Schreier v. Cashin

259 A.D. 756, 18 N.Y.S.2d 14, 1940 N.Y. App. Div. LEXIS 6551

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: March 6, 1940
• Status: Published

Opinion

The trustee in bankruptcy of Kinderhook Manufacturing Co., Inc., has appealed from a judgment in plaintiff’s favor adjudicating that defendant’s real and personal property is subject to the lien of a judgment earlier obtained by plaintiff against Kinderhook Knitted Cap Company in the sum of $7,335.43. Kinderhook Knitted Cap Company is a foreign corporation existing under the laws of the State of Massachusetts of which the individual defendants Charles P. Cummings and Clifford W. Lebrecht were the officers in control of its property. Defendant Gertrude R. Cummings is the wife of defendant Charles P. Cummings. Plaintiff was a creditor of this corporation. On October 3, 1932, he recovered a judgment against the corporation in the sum of $7,335.43. On March 18,1930, the company transmitted to R. G. Dun & Company a financial statement showing assets in excess of liabilities of more than $60,000. The National Commercial Bank and Trust Company of Albany held a mortgage against the property of $42,000, which had been reduced to the sum of $5,500. The bank in June, 1932, instituted an action for the foreclosure of this mortgage and obtained a judgment by default under which it sold the property of defendants Clifford W. Lebrecht and Gertrude R. Cummings for the sum of $4,400. On October 1, 1932, the defendants Charles P. Cummings, Clifford W. Lebrecht and Edward E. Lebrecht organized defendant Kinderhook Manufacturing Co., Inc. The purchasers of the assets of Kinderhook Knitted Cap Company transferred the same to Kinderhook Manufacturing Co., Inc., on October 24,1932, and took back a purchase-money mortgage of $5,000. This mortgage was subsequently assigned to defendant National Union Bank of Kinderhook. The defendants Charles P. Cummings, Clifford W. Lebrecht and Edward E. Lebrecht are the stockholders and directors and officers in control of Kinderhook Manufacturing Co., Inc. All the property which the Massachusetts corporation owned in the State of New York was covered by the mortgage held by the National Commercial Bank and Trust Company. Upon the foreclosure of that mortgage the company was divested of every bit of its tangible property in this State and plaintiff was unable to enforce the collection of his judgment. The trial court held that the defendants perpetrated a fraud upon plaintiff in permitting the judgment by default in the foreclosure action and in causing the assets of the Massachusetts corporation to be transferred to Kinderhook Manufacturing Co., Inc. The evidence sustains the finding of the trial court. Judgment affirmed, with costs. Crapser, Bliss, Hefíernan and Schenck, JJ., concur; Hill, P. J., dissents. No evidence was taken in this case. Judgment was rendered on the pleadings. The only fact pleaded which would sustain an inference of fraud arose from a financial statement made as of December 31, 1929. Plaintiff brought his action in 1932 to recover nearly $14,000 and recovered $7,000 plus. Prior to the date of his judgment the mortgagee, a bank in the city of Albany, had brought an action for foreclosure and the real property of the bankrupt had been sold. There is nothing to show that defendants had corporate funds with which to pay the mortgage. The judgment should be reversed and the complaint dismissed.