Opinion
July 24, 1961
In an action by the trustee in bankruptcy of the Babylon Country Club, Inc., brought by him as the assignee, by assignment from Marvin Traub, of a second mortgage for $50,000 made by the bankrupt corporation upon its real property, which was recorded on August 6, 1959, to recover said sum pursuant to a stipulation with respect to a prior action by defendant Sirlin Plumbing Company against the bankrupt to foreclose the mechanics' liens filed against its property by Sirlin and various other creditors of the bankrupt; and to obtain a judicial declaration that the rights of the bankrupt's creditors who filed mechanics' liens on the same date on which the second mortgage was recorded and thereafter are subordinate to the trustee's claim under said second mortgage and stipulation, in which the defendant lienor Sirlin and eight other defendant lienors interposed a joint answer asserting three separate affirmative defenses, the trustee appeals: (1) from an order of the Supreme Court, Queens County, dated February 23, 1961, and entered in Kings County on February 24, 1961, (a) which grants the motion of said nine defendants for summary judgment under rule 113 of the Rules of Civil Practice; (b) which directs judgment in favor of "all of the defendants" dismissing the complaint; (c) which provides that such judgment shall be without prejudice to the trustee's right to obtain relief in the prior foreclosure action by defendant Sirlin; and (d) which fails to make any disposition of the trustee's cross motion to dismiss for patent insufficiency the first and second defenses pleaded by said nine defendants, pursuant to rule 109 of the Rules of Civil Practice; and (2) from a judgment of the Supreme Court, Kings County, entered February 24, 1961, upon said order, which dismisses the complaint against all the defendants in the action. Order and judgment reversed, with one bill of $10 costs and disbursements payable by the said nine defendants to the trustee; the motion of said nine defendants for summary judgment is denied; the trustee's cross motion to dismiss the first and second affirmative defenses pleaded by them in their joint answer is granted; and said defendants are granted leave, within 20 days after entry of the order hereon, to serve an amended answer, if so advised, repleading the second defense and alleging such facts as may be material with respect to their claims of priority over the trustee's second mortgage. On July 13, 1959, defendant Sirlin filed a mechanic's lien against the bankrupt's real property. On July 16, 1959, Sirlin filed a lis pendens and complaint. On July 30, 1959, the bankrupt executed the said $50,000 second mortgage in favor of Marvin Traub, mortgagee. The mortgage contained the trust fund covenant provided for in subdivision 3 of section 13 Lien of the Lien Law, and it was recorded on August 6, 1959. Other mechanics' liens were filed after July 16, 1959, some prior to the recording of said mortgage and some subsequent thereto. In the foreclosure action instituted by Sirlin, orders were entered allegedly pursuant to section 62 Lien of the Lien Law, directing that various lienors who filed their liens subsequent to the filing of Sirlin's lis pendens be made parties and amending the title accordingly. On November 12, 1959, a judgment was entered directing the sale of the property and the payment in full or pro rata to the named lienors. Traub, the second mortgagee, was not named as a party to that action and he made no application to intervene. On November 13, 1959, an involuntary petition in bankruptcy was filed against the bankrupt, the then owner of the property. Thereafter plaintiff was appointed the trustee in bankruptcy, and Traub assigned the said second mortgage to the trustee. A stipulation was made in the bankruptcy proceeding which permitted the sale of the property pursuant to the judgment of foreclosure and sale in the then pending Sirlin mechanic's lien foreclosure action, and which, in effect, created a $50,000 cash fund to await the outcome of the trustee's claim. In the first affirmative defense sought to be struck out from the answer of said nine defendants, it is alleged that the trustee is bound by all the proceedings taken in Sirlin's prior foreclosure action and by the judgment entered therein on November 12, 1959, to the same extent as if he (the trustee) had been a party to such prior action; and that in such prior action the rights of all the defendant lienors to the proceeds of the sale of the property were adjudicated by such judgment. In our opinion, in this action by the trustee the judgment in Sirlin's prior foreclosure action is not res judicata as to the priorities between the trustee's claim and the claims of the defendants who filed mechanics' liens after the trustee's second mortgage was recorded. In the second affirmative defense sought to be struck out from such answer, it is alleged that the second mortgage upon which the trustee is suing as the assignee of Marvin Traub, was not properly authorized or executed by the bankrupt corporation and that it is invalid as against the lienors who filed their mechanics' liens. In our opinion, the second defense is wholly conclusory in nature. No facts are alleged therein to justify the conclusion that the second mortgage was not properly authorized or executed by the mortgagor, the bankrupt corporation. We do not pass upon the present contentions of the parties as to whether creditors of a corporation may plead a defense that the mortgage was not executed with the consent of the stockholders as prescribed in section 16 of the Stock Corporation Law, because no facts are pleaded in such second defense showing that it is based on a violation of said statute. Nolan, P.J., Beldock, Ughetta, Pette and Brennan, JJ., concur.