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PAC CONSTR. CO. v. NEW YORK FACTORS

January 24, 1961

PAC CONSTRUCTION COMPANY, a Delaware corporation, and Moyer Brothers, a partnership, Plaintiffs,
v.
NEW YORK FACTORS, INC., Defendant



The opinion of the court was delivered by: MARSH

To the complaint filed in the above entitled action the defendant made a motion to dismiss for failure to state a claim upon which relief can be granted, Rule 12(b)(6), Fed.R.Civ.P., 28 U.S.C.A.; and a motion for summary judgment, Rule 56(b), Fed.R.Civ.P. Pursuant to leave granted at the hearing, the parties subsequently filed a stipulation, and A. C. Moyer, a partner plaintiff, filed an affidavit in support of the complaint. It is the opinion of the court that the motions should be denied.

"On a motion for summary judgment, the pleadings of the opposing party must be taken as true * * *." Bragen v. Hudson County News Co., 3 Cir., 1960, 278 F.2d 615, 617.

 The facts as they appear from the complaint may be summarized as follows:

 Sometime prior to April 17, 1958, the plaintiff Moyer Brothers, a partnership (hereinafter 'the partnership') composed of A. C. Moyer and J. E. Moyer, made application for a loan from the defendant, New York Factors, Inc., a New York corporation. The partnership was advised by the president of defendant that defendant would not make a loan such as that requested to a partnership for the reason that the defendant would be unable to charge a partnership more than 6% Per annum interest. The president of defendant, however, advised A. C. Moyer that defendant would make the loan to a corporation which could be charged interest at the rate demanded by the defendant, viz.: 1/18% Per diem -- the equivalent of 20 5/18% Per annum.

 At the request of the defendant and 'for the purpose of being a conduit and for the sole purpose of making the loan', *fn1" the partnership caused to be incorporated Moyer Bros. Construction Co., Inc., (hereinafter 'the corporation'), a Pennsylvania corporation.

 On April 17, 1958, defendant loaned to the corporation the sum originally requested by the partnership and the corporation delivered to defendant three judgment notes totalling the amount of the loan and providing for the payment of interest at the rate of 1/18% Per diem commencing May 1, 1958. The individual partners, along with the corporation, signed a guarantee of the aforesaid judgment notes and gave to the defendant a secured interest in certain construction equipment specified in Exhibit 'E' attached to the complaint. In addition, the individual partners agreed to execute a collateral security assignment of life insurance on their lives to the defendant. *fn2"

 Subsequently the corporation obtained a second loan from the defendant and on May 1, 1958, delivered to the defendant the promissory note of the corporation and a letter signed by the individual partners of the partnership agreeing that this loan be covered by the previously-mentioned guarantee.

 Finally, on September 26, 1958, defendant granted the corporation a third loan, also at an interest rate of 1/18% Per diem. The individual partners of the partnership, as well as the partnership, became guarantors on this loan and agreed to extend the original guarantee agreements of the April 17, 1958 loan to this loan and further agreed to give a security interest to defendant in certain specified equipment of the partnership listed in Exhibit 'H' of the complaint.

 The plaintiff PAC Construction Company at a Sheriff's sale conducted by the Sheriff of Blair County, Pennsylvania, on July 3, 1959, at Fi. Fa. No. 3 June Term, 1959, purchased all of the equipment to which the partnership had given the defendant a security interest in connection with the aforesaid loans by defendant to the corporation.

 There is of record in the Prothonotary's Office of Blair County two financing statements listing the partnership as debtor and defendant as creditor, viz.: File No. 7278 dated April 17, 1958, listing the equipment set forth in Exhibit 'E' of the complaint; and File No. 7753 dated September 26, 1958, listing the equipment set forth in Exhibit 'H' of the complaint.

 Certain judgments have been entered by the defendant against A. C. Moyer and J. E. Moyer, individually, and trading as Moyer Brothers, a partnership, in the Prothonotary's Office of the Court of Common Pleas of Blair County and which judgments appear to be liens against certain realty owned by A. C. and J. E. Moyer, individually, and trading as Moyer Brothers.

 In paragraph 11 of the complaint, plaintiffs make the following allegations:

 'That at no time was Moyer Bros. Construction Co., Inc. an active corporation; that it was created solely for the purpose of securing the aforesaid loans and was used by the defendant as a device and/or conduit for the borrowing of money by Moyer Brothers, a partnership, ...


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