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CHOROST v. GRAND RAPIDS FACTORY SHOWROOMS

April 19, 1948

CHOROST et al.
v.
GRAND RAPIDS FACTORY SHOWROOMS, Inc. et al.



The opinion of the court was delivered by: SMITH

This is a civil action brought by the plaintiffs as trustees of the Zisblatt Furniture Company, Inc., the bankrupt, to set aside the transfer of merchandise made by the bankrupt to the defendants Grand Rapids Factory Showrooms, Inc., Irving Zisblatt and Rose Zisblatt, and to recover the value thereof. It is alleged by the plaintiffs but denied by the said defendants that the transfer was made with intent to hinder, delay and defraud creditors, in violation of the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., and the laws of the State of New York.

The plaintiffs have joined an independent claim against the defendant Meyer Zisblatt for $ 5,768.00, which sum was admittedly received by him within four months of the bankruptcy in payment of an antecedent debt. It is alleged by the plaintiffs but denied by the defendant that this payment was preferential and voidable under the Bankruptcy Act.

 Facts

 I. The Zisblatt Furniture Company, a corporation organized by one Morris Zisblatt under the laws of the State of New York (hereinafter identified as the Zisblatt Company), was and had been for many years prior to the bankruptcy engaged in the retail furniture business at 4132 Park Avenue, New York, N.Y. This business was and had been for many years also identified by the trade name 'Grand Rapids Factory Showrooms' (not the corporate defendant), as appears from a certificate filed by one Lillian Zisblatt, the wife of the said Morris Zisblatt.

 II. The corporate defendant Grand Rapids Factory Showrooms, Inc., (hereinafter identified as the Grand Showrooms) was organized by Morris Zisblatt under the laws of the State of New Jersey in 1938, but did not actually begin business until February or March of 1940, when it opened for business at 165 Ward Street, Paterson, N.J. Thereafter it was continuously engaged in the retail furniture business at the said address until June of 1941.

 III. The Grand Showrooms was stocked with furniture removed from the Zisblatt Company between February 20 and March 27, 1940; furniture of the value of $ 11,700 or more was removed from the place of business of the latter to the place of business of the former. It is reasonable to infer from all of the evidence that this removal of furniture was initiated by Morris Zisblatt to defraud the creditors of the Zisblatt Company.

 IV. The corporate stock in the Grand Showrooms was owned by Morris Zisblatt and Lillian, his wife, until April 2, 1940, when it was assigned by them to Irving Zisblatt, a brother, and Rose, his wife. This assignment of the corporate stock was followed immediately by the execution of an agreement between the Grand Showrooms and the Zisblatt Company, the pertinent provisions of which are quoted in the annexed appendix.

 V. The Zisblatt Company transferred and delivered to the Grand Showrooms, as of April 4, 1940, the furniture previously removed from the place of business of the former to the place of business of the latter, admittedly the property of the Zisblatt Company. This transfer and delivery of furniture was purportedly made to secure contemplated loans by the Grand Showrooms to the Zisblatt Company pursuant to the terms of the agreement.

 VI. The Grand Showrooms thereafter advanced to the Zisblatt Company the sum of $ 12,200 in four installments: $ 1600 on April 4, $ 600 on April 6, $ 5000 on April 8, and $ 5000 on April 10. These advances were made from funds previously deposited to the account of the Grand Showrooms by the defendant Rose Zisblatt. The Zisblatt Company paid $ 5768 of the sum thus advanced to the defendant Meyer Zisblatt, a brother of Morris and Irving, in full satisfaction of an antecedent debt. The balance, or at least a substantial part of it, was paid to other creditors.

 VII. The periodical removal of furniture from the place of business of the Zisblatt Company to the place of business of the Grand Showrooms, initiated by Morris Zisblatt in February 1940, was continued until May 21, 1940; between April 10 and May 21, 1940 furniture of the value of $ 6204.24 was removed from the former to the latter. The Grand Showrooms advanced to the Zisblatt Company an additional sum of $ 2399.75 in four installments: $ 500 on April 18, $ 160.78 on May 4, $ 1638.97 on May 23, and $ 100 on May 24.

 VIII. The Zisblatt Company was adjudged a bankrupt on June 10, 1940 on the petition of its creditors filed on June 7, 1940. The book value of its assets was $ 9667.68, of which $ 6205 was merchandise inventory, and its liabilities exceeded $ 42,000. The property of the Zisblatt Company was subsequently appraised at $ 3527.45 and was sold for $ 3098.10 at public auction.

 IX. It is apparent that during this entire period of time, from April 4, to May 21, the only merchandise acquired by the Grand Showroom was that which it acquired from the Zisblatt Company; there are no other purchases reflected in the books and records of the Grand Showrooms except minor ones. The testimony of Irving Zisblatt that furniture was purchased from the manufacturers is not supported by his books and records but is, in fact, therein contradicted. It is not without significance, however, that the purchases made by the Grand Showrooms in June of 1940 and thereafter, until the close of business in 1941, were substantial.

 X. It appears from the books and records of the Zisblatt Company that in the months of February and March, immediately proceeding the execution of the agreement, furniture of the value of $ 7272.19 was purchased from many of its present creditors. In the same months furniture of the value of $ 11,700 or more was removed from the place of business of the Zisblatt Company to the place of business of the Grand Showrooms. This removal of furniture obviously resulted in a noticeable depletion of the merchandise inventory of the former.

 XI. It further appears from the books and records of the Zisblatt Company that in the months of April and May, immediately preceding the bankruptcy, furniture of the value of $ 10,400.66 was purchased from many of its present creditors. In the same months furniture of the value of $ 6200 was removed from the place of business of the Zisblatt Company to the place of business of the Grand Showrooms.

 XII. A simple analysis of these figures discloses that the value of the furniture removed from the place of business of the Zisblatt Company to the place of business of the Grand Showrooms in the months in question was slightly in excess of the value of the furniture purchased by the former in the same months.

 XIII. A careful examination of the books and records of both corporations discloses that in the months of April and May, and particularly in May, the Zisblatt Company purchased from many of its present creditors furniture which was delivered to the Grand Showrooms and then resold to its customers. It clearly appears from the 'Confirmation Orders' of the former that particular items of furniture were purchased by the Zisblatt Company for customers of the Grand Showrooms. Some of the customers for whom these purchases were made, as appears from the books and records of both corporations, were: Albert Backel, Peter Brescia, Peter Condo, Jack DeFeo, Gian (John) Gonchar, Joseph Inserra, Bill Iozza, Kiminski, Joe Lano, John Luciano, and Pat Porsio. The profit realized from these transactions was retained by the Grand Showrooms and ...


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