Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BENNETT v. GLEISCH

September 14, 1932

BENNETT
v.
GLEISCH; SAME v. DIETZ; SAME v. WITTER HOMES, Inc.



The opinion of the court was delivered by: CAMPBELL

CAMPBELL, District Judge.

On stipulation the three above-entitled actions were tried together, and as they have many issues of fact that are common to all, and the legal principles underlying the different causes of action are substantially the same, one opinion will suffice.

Froh Homes, Inc., the bankrupt, was a close corporation. It was organized in April, 1926, and the incorporators were Ferdinand Frohwitter, the father, Gertrude Frohwitter, his wife, and Harold Frohwitter, the son. The capital was to be $5,000, divided into 50 shares.

 Witter Homes, Inc., was organized on November 17, 1927, certificate filed December 2, 1927; its incorporators being Gertrude Frohwitter, her son Harold Frohwitter, and Frank Alexander, a brother of Gertrude Frohwitter.

 The first above-described corporation has for its name the first syllable of the family name, "Froh." The second above-described corporation has for its name the second syllable of the family name, "Witter." Ferdinand Frohwitter, the father, was influential in forming both corporations because, although he was not an incorporator of Witter Homes, Inc., his name is appended as a witness and he took the acknowledgment on the certificate of incorporation. The certificates of incorporation of the two corporations are identical in language, save for the difference in the name of the corporation, and the difference in the names of the incorporators.

 Harold Frohwitter was the president of both corporations, Frank Alexander was the secretary of both corporations, and Gertrude Frohwitter, the mother, was the vice president and treasurer of both corporations. These corporations occupied the same offices, had the same telephone and the same stenographer. Their stationery bore the names of both corporations, and they are both engaged in the business of building.

 Between the date of its organization and May, 1928, Witter Homes, Inc., acquired title to a triangular plot of land in Queens Village, bounded on the north by Ninety-Second avenue, on the south by Ninety-Third avenue, on the east by Vanderveer street, and on the west by 214th place, from Joseph H. Gleisch. Gleisch had previously acquired the property from Froh Homes, Inc. Gleisch paid nothing to Froh Homes, Inc., for the property, and Witter Homes, Inc., paid nothing to Gleisch for the same property. This was the only development of Witter Homes, Inc.

 In May, 1928, Froh Homes, Inc., was completely out of the Queens Village development, and in the same month Froh Homes, Inc., undertook the Middle Village development.

 Harold Frohwitter testified that he did not believe that Froh Homes, Inc., had any money when it bought the Middle Village property, and that it did not have any other property.

 The purchase price of the Middle Village parcel was $54,000, of which Froh Homes, Inc., paid $5,000 in cash, and the balance of $49,000 they owed on mortgage. $2,500 of the $5,000 cash payment on the purchase price was borrowed by Froh Homes, Inc., from Witter Homes, Inc. The remaining $2,500 was borrowed, but there is a dispute as to whether it was borrowed from Ferdinand Frohwitter, the father, or the building loan.

 In May, 1928, Froh Homes, Inc., had no money of its own and no property, and it then acquired the Middle Village property at a cost of $54,000, of which $5,000 was borrowed and $49,000 remained on mortgage.

 Harold Frohwitter testified that the property when acquired was worth $70,000. This does not seem to be a fact in view of the testimony of his father, Ferdinand Frohwitter, that this particular parcel of land was worth $70,000 in October of that year after it had been developed, graded, and improved. That the testimony of Harold Frohwitter as to the value of this land when purchased is not worthy of serious consideration is apparent when you read the financial statement made by him to the Jamaica Bank, dated July 9, 1928, in which he put the cost of the Middle Village parcel as $90,000, almost double its cost.

 At and before the time that Froh Homes, Inc., acquired the Middle Village parcel, it owed other debts which it could not pay, to wit: $18,755.77 to Ferdinand Frohwitter, $3,000 to Joseph H. Gleisch, and was indebted to contractors on previous work in the sum of $7,591.92. This made the total of all the debts of Froh Homes, Inc., including the purchase price, $83,346, and this was exclusive of the first mortgage on said premises which was for a considerable sum.

 The Middle Village parcel was the only asset of Froh Homes, Inc.

 Froh Homes, Inc., bought the Middle Village parcel for development, that is, it was planning to erect thereon 35 one-family buildings, and depended for its finances upon a building loan that had been arranged with State Title & Mortgage Company in the sum of $171,750.

 The first advance was in the sum of $22,500 made on September 5, 1928. Other advances were made on the building loan from time to time until a total of $115,614.35 net had been advanced.

 Joy-Simpson, the excavator, was the first contractor on the job. Froh Homes, Inc., paid that contractor $1,500 on September 7, 1928, two days after the receipt of the first advance on the building loan, and still owes that contractor $2,879 from September 7, 1928.

 A check issued by Froh Homes, Inc., to a creditor as a first payment in July, 1928, came back unpaid. Five checks issued by Froh Homes, Inc., came back in August, six in September, ten in October, nine in November, and fifteen in December.

 The bank account of Froh Homes, Inc., in the Jamaica National Bank was closed out on January 8, 1929, and the bank account in Mechanics' Bank opened December 1, 1928, was closed out on February 13, 1929.

 Froh Homes, Inc., called a meeting of its creditors in the latter part of February, 1929, and in March, 1929, it transferred all of its property by deed of trust to Paul Wicksman, as trustee.

 Froh Homes, Inc., offered a settlement of 25 per cent. to its creditors on March 22, 1928, and it then owed over $90,000 to contractors only.

 A petition in bankruptcy was filed against Froh Homes, Inc., on June 26, 1929, and on September 7, 1929, after a contest it was adjudicated a bankrupt. The scheduled debts exceed $100,000 in amount. The proved claims amount approximately to $26,000. No assets came into the possession of the trustee.

 From all the testimony it is apparent that Froh Homes, Inc., was insolvent from May, 1928, right up to the time of the filing of the petition in bankruptcy herein, as "insolvency" is defined by the Debtor and Creditor Laws of the State of New York, chapter 17 of the Laws of 1909, as amended by chapter 254 of the Laws of 1925, constituting chapter 12 of the Consolidated Laws, so much of which as is necessary for consideration herein reads as follows:

 "§ 271. Insolvency. 1. A person is insolvent when the present fair salable value of his assets is less than the amount that will be required to pay his probable liability on his existing debts as they become absolute and matured. * * *"

 These facts are common to all the cases.

 These are not actions brought under section 67e (11 USCA § 107 (e), but under 70e of the National Bankruptcy Act, now title 11, section 110 (e), United States Code (11 USCA § 110 (e), which gives to the trustee the right to bring any action which a creditor could have brought under the state law, and reads as follows: "e. The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided and may recover the property so transferred, or its value, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.