The opinion of the court was delivered by: KAUFMAN
The Court has before it a petition by the Trustee of the Bankrupt, Belt-Modes, Inc., to review the order of the Referee in Bankruptcy allowing the wage claims of the employees of Danin, Inc.
The facts, as they appear to this Court, are as follows:
Prior to 1946, Belt-Modes, Inc., manufactured ladies' belts. In the early part of 1946 it began to or desired to manufacture children's and ladies' handbags. To make belts it had to sign a contract with the Beltmakers' Union, and to make pocketbooks a contract had to be signed with the Pocketbook Workers' Union.
Rather than combine both operations, on January 22, 1946, Daniel Rubin, the principal stockholder of Belt-Modes, Inc., organized a new corporation, Danin, Inc., for the purpose of manufacturing pocketbooks, and Belt-Modes, Inc. continued to make belts.
Danin, Inc. was a separate entity. It rented its own premises, hired its own help, owned the fixtures, machinery and equipment, had its own complete set of books and records, stationery, bank account, issued its own checks, paid its own taxes, issued financial statements, purchased insurance for itself, and participated in other normal business procedures.
The transactions between the two corporations, (Danin, Inc. and the (Bankrupt) followed the usual pattern found in a jobber-contractor relationship. At the end of every month Danin, Inc., rendered a bill to Belt-Modes, Inc. This bill was entered on the Danin, Inc., books as a debit to accounts receivable and a credit to sales and was entered on the Belt-Modes, Inc. books by a debit to 'purchases-contractors, labor and materials' and a credit to contractors payable.
Danin, Inc., was only one of several contractors with whom Belt-Modes had business negotiations. The same entries were made for all contracts on Belt-Modes, Inc., books.
All of the payrolls of Danin, Inc., were paid out of Danin's bank account
On or about the middle of 1947, Danin, Inc., moved into the same premises occupied by Belt-Mode, Inc., but continued to operate separately as it had previously done until Belt-modes was adjudicated a Bankrupt. Danin, Inc., apparently is still in existence and is not involved in this bankruptcy proceeding.
In spite of the fact that the claimants herein were the employees of Danin, Inc., they filed wage claims against the estate of the Bankrupt. The Trustee objected to such claims on the grounds that the Bankrupt was in no way obligated to said claimants, in that the claimants were never employed by the Bankrupt and never rendered any work, labor or services for the Bankrupt.
The Referee overruled these objections and allowed these claims on the ground that the said employees were actually the employees of the Bankrupt. The Referee made findings on March 25, 1949, as follows: (The numbers are designated as in the final order of the Referee, Oct. 27, 1949.)
'1. The bankrupt was organized in 1946 and began the manufacture of belts and pocketbooks and handbags but within several months was confronted with a jurisdictional dispute between two labor unions, one claiming the affiliation of the belt makers and the other that of the pocketbook and bag workers in the bankrupt's employ.
'2. Daniel Rubin, at all times herein mentioned being the president and sole stockholder of the bankrupt, thereupon caused the incorporation of Danin, Inc., of which he became president and sole stockholder, with the intent and purpose that Danin, Inc. would manufacture and deliver pocketbooks and handbags solely for the bankrupt with moneys and materials furnished by the bankrupt.
'3. The bankrupt's pocketbook and handbag employees were assigned to work in other premises under the name of Danin, Inc., but after a year the activities carried on in its ...