The opinion of the court was delivered by: ZAVATT
This is a proceeding instituted by Glenmore Distilleries Company (hereinafter Glenmore) as judgment creditor of Dundee Wine & Spirits, Ltd. (hereinafter Dundee), pursuant to Fed.R.Civ.P. 69(a) and N.Y. CPLR § 5225(b), to reach moneys of the judgment debtor transferred by it to the respondents.
During the latter part of 1963, the respondents initiated discussions with Glenmore for the purpose of seeking to become a distributor of Glenmore products in the New York City area. Neither respondent had had any experience in any phase of the liquor business. Seideman's background of experience was in the textile business, in which his average annual earnings approximated $75,000 to $80,000. Boorstein was in the phonograph record business. They consulted with a Mr. Koerner, who had been employed by Park Benziger, a liquor distributor. Glenmore had rejected Park Benziger's application for a distributorship because the latter sought such a distributorship upon the condition that Glenmore guaranteed to it an annual profit of $150,000.
Several meetings were held with officers and representatives of Glenmore, attended by one or both of the respondents, at some of which meetings Koerner was in attendance. At some of these meetings there was speculative discussion as to the possible annual gross sales of Glenmore products by the respondents or by a corporation to be formed by them. The negotiations contemplated a distributorship which would deal primarily, if not exclusively, in Glenmore products. It was in the hope that the respondent's annual gross sales of Glenmore's products would approximate $1,500,000 that Glenmore granted and the respondents accepted an oral distributorship. The respondents claim, but Glenmore denies, that there was discussion as to what would be a fair salary of each respondent, under the circumstances as contemplated. Respondents claim that they apprised Glenmore of their intention to draw an annual salary of $25,000 each and that Glenmore agreed that such salaries would be modest. The court finds that there was no such discussion and no such agreement.
On December 5, 1963, respondents caused the incorporation of Dundee, a New York corporation. They became, and still remain, its sole stockholders, officers and directors. Each respondent invested $50,000 in Dundee. On March 1, 1964, Dundee received from the State of New York a license to sell liquor. It employed the experienced Mr. Koerner at a weekly salary of $200 on the understanding that, "if things worked out well," his salary would be increased accordingly. As to the respondents, however, the minutes of the meeting of the directors of Dundee, held April 1, 1964, report the adoption of the following resolution:
"RESOLVED, that effective March 1, 1964 the salaries of the President and Treasurer be fixed on the basis of $25,000. per year each."
The minute book of Dundee records no meeting of stockholders or of directors after that of April 1, 1964.
Dundee had a small organization, consisting of the two respondents, Mr. Koerner, three employees in the office, two warehousemen and approximately ten salesmen. The record does not indicate whether the salesmen were employed on a salary or merely on a commission basis. During the initial period of approximately six months March 2 to August 20, 1964, Glenmore sold its products to Dundee, on credit, as follows:
Gross sales $167,601.70
Less returns 49,870.33
Net sales on credit $117,731.37
Paid on account $29,531.28
Misc. credits 6,771.04 36,302.32
Unpaid balance $ 81,429.05
After the indebtedness of Dundee to Glenmore had reached this substantial sum, Glenmore refused to make any further sales on credit and put Dundee on a cash basis. Dundee's federal income tax return for the period December 5, 1963 and ending November 30, 1964, reported a net loss of $108,094.81, including gross salaries of $9,000 to each of the respondents. Although Dundee is still in existence, it did not renew its license, sold all of its merchandise on hand and went out of business on February 28, 1965.
On September 11, 1964, Dundee instituted an action against Glenmore in this court (64-C-1089) claiming $500,000 damages for breach of the oral distributorship contract and an equal amount in quantum meruit. On November 10, 1964, Glenmore filed a general denial, counterclaimed in the sum of $86,845.05 for goods sold and delivered and moved for summary judgment dismissing the complaint and for summary judgment on its counterclaim. On February 4, 1965, Judge Bartels granted Glenmore's motion to dismiss Dundee's claim for breach of contract; denied Glenmore's motion to dismiss Dundee's claim in quantum meruit and found that the sum of $81,072.96 was admittedly due by Dundee to Glenmore. Dundee Wine & Spirits, Ltd. v. Glenmore Distilleries Co., 238 F. Supp. 283 (E.D.N.Y.1965). Judgment in that amount in favor of Glenmore and against Dundee was entered May 24, 1965 and remains wholly unpaid. It is to enforce that judgment that Glenmore has instituted this proceeding against the respondents. Dundee's claim against Glenmore for $500,000 damages in quantum meruit is pending undetermined in this court.
It was subsequent to Judge Bartels said opinion that Dundee made substantial payments to the respondents as follows:
Date 1965 Seideman Boorstein Total
February 15 $ 500.00 $ 500.00 $ 1,000.00
February 19 13,000.00 13,000.00 26,000.00
February 28 500.00 500.00 1,000.00
March 2,063.33 2,063.33 4,126. 66
April 2,063.33 2,063.33 4,126.66
By February 28, 1965, Dundee had sold its merchandise, ceased paying rent, had gone out of business and had paid all of its creditors except Glenmore and a disputed amount due to its landlord. Its only asset was its bank balance with the Franklin National Bank in the following amounts:
Date 1965 Bank balance
January 29 $25,137.02
February 26 8,033.59
March 31 15,981.80
April 30 630.97
May 28 overdrawn 67.35
Dundee's payments to the respondents in February, March and April 1965, totaling $34,253.32, were made while Dundee was insolvent. Respondents' contention that Dundee was solvent because of its $500,000 claim pending against Glenmore is without merit. "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." N.Y. Debtor and Creditor Law, McKinney's Consol.Laws, c. 12, § 271. Only assets with a present salable value are taken into consideration in determining insolvency under that law. Chase Nat'l Bank of City of New York v. United States Trust Co., 236 App.Div. 500, 260 N.Y.S. 40 (1st Dep't 1932), aff'd 262 N.Y. 557, 188 N.E. 63 (1933); Ballantine v. Ferretti, 28 N.Y.S.2d 668 (Sup.Ct.1941). Dundee's claim against Glenmore, being only inchoate, uncertain and contested, has no present value. Penn v. Grant, 244 F.2d 309 (9th Cir.), cert. denied, 355 U.S. 837, 78 S. Ct. 58, 2 L. Ed. 2d 47 (1957). Nor is that claim a debt in favor of Dundee which is subject to levy under N.Y. CPLR § 5201, because it is not a cause of action which "is * * * to become due, certainly or upon demand * * *."
Sections 272, 273 and 273-a of the N.Y. Debtor and Creditor Law provide:
"§ 272. Fair consideration
Fair consideration is given for property, or obligation,
a. When in exchange for such property, or obligation, as a fair equivalent therefor, and in good faith, property is conveyed or ...