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FIREMEN'S FUND AMERICAN INS. CO. v. KEN-LORI KNITS

May 8, 1975

FIREMEN'S FUND AMERICAN INSURANCE CO., Plaintiff,
v.
KEN-LORI KNITS, INC., et al., Defendants



The opinion of the court was delivered by: MISHLER

MEMORANDUM OF DECISION AND ORDER

 MISHLER, Chief Judge.

 United States of America, Ambassador Factors Corporation (Ambassador), Sapperstein, Hochberg and Haberman, Inc. (Sapperstein) and Courtaulds North America, Inc. (Courtaulds) move for partial (Ambassador filed a further motion for total) summary judgment against a fund in the amount of $96,750 deposited by plaintiff in this interpleader action with the Treasurer of the United States pursuant to an order dated March 27, 1974. *fn1" Ken-Lori Knits, Inc., (Ken-Lori) and Barrington Knitted Fabrics, Ltd. (Barrington) concede in their answer that they have no present interest in the fund and allege that their interest had been assigned to Ambassador. The other defendants have not answered the motions or appeared in opposition to the motions.

 BASIS OF CLAIMS

 Ken-Lori was engaged in the business of converting yarn into cloth in premises which it leased at 500 Stagg Street, Brooklyn. It installed knitting machinery and equipment and conducted its business at that address. Ken-Lori operated a service to the trade by converting the yarn of others for which it charged a fee computed by the pound. Ken-Lori was a contract knitter and also converted its own yarn. All the machinery, equipment, fixtures and furniture on the premises at 500 Stagg Street were owned by Ken-Lori at all the pertinent times referred to herein.

 Barrington delivered yarn to Ken-Lori for conversion to cloth. The interests that controlled Ken-Lori also controlled Barrington. *fn2" Barrington was a domestic corporation with offices at 135 West 35th Street in the City and County of New York.

 On January 4, 1972, Ambassador loaned Ken-Lori $100,000. Ken-Lori at the time of the loan or prior thereto, executed a security agreement in favor of Ambassador. Ambassador filed financing statements in the office of the Register of Kings County on January 27, 1972, and in the office of the Secretary of State of New York on January 28, 1972. At the time of the execution of the promissory note in favor of Ambassador and the security agreement, there existed a policy of fire insurance (policy number MXPL 158 87 75) issued by Firemen's Fund American Insurance Companies (Firemen's) effective April 10, 1971, for a term of three years, insuring "the furniture, fixtures, machinery and equipment usual to the manufacture of knitwear" and "the contents of yarn of Ken-Lori" in the amount of $300,000. A rider to the policy dated January 4, 1972 stated that:

 
"Loss, if any, due to the insured under all of the terms and conditions of this policy, to be payable to Ambassador Factors, Corp., 1470 Broadway [sic], N.Y., N.Y., as interest may appear."

 A rider to the same policy dated February 14, 1972, apparently intending to add Barrington as a named insured, named "Barrington Mills, Inc." and insured "contents of yarn while contained in the building" in the amount of $50,000. A subsequent rider dated May 15, 1972, corrected the name to read "Barrington Knitted Fabrics, Ltd."

 On June 12, 1972, Ambassador loaned Ken-Lori an additional $100,000, and Ken-Lori executed a promissory note in the amount of $200,000 and a security agreement in favor of Ambassador. A rider to the security agreement provided:

 
". . . Debtor hereby appoints the Secured Party the attorney for the Debtor in obtaining, adjusting and cancelling any such insurance and endorsing settlement drafts and hereby assigns to the Secured Party all sums which may become payable under such insurance . . . as additional security for the indebtedness."

 On the day of the fire, i. e., October 16, 1972, Handelsman retained Sapperstein to adjust the fire loss claim at a fee of 12% of the amount of recovery and assigned to Sapperstein the amount of the claim due to the extent of this fee. The retainer was signed:

 
"Robert Handelsman, Pres.
 
Ken-Lori Knits, Inc." *fn3" ...

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