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.

CHEMICAL BANK v. SOCIETY BRAND INDUS.

December 26, 1985

CHEMICAL BANK, Plaintiff, against SOCIETY BRAND INDUSTRIES, INC., SOCIETY BRAND INTERNATIONAL, INC., SEW & SEW, INC., KELLY SPORTSWEAR, INC., FRANK J. NOVOSON, JOEL RAPPAPORT, SBI ACQUISITION CORPORATION and PORSCHE, INC., Defendants


The opinion of the court was delivered by: SWEET

SWEET, D.J.

Defendants SBI Acquisition Corporation ("SBI") and Porsche, Inc. ("Porsche") have brought a motion seeking dismissal of the amended and supplemental complaint of the Chemical Bank ("Chemical") as against the. Chemical has sought relief against SBI and Porsche based on the defendants' alleged violation of the Bulk Sales Article of the U.C.C., N.Y.U.C.C. §§ 6-101 et seq., and for common law conversion of property. For the following reasons, the defendants' motions are denied.

Prior Proceedings

 Chemicals commenced this action on March 13, 1984, alleging the willful conversion of plaintiff's collateral by Society Brands Industries, Inc. ("Society Brand"), Sportswear, INc. ("Sportswear"). Chemical amended its complaint by adding claims for relief based upon the alleged failure of the original corporate defendants and SBI and Porsche to heed the prescriptions of the Bulk Transfer Article of the U.C.C. and upon the alleged conversion of Chemical's collateral by SBI. The original corporate defendants filed an amended answer and counterclaims, and Chemical filed a reply. SBI and Porsche have moved to dismiss the amended and supplemental complaint, contending Chemical does not hold a claim against Society Brand or its subsidiaries cognizable under the Bulk Transfer Article of the New York U.C.C. and therefore is not a "creditor" of those corporations and not entitled to notice of the bulk transfer of their assets. The moving defendants also contend that Chemical has not properly pleaded a conversion claim against SBI, because of Chemical's failure to allege it demanded a return of its collateral.

 Facts

 The facts contained in the amended complaint for the purpose of this motion are accepted as true. On or about December 14, 1984, after the filing of the complaint in this action, SBI and Porsche purchased substantially all of the assets of Society Brand, International, Sew, and Sportswear, the original corporate defendants. At the time of the bulk transfers, Society Brand, International, Sew, and Sportswear were in possession of a portion of Chemical's collateral, which was then included among the assets conveyed in the bulk transfers. Chemical had no prior notice of the transactions.

 Neither Society Brand and its subsidiaries nor SBI Porsche complied with the provisions of the bulk sales statutes of any jurisdiction. In the asset purchase agreement among SBI, International, Sew, Sportswear and in the asset purchase agreement between Porsche and Society Brand the parties expressly waived compliance by the others with the provisions of the Bulk Sales Law of any jurisdiction. Counsel for the transactions confirmed that no party had complied with the Bulk Sales Law. Both SBI and Porsche knew of Chemical's claims prior to the bulk transfers. In its agreement with International, Sew, and Sportswear, SBI agreed to assume the liabilities of those corporations. Expressly excluded from such assumption, however, were "all litigation claims by Chemical Bank."

 II. New York Bulk Sales Law

 With respect to Chemical's claims for relief based on the Bulk Transfer Article of the U.C.C., the only issue presented by the motion of SBI and Porsche is whether the nature of the claim Chemical holds against Society Brand and its subsidiaries places Chemical within the class of creditors entitled to notice of the bulk transfer of the assets of those corporations pursuant to the bulk transfer article of the New York Uniform Commercial Code, N.Y.U.C.C. §§ 6-101 et seq. (McKinney 1964).

 SBI and Porsche contend that Chemical does not stand within the class of protected creditors. Defendants' rely largely on an interpretation of creditor enunciated by cases construing the Bulk Sales Act (the "Prior Act") which was superseded by Article Six of the Uniform Commercial Code in 1964. N.Y.U.C.C. §§ 13-101 Article Six, however, was not a mere recodification of the Prior Act, and because of the changes wrought by the U.C.C., defendants' argument and motion, must be denied.

 Section 6-109 of the U.C.C. describes those entitled to the benefit of the statute:

 The creditors of the transferor mentioned in this Article are those holding claims based on transactions or events occurring before the bulk transfer . . .

 N.Y.U.C.C. § 6-109. Under Section 6-105, a bulk transfer is "ineffective against any creditor of the transferor unless . . . the transferee gives notice of the transfer in the manner and to the persons hereafter provided (Section 6-107)." N.Y.U.C.C. § 6-105. Section 6-107(3) states that notice of the bulk transfer must be given "to all persons shown on the list of creditors furnished by the transferor (Section 6-104) and to all other persons who are known to the transferee to hold or assert claims against the transferor." N.Y.U.C.C. § 6-107(3). Under section 6-104(2), the listed creditors must include "all persons who are known to the transferor to assert claims against him even though such claims are disputed." N.Y.U.C.C. § 6-104(2).

 Chemical falls within the language of Article Six of the U.C.C. Chemical held, before the bulk transfer, claims against Society Brand and its subsidiaries based on event occurring before the bulk transfer of their assets. Chemical asserted those disputed claims in this litigation, and the moving defendants knew that plaintiff had asserted those claims at the time of the bulk transfer. The U.C.C. does not specify the type of claim a person must hold or assert to be a creditor under the Bulk Transfer Article. Nothing limits the breadth of the class protected ...


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.