Sterling Nat. Bank & Trust Co. v. Boyajian

• Decision Date: 01 May 1942
• Docket Number: No. 240.,240.
• Citation: Sterling Nat. Bank & Trust Co. v. Boyajian, 127 F.2d 713 (2nd Cir. 1942)
• Parties: STERLING NAT. BANK & TRUST CO. v. BOYAJIAN.
• Court: U.S. Court of Appeals — Second Circuit

127 F.2d 713 (1942)

STERLING NAT. BANK & TRUST CO. v. BOYAJIAN.

No. 240.

Circuit Court of Appeals, Second Circuit.

May 1, 1942.

Before AUGUSTUS N. HAND, C. E. CLARK, and FRANK, Circuit Judges.

Abraham Lillienthal, of New York City, for Boyajian, bankrupt-appellant.

Sidney Golding, of New York City, (Joel Gross, of Newark, N. J., of counsel), for Sterling Nat. Bank & Trust Co. petitioner-appellee.

AUGUSTUS N. HAND, Circuit Judge.

The appellant filed a petition in bankruptcy on January 22, 1934. After adjudication he was granted a discharge and, on September 17, 1934, the estate was closed. In December 1941, Sterling National Bank & Trust Company, a creditor, moved to reopen the proceeding on the ground that the bankrupt had concealed from the bank and from his creditors in general a fraudulent transfer made to his wife in 1930. The bankrupt answered the moving papers by filing an affidavit in which he not only said that the transfer was not fraudulent but made for an adequate consideration and also stated that the bank knew all about the circumstances and had for years slept on its rights. The district court granted the motion and entered an order opening the estate from which the bankrupt has appealed. We think that the order must be reversed with leave to the petitioner to present a more adequate record.

The petition to have the bankruptcy proceeding opened was made on December 1, 1941. It alleged that prior to November 18, 1930, the bankrupt Boyajian and his partners Perrusi, Kweit and Cassen, who were engaged in a printing business, transferred their partnership assets to a corporation which they organized under the New York law and "caused the stock of their corporation to be issued to their respective wives, said wives paying nothing therefor." The petition also alleged that Boyajian, from November 18, 1930, until the filing of his petition in bankruptcy on January 22, 1934, was the treasurer and a director of the corporation and "the beneficial owner of 28% of the stock * * *"; that on November 18, 1930, he and his partners conspired to enrich themselves and to defraud their creditors by means of the above transfer and the issue of the stock to their wives without consideration. The petition further alleged that on September 25, 1930, the Central Zone Building Inc. gave its promissory note for $25,000 payable in three months to the Magoba Construction Co. Inc., which was endorsed by Boyajian, Perrusi, Kweit and Cassen and discounted for Magoba Construction Co. Inc. with Sterling National Bank & Trust Company, but had never been paid. On January 22, 1934, Boyajian stated in his bankruptcy petition that his liabilities totalled $697,020.75 in which he included his indebtedness arising from his endorsement of the note to the Central Zone Building Inc., and that his assets consisted only of 200 shares of stock of Central Zone Building Inc., said to be worthless. He was granted a discharge on July 18, 1934, and the estate was closed on September 17, 1934.

The petition of Sterling National Bank & Trust Company to reopen the bankruptcy proceeding alleged that at the time the Advertising Agencies Service Co., Inc., was incorporated Boyajian's liabilities were approximately the same as those enumerated in his schedules on January 22, 1934, and that the transfer to his wife then left him with insufficient assets to pay existing creditors. It also alleged that Boyajian's copartners filed petitions in bankruptcy on January 22, 1934, and listed the same obligations as he did. In the examinations before the referee in each of the bankruptcy proceedings Boyajian's three partners asserted that each had no assets and he and they all failed to disclose a beneficial ownership in the stock of Advertising Agencies Service Co., Inc., which was alleged to have existed.

The bankrupt filed an affidavit in opposition to the petition to reopen the estate in which he stated that all the debts listed in his schedules "were liabilities on accommodation endorsements and a mortgage guarantee," which grew out of real estate ventures. He said that in 1930 his firm owed $17,500 to the Sterling Bank and $20,000 to the Marine Midland Trust Co. which were balances of aggregate advances of $50,000 that had gradually been reduced. These creditors insisted upon immediate payment and as a result he and his partners had to place a chattel mortgage on their plant and to assign their accounts receivable to a money lender, and also to obtain money from their wives for the new corporation to which the business was transferred through the issue of its stock. The wife of Boyajian contributed $4,000 from her own funds and from moneys which she borrowed. From the funds thus obtained the $37,500 demanded by the two banks...