Henkin v. Rockower Bros., Inc., 65 Civ. 1001.

• Court: United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
• Citation: 259 F. Supp. 202
• Docket Number: No. 65 Civ. 1001.,65 Civ. 1001.
• Parties: Alexander HENKIN, as Trustee in Bankruptcy of Towers Marts International, Inc., Plaintiff, v. ROCKOWER BROS., INC., Defendant.
• Decision Date: 03 May 1966

259 F. Supp. 202

Alexander HENKIN, as Trustee in Bankruptcy of Towers Marts International, Inc., Plaintiff,
v.
ROCKOWER BROS., INC., Defendant.

No. 65 Civ. 1001.

United States District Court S. D. New York.

May 3, 1966.

259 F. Supp. 203

Samuel P. Adelman, New York City, for plaintiff.

Otterbourg, Steindler, Houston & Rosen, New York City, for defendant; Arthur A. Greenfield, Kurt J. Wolff, New York City, of counsel.

LEVET, District Judge.

The plaintiff, Henkin, moves to strike

(1) defendant's first affirmative defense to plaintiff's second cause of action;

(2) defendant's second affirmative defense to plaintiff's second cause of action; and

(3) defendant's counterclaim to plaintiff's second cause of action

on the ground that said defenses and counterclaim are insufficient in law.

On April 5, 1963, Towers Marts International, Inc. (hereinafter "Towers") filed a petition for arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 701 et seq., and on April 23, 1963, Towers was adjudicated a bankrupt. On May 7, 1963, the plaintiff, Henkin, was duly elected Trustee in Bankruptcy of Towers and is now acting as said Trustee.

Prior to said bankruptcy, on April 19, 1961, Towers and defendant Rockower Bros., Inc. (hereinafter "Rockower") had entered into a so-called Master Licensing Agreement in the City of New York whereby Rockower agreed to operate leased men's wear departments in 18 stores owned by Towers. The results of that agreement are the subject of this suit and of the second cause of action which is in issue on this motion.

Plaintiff's second cause of action seeks to set aside a transfer of $67,566.12 from Towers to the defendant Rockower as a preferential transfer under Section 60 of the Bankruptcy Act, 11 U.S.C. § 96.

The complaint alleges:

1. that on February 18, 1963, Towers was indebted to defendant for over $100,000 for moneys received by Towers from the proceeds of sales made by defendant and its wholly-owned subsidiaries at the store premises operated by Towers;

2. that on February 18, 1963, within four months of filing its bankruptcy petition, Towers transferred to defendant $67,566.12 on account of an antecedent indebtedness;

3. that at the time of the transfer Towers was insolvent, and that defendant or its agents at the time of the transfer had reasonable ground to believe that Towers was insolvent;

4. that the effect of this transfer was to enable defendant to obtain a greater percentage of its debts over some other creditors of the same class.

Thus, plaintiff alleges all the elements of a preferential transfer and seeks to recover from defendant the said sum of $67,566.12 with interest from February 18, 1963.

Plaintiff now moves to strike out the first and second affirmative defenses and the counterclaim to this cause of action. The first affirmative defense asserts that plaintiff's second cause of action was not instituted within two years of the adjudication in bankruptcy and, hence, is barred by the statute of limitations.

259 F. Supp. 204

The second affirmative defense asserts that the monies which the defendant received were trust funds under the express provisions of the bankrupt's contract with defendant and that the payments to defendant could not, therefore, be preferential transfers. Alternatively, the defense alleges that plaintiff is estopped from maintaining this action because he has failed to commence actions against other persons identically situated to defendant, who received payments from the same fund to plaintiff's knowledge, and as to whom the statute of limitations has expired on such actions. The defense claims that this has caused a diminution in the size of any dividend which defendant could receive from such estate, and defendant counterclaims against the plaintiff, individually and as Trustee, for the dividend

THE DEFENSE OF THE STATUTE OF LIMITATIONS

The relevant statute of limitations is found in Section 11(e) of the Bankruptcy Act, 11 U.S.C. § 29(e), which provides:

"A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy. * * *"

Section 302 of the Bankruptcy Act, 11 U.S.C. § 702, further provides:

"§ 702. Application of other provisions

"The provisions of chapters 1 to 7, inclusive, of this title shall, insofar as they are not inconsistent with or in conflict with the provisions

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