In re Atlas Foundry Company, B-90-55.
Decision Date | 17 October 1957 |
Docket Number | No. B-90-55.,B-90-55. |
Citation | 155 F. Supp. 615 |
Parties | In the Matter of ATLAS FOUNDRY COMPANY, a Corporation of New Jersey, Bankrupt. |
Court | U.S. District Court — District of New Jersey |
McGlynn, Stein & McGlynn, Newark, N. J., by Edward R. McGlynn, Newark, N. J., for Meyer Bornstein, Sarah Bornstein and Anne B. Abrams Sobel.
Holders of a mortgage, dated January 22, 1953, upon the plant real estate of the bankrupt corporation, have petitioned this Court, pursuant to 11 U.S.C.A. § 67, sub. c, for review of an order, dated May 8, 1957, made by the Referee and adjudging the mortgage invalid against bankrupt's Trustee. The following questions are presented by the Referee's Certificate of Review:
1. May stockholders of a corporation, through use of a fictitious consideration, obtain a mortgage on the realty of the corporation as part consideration for the sale of their shares of stock in the corporation?
2. In a subsequent Chapter XI, 11 U.S.C.A. § 701 et seq., proceeding involving the corporation, does the execution of an extension agreement regarding the mortgage estop the present Trustee in bankruptcy from questioning the validity of the mortgage?
So much of the factual background as appears established in the record, and was found by the Referee, may be set forth in the language of the Referee's said Certificate as follows:
The Referee correctly concluded that the mortgage in question is invalid against the Trustee of the bankrupt because its execution by the bankrupt and acquisition by the present holders was achieved with the knowledge and collusive cooperation of such holders by way of circumvention of the legal obstacle prohibiting the bankrupt from mortgaging its assets to pay its stockholders for their stock.
Counsel for the mortgagees (hereinafter referred to as the Bornsteins) concede that the bankrupt could not make a valid mortgage direct to the Bornsteins as part of the consideration for the sale of their stock in the bankrupt corporation. At page 5 of the Bornsteins' brief we read:
"Everyone...
To continue reading
Request your trial-
In re Suburban Motor Freight, Inc.
...Bank v. Desert View Bldg. Supplies, Inc., 475 F.Supp. 693 (D.Nev.1978), aff'd mem., 633 F.2d 225 (9th Cir.1980); In re Atlas Foundry Co., 155 F.Supp. 615 (D.N.J. 1957); Zuk v. Hale, 114 N.H. 813, 330 A.2d 448 (1974). This analysis requires a court to examine the ability of the debtor to gen......
-
In re Vaniman Intern., Inc.
...under circumstances similar to those present here. M.V. Moore & Co. v. Gilmore, 216 F. 99 (4th Cir. 1914); In re Atlas Foundry Co., 155 F.Supp. 615 (D.N.J.1957); Duberstein v. Werner, 256 F.Supp. 515 (E.D.N.Y.1966); In re Roco Corp., 15 B.R. 813, 8 B.C.D. 582, 5 C.B.C.2d 921 (Bkrtcy., D.R.I......
-
Roxbury State Bank v. The Clarendon
...151 P.2d 410 (Sup.Ct.1944); Steph v. Branch, 255 F.Supp. 526 (E.D.Okl.1966), aff'd 389 F.2d 233 (10 Cir. 1968); In re Atlas Foundry Company, 155 F.Supp. 615 (D.N.J.1957); Martin v. General Finance Co., 239 Cal.App.2d 438, 48 Cal.Rptr. 773 (D.Ct.App.1966); Catabene v. Wallner, 16 N.J.Super. ......
-
In re Vadnais Lumber Supply, Inc.
...v. Desert View Bldg. Supplies, Inc., 475 F.Supp. 693 (D.Nev.1978), aff'd without opinion 633 F.2d 225 (9th Cir.1980); In re Atlas Foundry Co., 155 F.Supp. 615 (D.N.J.1957); Zuk v. Hale, 114 N.H. 813, 330 A.2d 448 Unreasonably small capitalization is not the equivalent of insolvency in eithe......