In re Berkowitz
| Decision Date | 01 April 1908 |
| Citation | 173 F. 1013 |
| Parties | In re BERKOWITZ. |
| Court | U.S. District Court — District of New Jersey |
Julius Henry Cohen and Henry F. Wolff, for creditors.
Louis Hood, for bankrupt.
The Berkowitz Tailoring Company was incorporated shortly before the petition in bankruptcy was filed. The bankrupt was then insolvent; and conveyed all his assets to the company for an alleged consideration of $1,500. The incorporators were the bankrupt and three of his brothers-in-law. These brothers-in-law seem to have paid into the corporation for its capital stock, the sum of $2,000, and the bankrupt $25. The brothers-in-law made no inquiry concerning the quantity or value of the property transferred to the company by the bankrupt. and pave nothing whatever to do with the business of the company. If they did i, fact pay $2,000 into the treasury of the corporation, it is clear that their purpose was not to invest that sum in the business on their own account, but to aid the bankrupt in business that was to be treated by him as his own, and not as a business in which they had any interest whatever. The corporation was intended to operate as a cloak to shield the property from seizure by the bankrupt's creditors. Obviously it was a fraud upon the creditors of the bankrupt. The referee's orders of September 26 and 27, 1907, directing the receiver to seize the property in possession of the company, were amply sustained by the proofs, and will be confirmed.
The order of February 13, 1908, will also be confirmed. After the taking of much testimony subsequent to the orders of September 26 and 27, 1907, the referee, on the petition of the trustee, granted a rule, dated January 18, and returnable January 27, 1908, requiring the bankrupt to show cause why he should not turn over to the trustee moneys and property not accounted for by the bankrupt. For some reason which I do not find disclosed in the record the bankrupt secured an extension of two weeks after January 27th in which to file his answer to the petition. He filed such answer on February 11th. The petition of the trustee, filed as above stated on January 18th, showed amongst other things that the bankrupt mailed to Julius Magnus a statement of the assets and liabilities of the Berkowitz Tailoring Company, showing its assets to be $32,837.30 (including over $18,000 of merchandise and over $4,600 of accounts receivable), and liabilities for capital stock to the amount of $25,000. This statement was dated April 5, 1907, only about three weeks after the company was incorporated. The proofs seem to show that payments for capital stock had amounted only to $2,025 and...
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