In re Chubby's Parkchester

• Decision Date: 03 January 1951
• Citation: 94 F. Supp. 701
• Parties: In re CHUBBY'S PARKCHESTER, Inc.
• Court: U.S. District Court — Southern District of New York

94 F. Supp. 701

In re CHUBBY'S PARKCHESTER, Inc.

United States District Court S. D. New York.

January 3, 1951.

William Stephen Brown, New York City, for trustee.

Philip F. Schneider, New York City, for petitioner.

SUGARMAN, District Judge.

Petition to review a bankruptcy referee's order which dismissed the petition and denied the motion of Universal Factors, Inc., (hereinafter referred to as Universal) to recover from the trustee in bankruptcy, certain personal property in his possession, allegedly covered by two chattel mortgages wherein the corporate bankrupt, Chubby's Parkchester, Inc. (hereinafter referred to as the corporation) was mortgagor and Universal was mortgagee, and which order adjudged the said chattel mortgages void.

Prior to August 15, 1949, one David Zeeman individually owned and conducted a confectionery business under a trade name. He was in need of money. A broker arranged for a loan to be made to Zeeman by Universal. Zeeman was informed by one Goldhirsch, his attorney, that, before the loan would be made, the business would have to be incorporated, to enable Universal to exact a greater rate of interest than could have been legally undertaken by Zeeman individually. To obtain the loan, Zeeman consented to the formation of the corporation by Goldhirsch. The certificate of incorporation, filed August 5, 1949, listed Goldhirsch, and Feldman, and Carsons, employed in Goldhirsch's office and unknown to Zeeman, as the three directors until the first annual meeting of stockholders and each as a subscriber for one share of no par value common stock.

On August 15, 1949, certain events occurred, the chronology of which remains undisclosed by the record. The minutes of the corporation show that, at ten A. M. on that day, the incorporators, Goldhirsch, Feldman and Carsons, met at Goldhirsch's office and elected Goldhirsch as chairman and Feldman as secretary of the meeting. No waiver of notice of that meeting was executed by the incorporators. By-laws were adopted. They provided, among other things, that there be three directors none of whom need be stockholders; that there be a president, a vice president, a secretary and a treasurer; that the only officer authorized to execute the corporation's notes be the treasurer and that no other officer undertake so to do. Nowhere in the minutes of the incorporators' meeting does it appear that the corporation entertained any proposal from Zeeman for the transfer of his business to the corporation. The minutes of the incorporators' meeting were signed by Goldhirsch as chairman, and Feldman as secretary.

According to the minute book, simultaneously, at ten A. M. on August 15, 1949, there was also a meeting of the directors of the corporation, named in the certificate of incorporation. The same three, Goldhirsch, Feldman and Carsons, but now as directors, executed a waiver of notice of the first directors' meeting. They elected Goldhirsch temporary chairman, to act as such until relieved by the president, and Feldman temporary secretary until relieved by the permanent secretary. The actions of the incorporators were "ratified, approved and confirmed", as were the by-laws. No officers were elected. No proposal from Zeeman for the transfer of his business to the corporation was entertained, considered or acted upon. The temporary chairman and temporary secretary did not subscribe their names to the minutes.

Goldhirsch, Feldman and Carsons also, on August 15, 1949, each, by letter addressed to the corporation, resigned as a director thereof, "said resignation to take effect immediately". The incorporators did not assign their subscriptions to anyone. No stock certificate was ever issued to anyone and no entry was ever made in the stock book.

On the same day, August 15, 1949, Zeeman executed a bill of sale to the corporation wherein, for an undisclosed "sum of lawful money of the United States", he sold it "the confectionery and stationery business". Annexed to the bill of sale was a schedule, listing numerous fixtures, and a statement in the form of an affidavit of title, signed by Zeeman, but unsworn.

On the same day, August 15, 1949, the corporation executed and delivered to Universal the first of the alleged chattel mortgages involved herein. It recited the sale by the corporation to Universal of the fixtures identified in a schedule annexed thereto, as security for the payment by the corporation to Universal of an $8700 indebtedness, evidenced by twenty-seven promissory notes. Zeeman placed his signature at the foot of each page of the schedule except the last. There appeared at the end of the entire instrument the words "Chubby's Parkchester, Inc., David Zeeman", and the seal of the corporation. No designation of Zeeman as an officer of the corporation appeared at that point of the document. There was, however, appended to the instrument an affidavit by Zeeman, stating that he "is President of Chubby's Parkchester, Inc.", and that the chattels described in the instrument were free of encumbrances. This affidavit was executed "Chubby's Parkchester, Inc., David Zeeman" and notarized. There was also appended to the instrument a corporate acknowledgement by a notary public that some unnamed person appeared before said notary and deposed that "he is the President of Chubby's Parkchester, Inc.", and that he executed the instrument, and affixed the seal by the order of the board of directors of the corporation. These papers were filed, as a chattel mortgage, in the City Register's office on August 17, 1949.

Further, on the same day, August 15, 1949, Zeeman signed an unacknowledged document, claiming that he was the owner of ten shares of the stock of the corporation, aggregating two thirds of its outstanding shares and that he consented to the procuring of a $7500 loan (not $8700) pursuant to a chattel mortgage simultaneously executed by the corporation to Universal.

Later, and on March 17, 1950, a second alleged chattel mortgage, which is part of the subject matter of the present review, was executed. It is on a printed form similar to the earlier one and has attached thereto a rider, subscribed at the foot thereof "Chubby's Parkchester, Inc., David Zeeman". At the foot of the instrument proper, there is the signature "Chubby's Parkchester, Inc., David Zeeman", with the seal of the corporation but again, no designation of Zeeman as an officer of the corporation. No affidavits or acknowledgements (similar to those...