In re Klein

• Decision Date: 10 June 1922
• Citation: 281 F. 317
• Parties: In re KLEIN et al.
• Court: U.S. District Court — Northern District of New York

281 F. 317

In re KLEIN et al.

United States District Court, N.D. New York.

June 10, 1922

Joseph Krinsky, of New York City, for petitioners.

Costello Burden, Cooney & Fearon and George H. Cole, all of Syracuse N.Y. (D. F. Costello, of Syracuse, N.Y., of counsel), for Elsohn.

COOPER District Judge.

On October 10, 1921, and for some years prior thereto, Herman D Klein was engaged in the shoe business in the city of Auburn having two stores in said city. On that date a written agreement was entered into between Klein and William H. Elsohn, providing in substance that Elsohn should have a half interest in said shoe business. On or about January 14, 1922, an involuntary petition in bankruptcy was filed against the above firm. One of the partners, said William H. Elsohn (denominated as 'Joseph' Elsohn in the petition) answered, denying that the firm was insolvent, and denying any individual liability for the debts previously incurred by Klein. The question here is as to whether or not the firm should be adjudicated bankrupt. Inasmuch as no question is raised as to the bankruptcy of the firm, if the debts of Klein before the partnership were assumed by the partnership, the decision here must rest on the determination of the question of the assumption of the debts by the firm. The individuals are concededly without property other than their interest in the partnership.

The partnership agreement provided that prior to January 1, 1922, Elsohn should pay to Klein $2,000 to $2,500 toward the purchase price of a half interest in the firm, and that on January 1, 1922, an inventory at market value should be taken of the merchandise of the two stores, and that Elsohn should pay to Klein the remainder of the sum equal to a half interest in the 'equity.' The exact language in that respect, as quoted from the contract, is as follows:

'That thereafter and on the 1st of January, 1922, an inventory will be taken of the goods in the stores located at 40 and 46 Genesee street at a fair market value, and that the party of the second part hereby agrees that he will pay to the party of the first part the amount of equity which the party of the first part has in said merchandise.' Elsohn paid about $2,000 at or about the time of the making of the agreement, and subsequent thereto, and at one or more times, paid additional moneys, so that the total amount paid by him was $2,650, plus a note of $500, on which $150 was paid. The written agreement contained no reference to the liabilities which Klein had incurred for the goods constituting the merchandise to be turned over to the partnership, nor to any assumption of any debts whatever by Elsohn, except the necessary implication from the use of the word 'equity,' which must be interpreted as meaning the value of the goods in excess of the unpaid purchase price thereof.

Elsohn immediately became active in the business. The moneys deposited by him and moneys taken in after October 10th from the sale of these goods were deposited in the firm account. The moneys thus deposited were used to pay the expenses of the business and presumably payments to the partners in lieu of salaries. Some of the pre-existing debts were paid by the firm check. Some of such debts were paid by Klein individually, but as to some or all of these he was reimbursed by the firm check payable to him. Some of these payments of the pre-existing debts direct to the creditors,...