In re Rieger, In re Kapner & Altmark

• Decision Date: 04 November 1907
• Docket Number: 1,651.
• Citation: 157 F. 609
• Parties: In re RIEGER, KAPNER & ALTMARK.
• Court: U.S. District Court — Southern District of Ohio

157 F. 609

In re RIEGER, KAPNER & ALTMARK.

No. 1,651.

United States District Court, S.D. Ohio, Eastern Division.

November 4, 1907

Louis Kramer and James N. Rosenberg, for receivers.

T. H Southard and E. F. O'Neal, for Kapner Bros. & Duga Hosiery Co.

SATER District Judge.

On the 17th day of August, 1907, a petition in involuntary bankruptcy was filed in this court against the partnership firm of Rieger, Kapner & Altmark, and Frank Rieger, Jacob Kapner, Adolph Kapner, and Louis Altmark, the four individuals composing such firm. The defendants other than Rieger, who had disappeared and whose whereabouts was unknown, answered, consenting to an adjudication against them respectively. On the 20th day of August a petition in involuntary bankruptcy was filed in the United States District Court for the Southern District of New York against the same parties, other than Jacob Kapner, who was subsequently, by amendment, brought into the case. Frederick C. McLaughlin was in that case appointed receiver of all of the property of the defendants, and on the 24th day of August he was directed to take possession of the hosiery mills of the Kapner Bros. & Duga Hosiery Company, an Ohio corporation operating at Zanesville, Dresden, and Frazeysburg, Ohio. The alleged bankrupts were restrained at the same time from interfering in any wise with the receiver in his possession and in his taking possession of the property, and this court was requested to assist the receiver in securing and maintaining possession of such property, and to make such ancillary orders as may be proper and requisite.

On the 26th day of August, on application of the petitioners filed in this court, C. T. Marshall and Frederick C. McLaughlin were appointed receivers of all the property belonging to the partnership firm, and directed to take charge of the same. On the same day an application was made to extend the receivership to the property of the above-named corporation which is alleged to be a subsidiary company to the partnership. The application recites that the capital stock of the corporation is $50,000, divided into 500 shares, all of which is owned by the partners, which certificates of stock constitute a part of the assets of the alleged bankrupts. Of the stock issued, shares of the face value of $27,200 are in the possession of McLaughlin as receiver. Other shares of the face value of $12,300 are held by Edward Moyse & Company, stockbrokers of New York City, who desire the receivers to take possession of the property of the corporation, and the residue of the stock, being the holdings of Jacob Kapner, is said to be held by the Guardian Trust Company, of Pittsburg, Pa. The application further charges that the confessed bankrupts are in control of the corporate business, that the partnership business which was conducted in the city of New York was abandoned on the 14th day of August, and that if the defendants be permitted to remain in control of the property and assets of the corporation they will remove and dispose of it, to the irreparable damage of the creditors of both the partnership and the corporation. The prayer of the application is that the receivers be given possession of the corporate property as part of the assets of the bankrupts' estate, and that the officers and agents of the corporation be enjoined from disposing of the corporation's property pending the hearing. On August 30th a hearing was had on such application. The corporation and the defendants other than Rieger, who has not appeared, resist the application to extend the receivership to the corporate property, and assert that the corporation has at all times since its organization existed as a separate and distinct entity, and is in no respect subsidiary to the partnership. At the time the proceedings in bankruptcy were commenced, of the 500 shares of authorized capital stock, 490 shares had been issued. Ten shares remained as treasury stock. Jacob Kapner, Louis Altmark, and Frank Rieger each owned 123 shares. R. Kapner, an uncle of Jacob Kapner, owned four shares; and Abe Kapner, son of Jacob Kapner, owned one share, which share was issued to him two years ago, when he was but 19 years of age. The residue of the issued stock, aggregating 116 shares, was owned by Adolph Kapner. The members of the partnership firm owned 485 shares of the outstanding stock, and relatives of Jacob Kapner owned the remaining 5 shares.

The corporation was organized in 1896, to manufacture hosiery, and was owned by the Kapners and Duga. The partnership was formed in 1901, and engaged in a commission business, selling hosiery and gloves, and in the manufacture of pants and coats. It asserts itself to be the sole agent of the corporation. The firm business was so loosely conducted that neither Altmark, who had charge of the hosiery department, nor Jacob Kapner could give any idea of its debts. The corporation and the firm each kept its own books and bank account, but the business between the corporation and the partnership has been so conducted that the state of accounts between them is in dispute, and, so far as the record shows, is unknown, although the partnership took the corporation's entire product, and the books of either concern ought to show the exact condition of the two concerns with reference to each other. Jacob Kapner, who was the president and treasurer of the corporation and in charge of its finances, was unable to state even approximately the condition of the account, or how much the corporation owed the firm, whether it was $60,000 or more. He professes not to know which owes the other, or when the corporation last invoiced. He bought the merchandise, and looked after the raw material for the corporation, and yet states that he does not know what the corporation owes, although, on further inquiry, he testifies that it owes between $60,000 and $70,000, in addition to the $118,000 mortgage given to O'Neal. The secretary, Abe Kapner, testifies that the past-due obligations of the corporation are from $150,000 to $200,000. Jacob Kapner first states that he could not recollect who the corporation directors were prior to the 29th day of August, although on that date the board of directors held a meeting at which he presided, and at which one was removed, and three, including himself, went through the formality of resigning. Further examination was required to develop from him that the board consisted of the four partners and his son, Abe. He disclaims knowledge of the firm's assets which are in New York, or an understanding of the firm books. He values the corporation's mills at $150,000, its trade-mark at $50,000, and its merchandise at from $140,000 to $150,000. Only one of the mills-- the one at Dresden-- is owned in fee, the other two being leased property. The witness Shore values the mills and machinery at $150,000. The value of the corporation's trade-mark and merchandise must be regarded as problematical. Jacob Kapner's ignorance, real or professed, about matters with which he ought to have been familiar, if he in fact was not so, reflects seriously on the value of his uncorroborated statements. He was either surprisingly ignorant or forgetful of his own affairs, or willing to conceal the facts regarding them. To meet its pressing obligations, the corporation, on August 20th, executed and delivered to O'Neal a mortgage for $118,000, securing 46 notes. These notes were negotiated by O'Neal, and the money realized therefrom, excepting about $6,000 which was due to himself, was advanced to the corporation. To meet its pay rolls it has been transferring its orders and accounts receivable to banks, as security for money advanced for that purpose. It has no bills receivable or outstanding accounts. As fast as these were made, down to the time of the institution of bankruptcy proceedings, they were turned over, sold, to the firm.

Are the partnership and the corporation separate and distinct legal entities, or is one subsidiary and auxiliary to the other? These are the questions to be answered, and, although Jacob Kapner and Altmark repeatedly assert that the partnership is the sole agent of the corporation, and that the two concerns exist and have existed as such entities, these questions must...