IN RE v. LOEWER'S GAMBRINUS BREWERY CO.

• Decision Date: 07 May 1947
• Parties: In re V. LOEWER'S GAMBRINUS BREWERY CO.
• Court: U.S. District Court — Southern District of New York

74 F. Supp. 909

In re V. LOEWER'S GAMBRINUS BREWERY CO.

District Court, S. D. New York.

May 7, 1947.

Finke & Jacobs, of New York City (Marcy Finke, of New York City, of counsel), for claimant-petitioner.

Glass & Lynch, of New York City (Leslie Kirsch and Sidney Freiberg, both of New York City, of counsel), for trustee.

BRIGHT, District Judge.

Loewer Realty Company petitions for a review of an order made by the Honorable John J. Joyce, referee in bankruptcy, subordinating its claim for $48,138.39, to the claims of all other creditors of the estate.

Claimant on April 20, 1943, filed proof of claim in the sum of $49,519.63, of which $45,000 was represented by a promissory note dated March 28, 1941, $2700 interest thereon, and $1819.63 for rent. Objection was filed by the trustee on November 28, 1944, on the ground that the debtor was not justly and truly indebted to the claimant. A bill of particulars was thereafter furnished which stated that the rental agreement was oral and was made on or about February 12, 1930, by Jacob Loewer, Henry D. Muller, Sr. and Ida Loewer, president, treasurer and secretary respectively of the claimant, with the board of directors of defendant, as then constituted, the names of whom were not known to claimant. The rental claim was for the use of the premises at 536-38 West 41st Street, New York City, at $3750 per annum ($312.50 per month), 540-542 West 41st Street, at $1250 per annum ($104.16 per month) and 535 West 40th Street at $1875 per annum ($156.25 per month). Upon the trial, the claim was amended by reducing the amount to $48,138.39 and substituting the premises 536-42 West 41st Street as those for which rent was sought.

The referee found the following facts, which do not seem to be disputed:

The debtor was engaged in the manufacture and sale of beer and owned 528-532 West 42nd Street, where it had its office, and 521-523 West 41st Street, which it used as a brewery and for cold storage. Claimant was the record owner of 536-538 West 41st Street, which were used by the debtor as a bottling plant and garage respectively.

Prior to 1923 and at all times thereafter, the debtor and claimant each had the same officers, directors, and stockholders; the two corporations kept separate books and bank accounts, but had common office space and telephone facilities in the building owned by the debtor, whose office manager kept claimant's books without charge, and when other employees of the debtor performed service for the claimant, except the president who received a nominal salary from the claimant, they were paid only by the debtor. All transactions between claimant and debtor were conducted, approved and effected through the same group of officers, directors or stockholders; and each of the corporations was an integral part of an enterprise owned, controlled and directed by the same group of persons as stockholders for their own benefit; and moneys and property of each corporation were applied under the direction of the stockholders for the benefit of the other as a branch or department of a joint enterprise owned and controlled by the same persons for their own benefit.

It was also found that the note underlying part of the claim bears date March 28, 1941, and was made in the debtor's name by Kenneth P. Steinreich, as president and Henry D. Muller, as treasurer, and both were similar officers of the claimant. It was entered in the debtor's general ledger on May 31, 1941, and was executed as evidence of a purported indebtedness comprising (1) a loan account commencing in January 1923, and (2) a rental account commencing in May 1928.

The credit balance in favor of claimant was $35,154 at the end of each of the years 1935, 1936 and 1937. After 1935, the claimant was not credited with any loan but in 1941 was credited in the amount of $2,000, the character of which does not appear; and no other entries except for interest appear in the loan account after 1935.

It was further found that in 1932 claimant's three directors passed a resolution which recited that the two corporations were owned by the same individuals and were affiliated companies in fact, and directed its officers to assign its claim against the debtor to a bank as security for repayment of moneys borrowed by the debtor. At a joint meeting of stockholders of both corporations, held May 18, 1933, it was resolved that all of the assets of the respective companies, with certain exceptions, be sold, upon terms of sale to be fixed by the president, either by a direct sale or by transfer of assets to the stockholders and sale by them, or by transfer of the capital stock to the purchasers, or in such other manner as might be calculated to avoid or reduce taxes; and at a similar meeting on September 18, 1933, they considered a conditional offer by a prospective purchaser for such assets. On December 13, 1940, the stockholders of each corporation adopted separate but identical resolutions that the directors be instructed to receive and consider a proposal to purchase all the property of both corporations.

On December 3, 1940, the debtor's stockholders authorized a mortgage for $20,000 upon the 42nd Street property, the proceeds of which were to be applied to the discharge of all arrears of taxes, mortgage interest and other charges against the claimant's property; and out of the proceeds of that loan, the debtor on December 31, 1940, paid $5,671.33 taxes on the claimant's property at 530-538 West 41st Street, $3,973.75 for interest on a mortgage on part of those premises, and $1361.25 on mortgages covering the property.

On January 27, 1941, the debtor's directors authorized the sale of realty in Far Rockaway, the title to which was in the name of the claimant, and on the same day the same persons as directors of the claimant, adopted an identical resolution.

On April 25, 1941, the debtor's stockholders rejected a written proposal for an exclusive authorization to dispose of all of the realty between 40th and 42nd Streets and 10th and 11th Avenues, for a fixed sum, and on the same day, the same as stockholders of the claimant adopted a resolution that claimant combine with the debtor in negotiating a mortgage loan on the properties of both corporations. On November 24, 1941, the stockholders of both corporations at a joint meeting granted one stockholder an exclusive agency for two weeks to negotiate the sale of the assets of both corporations; and at their adjourned meeting on December 2, 1941, instructed the officers and directors of "the corporation," in the event a contract of the sale was executed, to make other arrangements for the continuance of the brewery.

It was also found that the debtor, in conjunction with Monarch Beer Sales Corp., a wholly owned subsidiary, sustained net losses amounting to $5,373 for the first quarter of 1934, $4,000 for 1935, $48,000 for 1937, $14,000 for 1938 and $70,000 for 1940. And at the annual meeting of the debtor's stockholders on March 28, 1941, the date of the promissory note, the vice president reported that the debtor lost $70,000 in 1940, that creditors were then, or at the time the mortgage was negotiated on December 3, 1940, about at the end of their patience, and that the bank was not aware of the debtor's serious situation.

Upon these findings of fact, the referee...