In re Windsor Plumbing Supply Co., Inc.

Decision Date07 July 1994
Docket Number190-11082-352 and 190-11123-352.,Bankruptcy No. 190-10224-352
Citation170 BR 503
PartiesIn re WINDSOR PLUMBING SUPPLY CO., INC., Debtor. In re WINDSOR SHOWROOM, INC., Debtor. In re WINDSOR WORLD, INC. a/k/a ABC Distribution Associates, Debtor.
CourtU.S. Bankruptcy Court — Eastern District of New York







Leo Fox, New York City, for debtors.

Chadbourne & Parke, New York City, for Cofacredit, S.A.

Platzer, Fineberg & Swergold, New York City, for Creditors Committee.


MARVIN A. HOLLAND, Bankruptcy Judge:

This is a claims estimation proceeding brought on by the creditor, Cofacredit, S.A. hereinafter "Cofacredit", "Creditor", "Plaintiff", or "Claimant" to establish the value of its claim against the debtors, Windsor Plumbing Supply Co., Inc., Windsor Showroom, Inc., and Windsor World, Inc. hereinafter "Debtors" or "Defendants", a wholesale dealer of plumbing fixtures and supplies and two retail plumbing supply operations respectively.


This Court has jurisdiction over this matter pursuant to 28 U.S.C. ?? 157 and 1334 and the Standing Order of Referral of Cases to Bankruptcy Judges for the Eastern District of New York dated August 28, 1986, found in Appendix 3 of Acolyte Electric Corp. v. New York, 69 B.R. 155, 186 (Bankr. E.D.N.Y.1986). This is a core proceeding pursuant to ? 157(b)(2)(B).


On August 27, 1990, Cofacredit filed a separate Proof of Claim against each of the Debtors in the amount of $3,502,860.1 Each Proof of Claim was based upon the facts alleged in an Amended Complaint hereinafter "Am.Compl. at ? ?€”" filed by Cofacredit in 1989 in the United States District Court for the Eastern District of New York against the Debtors and others. Each Proof of Claim has two components. The first is for $1,167,620, representing the amount claimed due from Windsor Plumbing Supply Co., Inc. hereinafter "Windsor Plumbing" under certain invoices factored by Cofacredit for merchandise allegedly shipped to Windsor Plumbing from France. The second component of each Proof of Claim is based upon treble damages under the Racketeer Influenced and Corrupt Organizations Act hereinafter "RICO".

Since the amount of the claim was unliquidated, the Creditor had the option of liquidating its claim either by vacating the stay as to its district court action and proceeding to a verdict, or by having this Court estimate the value of its claim. On February 2, 1992, Cofacredit made a motion to have this Court estimate the value of its claim pursuant to 11 U.S.C. ? 502(c)(1). The Court granted the motion. Both the Debtors and Cofacredit waived a hearing and elected to have the Court make its estimate based upon submitted papers.


This case arises out of an international invoice factoring agreement hereinafter "Factoring Agreement" between Holleville et Duverger hereinafter "HED-France" a French plumbing fixture concern and Cofacredit, a French financial services company. Sholam Weiss, the sole shareholder of Windsor Plumbing, entered into an agreement hereinafter "Distribution Agreement" with HED-France and formed Holleville et Duverger U.S.A., Inc. hereinafter "HED-USA", to market French plumbing fixtures in the United States. Meanwhile, HED-France factored Cofacredit's invoices representing claimed sales of plumbing fixtures to Windsor Plumbing. Windsor Plumbing denied liability for payment on the invoices, claiming that there were no sales of inventory to it since the inventory had been received on consignment to HED-USA. Cofacredit thereafter filed an action against Windsor Plumbing and others, which is presently pending in the United States District Court for the Eastern District of New York.


The Plaintiff in the action out of which this estimation proceeding arose, Cofacredit, is a Paris, France-based financial services company. (July 9, 1992 "Statement of Facts, Both Disputed and Undisputed Being Asserted by Each of the Parties" (Plaintiff's statement) ? 56 hereinafter "Pl.'s SOF" at ? ?€” or "Debtors' SOF" at ? ?€”.)2 During 1987 and 1988, Alain Jarry hereinafter "Jarry", and in 1988 Philippe Berthelier hereinafter "Berthelier", were executives of Cofacredit. (Pl.'s SOF at ? 63.)

The Defendants in the district court action are the Debtors, Windsor Plumbing, a Brooklyn-based plumbing wholesaler; Windsor World, Inc. hereinafter "Windsor World", a plumbing retailer with a showroom in Manhattan; (Debtors' SOF at ?? 4-5), HED-USA, the Brooklyn-based company set up to market HED-France products in the United States; and Sholam Weiss, the controlling shareholder, officer, and director of HED-USA in 1988. (Debtors' SOF at ? 3.) Sholam Weiss was also the sole stockholder and officer of Windsor Plumbing in 1987 and 1988, and both a controlling stockholder and officer of Windsor World. The parties differ slightly as to Mr. Weiss' various positions. During 1988, Moses Weiss and Hersch Lipszyc hereinafter "Lipszyc" were employees of HED-USA. Moses Weiss was also an officer of Windsor Plumbing. However Cofacredit, who named them as parties to the action, claims that Lipszyc and Moses Weiss held additional titles in Windsor World and Windsor Plumbing. (Debtors' SOF at ?? 8-9.)

Also named as a Defendant is HED-France, a French company with a place of business in Bethencourt-sur-mer, France. HED-France was in the business of designing, manufacturing, and selling deluxe kitchen and bathroom brass faucets and hardware. In 1987 and 1988, Erich Brandli hereinafter "Brandli" was a key executive of HED-France and represented himself as its president, according to the Debtors, (Debtors' SOF at ? 10.) Although Cofacredit acknowledged only that Brandli was a key executive and no more. (Pl.'s SOF at ? 64.)


The relationship between HED-France and the Weiss brothers began in January, 1988 when Moses Weiss met Brandli in a Paris trade show where HED-France was an exhibitor. (Debtors' SOF at ? 11.) Brandli told Moses Weiss that HED-France had some inventory in a St. Louis warehouse which it was unable to sell. (Debtors' SOF at ? 12.) He asked Moses Weiss whether Windsor Plumbing would evaluate the products for the United States market. (Debtors' SOF at ? 13.) Windsor Plumbing agreed, and in January 1988, HED-France shipped the products from St. Louis to Windsor Plumbing's warehouse in Brooklyn. (Debtors' SOF at ? 14.) Windsor Plumbing evaluated the products and advised HED-France that the products in their present state were unsuitable for the United States market, but that they could be successfully modified. (Debtors' SOF at ? 15.)

Later in January 1988, Sholam Weiss agreed to redesign the products for use in this country, but only if HED-France would grant him an exclusive right to distribute the products of HED-France in the United States. (Debtors' SOF at ? 16.) In order to accomplish the distribution, Sholam Weiss set up a separate company. This was done to enable the HED-France products to be distributed to competitors of Debtors who might be reluctant to purchase from Windsor (Debtors' SOF at ? 18). Moreover, he believed that a new entity could raise the substantial capital necessary to cover the costs of packaging, storage space, and a marketing campaign. (Debtors' SOF at ? 17.)


According to the Debtors, Sholam Weiss arranged for the redesign of the HED-France line and negotiated a Distribution Agreement ultimately signed on March 17, 1988. (Debtors' SOF at ? 19.) The Debtors claim that Brandli travelled to the United States from France to sign this agreement on behalf of HED-France. Id. The Debtors further claim that the Distribution Agreement provided for HED-France to furnish HED-USA with a revolving inventory having a minimum value of two million dollars. (Debtors' SOF at ? 23.) The Debtors contend that HED-USA needed such a large inventory to enable it to make deliveries promptly without encountering the difficulties normally encountered when goods are imported only in response to orders. Id. The Debtors further contend that the warehouse of HED-USA was filled with HED-France products sent on consignment so that any obligation of payment by HED-USA would arise only if and when the consigned products were sold. Id.

The Debtors assert that HED-USA guaranteed to HED-France, minimum sales of $400,000 in 1988, $1,000,000 in 1989, $1,500,000 in 1990, $1,800,000 in 1991, and $2,000,000 in 1992. (Debtors' SOF at ? 24.) The Debtors also contend that HED-France agreed to replace all consignment inventory sold. Id. The Plaintiff makes no mention of the terms of the Distribution Agreement.

According to the Debtors, from January though March 1988 while the Distribution Agreement was being negotiated, HED-France shipped merchandise to the United States in closed 4-foot by 4-foot crates which were to be stored unopened in Windsor Plumbing's warehouse until the HED-USA warehouse was established. (Debtors' SOF at ? 25.)

The Debtors maintain that in early March 1988, Brandli telephoned Sholam Weiss from France requesting an advance of funds against the minimum sales guaranteed under the Distribution Agreement. (Debtors' SOF at ? 31.) The Debtors assert that Brandli requested these funds be used to help offset costs incurred in the modification of the plumbing fixtures for the United States market. Id. The Debtors claim that the funds were to be paid to Societe Generale, the bank to whom HED-France allegedly owed money under a direct loan. (Debtors' SOF at ? 32.) The Debtors further claim Brandli also asked Sholam Weiss to advise Societe Generale that funds would be forthcoming once a Distributorship Agreement was signed. (Debtors' SOF at ? 33.) The Debtors assert that neither...

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