Trask v. Susskind
| Decision Date | 05 April 1967 |
| Docket Number | No. 23051.,23051. |
| Parties | David L. TRASK, Trustee in Bankruptcy of Magic Spuds, Inc., et al., Appellants, v. Carl SUSSKIND et al., Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Irving M. Wolff, Miami, Fla., for appellants.
A. M. Sandler, Martin L. Sandler, of Sandler & Sandler, Eugene C. Heiman, of Heiman & Heiman, Miami, Fla., for appellees.
Before GEWIN and GOLDBERG, Circuit Judges, and SPEARS, District Judge.
This suit was brought as a plenary action by David L. Trask, Trustee in Bankruptcy for six Florida corporations, Magic Spuds, Inc.; Miami Produce Company; United Wholesale Grocers, Inc.; Produce Distributors, Inc., hereinafter called Produce; Frankmaster Food Products, Inc., hereinafter called Frankmaster; and Abco Trading Company. The suit was brought against Edward Dokson, Harriet Dokson and Jack Weinstein, who were stockholders, officers, and/or directors of the bankrupt corporations, and against Carl and Martha Susskind, individually, and as Trustees for their minor children, who were directors and stockholders of United Purveyors, Inc., and against United Purveyors, Inc., hereinafter called United Purveyors.
The six bankrupt corporations were operated as a unit and were engaged in selling wholesale produce, including fresh fruits and vegetables, frozen foods and canned goods to restaurants, hotels and other large establishments in and around Miami, Florida.
The petition alleged certain violations of the Bankruptcy Act, namely, 11 U.S.C. §§ 46, 96, 107, and 110, in that the bankrupt corporations had attempted to defraud creditors by making certain preferential transfers of corporate assets to United Purveyors. The case was heard without a jury and at the close of plaintiffs' evidence the trial court entered an "involuntary dismissal" under Rule 41 (b) F.R.Civ.P. From that action this appeal was taken.
Three questions are presented: First, whether the bankrupt corporations made a fraudulent transfer of goodwill and customer lists to United Purveyors; Second, whether Produce made a fraudulent transfer of a leasehold interest to United Purveyors; and Third, whether the trial court erred in refusing to allow appellants' expert witness to testify because appellants' attorney had not furnished to opposing counsel an extract of his testimony prior to trial as required by the pre-trial stipulation.
When the trial court entertains a motion for involuntary dismissal under Rule 41(b) F.R.Civ.P., it becomes his duty to weigh the evidence. If he finds plaintiff's evidence insufficient and grants the motion, he must make findings of fact and conclusions of law. This was done. In order to prevail on their contentions regarding the fraudulent transfer of goodwill, customer lists and leasehold interest, appellants must necessarily show that the trial court's "findings of fact and conclusions of law" concerning these questions are "clearly erroneous." Benton v. Blair, 228 F.2d 55 (5th Cir. 1956), Daniel v. United States, 234 F.2d 102 (5th Cir. 1956) cert. den. 352 U.S. 971, 77 S.Ct. 362, 1 L.Ed.2d 324. See also Palmentere v. Campbell, 344 F.2d 234 (8th Cir. 1965), Ellis v. Carter, 328 F.2d 573 (9th Cir. 1964), United States v. Huck Manufacturing Co., 227 F.Supp. 791 (E.D.Mich.1964) affirmed 382 U.S. 197, 86 S.Ct. 385, 15 L.Ed.2d 268, Global Commerce Corporation v. Clark-Babbitt Industries, Inc., 255 F.2d 105 (2nd Cir. 1958). Since we are not left with the definite and firm conviction, based upon the entire evidence, that a mistake has been committed in relation to the findings and conclusions, and since we feel that the trial court properly exercised its discretion in refusing to allow appellants' expert to testify, we affirm.
In 1952, Carl and Martha Susskind caused a loan of $100,000 to be made on behalf of their two minor children to Benel, Inc. Benel, in turn, loaned a portion of the money to Frankmaster and Produce, who secured the advances by assigning their accounts receivable. Benel used the remainder of the money to purchase delivery trucks which were rented to the bankrupts. As security for the $100,000 loan, the corporate capital stock of Benel was endorsed in blank and deposited with Susskind and the accounts receivable of Benel were pledged to Susskind. No payments of principal were ever made on the loan, but interest in varying amounts was paid periodically.
Appellants' theory of the case was that during the summer of 1961, Susskind learned of the critical financial condition of the corporations, and after an unsuccessful attempt to secure further collateral on the $100,000 loan, he exercised his option to purchase the stock of Benel, and thereby caused the six corporations to declare bankruptcy. They argue that in order to maximize their personal gain, to the detriment of creditors, the appellees devised a scheme to transfer the goodwill and business customers of the bankrupts to another corporation called United Purveyors. At this time the stock of United Purveyors was wholly owned by the Susskind family and the individual members of the family were its officers and directors.
To support their contention of fraudulent transfer of assets, appellants proved that on August 26, 1961, the day after the six corporations ceased doing business, Edward Dokson and Jack Weinstein, both of whom had previously solicited business for the bankrupt corporations, began soliciting business on behalf of United Purveyors. Further, United Purveyors, which had previously sold only frozen seafood, immediately expanded its line of products to include most products handled by the six bankrupts. Weinstein and Dokson informed their customers that in the future they would be billed by United Purveyors, and not by the bankrupt corporations. The trial court found that appellants had failed to establish that the bankrupts had suffered any damage as a result of these activities. In doing so, it relied on evidence that the customer names and businesses to which the bankrupts sold were readily obtainable in classified telephone directories and other similar sources. There was also evidence that United Purveyors was already familiar with the customers of the bankrupts since United Purveyors had been soliciting their business in frozen seafood products for some time before the bankrupt corporations ceased doing business.
"Goodwill" may, under proper circumstances constitute an asset in the hands of the trustee, and as this Court held in Sawilowsky v. Brown, 288 F. 533 (5th Cir. 1923), the sale of a bankrupt business by the trustee may validly include the...
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