Court Opinion

ID: 8591949
Source: CourtListenerOpinion
Date Created: 2022-11-23 15:50:51.738652+00
Date Added: 2024-06-11T16:54:32.849685
License: Public Domain

Whitaker, Judge,
dissenting:
The majority opinion shows that Krolman offered to purchase the remaining assets of Lane I on behalf of a group which was using the trade name of Lane Industries. This group turned out to be Krolman and Staudt. Krolman and Staudt then formed a corporation, designated in the majority opinion as Lane II, and Krolman transferred to it the claim of Lane I under the Lucas Act. Under these circumstances I think Krolman was acting as the agent of Lane II when he purchased these assets and, therefore, that the sale by the Bankruptcy Court should be considered as a sale to Lane II and, hence, not within the Anti-Assignment statute as that statute has been construed.
ITNDINGS OF FACT
The court, having considered the evidence, the report of Trial Commissioner Mastín G. White, and the briefs and argument of counsel, makes findings of fact as follows:
1. (a) This suit was instituted on September 10, 1948 by Lane Industries, Inc., under the provisions of the so-called Lucas Act (Public Law 657, 79th Cong., 60 Stat. 902, as *721amended by section 37 of Public Law 773, 80th Cong., 62 Stat. 869,992).
(b) Lane Industries, Inc., seeks to recover on the basis of an overall net loss allegedly incurred by another corporation, the Lane Lifeboat & Davit Corporation, during the period between August 24, 1942 and August 17, 1945 in the performance of more than 200 contracts for the furnishing of lifeboats and lifeboat equipment to departments and agencies of the defendant. It appears from an exhibit which is annexed to and made a part of the petition, as amended, that the alleged losses were restricted to 12 of the contracts, as follows:
„ , Amount of Contract alleged loss
SRF 1-50423_ $3. 03
986 _ 1,200.00
NX-MC44-6659 _ 160. 00
S0-6422 _ 6,230.64
PHMC44r-2918 _ 310.00
PHMC44-3002 _ 110.00
PRMC44r-3350 _ 150.00
S0-677 _ 50.00
PHMC45-5285 _ 4.06
NYMC45-4118 ___ 149.50
MCc-10054 _ 177,852.40
MCc-16028 _ 123, 288.15
However, the alleged losses under the contracts listed above were offset in part by profits that were made in the performance of other contracts, with the result that the net overall loss amounted to $237,823.75, according to the allegations in the petition, as amended.3
(c) The petition, as amended, alleges that in August 1948 Lane Industries, Inc., acquired by purchase the claim of the Lane Lifeboat & Davit Corporation under the Lucas Act.
2. Pursuant to Pule 38 (b), the court on October 20,1954, entered an order directing that a separate trial be held with respect to the following issues of law and related issues of fact
1. Whether under the law plaintiff is entitled to recover in view of the fact that plaintiff was not the original contractor but is the successor in interest to the original contractor through reorganization proceedings.
*7222.Whether the written request for relief contained in the letter of March 12,1944 set out in paragraph 4 of the answer, satisfies the requirements of the Lucas Act.
3. With regard to the issues outlined in the court’s order of October 20, 1954, the Lucas Act in section 1 authorizes the consideration, adjustment, and settlement of the “equitable claims of contractors, including subcontractors and material-men,” who incurred losses between September 16, 1940 and August 14,1945 in furnishing work, supplies, or services for any department or agency of the United States under a contract or subcontract; but the act states in section 3 that any such claim shall be limited to losses with respect to which “a written request for relief was filed with such department or agency on or before August 14,1945.”
4. The defendant’s contractor, Lane Lifeboat & Davit Corporation, was the first of three related corporations to use the word “Lane” as part of the corporate name. When mentioned hereinafter, this corporation will usually be referred to as “Lane I”.
5. (a) Lane I was engaged for many years in the business of manufacturing and selling lifeboats, davits, and winches. At the time when participation by the United States in World War II began, Lane I was a well-established company in its field.
(b) During the period, between August 24, 1942 and August 17, 1945, Lane I entered into many contracts with departments and agencies of the defendant pursuant to which Lane I manufactured and furnished lifeboats and lifeboat equipment to the defendant.
6. From 1923 until 1946, Anthony Staudt (hereinafter usually referred to as “Staudt”) was a supplier for Lane I, selling it bronze castings, masts, rudders, and other items for its lifeboats. In addition, Staudt was a subcontractor under some of the contracts between Lane I and the defendant referred to in paragraph (b) of finding 5. Staudt conducted his business through two corporations that were wholly owned by him, namely, A. Staudt Company, Inc., and Globe Brass Foundry & Pattern Corporation.
7. (a) Under the date of March 12,1944, Lane I wrote the following letter to the United States Maritime Commission:
*723IT. S. Maritime Commission Washington, D. C.
Subject: Purchase Order PD-MC-43-5716 — 22' Metallic Lifeboats
PD-MC-43-14583 — 24' Metallic Lifeboats
Gentlemen:
From the attached memo it can be seen that in spite of our best efforts our production costs for the above contracts are such as to result in losses even before general or administrative overhead charges are supplied.
It is our understanding that according to the rules of equity, we are entitled to ask for relief which, in this case, would be a unit price increase to provide at least a minimum profit.
We await your decision with interest.
Yours very truly,
Lane Lieeboat & Davit Core.
Walter J. Krolman,
President.
(b) The “attached memo” referred to in the letter dated March 12,1944 is not in evidence.
(c) The present action is largely based on losses that were allegedly incurred by Lane I in the performance of the two contracts mentioned in the letter of March 12,1944, since the purchase orders PD-MC-43-5716 and PD-MC-43-14583 referred to in that letter are merely other designations for the contracts MCc-10054 and MCc-16028, respectively, under which the principal losses of Lane I involved in the present action are alleged to have occurred. (See finding 1 (b).)
(d) Following the receipt of the letter dated March 12, 1944, the United States Maritime Commission took actions some months later in 1944 that resulted in a unit price increase being granted to Lane I under Title II of the First War Powers Act (55 Stat. 838, 839) and Executive Order 9001 with respect to purchase order PD-MC-43-14583 (contract MCc-16028). However, as the evidence does not show the extent of the unit price increase that Lane I was seeking to obtain by means of the letter dated March 12, 1944, it is unknown whether the relief that was granted by the Maritime Commission in 1944 respecting purchase order PD-MC-43-14583 (contract MCc-16028) constituted full or only partial compliance with the request for relief relative to that purchase order contained in the letter dated March 12,1944.
*724(e) No relief was granted to Lane I by tlie United States Maritime Commission with respect to purchase order PD-MC-43-5716 (contract MCc-10054) pursuant to the request that was contained in the letter of March 12, 1944. The evidence does not show the extent of the unit price increase relative to such purchase order that Lane I was seeking to obtain by means of the letter dated March 12, 1944.
(f) The fetter of March 12,1944 quoted in paragraph (a) of this finding is the fetter that is mentioned in the second part of the court’s order dated October 20,1954. (See finding 2.)
8. At about the time of, or shortly after, the end of hostilities in World War II, Lane I was having difficulty in discharging its financial obligations. One of the creditors of Lane I was Edwin Y. Krolman, who was vice president of Lane I. Another creditor was Staudt. The latter took an active part in attempting to straighten out the financial affairs of Lane I; and late in 1945 or early in 1946, Staudt became a member of the board of directors of Lane I. The efforts to pay off creditors and rehabilitate Lane I continued until June 1947. Staudt did not receive any pay for the work that he did during this period in attempting to salvage Lane I. Furthermore, Staudt disposed of his wholly owned corporations (see finding 6) and used the proceeds for the benefit of Lane I. Edwin V. Krolman also furnished money for that purpose.
9. Under the date of April 2, 1946, the following fetter was written on behalf of Lane I to the United States Maritime Commission:
U. S. Maritime Commission Kenegotiation Division Washington, D. C.
Gentlemen:
My client, Lane Lifeboat & Davit Corp. 518 Gardner Ave., Brooklyn, N. Y. has requested me to apply for reopening of his contracts with the Maritime Commission.
During the years 1942-1945 inclusive for work done exclusively for the Maritime Commission the losses were exceptionally great. We did not show a profit for any single year during the 1942-1945 period.
*725This state of affairs left the company in a precarious financial condition. May we therefore urgently request an immediate consideration for a hearing.
Sincerely,
Ralph Dashow.
10. (a) The letter referred to in finding 9 was supplemented by the filing on February 5, 1947, on March 5, 1947, and on or about July 7, 1947 of documents constituting a formal claim on behalf of Lane I under the Lucas Act. This claim was in the total amount of $301,140.55, and was based upon losses in the respective amounts of $177,852.40 and $123,288.15 allegedly incurred in the performance of contracts with the United States Maritime Commission designated as MCc-10054 and MCc-16028.
(b) The alleged losses mentioned in paragraph (a) of this finding are the ones upon which the present action is based. (See finding 1 (b).)
11. On May 14, 1947, Lane I executed an instrument assigning to the State of New York “all of its right, title and interest in and to Renegotiation Funds due it from the U. S. Maritime Commission as a result of an application now filed and pending with the said U. S. Maritime Commission for the Renegotiation of its War Contracts.” The instrument stated that the purpose of the assignment was to secure the payment of “Unemployment Insurance Tax now due” the State.
12. On or about June 9, 1947, Lane I filed in the United States District Court for the Eastern District of New York a petition for reorganization under Chapter X of the Bankruptcy Act. Among the assets listed in the petition was
* * * a renegotiation claim against the United States Maritime Commission that was filed in the sum of $301,-140.55, but which after the deduction of claims for compensation in connection therewith and a portion thereof assigned to the State of New York to cover its claim for unemployment insurance, leaves a net amount available to your petitioner of $65,000.00.
13. Staudt and Hunter L. Delatour were appointed trustees of Lane I in the reorganization proceedings. For his services as co-trustee, Staudt was paid $50.00 per week under the order of the court.
*72614. After tlie reorganization proceedings were instituted, Lane I continued in business as usual, except for the fact that it was under the trusteeship.
15. Staudt’s claim in the amount of $31,980.00 and Edwin V. Krolman’s claim in the amount of $34,376.10 were among the claims against Lane I that were listed in connection with the reorganization proceedings. Staudt did not receive any payment from Lane I or its trustees on his claim. The evidence does not show whether Edwin Y. Krolman received any payment from Lane I or its trustees on his claim.
16. Staudt became a stockholder of Lane I on August 6, 1947, during the trusteeship period.
17. On or about September 26, 1947, the State of New York, acting through its Chief Tax Collector, filed with the court in the reorganization proceedings a claim against Lane I in the total amount of $41,905.57 for money allegedly due the New York State Unemployment Insurance Fund. The evidence does not show what action, if any, was taken by the court on this claim.
18. On March 12, 1948, the United States Maritime Commission rejected the claim of Lane I under the Lucas Act.
19. On May 24, 1948, the bankruptcy court confirmed a judicial sale of Lane I’s real property.
20. On or about June 15,1948, Edwin Y. Krolman, acting under the trade name of “Lane Industries”, submitted to the court in the reorganization proceedings an offer to purchase the assets of Lane I for the sum of $31,000. The offer was subsequently amended by increasing the amount of the offer to $37,500, and finally to $41,400.
21. (a) Staudt, who was a trustee of Lane I at the time, had an interest in the offer that Edwin V. Krolman made to purchase the assets of Lane I.
(b) In a letter dated June 15,1948 from Staudt to his co-trustee, Staudt referred to the offer and said that “I am * * * interested in the offer.” Stating that he would not do anything which might embarrass his co-trustee or the court, or place himself in a position where there might be a conflict of interests, Staudt said that he did not wish to take any position as a trustee respecting the offer to purchase the assets of Lane I, it being his preference that all *727decisions with respect to such offers be made by his co-trustee alone. Staudt also stated that he was “perfectly willing to resign as a trustee at any time if either you or the Court deem it advisable.”
22. (a) On June 23,1948, Delatour, as trustee, petitioned the bankruptcy court to issue an order to show cause why Krolman’s amended offer should not be approved. One of the assets specifically referred to in the petition was the claim of Lane I under the Lucas Act.
(b) In his petition, Delatour informed the court that Krol-man’s offer was being made by him “for and on behalf of a group of employees and officers of the debtor corporation, including Mr. Staudt.”
(c) An order to show cause why the offer of Krolman should not be approved was issued by the court and notice of the proposed sale given. On July 7, 1948, a hearing on the show causé order was held before the court.
23. On July 19,1948, the court entered in the reorganization proceedings an order authorizing and directing Hunter L. Delatour and Staudt, trustees, and Lane I, the debtor, to convey to Edwin Y. Krolman, or his assigns, upon the payment of a purchase price in the sum of $41,400
* * * all machinery, tools, furniture, fixtures and equipment, the claim of the debtor and. the trustees against U. 8. Maritime Commission for 191$ and 191$ losses oh government contracts, all patents, approved drawings and certificates issued against or on the basis of approved drawings, the account receivable due and owing to the trustees from Boxart Machine Co. * * * in the face amount of $6,401.77 * * *; and all books, records, papers and files, the name of Lane Lifeboat & Davit Corporation and all goodwill of the debtor * * *. [Emphasis supplied.]
24. On July 29, 1948, Edwin V. Krolman executed an instrument assigning to “Lane Industries, Inc.”
* * * all my right, title and interest under the offer * * * made to Hunter L. Delatour and Anthony Staudt, Trustees of the Lane Life Boat & Davit Corporation * * * to purchase from the said Trustees all of the right title and interest of the said Trustees and of the Lane Life Boat & Davit Corporation * * * for the sum of $41,400 * * * in and to all of the merchandise, inven*728tory, raw material, parts on hand and unfinished work in process, * * * all machinery, tools, furniture, fixtures, and equipment, the claim of the debtor agaimt the U. N, Maritime Commission for 191$ and 191$ losses on government contracts, all patents, approved drawings, and certificates issued against or on the basis of approved drawings, the account receivable due and owing to the Trustees from Boxart Machine Co. * * * in the face amount of $6,401.77 * * * ; all boobs, records, papers and files, the name of Lane Life Boat & Davit Corporation, and all of the good will of the Lane Life Boat & Davit Corporation * * * . [Emphasis supplied.]
This instrument stated that it was executed “in consideration of One ($1.00) Dollar and other good and valuable consideration.”
25. (a) On August 5, 1948, there was filed with the appropriate agency of the State of New York a certificate of incorporation relating to a new corporation bearing the name of Lane Industries, Inc.
(b) The certificate of incorporation provided that the capital stock of Lane Industries, Inc., should consist of 500 shares of common stock having a par value of $100 each.
(c) The corporation mentioned in this finding will usually be referred to hereinafter as “Lane II”. It is the plaintiff in the present action.
26. (a) Only 10 shares of the capital stock of Lane II were ever issued. The original stockholders were Staudt (acting in the name of his wife, Agnes Staudt), who owned 6y2 shares of the stock, and Edwin Y. Krolman, who owned Sy2 shares of the stock.
(b) The sum of $650 was paid for the stock that was issued to Staudt (in his wife’s name); and the sum of $350 was paid for the stock that was issued to Edwin V. Krolman.
(c) Edwin V. Krolman transferred his 3y2 shares of stock to Margery Nyman on December 6,1948.
(d) Staudt assumed the ownership of his &y2 shares of stock in his own name as of December 16,1948.
(e) The ownership of the stock of Lane II by Staudt (6}4 shares) and Margery Nyman (3% shares) continued after December 1948 until the time of the trial in the present case.
27. (a) On August 23, 1948, Lane I executed an instrument conveying to Lane II all of the grantor’s
*729* * * right, title and interest in and to the claim of Lane Lifeboat & Davit Corporation and of Hunter L. Delatour and Anthony Staudt, as trustees in reorganization of Lane Lifeboat & Davit Corporation, debtor, against the U. S. Maritime Commission under Public Law 657, 79th Congress, filed by Lane Lifeboat & Davit Corporation with the said U. S. Maritime Commission for a net loss totaling $301,140.55.
The instrument of conveyance stated that it was executed in consideration of the sum of $1.00 paid by Lane II to Lane I and the sum of $34,998.23 paid by Lane II to Hunter L. Dela-tour and Staudt, as trustees in reorganization of Lane I.4
(b) In a similar instrument dated August 23,1948, Hunter L. Delatour and Staudt, as trustees in reorganization of Lane I, conveyed to Lane II their right, title, and interest as trustees in and to the claim of Lane I “against the IT. S. Maritime Commission under Public Law 657, 79th Congress.”
(c) Except for the claim of Lane I against the United States Maritime Commission, the instruments of conveyance referred to in paragraphs (a) and (b) of this finding did not include the assets of Lane I which Edwin V. Krolman had been authorized by the court’s order of July 19, 1948 to purchase (see finding 23), and concerning which Lane II, as the assignee of Edwin V. Krolman, subsequently acquired the right of purchase (see finding 24).
28. For a time after the conveyances referred to in finding 27 were executed, Lane I continued in the business of manufacturing and selling lifeboats and lifeboat equipment.
29. (a) On October 28, 1948, Lane II executed a document purporting to convey to Staudt, Edwin V. Krolman, James B. Sullivan, Peter J. Lahny, and William I. Musso, “in consideration of One ($1.00) dollar and other good and valuable consideration,” all of its
* * * right, title and interest in and to all of the merchandise, inventory, raw material, parts on hand, unfinished work in process, machinery, tools, furniture, fixtures and equipment, patents approved, drawings and certificates issued against or on the basis of approved drawings, books, records, papers and files, the name of *730Lane Lifeboat & Davit Corporation, and all the goodwill of the Lane Lifeboat & Davit Corporation owned by the undersigned as ox the date of this Assignment.
(b) The evidence does not disclose the manner in which Lane II acquired (if it did)' the property that was included in the conveyance referred to in paragraph (a) of this finding.
30. A new corporation, bearing the name of Lane Lifeboat & Davit Corporation (i. e., the same name as Lane I), was formed on November 1,1948. When mentioned hereinafter, this new corporation will be referred to as Lane III.
31. On November 1, 1948, Staudt, Edwin Y. Krolman, James B. Sullivan, Peter J. Lahny, and William I. Musso, “in consideration of One ($1.00) dollar and other good and valuable consideration,” purported to assign to Lane III all of their
* * * right, title and interest in and to all of the merchandise, inventory, raw material, parts on hand, unfinished work in process, machinery, tools, furniture, fixtures and equipment, patents approved, drawings and certificates issues [sic] against or on the basis of approved drawings, books, records, papers and files, the name of Lane Lifeboat & Davit Corporation, and all the good-will of the Lane Lifeboat & Davit Corporation owned by the undersigned as of the date of this Assignment.
32. After the execution of the assignment referred to in finding 31, Lane III took over the business that had been carried on by Lane I for many years. Lane III was still actively engaged in such business at the time of the trial in the present case.
33. Staudt is president, general manager, and a member of the board of directors of Lane III.
34. Lane II (i. e., the plaintiff) is not engaged in any business activity and does not have any assets, with the exception of the Lucas Act claim involved in the present action. The only purpose of Lane II is to hold title to such claim.
35. The plaintiff (Lane II) was not a contractor, subcontractor, or materialman during the period between September 16, 1940 and August 14, 1945, and it did not incur any loss in furnishing work, supplies, or services for any depart*731ment or agency of the United States under a contract or subcontract during such period.
36. Neither Lane I nor the plaintiff (Lane II) filed with any department or agency of the defendant on or before August 14, 1945 a written request for relief respecting any of the alleged losses upon which this action is based (see finding 1 (b), except for the letter dated March 12, 1944 from Lane I to the United States Maritime Commission (see finding 7).
CONCLUSION OF LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is not entitled to recover, and the petition is therefore dismissed.

 The prayer requests a judgment in the amount of $237,832.75.

 The instrument stated that Boxart Machine Company had paid the sum of $6,401.77 to the trustees, thereby reducing the purchase price for the assets of Lane I from $41,400.00 to $34,998.23.