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IN RE VICTOR'S LADIES SHOP

July 18, 1940

In re VICTOR'S LADIES SHOP, Inc.


The opinion of the court was delivered by: KALODNER

This case arises on petitions by both the Trustee and the president of the bankrupt corporation, Louis Epstein, for review of the findings and order of the Referee that "Louis Epstein turn over to George J. Cherry, the Trustee in Bankruptcy, dresses, suits, etc., such as those carried by the Bankrupt Company to the cost price of $4,000. or the equivalent thereof in cash, which dresses, suits, etc., belonged to the instant bankrupt estate and were in the possession or under the control of the said Louis Epstein at the time the petition in bankruptcy was filed and fraudulently concealed or withheld by him from his Trustee". The Trustee also seeks an order on Epstein and the bankrupt corporation to turn over additional goods and merchandise of the cost value of $6,047.81. Epstein denies having concealed or withheld from the Trustee any property belonging to the estate and seeks to have the Referee's order invalidated as unsupported by the evidence.

On July 15, 1938, a petition in involuntary bankruptcy was filed against the Victor's Ladies Shop, Inc. An adjudication was decreed on August 29, 1938, and the matter referred to the Referee. On January 4, 1939, a petition was filed by the duly elected and qualified Trustee praying for an order on the bankrupt corporation and its president, Louis Epstein, to turn over to him merchandise costing $10,538.48 or the cash equivalent thereof. An amended petition was filed on March 17, 1939, wherein an additional item of merchandise to the value of $4,000 was added. Answers were filed by Epstein denying the material averments of the petitions.

 The following findings of fact of the Referee are not in dispute: The opening inventory (merchandise on hand, January 1, 1938) was $5,195.50 at cost; purchases to July 15, 1938, amounted to $31,083.60 at cost, making a total of goods available at cost of $36,279.10. Total sales amounted to $21,084.75, leaving a balance of $15,194.35.

 Epstein claims to have sustained a loss of $4,135. by virtue of an alleged burglary of merchandise in March, 1938, and to have turned over to the Receiver goods valued at $9,536.31, making a total of $13,671.31. The balance of $1,523.04, according to Epstein, represents a loss resulting from sales below cost during the period of operation prior to bankruptcy.

 The Trustee denies:

 1. That there was a burglary and loss, as alleged;

 2. That the closing inventory amounted to the sum claimed by Epstein; or

 3. That the total sales of $21,084.75 represented goods costing $22,607.79.

 Although no specific declaration was made by the Referee, his findings imply the fact that there were no records or accounts of the bankrupt disclosing the cost of goods sold, and this not only is fully supported by the evidence but also is not disputed by any of the parties.

 As to the alleged burglary loss, the Referee viewed the evidence as insufficient to establish this fact. Accordingly, he found that merchandise to the cost price of $4,000 belonging to the bankrupt estate was fraudulently concealed or withheld by Epstein from the Trustee.

 However, the Referee found that the Trustee had not met his burden of establishing the cost of sales and, therefore, refused to find any further concealment.

 No findings were made by the Referee with regard to the closing inventory.

 In the Bankrupt's petition for review and brief the turn-over order of ...


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