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IN RE BARGAIN CITY

December 18, 1962

In the Matter of BARGAIN CITY, U.S.A., INC., a corporation


The opinion of the court was delivered by: WOOD

Consolidated Sun Ray, Inc., Hybla Valley Development Corp., and Blauner's, Inc., applied for and received restraining orders directed against Joscar Co., which were granted until December 17, 1962. Counsel were advised that we would hold further hearing on that date and make a determination whether to vacate the restraining orders or to issue a preliminary injunction.

The Court, after hearing and before the obtaining of a transcript due to the urgency of the situation, adopts the findings of fact submitted by Consolidated Sun Ray, Inc., Hybla Valley Development Corp., and Blauner's, Inc., petitioners, and concludes that they are supported by the testimony, arguments and statements of counsel adduced at the hearing on vacation of the restraining orders and/or issuance of a temporary injunction.

 FINDINGS OF FACT

 1. Consolidated Sun Ray, Inc. is the successor corporation to Sun Ray Drug Company.

 2. Blauner's, Inc. is the owner and holder of all of the stock of Hybla Valley Development Corp.

 3. On January 29, 1959, Sun Ray Drug Co. and Hybla Valley Development Corp. leased from The Joscar Company, a limited partnership, premises situate in Lee Magisterial District, Fairfax County, Virginia.

 4. On January 29, 1959, Blauner's, Inc. executed a document in which it agreed in part to guaranty: 'the full performance, payment and observance of all covenants * * *' of Hybla Valley Development Corp. in connection with the aforementioned lease.

 5. On January 29, 1959, The Joscar Company granted Sun Ray Drug Co. and Blauner's an option to purchase substantial acreage of land adjacent to the leased premises in Lee Magisterial District, Fairfax County, Virginia, at a stated price per acre, said option to remain effective until July 31, 1966. This option further provided that there 'shall have been a full and complete performance of all of the terms, covenants and conditions of a certain lease made by The Joscar Company, as landlord, and Sun Ray Drug Co. and Hybla Valley Development Corp., as tenants dated January 29, 1959, which lease is being executed simultaneously herewith.'

 7. On January 29, 1959, Bargain City, U.S.A., Inc., debtor, assigned the said lease, in turn, to its wholly-owned subsidiary, Bargain City, U.S.A., Inc., a Delaware corporation, the debtor corporation agreeing that 'this assignment shall not in any manner operate to release or discharge * * * (Debtor) * * * from its liability for full performance and observance of all of the terms, covenants and conditions, to be performed under the lease.'

 8. The assignment to Bargain City, U.S.A., Inc., a Delaware corporation, was solely for the convenience of the debtor corporation, the said debtor corporation continuing to act as lessee from and since January 29, 1959 to the present, and the said lessor, The Joscar Company looking solely to the debtor corporation as its lessee from and since January 29, 1959.

 9. The debtor has a substantial claim against The Joscar Company arising out of a failure by the said Joscar Company to complete payment of all monies due debtor in connection with the construction of the building at Hybla Valley, Virginia. The said monies are an asset of the debtor corporation.

 10. On October 18, 1962, debtor corporation instituted bankruptcy proceedings in this Court for an arrangement under Chapter XI of the Bankruptcy Act. Said proceedings embrace and apply to debtor's subsidiaries including Bargain City, U.S.A., Inc., a Delaware corporation.

 11. Prior to the institution of the said bankruptcy proceedings, the Joscar Company instituted suit jointly against the debtor corporation. Consolidated Sun Ray, Inc., Hybla Valley Development Corp. and Blauner's in the state courts of Virginia, Circuit Court of the County of Fairfax, Law Number 11279. Said suit was for rent under the lease for the period of October 1, 1962 to December 31, 1962.

 12. On October 26, 1962, with neither notice to nor consent of any of the defendants therein, including debtor, The Joscar Company filed a non-suit withdrawing and discontinuing the said law suit in the State Courts of Virginia.

 13. On November 2, 1962, The Joscar Company instituted suit in the United States District Court for the Eastern District of New York against Consolidated Sun Ray, Inc., Hybla Valley Development Corp. and Blauner's seeking to recover rent on the said ...


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