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In re Arlco, Inc.

United States Bankruptcy Court for the Southern District of New York
239 B.R. 261 (1999)


Arley Corporation (Arley) (plaintiff) was a home furnishings manufacturer and wholesaler. Home Fashions Outlet, Inc. (Home Fashions) (plaintiff), Arley’s wholly owned subsidiary, was a retailer. CIT Group/Business Credit Inc. (CIT) was a creditor who had a perfected security interest in Arley’s assets, including its inventory. Galey & Lord, Inc. (Galey) sold textiles to Arley. In May, Galey sent a letter to Arley demanding the return of goods received within ten days. In June, Arley and Home Fashions (the Debtors) filed petitions for Chapter 11 bankruptcy. Galey made a claim for reclamation. In September, the bankruptcy court approved of a plan for the Debtors’ assets to be sold as a going concern. The agreement required that the Debtors change their corporate names; Arley became Arlco, Inc. (Arlco), and Home Fashions became HFO, Inc. Galey moved for summary judgment, which the bankruptcy trustee opposed.

Rule of Law


Holding and Reasoning (Gonzalez, J.)

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