In re Custom Furniture Technologies, Inc., Inc. d/b/a/ The Inside to: The Inside (ABC), LLC

• Court: Court of Chancery of Delaware
• Decided: May 17, 2022
• Docket: C.A. No. 2022-0041-PAF
• Status: Published

Opinion

COURT OF CHANCERY OF THE STATE OF DELAWARE PAUL A. FIORAVANTI, JR. LEONARD L. WILLIAMS JUSTICE CENTER VICE CHANCELLOR 500 N. KING STREET, SUITE 11400 WILMINGTON, DELAWARE 19801-3734

May 17, 2022

Eric Lopez Schnabel, Esquire Jeffrey S. Cianciulli, Esquire Alessandra Glorioso, Esquire Weir Greenblatt Pierce LLP Dorsey & Whitey (Delaware) LLP 824 North Market Street, Suite 800 300 Delaware Avenue, Suite 1010 Wilmington, DE 19801 Wilmington, DE 19801

Re: In re Custom Furniture Techs., Inc. D/B/A The Inside (ABC), LLC, C.A. No. 2022-0041-PAF

Dear Counsel:

I write concerning the Assignee’s Motion for an Order Establishing Bond

Amount Pursuant to 10 Del. C. § 7383 (the “Motion”). An assignment for the benefit

of creditors is governed by 10 Del. C. §§ 7381-7387 (the “ABC Statute”). The ABC

Statute requires the assignee to file within 30 days of the assignment “an inventory

or schedule of the estate or effects so assigned.” 10 Del. C. § 7381. According to

the petition in this case, The Inside (ABC), LLC (the “Assignee”) was appointed as

the assignee of the estate on January 14, 2022. Dkt. 1 ¶ 6 & Ex. A. Also filed with

the petition was a declaration of H. Michael Hogan, the Authorized Representative

of the Assignee, attaching “a full and complete inventory of all Assignor’s tangible

and intangible estate and effects.” Dkt. 4 ¶ 7 & Ex. A. In re Custom Furniture Techs., Inc. D/B/A The Inside (ABC), LLC C.A. No. 2022-0041-PAF Page 2 of 4

Pursuant to the ABC Statute, upon the filing of the inventory, “the Court of

Chancery shall appoint 2 disinterested and competent persons to appraise the estate

assigned.” 10 Del. C. § 7382. The appraisers must “perform their duties with

fidelity” and “forthwith proceed to make an appraisement” of the assigned estate and

file it with the Register in Chancery. Id. Upon the filing of the appraisal, the

assignee is required to “give bond with sufficient surety, to be approved by the Court

of Chancery in an amount fixed by the Court, being not less than the total amount of

inventory and appraisement of the estate so assigned.” 10 Del. C. § 7383.

On February 9, 2022, the court entered an order appointing two appraisers

recommended by the Assignee: National Valuations, Inc. (“NVI”) and Presidio

Capital, LLC (“Presidio”). Dkt. 8. On April 8, 2022, the Assignee filed the Motion.

Dkt. 18. The Motion attached as exhibits the appraisals required to be filed pursuant

to Section 7382 of the ABC Statute. The NVI valuation appraised the assigned estate

at between $85,000 and $165,000 based on an “Orderly Liquidation Value.” 1 Dkt.

18 Ex. A at 5. Of that amount, NVI valued the inventory at between $10,000 and

$15,000, and the intellectual property between $75,000 and $150,000. Id. at 11.

1 Orderly Liquidation Value is defined as “the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period (180 days) to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.” Dkt. 18 Ex. A at 5. In re Custom Furniture Techs., Inc. D/B/A The Inside (ABC), LLC C.A. No. 2022-0041-PAF Page 3 of 4

NVI’s valuation did not make any deduction for liabilities or the costs of the ABC

process.

Presidio’s appraisal also valued the estate’s assets using an Orderly

Liquidation Value. Dkt. 18 Ex. B at 7. Presidio valued the assets at $104,100. Id.

Presidio’s valuation included a “Best Case,” “Moderate Case,” and “Worst Case”

scenario. Id. at 14. Presidio’s Worst Case scenario attributed no value to the

intellectual property assets and $383,954 to the other assets. Id. Presidio then

deducted $279,900 in anticipated liabilities, including the costs of funding the ABC

process. Id.

The ABC Statute requires an appraisal of the estate’s assets and the fixing of

the bond in an amount “being not less than the total amount of inventory and

appraisement of the estate so assigned.” 10 Del. C. § 7383. The statute makes no

provision for deducting liabilities in the appraisal process, and the Assignee does not

offer any basis for doing so.2 Accordingly, the court will set the bond at $533,954.

This amount is derived from Presidio’s $383,954 valuation of the non-intellectual

2 In another recent ABC proceeding, Presidio deducted liabilities in its appraisal of the assignor’s estate. See In re LM Indus. Gp., Inc., C.A. No. 2022-0148-PAF Dkt. 5 Ex. B (deducting $2,675,093 in liabilities). After the court raised the issue sua sponte, counsel and Presidio acknowledged it was improper to subtract the assignor’s debts from the appraisal. Id. Dkt.7. As here, the court in LM Industries corrected for Presidio’s error and set the bond without deducting for liabilities. See id. Dkt. 9 (Order). In re Custom Furniture Techs., Inc. D/B/A The Inside (ABC), LLC C.A. No. 2022-0041-PAF Page 4 of 4

property assets, plus the top-end range of NVI’s valuation of the intellectual property

assets of $150,000, with no deduction for liabilities. Bond shall be secured.

IT IS SO ORDERED.

Very truly yours,

/s/ Paul A. Fioravanti, Jr.

Vice Chancellor