In re Leather Factory Inc.

MEMORANDUM OF OPINION DENYING MOTION TO DISALLOW CLAIM NUMBER 211-1 OF VAR-LOW ENTERPRISES AND CLAIM NUMBER 60 OF CREDITOR HARRY ROSS INDUSTRIES AND DENYING SANCTIONS

On October 12, 2005, the Leather Factory filed its chapter 11 petition. At the *711 time that it filed, the Leather Factory was a vertically integrated company that manufactured and sold custom leather furniture built in its Montebello, California factory and sold in its twelve retail stores located throughout California. The schedules showed $22,000 + in secured claims, $269,-000+ in unsecured priority claims, and $4.6 + million in unsecured claims (of which about $2 million was owed to non-insiders). The assets (all personal property) were valued at $2.3 million.

A creditors’ committee was appointed and the debtor was immediately subject to a series of motions for relief from stay by the landlords. It rejected some leases as early as December 2005 and continued to operate as a debtor-in-possession until its case was converted to chapter 7 on March 9, 2007. David Seror was appointed as the trustee and he continued to oversee a series of avoidance power actions as well as carry out the other duties required of the…