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Continental Purchasing Co. v. Norelli

Decided: January 15, 1946.


On appeal from the Essex County Court of Common Pleas.

For the plaintiff-appellant, Allan L. Tumarkin.

For the defendants appellees, Joseph C. Cassini.

Before Brogan, Chief Justice, and Justices Parker and Oliphant.


The opinion of the court was delivered by

BROGAN, CHIEF JUSTICE. This is an appeal from an order the effect of which is a restraint of execution. The record comes before us on verified petition and rule to show cause why the Continental Purchasing Company, a judgment creditor, should not be enjoined from having execution and sale of the property of Anthony Norelli. Depositions were taken and after argument the learned judge in the Pleas signed an order making the rule absolute. The holder of the judgment appeals. This state of fact appears from the depositions:

Frances and Anthony Norelli became indebted to the National Furniture Company for certain merchandise which had been sold to them. The claim of the furniture company was assigned to the Continental Purchasing Co. and on January 7th, 1937, the assignee obtained a judgment in a District Court in Essex County. On November 24th, 1942, Norelli filed a petition in bankruptcy in this district and was adjudicated a bankrupt. Notice to the listed creditors was mailed by the referee on December 1st, 1942. The first meeting of creditors was fixed by the referee for December 11th, 1942. Norelli did not list in his schedule of liabilities the judgment owned by the Continental Purchasing Co. He did, however, list the National Furniture Co., the original creditor, but the notice mailed to it was returned "Not Found." A few days later, Norelli having made a further search for outstanding judgments against him in the several District Courts, came across the judgment under consideration. On December 8th, 1942, the bankrupt caused his petition and order and schedule to be amended to include this judgment. The judgment creditor had no notice or knowledge of the bankruptcy. The proof is that Norelli's bankruptcy proceeding did not come to its attention until January, 1945, almost two years after the date of the bankrupt's discharge. Norelli admitted that he did not serve a copy of the order amending

the schedule of his creditors on Continental Purchasing Co. or National Furniture Co. or Mr. Levine or Mr. Segal, attorneys who had at intervals represented the judgment holder. The file from the Bankruptcy Court contained nothing to indicate that notice of the amendment of the bankrupt's schedule was mailed to Continental Purchasing Co. or to anyone for it. The amended schedule showed that the bankrupt listed this debt by naming the creditor and the amount and date of the judgment. Instead of stating the creditor's address the name of Mr. Levine, its attorney in 1936, with his business address, was given. The testimony for the judgment creditor was that Mr. Levine, who from time to time handled litigation for it, did not bring the matter to its attention; that at the time of the bankruptcy he was not the company's attorney; that the suit in the District Court in the name of Continental showed that it was the assignee of the original creditor and that Norelli was informed of that fact both before and after judgment. It also appeared that Mr. Cassini, counsel for the bankrupt, telephoned to Mr. Levine, when the schedule was amended, to find out if he represented the Continental Purchasing Co. Mr. Levine answered in the affirmative and further said that if there was any matter "to take up with Continental Purchasing Co. to take it up with him." Mr. Cassini did not advise Mr. Levine of the pending bankruptcy proceeding of Norelli. Subsequent to the bankruptcy, the discharged bankrupt purchased some real estate in Essex County. On April 16th, 1945, Continental Purchasing Co. issued an execution against this property to satisfy its judgment. On this state of the proof the learned judge of the Essex County Court of Common Pleas restrained execution. This, we think, was error.

The Bankruptcy Act (title XI, section 35, U.S.C.A.) provides that a discharge in bankruptcy releases a bankrupt from all provable debts except such as * * * (3rd) "have not been duly scheduled in time for proof and allowance, with the name of the creditor, if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy;".

It is conceded that notice had not been sent this creditor direct. And the proof is that it had no actual knowledge of the proceedings in bankruptcy. The schedule was amended to include this creditor and the name of Herbert Levine, an attorney, was listed as the person to whom notice should be sent.

The important question in this case is whether the debt in question was "duly scheduled" as is required by the federal statute, supra; if it was then it was released by the discharge in bankruptcy, otherwise not. The cases on the question -- too many to cite -- have passed upon a great variety of fact and circumstance as to what constitutes due scheduling. Many of those cases may be found in U.S.C.A., Title Bankruptcy, pp. 191-199, ยง 35, notes 141 to 155. From these cases the holdings of which are not all in accord, particularly those from the several states, we gather that there must be a substantial compliance with the provisions of the act in these essentials: that the debt must be set out in time for proof ...

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