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Diecasters Inc. v. Lamar Sales Corp.

Decided: July 3, 1957.


Clapp, Francis and Stanton. The opinion of the court was delivered by Clapp, S.j.a.d.


The question presented by this appeal is whether a judgment secured by the plaintiff against the defendant, Leo Goldenberg, in the Superior Court, Law Division, was released by Goldenberg's subsequent discharge in bankruptcy. The Law Division held that the judgment rested on a claim for willful and malicious injury and therefore was not dischargeable. 11 U.S.C.A. § 35. Goldenberg appeals.

Plaintiff brought the action against the defendant Lamar Sales Corporation for breach of contract, and against Goldenberg, its president, for a conversion. Under the contract between plaintiff and Lamar, plaintiff agreed to give Lamar the right to buy its entire output of certain merchandise, and the latter agreed that payments therefor, received from its customers from time to time, were to be deposited in a bank to the credit of Lamar, withdrawable only on the counter-signature of the plaintiff's designee. After this arrangement had been in operation a year and a half, plaintiff duly terminated it, but the parties in writing agreed that the orders on hand would be shipped, and payments made therefor, pursuant to the contract. Thereafter Lamar, without notice to the plaintiff, adopted a resolution and filed it with the bank, authorizing checks to be drawn on the bank account without the plaintiff's countersignature. At the time there was $1,100 in the bank account, and subsequently an additional sum of $2,500 was collected, all representing the proceeds of plaintiff's merchandise. The $3,600 was used by Lamar to pay its creditors, a large part of it going to Goldenberg for back salary, commissions and expenses.

At the close of the case, the Law Division granted plaintiff's motion for judgment, saying, inter alia:

"It appears, I think beyond question, that Mr. Goldenberg, the individual defendant and president of Lamar Sales Corporation, was entirely familiar with the contractual rights of the parties * * * and that he either directed or at least participated in the diversion of money other than provided for in the contract and therefore became individually liable under the authority of Rose v.

Bernhardt , 107 N.J.L. 501 (E. & A. 1930); Sensale v. Applikon Dyeing & Printing Corp. , 12 N.J. Super. 171 (App. Div. 1951); and Hirsch v. Phily , 4 N.J. 408 (1950), that is, he became personally liable to the extent of the funds diverted or converted to uses other than those permitted by the contract."

Judgment was entered in 1955 against Goldenberg for the $3,600 stated and also against Lamar for a larger amount, but we are not concerned with the judgment against Lamar. Over six months later, Goldenberg, claiming that his discharge in bankruptcy barred execution on the judgment, instituted the present proceeding to stay execution. This appeal is from the order denying the stay.

The Law Division held that the judgment debt fell within 11 U.S.C.A. § 35 (a) (2), which provides:

"(a) A discharge in bankruptcy shall release a bankrupt from all of his provable debts * * * except such as * * * (2) are liabilities * * * for willful and malicious injuries to the person or property of another * * *."

Was this a judgment for a "wilful and malicious" injury? It is settled that the phrase "wilful and malicious," as used in this statute, has reference to a wrongful act, done intentionally, and not innocently. McIntyre v. Kavanaugh , 242 U.S. 138, 37 S. Ct. 38, 61 L. Ed. 205 (1916) (dealing with a conversion); Davis v. Aetna Acceptance Co. , 293 U.S. 328, 332, 55 S. Ct. 151, 79 L. Ed. 393, 397 (1934) (holding that a conversion that is innocent or technical, or one based on an honest or mistaken belief is not within the statute); Petrillo v. Snelbaker , 129 N.J. Eq. 437, 439 (E. & A. 1941); Wegiel v. Hogan , 28 N.J. Super. 144, 147, 152 (App. Div. 1953) (dealing with constructive intention). Shapiro v. Marzigliano , 39 N.J. Super. 61, 67 (App. Div. 1956), is not to the contrary.

Goldenberg argues that he could not be held personally in this action because it was founded upon a mere breach of contract on the part of Lamar. However, he cannot at this late date impeach the judgment. Beyond question the Law ...

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