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Maritime Electric Co. v. United Jersey Bank

argued: June 12, 1991.

MARITIME ELECTRIC COMPANY, INC., A NEW YORK CORPORATION
v.
UNITED JERSEY BANK, A NEW JERSEY BANKING CORPORATION; MICHAEL GILL; AND MARITIME ELECTRIC COMPANY, INC., A NEW JERSEY CORPORATION AND MICHAEL GILL, THIRD-PARTY PLAINTIFF V. MARITIME ELECTRIC COMPANY, INC., A NEW YORK CORPORATION; THOMAS GILL, INDIVIDUALLY AND IN HIS CAPACITY AS PRESIDENT OF MARITIME ELECTRIC COMPANY, INC., (N.Y.), THIRD PARTY DEFENDANTS; MARITIME ELECTRIC CO., INC., (PLAINTIFF AND THIRD-PARTY DEFENDANT) AND THOMAS GILL (THIRD-PARTY DEFENDANT), APPELLANTS



On Appeal from the United States District Court for the District of New Jersey; D.C. Civil No. 87-02500.

Nygaard and Alito, Circuit Judges, and Fullam, District Judge*fn*

Author: Nygaard

Opinion OF THE COURT

In this appeal arising from litigation between a father and son and their respective corporations, we address the scope and effect of the Bankruptcy Code's automatic stay provision, 11 U.S.C. § 362(a)(1), on the district court's judgment entered after the son filed a Chapter 13 petition in bankruptcy. We hold that any district court proceedings against the debtor-son that occurred during the son's bankruptcy are void ab initio ; that the district court's July 16, 1990 judgment must be vacated accordingly; and, given the lack of a final order respecting appellant Maritime Electric Co.'s conversion claim against Michael Gill, we must dismiss for lack of appellate jurisdiction.

The district court had jurisdiction under 28 U.S.C. § 1332(a). We have inherent power and a continuing obligation to determine our own jurisdiction. See Shendock v. Director, OWCP, 893 F.2d 1458, 1461 (3d Cir.), cert. denied, 112 L. Ed. 2d 53, U.S. , 111 S. Ct. 81 (1990); Thermice Corp. v. Vistron Corp., 832 F.2d 248, 251 (3d Cir. 1987).

I.

A. Facts

At various times during the period 1975-1986, Thomas Gill ("Father") and Maritime Electric Co., Inc. ("MNY"), Father's New York corporation, employed Michael Gill ("Son"). Father was MNY's President. MNY was in the business of selling electrical equipment and parts to the marine industry. Albert Bishow was MNY's treasurer during the events described below.

At first, MNY employed Son as an outside salesman. Son was paid a weekly salary plus selling expenses. Then, pursuant to an oral agreement between Father and Son effective beginning May 1, 1979, Son was employed on a commission and monthly draw basis: he was entitled to commissions equal to 25% of MNY's gross profit margin on his sales, and to regular monthly draws against those commissions.

From 1979 until August 1984, Son's sales performance for MNY increased steadily. During this period, Son made repeated requests for an accounting and payment of all the commissions he earned, but Father made excuses and refused to comply. By and large, MNY paid Son monthly draws only which fell far short of the total commissions Son earned.

In 1979, when Son's sales for MNY were over $800,000, he received monthly draws of $2000 and one additional $2000 payment against the commissions outstanding. In 1980, when Son's sales were more than $1,000,000, Son received only monthly draws. Towards the end of 1980, Son's monthly draw was increased to $4000, but as the district court found "his requests for payment of accrued commissions were still being 'sandbagged' and he was told to wait".

Son's sales for MNY increased to approximately $1,500,000 in 1981, and to approximately $1,800,000 in 1982 -- but for each of these years Son received only $48,000 in monthly draws instead of his earned commissions which were $131,250 and $157,500, respectively. At the end of 1982, Father again refused Son's request for a comprehensive accounting and payment of all past due commissions. Nevertheless, Son continued to work for MNY.

In February 1984, when Son's sales for MNY had increased to approximately $2,200,000 out of the company's total sales of $2,831,000, Father told Son that the commission arrangement would be terminated and Son would be compensated on a salary plus expenses basis beginning March 1, 1984. Indeed, on that date the commission arrangement ended and Son began to receive a salary, but it amounted to $8000 less per year than the draws he had most recently been receiving. Furthermore, Son's past due commissions remained unpaid. When Son repeated his request for an accounting of the unpaid commissions, Father made assurances and referred vaguely to "corporate problems".

In May 1984, Son yet again requested an accounting, but this time Father said to forget the unpaid commissions. Son responded by suggesting that they agree to settle their commission dispute on some figure -- $50,000, $20,000, or even $10,000 -- but Father refused saying, "You got f//--d. But at least you got f//--d by someone you know. Don't let it happen down the road." Needless to say, the father-son relationship had wholly deteriorated.

In August 1984, Son filed a complaint against MNY in the Supreme Court of the State of New York, County of New York, seeking to recover the unpaid commissions. In response to Son's suit, Father terminated Son's employment with MNY.

In the spring of 1985, before discovery commenced in the New York litigation, Father asked Son to come back to work at MNY. Still refusing to pay the past due commissions, Father promised that if Son dropped the pending state court action: Son could come back as General Manager of MNY with authority over all of its business but not its general ledger; and, at the end of 1985, Father and Bishow would retire, Son would become President of MNY and he could buy Father's stake in the company. Father insisted, however, that no attorneys were to be involved in this proposed settlement.

Father reiterated the details of his proposal at a subsequent meeting with Son. But Father became indignant and emotional when Son asked that the proposed settlement be put in writing. Father said, "I promise you on the grave of my father who started the business. . . . [that I will keep my settlement promises]". The proposed settlement terms were confirmed at yet another meeting. Son finally accepted the settlement and agreed that it not be in writing.

When, as per their agreement, Son returned to work at MNY, he was introduced by his Father to the company's staff as "General Manager", "their boss". The following day, Son signed a Stipulation of Discontinuance of his New York suit with prejudice. Son also signed a general release in favor of MNY.

Later, in early December 1985, Father told Son he was no longer General Manager of MNY, he was demoted to MNY office manager, Father and Bishop were not retiring as promised, and "there's nothing -- no presidency, no nothing." Despite Father's breach of the settlement agreement, Son continued to work for MNY.

In February 1986, Son set up a New Jersey corporation named "Maritime Electric Company, Inc." ("MNJ"). He opened a bank account in New Jersey in the new corporation's name, which was identical to MNY's trade name.

Between July and November of 1986, while employed by MNY, Son took thirty-seven checks made payable to MNY and deposited them into his new corporation's account. He later withdrew the funds for his personal use. Thus, Son converted MNY funds totalling $111,725.09 because he felt he was entitled to them on account of the commissions still unpaid by MNY. Son's employment at MNY came to an end.

B. The federal litigation.

In June 1987, MNY filed a complaint in district court against Son and MNJ, alleging conversion, unjust enrichment, and fraudulent contraction of debt under N.J.S.A. 2A:26-2(a). MNY sought compensatory and punitive damages, interest, costs and, as provided by the New Jersey statute, prejudgment interest, attorneys' fees and a writ of attachment against Son's and MNJ's assets in New Jersey.

Son and MNJ answered MNY's complaint with several affirmative defenses and a jury trial demand. Additionally, Son asserted a counterclaim against MNY and a third-party complaint against Father, individually and in his capacity as President of MNY. The counterclaim and third-party action alleged inter alia that MNY and Father had breached Son's employment contract, and had fraudulently induced Son into ...


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