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IN RE SPUR FUEL OIL SALES CORP.

May 3, 1962

In the Matter of SPUR FUEL OIL SALES CORP., Alleged Bankrupt


The opinion of the court was delivered by: MISHLER

FACTS

Upon the petition of Robert T. Williamson, Assignee for the benefit of creditors of Spur Fuel Oil Sales Corp., Assignor (alleged bankrupt), the County Court of Nassau County, by order dated February 8, 1962, authorized a sale of the assets of the Assignor by giving 5 days notice of sale to creditors and publishing the notice at least three days prior to the date of sale. The sale was fixed for February 14th at 11:00 A.M. at 150 Roger Avenue, Inwood, the place of business of the Assignor.

 Lawrence J. Bennett, Inc. was at the time of execution of said order and prior thereto the sole stockholder of the Assignor; it also owned two chattel mortgages encumbering motor vehicles owned by the Assignor. On the date fixed for the Assignee's sale of assets, i.e., February 8th, a chattel mortgagee's sale was also scheduled at Assignor's place of business at 10:30 A.M.

 On February 14th, the date fixed for both sales at about 10:10 A.M., an order was signed by a judge of the County Court of Nassau County, directing the Assignee and Lawrence J. Bennett, Inc. to show cause why the assignment should not be set aside and staying '* * * all proceedings and sales herein and under the chattel mortgage * * * together with any sale by the assignee herein.' The order further directed service of the order to show cause upon the Assignee or his attorney personally, the auctioneer and upon Lawrence J. Bennett, Inc. 'at their offices in accordance with Rule 20 of the Rules of Civil Practice on or before the 14th day of February 1962, shall be sufficient.' *fn1"

 Hilton Scoba, the attorney for one Arthur Ross, who procured the order to show cause and presently is representing petitioning creditors in this proceeding, called the Assignor's place of business and spoke on the telephone to the Assignee's attorney, the attorney for Lawrence J. Bennett, Inc. and Gabe Wishbow, the auctioneer. Mr. Scoba testified he called about 10:20 A.M. on February 14th. This testimony is supported by one Sy Blumberg who was present at the Assignor's premises. Other testimony was offered that all three persons spoke to Mr. Scoba when the chattel mortgage sale had started but before it was completed; these persons were advised by Mr. Scoba that an order to show cause was signed by a judge of the County Court staying both sales. Actual service of the order was made upon Lawrence J. Bennett, Inc. at 10:40 A.M. of that day at the corporation's offices in Garden City, and upon the auctioneer at about 11:21 A.M.

 The auctioneer announced before the bidding had been completed that the sale was 'an iffy sale'. If the sale were stopped the purchaser would receive his money back and if not the merchandise purchased would be retained by the successful bidder. *fn2"

 Lawrence J. Bennett, Inc. was the successful bidder at both sales. Bills of sale were executed in favor of Frederick Schrank, nominee of Lawrence J. Bennett, Inc. and to Lawrence J. Bennett, Inc. immediately after the sale and before service of the order staying the sales. Inwood Oil Corp. was organized by Lawrence J. Bennett, Inc. to operate the fuel oil business formerly conducted by the Assignor and is presently in possession of said business together with all the physical assets purchased at both sales and which were used in the business of the Assignor.

 FILING OF INVOLUNTARY PETITION AND PROCEEDING

 On February 19, 1962, an involuntary petition in bankruptcy was filed and John M. Conroy was appointed Receiver. The instant application is by the Receiver to turn, over to him all the assets of the Assignor (alleged bankrupt) now in the possession of the Assignee, Inwood Oil Corp. and Lawrence J. Bennett, Inc. and for an accounting.

 In addition to generally denying the allegations of the petition, respondent Inwood Oil Corp., Lawrence J. Bennett, Inc. and the Assignee put in issue the jurisdiction of this Court to summarily determine the validity of the two sales conducted on February 14, 1962, prior to the filing of the petition.

 The Court held a hearing on the issues raised by respondents.

 SUMMARY JURISDICTION OF THE BANKRUPTCY COURT

 Respondents dispute the jurisdiction of this Court to summarily determine the question of title of Inwood Oil Corp. to the chattels, fixtures, equipment and good will (including customers' lists). The contention of the respondents is that the claim of the said Inwood Oil Corp. is a substantial adverse claim which must in the absence of the consent of such adverse claimant to the summary jurisdiction of this Court, be determined in a plenary ...


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