Knott v. Penno Leasing Co.

472 F. Supp. 564, 1979 U.S. Dist. LEXIS 13093
CourtDistrict Court, S.D. Ohio
DecidedApril 12, 1979
DocketNo. C-2-78-473
StatusPublished
Cited by1 cases

This text of 472 F. Supp. 564 (Knott v. Penno Leasing Co.) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Knott v. Penno Leasing Co., 472 F. Supp. 564, 1979 U.S. Dist. LEXIS 13093 (S.D. Ohio 1979).

Opinion

MEMORANDUM AND ORDER

DUNCAN, District Judge.

This action began as a lawsuit by the trustees of certain joint employer-employee fringe benefit funds created by written declarations of trust. Defendant Penno Leasing Company, Inc. (Penno) is a party to these declarations of trust and as such was apparently obligated to make contributions to the funds. The trustees claimed that Penno failed to make these required payments and sued to recover the amounts owed.

On July 14, 1978, Penno having failed to answer or otherwise move, the Court entered a default judgment against Penno. On September 7, 1978, Penno moved the Court to vacate the default judgment. The matter is presently before the Court on said motion. For the reasons stated below, Pen-no’s motion to vacate will be denied.

Penno’s motion is made pursuant to Rule 60(b)(4), Fed.R.Civ.P., which provides that a party may be relieved from a final judgment order where it can demonstrate that the judgment is for some reason void. Pen-no relies solely on Rule 60(b)(4) and does not allege any other grounds for vacating the judgment of July 14. Consequently the Court’s discretion in deciding the motion is limited. Either the judgment is void or it is valid. Determining which it is may well present a difficult question, but when that question is resolved, the Court must act accordingly. Jordan v. Gilligan, 500 F.2d 701, 704 (6th Cir. 1974), cert. denied, 421 U.S. 991 (1975); 11 Wright & Miller Federal Practice and Procedure § 2862 (1973).

Penno claims the Court’s judgment is void for the following reasons. In July 1976, Penno filed a petition for an Arrangement pursuant to Chapter XI of the Bank[566]*566ruptcy Act1 in the United States District Court for the Northern District of Ohio, Eastern Division. The order of confirmation of the defendant’s Plan of Arrangement was approved and filed with that Court on June 16, 1978, nearly one month prior to this Court’s default judgment. Rule 11 — 44 of the Bankruptcy Rules governing Chapter XI provides in pertinent part:

(a) Stay of Actions and Lien Enforcement. A petition filed under Rule 11-6 or 11-7 shall operate as a stay of the commencement or the continuation of any court or other proceeding against the debtor, or the enforcement of any judgment against him .

Pursuant to the above rule defendant claims that the action in this Court was automatically stayed, thereby rendering the subsequent judgment void. However, Rule 11-44 further provides:

(c) Annulment of Stay. At the expiration of 30 days after the first date set for the first meeting of creditors, a stay provided by this rule other than a stay against lien enforcement shall be deemed annulled as against any creditor whose claim has not been listed in the schedules and who has not filed his claim by that time.

Defendant concedes that plaintiff creditors were not listed in its schedules and thus the Court finds that the stay was annulled and of no effect on the proceedings in this Court.

Defendant next relies on the following provision contained in the confirmation order issued by the Bankruptcy Court and derived from Section 314 of the Bankruptcy Act:

b. Any judgment heretofore or hereafter obtained in any court other than this Court is null and void as a determination of the personal liability of the Debtors with respect to any of the following:
(i) Debts dischargeable under Section 17a and b of the Act;

It is clear from the above order, however, that the Bankruptcy Court intended to nullify judgments of other courts only insofar as those judgments concerned “dischargeable debts.” Further, under Section 371 of the Act the binding effect of a confirmation order, outlined in Section 367, is qualified to the extent that debts “not dischargeable” under Section 17 still remain outstanding. See, 9 Collier on Bankruptcy, §§ 9.25[6] and 9.32[1] (1975). Thus the nub of the present action is the question whether the debts owed by defendant Penno to the benefit funds were in fact “dischargeable.” If they were dischargeable, this Court’s judgment of July 14 was void and should be vacated; if they were not, the judgment must stand.

Section 1(15) of the Bankruptcy Act defines “Discharge” as follows:

“Discharge” shall mean the release of a bankrupt from all of his debts which are provable in bankruptcy, except such as are excepted by this Act.

Section 17(a) of the Act provides in pertinent part:

A discharge in bankruptcy shall release a bankrupt from all of his probable debts, whether allowable in full or in part, except such as (3) 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. (Emphasis added.)

As stated previously, defendant’s debts to plaintiffs were not scheduled before the Bankruptcy Court by Penno. Therefore, unless plaintiff creditors had “notice or actual knowledge” of Penno’s Chapter XI proceedings, these debts would not be discharged. Section 17(a)(3), supra.

Penno claims that plaintiffs did have actual knowledge of the proceedings by virtue of two letters written by an attorney in Chicago, Louis E. Sigman, to Penno’s attorney, which referred to Penno’s Chapter XI [567]*567proceedings.2 The letters, written on August 23, 1977 and September 14, 1977, both contained a subscript as follows:

cc: William Fadel
Frank Gould
Jerry Graff
Earl A. Erwin

The above-named Earl A. Erwin (spelled “Irwin” in the September 14 letter) is one of the plaintiff trustees in the present action. Penno claims that because Erwin apparently was sent a copy of these letters he had actual knowledge of the Chapter XI proceedings, which knowledge is imputable to plaintiff, thereby making Penno’s debt dischargeable. Erwin submitted an affidavit denying that he ever received a copy of these letters.

At the outset, the Court notes that defendant Penno has the burden of proof regarding plaintiffs’ actual knowledge of Penno’s Chapter XI proceedings. Hill v. Smith, 260 U.S. 592, 43 S.Ct. 219, 67 L.Ed. 419 (1923); In re Venson, 234 F.Supp. 271, 273 (N.D.Ga.1964), aff’d, 337 F.2d 616 (5th Cir. 1964); 1A Collier on Bankruptcy § 17.-23[6]. Upon consideration of the facts presented herein, the Court is unable to find that Penno has carried this burden.

[568]*568The letters raised by Penno were written in Chicago by a lawyer who represents the Central Pension Fund of the International Union of Operating Engineers (I.U.O.E.). There is apparently no connection between this fund and the fund of which plaintiff Erwin is a trustee. Further, Erwin, in addition to his role as trustee for the Ohio Operating Engineers funds, is business manager of Local 18, I.U.O.E.

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Cite This Page — Counsel Stack

Bluebook (online)
472 F. Supp. 564, 1979 U.S. Dist. LEXIS 13093, Counsel Stack Legal Research, https://law.counselstack.com/opinion/knott-v-penno-leasing-co-ohsd-1979.