107 F.Supp. 486 (D.N.J. 1952), 69-51, In re Stridacchio

Docket Nº:69-51.
Citation:107 F.Supp. 486
Party Name:In re STRIDACCHIO.
Case Date:October 02, 1952
Court:United States District Courts, 3th Circuit, District of New Jersey
 
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Page 486

107 F.Supp. 486 (D.N.J. 1952)

In re STRIDACCHIO.

No. 69-51.

United States District Court, D. New Jersey.

Oct. 2, 1952

Page 487

Milberg & Milberg, Jersey City, N.J., for petitioner

Milton B. Levin, Newark, N.J., for trustee.

SMITH, District Judge.

This matter is before the Court on a petition for review filed herein by N. Torczyner & Son, Inc., hereinafter identified as the claimant, pursuant to Section 39, sub. c of the Bankruptcy Act as amended, 11 U.S.C.A. 67, sub. c. The petition alleges generally that the Referee in Bankruptcy erred in the dismissal of a petition for reclamation filed by the claimant.

The claimant filed a petition for the reclamation of certain merchandise, to wit, two diamonds, which had been sold and delivered to the bankrupt on January 22, 1951, approximately two weeks before the voluntary petition in bankruptcy was filed herein. The right to rescind the sale and reclaim the merchandise was predicated solely on the ground of fraud; there was no dispute as to the sale. The Referee in Bankruptcy, after hearing, determined 'that there was an outright sale and delivery of the diamonds' and dismissed the petition for reclamation. The Referee, however, made no finding on the issue of fraud, a finding essential to the determination of the ultimate issue here raised.

It appears from the record before the Court that the order of dismissal was based solely on the said determination, which was amply supported by the evidence. The dismissal of the petition solely on this ground, however, was error. The mere fact that there was a 'sale and delivery' of the diamonds would not defeat the claimant's right of rescission if the sale had been induced by the fraudulent representations of the Bankrupt. It is well established that the sale of merchandise induced by the fraudulent representations of the buyer, although not void, is voidable at the instance of the seller; the seller may, if he acts promptly upon the discovery of the fraud and before title has passed to an innocent purchaser, rescind the sale and recover the merchandise. Manly v. Ohio Shoe Co., 4 Cir., 25 F.2d 384, 59 A.L.R. 413, and the cases therein cited. The transfer of title and the delivery of the merchandise does not defeat the right of the seller to rescind the sale.

The rule which must be applied is succinctly stated in the cited case, 25 F.2d at page 385: 'The law...

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