Summary
affirming disqualification based on conduct of nonlawyer violative of lawyers' duties under Code of Professional Responsibility
Summary of this case from Smart Industries v. Superior CourtOpinion
April 20, 1987
Appeal from the Supreme Court, Suffolk County (Tanenbaum, J.).
Ordered that the judgment is reversed, on the law, with costs, and the priority of the appellant's judgment is reinstated.
The appellant's service of a summons against the debtor, who had filed a petition for bankruptcy pursuant to U.S.C. chapter 11 violated the automatic stay provided for in that chapter against the commencement of actions against the debtor concerning preexisting debts ( 11 U.S.C. § 362 [a] [1]; Matter of Oliver, 38 B.R. 245, 247; Matter of Murray, 5 B.R. 732). However, the stay did not deprive the court of jurisdiction over the action commenced but merely suspended the proceedings (see, David v Hooker, Ltd., 560 F.2d 412; Matter of Lahman Mfg. Co., 31 B.R. 195) . While acts taken in violation of the stay may be voided in appropriate circumstances where they have prejudiced the other parties to the bankruptcy proceeding (Matter of Oliver, supra, at 948; Matter of Fuel Oil Supply Terminaling, 30 B.R. 360) no such prejudice occurred here (cf., D D Realty v Lionel Corp., 87 A.D.2d 859). The debtor was not prejudiced since the appellant ceased prosecution of the action when informed of the bankruptcy proceeding and only moved to secure a default judgment against the debtor two months after the dismissal of the bankruptcy proceeding terminated the automatic stay. Further, contrary to the petitioner's claim, the delay it encountered in reducing its claim against the debtor to judgment was not due to the appellant's commencement of its action during pendency of the bankruptcy proceedings. Rather, it was due to the petitioner's attempts to serve the debtor at an incorrect address notwithstanding the fact its attorneys had knowledge of the correct address of the debtor. Mangano, J.P., Bracken, Eiber and Spatt, JJ., concur.