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July 27, 1962


The opinion of the court was delivered by: John E. Miller, Chief Judge.

On February 2, 1962, A. Edward Harnik and William C. Thalheimer, d/b/a Philips Art Gallery, filed joint petitions asking that they, as individuals, and the partnership be adjudged to be bankrupts within the purview of the Bankruptcy Act, and on said date were duly adjudged a bankrupt.

On February 23, 1962, the first meeting of the creditors was held. The Referee's notes of the hearing, inter alia, recite:

    "A turnover order is to be served on Richard Hobbs, attorney
  for Selda Thalheimer, directing that she return the jewelry
  referred to in the chattel mortgage listed on Schedule A-2."

In accordance with the statement, the following order was entered:


"At Little Rock, Arkansas, this 26th day of February, 1962.

    "It appearing to the court that Selda Thalheimer has in her
  possession certain jewelry, referred to in Schedule A-2 of
  the schedules of the above bankrupt, which is rightfully and
  legally property of the bankrupt estate; that same should be
  forthwith turned over to Earl Mander [Mazander], trustee in
  the above entitled bankrupt estate; and the court being well
  and sufficiently advised and no adverse interests appearing,
  it is by the court
    "ORDERED, That Selda Thalheimer be, and she hereby is,
  directed to turn over to Earl Mander [Mazander], Trustee in
  Bankruptcy, all of the jewelry now in her possession, which
  property is referred to in Schedule A-2 of the schedules of
  this bankrupt."

On the same date the order was entered, a copy of same was mailed to Mr. Hobbs, the attorney of record for Mrs. Thalheimer, and she promptly complied with the order. The court fixed March 15, 1962, as the date for public auction of the assets of the bankrupt. On that date Mr. Hobbs telephoned the Referee, who was in Jonesboro, Arkansas, and requested that the Referee instruct the Trustee not to sell the jewels mentioned in the turnover order and to give Mrs. Thalheimer an opportunity to be heard on her claimed ownership. The Referee was of the opinion that the claimant, petitioner here, had not used due diligence in attacking the turnover order in that she had deferred attacking the turnover order from February 26 until March 15, and in the meantime had complied with the order, but not wishing to be arbitrary and in view of the fact that Mrs. Thalheimer had not testified, the Referee instructed the Trustee as requested by Mr. Hobbs. At the same time the Referee requested Mr. Hobbs to file during the next week such petition as he might desire to obtain a hearing on the claim to the jewels of Mrs. Thalheimer. Instead of filing the petition as directed, the Trustee on March 19, 1962, filed a petition for an order authorizing him to abandon all title to the property covered by the turnover order and to disclaim the same. On the same date that the petition of the Trustee was received by the Referee, the date of April 2 was fixed for a hearing on the matter, and a copy of the letter fixing the date for a hearing on the petition was furnished to Mr. Hobbs. On the date of the hearing Mr. Hobbs was present but Mrs. Thalheimer was absent. The record does not reflect what was done on April 2, 1962, but on April 6, Mrs. Thalheimer through her attorney filed a petition to set aside the turnover order, and on April 9 the Referee advised Mr. Hobbs that he desired that Mrs. Thalheimer be present at the hearing on the two petitions, and fixed June 21 as the date for the hearing on the petition of the Trustee and also on the petition of Mrs. Thalheimer.

At the hearing the Trustee appeared in person and by his attorney, and Mrs. Thalheimer appeared in person and by her attorney. Testimony was heard, and on June 28, 1962, the Referee filed a memorandum opinion and entered an order dismissing the petition of Selda Thalheimer and also the petition of the Trustee. On the same day a copy of the opinion and order were mailed to the attorney for Mrs. Thalheimer and to the attorney for the Trustee.

The order further provided that the Trustee should have until on or before July 17 to submit to the court an acceptable private offer for the jewelry, and "failing this, shall forthwith contact the auctioneer for public auction of said jewels under the control of the court."

The petitioner is the wife of William C. Thalheimer, one of the bankrupts. Apparently no testimony was introduced by anyone at the first meeting of the creditors on February 23, 1962, but Mr. Hobbs, the attorney for the petitioner, was present. The summary of debts and assets that was on file disclosed that the bankrupt owed a total of $124,914.88 and with assets of only $23,391.82. Schedule A-2 referred to in the turnover order disclosed that the petitioner was in possession of jewelry valued at $2,834.01, as described in "chattel mortgage given Selda Thalheimer by Philips Art Gallery, a partnership, dated December 18, 1961, as security for total loans to partnership in the form of cash in the amount of $8,500.00." The instrument, sometimes referred to as "chattel mortgage" or "financing statement," had been filed for record on January 8, 1962, and the adjudication of bankruptcy was made on February 2, 1962.

On July 9, 1962, the attorney for the claimant mailed to the Referee at Little Rock, Arkansas, a petition for review in which he alleged that the original turnover order was invalid and should have been set aside because of the order having been entered without notice to the petitioner, or without the right to interpose any objections to the issuance of the said turnover order and without any evidence being presented to the Referee as to whether or not the bankrupt was insolvent at the time the lien was obtained and without any objections having been filed by any of the creditors of the bankrupt.

The petitioner further alleged that the dismissal of the petition of the Trustee to abandon said property was erroneous in that no objections had been filed by any of the creditors of the bankrupt with respect to the petition for leave to abandon the said property, and for the further reason that $5,300 of the petitioner's money was used by the bankrupt to redeem merchandise prior to its adjudication of bankruptcy, and said merchandise became assets of the bankrupt and passed to the Trustee and were sold and the moneys received for the use and benefit of the creditors of the bankrupt.

That the said order was erroneous in that neither the Trustee, nor anyone else, presented any evidence to the court alleging the insolvency of the bankrupt at the time the possessory lien was given the petitioner, and no allegations were ever made as to any insolvency and no allegations of fraud have ever been interjected, nor has there been any proof with respect to such.

As stated above, the petition for review was mailed to the Referee on July 9, 1962, but no filing fee accompanied the petition, which was received by the Referee on July 11. Immediately upon receipt of the petition, the Referee wrote the attorney for the claimant as follows:

"Dear Mr. Hobbs:

    "I am this date, July 11th, in receipt of your Petition for
  Review (original only). Please advise if you desire to pursue
  this in view of the fact that the Petition was not filed with
  the Referee within ten days of the entry of the order
  complained of. Also, if you desire to go further, you will
  forward your check in the sum of $10.00, which is the
  statutory fee for filing a petition for ...

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