International Diamond Corp. v. Parullo (In re Parullo)
Docket: Bankruptcy Nos. 80 A 2081, 80 B 12119
Court: United States Bankruptcy Court, N.D. Illinois; September 10, 1981; Us Bankruptcy; United States Bankruptcy Court
International Diamond Corporation, Inc. filed a complaint seeking to have a $3,000 claim against debtor Salvatore Parullo declared non-dischargeable under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(4). The court found no evidence that Parullo was a fiduciary or employee of the corporation or that he committed larceny, leading to the dismissal of the § 523(a)(4) allegations. The central issue became whether Parullo obtained the diamonds through false pretenses or fraud as defined by § 523(a)(2)(A).
It was established that Parullo purchased two diamonds for $3,000 and issued a check, but stopped payment before delivery. The plaintiff argued this constituted fraud, while Parullo denied any wrongdoing. Testimony from company representatives provided limited context about the company's reputation, which had faced scrutiny from consumer protection organizations. Parullo's testimony was affected by his health issues and medication, and he claimed to have intended to cover the check with funds from a loan from his father, which had not cleared in time.
The timeline indicated that Parullo stopped the check on June 5, 1980, while the diamonds were mailed on June 16, 1980, with the company unaware of the stop payment until June 17, 1980. Discrepancies between Parullo’s account of the packaging and mailing of the diamonds versus the standardized procedures of the company suggested a lack of attention to detail on his part, though these differences were deemed not significantly determinative. Overall, the court leaned toward the credibility of the Diamond Corporation’s witnesses over Parullo’s testimony.
Parullo was certain that the first three digits of the zip code for the Diamond Corporation in California were 603, which corresponds to Oak Park, Illinois. Despite inconsistencies in his testimony, he claimed to have negotiated with Jesse Waldron for several months regarding the diamonds, which Waldron indicated could serve as collateral due to the corporation's long-standing business. However, Parullo later discovered that the corporation was relatively new and that the diamonds could not be used as collateral. Following this, after facing pressure from his wife regarding the financial decision, he stopped payment on a $3,000 check for the diamonds. There was no evidence suggesting that he anticipated receiving the diamonds after halting payment. The Court inferred that halting payment would likely prevent delivery, and there was no indication that Parullo knew the corporation's practices regarding payment and delivery. The Court concluded that stopping payment was not fraudulent, as there was no evidence of initial fraud or expectation of delivery post-payment stoppage. The narrative suggested that Parullo purchased the diamonds but, under familial pressure, attempted to cancel the deal by stopping payment and subsequently received the diamonds, which he kept. The Court determined that the plaintiff did not meet the burden of proof, and therefore the debt to International Diamond Corporation, Inc. was discharged.
