Franks v. Thomason, Civ. A. No. C80-61A.
| Citation | 4 BR 814 |
| Decision Date | 11 June 1980 |
| Docket Number | Civ. A. No. C80-61A. |
| Parties | Gerald D. FRANKS a/k/a Jerry Franks v. Larry THOMASON. |
| Court | U.S. District Court — Northern District of Georgia |
Howell W. Ragsdale, Jr., Atlanta, Ga., for plaintiff.
John M. Vansant, Jr. and Alfred N. Corriere, of Vansant, Engram & Corriere, Albany, Ga., for defendant.
This is a bankruptcy action to determine dischargeability of a judgment. It is before the court pursuant to Bankruptcy Rule 8011 on appeal from an order of the bankruptcy court dated December 27, 1979, which denied appellant Franks' motion for a new trial and rehearing of appellee Thomason's motion for summary judgment.
This appeal has its origin in a suit filed in this court in 1972 by Thomason against Franks, First Palmetto Bank, Cox Broadcasting Company d/b/a WSB-TV, newsman Don McClellan and the Credit Bureau of Atlanta. That suit, brought under the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681t, charged that Franks, then a director of First Palmetto Bank, had improperly obtained a credit report on Thomason, then a candidate for the Georgia Public Service Commission, and had provided the report to McClellan, who publicized its contents. Each of the defendants except Franks were dismissed or settled with Thomason prior to trial. Franks' attorneys were granted leave to withdraw from the case prior to trial, after almost two years of representation. Franks did not obtain substitute counsel, and failed to appear at the scheduled trial of the case. Judgment was entered against him in favor of Thomason in the amount of $20,000.
The district court's order stated that Franks had violated section 1681d of the Act in that he had failed properly to make the required disclosure to Thomason that he had obtained the credit data. Based upon evidence submitted by Thomason of injury to his law practice and attendant embarrassment and physical manifestations of that humiliation, the court awarded Thomason $10,000 in general damages. In addition, the court found that Franks' violation was willful and awarded $6,000 in punitive damages pursuant to 15 U.S.C. § 1681n. The court also assessed an additional $4,000 in attorneys' fees against Franks, bringing the total award to $20,000. Judgment was entered on September 16, 1975.2
On November 9, 1978, Franks filed a petition for voluntary bankruptcy, and listed the judgment as an unsecured debt from which he sought to be discharged. Thomason filed the instant adversary proceeding in the bankruptcy court contesting dischargeability, pursuant to section 17c of the Bankruptcy Act, 11 U.S.C. § 35(c), on January 4, 1979. Thomason sought a determination that the judgment against Franks was not dischargeable under the provision of section 17a(8) of the Bankruptcy Act, 11 U.S.C. § 35(a)(8). That subparagraph denies discharge for "liabilities for willful and malicious injuries to the person or property of another . . .." Thomason alleged that the express finding by the district court of a "willful" violation by Franks, together with its award of punitive damages, allowable by statute only where a violation is found to be willful, precluded discharge of the judgment debt.
Franks filed an answer to that complaint and subsequently filed a motion to dismiss for failure to state a claim, Rule 12(b)(6), Fed.R.Civ.P.3 Thomason responded by filing a motion for judgment on the pleadings or summary judgment and a brief in support of that motion and in opposition to Franks' motion to dismiss. Franks filed no response to Thomason's motion.
The bankruptcy court entered an order on October 16, 1979 denying Franks' motion to dismiss and granting Thomason's motion for summary judgment. The record indicates that no oral hearing was held on these motions at that time. On October 31, 1979, Franks filed a "motion for new trial and rehearing,"4 in an effort to obtain reconsideration of the order of October 16, 1979.
The bankruptcy court held an oral hearing on that motion on December 17, 1979. At the hearing, Franks attempted to introduce into evidence an affidavit by Don McClellan, the news reporter who publicized Thomason's credit information, which was not a part of the record in the district court suit. In addition, McClellan was present at the hearing and apparently was prepared to testify concerning the events leading up to that lawsuit, according to Franks' brief on appeal.
The bankruptcy court refused to consider the affidavit or to hear testimony from McClellan and on December 28, 1979 entered an order denying Franks' motion for new trial or rehearing. In that order, the court declared that Franks' motion "is an attempt to relitigate matters which could have been or should have been previously raised in prior litigation before the United States District Court or at the time of the consideration of the Motion for Summary Judgment previously filed in the case." It is unclear whether the bankruptcy court refused to consider the evidence based upon its conception of res judicata, or whether it simply viewed the evidence as tardy and exercised its discretion to refuse to reconsider its earlier order.
Franks filed the instant appeal to this court from that order denying reconsideration. He raises two issues as error by the bankruptcy court. The first issue is whether the bankruptcy court erred in refusing to consider evidence outside the record in the underlying civil suit that might bear upon a determination of dischargeability. This objection refers to the affidavit and proffered testimony of McClellan that was excluded at the oral hearing on his motion for new trial or rehearing.
The second issue is whether the bankruptcy court erred in refusing to consider evidence within the record of the underlying civil suit that might bear upon a determination of dischargeability. This point refers to the deposition testimony of McClellan taken in 1973 and included in the record of the earlier case, which Franks claims the bankruptcy court refused to consider at the oral hearing on his motion for new trial or rehearing.
Stated more concisely, the issues that Franks seeks to raise in this appeal are whether the bankruptcy court should look beyond the order and judgment in the underlying civil action in determining whether the judgment is dischargeable under section 17a(8) and, if so, whether it should consider evidence outside the record or only that before the court in the previous suit.
The procedural posture of this case presents several preliminary obstacles to reaching these questions.
Franks' notice of appeal stated that he was appealing from the order of December 28, 1979, which denied his motion for a new trial or rehearing. In his statement of issues on appeal filed January 10, 1980, Franks stated that he intended to contest the issue of whether evidence extrinsic to the record in the earlier civil action should have been admitted by the bankruptcy court. No mention was made of excluded evidence within the record in that case, although he raises that issue in his brief.
To complicate this appeal further, the order appealed from set forth two alternative grounds for denying Franks reconsideration of the order granting Thomason summary judgment: language indicating a res judicata notion; and tardiness by Franks in producing the excluded evidence in response to the motion for summary judgment. This court is convinced, however, that this ambiguity is immaterial since if res judicata principles do not bar consideration of evidence beyond the judgment of the district court, then the bankruptcy court abused its discretion in refusing to consider the evidence solely due to Franks' tardiness in offering it.
Further, despite the omission by Franks of one of his points on appeal from his statement of issues, Thomason has not objected and has addressed both points in his brief. In addition, the parties have argued both the application of res judicata by the bankruptcy court in its order granting summary judgment, and its exclusion of the affidavit and testimony of McClellan from the December 17, 1979 hearing. For this reason, the court regards both of those rulings by the bankruptcy court as properly before this court on appeal.
Franks filed a motion in the bankruptcy court to dismiss for failure to state a claim under Rule 12(b)(6), Fed.R.Civ.P.5 Franks' brief supporting that motion, however, included portions of deposition testimony by McClellan from the previous suit. Rule 12(b) requires that, when matters outside the pleadings are presented to and not excluded by the court on a Rule 12(b)(6) motion, the motion shall be treated as one for summary judgment.
Here, the deposition testimony of McClellan was not excluded by the bankruptcy court; it expressly referred to it in its order granting summary judgment. For this reason, Franks' motion to dismiss should have been more appropriately considered as one for summary judgment. Summary judgment practice in bankruptcy adversary proceedings is governed by Rule 56, Fed.R. Civ.P. See Bankruptcy Rule 756.
Under Rule 56, the appropriate standard is whether a material factual issue exists, in contrast to the Rule 12(b)(6) standard of whether the plaintiff can prove any possible set of facts that would entitle him to the relief sought in the complaint. Although not expressly stated in its order, this court must infer that the bankruptcy court applied the proper standard to Franks' motion since it determined that no material factual issue existed and that Thomason was entitled to judgment as a matter of law.
Having resolved the procedural problems involved in this appeal, the court turns to the central issues presented.
Section 17a of the Bankruptcy Act, 11 U.S.C. § 35(a), provides that "a discharge in bankruptcy shall release a bankrupt from all of his provable...
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