In re Day
| Decision Date | 05 February 1980 |
| Docket Number | Bankruptcy No. B-1-78-1004.,Civ. No. C-1-79-554 |
| Citation | 4 BR 750 |
| Parties | In re Charles F. DAY, Jr., Bankrupt. Carl MURRAY d/b/a C & C Plumbing Co. and Reliance Insurance Company, Plaintiffs, v. Charles F. DAY, Jr., a/k/a Chuck Miller, Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Albert T. Brown, John D. Erhardt, Cincinnati, Ohio, for plaintiffs.
Allen Brown, Dennis M. O'Connell, Cincinnati, Ohio, for defendant.
This matter is on appeal from an order of the bankruptcy court finding that a debt owed by defendant-appellee Charles F. Day, Jr. ("Day") to plaintiff-appellants Carl Murray and Reliable Insurance Company (collectively referred to as "Murray") is dischargeable under Section 17 of the Bankruptcy Act, 11 U.S.C. § 35.1
The debt arose out of a default judgment in the amount of $12,488.08 against Day that was obtained by Murray from the Court of Common Pleas for Clermont County, Ohio: Carl Murray v. Charles Day, No. 76-CV 0578 (September 28, 1976) (). In its default judgment entry the common pleas court found that Day had stolen and converted to his own use a bulldozer owned by Murray and that his conduct in doing so was "wanton, willful, malicious, and intentional." Id. The particulars of the bulldozer abduction are not in dispute and are briefly summarized in the bankruptcy court's order (doc. 10, p. 2):
Some time after Murray obtained the default judgment, Day filed a petition with the bankruptcy court for discharge of his debts. In September, 1978, while Day's bankruptcy petition was pending, Murray filed a complaint (doc. 1) with the bankruptcy court asking for a declaration that the debt created by the default judgment is "nondischargeable" under Section 17a(2) of the Bankruptcy Act, 11 U.S.C. § 35(a)(2). That section states in pertinent part:
(a) a discharge in bankruptcy shall release a bankrupt from all of his provable debts . . . except . . . (2) . . . liabilities . . . for willful and malicious conversion of the property of another. . . .
Day's answer (doc. 4) denied that the debt was nondischargeable. Murray moved for summary judgment (doc. 6), contending the default judgment found Day had willfully and maliciously converted Murray's bulldozer and the doctrine of collateral estoppel prevented the bankruptcy court from independently determining the willfulness and maliciousness issues. The summary judgment motion was unopposed, yet the bankruptcy court denied it (doc. 7). The matter proceeded to trial (transcript is doc. 8). The bankruptcy court found that Day willfully converted Murray's bulldozer, but did not do so maliciously (doc. 10, p. 3). The debt was declared dischargeable (Id.). This appeal followed pursuant to Bankruptcy Rule 801 and S.D.Ohio R. B-6.
In an appeal such as this the bankruptcy court's findings of fact must be accepted by the district court unless they are clearly erroneous. Bankruptcy Rule 810. The district court is, however, free to reach its own conclusions of law, and to draw inferences or deductions different from those of the bankruptcy court on documentary, undisputed, and stipulated evidence. Stafos v. Jarvin, 477 F.2d 369, 372 (10th Cir. 1973), cert. denied, 414 U.S. 944, 94 S.Ct. 230, 38 L.Ed.2d 168 (1973); In re Clemens, 472 F.2d 939, 943 n. 5 (6th Cir. 1972); 13 Collier on Bankruptcy § 810.05, p. 8-79 (14th Ed. 1978).
On appeal Murray alleges the bankruptcy court committed three errors: (a) denying Murray's unopposed summary judgment motion, (b) concluding Day's conversion of Murray's bulldozer was not malicious, and (c) adopting language in Day's answer as a finding of fact.
Each of these alleged errors will be discussed separately.
Murray forwards two arguments for finding the bankruptcy court's denial of his summary judgment motion in error. The first is that the motion was unopposed and therefore should have been granted as a matter of course. The second is that the default judgment determined the issues of willfulness and maliciousness in Murray's favor and the doctrine of collateral estoppel prevents the relitigation of those issues in bankruptcy court.
This Court cannot agree with either of these arguments.
Murray's summary judgment motion (doc. 6), made pursuant to Bankruptcy Rule 756, was supported by documents whose genuineness was established by Bankruptcy Rule 736 (doc. 5). These documents included the default judgment entry. Day supplied no responsive memoranda or evidentiary material.
Bankruptcy Rule 756 adopts Fed.R.Civ.P. 56, which states in pertinent part:
(e) . . . When a motion for summary judgment is made and supported as provided in this rule, one adverse party may not rest upon the mere allegations or denials of his pleading, but his response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue of fact for trial. If he does not respond, summary judgment, if appropriate, shall be entered against him. (Emphasis added.)
The words "if appropriate" in Rule 56(e) indicate that a court cannot automatically grant a movant's summary judgment motion when the opposing party fails to comply with the requirement of the rule. It is incumbent upon the Court to review the materials submitted in support of the motion to determine if they establish the absence of a genuine issue of fact, even if no opposing evidentiary matter is presented. "Advisory Committee Note to the 1963 Amendments to Rule 56," 31 F.R.D. 647, 648 (1963). If that review indicates a triable issue of material fact, then summary judgment should be denied. Anderson v. Schulman, 337 F.Supp. 177 (N.D.Ill.1971); see Wright & Miller, Federal Practice and Procedure: Civil § 2739 (1973).
The bankruptcy court's denial of Murray's summary judgment motion was not erroneous. As discussed below, it is incumbent upon the bankruptcy court to determine matters of dischargeability under the Bankruptcy Act. The questions of willfulness and maliciousness must be decided on the basis of facts found at trial by the bankruptcy court. Granting Murray's motion for summary judgment on the issue of dischargeability simply because Day did not respond to it would have been inappropriate.
Murray's second argument for finding the denial of his summary judgment motion in error is that the default judgment held Day had acted willfully and maliciously in converting Murray's bulldozer and therefore the Bankruptcy Act's prerequisites for nondischargeability had been fulfilled. Murray asserts the doctrine of collateral estoppel precludes determination of the issues of willfulness and maliciousness by the bankruptcy court.
This argument is effectively undercut by the Supreme Court's recent decision in Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). Brown involved an appeal of a bankruptcy court's finding that a debt had been discharged. The debt was created by a state court judgment pursuant to a stipulated settlement. The stipulation creating the debt did not state the basis of the debtor's liability. When the debtor later petitioned for bankruptcy, the judgment creditor alleged that debt was the product of the debtor's fraud, deceit and malicious conversion and therefore was nondischargeable under Sections 17a(2) and 17a(4) of the Bankruptcy Act, 11 U.S.C. §§ 35(a)(2), (4). The debtor successfully argued that the doctrine of res judicata prevented litigation of grounds that could have been the basis of the state court's judgment and, therefore, the creditor cannot assert matters that were not part of that judgment. Id., 442 U.S. at 129-130, 99 S.Ct. at 2208-09.
In reversing the bankruptcy court's finding, which had been affirmed by the Colorado district court and the Tenth Circuit, the Supreme Court held the bankruptcy court was not confined to a review of the judgment and record in the prior state court proceeding when determining the dischargeability of the debt. The court found that the 1970 amendments to Section 17 of the Bankruptcy Act2 committed Section 17 issues to the exclusive jurisdiction of the bankruptcy court. Dischargeability was a federal question, the court explained, and considerations material to discharge are irrelevant to the ordinary state court collection proceeding. To apply res judicata, the court said, "would force an otherwise unwilling party to try § 17 questions to the hilt in order to protect himself against the mere possibility that a debtor might take bankruptcy in the future." Id., 442 U.S. at 135, 99 S.Ct. at 2211. Cf. Ryan v. Ohio Edison Co., 611 F.2d 1170 at 1176 n. 6 (6th Cir. 1979).
The error alleged by Murray in this appeal differs from that alleged in Brown in that Murray asserts the doctrine of collateral estoppel prevents the bankruptcy court from determining matters dealt with in the state court judgment. The error alleged in Brown was the bankruptcy court's application of the doctrine of res judicata. This distinction is important in light of the last footnote in Brown:
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