In re McHenry, Bankruptcy No. 83-61497

• Decision Date: 09 June 1989
• Docket Number: Adv. No. 84-6001.,Bankruptcy No. 83-61497
• Parties: In re David McHENRY, Debtor. Annie McHENRY, Plaintiff, v. David McHENRY, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

131 B.R. 669 (1989)

In re David McHENRY, Debtor Annie McHENRY, Plaintiff, v. David McHENRY, Defendant.

Bankruptcy No. 83-61497, Adv. No. 84-6001.

United States Bankruptcy Court, N.D. Indiana, Hammond Division at Gary.

February 27, 1989.

Findings of Fact, Conclusions of Law and Judgement June 9, 1989.

John L. Kelly, Merrillville, Ind., for debtor.

John Hovanec, Lake Station, Ind., for plaintiff.

Jeff Schlesinger, Gary, Ind., for defendant.

MEMORANDUM OPINION AND ORDER¹

KENT LINDQUIST, Chief Judge.

I Statement of Proceedings

On January 4, 1984, the Plaintiff, the former wife of David McHenry, the Defendant-Debtor (hereinafter: "Debtor") filed her nondischargeability complaint pursuant to § 523. The complaint sounds in tort for fraud and conversion arising out of a state dissolutions proceeding, but does not specify what subsection of § 523 the Plaintiff is proceeding under, i.e. § 523(a)(2), (5) or (6). The Plaintiff's Civil Cover Sheet states this adversary is being brought pursuant to § 523(a)(2) which is fraud.

The Plaintiff's complaint asserts as follows:

1. That on December 1, 1982, the marriage of the parties was dissolved by a decree of the Lake Superior Court under Cause No. 480-1913.

2. That the decree provided as part of the property settlement that the Plaintiff receive one (1) cadillac and the Debtor receive four (4) cadillacs.

3. That the Plaintiff never received said cadillac as awarded in the decree, as the Debtor testified subsequently that he could not deliver possession of the same when in truth the Debtor had constantly possessed the cadillac and used the same for his own benefit.

4. That as a result thereof, the state court ordered the Debtor to pay the equivalent value of said cadillac or $4,000.00 in lieu of delivery of possession thereof to the Plaintiff.

5. That the Debtor never intended to deliver possession of the cadillac to the Plaintiff or pay the $4,000.00 in lieu of possession, and filed his voluntary Chapter 7 bankruptcy.

6. That the above actions of the Debtor constituted "fraud, deception, trick, avoidance, perjury, and willful conversion on the part of the bankrupt, all within the meaning of 11 U.S.C. Sec. 523, et. seq.; and the same constitutes malicious injury by Debtor to Plaintiff herein, . . . "

Pursuant to Order of Court of August 20, 1985, this adversary was set for trial on October 10, 1985.

The parties appeared for trial and orally stipulated that there was no genuine issue of material fact, and that an evidentiary hearing was not required. The parties agreed to file as a joint and stipulated exhibit, certified copies of the Divorce Decree between the parties entered December 1, 1982, as modified by Orders dated May 12, 1983, and August 25, 1983, and the Court would set a briefing schedule.

On December 9, 1985, the Debtor filed certified copies of the above State Court decrees and orders.

The original Dissolution Decree of December 1, 1982 was by Default in that the petitioner-Debtor did not appear at trial, and the Plaintiff-Respondent was awarded a 1978 cadillac.

It is also noted in this decree that two minor children were born of the parties' marriage. Custody of these two minor children was granted to the Plaintiff-Respondent, and the Defendant-Petitioner was ordered to pay $300.00 a month child support to Plaintiff-Respondent. In addition, other specific marital property was awarded to the respective parties. In particular the Plaintiff-Respondent was awarded the marital real estate located at 713 Georgia Street, and 2680 Pennsylvania Street, Gary, Indiana, and the Defendant-Petitioner was awarded certain real estate at 3633 Monroe Street, Gary, Indiana. The Defendant-Petitioner was ordered to pay all marital debts and hold the Respondent harmless therefrom.

In the Order dated May 12, 1983, the state court after hearing the evidence with both parties present ordered that the Petitioner deliver to the Respondent a 1977 Cadillac by May 14, 1983, and to effectuate "proper title ownership at said time to Respondent".

By Order of August 25, 1983, the state court after hearing the evidence with both parties present granted the Petitioner-Debtor's Motions for a Nunc Pro Tunc Order and to Correct Errors, and the Respondent-Plaintiff's Verified Rule to Show Cause, and entered money judgment versus the Defendant in the sum of $4,000.00 in lieu of an award of the 1977 Cadillac in that the evidence showed the Petition-Debtor could not deliver possession thereof.

The Plaintiff filed her brief on March 27, 1987 asserting in essence that the legal issue here is whether the $4,000.00 indebtedness of the Debtor to the Plaintiff is nondischargeable under § 523(a)(5) as being in the nature of alimony, maintenance or support, with other assertions of possible fraud, while her complaint apparently alleges the debt is nondischargeable pursuant to either § 523(a)(2)(A) or § 523(a)(6).

II Conclusions of Law and Discussion

No objection was made by counsel to the jurisdiction of this Court as to this matter and the Court finds jurisdiction to be present, and that this adversary proceeding is a core proceeding pursuant to 28 U.S.C. § 157.

This Court, as a general rule, must give full faith and credit to a state judgment such as the State Court Dissolution Decree and Orders modifying that Decree. U.S.C.A. Const. Art. IV, § 1; 28 U.S.C. § 1738. The fact that the Plaintiff asserts that the State Court was erroneous in that the Defendant gave false evidence on the merits in the State Court proceedings, does not alter the situation. However, this Court may still determine under § 523 the effect of the State Court's findings and order of August 25, 1983, which modified the original Dissolution Decree of December 1, 1982, and granted the Plaintiff-Respondent a $4,000.00 money judgment in lieu of the Cadillac in these bankruptcy proceedings. That is, whether the indebtedness as adjudicated by the state court is nondischargeable in this Defendant's bankruptcy. The issue of whether the Defendant could not transfer the Cadillac to the Plaintiff and the award of $4,000.00 in lieu of the vehicle was tried on the merits in the State Court, who had proper jurisdiction over the person and subject matter and there was no evidence of fraud in obtaining jurisdiction. Thus, the State Court's determination was collateral estoppel on that issue. This determination after a trial on the merits will not be overturned or modified by this Court.² The right of the Plaintiff at the time of the Defendant's bankruptcy, pursuant to said Dissolution Decree, as modified, relating to the Cadillac, was that she had a $4,000.00 judgment in lieu thereof. This court cannot overturn or modify the findings and conclusions of the state court no matter how erroneous the Plaintiff may believe they are, and even if based on false testimony of the Debtor as jurisdiction of subject matter and the person was present in the state court.

The Supreme Court in examining the full faith and credit clause and 28 U.S.C. § 1738 held that "a federal court must give to a state court judgment the same preclusive effect as would have been given that judgment under the law of the state in which the judgment was rendered." Migra v. Warren City School District Board of Education, 465 U.S. 75, 81, 104 S.Ct. 892, 896, 79 L.Ed.2d 56, 63 (1984). This general rule is limited of course by Brown v. Felsen, discussed at footnote 2, supra. In Indiana a party to a judgment generally may not collaterally attack a final judgment of a court of competent jurisdiction when the record is regular on its face; such a judgment is entitled to full faith and credit by courts of coordinate jurisdiction until set aside, either by appeal or by direct proceeding brought in the court rendering it for that purpose. State of Indiana v. Dossett, 174 Ind.App. 501, 368 N.E.2d 259, 262 (1st Dist.1977). Where a court has jurisdiction of the subject matter and of the person of the Defendant and renders a judgment not in excess of the jurisdictional power of the court, no judgment it may render within the issues is void, however erroneous it may be. Id. 368 N.E.2d at 262. Here, the Plaintiff did not appeal the state court finding and valid order of August 25, 1982, or directly attack the same in that court based on false testimony. Thus, the Plaintiff cannot now collaterally attack that courts findings as to the validity, amount or extent of the Defendant's liability even though erroneous.

As stated in Federated Department Stores v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 2428, 69 L.Ed.2d 103 (1981), the res judicata or collateral estoppel "consequences of a final unappealed judgment on the merits are not altered by the fact that the judgment may have been wrong."

However, while the state court judgment shall have preclusive effect in this court as to the nature and amount of the debt, even if clearly erroneous, this court will still have concurrent jurisdiction to determine whether it is nondischargeable under § 523(a)(5) since the state court clearly never decided that issue.

The issue before this Court is thus whether under Federal Bankruptcy Law the $4,000.00 money judgment is nondischargeable in the Defendant's Chapter 7 bankruptcy proceeding, not based on fraudulent evidence given by the Debtor in the state court pursuant to § 523(a)(2)(A), or a fraudulent refusal to turnover the vehicle by the Debtor based on conversion under § 523(a)(6), but based on whether said money judgment was in the nature of alimony, maintenance or support pursuant to § 523(a)(5).

This Court has had occasion to discuss this issue in the cases of In re Rollins, Case No. 83-60657 (Tokash v. Rollins, Adv. No. 83-6164) (Bankr.N.D.Ind., J. Lindquist, unpub. opin. February 6, 1987); In re Helping, Case No. 83-40459 (Miller v. Helping, Adv. No. 84-4001) (Bankr. N.D.Ind., J. Lindquist, unpub. opin., March 27, 1986); In re Sells, Case No. 83-61680 (Sells v. Sells, Adv. No....