In re Peterman
| Decision Date | 25 August 1980 |
| Docket Number | Adv. No. 80-0128G.,Bankruptcy No. 79-02320G |
| Citation | 5 BR 687 |
| Parties | In re George A. PETERMAN, Debtor. Annemay Peterman KUZMINSKI, Plaintiff, v. George A. PETERMAN, Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Saul L. Langsam, Cheltenham, Pa., for plaintiff.
Timothy R. Smith, Yardley, Pa., for defendant.
Leo F. Doyle, Philadelphia, Pa., interim trustee.
The legal problem confronting us arises from a complaint filed by the debtor's former wife for a determination of the dischargeability of a debt included in her judgment for divorce which debt a state court judge has determined to be dischargeable. We conclude that, under the facts of this case, that determination is entitled to res judicata or collateral estoppel effect.
The facts of the instant case are as follows:1
On November 7, 1979, a judgment for divorce was entered by the Superior Court of New Jersey, Chancery Division, Mercer County, in the matter of George A. Peterman v. Annemay Peterman.2 As part of that judgment,3 George Peterman was ordered to pay $12,533.19 to Annemay Peterman "representing her equitable share of the property acquired during the marriage and the stocks retained by" George Peterman.4
On December 17, 1979, George Peterman filed a petition for relief under Chapter 7 of the Bankruptcy Code ("the Code").5 One of the debts listed in the schedules which accompanied that petition was the foregoing judgment. After receiving notice of the filing of the petition, Annemay Peterman filed a motion in the Superior Court of New Jersey to enforce her rights under the judgment for divorce.6 In that motion, Annemay Peterman advised the state court that George Peterman had filed a petition for relief under the Code.7
On March 7, 1980, at a hearing before the judge who had entered the judgment for divorce,8 the attorney for George Peterman raised only one issue, — the effect of the filing of the bankruptcy petition on the enforceability of the money judgment. When the hearing judge stated that he understood that, pursuant to New Jersey law, the provisions of a property settlement, which he considered to be the basis of the debt at issue, were dischargeable in bankruptcy, the attorney for George Peterman argued that, under the new Bankruptcy Code, federal law, not state law, was to control in dischargeability issues.9 Thereupon the hearing judge stated that he would consider the issue in light of the applicable federal cases and held the matter under advisement to afford both parties the opportunity to file memoranda of law on the issue. On April 3, 1980, the judge entered an order denying the motion of Annemay Peterman to compel payment of the $12,533.19 by George Peterman, thereby, in effect, ruling that the debt was dischargeable.
In the meantime, on March 28, 1980, while the issue was pending before the state court, Annemay Peterman filed a complaint in this court to determine the dischargeability of the debt of $12,533.19 owed to her by George Peterman.10 In his answer and at the hearing on the complaint, George Peterman argued that the decision of the Superior Court of New Jersey was res judicata of the issue of the dischargeability of the debt. Since the relevant facts are not in dispute, we allowed George Peterman to file a motion for summary judgment and directed that briefs be filed on the res judicata effect of the prior decision of the Superior Court of New Jersey. It is that motion that is before us now.
We initially note that res judicata is a general doctrine whereby multiple litigation is sought to be avoided.
Res judicata ensures the finality of decisions. Under res judicata, "a final judgment on the merits bars further claims by parties or their privies based on the same cause of action." Montana v. United States, 440 U.S. 147, 153 99 S.Ct. 970, 973, 59 L.Ed.2d 210 (1979). Res judicata prevents litigation of all grounds for, or defenses to, recovery that were previously available to the parties, regardless of whether they were asserted or determined in the prior proceeding.11
Collateral estoppel, though related, is a much narrower term.
Under collateral estoppel, once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation.12
Thus, while res judicata bars relitigation of all related issues which were or could have been litigated in a prior case, collateral estoppel bars only the relitigation of issues which were actually decided in the prior case.
With both res judicata and collateral estoppel, the prior decision must have been a valid and final judgment made by a court of competent jurisdiction.13 In the instant case Annemay Peterman contends that the Superior Court of New Jersey was not a court of competent jurisdiction because the bankruptcy court is the only court with jurisdiction to determine the dischargeability of debts. We cannot agree.
Under the new Bankruptcy Code, the bankruptcy courts have "original but not exclusive jurisdiction of all civil proceedings arising under Title 11 or arising in or related to cases under Title 11."14 Therefore, a state court, acting within its own jurisdictional bounds, would have jurisdiction concurrent with the bankruptcy court with respect to civil proceedings arising in a bankruptcy case. The case before us appears to present just such a situation. The Superior Court of New Jersey, acting within its jurisdiction to interpret and enforce its own judgments for divorce, of necessity had to determine the dischargeability of the debt in question before it could proceed to act on the motion of Annemay Peterman for enforcement of the monetary provision of its judgment for divorce.
Section 523 of the Code, which deals with the dischargeability of debts, does not alter this concurrent jurisdictional arrangement, at least with respect to a debt of the kind involved herein. Annemay Peterman asserts that the debt involved in this case falls within subsection 523(a)(5), which makes nondischargeable a debt in the nature of alimony, maintenance or support.15 While subsection 523(c) gives the bankruptcy court exclusive jurisdiction to determine the dischargeability of debts listed in subsections 523(a)(2), (4), and (6) when a creditor requests such a determination, it does not give the bankruptcy court exclusive jurisdiction over the debts listed in the other subsections of 523(a), including subsection 523(a)(5).16 Therefore, it is clear that there is concurrent jurisdiction in the bankruptcy court and the state courts to determine the dischargeability of debts under subsection 523(a)(5).17
It has been questioned, however, whether, despite the fact that a state court has concurrent jurisdiction, the bankruptcy court is bound to give the state court decision res judicata or collateral estoppel effect in dischargeability issues. At least one court has recently decided that a bankruptcy court is not so bound. In re Williams, 3 B.R. 401 (Bkrtcy.N.D.Ga.1980).18 In that case the bankruptcy court held that it was not bound by a state court determination that a debt (for maintenance and support) was nondischargeable where that determination was made "as a collateral matter in a contempt proceeding rather than specifically in a proceeding to determine dischargeability."19 The bankruptcy court cited Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979) in support of its conclusion that res judicata and collateral estoppel were not applicable and that the bankruptcy court was thus not confined to a mere review of the state court record in dischargeability cases.
We cannot agree with the result reached by the bankruptcy court in Williams. First, in Brown v. Felsen, the Supreme Court was considering a case under subsections 17a(2) and (4) of the former Bankruptcy Act where the bankruptcy court had exclusive jurisdiction over the determination of the dischargeability debts — just as the bankruptcy court has exclusive jurisdiction under the Code over the determination of the dischargeability of debts under subsections 523(a)(2), (4) and (6). The Supreme Court held that, where Congress had mandated that the bankruptcy courts shall have exclusive jurisdiction over an issue, res judicata should not be used, in effect, to divest that court of that exclusive jurisdiction.20 However, the Supreme Court in Brown v. Felsen did not deal with the case where the bankruptcy court has only concurrent jurisdiction. In such a case we believe that the bankruptcy court should not, in effect, create exclusive jurisdiction in itself by ignoring the principles of res judicata and collateral estoppel.
Further, in Brown v. Felsen, the Supreme Court indicated that although res judicata was not appropriate in cases where the bankruptcy court had exclusive jurisdiction, collateral estoppel might be. The Supreme Court stated, in this regard:
This case concerns res judicata only, and not the narrower principle of collateral estoppel. Whereas, res judicata forecloses all that which might have been litigated previously, collateral estoppel treats as final only those questions actually and necessarily decided in a prior suit. . . . If, in the course, of adjudicating a state-law question, a state court should determine factual issues using standards identical to those of § 17, then collateral estoppel, in the absence of countervailing statutory policy, would bar relitigation of those issues in the bankruptcy court.21
Where Congress has given the bankruptcy court exclusive jurisdiction over an issue, there might be an argument that statutory policy prevents the application of collateral estoppel because Congress has intended that the issue actually be decided in the bankruptcy court.22 However, where Congress has only given the bankruptcy court jurisdiction which is concurrent...
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