In re Schwager
| Citation | 178 BR 106 |
| Decision Date | 15 February 1995 |
| Docket Number | Bankruptcy No. 93-48723-H5-7. Adv. No. 94-4169. |
| Parties | In re Bruce Barton SCHWAGER, Debtor. Meyer FALLAS, Fred Fallas, William Cramer, and Malcolm Marcoe, Plaintiffs. v. Bruce Barton SCHWAGER, Defendant. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Southern District of Texas |
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James H. Kepner, Jr., James H. Kepner, Sr., Houston, TX, for plaintiffs.
Bruce Barton Schwager, pro se.
Before the Court are cross-motions for summary judgment filed by plaintiffs Meyer Fallas, Fred Fallas, William Cramer, and Malcolm Marcoe, and by defendant and debtor, Bruce Barton Schwager. The Court has jurisdiction of this proceeding pursuant to 28 U.S.C. §§ 1334 and 157(b)(I). This is a core proceeding. After reviewing the law and record, this Court concludes that summary judgment is GRANTED for plaintiffs and DENIED for debtor.
In January 1984, Schwager, as general partner, and plaintiffs, as limited partners, formed an entity named B.B.M.M., Ltd., a Texas limited partnership. Litigation arose between the partners in 1986 in cause no. 86-07376 in the 125th Judicial District Court of Harris County, Texas, resulting in an appointment of a receiver for the real property owned by the partnership. Thereafter, litigation was instituted by the lender on the real property in cause no. 87-14551 in the 125th Judicial District Court, Harris County, Texas. The two cases were consolidated and after trial by jury, judgment was rendered in favor of plaintiffs against debtor. The judgment incorporates the jury verdict which found:
(1) Bruce Schwager breached his fiduciary duty to Meyer Fallas, Fred Fallas, William Cramer, Malcolm Marcoe and Harvey Resnick in the performance of his responsibilities between August 11, 1986, and the present time November 3, 1989 which proximately caused damages to the named individuals;
(2) Bruce Schwager materially breached the limited partnership agreement after August 11, 1986, proximately causing damages to Meyer Fallas, Fred Fallas, William Cramer, Malcolm Marcoe, and Harvey Resnick;
(3) the sum of money, if paid now in cash, which would fairly and reasonably compensate Meyer Fallas, Fred Fallas, William Cramer, Malcolm Marcoe, and Harvey Resnick for damages sustained as a result of breach of fiduciary duty or the material breach of the partnership agreement is $94,000.00 for Meyer Fallas, $47,000.00 for Fred Fallas, $94,000.00 for William Cramer, $94,000.00 for Malcolm Marcoe, and $47,000.00 for Harvey Resnick;
(4) Bruce Schwager's breach of fiduciary duty was committed intentionally, maliciously or with heedless and reckless disregard of the rights of the limited partners;
(5) the sum of money, if now paid in cash, which should be awarded to the limited partners as exemplary damages against Bruce Schwager is $188,000.00 for Meyer Fallas, $94,000.00 for Fred Fallas, $188,000.00 for William Cramer, $188,000.00 for Malcolm Marcoe, and $94,000.00 for Harvey Resnick; and
(6) Bruce Schwager fraudulently induced Meyer Fallas, Fred Fallas, William Cramer, Malcolm Marcoe and Harvey Resnick to enter the partnership agreement or the subscription agreement.
Based on the jury issues, the judgment provides:
At issue is whether the state court judgment against debtor in favor of plaintiffs is non-dischargeable under 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4) or 523(a)(6).
A party seeking to invoke the doctrine of collateral estoppel must establish that: (1) the facts to be litigated in the second action were fully and fairly litigated in the first action; (2) these facts were essential to the judgment in the first action; and (3) the parties who litigated the issue were cast as adversaries. Daniels v. Equitable Life Assurance Soc'y of the United States, 35 F.3d 210 (5th Cir.1994).
Debtor urges that plaintiff failed to provide a sufficient record to reveal the controlling facts and issues litigated in the prior action. To the contrary, the judgment provided to this Court contains the jury issues submitted and the findings which are sufficiently detailed for this Court to determine this matter under the principles of issue preclusion. See Sheerin v. Davis (In re Davis), 3 F.3d 113 (5th Cir.1993). There is no dispute that the jury findings were made under the preponderance of the evidence standard applicable to dischargeability complaints. See Grogan v. Garner, Jr., 498 U.S. 279, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991).
Debtor urges that the matters raised herein have not been fully and fairly litigated because the issues were not fully and fairly represented at trial, and debtor's issues of fraud, conspiracy, wrongful acceleration, forgery, and others were never submitted to the jury. Debtor complains that he and his attorney were illegally held in contempt of court preventing debtor from having adequate representation during the trial. Further, debtor complains that the two state court cases were improperly consolidated and the matters presented in the 1986 case were improperly relitigated in the consolidated case. Moreover, debtor complains that the plaintiffs' judgment and the state court proceedings were tainted with fraud.
An exception exists to the application of res judicata where the original judgment was obtained through the use of fraud. Heiser v. Woodruff, 327 U.S. 726, 66 S.Ct. 853, 90 L.Ed. 970 (1946); see also Montalvo v. Banco Comercial de Mayaguez (In re Montalvo), 157 B.R. 510 (D.P.R.1993). However, if the fraud at issue was the subject of litigation in a previous suit, such a suit itself has preclusive or res judicata effect. Heiser, 327 U.S. at 736, 66 S.Ct. at 857-58. Moreover, a judgment is res judicata not only as to all matters litigated and decided by it, but as to all relevant issues which could have been but were not raised and litigated in the case. Id. at 735, 66 S.Ct. at 857.
A review of the record provided by debtor reveals that the allegations raised by debtor supporting his claim that the prior proceedings were tainted by fraud were themselves litigated at both the trial and appellate level. Furthermore, to the extent that any allegations were not fully raised, debtor had opportunity to raise them to the Supreme Court of Texas and the Supreme Court of the United States. A review of the portions of the record submitted by debtor as well as the subsequent history of the reported opinions of debtor's prior litigation reveals that debtor's allegations concerning fraud on the court as well as debtor's other enumerated challenges to the state judgment were previously considered and rejected by the state courts. See e.g. Schwager v. Texas Commerce Bank, N.A., 827 S.W.2d 504 (Tex.App. — Houston 1st Dist. 1992, writ denied), cert. denied, ___ U.S. ___, 113 S.Ct. 1844, 123 L.Ed.2d 469 (1993) and Schwager v. Texas Commerce Bank, 813 S.W.2d 225 (Tex. App. — Houston 1st Dist. 1991, no writ). By attempting to relitigate the facts adduced at the trial level and the evidentiary rulings made by the trial court the debtor seeks to place this Court in the position of an appellate court for purposes of rectifying perceived errors at the trial level. This Court has reviewed the record submitted by debtor including the undated and unverified portions of transcribed questions and answers by unidentified persons which debtor submits as evidence of the trial judge's knowing participation in perjury and fraud. The Court concludes that debtor's allegations of fraud in obtaining the judgment are precluded by res judicata and collateral estoppel and that the state court judgment is a valid judgment for purposes of invoking collateral estoppel and for determining whether it satisfies the elements of 11 U.S.C. § 523. The Court finds that all issues were fully and fairly litigated between Schwager and the plaintiffs, the issues were essential to the judgment...
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