In re Spector

• Decision Date: 20 July 1982
• Docket Number: Bankruptcy No. 81 01560,81 01559,81 0274.,Adv. No. 81 0275
• Citation: 22 BR 226
• Parties: In re Joseph SPECTOR, Debtor. REVELLE MOTORS, INC. and Jack D. Revelle, Plaintiffs, v. Joseph SPECTOR, Ind. and as General partner in Spector Wholesale Co., Defendant. In re Stephen SPECTOR, Debtor. REVELLE MOTORS, INC. and Jack D. Revelle, Plaintiffs, v. Stephen SPECTOR, Ind. and as General partner in Spector Wholesale Co., Defendant.
• Court: U.S. Bankruptcy Court — Northern District of New York

22 B.R. 226 (1982)

In re Joseph SPECTOR, Debtor.

REVELLE MOTORS, INC. and Jack D. Revelle, Plaintiffs, v. Joseph SPECTOR, Ind. and as General partner in Spector Wholesale Co., Defendant.

In re Stephen SPECTOR, Debtor.

REVELLE MOTORS, INC. and Jack D. Revelle, Plaintiffs, v. Stephen SPECTOR, Ind. and as General partner in Spector Wholesale Co., Defendant.

Bankruptcy Nos. 81 01560, 81 01559, Adv. Nos. 81 0275, 81 0274.

United States Bankruptcy Court, N.D. New York.

July 20, 1982.

COPYRIGHT MATERIAL OMITTED

Goldberg, Sanders & Talev, Syracuse, N.Y., for plaintiff; Harold P. Goldberg, Syracuse, N.Y., of counsel.

Menter, Rudin & Trivelpiece, P.C., Syracuse, N.Y., for defendants; David Pelland, Syracuse, N.Y., of counsel.

MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

LEON J. MARKETOS, Bankruptcy Judge.

Statement of the Cases

On October 30, 1981, Joseph and Stephen Spector, individually and as General Partners in Spector Wholesale Company (hereinafter, the Debtors), each filed a separate petition for relief under Chapter 7 of the Bankruptcy Code, 11 U.S.C. § 701 et seq. (Supp. IV 1980) (hereinafter, the Code). Pursuant to Rule 701(7) of Bankruptcy Procedure, Revelle Motors, Inc. and Jack D. Revelle (hereinafter, Creditors) joined as plaintiffs and filed identical pleadings entitled "OBJECTIONS TO DISCHARGE" against each Debtor. Yet, particular debts are the subject matter of the complaints and the Creditors cite the Court to numerous subdivisions of § 523(a) of the Bankruptcy Code rather than Code § 727(a) and (c)(1). See 11 U.S.C. § 727(a) and (c)(1).

The Creditors' pleadings allege two causes of action. The gravamen of the first cause of action is that the Debtors, while making payment on an underlying contractual agreement, drew and delivered numerous checks to the corporate Creditor when it was known by the Debtors on each occasion that (1) such checks were uncollectible and non-negotiable, and (2) such utterances were done "willfully, knowingly and fraudulently intended to defraud" the Creditors of the sum owing. It is further alleged that on September 2, 1980, the Creditors herein obtained an order adjudging that the Debtors were liable to the Creditors in the aggregate sum of $15,725.00 together with costs and disbursements of that state court proceeding (totalling $16,249.78). Furthermore, the Creditors allege such judgment is res judicata against the Debtors. Therefore, the Creditors' dischargeability complaints request a judgment against each Debtor for $16,249.78, and that such sum be adjudged and decreed to be non-dischargeable in the bankruptcy proceeding of each respective Debtor pursuant to § 523(a)(2) of the Bankruptcy Code.

Pursuant to Rule 756 of Bankruptcy Procedure which incorporates Rule 56(d) of Federal Civil Procedure, the Creditors move in each of the above adversary proceedings for partial summary judgment on each dischargeability complaint's first cause of action. Because these motions are premised on the identical legal arguments and exhibits, the Court's MEMORANDUM-DECISION, infra, operates to decide each motion concerning each of the individual Debtors, Joseph Spector and Stephen Spector, respectively.

FINDINGS OF FACT

The Creditors' motion papers contain several exhibits which remain uncontroverted by the Debtors and lead this Court to find the following facts undisputed.

1. Prior to the Debtors\' petition in bankruptcy, the Hon. Donald H. Miller of the Supreme Court of New York awarded the Creditors a "JUDGMENT IN TORT" against the Debtors. JACK D. REVELLE AND REVELLE MOTORS, INC. vs. JOSEPH SPECTOR AND STEPHEN SPECTOR d/b/a SPECTOR WHOLESALE COMPANY, 80-4682 (Sup.Ct. Onondaga Co. September 9, 1980). Premised upon submitted pleadings and affidavits, the New York state court granted partial summary judgment

". . . pursuant to Section 3213 sic of the New York CPLR . . . and it appearing that there was issued by the Debtors five bad checks amounting to $15,725.00 to the Creditors and that the same are outstanding and unpaid and it further appearing that as a matter of law, the same are due, owing and payable to the Creditors and the Debtors having no defense thereto and due deliberation having been had, . . . it is hereby

ORDERED, ADJUDGED AND DECREED that the Debtors answer in so far as it pertains to causes of action "1" through "5" of the Creditors complaint and the Debtors first affirmative defense are stricken and the Creditors motion pursuant to Section 3213 of the CPLR is granted as to the first five causes of action set forth in the Creditors complaint. And it is further

ORDERED, ADJUDGED AND DECREED that the Creditors are entitled to and hereby are granted judgment against the Debtors pursuant to the motion as aforesaid and that part thereof hereby granted in the sum of $15,725.00 IN TORT together with costs and disbursements and interest thereon from March 12, 1980. . . ." (Emphasis added).

The balance of the motion seeking judgment on five other causes of action was denied and referred to the trial calendar for determination. There is no indication that this judgment is anything but final with no appeal pending.

2. In the state court complaint by the Creditors, the first five causes of action are premised on the Debtors\' utterance of five checks to the corporate Creditor for monies due and owing under an agreement between the individual Debtors and the individual Creditor herein. The gravamen of such conduct is that with each check utterance for payment of the purchase of an automobile

the aforesaid check at the time it was drawn and delivered to the corporation, it was known by the Debtors to be uncollectable (sic) and non-negotiable and was uttered by them for good and valuable consideration which they willfully, knowingly and fraudulently intended to defraud the Creditors in the sum . . . which has been duly demanded of the Debtors on numerous occasions and which they continue to fraudulently withhold payment.

(Creditors\' state court complaint, ¶¶ 7, 11, 15, 19, and 23). The total of the five checks is $15,725.00.

3. The Debtors\' state court answer admitted the establishment of the underlying contract. All other allegations of the complaint were specifically denied. The Debtors\' first affirmative defense was that

(T)he first five causes of action set forth in Creditors Complaint fail to state a cause of action upon which relief can be granted as there is no allegation that Creditors gave Debtors notice of said dishonor and made demand for payment as is required by the Uniform Commercial Code as a condition precedent to suit.

(Debtors\' state court Answer, ¶ 6).

4. In the Creditors\' state court motion for partial summary judgment both parties moving and opposing papers were supported by affidavits. The one Debtor, Stephen Spector, specifically attested to a collateral agreement concerning the Creditors\' right of immediate presentment of the uttered checks. Furthermore, he specifically denied any intent to defraud the Creditors. (Stephen Spector affidavit 8/29/80 ¶ 5). There was no affidavit of Joseph Spector in opposition to the Creditors\' motion.

DISCUSSION

Although the parties' memoranda of law expand their respective discussions to numerous factual and substantive law issues in these particular dischargeability proceedings, there is but a singular issue on these motions for summary judgment. The Creditors have moved for partial summary judgment contending there are no issues of disputed material fact concerning their dischargeability complaints. See Fed.R.Civ.P. 56(c) and (d). Each complaint's first cause of action seeks to hold certain debts of the Debtors nondischargeable in bankruptcy pursuant to Bankruptcy Code § 523(a)(2), alleging that such debts were incurred by conduct of the Debtors which was "willfully, knowingly, and fraudulently intended to defraud" the Creditors. Because there are no allegations concerning written financial statements¹ by the Debtors, the Court deems the Creditors' allegations to be under § 523(a)(2)(A) of the Bankruptcy Code, which pertains to debts "for obtaining money, property, services, or an extension, renewal, or refinance of credit, by — false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's . . . financial condition." 11 U.S.C. § 523(a)(2)(A).

In support of the Creditors' motions, they interpose the pre-petition state court judgment granted to the Creditors on those debts which constitute the Creditors' first cause of action in the dischargeability complaint. The issue before this Court is whether the aforesaid state court judgment precludes this Court's relitigation of factual allegations in dischargeability by operation of the judicial doctrines of res judicata and collateral estoppel.

The Creditors' invocation of the doctrine of res judicata in these dischargeability proceedings is inapposite. Clearly, the state court proceedings from which the judgment was rendered were not based on the federal legal issue of dischargeability under § 523 of the Bankruptcy Code.² The doctrine of res judicata is not operative in dischargeability proceedings in a bankruptcy court. See United States Life Title Insurance Company of New York v. Dohm, 19 B.R. 134, 136 (N.D.Ill.1982) citing to Brown v. Felsen, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979); see also Matter of Eskenazi, 6 B.R. 366, 368, 6 BCD 1140, 1141, 3 C.B.C.2d 20 (Bkrtcy. 9th Cir. 1980); Matter of Supple, 14 B.R. 898, 902, 8 BCD 544, 546, 5 C.B.C.2d 1081 (Bkrtcy.D.Conn.1981); In re Greenblatt, 8 B.R. 994, 996 (Bkrtcy.E.D.N. Y.1981).

This Court shall construe the Creditors' interposition of the state court judgment as attempting to collaterally estop³ relitigation of factual issues which were germane to the state court proceedings and which may again be material to these dischargeability proceedings.⁴ "Whereas res judicata forecloses all that which might have been litigated...