In re Whitmore, Bankruptcy No. 80-0322A
| Decision Date | 23 December 1980 |
| Docket Number | Adv. No. 80-0259A.,Bankruptcy No. 80-0322A |
| Citation | 7 BR 835 |
| Parties | In re Arnold WHITMORE, Debtor. Sheri P. KING, Plaintiff, v. Arnold P. WHITMORE, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Georgia |
Bensonetta Tipton Lane, Atlanta, Ga., for Sheri P. King.
Arnold P. Whitmore, pro se.
Plaintiff's motion for summary judgment brings the matters herein before the Court. Having considered the motion, the briefs and documents submitted and the pleadings on file the Court makes the following entry.
1. Arnold P. Whitmore, (hereinafter referred to as "Debtor"), filed a voluntary petition under Chapter 7 of Title 11 of the United States Code on February 1, 1980.
2. This adversary proceeding was commenced by a complaint filed by Sheri P. King, (hereinafter referred to as "Plaintiff"), to determine the dischargeability of a judgment debt.
3. In proceedings brought by Plaintiff against Debtor in the State Court of Fulton County, Plaintiff was awarded judgment of $2,200.00. The complaint filed by Plaintiff in this action alleged, among other things, that Debtor intentionally converted funds in the amount of $2,200.00 which had been entrusted to Debtor by Plaintiff. The parties waived reporting of the case by a court reporter and waived the statement of findings of fact and conclusions of law by the trial judge.
4. Plaintiff contends that the judgment debt is nondischargeable under parts (2)(A) and (4) of 11 U.S.C. § 523, subsection (a). It is alleged that Debtor fraudulently converted funds Plaintiff had delivered to him to be invested on Plaintiff's behalf.
5. In his answer to Plaintiff's complaint, Debtor alleges that the debt in question arose from a joint venture approved by Plaintiff. Debtor alleges that the joint venture was unsuccessful due to the failure of a contractor to complete work contracted for by the joint venture.
6. Plaintiff filed a motion for summary judgment and a statement of facts as to which she contends there are no issues to be tried on June 18, 1980. It is her position that Debtor is barred by the doctrine of collateral estoppel from relitigating in the bankruptcy court the issues presented in this case.
In her complaint, Plaintiff contends that the judgment debt owed to her by Debtor is nondischargeable under parts 2(A) and (4) of 11 U.S.C. § 523, subsection (a). The applicable statutory provisions read:
Plaintiff's motion for summary judgment is based on her claim that the debt which is the subject matter of this proceeding is nondischargeable under 11 U.S.C. § 523(a)(4).
Plaintiff contends that the issues presented by the complaint filed in this Court have already been tried and resolved in the State Court of Fulton County. It is Plaintiff's position that Debtor is collaterally estopped from relitigating these issues before the bankruptcy court.
The doctrine of collateral estoppel must be distinguished from the doctrine of res judicata. Res judicata bars the relitigation between the same parties of a cause of action finally determined by a court of competent jurisdiction. Not only does this doctrine extend to the questions actually decided in the prior proceedings, it also operates as a bar to the litigation of all grounds of recovery or defenses which might have been presented. Blanchard v. St. Paul Fire and Marine Insurance Company, 341 F.2d 351 (5th Cir. 1965), cert. denied 382 U.S. 829, 86 S.Ct. 66, 15 L.Ed.2d 73 (1965). Collateral estoppel prevents the relitigation of issues actually adjudicated in a different cause of action. Unlike res judicata, the operation of the doctrine of collateral estoppel is limited to those matters distinctly put in issue, litigated and determined in the former action. Diplomat Electric, Inc. v. Westinghouse Electric Supply Company, 430 F.2d 38 (5th Cir. 1970).
Because the present cause of action is not the same cause of action brought in the Georgia state court, the doctrine of res judicata is not applicable in this case. This Court is concerned with the applicability of the doctrine of collateral estoppel in these proceedings to determine the dischargeability of a debt.
Procedurally, this case involves what has been termed as the offensive use of collateral estoppel. Here collateral estoppel is not being asserted as an affirmative defense to a claim; rather, Plaintiff is seeking to estop Debtor from relitigating issues which Debtor previously litigated and allegedly lost in the prior state court proceedings. This Court is aware of the admonitions of the United States Supreme Court in Parklane Hosiery Company v. Shore, 439 U.S. 322, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) concerning the potential disadvantages of the offensive use of the doctrine of collateral estoppel. However, the Court need not address the appropriateness of the offensive use of collateral estoppel in the instant case for the reason that the Court finds this doctrine inapplicable.
The applicability of the doctrine of res judicata in suits to determine the dischargeability of a debt has been addressed by the Supreme Court in Brown v. Felson, 442 U.S. 127, 99 S.Ct. 2205, 60 L.Ed.2d 767 (1979). Brown, the petitioner, was guarantor on a bank loan obtained by the debtor, Felson. A state court action was instituted by the lender against Brown, Felson and Felson's car dealership. Brown filed a cross claim against Felson and Felson's car dealership alleging that he was induced to sign the guarantee by misrepresentations and nondisclosures of material fact. The suit was settled by stipulation which provided, among other things, that Brown should have judgment against Felson and the car dealership. There was no indication in the stipulation as to the cause of action on which the judgment was based. Felson thereafter filed for bankruptcy, and Brown initiated proceedings to determine the dischargeability of the judgment debt. The Supreme Court held that the bankruptcy court was not limited to a review of the judgment and record in the prior state court proceedings when considering the dischargeability of the debt.
Brown did not resolve the issue of the applicability of the doctrine of collateral estoppel in suits to determine dischargeability. This issue was reached in Franks v. Thomason, 4 B.R. 814 (N.D.Ga.1980). In this case the court was presented with the appeal of a decision of a bankruptcy court which held that a judgment debt was non-dischargeable.
A judgment against the debtor, Franks, had been entered by a federal court in a suit brought by Thomason under the Fair Credit Reporting Act. Franks later filed for bankruptcy, and Thomason commenced proceedings to determine the dischargeability of the judgment debt. Refusing to consider matters extrinsic to the record of the prior case, the bankruptcy court granted Thomason's motion for summary judgment. The district court held this refusal to consider extrinsic matters to be error. The court said:
"This court is persuaded that the prevailing trend of recent authority points to the inapplicability of collateral estoppel to the ultimate question of dischargeability concerning state court judgments."
The district court relied on the Fifth Circuit case Carey Lumber Company v. Bell, 615 F.2d 370 (5th Cir. 1980). This decision affirmed per curiam the decision of a district court. The district court's opinion was incorporated as an appendix to the Fifth Circuit's...
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