Kuzemchak v. Pitchford
| Decision Date | 23 March 1970 |
| Docket Number | No. 8823,8823 |
| Parties | Peter KUZEMCHAK and Lois Kuzemchak, Plaintiffs-Appellees, v. C. R. PITCHFORD and Jean Pitchford, Defendants-Appellants, and Frank Brown and Bennie Brown, and Frank Brown and Bennie Brown, d/b/a Brown Realty and Brown Title Company, Los Lunas, New Mexico, Garnishees. |
| Court | New Mexico Supreme Court |
Menig & Sager, Edward T. Curran, Albuquerque, for defendants-appellants.
Hanna, Mercer & Carpenter, Albuquerque, for plaintiffs-appellees.
In 1964, the Kuzemchaks, appellees herein, filed their complaint against the Pitchfords, appellants herein, alleging that in a written agreement to purchase their home the Pitchfords had assumed and agreed to pay the outstanding mortgage thereon. They further alleged that the Pitchfords' failure to pay the mortgage in accordance with the agreement resulted in a deficiency judgment on its foreclosure which the Kuzemchaks had been required to pay and for which they sought judgment against the Pitchfords. The trial court dismissed the complaint on the theory that the deed given to the Pitchfords, which conveyed the home, recited only that it was subject to the mortgage, and that the acceptance of the deed superseded the agreement and eliminated the obligation in it. On appeal we reversed. Kuzemchak v. Pitchford, 78 N.M. 378, 431 P.2d 756 (1967). The trial court, on our mandate, entered judgment for the Kuzemachaks and against the Pitchfords. The result was a judgment for breach of contract based upon a complaint that alleged solely the breach of the agreement to pay the mortgage.
On October 16, 1968, a writ of garnishment was issued upon this judgment. On October 21, 1968, involuntary petitions in bankruptcy were filed against the Pitchfords, who thereupon asked the trial court to release the writ of garnishment because the judgment was discharged by their bankruptcy. This request was granted by ex parte order; but after a hearing upon a motion to vacate this order, filed by the Kuzemchaks, the court vacated it and let the garnishment proceed. This appeal followed.
The issue presented by the motion to vacate was whether the judgment indebtedness was one dischargeable by the bankruptcy act (11 U.S.C.A. § 35(a) (2)). Both parties filed requested findings and conclusions on this issue, and the Court adopted the plaintiffs' (judgment holders) submitted findings and conclusions to the effect that the judgment was not discharged by appellants' bankruptcy.
Section 17(a)(2) of the Federal Bankruptcy Act, 11 U.S.C.A. § 35(a)(2), excepts from discharge in bankruptcy 'liabilities for obtaining money or property by false pretenses or false representations * * *'
Appellants' sole point is:
The trial court reviewed the record and the transcript of the testimony taken at the trial of the case and found that the appellants, Pitchfords, were realtors and only purchased the home of the appellees for the purpose of immediate resale but, in order to induce Mrs. Kuzemchak to sell it, had falsely and fraudulently represented that they wanted it for their personal use and occupancy and would assume the mortgage and protect the Kuzemchaks for any liability under it. The court further found that the appellees, in reliance solely upon these false representations, sold their home to appellants expecting them to make the payments on the mortgage, which they did not do. Instead, appellants immediately resold the house and did not protect appellees in their obligation under the mortgage. The court concluded that the judgment entered herein was thus 'based upon an indebtedness which was incurred as a result of false pretenses and false representations fraudulently made by appellants to appellees' (emphasis ours). It was upon this conclusion that the trial court held the debt was not discharged by bankruptcy and permitted the garnishment to proceed.
Is a judgment 'based upon an indebtedness which was incurred as a result of false pretenses' a 'liability for obtaining money or property by false pretenses' as is required if it is to be exempted from discharge by bankruptcy? We believe the answer is yes.
The court will examine the underlying cause of action in determining the question of dischargeability of a judgment. 1 Collier Bankruptcy Manual, § 17.00 at 205 (2nd ed. 1969). Prior to the act of February 5, 1903 (32 Stat. at L. 797, ch. 487), § 17(a)(2) of the Bankruptcy Act, supra, used the word 'judgments' instead of 'liabilities.' This, the cases hold, indicates that Congress intended to use as a basis for withholding the discharge the nature of the obligation rather than the form of the judgment. 7 Remington on Bankruptcy, § 3538 (5th ed. 1939).
The question upon which the courts are divided, however, is: May the judgment creditor go behind his judgment, and if so, how far, when the issue as to its dischargeability is raised? The authorities are divided. Miller v. Rush, 155 Colo. 178, 393 P.2d 565 (1964). Three conclusions have been reached including:
1. That the judgment is conclusive and the court will not go behind the record proper to determine the facts.
Consolidated Plan of Connecticut v. Bonitatibus, 130 Conn. 199, 33 A.2d 140 (1943); National Finance Co. of Provo v. Daley, 14 Utah 2d 263, 382 P.2d 405 (1963); Peerson v. Mitchell, 205 Okl. 530, 239 P.2d 1028, 26 A.L.R.2d 1362 (1950), cert. denied 342 U.S. 866, 72 S.Ct. 106, 96 L.Ed. 652 (1951); In re Fuller (M.D.Pa., 1937), 18 F.Supp. 394; Harrison v. Donnelly, 153 F.2d 588 (8th Cir. 1946).
2. That a review of the whole record including testimony is permitted to determine the nature of the claim.
Allen v. Lindeman, 164 N.W.2d 346 (Iowa 1969); Wegiel v. Hogan, 28 N.J.Super. 144, 100 A.2d 349 (1953); In re Dutkiewicz, 27 F.2d 334 (W.D.N.Y.1928); In re Kubiniec, 2 F.Supp. 632 (W.D.N.Y.1932); 1 Collier Bankruptcy Manual, § 17.00 (2nd ed. 1969).
3. That review of the entire record and transcript of the original proceedings together with any extrinsic evidence is permitted.
Fidelity & C. Co. v. Golombosky, 133 Conn. 317, 50 A.2d 817, 170 A.L.R. 361 (1946).
It appears that number 3 above is authorized by only a minority of the courts. Anno. 170 A.L.R. 368; Miller v. Rush, supra. There are, however, well-reasoned opinions supporting it, including: United States Credit Bureau v. Manning, 147 Cal.App.2d 558, 305 P.2d 970 (1957); Levin v. Singer, 227 Md. 47, 175 A.2d 423 (1961); Greenfield v. Tuccillo, 129 F.2d 854 (2nd Cir. 1942). See also Welsh v. Old Dominion Bank, 229 A.2d 455 (D.C.C.A.1967).
The question is one of first impression in New Mexico. Appellants relying upon the reasoning in Consolidated Plan of Connecticut v. Bonitatibus, supra, would have us follow conclusion number 1 above. Appellees contending for the reasoning in Fidelity & C. Co. v. Golombosky, supra, would have us follow conclusion number 3 above. Both of these opinions are by the Connecticut Supreme Court of Errors. The personnel of that court remanded the same in each case, although Judge Dickenson, who wrote the first opinion, did dissent in the second opinion,...
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Nicholas, In re, 74--1490
... ... For two cases from state courts which summarize quite well the competing views on this subject, see Kuzemchak ... v. Pitchford, 81 N.M. 438, 468 P.2d 409 (1970), cert. denied, 400 U.S. 833, 91 S.Ct. 66, 27 L.Ed.2d 64 (1970), and Miller v. Rush, 155 Colo ... ...