Martin v. Martin

• Decision Date: 26 June 1970
• Citation: 470 P.2d 662,2 Cal.3d 752,87 Cal.Rptr. 526
• Court: California Supreme Court
• Parties: , 470 P.2d 662 Maxine MARTIN, Plaintiff and Appellant, v. Robert I. MARTIN, Defendant and Respondent. L.A. 29668.

Page 526

87 Cal.Rptr. 526

2 Cal.3d 752, 470 P.2d 662

Maxine MARTIN, Plaintiff and Appellant, v. Robert I. MARTIN, Defendant and Respondent.

L.A. 29668.

Supreme Court of California,

In Bank.

June 26, 1970.

Rehearing Denied Aug. 5, 1970.

Biafora & Weiner and Michael Korn, Reseda, for plaintiff and appellant.

Wells & Herring, and William G. Wells, Santa Monica, for defendant and respondent.

SULLIVAN, Justice.

In this case we inquire into the res judicata effect to be accorded by a California court to an order made by federal referee in bankruptcy. Theprecise question presented us by this appeal ¹ is whether the court below erred in cancelling pursuant to Code of Civil Procedure section 675b ² a portion of an interlocutory judgment of divorce entered in the above-entitled action and in discharging all sums and obligations due from defendant thereunder.

Plaintiff Maxine D. Martin (Maxine) was awarded such interlocutory judgment against defendant Robert J. Martin (Robert) by default in 1963. ³ The interlocutory judgment expressly approved a property settlement agreement entered into by the parties on January 1, 1963, and further provided that 'Pursuant Thereto IT IS FURTHER ORDERED that defendant shall pay to plaintiff as consideration for and part of the division of community property the sum of $500.00 per month during the remainder of the natural life of defendant payable $250.00 on the 5th and $250.00 on the 20th of said calendar month beginning January 3, 1963.' ⁴ Robert complied with the order for monthly payments until shortly after entry of the final judgment of divorce on March 23, 1964.

On April 16, 1964, Robert filed in the United States District Court for the Southern (now Central) District of California a voluntary petition in bankruptcy and was adjudicated a bankrupt. The schedules submitted by Robert listed Maxine as his only creditor alleging a debt to her at the time of filing the petition of $344.75 and a continuing obligation to pay her $500 a month for the remainder of her life pursuant to the terms of a property settlement agreement. As already mentioned, this agreement was approved in the interlocutory judgment of divorce. Robert then filed with the referee an application to stay the state court proceedings and to enjoin Maxine from enforcing the obligation by a writ of execution or other process. Maxine filed an opposition thereto and obtained the issuance against Robert of an order to show cause why his adjudication in bankruptcy should not be vacated and his petition in bankruptcy dismissed. After a hearing the referee denied Robert's application for a stay on the ground of unclean hands ⁵ and on the alternate ground that Robert's monthly payments obligation to Maxine was in the nature of a liability for alimony due or to become due or for support of wife and therefore was not dischargeable in bankruptcy ⁶ under section 17(a)(2) of the Bankruptcy Act. ⁷

On August 6, 1964, the referee in bankruptcy issued a 'Discharge of Bankrupt' discharging Robert from all provable claims against his estate 'except such debts as are, by said Act, excepted from the operation of a discharge in bankruptcy.' Four days later the referee filed formal findings of fact, conclusions of law and a judgment ordering that the debt due Maxine came within section 17(a) of the Act and was not affected by the discharge. The federal district court affirmed the judgment on the ground of unclean hands. ⁸

In the meantime Robert had challenged the validity of the monthly payments obligations in the superior court. Finally he moved to cancel the pertinent part of the interlocutory judgment pursuant to Code of Civil Procedure section 675b. After extensive argument on the issue of the res judicata effect of the referee's determination of nondischargeability, the trial court granted Robert's motion and directed his attorney to prepare the order. Maxine objected to the proposed order and moved for reconsideration. On the following day she moved in the bankruptcy court for correction of the general discharge Nunc pro tunc.

On September 30, 1966, the superior court heard Maxine's objection to the proposed order. At that time she informed the court below that the motion for correction Nunc pro tunc would be heard by the referee in bankruptcy on October 3, 1966, and moved that the trial judge defer signing the proposed order until after the hearing of her motion for correction of the discharge. The trial judge signed the order but agreed to hear Maxine's motion for reconsideration on October 6, 1966.

On October 3, 1966, the referee heard and granted Maxine's motion for correction of the discharge Nunc pro tunc so as to exclude therefrom the monthly payments liability. On October 17, 1966, formal findings of fact, conclusions of law and the amended order of discharge were filed. This order was thereafter affirmed by the United States District Court. An appeal from this judgment is now pending before the United States Court of Appeals for the Ninth Circuit.

On October 6, 1966, Maxine advised the trial court of the referee's action upon her motion for correction Nunc pro tunc and requested a continuance of her motion for reconsideration pending the filing of the amended discharge. The record shows that Robert's counsel thereupon stated to the court that the motion had not been granted by the referee and the superior court, over Maxine's attempts to correct this misstatement, denied Maxine's motion for reconsideration. Maxine's motion to vacate the order was denied. (See fn. 1, Ante.) This appeal followed.

The central question before us is whether the bankruptcy referee's determination that Robert's monthly payments obligation to Maxine was not a dischargeable debt under the Bankruptcy Act was res judicata on that issue in the superior court proceedings. Maxine contends that it was, and that the superior court's determination of the question de novo was an impermissible collateral attack upon a judgment of a federal court. Robert urges us to uphold the superior court's action, arguing that the determination made in the bankruptcy proceedings should not be given res judicata effect, since it was neither final nor on the merits.

'The doctrine of res judicata precludes parties or their privies from relitigating a cause of action that has been finally determined by a court of competent jurisdiction. Any issue necessarily decided in such litigation is conclusively determined as to the parties or their privies if it is involved in a subsequent lawsuit on a different cause of action.' (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 810, 122 P.2d 892, 894.) 'The normal rules of Res judicata and collateral estoppel apply to the decisions of bankruptcy courts.' (Katchen v. Landy (1966) 382 U.S. 323, 334, 86 S.Ct. 467, 475, 15 L.Ed.2d 391; see also Chicot County Drainage District v. Baxter State Bank (1940) 308 U.S. 371, 376--377, 60 S.Ct. 317, 84 L.Ed. 329; Stoll v. Gottlieb (1938) 305 U.S. 165, 170--171, 59 S.Ct. 134, 83 L.Ed. 104; Mueller v. Elba Oil Co. (1942) 21 Cal.2d 188, 205--206, 130 P.2d 961). ⁹ Our inquiry therefore is whether the bankruptcy court (the referee) had jurisdiction to make the order which Maxine claims is a conclusive adjudication that Robert's obligation to her was not a dischargeable debt and whether that order, if valid, finally determined the issue.'

It is beyond dispute that the discharge of bankrupt filed in Robert's bankruptcy proceedings on August 6, 1964, and the order amending said discharge filed on October 17, 1966, and entered Nunc pro tunc as of August 6, 1964, on which Maxine relies in the instant case were rendered by a 'court of competent jurisdiction' (Bernhard v. Bank of America, Supra, 19 Cal.2d 807, 810, 122 P.2d 892) having jurisdiction over the subject matter and the parties before it. Indeed, the voluntary appearance of both parties in the proceeding constituted a waiver of any grounds upon which they might otherwise attack the court's judgment for want of on personam jurisdiction. (Rest., Judgments, §§ 18, 19; 1 Witkin, Cal. Procedure (1954) Jurisdiction, § 70; see generally, James, Civil Procedure (1965) § 12.6.) Having submitted themselves to the court's jurisdiction, the parties were therefore bound by any judgment or order which the bankruptcy court had the power to make in the exercise of its jurisdiction. (Cf. Adam v. Saenger (1938) 303 U.S. 59, 67--68, 58 S.Ct. 454, 82 L.Ed. 649.) We must therefore determine whether the bankruptcy court (the referee) had the power to exclude Robert's monthly payments obligation from the discharge as a nondischargeable debt and to effectuate such exclusion by a Nunc pro tunc order.

The right to a discharge under the Bankruptcy Act and the effect of such discharge are, of course entirely distinct matters. (Harrison v. Donnelly (8th Cir. 1946) 153 F.2d 588, 589.) As a general practice, bankruptcy courts have merely determined whether the bankrupt is entitled to a discharge and have left 'the effect of the discharge, if granted, upon a particular claim is to be determination when the discharge is pleaded or relied upon as a defense to the enforcement of such claim.' (In re Tamburo (D.Md.1949) 82 F.Supp. 995, 998; see Yellow Creek Logging Corp. v. Dare (1963) 216 Cal.App.2d 50, 55, 30 Cal.Rptr. 629.) It is settled, however, that the bankruptcy court may, in its discretion, limit the effect of its discharge of the bankrupt to exclude particular debts from its operation. 'Formerly the federal courts held that the bankruptcy court could not determine upon a bankrupt's application for a discharge whether the debt due a particular creditor was to be excepted from the operation of the discharge, the only proper issue being the bankrupt's right to a discharge; and that the effect of the discharge, if granted, upon a particular claim is to be determined when the discharge is pleaded or relied upon as a defense to the enforcement of such...