Opinion
No. 7-00-16005 MF, Adversary No. 01-1023 M
June 15, 2001
F. Chester Miller, Attorney for Plaintiff, Farmington, NM.
Nathalie D. Martin, supervising attorney, UNM Clinical Law Program, Albuquerque, NM.
MEMORANDUM
THIS MATTER came before the Court on the Motion for Summary Judgment filed by Plaintiff, Ilse Herta Homernik, f/ k/ a Ilse Herta Horman, by and through her attorney, F. Chester Miller, III. The Court held a final hearing on the Motion for Summary Judgment on April 10, 2001. After considering the arguments of counsel and their memorandum briefs, and being otherwise fully informed, the Court finds that summary cannot be granted in favor of Plaintiff based solely on the prior Judgment and Order entered in favor of Plaintiff and against Defendant L. R. Fitzgerald in the Eleventh Judicial District Court, County of San Juan, State of New Mexico, Cause No. CV 99-1070-3. Summary judgment should be granted when the moving party has shown that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Rule 56(c) Fed.R.Civ.P., as incorporated into the Federal Rules of Bankruptcy Procedure by Rule 7056 Fed.R.Bankr.P. Plaintiff moved for summary judgment on grounds that a prior ruling entered as part of a state court proceeding has collateral estoppel effect on this adversary proceeding.
A prior judgment entered in a state court proceeding can have collateral estoppel effect on a subsequent proceeding before a bankruptcy court to determine dischargeability of debt. Klemens v. Wallace (In re Wallace), 840 F.2d 762, 764-765 (10 th Cir. 1988). More specifically, even though the Bankruptcy Court maintains exclusive jurisdiction to determine dischargeability, previously decided facts that may form the basis for a determination of non-dischargeability in the bankruptcy arena need not be re-litigated before the Bankruptcy Court. See In re Tsamasfyros, 940 F.2d 605, 606-607 (10 th Cir. 1991) (though bankruptcy court ultimately determines dischargeability, collateral estoppel can be used to preclude re-litigation of issues forming the basis of a claim for non-dischargeability) (citation omitted).
Brown v. Felson, 442 U.S. 127, 129-130 (1979) (bankruptcy court has exclusive jurisdiction over discharge).
Plaintiff filed this adversary proceeding against Defendant seeking the determination of non-dischargeability of certain debt pursuant to 11 U.S.C. § 523(a)(2)(A), (4) and (6). Attached to Plaintiffs Complaint is the state district courts Judgment and Order, which also forms the basis of Plaintiffs Motion for Summary Judgment. The state district courts Judgment and Order awards Plaintiff money damages for Defendants fraud and breach of fiduciary duty to Plaintiff. See Judgment and Order, ¶¶ 2., 3., and 5. The Judgment and Order also concludes that Defendants actions were willful, malicious and performed without conscience and in violation of law. Judgment and Order, ¶ 7. These conclusions track the language of 11 U.S.C. § 523(a)(2)(A), (4) and (6), and would appear to pre-suppose that facts sufficient to form the basis of a claim for non-dischargeability under these sections were actually and necessarily decided in the state district court. However, the Judgment and Order contains no findings of fact that formed the basis for the conclusions. Absent additional findings of fact in the state district court action from which this Court could determine whether the standards of non-dischargeability required under 11 U.S.C. § 523(a)(2)(A), (4) and/ or (6) have been met, the state district court Judgment and Order cannot be given collateral estoppel effect. It is therefore inappropriate to grant summary judgment.
Those sections provide:
A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
(2) for money, property, service, or an extension, renewal, or refinancing of credit, to the extent obtained by (A) false pretenses, a false representation, or actual fraud, other than a statement respecting the debtors or an insiders financial condition;
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny;
(6) for willful and malicious injury by the debtor to another entity or to the property of another entity.
11 U.S.C. § 523(a)(2)(A), (4) and (6).
This opinion constitutes the Courts findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure. An appropriate order will be entered.