In Re Vierra

Memorandum of Decision

Before defendant George Vierra filed his chapter 7 bankruptcy petition, he was a defendant in a state court action in South Carolina. He answered the complaint, but his default was later entered when he failed to comply with discovery orders. The court held' a default hearing and made specific findings of fraud in awarding plaintiff D. Parker Stokes $100,000.00 in actual damages, $42,656.38 in prejudgment interest, $258,-343.62 in punitive damages, $25,000.00 in attorneys’ fees, and $350.12 in costs. The court found that Vierra had made false statements to Stokes to induce him to invest in a limited partnership. Stokes now seeks summary judgment on grounds that the South Carolina default judgment precludes this court from adjudicating the case on its merits.

The court has no problem finding that it is precluded from hearing the case where there has been a full trial on the merits in state court. See In re Bugna, 33 F.3d 1054 (9th Cir.1994). However, it chafes at the idea that a default judgment in state court precludes a trial on the merits in bankruptcy court. State court litigants lose by default for too many reasons having nothing to do with wrongful…