In the Matter of Gordon Irving Wright, Bankrupt. Gordon Irving Wright, Bankrupt-Appellant v. George Lubinko, Creditor-Appellee

Wright sold stock in his company to Lubinko in violation of California corporate securities laws which require a permit to sell such stock. Lubinko brought suit in the California Superior Court and recovered judgment against Wright for the purchase price plus interest. Wright subsequently filed for bankruptcy. The present controversy stems from Lubin-ko’s application to the bankruptcy court to declare the judgment debt nondis-chargeable under section 17a(2) of the Bankruptcy Act, 11 U.S.C. § 35a(2). The bankruptcy judge held the debt to be nondischargeable and the district court agreed. We reverse.

Section 17a(2) states:

The bankruptcy judge held that the superior court’s findings of fact were res judicata, relying specifically on finding IV:

(Strikeouts in original.) The bankruptcy judge went on to hold that the judgment was a liability for obtaining money or property by false pretenses or false representations within the meaning of section 17a(2). After a hearing and again on rehearing, the district court affirmed this determination of nondis-chargeability. Wright appeals from the order of affirmance on rehearing.

We agree with both the bankruptcy judge and the…