In Re John Houtman and Gladys Irene Houtman, Bankrupts. John Houtman and Gladys Irene Houtman v. Edgar F. Mann and Edna M. Mann, Creditors-Appellees

This is an appeal from an order of the district court affirming a decision of the bankruptcy judge that a 1971 state court judgment for $55,000 against the appellants was nondischargeable in bankruptcy. The bankruptcy judge found that the judgment rested on a transaction “so tainted by fraud as to render it [the judgment] a nondischargeable obligation.” Presumably this meant that the judgment represented a “liability for obtaining money or property by false pretenses or false representations” and was therefore nondischargeable under § 17(a)(2) of the Bankruptcy Act. 11 U.S.C. § 35 (a)(2). We affirm.

I. Facts.

The Manns, appellees and judgment creditors of the bankrupts, were awarded both compensatory and punitive damages in a suit brought against the Houtmans in the El Dorado County Superior Court in California in November, 1971. This judgment *653 was awarded after a jury trial on a complaint alleging fraud and misrepresentation resulting from a three-party real estate transaction. On June 9, 1972 both Houtmans filed petitions for bankruptcy. Each listed the Manns in the proper schedule as unsecured creditors. On October 4, 1972, the Manns, pursuant to the bankruptcy rules then…

concurring and dissenting:

I have no quarrel with the majority’s enunciation of the controlling principles of law, but I disagree with the application of those principles in this case. I would remand the case to the district court for reconsideration in the light of the legal principles stated in the majority opinion.

Upon the record, it is impossible to determine whether either the bankruptcy judge or the district court was under the erroneous impression that the state court judgment foreclosed the bankruptcy court and the district court from independently determining dischargeability of the obligation by application of the principles of res judicata *657 (issue preclusion, formerly known as collateral estoppel). The courts below appear to have relied upon the teaching of Coen v. Zick (9th Cir. 1972) 458 F.2d 326 , in which we stated: “[t]he only unresolved inquiry is whether that record [of the state court] taken as true constitutes sufficient proof to establish that the judgment obtained by appellant against the bankrupts in the state court was based upon willful and malicious acts of Coen. We find that it was conclusive of the nature of the proceeding and of the basis upon…

568 F.2d 651 In re John HOUTMAN and Gladys Irene Houtman, Bankrupts. John HOUTMAN and Gladys Irene Houtman, Petitioners-Appellants, v. Edgar F. MANN and Edna M. Mann, Creditors-Appellees. No. 76-3611. United States Court of Appeals, Ninth Circuit. Jan. 25, 1978. 1 Richard K. Park, Sacramento, Cal., for petitioners-appellants. 2 James A. Thompson, Redwood City, Cal., for creditors-appellees. 3 Appeal from the United States District Court for the Eastern District of California. 4 Before HUFSTEDLER and SNEED, Circuit Judges, and RENFREW, * District Judge. 5 This is an appeal from an order of the district court affirming a decision of the bankruptcy judge that a 1971 state court judgment for $55,000 against the appellants was nondischargeable in bankruptcy. The bankruptcy judge found that the judgment rested on a transaction "so tainted by fraud as to render it (the judgment) a nondischargeable obligation." Presumably this meant that the judgment represented a "liability for obtaining money or property by false pretenses or false representations" and was therefore nondischargeable under § 17(a)(2) of the Bankruptcy Act. 11 U.S.C. § 35 (a)(2). We affirm. 6 I. Facts. 7 The…