IN RE: JOHN W. CATT, II, APPEAL OF: SHIRLEY and GERALD HASH (SD Ind., Judge Young). Judge Posner writes for the panel:
When John Catt, a builder, declared bankruptcy, the Hashes, who had been joint venturers with Catt and had obtained a fraud judgment against him in an Indiana state court for almost half a million dollars, sought a ruling from the bankruptcy judge that the judgment debt to them was not dischargeable in bankruptcy. 11 U.S.C. § 523(a)(2)(A). The judge ruled, however, that the Hashes could not use the doctrine of collateral estoppel to make the state court’s finding of fraud binding in the bankruptcy proceeding; they would have to prove fraud anew in that proceeding to defeat discharge. They declined to do so, standing on their claim of collateral estoppel, and so the bankruptcy judge ruled the debt dischargeable. The district judge affirmed, and the Hashes appeal.The court here, after an interesting discussion, reverses, stating:
But all that the Hashes want to use the judgment for is the underlying finding of fraud, and under Indiana law they could have used it for that purpose even if there had been no hearing in the state court at all. The finding thus bound the bankruptcy judge.Access the briefs in the case: Appellant; Appellee; Reply. Posted by Marcia Oddi at May 19, 2004 12:39 PM