McCart v. Jordana

• Court: Court of Appeals for the Tenth Circuit
• Decided: June 20, 2000
• Docket: 99-6194
• Status: Unpublished

Opinion

F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS JUN 20 2000 FOR THE TENTH CIRCUIT PATRICK FISHER Clerk

In re:

JONN M. JORDANA, doing business as Mediline Service Corporation, No. 99-6194 doing business as Intercorp (BAP No. WO 98-051) Investment, (Bankr. No. 97-17566) (Adv. No. 97-1400) Debtor.

MAGDELENA MORETTA MCCART,

Plaintiff-Appellee,

v.

JONN M. JORDANA, doing business as Mediline Service Corporation, doing business as Intercorp Investment,

Defendant-Appellant.

ORDER AND JUDGMENT *

Before TACHA , EBEL , and BRISCOE , Circuit Judges.

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore

ordered submitted without oral argument.

Debtor Jonn H. Jordana appeals a decision of the Tenth Circuit Bankruptcy

Appellate Panel (BAP) affirming the bankruptcy court’s summary judgment in

favor of creditor Magdelena Moretta McCart, denying Jordana a discharge of

McCart’s judgment against him. McCart brought a federal securities fraud action

against Jordana for fraudulently inducing her to invest in worthless securities.

Jordana refused to file an answer in that proceeding, despite repeated warnings,

refused to comply with discovery requests and absconded with the original copy

of his deposition transcripts, refusing to return it. The district court in that

proceeding eventually entered a default judgment against Jordana as a sanction

for his misconduct and obstructive behavior.

Jordana filed a Chapter 7 bankruptcy proceeding. McCart filed an

adversary proceeding in the bankruptcy court claiming the default judgment

she had obtained against Jordana in the federal securities fraud action was

nondischargeable under 11 U.S.C. § 523(a)(2)(A) and (B). The bankruptcy court

ruled that McCart’s default judgment against Jordana had collateral estoppel

effect in the nondischargeability proceeding, and that Jordana was therefore

-2- estopped from contesting the dischargeability of that debt. See McCart v.

Jordana (In re Jordana) , 221 B.R. 950, 954-56 (Bankr. W.D. Okla. 1998).

The BAP affirmed the bankruptcy court’s decision. See McCart v. Jordana

(In re Jordana) , 232 B.R. 469, 480 (10th Cir. BAP 1999).

Although other issues were raised in the bankruptcy court and the BAP,

Jordana appeals only the finding that the prior default judgment had collateral

estoppel effect in the nondischargeability proceeding. We review the bankruptcy

court’s grant of summary judgment de novo applying the legal standards set forth

in Fed. R. Civ. P. 56(c). See Hollytex Carpet Mills, Inc. v. Oklahoma

Employment Sec. Comm’n (In re Hollytex Carpet Mills, Inc.) , 73 F.3d 1516, 1518

(10th Cir. 1996). We exercise jurisdiction pursuant to 28 U.S.C. § 158(d), and

we affirm.

The bankruptcy court recognized the general rule that a default judgment

will not be granted preclusive effect because none of the issues was actually

litigated. See McCart , 221 B.R. at 954. However, as both the bankruptcy court

and the BAP recognized, there is an exception where the losing party has had

a full and fair opportunity to participate in the previous litigation, but has

engaged in serious obstructive conduct resulting in a default judgment.

See Wolstein v. Docteroff (In re Docteroff) , 133 F.3d 210, 216-17 (3d Cir. 1997)

(affirming use of collateral estoppel in bankruptcy discharge proceeding where

-3- default entered because debtor wilfully obstructed discovery); Bush v. Balfour

Beatty Bahams, Ltd. (In re Bush) , 62 F.3d 1319, 1323-24 (11th Cir. 1995) (same;

debtor engaged in dilatory and deliberately obstructive conduct); FDIC v. Daily

(In re Daily) , 47 F.3d 365, 368-69 (9th Cir. 1995) (same; debtor deliberately

precluded resolution of factual issues by obstructing discovery process). In these

circumstances, the “actual litigation” requirement of collateral estoppel may be

satisfied because the party was afforded a reasonable opportunity to defend

himself on the merits but choose not to do so. See Bush , 62 F.3d at 1324.

The circumstances in this case justify the application of collateral estoppel

to the default judgment entered against Jordana. Like the debtors in Wolstein ,

Bush and Daily , Jordana did not simply default at the outset of the federal

securities fraud proceeding. Instead, he significantly participated in the litigation

and engaged in serious obstructive behavior for more than two years before the

default judgment was entered as a sanction. Jordana has never disputed that he

took his deposition transcript and refused to return it, refused to cooperate in

discovery, and refused to answer McCart’s complaint, all in spite of repeated

warnings from the district court that his conduct was in violation of the court’s

rules. See McCart , 221 B.R. at 955 (“It is illuminating to this court that the

debtor-defendant does not dispute that he engaged in this obstructive behavior.”).

Further, it is clear from the record that Jordana was repeatedly warned that his

-4- conduct could result in a default judgment against him. Jordana had every

opportunity to fully and fairly litigate all of the relevant issues in the securities

fraud action.

Jordana contends on appeal that the BAP placed “[t]oo strong

a reliance . . . on the allegations of misconduct” in the securities fraud action.

Appellant’s Br. at 5. He contends the default judgment was only entered because

he failed to answer the complaint. We disagree. Based upon our review of the

record, the parties’ briefs, and our independent research, we conclude that the

BAP’s factual findings are supported by the record and that it properly considered

and rejected Jordana’s arguments in a thorough and well-reasoned opinion.

Therefore, we AFFIRM the judgment of the bankruptcy court for substantially

the same reasons set forth by the BAP in McCart , 232 B.R. 469.

Entered for the Court

Deanell Reece Tacha Circuit Judge

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