Quality Pools v. Lichter (In Re Lichter)

104 B.R. 521, 1989 Bankr. LEXIS 1504, 1989 WL 103209

• Court: United States Bankruptcy Court, M.D. Georgia
• Decided: July 27, 1989
• Docket: 14-70207
• Status: Published

Opinion

MEMORANDUM OPINION

JOHN T. LANEY, III, Bankruptcy Judge.

On June 7, 1989, a pre-trial conference was held on Quality Pools’ (hereinafter “Plaintiff”) complaint to determine dis-chargeability of debt under § 523(a)(4) and (6) of the Bankruptcy Code. 1 After hearing argument of counsel, the court invited both parties to submit briefs on the issue of whether collateral estoppel would apply to a default judgment in the State Court in a dischargeability action under § 523(a)(4) and (6) of the Bankruptcy Code. 2 This court, having considered the arguments and briefs of counsel, now renders this Memorandum Opinion.

The Plaintiff filed a complaint against the Debtor in the Municipal Court of Columbus on March 9, 1987. Plaintiff is a creditor of the Debtor, having obtained a judgment against the Debtor on January 12, 1988. The Debtor, Raphael Lichter, also known as Ralph Lichter, filed his Chapter 7 bankruptcy petition on January 9, 1989.

Plaintiff contends that the state court default judgment should be given issue preclusion effect in the instant discharge-ability action under § 523(a)(4) and (6) of the Bankruptcy Code. 3 Plaintiff has cited to this court numerous cases which it alleges support its contention.

The court feels that a fundamental issue has not been addressed by either the Plaintiff or by the Debtor. This issue is the difference in the burden of proof in a dis-chargeability action in the Bankruptcy Court and a civil suit in State Court. In actions under § 523 of the Bankruptcy Code, 4 the burden of proof is clear and convincing. In re Hunter, 780 F.2d 1577 (11th Cir.1986). However, in a civil suit in the Georgia state court, the burden of proof is preponderance of the evidence. Therefore, the burden of proof is much greater in the Bankruptcy Court when dis-chargeability actions under § 523 of the Bankruptcy Code 5 are involved. Collateral estoppel is held not applicable in cases where the burden of proof under § 523 of the Bankruptcy Code 6 is clear and convincing, and the state court judgment against the Debtor was by a preponderance of the evidence. B. Russell, Bankruptcy Evidence Manual § 6(3) (1987). See also In re Billings, 94 B.R. 803 (Bankr.E.D.N.Y.1989); In re Weitzel, 72 B.R. 253 (Bankr.N.D.Ohio 1987); In re Wintrow, 57 B.R. 695 (Bankr.S.D.Ohio 1986); In re D’Annolfo, 54 B.R. 887 (Bankr.D.Mass.1985).

Accordingly, this court holds that the default judgment entered against the Debt- or in the Municipal Court of Columbus, Georgia, will not be given issue preclusion effect under the doctrine of collateral es-toppel in the instant dischargeability action under § 523 of the Bankruptcy Code. 7

1 . 11 U.S.C.A. § 523(a)(4), (6) (West 1979 & Supp.1989).

2

3 .11 U.S.C.A. § 523(a)(4), (6) (West 1979 & Supp.1989).

4 . 11 U.S.C.A. § 523 (West 1979 & Supp.1989).

5

6 . 11 U.S.C.A. § 523 (West 1979 & Supp.1989).

7