Guion v. Sims (In re Sims)
479 B.R. 415
Bankr. S.D. Tex.2012Background
- Texas state court found Thomas Sims liable for fraud after death-penalty sanctions for discovery abuse; judgments in favor of Guión and Fitzpatrick followed by a damages award and appellate remand on damages; parties settled before new trial on damages; Sims filed Chapter 7 bankruptcy on Oct 29, 2011; Guión and Fitzpatrick filed §523(a)(2)(A) and (a)(6) adversary action Jan 2012; court applies collateral estoppel to fraud finding and considers alternative §523(a)(2)(A) basis based on trial evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars discharge of the debt for fraud. | Guión and Fitzpatrick argue Texas fraud finding controls. | Sims contends estoppel doesn’t apply to all elements or amounts. | Collateral estoppel applies; fraud finding nondischargeable under §523(a)(2)(A). |
| Whether the state court judgment was final for collateral estoppel despite damages remand. | Finality achieved by the liability finding. | Remand on damages prevents finality. | Judgment final for purposes of issue preclusion. |
| Whether the elements of §523(a)(2)(A) are satisfied by the Texas fraud finding. | Fraud elements align with §523(a)(2)(A). | Sims contested the intent and reliance. | Elements satisfied; debt nondischargeable under §523(a)(2)(A). |
| Whether, alternatively, the debt is nondischargeable under §523(a)(2)(A) based on the evidence presented. | Evidence at trial supports all §523(a)(2)(A) elements. | Nondischargeability depends on the state court record. | Court finds trial evidence supports §523(a)(2)(A) nondischargeability. |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (constitutional basis for collateral estoppel in bankruptcy dischargeability)
- Plunk v. Yaquinto (In re Plunk), 481 F.3d 302 (5th Cir. 2007) (state-law preclusion rules apply in dischargeability actions)
- Gober v. Terra + Corp. (In re Gober), 100 F.3d 1195 (5th Cir. 1996) (fully and fairly litigated prong satisfied by sanctions/defaults)
- Park v. Chang (In re Park), 271 Fed.Appx. 398 (5th Cir. 2008) (elements of fraud align with 523(a)(2)(A))
- Acosta (In re Acosta), 406 F.3d 367 (5th Cir. 2005) (elements of fraud under §523(a)(2)(A))
- Pye v. Dep’t of Transp. of Ga., 513 F.2d 290 (5th Cir. 1975) (final judgment for collateral estoppel can exist despite remand on damages)
- Prager v. El Paso Nat. Bank, 417 F.2d 1111 (5th Cir. 1969) (flexible finality standard for collateral estoppel)
- Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1 (Tex. 1986) (finality of judgments for collateral estoppel)