DAWN MARIE ADAMS, Crеditor‐Appellant, v. JAMES GREGORY ADAMS, Debtor‐Appellee.
No. 13‐1636
United States Court of Appeals For the Seventh Circuit
ARGUED SEPTEMBER 9, 2013 — DECIDED DECEMBER 27, 2013
Before POSNER, ROVNER, and HAMILTON, Circuit Judges.
Appeal from the United States District Court for the Southern District of Indiana, Terre Haute Division. No. 2:12‐cv‐130‐WTL‐WGH— William T. Lawrence, Judge.
Because the decisions of the bankruptcy court and the district court were final orders as to Dawn’s claim, we have jurisdictiоn over her appeal pursuant to
Procedural History
Debtor Greg Adams and creditor Dawn Adams had been married for about three years when they were divorced in 2004 by an order of the Superior Court of Jasper County, Georgia. The divorce decree and a 2006 modification required Greg to pay Dawn $61,295, secured by a note and а security agreement in certain trucks and equipment (including a “‘Monster Truck’ with a Summit Motor installed and currently identified as the ‘Annihilator’“).
Greg failed to pay the judgment, however, and in 2007 Dawn sued him for breach of the note and security agreement in the Superior Court of Upson County, Georgia, where Greg had relocated. Greg asserted in his answer that the note had been paid in full, but he failed to appear for trial. The Upson County court entered judgment against him on June 27, 2008 and reduced all of Dawn’s claims to a single judgment of $97,091. Greg did not appeal from the 2008 Upson County judgment.
By the spring of 2010, Greg had moved to Putnam County, Indiana. Dawn then sought to enforce the June 2008 Upson County judgment by registering it in the Putnam Circuit Court. That court also ruled in Dawn’s favor, finding that Greg’s “general denials/defense[s] are hereby overruled” and that the Upson County judgment was properly registered and entitled to full faith and credit for purposes of collection. Greg did not appeal.
Greg then sought to set aside the judgment in Georgia back in the Superior Court of Upson County. He argued that the Upson County judgment had been fully satisfied by the payment he had made towards the Jasper County contempt
Once again, Greg did not appeal or make payment. Instead, he filed for relief under Chapter 13 of the Bankruptcy Code in the Southern Distriсt of Indiana. Dawn filed a Proof of Claim for $74,612.25. Greg objected, arguing that Dawn’s claim had “been satisfied through a variety of transactions which have occurred between the parties.” Dawn responded that Greg’s defenses had been fully and finally litigated in the Georgia state court actions and that his оbjection to her claim was barred by preclusion principles. The bankruptcy court sided with Greg and rejected Dawn’s claim. In spite of the three final and unappealed rulings against Greg, the court said: “I can always hear what the value of a claim is.” The bankruptcy court heard Greg’s argument that the state courts had not properly credited him with certain payments and that the agreements underlying the judgments had been obtained under duress. The bankruptcy court then rejected Dawn’s claim, stating:
I’m going to solve the problem by letting the Chapter 13 continue, and denying the claim, because I don’t know whether the claim has really totally been paid in full, but it’s no $69,000 claim. And I see on the claim that the—that all of the notices go out to ... Sheridan, Wyoming and ... Monticello, Georgia. I’ve never seen this ... Dawn Marie Adams, and her claim is denied. I note that on Exhibit 21...is a money order for $51,000, and after you take all thоse exhibits and add them up, what’s submitted here was well over $200,000. And I couldn’t quite determine whether that included the $51,000 or not, but there have been thousands—over—there’s been over $250,000 paid in this case, no question about it, for a marriage that was about 28 months.
Dawn appealed the bankruptcy court’s ruling to the distriсt court. The district court affirmed, finding that the bankruptcy court had the power to inquire into the validity of Dawn’s claim and that she had failed to prove her claim by a preponderance of the evidence. Adams v. Adams, 2013 WL 752928, at *3–4 (S.D. Ind. Feb. 27, 2013). Dawn appeals.
Analysis
Dawn Adams argues that the bankruptcy court was precluded from rehearing Greg’s defenses pursuant to the doctrine of issue preclusion. We agree. Accordingly, we reverse for further proceedings.2
Dawn’s claim against Greg’s bankruptcy estate is supported by several judgments of the Georgia state courts that culminated in the Upson County court’s judgment of April 1, 2011 that Greg owed Dawn $74,612.25. In the Georgia state courts, Greg raised several defenses to Dawn’s suits, including that he had not been credited for payments he had made toward what he owed and that the obligations underlying the judgments were procured by duress and fraud. Those arguments, predicated on the argument that the Georgia state court decisions in Dawn’s favor were wrong, were heard and rejected by the Georgia courts.
Issue preclusion principles apply to prevent the relitigation of issues in bankruptcy proceedings, just as they do in other
To determine whether issue preclusion applied, we look to the preclusion law of the state where the judgment was rendered.
Under Georgia law, the doctrine of issue preclusion, also known as collateral estoppel,
precludes the re‐adjudication of an issue that has рreviously been litigated and adjudicated on the merits in another action between the same parties or their privies. Like res judicata [claim preclusion], collateral estoppel [issue preclusion] requires the identity of the parties or their privies in both actions. However, unlikе res judicata [claim preclusion], collateral estoppel [issue preclusion] does not require identity of the claim—so long as the issue was determined in the previous action and there is
identity of the parties, that issue may not be re‐litigated, even as part of a different claim.
Shields v. BellSouth Advertising & Publishing Corp., 545 S.E.2d 898, 900 (Ga. 2001), quoting Gwinnett County Bd. of Tax Assessors v. General Electric Capital Computer Svcs., 538 S.E.2d 746, 748 (Ga. 2000).
Here, the Upson County court entered judgment against Greg not just once but three times, though once would have been enough to support issue preclusion. With each judgment, the Georgia state court heard and rejected Grеg’s defenses, finding that he was granted all credits he was due and that his obligation to Dawn was not procured by fraud or duress. The bases of Greg’s objection to Dawn’s claim against his bankruptcy estate thus are identical to the defenses that the state court considered and rejected. The partiеs and the issues are identical, and under Georgia law issue preclusion applies.
We find this case indistinguishable from In re Bulic, 997 F.2d at 303–05, in which we found that issue preclusion applied in a bankruptcy proceeding to foreclose the bankruptcy court’s reconsideration of a state court’s prior judgment that the bankruptcy debtors owed their creditor civil damages. The debtors argued before the bankruptcy court that the creditor’s claim against their bankruptcy estate was based on a state court judgment that had been procured by fraud, deceit, and perjury. Id. at 303. They argued that the bankruptcy court should have re‐еxamined the validity and amount of the creditor’s claim under its general equitable powers. We found that reliance on “general equitable principles, independent of the [bankruptcy] code, is insuffi‐
Though there are а few narrow exceptions to the application of issue preclusion in bankruptcy cases, Greg does not argue that any of these exceptions apply. He does not argue, for instance, that the Upson County court lacked jurisdiction to hear Dawn’s suit. See Bulic, 997 F.2d at 304–05, quoting Heiser v. Woodruff, 327 U.S. 726, 736 (1946) (“Undoubtedly, since thе Bankruptcy Act authorizes a proof of claim based on a judgment, such a proof may be assailed in the bankruptcy court on the ground that the purported judgment is not a judgment because of want of jurisdiction or because it was procured by fraud of a party.“). He also does not arguе that Dawn procured the Upson County judgment by fraud on the court. Bulic, 997 F.2d at 305 (distinguishing fraud on the court in Heiser from previously‐litigated fraud on a party: “the only allegations of fraud were not of fraud upon the court, but of perjury at trial and coercion in obtaining the promissory notes. Thus the only issues of fraud...were fully litigated and decided by the statе court judgment.“). Greg argues only that the Upson County court’s order is silent concerning his defenses, so “whether those issues were ‘actually litigated and adjudi‐
Greg alsо argues that state law preclusion principles are secondary to the bankruptcy court’s interest in ensuring that a bankruptcy claimant does not receive a windfall, relying on In re Witte, 841 F.2d 804 (7th Cir. 1988). But Witte is inapposite, and Greg’s attempt to expand it would amount to a broad command to bankruptcy courts to allow relitigation of issues and claims already resolved by other courts. The creditor in Witte had repossessed the debtor’s farm. Yet, the creditor attempted also to pursue a claim against the bankruptcy estate based on the debtor’s missed payments toward an installment contract on the farm. We rejected that attempt on the ground that the creditor had made an election of remedies in the state courts by repossessing the farm, so the creditor could not also seek payments under the parties’ installment contract. See Id. at 808. Had the creditor been pеrmitted to pursue his claim, he would have received what would have amounted to an inequitable double recovery.
Here it is undisputed that between the time of the final Upson County judgment in 2011 and Greg’s bankruptcy petition, Greg did not pay Dawn any amounts toward the
In sum, though Greg Adams had the opportunity to appeal the Georgia state court judgments, he did not avail himself of that opportunity. Instead, he filed for bankruptcy, but that is not a substitute for timely aрpeals of the state court judgments. The doctrine of issue preclusion (collateral estoppel) bars him from using the bankruptcy system to have his defenses reheard despite the state courts’ rejection of those defenses.
The judgment of the district court is REVERSED and the case is REMANDED for further proceedings consistent with this opinion.