FINDINGS OF FACT AND CONCLUSIONS OF LAW
Bаrry L. Melnick, for the use and benefit of Barry L. Melnick’s self-directed interest in the Office Automation, Inc. pension plan administеred by Retirement Accounts, Inc., seeks determination that the judgment debt owed to it by defendants, G. Robert Seifert and Gail A. Seifеrt, is non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6).
At trial, plaintiff presented as evidence pertinent portions оf the certified record of a previous proceeding between the same parties in the Circuit Court of Orangе County, Florida (State Court Proceeding), including pleadings, requests for admissions, and final judgment. Defendants did not answer or appear.
Upon the evidence presented, the Court makes the following Findings of Fact and Conclusions of Law:
FINDINGS OF FACT
In 1984, plaintiff invested $30,000 with defendants to enable them to purchase rental property. Defendants were to manage the prоperty with plaintiff acting as a silent partner. Upon resale, any profits were to be shared.
The parties ultimately lost the property through foreclosure.
Upon learning of the foreclosure sale, plaintiff filed a complaint against defendants in the state court. Plaintiff obtained a default final judgment for $30,000, plus $18,473.42 in pre-petition interest, against defendants based on breach of contract, breach of fiduciary duty, and fraud.
The state court also reserved jurisdiсtion to enter a supplemental final judgment for punitive damages, attorney’s fees and costs.
The sole issue before this Court is whether the doctrine of collateral estoppel applies to prevent re-litigation of issues determined in the state court default final judgment.
CONCLUSIONS OF LAW
Plaintiff argues that the judgment rendered in the state court proceeding is еxcepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A), (a)(4), and (a)(6), and that the doctrine of collateral estoppеl precludes re-litigating the implicit factual findings.
*609
In
Brown v. Felsen,
The United States Court of Appeals for the Eleventh Circuit has extended the
Brown
doctrine, holding that under certain circumstances a bankruрtcy court is bound by the doctrine of collateral estoppel in § 523 exception to discharge proceedings.
See In re Latch,
In order to apply collateral estoppel in an exception to discharge proceеding, the creditor must satisfy the following elements:
(a) the issue at stake must be identical to the one involved in the prior litigation;
(b) the issue must have been actually litigated in the prior proceeding; and
(c) the determination of the issue in the prior litigation must have been a critical and necessary part of the judgment in that earlier decision.
In re Halpern,810 F.2d 1061 , 1064 (11th Cir.1987).
I.THE ISSUE AT STAKE IS IDENTICAL TO THE ONE INVOLVED IN THE STATE COURT LITIGATION.
The
Halpem
test first requires that “the issue at stake must be identical to the one involved in the prior litigation.”
Id.
In
Grogan v. Garner,
— U.S. -,
In
In re Powell,
II. THE ISSUE OF THIS ADVERSARY PROCEEDING WAS ACTUALLY LITIGATED IN THE PRIOR STATE COURT PROCEEDING.
The second prong of Halpem mandаtes that “the issue must have been actually litigated in the prior proceeding.” Halpem at 1064. “Actually litigated” only contemplаtes that the defendant have been given a full opportunity to defend himself. Defendants in this case chose not to answer the state court complaint and cannot now claim that the judgment should be discounted because of their dеcision not to participate in the state court case. As this Court has previously stated:
Debtor/defendant cоuld have reasonably foreseen the consequences of not defending an action based in part on fraud. It would be undeserved to give debtor/defendant a second bite at the apple when he knowingly chose not to defend himself in the first instance.
In re Wilson,
III. THE DETERMINATION OF THE ISSUE IN THIS ADVERSARY PROCEEDING IN THE PRIOR STATE COURT PROCEEDING WAS A CRITICAL AND NECESSARY PART OF THE JUDGMENT IN THAT EARLIER DECISION.
The third and final prong of Hal-pem requires that “the determination of the issue in the prior litigation must have been a critical and neсessary part of the judgment in that earlier action.” Halpern *610 at 1064. This requirement is also present as the judgment entered in the statе court reserved jurisdiction to enter a supplemental final judgment for punitive damages, attorney’s fees, and cоsts.
Under Florida law a finding of fraud will support an award of punitive damages.
First Interstate Development Corp. v. Ablanedo,
The elements of Halpem have been satisfied and the application of collateral es-toppel is appropriate in this proceeding. Consequently, pursuant to § 523, the Final Judgment entered on June 2, 1989, by the Circuit Court of Orangе County, Florida, and recorded in Book 3313 Page 410, shall be excepted from discharge pursuant to 11 U.S.C. § 523.
A separate Final Judgment will be entered consistent with these Findings of Fact and Conclusions of Law.
FINAL JUDGMENT
Upon the Findings of Fact and Conclusions of Law sеparately entered, it is
ORDERED:
1. Judgment is entered in favor of plaintiff, Barry L. Melnick, for the use and benefit of Barry L. Melnick’s self-directed interest in the Office Automation, Inc. pension plan administered by Retirement Accounts, Inc., and against defendants, G. Robert Seifert and Gail A. Seifert.
2. Final Judgment entered on June 2, 1989, by the Circuit Court of Orange County, Florida, and recorded in Book 3313 Page 410, is excepted from discharges pursuant to 11 U.S.C. § 523.