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Litton Loan Servicing, L.P. v. Dennis Schubert

Summarizing by Amir Shachmurove

Panther Petroleum, LLC v. Couch

Case Type:
Case Status:
2017 WL 444644 (6th Circuit, Feb 02,2017) Published
State Court Default Judgment based on defendant's failure to appear and participate entitled to collateral estoppel effect in later action to except debt from discharge under Sections 523(a)(2) and 523(a)(6).
Procedural context:
Debtor suffered default judgment in State Court. Debtor filed Bankruptcy and creditor brought non-dischargability action. Bankruptcy Court granted Summary Judgment in favor of Creditor based on collateral estoppel effect of State Court Judgment. On appeal, Sixth Circuit BAP affirmed,.
Creditor brought action against debtor alleging fraud and willful and malicious conduct. Debtor initially filed answer and counterclaim and actively participated in litigation. At some point, debtor's state court attorney withdrew and debtor stopped participating, ignoring discovery requests and not appearing on the Motion for Default Judgment or the subsequent hearing on damages. State Court made specific factual findings that debtor's conduct was fraudulent and constituted willful and malicious actions designed to cause harm to creditor. Debtor filed for bankruptcy and creditor brought action to except debt from discharge under Section 523(a)(2), (a)(4) and (a)(6). Bankruptcy Court held that creditor entitled to judgment under (a)(2) and (a)(6) where State Court complaint adequately set out factors that would be sufficient to except debt form discharge, and State Court Judgment made specific findings of fraud and willful and malicious injury. On appeal, debtor argued that he fully participated until his attorney withdrew and after that debtor did not intentionally refuse to participate but did not know what was happening in litigation. BAP affirmed, holding that debtor's active participation indicated that he had full and fair opportunity to defend, and judgment rendered by default entitled to collateral estoppel effect.
Opperman, Harrison & Preston

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