Memorandum of Decision Re: Collateral Effect of Default Judgment

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Judge's Decisions
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re CHARLES and HELAYNE OGULNIK, No. 98-11326 Debtor(s). ______________________________________/
ALLEN BRUMBAUGH,
Plaintiff(s), v. A.P. No. 98-1152 CHARLES OGULNIK, Defendant(s). _______________________________________/
Memorandum of Decision
The court has made no secret of its dislike for the rule that state court default judgments are to be given collateral estoppel effect in dischargeability litigation. More often than not, the rule renders a debt nondischargeable because the debtor could not afford the costs of litigation or had a substance abuse or other personal problem which rendered him incapable of dealing with the lawsuit. Moreover, the rule results in nondischargeability based on an arcane issue of state law rather than the actual conduct of the debtor. In those states which do not give collateral estoppel effect to default judgments, the debtor can be heard on the merits. In those states which do give collateral effect to default judgments, the debtor is precluded from being heard. Nonetheless, the court's responsibility is to follow the law. The current law in this circuit is that state court default judgments are to be given collateral estoppel effect in dischargeability litigation. In re Nourbakhsh, 67 F.3d 798 (9th Cir. 1995). The state court default judgment in this case uses the terms "fraud," "misrepresentation" and "deceit." Regardless of what the debtor in this case actually may have done, the court is precluded from hearing the matter on the merits and reaching a different conclusion. Accordingly, plaintiff's motion for summary judgment will be granted. Counsel for plaintiff shall submit an appropriate form of judgment.
Dated: January 31, 1999 ____________________________ Alan Jaroslovsky United States Bankruptcy