In re Harkins (Ch. 7, Case No. 02-55794, Adv. No. 03-05046)

The creditor obtained a default judgment in state court when the debtor failed to respond to a request for production of documents. The state court's order stated that by reason of the debtor's default, the court affirmatively found that the actions of the debtor constituted a fraud on the creditor. The creditor contended that under collateral estoppel principles, the state court's order may be used to establish conclusively the elements of fraud in this dischargeability proceeding.

The Court disagreed, noting that the debtor was acting on the advice of counsel who advised that filing bankruptcy was inevitable. The Court also noted that the debtor was unable to produce the records because he no longer had control or access to his former business location and its business records.

Monday, December 22, 2003