Title: Miller v. Rush

State: colorado

Issuer: Colorado Supreme Court

Document:

393 P.2d 565 (1964) William D. MILLER, Plaintiff in Error, v. Paul RUSH, Defendant in Error. No. 20437. Supreme Court of Colorado. In Department. June 22, 1964. Rehearing Denied July 13, 1964. *566 Holland & Hart, Dwight K. Shellman, Jr., Denver, for plaintiff in error. Milton Berger, Sidney Biderman, Denver, for defendant in error. HALL, Justice. On October 12, 1955, Miller, as purchaser, and Rush, as seller, entered into a written contract whereby Rush agreed to sell and Miller agreed to purchase Plot 6, Charlou Park Addition, known as 6464 Rim Road, with a residence to be constructed thereon by Rush for the agreed price of $63,000.00. Among other things the agreement provided: Rush completed the residence and on March 23, 1956, executed and tendered to Miller a warranty deed. At that time there was due and unpaid on the agreed price $25,000.00, and this amount was on that date paid by Miller to Rush and the deed delivered. Simultaneous with delivery of the deed and payment of the balance due and as a condition of making the payment, Miller required Rush to execute and deliver to him a written "LIEN WAIVER" which is as follows: On May 14, 1956, Pyramid Lumber and Supplies, Inc., and Hy Scott commenced an action against Miller and Rush. Each plaintiff alleged that they had furnished materials for the residence built on Plot 6, had recorded lien statements and each sought foreclosure. An additional lien claimant was permitted to intervene. Miller, seeking to clear the property of the liens, filed a motion in the case seeking foreclosure. He requested permission to deposit with the court $14,000.00, an amount more than sufficient to pay the lien claims, and requested that on making the deposit an order be entered directing that the liens be released and that the claimants have recourse to the cash deposit in lieu of the real estate. By stipulation and order entered pursuant thereto the money was deposited and the liens on the real property released. Rush answered the complaints of the lien holders and put in issue the amounts due. Miller filed his answer and cross-claim. His answer denied the claims of the lien holders; his denial was based on the fact that he was without knowledge with reference thereto. For cross-claim against Rush, Miller set forth his contract with Rush and further alleged that: On November 5, 1956, by agreement of all parties, findings and judgment were entered adjudicating all of the rights and duties of the parties asserted in the pleadings. Each lien holder had judgment for a specified amount and the amounts specified were paid out of the $14,000.00 deposit and the judgments satisfied. The findings and judgment further provided that: The judgment that Miller obtained against Rush (1956) was partially satisfied in 1958 *568 by payment to Miller of $6807.00. Miller, on November 4, 1960, filed a motion for supplementary proceedings under Rule 69, R.C.P.Colo., seeking to make discovery of assets of Rush that might be available for satisfaction of the balance due on the judgment. On presentation of this motion the trial court, ex parte and without notice, entered an order directing Rush to appear on November 25, 1960, and respond to said motion and order. (The record before us is silent as to whether Rush did or did not appear on the 25th, or at all.) On November 29, 1960, Rush filed a debtor's petition in bankruptcy. Among debts listed is: On February 23, 1961, Miller filed his verified "PROOF OF CLAIM IN BANKRUPTCY" wherein it is stated: On July 18, 1961, the referee in bankruptcy entered his order "DISCHARGE OF BANKRUPT" wherein appears the following: On December 5, 1960, Rush filed his "PETITION TO TERMINATE HEARING." (The hearing ordered November 4, 1960, for November 25, 1960.) The purpose of the petition was to obtain an order directing that no further efforts be made to collect on the judgment. Therein Rush alleges that he had filed his petition in bankruptcy and scheduled Miller's judgment as one of his debts, and that further "inquiry as to this court is moot." This petition was set for hearing for May 25, 1962, at which time, and after full argument, the court stated: On June 4, 1962, Miller filed his motion for new trial or rehearing. On August 15, *569 1962, this motion was denied and the court ordered: Miller is here by writ of error seeking reversal, contending that the trial court should conduct a hearing on the true nature of Miller's claim and find that the judgment is based on fraud and therefor nondischargeable and enter an order that Miller be authorized to proceed to collect on his judgment. Only one question is presented here, and that is: May a court which has entered a judgment go outside of the record to determine whether the judgment is discharged by a general order of discharge in bankruptcy proceeding instituted by the judgment debtor, and in which proceeding the judgment creditor has filed a claim on its judgment alleged to be based upon the bankrupt's obtaining money by false pretenses and representations? Many courts have considered this matter under varying circumstances and are at wide variance in their opinions. Miller here urges that we should follow the minority rule. The trial judge refused to go outside of the record to determine the real basis of the judgment. At the time judgment was entered (1956) in favor of Miller and against Rush, there was not one word in the record then before the trial judge concerning fraud or misrepresentation. Miller, in filing his cross-claim against Rush, could have sought actual damages for fraud, he could have demanded exemplary damages and a body judgment. He elected to forego these remedies and sought and obtained judgment for damages arising out of breach of contract. In National Finance Company of Provo v. Daley, 14 Utah 2d 263, 382 P.2d 405 (1963), a judgment had been obtained on a promissory note. In the opinion it is stated : For answer to the complaint the defendants pleaded a discharge in bankruptcy. For reply National alleged that the debt which was reduced to judgment was one arising out of the fraud of the defendants, consequently not dischargeable in bankruptcy. The defendants moved for judgment on the pleadings. This motion was denied and on review by the Supreme Court of Utah was ordered granted. The court said: "The question of critical importance here is whether, in determining dischargeability of a judgment, the Court should look only to the judgment and the record of the case upon which it is based, or may go back of the judgment and examine issues not raised in that proceeding. There is a division among the authorities on this problem. The view is sometimes expressed that once the claim is reduced to judgment, the obligation is fused into the judgment, which is a shield beyond which no search may be made. On the other view, that the Court may look behind the judgment, there is further division as to whether the inquiry must be confined to the record of the proceeding which produced the judgment or may *570 go beyond that record and examine into matters not litigated in that action. Colorado has in effect renounced the minority. In Valdez v. Sams, 134 Colo. 488, 307 P.2d 189, Valdez had obtained a judgment against Sams for injuries and damages resulting from an automobile collision. In the complaint Valdez charged Sams with negligence Sams did not defend and his default was entered. The trial court took evidence "to determine what judgment should be entered." No findings were made as to the alleged recklessness and wantonness of Sams' actions. Compensatory damages only were awarded. Later Sams filed a petition in bankruptcy and listed the Valdez judgment as a debt. Valdez appeared in the bankruptcy proceedings and filed a petition resisting Sams' efforts to be discharged. This petition was denied by the referee Sams was discharged in bankruptcy and thereafter Valdez undertook by garnishment proceedings to collect on the judgment. The trial court prohibited Valdez from further efforts to collect and decreed that: On review this court said: *571 In Valdez, supra, the court had before it allegations sufficient, if proven, to warrant the entry of a judgment that would not be dischargeable in bankruptcy. Here, the court had no such allegations before it, and could not on the pleadings and proof have entered a nondischargeable judgment. If Valdez, supra, is to be sustained, then a fortiori the judgment here must be sustained. We are not unmindful of the fact that several courts follow the minority rule, which sanctions proceedings aliunde and dehors the record in order to get at the true nature of the debt. To that we do not subscribe. We see no useful purpose in seeking to analyze, discuss or distinguish the numerous cases cited by counsel for Miller. Leading cases referred to are: Levin v. Singer, 227 Md. 47, 175 A.2d 423, and Fidelity and Casualty Co. v. Golombosky, 133 Conn. 317, 50 A.2d 817 (annotated in 170 A.L.R. 368). They follow the minority rule, which we reject. The judgment is affirmed. SUTTON and FRANTZ, JJ., concur.