Court Opinion

ID: 6891200
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:41:56.14918+00
Date Added: 2024-06-11T16:05:50.623335
License: Public Domain

HUXMAN, Circuit Judge
(dissenting).
I think the judgment of the lower court is right and should be affirmed on the ground that the issue presented is res judicata.
It is of course well settled that a bankruptcy court is not precluded from inquiring into the validity of a claim by the mere fact that it has been reduced to judgment, but when the validity of the judgment has been adjudicated since its entry, no good reason appears why a court of bankruptcy under its equitable powers should again relitigate the same issue.
The gist of the fraud with which Heiser was charged and which was made the basis of the attempt to defeat his claim in the bankruptcy court was that he panned off a bunch of worthless stones as jewels, and by the use of perjured and false testimony as to their value obtained a default judgment in the California court which now is the basis of his claim. This is the only fraud with which he has ever been charged. It is the basis of every effort of the Woodruffs or of the trustee to resist his claim.
In my view, this question of fraud in the procurement of the default judgment has been adjudicated twice since its entry. It was first adjudicated at the hearing on Woodruff’s motion to set aside the default judgment, which was filed nine days after the entry thereof. While the record is not as clear on this point as might be desired, the charge must have been made at that time that the judgment was fraudulent because the gems had no value. This must have been so because while the court refused to set the default aside, it was stipulated in open court that the court should hold a hearing as to the value of the gems, and that the amount of the judgment should be modified if required in accordance with the evidence produced at such hearing. Pursuant .to this stipulation a lengthy hearing was had in which both Woodruff and Heiser appeared and participated. At the end of that adversary hearing, the court found the value of the property to be the amount of the judgment, and accordingly refused to modify .the judgment. So it appears that Woodruff got everything he would have gotten had his motion been sustained and had he been permitted to answer and defend.
Immediately after the court ruled against Woodruff, he went into bankruptcy, and this proceeding resulted. The order of the court refusing to modify the amount of the judgment was entered June 29, 1939. On July S, 1939, Woodruff was adjudged a bankrupt on his voluntary petition in the United States District Court for the Eastern District of Oklahoma. Jackson was appointed trustee on July 20, 1939. On September 11, 1939, pursuant to authority theretofore obtained, he filed a notice of motion to vacate the default judgment in the United States District Court of California where the default judgment had been obtained. He also filed an affidavit of merit in support of his motion. The notice set forth many grounds in support thereof. Among others, it stated that the motion “will be made upon the ground that a fraud was practiced upon the above entitled court with respect to the entry of said judgment.” The affidavit of merit by the trustee in support of the motion to set the judgment aside, among others, recited upon information and belief that the “judgment * * * is based upon fictitious values and was obtained by methods which amount to a constructive fraud * * * and in the event said judgment is set aside the alleged claim of said M. E. Heiser can be defeated in whole at a trial on the merits.”
So here we have a direct attack upon the validity of the judgment on account of fraud in its procurement by the trustee himself. He failed in this attack in the California District Court. Why should he be permitted to raise the same question again a second time in the United States District Court of Oklahoma?
I cannot agree with the statement in the majority opinion that the issue of fraud in the procurement of the original judgment by the use of false and fraudulent testimony as to the value of the gems was not placed before the California court by the trustee’s motion and supporting affidavit. The notice of motion alleged fraud and the affidavit stated that the judgment was based upon fictitious values and was obtained by methods that amounted to a constructive fraud. This could mean only one thing, namely, that the testimony as to the value of the gems was fictitious, false and fraudulent. Heiser’s affidavits denied that *873any fraud was practised upon the court. This presented a clear-cut issue of fraud in the procurement of the judgment. It was the duty of the trustee to substantiate the charge. This he failed to do.
Nor is it sufficient to say that the trustee was denied the opportunity to introduce oral testimony to support the charge. The record does not reveal that any oral testimony was offered or that the trustee was denied .the right to introduce any testimony. But if he was denied this right, he should have raised the question when he appealed the case to the Circuit Court of Appeals.
Apparently the trustee abandoned the charge of fraud both in the California District Court and in .the Circuit Court of Appeals. See Jackson v. Heiser, 9 Cir., 111 F.2d 310. But this he will not be permitted to do. One of the issues presented by both Woodruff and the trustee in their motions to vacate the judgment was fraud in the use of false and fictitious testimony relating to the value of the stones. The issue as tendered was broad enough to prove every kind and nature of fraud. It is incumbent upon one attacking the validity of a judgment to present every available ground of which he has knowledge. He may not present his claim by piece meal. Grubb v. Public Utility Comm., 281 U.S. 470, 478, 479, 50 S.Ct. 374, 74 L.Ed. 972. It is not claimed that the trustee was without knowledge of the claimed facts which would have enabled him to present the issue. He had the active help and assistance of Woodruff throughout in his efforts to vacate the judgment. Woodruff filed a motion with him to vacate this judgment.
The Circuit Court of Appeals of the Ninth Circuit treated' the motion of the trustee as an independent action or proceeding attacking the judgment. The trustee tendered the issue of fraud in this proceeding and was defeated. He appealed, and abandoned the charge of fraud. A judgment is res judicata not only as to those matters which were decided, but also as to all matters which could have been presented for decision. Chicot County Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 378, 60 S.Ct. 84, 84 L.Ed. 449. Two attacks have already been made upon this judgment since its entry on the ground there was no value to these stones and that .the testimony establishing the value was fraudulent, fictitious and perjured. I do not think that either the Woodruffs or the trustee is entitled to try the issue a third time.