Grogan v. Garner
Argued Oct. 29, 1990
Decided Jan. 15, 1991
498 U.S. 279
Respondent Garner filed a petition for comfort under Chapter 11 of the Bankruptcy Code, list a fraud judgment in petitioners desire as a dischargeable debt. Petitioners then filed a criticism in the intending requesting a determination that their claim ought to be exempted from discharge pursuant to § 523(a), which gives that a debtor won't be discharged from, inter alia, responsibilities for cash obtained by means of "real fraud." Presented with portions of the fraud case record, the Bankruptcy Court found that the factors of actual fraud underneath § 523 have been proved and that the doctrine of collateral estoppel required a retaining that the debt turned into no longer dischargeable. It and the District Court rejected Garner s argument that collateral estoppel does now not observe because the fraud trial s jury instructions required that fraud be proved by way of a preponderance of the proof, while § 523 requires evidence by clean and convincing proof. The Court of Appeals reversed, concluding that the clean-and-convincing proof wellknown applies in fraud instances, in view that Congress might no longer have silently changed pre-§ 523(a) law, which commonly implemented the higher preferred in commonplace regulation fraud litigation and in resolving dischargeability problems, and because the Code s widespread "fresh start" policy militated in desire of a huge creation favorable to the debtor.
Held: Preponderance of the evidence is the same old of proof for § 523(a) s dischargeability exceptions. Neither § 523 and its legislative records nor the legislative history of § 523 s predecessor prescribes a wellknown of evidence, a silence this is inconsistent with the view that Congress meant to require a clean-and-convincing evidence preferred. The preponderance widespread is presumed to be relevant in civil moves among personal parties unless specifically vital character pursuits or rights are at stake, and, inside the context of the release exemption provisions, a debtor s interest in discharge is inadequate to require a heightened fashionable. Such a general isn't required to effectuate the Code s "clean begin" policy. Since the Code limits the possibility for a very unencumbered new starting to the honest however unlucky debtor by exempting sure debts from discharge, it's miles not likely that Congress would have fashioned a evidence fashionable that desired an hobby in giving the perpetrators of fraud a sparkling begin over an interest in defensive the victims of fraud. It is also honest to infer from § 523(a) s shape that
Page 498 U. S. 280
Congress supposed the preponderance wellknown to use to all of the discharge exceptions. That they're grouped together inside the equal subsection and not using a notion that any specific exception is subject to a unique preferred implies that the equal popular ought to govern all of them, and it seems clean that a preponderance popular is sufficient to set up nondischargeability of a few claims. The fact that many States required proof of fraud through clear and convincing proof on the time the modern-day Code was enacted does not suggest that Congress silently advocated this type of rule for the fraud discharge exception. Unlike many States, Congress has chosen a preponderance fashionable while it has created substantial causes of action for fraud. In addition, it amended the Bankruptcy Act in 1970 to make nondischargeability a question of federal law unbiased of the difficulty of the underlying claim s validity, which is decided with the aid of nation law. Moreover, each earlier than and after 1970, courts had been break up over the appropriate evidence trendy for the fraud discharge exception. Application of the preponderance trendy will also allow exception from discharge of all fraud claims creditors have reduced to judgment, a result that accords with the historical improvement of the discharge exceptions, which have been altered to broaden the insurance of the fraud exceptions. Pp. 498 U. S. 283-291.
881 F.2nd 579 (CA8 1989), reversed.
STEVENS, J., delivered the opinion for a unanimous Court.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE EIGHTH CIRCUIT
Respondent Garner filed a petition for remedy below Chapter 11 of the Bankruptcy Code, listing a fraud judgment in petitioners choose as a dischargeable debt. Petitioners then filed a complaint within the intending soliciting for a willpower that their declare have to be exempted from discharge pursuant to § 523(a), which offers that a debtor might not be discharged from, inter alia, obligations for cash received via "real fraud." Presented with portions of the fraud case document, the Bankruptcy Court observed that the elements of actual fraud under § 523 were proved and that the doctrine of collateral estoppel required a protecting that the debt changed into not dischargeable. It and the District Court rejected Garner s argument that collateral estoppel does not apply due to the fact the fraud trial s jury instructions required that fraud be proved via a preponderance of the proof, while § 523 calls for proof by clean and convincing proof. The Court of Appeals reversed, concluding that the clean-and-convincing proof standard applies in fraud cases, considering that Congress would no longer have silently modified pre-§ 523(a) law, which usually carried out the better wellknown in not unusual regulation fraud litigation and in resolving dischargeability problems, and because the Code s preferred "sparkling begin" coverage militated in want of a vast construction favorable to the debtor.
Held: Preponderance of the proof is the same old of proof for § 523(a) s dischargeability exceptions. Neither § 523 and its legislative history nor the legislative records of § 523 s predecessor prescribes a trendy of proof, a silence that is inconsistent with the view that Congress intended to require a clear-and-convincing proof wellknown. The preponderance wellknown is presumed to be applicable in civil movements between personal events except especially critical individual hobbies or rights are at stake, and, in the context of the discharge exemption provisions, a debtor s hobby in discharge is insufficient to require a heightened preferred. Such a general isn't required to effectuate the Code s "fresh start" coverage. Since the Code limits the opportunity for a very unencumbered new beginning to the honest but unlucky debtor by way of exempting certain money owed from discharge, it is unlikely that Congress could have long-established a proof widespread that favored an interest in giving the perpetrators of fraud a fresh begin over an hobby in defensive the victims of fraud. It is likewise truthful to deduce from § 523(a) s shape that
Congress meant the preponderance preferred to use to all of the discharge exceptions. That they're grouped collectively inside the equal subsection and not using a inspiration that any precise exception is difficulty to a special trendy means that the same fashionable ought to govern they all, and it seems clean that a preponderance wellknown is enough to set up nondischargeability of some claims. The reality that many States required evidence of fraud with the aid of clean and convincing proof at the time the modern-day Code was enacted does not mean that Congress silently advocated any such rule for the fraud discharge exception. Unlike many States, Congress has chosen a preponderance widespread while it has created important reasons of movement for fraud. In addition, it amended the Bankruptcy Act in 1970 to make nondischargeability a query of federal regulation impartial of the difficulty of the underlying claim s validity, that is decided by nation law. Moreover, both before and after 1970, courts had been cut up over the ideal evidence widespread for the fraud discharge exception. Application of the preponderance general may also permit exception from discharge of all fraud claims lenders have reduced to judgment, a result that accords with the ancient improvement of the release exceptions, which have been altered to increase the coverage of the fraud exceptions. Pp. 498 U. S. 283-291.
881 F.second 579 (CA8 1989), reversed.
STEVENS, J., brought the opinion for a unanimous Court.
Justice STEVENS added the opinion of the Court.
Section 523(a) of the Bankruptcy Code provides that a discharge in bankruptcy shall now not discharge an individual debtor from positive styles of duties, which include those for cash
Page 498 U. S. 281
received through "actual fraud." [Footnote 1] The question in this situation is whether the statute requires a defrauded creditor to show his declare through clear and convincing evidence so as to hold it from discharge.
Petitioners introduced an action against respondent alleging that he had defrauded them in reference to the sale of positive company securities. App. 16-25. Following the trial court s instructions that legal a recuperation based on the preponderance of the proof, a jury lower back a verdict in want of petitioners and offered them real and punitive damages. Id. at 28-29. Respondent appealed from the judgment on the verdict, and, even as his enchantment became pending, he filed a petition for remedy below Chapter 11 of the Bankruptcy Code, list the fraud judgment as a dischargeable debt.
The Court of Appeals for the Eighth Circuit reduced the damages award, however affirmed the fraud judgment as changed. Grogan v. Garner, 806 F.2d 829 (1986). Petitioners then filed a grievance within the financial ruin proceeding requesting a dedication that their declare based totally on the fraud judgment must be exempted from discharge pursuant to § 523. App. three-four. In support in their complaint, they added portions of the document within the fraud case. The Bankruptcy Court found that all of the factors required to establish actual fraud under § 523 have been proved, and that the doctrine of collateral estoppel required a keeping that the debt become consequently not dischargeable. In re Garner, 73 B.R. 26 (WD Mo.1987).
Page 498 U. S. 282
Respondent does not undertaking the belief that the elements of the fraud claim proved within the first trial are enough to establish "fraud" inside the that means of § 523. [Footnote 2] Instead, he has constantly argued that collateral estoppel does not apply due to the fact the jury commands inside the first trial simply required that fraud be proved by way of a preponderance of the evidence, whereas § 523 calls for proof via clear and convincing proof. Both the Bankruptcy Court [Footnote 3] and the District Court [Footnote 4] rejected this argument.
The Court of Appeals, however, reversed. In re Garner, 881 F.2nd 579 (CA8 1989). It identified that the "Bankruptcy Code is silent as to the weight of evidence essential to establish an exception to discharge beneath segment 523(a), consisting of the exception for fraud," id. at 581, however concluded that two elements supported the imposition of a "clear and convincing" standard, at the least in fraud cases. First, the courtroom stated that the higher trendy had normally been implemented in each not unusual law fraud litigation and in resolving dischargeability
Page 498 U. S. 283
troubles earlier than § 523(a) turned into enacted, and reasoned that it become unlikely that Congress had meant silently to exchange settled law. [Footnote five] Second, the court docket opined that the overall "sparkling start" policy that undergirds the Bankruptcy Code militated in favor of a extensive production favorable to the debtor. [Footnote 6]
The Eighth Circuit maintaining is constant with rulings in maximum different Circuits, [Footnote 7] but conflicts with recent choices by using the Third and Fourth Circuits. [Footnote eight] The conflict, collectively with the significance of the issue, precipitated us to provide certiorari, 495 U.S. 918. We now opposite.
At the outset, we distinguish among the usual of proof that a creditor have to satisfy on the way to set up a valid declare towards a bankrupt property and the same old that a creditor who has installed a legitimate declare should still satisfy so that you can keep away from dischargeability. The validity of a creditor s claim is determined with the aid of policies of nation regulation. See Vanston Bondholders Protective Comm. v. Green, 329 U. S. 156, 329 U. S. 161
Page 498 U. S. 284
(1946). [Footnote 9] Since 1970, however, the issue of nondischargeability has been a depend of federal regulation governed by using the terms of the Bankruptcy Code. See Brown v. Felsen, 442 U. S. 127, 442 U. S. 129-a hundred thirty, 442 U. S. 136 (1979). [Footnote 10]
This distinction is the wellspring from which instances of this type glide. In this situation, a creditor who decreased his fraud declare to a valid and very last judgment in a jurisdiction that calls for proof of fraud by a preponderance of the proof seeks to minimize additional litigation with the aid of invoking collateral estoppel. If the preponderance standard also governs the question of nondischargeability, a bankruptcy court docket should properly give collateral estoppel effect to those elements of the claim which might be same to the factors required for discharge and which were really litigated and determined in the previous action. See Restatement (Second) of Judgments § 27 (1982). [Footnote 11] If, however, the clean-and-convincing preferred applies
Page 498 U. S. 285
to nondischargeability, the prior judgment could not take delivery of collateral estoppel effect. § 28(4). A creditor who successfully received a fraud judgment in a jurisdiction that requires proof of fraud with the aid of clean and convincing evidence would, however, be detached to the burden of evidence concerning nondischargeability, due to the fact he could invoke collateral estoppel in any event. [Footnote 12]
In sum, if nondischargeability should be proved simplest by way of a preponderance of the proof, all lenders who have secured fraud judgments, the factors of which can be similar to the ones of the fraud discharge exception, will be exempt from discharge beneath collateral estoppel concepts. If, but, nondischargeability have to be proved by means of clean and convincing evidence, lenders who secured fraud judgments based totally best at the preponderance standard could not be confident of qualifying for the fraud discharge exception.
Page 498 U. S. 286
With those considerations in thoughts, we begin our inquiry into the suitable burden of evidence below § 523 via inspecting the language of the statute and its legislative history. The language of § 523 does no longer prescribe the same old of proof for the release exceptions. The legislative history of § 523 and its predecessor, 11 U.S.C. § 35 (1976 ed.), is also silent. This silence is inconsistent with the view that Congress intended to require a special, heightened preferred of proof.
Because the preponderance-of-the-evidence standard consequences in a more or less same allocation of the risk of error between litigants, we presume that this widespread is applicable in civil moves among non-public litigants until "particularly vital person interests or rights are at stake." Herman & MacLean v. Huddleston, 459 U. S. 375, 459 U. S. 389-390 (1983); see also Addington v. Texas, 441 U. S. 418, 441 U. S. 423 (1979). We have formerly held that a debtor has no constitutional or "essential" proper to a discharge in financial ruin. See United States v. Kras, 409 U. S. 434, 409 U. S. 445-446 (1973). We also do now not consider that, in the context of provisions designed to exempt certain claims from discharge, a debtor has an interest in discharge sufficient to require a heightened trendy of evidence.
We are unpersuaded via the argument that the clear-and-convincing trendy is required to effectuate the "fresh begin" coverage of the Bankruptcy Code. This Court has without a doubt recounted that a significant purpose of the Code is to offer a process by using which certain insolvent debtors can reorder their affairs, make peace with their creditors, and experience "a new possibility in life with a clean discipline for future effort, unhampered through the stress and discouragement of preexisting debt." Local Loan Co. v. Hunt, 292 U. S. 234, 292 U. S. 244 (1934). But inside the identical breath that we've invoked this "clean begin" coverage, we were cautious to explain that the Act
Page 498 U. S. 287
limits the opportunity for a completely unencumbered new beginning to the "honest but unlucky debtor." Ibid.
The statutory provisions governing nondischargeability replicate a congressional decision to exclude from the general policy of discharge sure classes of debts -- together with infant guide, alimony, and positive unpaid educational loans and taxes, in addition to liabilities for fraud. Congress certainly concluded that the creditors hobby in getting better complete payment of money owed in these categories outweighed the borrowers hobby in a entire fresh start. We think it unlikely that Congress, in fashioning the usual of proof that governs the applicability of these provisions, would have favored the interest in giving perpetrators of fraud a sparkling begin over the interest in shielding victims of fraud. Requiring the creditor to set up with the aid of a preponderance
Page 498 U. S. 288
of the evidence that his declare is not dischargeable displays a honest balance between those conflicting hobbies.
Our conviction that Congress supposed the preponderance widespread to use to the release exceptions is strengthened by means of the structure of § 523(a), [Footnote 13] which groups together within the identical subsection a whole lot of exceptions without any indication that any precise exception is situation to a unique wellknown of evidence. The omission of any proposal that extraordinary exemptions have different burdens of proof means that the legislators meant the same general to govern the nondischargeability underneath § 523(a)(2) of fraud claims and, as an example, the nondischargeability underneath § 523(a)(five) of claims for infant aid and alimony. Because it seems clear that a preponderance of the proof is enough to set up the nondischargeability of some of the styles of claims covered by § 523(a), [Footnote 14] it's far honest to deduce that Congress supposed the regular preponderance general to manipulate the applicability of all of the discharge exceptions.
We are consequently now not inclined to just accept respondent s competition that application of the regular preponderance preferred to the fraud exception is inappropriate because, on the time Congress enacted the modern-day Bankruptcy Code, the bulk of states required evidence of fraud through clear and convincing evidence. [Footnote 15] Even if we believed that Congress had pondered the utility of different burdens of proof for unique exceptions, the fact that maximum States required fraud claims to be proved by clean and convincing proof might now not aid the realization that Congress meant to adopt the clear-and-convincing trendy for the fraud discharge exception.
Unlike a massive quantity, and possibly the bulk, of the States, Congress has selected the preponderance general whilst it has created major reasons of action for fraud. See, e.g., 31 U.S.C. § 3731(c) (False Claims Act); 12 U.S.C.A. § 1833a(e) (civil consequences for fraud regarding financial establishments); forty two CFR § 1003.114(a) (1989) (Medicare and Medicaid fraud under forty two U.S.C. § 1320a-7a); Herman & MacLean v. Huddleston, 459 U.S. at 459 U. S. 388-390 (civil enforcement of the antifraud provisions of
Page 498 U. S. 289
the securities legal guidelines); Steadman v. SEC, 450 U. S. 91, 450 U. S. ninety six (1981) (administrative complaints concerning violation of antifraud provisions of the securities legal guidelines); SEC v. C.M. Joiner Leasing Corp., 320 U. S. 344, 320 U. S. 355 (1943) (§ 17(a) of the Securities Act of 1933); First National Monetary Corp. v. Weinberger, 819 F.2nd 1334, 1341-1342 (CA6 1987) (civil fraud provisions of the Commodity Exchange Act). Cf. Sedima, S.P.R.L. v. Imrex Co., 473 U. S. 479, 473 U. S. 491 (1985) (suggesting that the preponderance preferred applies to civil actions underneath the Racketeer Influenced and Corrupt Organizations Act). Most notably, Congress selected the preponderance wellknown to manipulate determinations beneath eleven U.S.C. § 727(a)(4), which denies a debtor the right to discharge altogether if the debtor has dedicated a fraud on the bankruptcy court docket. See H.R.Rep. No. 95-595, p. 384 (1977), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6340 ("The fourth floor for denial of discharge is the commission of a bankruptcy crime, although the same old of evidence is preponderance of the proof"); S.Rep. No. 95-989, p. ninety eight (1978), U.S.Code Cong. & Admin.News 1978, p. 5884 (identical). [Footnote sixteen]
Moreover, as we defined in Part I, supra, Congress amended the Bankruptcy Act in 1970 to make nondischargeability a question of federal law independent of the difficulty of the validity of the underlying claim. Even before 1970, many courts imposed the preponderance burden on creditors invoking the fraud discharge exception. See, e.g., Sweet v. Ritter Finance Co., 263 F. Supp. 540, 543 (WD Va.1967); Nickel Plate Cloverleaf Federal Credit Union v. White, a hundred and twenty Ill.App.second 91, 93-ninety four, 256 N.E.2d 119, one hundred twenty-121 (1970); Gonzales v. Aetna Finance Co., 86 Nev. 271, 275, 468 P.2nd 15, 18 (1970); Beneficial Finance Co. of Manchester v. Machie, 6 Conn.Cir. 37, 41, 263 A.2d 707, 710 (1969); Budget Finance Plan v. Haner, ninety two Idaho fifty six, fifty nine, 436 P.2nd 722, 725
Page 498 U. S. 290
(1968); Atlas Credit Corp. v. Miller, 216 So. 2d one hundred, a hundred and one (La.Ct.App.1968); Household Finance Corp. v. Altenberg, five Ohio St.2nd one hundred ninety, 193, 214 N.E.2d 667, 669 (1966); MAC Finance Plan of Nashua, Inc. v. Stone, 106 N.H. 517, 521-522, 214 A.2nd 878, 882 (1965). And, following the 1970 amendments, but previous to the enactment of § 523 in 1978, the courts continued to be almost evenly cut up over the suitable widespread of proof. Compare, e.g., Fierman v. Lazarus, 361 F. Supp. 477, 480 (ED Pa.1973); In re Scott, 1 BCD 581, 583 (Bkrtcy.Ct. WD Mich.1975) with Brown v. Buchanan, 419 F. Supp. 199, 203 (ED Va.1975); In re Arden, seventy five B.R. 707, 710 (Bkrtcy.Ct.R.I.1975). Thus, it might not be reasonable to finish that in enacting § 523 Congress silently advocated a background rule that clear-and-convincing evidence is needed to set up exemption from discharge.
A very last attention assisting our end that the preponderance popular is the proper one is that, as we explained in 498 U. S. supra, software of that preferred will permit exception from discharge of all fraud claims creditors have efficiently reduced to judgment. This end result accords with the historic improvement of the discharge exceptions. As we explained in Brown v. Felsen, the 1898 Bankruptcy Act supplied that "judgments" sounding in fraud had been exempt from discharge. 30 Stat. 550. In the 1903 revisions, Congress substituted the term "liabilities" for "judgments." 32 Stat. 798. This alteration was meant to develop the insurance of the fraud exceptions. See Brown v. Felsen, 442 U.S. at 442 U. S. 138. Absent a clear indication from Congress of a alternate in coverage, it might be inconsistent with this earlier expression of congressional cause to construe the exceptions to permit a few debtors dealing with fraud judgments to have the ones judgments discharged.
Page 498 U. S. 291
For those reasons, we hold that the standard of evidence for the dischargeability exceptions in eleven U.S.C. § 523(a) is the everyday preponderance-of-the-evidence fashionable.
The judgment of the Court of Appeals is reversed.
It is so ordered.
Title eleven U.S.C. § 523(a) affords, in pertinent component:
"Exceptions to discharge."
"(a) A discharge beneath section 727, 1141, 1228(a), 1228(b), or 1328(b) of this identify does no longer discharge an individual debtor from any debt -- "
"* * * *"
"(2) for cash, assets, services, or an extension, renewal, or refinancing of credit, to the extent received via -- "
"(A) fake pretenses, a false illustration, or actual fraud, apart from a assertion respecting the debtor s or an insider s financial condition; . . . ."
We consequently do not bear in mind the question whether § 523(a)(2)(A) excepts from discharge that part of a judgment in excess of the real fee of money or property obtained through a debtor by means of virtue of fraud. See In re Rubin, 875 F.second 755, 758, n. 1 (CA9 1989). Arguably, fraud judgments in cases wherein the defendant did now not attain money, assets, or offerings from the plaintiffs and people judgments that consist of punitive damages awards are more correctly governed with the aid of § 523(a)(6). See eleven U.S.C. § 523(a)(6) (excepting from discharge debts "for willful and malicious damage via the debtor to every other entity or to the property of any other entity"); In re Rubin, 875 F.second at 758, n. 1.
The Bankruptcy Court concluded that "there's no actual distinction between preponderance of the proof and `clean and convincing as regards Section 523 litigation." In re Garner, 73 B.R. 26, 29 (WD Mo.1987).
The District Court explained:
"A relitigation of this example in Bankruptcy Court at the identical reality problems could be to allow the party who loses at a jury trial to have a 2d day in court at the identical difficulty he and his opponent have been fully heard previously. It permitted, all like cases might bring about duplicitous litigation resulting in an unreasonable burden on the bankruptcy court."
App. to Pet. for Cert. 28a.
"While the legislative records is scant on this difficulty, we feel that it is fair to presume that Congress become aware that the prevailing view at the time of adoption changed into that fraud, for both phase 523 and state commonplace law purposes, had to be proved via clean and convincing evidence."
In re Garner, 881 F.2d at 582.
"This Circuit concluded that the stricter wellknown turned into appropriate, due to the fact that the overall coverage of financial ruin is to offer the debtor with the opportunity for a fresh begin and the courts ought to, thereby, construe provisions of the Bankruptcy Code favoring the debtor broadly. Matter of Van Horne, 823 F.2d [1285, 1287 (CA8 1987).]"
See In re Phillips, 804 F.second 930, 932 (CA6 1986); In re Kimzey, 761 F.second 421, 423-424 (CA7 1985); In re Black, 787 F.2nd 503, 505 (CA10 1986); Chrysler Credit Corp. v. Rebhan, 842 F.second 1257, 1262 (CA11 1988); In re Hunter, 780 F.2d 1577, 1579 (CA11 1986); In re Dougherty, 84 B.R. 653 (CA9 BAP 1988).
In re Braen, 900 F.2nd 621 (CA3 1990); Combs v. Richardson, 838 F.2d 112 (CA4 1988).
We use the time period "kingdom law" expansively herein to refer to all nonbankruptcy regulation that creates sizeable claims. We therefore mean to include on this time period claims which have their supply in considerable federal law, inclusive of federal securities regulation or other federal antifraud laws. As the amici factor out, many federal antifraud laws that may supply upward push to nondischargeable claims require plaintiffs to show their proper to get better handiest by way of a preponderance of the proof. See Brief for United States et al. as Amici Curiae 1-three, and n. 2.
Before 1970, the financial ruin courts had concurrent jurisdiction with the state courts to decide whether debts were excepted from discharge. In exercise, but, financial ruin courts generally kept away from determining whether or not particular debts had been excepted, and instead allowed those inquiries to be litigated in the state courts. See Brown v. Felsen, 442 U.S. at 442 U. S. 129; 1A Collier on Bankruptcy 17.28, pp. 1726 1727 (14th ed. 1978). The kingdom courts therefore decided the relevant burden of proof, regularly applying the equal preferred of proof that ruled the underlying declare. The 1970 amendments took jurisdiction over certain dischargeability exceptions, along with the exceptions for fraud, away from the state courts and vested jurisdiction solely in the financial disaster courts. See Brown v. Felsen, 442 U.S. at 442 U. S. 135-136; S.Rep. No. ninety one-1173, pp. 2-3 (1970); H.R.Rep. No. ninety one-1502, p. 1 (1970), U.S.Code Cong. & Admin.News 1970, p. 4156.
Our previous cases have advised, however have no longer officially held, that the concepts of collateral estoppel practice in financial ruin court cases underneath the cutting-edge Bankruptcy Code. See, e.g., Kelly v. Robinson, 479 U. S. 36, 479 U. S. forty eight, n. eight (1986); Brown v. Felsen, 442 U.S. at 442 U. S. 139, n. 10. Cf. Heiser v. Woodruff, 327 U. S. 726, 327 U. S. 736 (1946) (applying collateral estoppel underneath an earlier model of the financial disaster laws). Virtually every courtroom of appeals has concluded that collateral estoppel.is relevant in discharge exception lawsuits. See In re Braen, 900 F.2d 621, 630 (CA3 1990); Combs v. Richardson, 838 F.second 112, a hundred and fifteen (CA4 1988); Klingman v. Levinson, 831 F.2d 1292, 1295 (CA7 1987); In re Shuler, 722 F.2d 1253, 1256 (CA5), cert. denied sub nom. Harold V. Simpson & Co. v. Shuler, 469 U.S. 817 (1984); Goss v. Goss, 722 F.second 599, 604 (CA10 1983); Lovell v. Mixon, 719 F.2nd 1373, 1376 (CA8 1983); Spilman v. Harley, 656 F.second 224, 228 (CA6 1981). Cf. In re Rahm, 641 F.2d 755, 757 (CA9) (prior judgment establishes most effective a prima facie case of nondischargeability), cert. denied, sub nom. Gregg v. Rahm, 454 U.S. 860 (1981). We now clarify that collateral estoppel principles do certainly observe in discharge exception court cases pursuant to § 523(a).
This indifference might now not be shared, but, by means of a creditor who either did now not attempt, or tried unsuccessfully, to show fraud in a jurisdiction requiring clear and convincing evidence, however who despite the fact that set up a valid claim by way of proving, for example, a breach of contract related to the equal transaction. See, e.g., In re Black, 787 F.second 503 (CA10 1986); In re Rubin, 875 F.second at 758, n. 1.
See Crandon v. United States, 494 U. S. 152, 494 U. S. 158 (1990) ("In determining the that means of the statute, we look now not best to the unique statutory language however to the layout of the statute as a whole and to its item and policy"); K Mart Corp. v. Cartier, Inc., 486 U. S. 281, 486 U. S. 291 (1988) ("In ascertaining the obvious which means of the statute, the courtroom must look to the particular statutory language at trouble, as well as the language and design of the statute as a whole").
For example, § 523(a) presents for the nondischargeability of money owed now not simplest for child aid and alimony, but also for certain fines and penalties, academic loans, and tax duties. See 11 U.S.C. § 523(a)(1); § 523(a)(5); § 523(a)(7); § 523(a)(eight).
Respondent claims that the enormous majority of States implemented the heightened popular. See Brief for Respondent 8-14. Petitioners and the amici acknowledge that the clear-and-convincing general applied in lots of jurisdictions, but contend that respondent overstates the wide variety of States that required the heightened fashionable. See Brief for Petitioners 17-20, and n. 1; Brief for United States et al. as Amici Curiae 21-25. Resolution of this dispute is not essential for our selection.
Prior to the enactment of the 1978 Bankruptcy Code, the courts of appeals had held that the preponderance popular implemented in this situation. See, e.g., In re Robinson, 506 F.2d 1184, 1187 (CA2 1974); Union Bank v. Blum, 460 F.2d 197, two hundred-201 (CA9 1972).
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