Petition for Writ of Certiorari — Pitchford v. Kuzemchak

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IN THE

SUPREME COURT OF THE NTE STATES,

OCTOBER Skane, 19% -

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- No..- _...... <. 42‘

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oe OR. PITCHFORD and JEAN PITCHFORD, oee .

e Petitioners, ; “eon ,

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VS.

‘PETER KUZEMCHAK and LOIS KUZEMCHAK,

ae Be __-; —~ Respondents.

4

_ PETITION FOR A WRIT OF CERTIORARI TO THE |

‘+ SUPREME COURT OF THE STATE OF

oe NEW MEXICO .

‘Joun E. MENtc, ‘Esq. |

Counsel for Peusonens |

- 5200 Copper, N. E.

. | _ Albuquerque, N. M.

Of Counsel: RES |

STANLEY C. SAGER, Esq: © - | | et

~ -Epwarp T. CURRAN, Esq.

5200 Copper, N..E, A ;

~» Albuquerque, N. M. os 3

E. L. Mennennany, Inc., 926.Cherry Street, Kansas City, Mo. 64106, HArrison 1-3030

»- @

S INDEX-Y . * an

_ Opinions Below ........... seen ie ica Heores Spr I

Jurisdiction ...............0:..... PEATE ater dT ene LE AT AR 2

a Presented - IAS ee ey Oe pee ee PRREPK. ed Oe ve

Statute Involy EAS ER [RMI CPOE lath aN AE he aa

Statement of the- Case EEL eRe ele a ssseome a

Reasons for Granting the Writ (Ar gumienty eae Te

ie. 3 The New Mexico Court Has Decided a ae

- Question of. Substance Which Has ‘Been: Decided

fn Conflicting Ways in Other State’ Courts of Final

Jurisciction, and in Other Federal | Courts, and

Which Has* Not Heretofere Been Determined by . as

This.Court Fries oe ste Oe

Conclusion ......... BS Pint Pret MNEs Sees U2, Sarat ee oen en! 10

II rte ee els Al

Judgment Souight to be: Rev iéwed ........ N.My Se

Mate 00 GW) oo a

EN thea stomonadnon naar Pelt oan eae ae

Order Deny ing ‘Motion for Rehearing ee bee ee

ee Ot Oe ee cee BAO

Defendants’ Requested F indings of : Fact and Con,’ oe

I AE Cn acs ee scleseegfh--- AIOe

- Bernalillo County District Court Order pers dae

U.S. Const. amend. XT, Sec. 1 .... RE a cnsinl one .. ALB:

Cass, Pe ee aoc. ?

"Allen V. Lindeman, 164 N.W. 2d 346 (lime 1969) it

. Armstrong v. Monzo, 380 U.S. 545 (1965) 4 2S

- Consotidated Plan of Connecticut v« Bonitatibis, 130 :

Conn. 199, 33 A.2d 140 (1948). mi

Continental Illinois Nat. Bank and Trust Co. v.. Rock —

Island Ry., UR Gee fl Es

: Dutkiewicz, In.re, 27 F.2d 334 (W.D.N.Y. 1928) 7

4 é

a pe eae pea = INDEX

: Fidelity & C. Co. Vv. Gslombonkes, 133 Conn. 317, 50°

A.2d 817, 170 ALR 361. RN ces pa ae

. Filler, In re, (M.D. Pa. 1987) 18 F. Supp. 394° meshes oe 4

Greenfield v. Tuccillo, 129 F.2d 854 (2nd-Cir, 1942) am

Harrison v. epi 153 F.2d 588 (8th Cir. 1946) . ee

Kubiniec, In re, 2 F. Supp. 632 (W.D.NVY..1932) . 7

Kuzemehak v. Pitchford, 78 NM. 378, 431 P.2d. 756 hae

CEE ck le re Seance teen Pita teutdenc * 3

Kuzemchak v. Ritchford, Bren N.M. seas 468. P2d -

409 (1970) CORN SID Dee aerated Name ee REM PAE _1,5

Levin v. Singer, 227 Md. 47, 175 A.2d 423 (1961) . 7

Local Loan Co. v. Hunter,,292 U.S. 234, 245 (1934) 0 9

. Miller v. Rush, 155 Colo. 178, 2... P.2d 565 (1964) 6

- National Finance Co. of Provo V. sear 14 Utah

“+ 268, 382 Pe Ae CI eas ~ #6

-Peerson V. Mitchell, 205 Okl. 530, 239. “P.2d 1028, 26

ALR 1362 (1950), cert. denied 342 USS. 866, a S.

Ct. 106, 96 Led. OR OEY aa ocivcersncotagtanicetenlh § é

..U. S.y. Qregon, 366 U.S. 643 (1961) ce ar sane £ ae

“United States Credit Bureau - Manning, 147 Cal. Ste MS

~ App. 2d.558,°305 P.2d 970 ast) ee ee

Wegiel v. Hogan, 28 ites ‘Super. 144, 100. A.2d i

: (1953)°:.<..-<. Rah yk, Ae ao lanes DE Rain Putt Abas Rar By 6

“@ Welch v. Old Dominion Bank, (DCCA. 1967) 229

A.2d° 455 TO Ny ae A MDM MOORS SS ihn whe tek 7

Williams v..U. s. Fideltt Co., 236 US. 549, 554, 555

C5 eee ee Se ee 9

]; &. Constitu TION AND STATUT ES: ;

U.S. Const., Art. I2Sec.'8, Ch. 4 oto. eeccceeeeeecneee ea ers 6

U. S. Const., Amend. XIV, See. 1... Sed SERRE RT Pee hee

SURO 3G ee

PLS Ta > Se | eld ety Abie RARE ete Waco mena nea Oe:

e Pee

MiscetLANEOUS AUGHORITIESS .

‘1 Collier on Bankruptcy, 14th aa. Seg. Bp 16/4] ne a 6 yr

Collier, Bankruptcy Manual, Sec. 7, 00 (2nd ed. ae

s, (1969) SAtMRsanteen nie YX uae % --..-. beacnecisese ote PERSE eee ee pene 7

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IN THE |

» SUPREME COURT OF THE UNITED STATES |

OCTOBER TERM, 1970 i<

-

Fa re eee ee ep

No. a

UC. R. PITCHFORD and JEAN PITCHFORD,

bye ape _ Petitioners,

; ae

°

«

| PETER KUZEMCHAK and LOIS KUZEMCHAK,

Respondents.

PETITION FOR A’WRIT OF CERTIORARI TO THE _

- SUPREME COURT OF THE STATE OF -

__ “NEW MEXICO |.

Mr. joke E. Menig. on behalf of the Petitioners, prays

that a writ of certiorari issue to review ‘the judgment of the

Supreme Court of New Mexico entered in the above case

on ail 15, 1970.

OPINIONS BELOW Roce s ;

: The opinion of the District Court of Bernalillo Ceicii.

’ State of New Mexico, is unreported. »The opinion of the _

' Supreme Court ‘of. the State of New Mexico: is officially

reported in ....... N.M. ......, 468 P.2d 409 (1970) and unoffi-

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cially reported in State Bar of New Mexico Bulletin and -

Advance Opinions, Vol. 8; No. 45.. It ‘appears in the “Ap-—

pendix, p. Al. Phe order of the Supreme Court of New

_ Mexico denying the Petitioners’ motion for rehearing is un-"

_Teported. _It appears in the Appendix, p. A9.

<1

“dated March 23, 1970, and that is the. time of its ent ‘-

JURISDICTION 2

The opinion : of the New Mico, Supreme Court

. An order denying Pétitionets’ notion, for rehéaring

was dated and filed May 4, 1970. | 5,

The statutory provision believed to cnsiter jurisdiction

‘to review the judgment or. decree in question by writ of

wt. certiorari i is 28 USC. 1257" (3) (Aepends, p.. i de

QUESTION PRESENTED ,

The question — for 1 review by this Petition. is’

ns as follows:

Whether a state’ court; Ww shen asked. to determine that

“its prior. judgment. is not dischargeablé in bankruptcy be-

cause it allegedly was based upon a liability for obtaining

money or property by false pretenses or false representa- ;

tions under 11 U.S.C; 35 (a) (2), may go behind that judg;

ment, and examine the transcript of the testimony at the

_ original trial when the record proper shows that at no time

" was the defendant-bankrupt given notice that a charge of |

false pretenses or false representations was any part of the

claim against which he'was then defending:

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STATUTE INVOLVED.

i The péitingnt portion of the Federal Baskéaptiy Act,

' USS 35 (a) (2), is: < | BS oe

(a) A ‘discharge in baniicragias ‘shall ahanad a orm .

rupt from all of his provable debts, whether allowable

in fult or in part, except such as... (2). are liabilities -

for obtaining’ ‘money or property by falsé preténse eae

rs er - . Soy

‘

- STATEMENT OF THE Cc ASE

“This Statement of the Case" is ses tank as set forth.

in the opinion (Appendix, p. Al).

In 1964 the respondents ( Kuzemchaks ) filed a’ com--

- plaint against the petitioners (Pitchfords ) in the District

- Court of Bernalitlo- County, New Mexico. . They alleged.

that in-a written agreement to purchase their home the

'. Pitchfords- had assumed and agreed. to pay the outstanding

mortgage thereon. They further alleged that the Pitch-

’ fords’ failure to pay the mortgage’ as agreed had resulted

in a foreclosure and deficiency judgment, which the

Kuzemchaks had’ heen requiréd’ to pay. * It was for this

a oe A ae»

payment that they _ sought io es against the. Pitch- ae

; _ fords. . a : Oy ‘

The trial court dismissed the complaint on the theory

that. the deed. given to the’ Pitchfords. w hich conveved. the.

. hone, recited only that sit was ‘subject’ to. the mortgage.

and that the acceptance of the deed superseded the agree-

-. ment and eliminated ‘the obligation in 4f. On appeal, the

New Mexico Supreme: Court reversed. Kuzemchak v./

Pitchford, 78 N.M. 378, 431 P.2d.756 (1967). The trial court;

on the New Mexico Supreme Court mandate, entéred

udgment | for the Kuzemchaks and — the Pitchfords .

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The result was a judgment the ‘Seas of contract based

upon a complaint that alleged solely the breach of the

’ agreement -to pay the mortgagé. The New Mexico Su-.

preme Court*decision (supra) was. framed solely upon. the.

theory of the breach of contract. |

On. October 16, 1968, a eit of garnidhment was is- -

sued upon this judgment. On October’21, 1968, the Pitch-

fords filed-a petition in bankruptcy, and thereupon asked .

the trial court to quash the writ of garnishment claiming ©

they were entitled to a stay:of proceedings because of the

bankruptcy. The request was granted by ex parte order.

At the héaring upon a motion to vacate this order, over

' Pitchfords’ objections, the trial court considered portions .

of ‘the transcript of the tevtimcy, taken at the original *

trial and as a result concluded that the: judgment. was not

dischargeable in bankruptcy under 11 USC. 35 (a)(2).

The ttial court found that the transcript of testimony in-

, dicated it was based on an indebtedness which was in-

curred as a result of false pretenses and false epresenta-

tions fraudulently made. It was at this hearing that the

. Pitchfords raised the federal question of the applicability

_ of 11 U.S.C. 35 (a) (2), and their: position is preserved by

corequested findings of fact and conclusions of law (Appen-

dix, p. Al0). The trial court overruted the objections made

to the review of the transcript of the trial testimony upon ~

the inquiry into dischargeability, and considered the —

‘transcript. The trial court’s order er in the Appa

dix, p. A12. : .

In its ‘rev iew of the trial testimony from the trariscript,

Bei the court found that the Pitchfords were realtors and pur-

‘chased the home for immediate resale. -It found that in

order to induce the Kuzemchaks to sell the home to them,

_ the Pitchfords had falsely and fraudulently represented

5) e

that jthey wanted the house for their personal use and

occupancy. | :

he Pitchfords’ _position was that since at the time

of the trial no issue had been raised ‘as to the existence

of false pretenses .or false representations - (Appendix, p.

A10), they had not. defended agaist the. testimony or:

against that theory of liability. The court set aside the

"Stay of garnishment. .

The Pitchfords apifealed the trial court’s decision set-

ting setting. aside the stay--of garnishment, to the New

Mexico Supreme Court The New Mexico Supreme Court

affirmed the trial court’s order in an opinion reported in

Kuzemchak v. Pitchford, . N.M. .. ., 468 P.2d 409

(1970). (See Appendix, p. Al). The Pitchfords moved the

4 New Mexico Supreme Court for a. rehearing, and this mo-

» tion was denied ‘by order filed May 4, 1970. (See Appen-

' dix, p. AQ). ‘

. In its opinion, the New Mexico Supreme’ Court recog- .

nized three conclusions which. have been reached in vari-

ous state courts of final jurisdiction, and in lower federal. >

courts, which have considered the question of how’’far, if

at all, a‘court may go behind its judgment in determinirig

dischargeability or nondischargeability under 11 U.S.C. 35

(a) (2). The court attempted to balance: the basic rea-

sons for these different. rules against foreseeable applica-

tions of the same, and concluded that the. purposes of the

Bankruptcy Act are better served by permitting the trial

~ * court to review the ’entire récord, including. the transcript

of the testimony. than by limiting it to, the form of iude-

ment, and the record proper.

“er

@e * &

REASONS FOR GRANTING THE WRIT ~~

. 1. The New Mexico Court has decided a federal ques-

tion of substance which. has been decided in’ conflicting

ways in other state courts “of final jurisdiction, and: in

other federal courts, and which has not heretofore been

~ determined by this Court. .

The question (p. 2 of this’ Petition) relates specifi-

cally to the means of determining dischargeability and non-

dischargeability as found in Section 35 (a)(2) of the Fed-

eral Bankruptcy Act. (11 U.S.C. 35 [a][2]).

_ The Constitution gives Congress the power:

“to establish a uniform Rule of-Naturalization and uni-

form Laws on the subject of bankruptcies throughout

‘ . the United States.” Art. I, Sec. 8, Cl. 4. e

won The court below admits that there is no-uniformity in

this area. : The authorities are divided and three conclu-

sions have been reached (Appendix, p. A4):.

a. “That the judgment is conclusive and the court

will not go behind the record proper to determine the _

facts.” Consolidated Plan.of Connecticut v. Bonitati- ,

bus, 130 Conn. 199, 33 A.2d 140- (1943); National

Finance Co. of Provo v.’ Daley, 14 Utah 263, 382 P.2d

405 (4963); Peerson. v. Mitchell, 205 Okl. 530, 239 P.2d

~ .1028,°26 ALR 1362 (1950), cert. denied 342 U.S. 866,

72 S.Ct. 106, 96 L.ed. 652 (1951); In re Fuller (M.D.

Pa. 1937) 18 F. Supp. 394; Harrison v. Donnelly, 153

- F.2d 588 (8th Cir. 1946); ‘Miller v. Rush, 155 Colo. 178;

*......,.P.2d 565 (1964); 1 Collier on Bankruptcy, 14th Ed.,

Sec. 17. a [4].

b. “That a review of in whole record including

testimony is permitted to determine the nature of the

claim.” Allen v. Lindeman, 164 N.W.2d 346 (Iowa

1969); Wegiel v. Hogan, 28 N.J. Super. 144, 100 A.2d

é 7 4

wees hi ee

349 (1953); In re Dutkiewicz, 27 F.2d 334 (W.D.N.Y.

(1928); In re Kubiniéc, 2 F. Supp. 632 (W.D.N.Y. 1932):

. 1 Collier,-Bankruptcy Manual, Section #7.00 (2nd ed.

1969).:°° Yee. -

+

. Script of the gfiginal proceedings together with any

~ extrinsic evidence. is permitted.” . Fidelity & C..Co.

_v. Golombosky.. 133 Conn. 317, 50 A:2d 817, 170. ALR

361 (1946): United States Credit Bureau v. Mannina,

147 Cal. App.. 2d 558. 305 P.2d-970 (1957); Levin v.

- Singer, 227 Md. 47. -175 A.2d 423 (1961); Greenfield |

V. Tuccillo, 129 F.2d 854 (2nd Cir. 1942); Welch v. Old

2 Dominion Bank, (D.C.C.A. 1967) 229°A.2d 455.

Justice Watson, author of the New Mexico opinion ad-

c. “That review of the entire record and tran- |

~

mits that point “c” above is authorized-only by a minority

_ ef courts.

As the opinion stands, the New Mexico court,-in. belief

that both justice and the bankruptcy act are better served .

by permitting the trial court to rev iew the entire record

and. transcript of testimony, found that conclusion ‘“b” above

was the view most-acteptable to New Mexico.

Of the three interpretations presented by the courts,

this court has not pointed to the correct,one. The opinion ,

of the New Mexico court 7 contributes to the existing

conflict in the decisions. : Ee Say

The effect of having three different approaches to in-

quiry into the. dischargeability of a judgment debt in bank-

ruptcy results in a varying treatment of bankrupts from

one state jurisdiction to another. _A conflict among de-

cisions made by state courts of final jurisdiction has been

held grounds for granting a writ of certiorari when. an im-—

portant question of federal statutory construction is in-

volved: U. S. v. Oregon. 366 U.S. 643 (1961). ie :

8

In those ‘jurisdictions see view gt “That the

judgment. is conclusive,and the court will not go behind

the record proper to determine the facts”, the bankrupt is

secure in the knowledge that the relationship between the

judgment creditor and himself is fixed when the Judgment

is entered. : :

In those jurisdictions applying view “b”, “That a re-

view of the whole record including testimony is permitted

to determine the nature of the’ claim”, the bankrupt cannot -.:

- know for certain what his relationship. is with his judg--

ment creditors, although by its terms the judgment was

not based on false representations or false pretenses. At

any time after bankruptcy; the bankrupt may be required

to defend these charges. .His defense then is based upon.

a record of testimony taken at a time when fraud was not an

issue! and when he therefore was not defending against it. . ~ ©

Fis atc is pice ins e transcript of testimony 5

“pretenses, when nt context out of which the testimony

arose was something other than that. oe an

In those jurisdictions applying view “c”, “That review |

of the entire record and transcript of the original proceed-

ings together w ith any’ extrinsic evidence is permitted”,

‘the bankrupt is exposed to the possibility of two hearings

on any claim—the hearing which resulted in the judgment,

plus another to ascertain whether the judgment was in fact

a liability for obtaining money or property by: false pre-

ténse of false repr esentations. ©

A determination of the proper extent of review which»

should be allowed where the above question is raised is

important in the administration of the Federal Bankruptcy

Act. The avowed pet of a proceeding in bankruptcy

is to give bankrupts.‘‘the new opportunity in life and the

clear field for future effort, which it is the ee of

.

9

the Bankruptcy Act’to afford the emancipated debtor.”

Local Loan Co. v.. Hunter, 292 U.S. 234, 245 (1934). It is -

also the obvious purpose of the act’to grant a discharge

of honest debts to honest debtors. Williams v-U.S. Fidelity '

Co., 236 U.S. 549, 554, 555 (1915). It is important that this

court determine which of the three various conclusions

above is most in keeping with these purposes, and which

is designed properly to weed the disho nest debtors from

the honest. | . fs ‘

The view icleetad must be designed to afford the Bank-

rupt the constitutional right to due” process of law (US.

Const., Amend. XIV, Sec. 1, Appendix, p. A135) in the deter-

mination of whether. he is, in fact, an honest ora “dishonest .

. debtor. . This subsidiary question would seem to be fairly

comprised, within the arguments advanced heretofore by |

the Petitioners in. their objections to the trial court exam-

ining tf€transcript of trial testimony to determine ‘if they

were honest, debtors, when the trial reported-in that tran-

script was a breach of contract suit, not embracing charges 4

of false pretenses or false representations.

j -

' The age in- which it was. assumed that the debtor. an |

h

necessarily to be dealt with,as an offender passed wi

Nat. Bank and Trust Co. .v. Rock Island Ry., 294 U.S. 648

the adoption of the Constitution. See pyre vy Illinois

(1935). Yet, the effect of a‘decision; which decides the

honesty or dishonesty of a debtor baged on testimony: at _

a hearing in which he was defending ‘contract action, and

. had not been charged with having incurred liability for

_faise representations or false pretenses, w ould seem to be

| to give cr edence to some-pr esumption of guilt.”

No notice of the charged offense was, given before the

' trial recorded in the transcript and notice is a basic re-'

quirement of the due process clause. Armstrong. V, Monzo,

oo 380 USS. 545. We nanos urge that in. its con-

er

, | /10 °

sideration of the three views adopted by the various states

in: their inquiry‘into the dischargeabijity of a judgment -un-

der, 11:U.S.C., Section 35 (a) (2), this Court give recogni- i

tion td the implicit due eae problem. . . ™

%

.

¢

; CONCLUSION |

_ The conflict among the various state courts of final

__—Urisdiction in determining a question involving the rights | .

afforded by the federal bankruptcy laws, and the choice

by the New Mexico court of a rule resulting in a denial of

due process, make this matter one for the granting of a

' "- writ of certiorari.

Respectfully stibmitted,

Joun E. MEnic, Esq..

Counsel for Petitioners

5200 Copper, N. E.

Albuquerque, N. M.

Of Counsel: ‘

STANLEY C. SaGER, Esq.

EDWARD T. Curran, Esq.

5200 Copper, N. E.

. Albuquerque, N. M.

(