Pasian v. Leonetti

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-1-	MEMORANDUM RE SUMM. JUDG. MOTIONS
UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re
OTTORINO PASIAN and
DANILA PASIAN,
Debtors.
OTTORINO PASIAN,
Plaintiff,
vs.
SAM LEONETTI,
Defendant.
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Case No. 94-31563 TEC
Chapter 7
Adv. Proc. No. 09-3182 TC
MEMORANDUM RE COUNTER MOTIONS FOR SUMMARY JUDGMENT
On May 28, 2010, the court held a hearing on Defendant’s
Motion for Summary Judgment and Plaintiff’s Counter Motion for
Summary Judgment. 	Dennis D. Davis appeared for Plaintiff Ottorino
Pasian (hereinafter Debtor). 	Iain A. Macdonald and Michele L.
McGill appeared for Defendant Sam Leonetti (hereinafter Leonetti).
The motions concern the preclusive effect of the judgment
(Judgment) filed on March 4, 1999 in the action styled as Leonetti
Signed and Filed: June 02, 2010
________________________________________
THOMAS E. CARLSON
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 03, 2010
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-03182 Doc# 28 Filed: 06/02/10 Entered: 06/03/10 10:30:23 Page 1 of 3

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1 I.e., the complaint functionally alleges the elements of a
claim under section 523(a)(6) without expressly seeking relief
under section 523(a)(6).
2 In opposition to Debtor’s motion to reopen the bankruptcy
case, Leonetti filed a sworn declaration stating that he did not
receive notice of the bankruptcy case. 	Debtor neither introduced
evidence to contradict Leonetti’s declaration, nor moved under Rule
56(f) for additional time to file or obtain such evidence.
-2-	MEMORANDUM RE SUMM. JUDG. MOTIONS
v. Pasian et al., San Francisco County Superior Court Case No.
990679 (the State-Court Action).
Debtor first contends that the Judgment should not be given
preclusive effect, because it involved an action to enforce a
prepetition claim after Debtor’s discharge was entered. 	This
argument is unpersuasive. 	There is an implied exception to the
discharge injunction for actions to determine whether a particular
debt should be excepted from discharge under section 523(a). 	The
complaint filed in the State-Court Action “incidentally pleaded” 1
all of the elements of an exception-from-discharge claim under
section 523(a)(6). 	Because Leonetti neither received notice of
Debtor’s bankruptcy case nor had actual knowledge of the case, 2 	the
state court had jurisdiction to enter a judgment that included
findings sufficient to establish the non-dischargeability of the
debt in question. 	Fidelity Ntl. Title Ins. Co. v. Franklin (In re
Franklin), 179 B.R. 913 (Bankr. E.D. Cal. 1995).
Debtor next argues that the Judgment was obtained through
extrinsic fraud. 	Even if this court cannot set aside the Judgment
on such grounds, it is well recognized that a federal court should
decline to give issue-preclusion effect to the judgment of a
California state court if that judgment was obtained by extrinsic
fraud. 	See, e.g., Younie v. Gonya (In re Gonya), 211 B.R. 367 (9th
Cir. BAP 1997).
Case: 09-03182 Doc# 28 Filed: 06/02/10 Entered: 06/03/10 10:30:23 Page 2 of 3

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-3-
Debtor has introduced evidence sufficient to create a triable
issue of fact regarding whether the Judgment was obtained by
extrinsic fraud. 	The court determines that it is appropriate to
stay the present action to allow the California state court, rather
than this court, to determine whether the Judgment was obtained by
extrinsic fraud. 	Such a course of action would intrude less upon
the state courts and would therefor be in keeping with principles
of federalism. 	The parties agree that it is preferable for the
state court to determine the issue.
**END OF MEMORANDUM**
Case: 09-03182 Doc# 28 Filed: 06/02/10 Entered: 06/03/10 10:30:23 Page 3 of 3