UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
JOHN C. TAYLOR
CAROLYN SUE TAYLOR CASE NO. 92-60256
This matter is before the Court upon the debtors' Motion to Alter or Amend Order filed herein on February 10, 1993 seeking relief from the Court's Order entered January 29, 1993 which denied the Motion of the debtors to avoid the lien of Creditor Tri-County National Bank ("Tri-County) on certain real property of the debtors. A hearing was held on March 11, 1993 at which arguments of counsel were heard.
By its Memorandum Opinion of January 29, 1993 the Court held that the issue of the validity of the lien of Tri-County was res judicata by virtue of a state court foreclosure judgment and order of sale which found the lien to be valid. That judgment was entered by default. The debtors contend that they did not intend to give a lien on the subject property and that there was no meeting of the minds on the subject and misdescribe the lien involved as a judicial lien instead of its proper description for these purposes as a consensual lien. Indeed, it is the question of whether the lien was consensual that is the basis of the debtors' challenge to Tri-County. Obviously this is an issue which could have been litigated in the state court proceeding had the debtors chosen to contest that proceeding.
The debtors rely on Spilman v. Harley, 656 F.2d 224 (6th Cir. 1981) as authority for their motion. That case involved a dischargeability question and stands for the proposition, inter alia, that, questions of exclusive jurisdiction aside, by definition, since the question of dischargeability could not have arisen prior to the bankruptcy proceeding, the state court could not have addressed that question of law and it could not therefore be res judicata. The Spilman court proceeds to give a thorough analysis of the requisites for collateral estoppel (fact preclusion). The present case involves no question of dischargeability but only the question of the validity of the mortgage of Tri-County under Kentucky law. That was the same question which was before the state court in the earlier proceeding between these same two parties and the debtors chose not to defend it. This proceeding involves no unique question of bankruptcy law nor does it involve a matter committed to the exclusive jurisdiction of the bankruptcy court.
Accordingly, the Court believes its original reliance upon Davis v. Tuggle's Administrator, 178 S.W.2d 979 is well founded and that res judicata applies to this question between these parties.
A separate order overruling debtors' motion will be entered.
Dated this _______ day of March, 1993.
By the Court,
Jeffery R. Tipton, Esq.
R. Gregory Lathram, Esq.