## Facts

- Evelyn Halpern personally guaranteed corporate debt owed to a bank after her husband’s construction company suffered financial collapse.
- Halpern and her husband assigned to their son a bond and mortgage valued at about $80,000 while corporate debt to the bank remained substantial; the assignment was not recorded.
- The bank filed involuntary bankruptcy petitions against Halpern, alleging the assignment constituted acts of bankruptcy, including a transfer made with intent to hinder, delay, or defraud creditors and a preferential transfer while insolvent.
- A bankruptcy referee adjudicated Halpern bankrupt based on three independent acts of bankruptcy; the district court affirmed, and the adjudication became final.
- In the later discharge phase, the trustee objected to discharge based on alleged fraudulent intent in the same transfer and sought summary judgment on collateral estoppel grounds.
- The referee granted summary judgment denying discharge, and the district court affirmed.

## Issues

1. Whether a finding of actual intent to hinder, delay, or defraud creditors from a prior judgment is issue-preclusive in a later discharge proceeding when the prior judgment rested on multiple independent, alternative grounds.
2. Whether summary judgment denying discharge was proper when the trustee relied on collateral estoppel as to intent.

## Decision

- The Second Circuit reversed.
- A prior judgment resting on multiple independent alternative grounds is not conclusive, for issue-preclusion purposes, as to an issue necessary to only one ground.
- The earlier intent finding was not “essential to the judgment” because any one act of bankruptcy sufficed for adjudication.
- The court directed that the bankruptcy referee consider Halpern’s opposition to the objection to discharge on the merits rather than treating intent as conclusively established.

## Legal Principles

- Issue preclusion applies only to issues actually litigated and determined that were essential to the prior judgment.
- When a judgment rests on two or more independent alternative grounds, findings necessary to only one ground are not treated as essential to the judgment as a whole.
- Denying preclusive effect in this setting is supported by concerns that nonessential findings may receive less careful trial attention and may not receive meaningful appellate review.

## Conclusion

Because the earlier bankruptcy adjudication could stand on independent grounds without any determination of fraudulent intent, the intent finding was not essential to that judgment and could not collaterally estop Halpern from litigating intent in the discharge proceeding; summary judgment denying discharge was therefore improper.


Halpern v. Schwartz, 426 F.2d 102 (2d Cir. 1970)