## Facts

- Eddie Lou Morris sued real estate agent Willie Cunningham and others in Georgia Superior Court based on an allegedly fraudulent sale of a residential property in College Park, Georgia.
- Morris asserted a fraud claim against Cunningham arising from the property transaction and Morris’s payment of money in reliance on Cunningham’s representations.
- Cunningham filed an answer and a counterclaim in the state-court action.
- Cunningham later failed to appear for trial, and the superior court entered a default judgment against him on liability for Morris’s fraud claim.
- The superior court then held a jury trial on damages.
- The state court entered a final judgment awarding Morris approximately $350,000 in compensatory damages against Cunningham and two other defendants, jointly and severally, and $166,666.63 in punitive damages against Cunningham individually on the fraud claim.
- Cunningham did not object to, appeal, or pay the state-court judgment.
- Cunningham later filed a Chapter 7 bankruptcy case.
- Morris filed an adversary complaint seeking a determination that the judgment debt was excepted from discharge under 11 U.S.C. § 523(a)(2)(A) (money obtained by false pretenses, false representation, or actual fraud) and § 523(a)(6), and she moved for partial summary judgment on the § 523(a)(2)(A) claim.
- In opposing summary judgment, Cunningham did not dispute Morris’s statement of material facts; he argued instead that the state-court judgment should not be enforced because venue in Fulton County allegedly became improper under Georgia’s “vanishing venue” doctrine.

## Issues

1. Whether Georgia collateral estoppel barred Cunningham from relitigating fraud in the bankruptcy court and, if so, whether the state-court fraud judgment established nondischargeability under 11 U.S.C. § 523(a)(2)(A).
2. Whether Cunningham could avoid preclusion by arguing the state-court judgment was unenforceable due to an alleged venue defect that he did not raise in the state proceedings.

## Decision

- The bankruptcy court granted Morris’s motion for partial summary judgment on her § 523(a)(2)(A) nondischargeability claim.
- Applying Georgia collateral estoppel law, the court held the superior court judgment conclusively established the fraud elements needed for § 523(a)(2)(A), so Cunningham could not relitigate fraud in bankruptcy.
- The court rejected Cunningham’s venue challenge, holding that any venue objection was waived under Georgia law because Cunningham answered and litigated without timely raising venue and did not appeal the final judgment.
- The court ruled that Morris’s judgment debt was nondischargeable under § 523(a)(2)(A) (with the adversary case continuing as to any remaining claims not resolved by the partial summary judgment).

## Legal Principles

- Federal courts must give a state-court judgment the same issue-preclusive effect it would receive under the law of the state that rendered it; therefore, Georgia collateral estoppel rules govern the preclusion analysis.
- Under Georgia law, collateral estoppel applies when the identical issue was actually litigated and determined, the determination was essential to the judgment, and the party against whom estoppel is asserted had a full and fair opportunity to litigate.
- A defendant who appears in the state action (for example, by filing an answer and counterclaim) and then fails to appear for trial after notice may still be treated as having had a full and fair opportunity to litigate for purposes of issue preclusion, depending on how the issues were determined in the prior proceeding.
- For nondischargeability under 11 U.S.C. § 523(a)(2)(A), the creditor must show that the debt arose from the debtor’s fraudulent conduct (false representation or actual fraud), including intent to deceive, reliance, and resulting loss; a prior state-court fraud judgment that necessarily decides those elements can satisfy § 523(a)(2)(A).
- Under Georgia law, venue is a personal privilege that must be asserted at the earliest opportunity; litigating on the merits without raising venue (and failing to appeal) waives the objection.
- Bankruptcy nondischargeability litigation is not a vehicle for a collateral attack on a final state-court judgment based on defenses that were available but not timely raised in the state court.

## Conclusion

The bankruptcy court held that Morris’s Georgia superior court fraud judgment against Cunningham had issue-preclusive effect and established the elements required for nondischargeability under § 523(a)(2)(A), and it further held that Cunningham’s “vanishing venue” argument was waived and could not be used to defeat preclusion or dischargeability.


Morris v. Cunningham (In re Cunningham), 355 B.R. 913 (2006)