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DISCHARGE OF BANKRUPT - Debts not released by discharge

Monday, July 19, 2021 @ 9:31 AM  


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Appeal by plaintiff from a summary trial decision dismissing his application for a declaration that his partial summary judgment survived the defendant’s bankruptcy and that any damages flowing from claims not yet proved were exempt from any discharge that might be granted in the defendant’s bankruptcy. The plaintiff sued the defendant for a contractual debt, fraudulent misrepresentation and fraudulent preference. A master granted the plaintiff partial summary judgment for liquidated damages on a personal guarantee of a corporate debt and a promissory note. The defendant then made an assignment into bankruptcy. The summary trial judge held the summary judgment was obtained based on contract and that the plaintiff could not now rely on additional information about fraud in support of his application for exemption or to recharacterize that judgment. She found the additional unadjudicated claims were not suitable for summary determination and that the court could not predetermine whether any claims that did not relate to or duplicate the partial summary judgment already obtained would survive discharge prior to those claims being adjudicated.

HELD: Appeal dismissed. The summary judgment could not be recharacterized after the fact. The master did not find any version of fraud and did not make factual findings that could form the basis for a conclusion that any fraud had occurred. The plaintiff deliberately chose to sever his action and to obtain summary judgment based on the promissory notes and guarantee, not on the fraudulent misrepresentation and fraudulent preference allegations. The summary trial judge did not err in finding that res judicata applied to the successful summary judgment. Because the plaintiff chose to pursue a summary disposition of the debt part of his claim without relying on the allegations of fraudulent misrepresentation and fraudulent preference, he was now estopped from relitigating the debt claim. Once a final order or judgment was granted, the cause of action was extinguished such that even if there were two possible claims emanating from the same cause of action, and even if proceeding with the other claim might have been more fruitful, once judgment was rendered in one claim, the other was extinguished. The plaintiff had shown no error in the summary trial judge’s conclusion that the master’s judgment would not survive a discharge from bankruptcy. She did not prohibit the plaintiff from making other arguments regarding whether discharge from bankruptcy should be granted or refused.

Johansen v. Wallgren, [2021] A.J. No. 847, Alberta Court of Appeal, P.W.L. Martin, B.L. Veldhuis and J. Antonio JJ.A., June 22, 2021. Digest No. TLD-July192021002