M & M Transmissions, Inc. v. Raynor (In re Raynor)

BUTZNER, Senior Circuit Judge:

The narrow issue in this appeal is whether the district court properly denied discharge of a debtor by accepting as res judicata a prior default judgment awarding damages for fraud. We conclude that the default judgment provides an insufficient basis for the denial of discharge. We reverse and remand the case with directions to the bankruptcy court to conduct an adversary evidentiary proceeding on the issue of fraud in order to decide whether the debtor should be discharged.

I

M & M Transmissions, Inc. (M & M) contracted with AAA Distributors and Associates, Inc.…