Brown v. Felsen

Brown (plaintiff) guaranteed a bank loan for Felsen (defendant) and his dealership; when the bank sued to collect, Brown cross-claimed against Felsen for fraudulently inducing him to guarantee the loan, but the parties settled before Felsen's deposition became part of the record. Felsen later filed for bankruptcy and sought to discharge his debt to Brown; Brown argued in bankruptcy court that the debt was non-dischargeable because it arose from fraud under the Bankruptcy Act, and Felsen argued res judicata barred relitigating the nature of the debt since the fraud issue could have been raised in the earlier state collection suit. The bankruptcy court, district court, and court of appeals all found the debt dischargeable, and the Supreme Court granted certiorari.