Opinion
20-60031 21-60048
10-24-2022
In re: ROBERT EDWARD ZUCKERMAN Debtor, v. HENRY P. CRIGLER; et al., Appellees. ROBERT EDWARD ZUCKERMAN, Appellant, In re: ROBERT EDWARD ZUCKERMAN, Debtor, ROBERT EDWARD ZUCKERMAN, Appellant, v. RICHARD ABEL, Appellee.
NOT FOR PUBLICATION
Submitted October 18, 2022 [**]Pasadena, California
Appeal from the Ninth Circuit Bankruptcy Appellate Panel, BAP No. 19-1200; Taylor, Faris, and Spraker, Bankruptcy Judges, Presiding
Appeal from the Ninth Circuit Bankruptcy Appellate Panel, BAP No. 20-1186; Taylor, Lafferty III, and Gan, Bankruptcy Judges, Presiding
Before: O'SCANNLAIN, WATFORD, and HURWITZ, Circuit Judges.
MEMORANDUM [*]
Robert Zuckerman, a Chapter 7 debtor, appeals two Bankruptcy Appellate Panel ("BAP") decisions affirming summary judgments of the bankruptcy court finding a state fraud judgment nondischargeable under 11 U.S.C. § 523(a)(2)(A). Reviewing the bankruptcy court's granting of summary judgment and its determination that issue preclusion is available de novo, Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000), and its application of issue preclusion for abuse of discretion, Albert v. Golden (In re Albert), 998 F.3d 1088, 1091 (9th Cir. 2021), we affirm.
1. "[T]he preclusive effect of a state court judgment in a subsequent bankruptcy proceeding is determined by the preclusion law of the state in which the judgment was issued." Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001). California permits issue preclusion when the issue sought to be precluded is identical to that decided in a former proceeding, was actually litigated in that proceeding, and was necessary to the outcome in that proceeding. Lucido v. Superior Ct., 795 P.2d 1223, 1225 (Cal. 1990) (en banc). Additionally, issue preclusion should be applied only if its use aligns with the public policy interests underlying it. Id. at 1226-27.
a. The elements of fraud under California law mirror those in 11 U.S.C. Compare Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 917 (Cal. 1997) (cleaned up), as modified (July 30, 1997),
with Am. Express Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th Cir. 1996), as amended (Jan. 24, 1997). The BAP has repeatedly so held. See, e.g., Lee v. Tcast Commc'ns, Inc. (In re Jung Sup Lee), 335 B.R. 130, 136 (B.A.P. 9th Cir. 2005); Younie v. Gonya (In re Younie), 211 B.R. 367, 373-74 (B.A.P. 9th Cir. 1997), aff'd mem., 163 F.3d 609 (9th Cir. 1998) (table disposition). Contrary to Zuckerman's argument, actual fraud in California requires an "intent to defraud," a scienter at least as demanding as the "intent to deceive" required under § 523(a)(2)(A). See Engalla, 938 P.2d at 917.
b. "[A]n issue was actually litigated in a prior proceeding if it was properly raised, submitted for determination, and determined in that proceeding." Hernandez v. City of Pomona, 207 P.3d 506, 511 (Cal. 2009). The fraud issue was actually litigated in state court.
Contrary to Zuckerman's argument that "liability was established solely by the defaulted admissions" and "cannot establish collateral estoppel," the state court judgment was based only in part on the deemed admissions, as it also acknowledged the "plaintiffs' presentation of the evidence" and expert testimony.
In any event, under California law, a judgment founded on facts deemed admitted because of failure to respond to requests for admission can be given preclusive effect. See Allis-Chalmers Corp. v. Superior Ct., 214 Cal.Rptr. 615, 617 (Ct. App. 1985). Indeed, even if we treated the judgment at issue here as a default
judgment, preclusion would be appropriate. Under California law, default judgments are entitled to issue-preclusive effect if the defendant "had actual knowledge of the existence of the litigation" and "the court made an express finding on the issue or . . . the issue was necessarily decided in the prior proceeding." Baldwin v. Kilpatrick (In re Baldwin), 249 F.3d 912, 919 (9th Cir. 2001) (cleaned up). Both requirements are satisfied here.
c. The state court judgment makes clear that it found Zuckerman liable for fraud. That judgment "necessarily included a determination of all of the facts required for actual fraud under California law." In re Younie, 211 B.R. at 374. The state court judgment was not based on imputed or vicarious liability; it was against Zuckerman alone and expressly found that he was "the central figure in charge" of the fraudulent scheme.
d. Application of issue preclusion in this case aids in the "preservation of the integrity of the judicial system, promotion of judicial economy, and protection of litigants from harassment by vexatious litigation." Lucido, 795 P.2d at 1227. Zuckerman had notice of the state court proceedings and the opportunity to be heard. The state court characterized Garcia's walkout as "a tactical maneuver . . . to confound the Court proceedings." And, as the bankruptcy court noted, "[d]isregarding a judgment on this basis would improperly encourage defendants not
to appear at trial and subsequently to attack the judgment on the basis that they did not have an opportunity to litigate their defense."
2. The bankruptcy court did not err in granting summary judgment to the fourteen investors that Zuckerman claims had sought pre-judgment dismissals in the state court and assigned their claims. The state court's judgment was in favor of all plaintiffs listed therein, including those fourteen investors, and Zuckerman abandoned any appeal of that judgment in the state courts. The bankruptcy court did not err in relying on the face of the state court judgment, and its order of nondischargeability does not establish that the fourteen investors, as opposed to their purported assignees, are currently the proper parties to execute upon the state court judgment.
Appellee's motion requesting that the court take judicial notice of the Second Amended Judgment, Dkt. 58, is DENIED. Appellee's motion requesting that the court take judicial notice of four death certificates, Dkt. 53, is DENIED.
AFFIRMED.
[*] This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.
[**] The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2).