### ORD ERED PU BLISHED

U NIT E D ST A T E S BA NK RU PT CYA PPE L L A T E PA N E L

OF T HE NINT H CIRCU IT In re: C HA D PA U L DELA N N OY,

Deb to r. C HA D PA U L DELA N N OY,

A p pellant,

v. W O O D LA W N C O L O N I A L , L.P., a C alifo rnia Lim ited Partnership,

A p pellee. BA P N o . C C -19-1230-TaFS Bk. N o . 8:17-b k-10423-ES A dv. N o . 8:17-b k-01073-ES

OPINION

A ppeal fro m the U nited States Bankruptcy C o urt fo r the C entral Distric t o f C alifo rnia Ho no rab le Erithe A . Sm ith, Bankruptcy Judge, Presiding

A P PEA RA N C E S: C harity J. Manee o f Go e &Fo rsythe, LLP argued fo rappellant; Ho ward M. Bidna o f Bidna &K eys, A PLC, argued fo rappellee. Befo r e: TAY LO R

, FA R IS, A N D SPRA K E R , Bankruptcy Judges. 

# FIL ED
JUN 19 2020 SUSAN M . SPRAUL, CLERK U. S

. BKCY

. APP. PANEL O F T HE NI NT H CI RCUI TTAY LO R

, Bankruptcy Judge:

INT ROD U CT I ON C had Paul Delanno y lo st his po sitio n as c aptain o f the luxury yacht AlessaLeigh when his em plo yer disc o vered his ac t s o f theft; this led to
c rim inal charges and an adverse c ivil judgm ent b a sed o n c o nversio n. While his appeal o f the judgm ent was pending, he filed a chapter 7 1 b a nkruptc y. The Trustee pro m ptly seized the helmin his appeal. Delanno y was no lo nger the m aster o f his appellate fate. O ver Delanno y’s obj ec tio n, the Trustee so ld Delanno y’s appeal rights to his adversary, W o o dlawn C o lo nial, L.P. (“W o o dlawn”), which then dism issed the appeal torender the judgm ent final. The b ankruptcy c o urt determ ined that the then-final judgm ent was issue prec lusive as to W o o dlawn’s § 523(a)(6) claimand granted W o o dlawn sum m ary judgm ent. Delanno y appealed. W e A FFIRM. W e pub lish this dec isio n prim arily to dispel any m isc o nc eptio n regarding what a c redito r is purchasing when it b u ys a chapter 7 deb to r’s right to appeal a C alifo rnia judgm ent. The c redito ris no t securing c ertain vic to ry in asserting the prec lusive effec t o f the judgm ent in a
no ndischargeab ility ac tio n. A t m o st, the c redito r is purchasing the

1 Unless specifi ed other wi se, all chapterand secti on r efer ences ar e to the Bankr uptcy Code, 11 U.S

. C. §§ 101–1532, all “Rule” r efer ences ar e to the Feder al Rules of Bankr uptcy Pr ocedur e, and all “Ci v i l Rule” r efer ences ar e to the Feder al Rules of Ci v i l Pr ocedur e. 2po ssib ility o f ob t aining the finality o f the judgm ent nec essary tothen argue

that issue prec lusio n c o uld and sho uld apply. The c redito rm ust pro ve that all elem ents o f issue prec lusio n are m et. A nd the applic atio n o f issue prec lusio n rem ains a disc retio nary dec isio n b y the b ankruptcy c o urt b ased
o n a pub licpo licy analysis. FA CT S 2 T he Prepetition State Court Proc e eding s T he State Court T rial Prepetitio n, Delanno y’s em plo yer, A lessa Leigh LLC, and its
m emb er, R . Sc o tt Bell (“Plaintiffs”), sued Delanno y fo r c o nversio n and
m o ney had and rec eived under C alifo rnia law. Plaintiffs’ c o nversio n c laim allegatio ns, inc luding the last allegatio n that Delanno y’s ac ts “were willful,
m alic io us, and o ppressive and were undertaken with the intent to c ause injury and dam age to Plaintiffs, therefo re justifying an award o f exem plary and punitive dam ages,” were inc o rpo rated in their m o ney had and
rec eived c laim

. A fter c o m m enc em ent o f the c ivil suit, Delanno y pleaded guilty to C al. Penal C o de § 487(a) grand theft and adm itted that he unlawfully and

2 We heav i ly bor r ow fr om our deci si on, Delannoy v. Woodlawn Colonial, L.P. (In re Delannoy) , BAP No. CC-17-1334-S KuL, 2018 WL 4190874 (9th Ci r . BAP Aug. 31, 2018) (“ Delannoy I”). We take j udi ci al noti ce of documents fi led in Delannoy I , the appeal ther efr om (No. 18-60057), the bankr uptcy case, and the adv er sar y pr oceeding. Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Ci r . BAP 2003). 3fraudulently appro priated, c o nverted, sto le, and emb ezzled Bell’s pro perty.

But at the c ivil trial, he denied taking Plaintiffs’ pro perty. The state c o urt fo und his testim o ny no t c redib le and, at tim es, evasive. It alsoac c epted his adm issio n that he m ade chec ks payab le to c ash drawn o n Plaintiffs’ b ank
ac c o u nts and depo sited tho s e chec ks in his perso nal b ank ac c o u nt. The trial
rec o r d well suppo rts the state c o urt’s c o nc lusio n that Delanno y was liab le
o n b o th theo ries o f rec o very. T he T entativ e Statem ent of D e c is ion A fter trial, the state c o urt first entered a tentative statem ent o f dec isio n (“TSO D”). It held Delanno y liab le fo r $59,550.07 fo r the value o f the c o nverted perso nal pro perty o ther than c a sh plus pre-judgm ent interest. A s fo r the c ash he to o k, the state c o urt no ted that “[m ]o ney c anno t b e the subjec to f a c ause o f ac tio n fo rc o nversio n unless there is a spec ific, identifiab le am o unt invo lved” and stated that “[h]ere, identifiab le am o unts are invo lved.” Thus, it additio nally held Delanno y liab le fo r $722,530 fo r the value o f “c o nverted” c a sh and prejudgm ent interest. Finally, it fo und, b y c lear and c o nvinc ing evidenc e, that Delanno y’s takings were “done with fraud, if no t m a lic e,” and c o nc luded that punitive dam ages and a sec o nd stage o f the trial wo uld b e appro priate. T he M inute Order A fter the punitive dam ages trial, the state c o urt issued a m inute
o rder (“Minute O rder”), awarding Plaintiffs $60,000 in punitive dam ages
4under C al. C iv. C o d e § 3294 b ased o n its finding that Delanno y ac t ed with

fraud, m alic e, and an intent to c ause ec o no m ic injury. It reiterated that its $59,550.07 award was “o n the c o nversio n c ause o f ac tio n.” Then, after
rec iting the elem ents fo r a m o ney had and rec eived c laim, it c larified that “[i]t was under this theo ry o f rec o very that the C o urt intended to award the c ash plus prejudgm ent interest. Sinc e judgm ent has no t b een entered yet, the C o urt m ay c o rrec t o rc larify its [TSO D] ac c o rdingly, and no wdo es
so .” The Minute O rder direc ted Plaintiffs’ c o unsel to prepare the judgm ent. T he State Court Judgm ent and the A ppeal The state c o urt entered judgm ent against Delanno y (“Judgm ent”)
c o nsistent with the TSOD and Minute O r der in all b ut two respec ts: (1) it desc rib ed the c o nverted pro perty as inc lusive o f the c ash taken b y Delanno y; and (2) it pro vided that Delanno y shall pay A lessa Leigh LLC dam ages fo r the c ash taken under b o th the c o nversio n and m o ney had and
rec eived theo r ies o f rec o very. The state c o urt handwro te o n the Judgm ent that “[t]he c o urt no tes that no objec tio ns to pro po sed judgm ent were filed.” The Judgm ent was assigned toW o o dlawn and appealed b y Delanno y (“State C o urt A ppeal”). T he Pos tpetition Proc eeding s T he Sale of D elannoy’s State Court A ppeal Rights and the Conc lus ion of the State Court A ppeal Befo re the c o nc lusio n o f the State C o urt A ppeal, Delanno y
5c o m m enc ed his chapter 7 c ase. W o o dlawn respo nded with a

no ndischargeab ility c o m p laint seeking to have the Judgm ent deb t exc epted fro mdischarge under §§ 523(a)(2), (4), and (6). De lanno y answered and
c o u nterc laim ed fo r dam ages fo r alleged auto m aticstay vio latio ns. A nd W o o dlawn c a pitalized o n an advantage arising direc tly fro m Delanno y’s dec isio n to file a chapter 7 c a s e; the Trustee filed a m o tio n to sell Delanno y’s appeal rights (“A ppeal Rights”) to W o o dlawn fo r $7,500, subjec t to o verb id. In additio n to analyzing the sale o f the A ppeal Rights to W o o dland under § 363, the Trustee analyzed it as a R ule 9019 c o m pro m ise. He m aintained it was a fair and reasonab le settlem ent and that a suc c essful pro secutio n o f the State C o urt A ppeal was highly unlikely. Delanno y o p p o sed the sale. N o t surprisingly, he expressed a m o re
o ptim isticview o f his chanc es in the State C o urt A ppeal and alleged,
am o ng o ther things, that the sale wo uld b e used to term inate his State C o urt A ppeal. Thus, he c o ntended that it am o unted to an im perm issib le waiver o f his right to a discharge in vio latio n o f § 524(c ). He also filed a
m o tio n to c o m pel ab ando nm ent o f the A ppeal Rights. The o verb id auc tio n o f the A ppeal Rights resulted in their sale to W o o dlawn fo r $10,000. Delannoy all b ut disc a rded his ab ando nm ent
m o tio n and instead partic ipated as a b idder. In the pro c ess o f appro ving the sale, the b ankruptcy c o urt twic e referred to the State C o urt A ppeal as a “lo ngsho t.” It alsodesc rib ed Delanno y’s chanc e o f c o m p letely prevailing as

6“prob ab ly highly unlikely.”

It then entered an o rder autho rizing the sale, which expressly autho r ized W o o d lawn to dism iss the State C o urt A ppeal. 3 Delanno y appealed the o rder, and we affirm ed. 4 A t no po int in that appeal did he challenge the b ankruptcy c o u rt’s finding that his chanc es in the State C o urt A p p eal were a “lo ngsho t.” T he D is m is s al of the State Court A ppeal Thereafter, in the State C o urt A ppeal, the C alifo rnia C o urt o f A ppeal added W o o dlawn as the “appellant,” dismissed the appeal pursuant to W o o dlawn’s request, and issued a remittitur deem ing the Judgm ent final. T he Nondis c harg eable Judgm ent W o o dlawn then filed a m o tio n fo r sum m a r y judgm ent o r sum m ary adjudic atio n o n its no ndischargeab ility c o m plaint b ased o n the prec lusive effec t o f the no w final Judgm ent. Delanno y o ppo sed and c o ntended that
sum m ary adjudic a tio n o n the § 523(a)(6) c laimwo uld b e im p ro per b ec ause, he argued, the state c o urt erred in awarding Plaintiffs dam ages fo r c ash taken under b o th o f Plaintiffs’ theo ries o f rec o very— r ather than o nly under the m o ney had and rec eived theo ry— per the Minute O rder. A t the hearing o n W o o dland’s m o tio n, am o ng o ther things, the

3 The bankr uptcy cour t also enter ed an or der denyin g the abandonment moti on, whi ch Delannoy di d not appeal.

4 Delannoy appealed to the Ni nth Ci r cui t. That appeal i s pending wi thout a stay. 7b ankruptcy c o urt to o k judic ial no t ic e o f the TSO D, Minute O rder, and

Judgm ent b ut stated that, in determ ining the ac tual ruling o f the state
c o u rt, it relied o n the Judgm ent and c o nsidered the TSO D and Minute O rder so lely fo r the purpo se o f determ ining whether o r no t particular issues had b een litigated. U nder this fram ewo rk, the b ankruptcy c o urt denied sum m ary judgm ent o n W o o dlawn’s §§ 523(a)(2) and (4) claim s b ut determ ined that the entire Judgm ent was no ndischargeab le under § 523(a)(6). It relied o n the Judgm ent’s findings o f c o nversio n and fraud and m alic e in suppo rt o f the punitive dam ages award. In so ruling, it rejec ted Delanno y’s argum ent that the Judgm ent c o uld
no t b e given prec lusive effec t due to its deviatio ns fro m the Minute O rder. It em p hasized that it had noreaso n to b elieve that the state c o urt was in
erro r; the state c o urt had apparently reviewed the Judgm ent as evidenc ed b y its handwritten no tatio n thereo n. The b ankruptcy c o urt alsorejec ted Delanno y’s argum ent that W o o dlawn’s purchase o f his A ppeal Rights destro yed the privity nec essary to apply issue prec lusio n. The b ankruptcy c o urt entered its o r der granting W o o d lawn sum m ary adjudic atio n as to its § 523(a)(6) c laimand later, pursuant toW o o dlawn’s
m o tio n, entered an o rder dism issing W o o dlawn’s §§ 523(a)(2) and (4) c laim s and c ertifying under C ivil Rule 54(b ) that there was no just
reaso n fo r delay in entering judgm ent o n W o o d lawn’s § 523(a)(6) claim

. 5 The b ankruptcy c o urt then entered its judgm ent exc epting fro m

5 The counter clai m for alleged stay v i olati ons r emained pending. 8Delanno y’s discharge the am o unt o f $846,089.65, to gether with po stjudgm ent interest, under § 523(a)(6). Delanno y tim ely appealed. JU RISD ICT ION The b ankruptcy c o urt had jurisdic tio n under 28 U .S.C . §§ 1334 and 157(b )(2)(I). W e have jurisdic tio n under 28 U .S.C . § 158, no twithstanding that the b ankruptcy c o urt’s judgm ent did no t adjudic ate all o f the c laim s, b ec ause the b ankruptcy c o urt c ertified that there was no just reason to delay entry o f judgm ent o n W o o dlawn’s § 523(a)(6) claimunder C ivil Rule 54(b ) and b ec ause Delanno y’s rem aining c o unterc laimwo uld no t require an appellate c o urt to re-exam ine the issues and fac t s suppo rting judgm ent o n W o o dlawn’s § 523(a)(6) claim

. S ee C utter v. S ero r (In re C utter) , 398 B.R . 6, 16 (9th C ir. BA P 2008), a ff’d , 468 F. A pp’x 657 (9th C ir. 2011). ISSU E Did the b ankruptcy c o urt err in granting sum m ary judgm ent o n W o o dlawn’s § 523(a)(6) claimb ased o n issue prec lusio n? ST A ND A RD S OF RE V IE W W e review de no v o a b ankruptcy c o urt’s grant o f sum m a ry judgm ent and exc eptio n o f a deb t fro mdischarge under § 523. S ee Bla ck v. Bo nnie S prings Fa m i ly Ltd. P’ship (In re Bla ck) , 487 B.R
. 202, 210 (9th C ir. BA P 2013). W e also review de no vo a b a nkruptc y c o urt’s determ inatio n that issue prec lusio n is availab le. Id. If issue prec lusio n is availab le, we review its applic atio n fo r an ab use o f disc retio n. Id. Ab ankruptcy c o urt ab uses its

9disc retio n if it applies the wro ng legal standard, m isapplies the c o rrec t

legal standard, o r its fac tual findings are illo gic al, im p lausib le, o r witho ut suppo rt in inferenc es that m ay b e drawn fro mthe fac t s in the rec o rd. S ee Tra fficS cho o l.co m, Inc. v. Edriver Inc. , 653 F.3d 820, 832 (9th Cir. 2011). W e m a y affirmo n any b asis suppo rted b y the rec o rd. In re Bla ck , 487 B.R . at 211. D ISCU SSION Sum m ary judgm ent is appro priate when the pleadings and supplem ental m aterials sho w that there is no genuine issue as toany
m aterial fac to n the c laim s and the m o ving party is entitled to judgm ent as
a m a tter o f law. R o usso s v. M icha elides (In re R o usso s) , 251 B.R . 86, 91 (9th C ir. BA P 2000). Apro p erly-suppo rted sum m ary judgm ent m o tio n
c anno t b e defeated b y the m ere existenc e o f so m e alleged fac tu al dispute. Id. The requirem ent is that there b e no genuine issue o f m aterial fac t. Anderso n v. Liberty Lo bby, Inc. , 477 U .S. 242, 247-48 (1986). O nly disputes
o ver fac ts that m ight affec tthe o u tc o m e o f the lawsuit m ay defeat a
sum m ary judgm ent m o tio n. Id. at 248. The b ankruptcy c o urt m ay grant sum m ary judgm ent in a dischargeab ility pro c eeding b ased o n the issue prec lusive effec t o f a judgm ent. S ee Gro

ga n v. Ga rner

, 498 U .S. 279, 284-85 & n.11 (1991). It “must give to a state-c o urt judgm ent the sam e prec lusive effec t as wo uld b e given that judgm ent under the law o f the State in whic h the judgm ent was

10rendered.” M igrav. W a rren C ity S ch. D ist. Bd. o f Educ. , 465 U .S. 75, 81 (1984). In C alifo rnia, issue prec lusio n prevents a party fro m re-litigating a previo usly dec ided issue in a sec o nd suit if: (1) the issue is identic al to that dec ided in the first suit; (2) the issue was actually litigated in the first suit; (3) the issue was nec essarily dec ided in the first suit; (4) the dec isio n in the first suit is final and o n the m erits; and (5) the party is the sam e as, o r in privity with, the party to the first suit. Lucidov. S uper. C t. , 51 C al. 3d 335, 341(1990). Even if these five requirem ents are m et, its applic atio n m ust b e
c o nsistent with the pub licpo lic ies o f “preservatio n o f the integrity o f the judic ial system, pro m o tio n o f judic ial ec o no m y, and pro tec t io n o f litigants fro mharassm ent b y vexatio u s litigatio n.” Id. at 343. The party asserting issue prec lusio n m ust pro ve all the c riteria fo r its applic atio n b y intro duc ing a rec o rd suffic ient to reveal the c o ntro lling fac ts and the exac t issues litigated in the first suit. K elly v. Okoy e (In re K

elly) , 182 B.R . 255, 258 (9th C ir. BA P 1995). Reaso nab le do ub t as towhat was dec ided in the first suit will weigh against applying issue prec lusio n. Id. Delanno y asserts that no ne o f the six c riteria fo r issue prec lusio n exist. He argues that the identic al issues were no t ac tually litigated and
nec essarily dec ided b y the state c o urt b ec ause Plaintiffs’ c laim s did no t require pro o f o f intent to harmand their m o ney had and rec eived c laim
was no t an intentio nal to rt. He argues that the Judgm ent was neither o n the
m erits no r ob tained b y a party in privity with himb ec ause his adversary

11purchased his A ppeal Rights and dism issed the State C o urt A ppeal to

render the Judgm ent final. A nd he argues that the b ankruptcy c o urt erred in failing to engage in a pub licpo lic y analysis. W e disagree. A . W e find no rev ers ible error in the bankruptcy c ourt’s failure to
c onduc t a public polic y analys is . Even where the five thresho ld c riteria fo r issue prec lusio n are m et, a b ankruptcy c o urt must c o nduc t an “inquiry into whether im po sitio n o f issue prec lusio n in the partic ular setting wo uld b e fair and c o nsistent with
so und pub licpo lic y” b efo re applying issue prec lusio n. K ha ligh v. H

a da egh (In re K ha ligh) , 338 B.R . 817, 824-25 (9th C ir. BA P 2006), a ff’d , 506 F.3d 956 (9th C ir. 2007). Three fundam ental po lic ies sho uld b e c o nsidered: “preservatio n o f the integrity o f the judic ial system, pro m o tio n o f judic ial
ec o no m y, and pro tec tio n o f litigants fro mharassm ent b y vexatio us litigatio n.” Lucido, 51 C al. 3d at 343. A b ankruptcy c o urt’s dec isio n to apply issue prec lusio n ultim ately is a disc retio nary m atter, turning o n whether its applic atio n is c o nsistent with these po lic ies. Id. at 343-44. Delanno y argues that (1) the b ankruptcy c o urt erred b y no t explic itly assessing whether the applic atio n o f issue prec lusio n was c o nsistent with pub licpo lic y; and (2) the applic atio n was no tc o nsistent with pub lic po lic y b ec ause he c o uld no t pro secute his State C o urt A ppeal. W e agree that the
rec o r d do es no t reflec t that the b ankruptcy c o urt explic itly c o nduc ted a pub licpo lic y inquiry direc tly in c o nnec tio n with W o o dlawn’s summ ary
12judgm ent m o tio n. But we dono t perc eive this o versight as reversib le erro r

b ec ause we c an do so in the first instanc e given that the rec o rd allo ws a
c o m p lete understanding o f these issues. S wa nso n v. Levy , 509 F.2d 859, 861 (9th C ir. 1975). And we c o nc lude that the applic a tio n o f issue prec lusio n did no t c o ntravene pub licpo lic y. In discussing pub licpo lic y, W o o dlawn o verstates the im po r t o f the b ankruptcy c o urt’s sale and c o m pro m ise o rder and o ur affirm anc e o f the
o rder in D ela nno y I . Spec ific a lly, it po s its that the o rder— so far upheld o n appeal— c o nc lusively estab lished that the applic a tio n o f issue prec lusio n is
c o nsistent with pub licpo lic y pursuant to the “law o f the c ase” do c trine. W e disagree. “Under the ‘law o f the c ase’ do c trine, a c o urt is
o rdinarily prec luded fro mreexam ining an issue previo usly dec ided b y the
sam e c o urt, o ra higher c o urt, in the sam e c a se.” R icha rdso n v. United S ta tes , 841 F.2d 993, 996 (9th Cir. 1988) (c itatio ns o m itted), a m ended, 860 F.2d 357 (9th C ir. 1988). Fo r the do c trine to apply, “the issue in question m ust have b een dec ided explic itly o r b y nec essary im plic atio n in the previo us dispo sitio n.” United S ta tes v. Lum m i India n Tribe, 235 F.3d 443, 452 (9th Cir. 2000) (internal quo tatio n m arks and c itatio n o m itted). W e rejec t the no tio n that the sale and c o m p ro m ise o rder o r D e la nno y I r eso lved, either explic itly
o r b y nec essary im p lic atio n, whether issue prec lusio n c o uld o r sho u ld apply. In appro ving the sale and c o m pro m ise, the b ankruptcy was no t

13ob liged to c o nsider the effec t o f a transfer o f the A ppeal Rights to

W o o dlawn o n its no ndischargeab ility c laim s. N either were we so ob liged in o ur review o f the sale and c o m pro m ise o rder. A ppro val o f the sale hinged o n whether the Trustee pro po sed the sale in go o d faith and fo r a pro per purpo se, the sale was in the b est interests o f the estate, and the sale yielded o ptim al value fo rthe estate under the c irc um stanc es. S ee S im a nto b v. C la im s Pro secuto r, LLC (In re La hija ni) , 325 B.R . 282, 288 (9th C ir. BA P 2005); 240 N. Bra nd Pa r tners, Ltd. v. Co lo ny GFP Pa rtners, L.P. (In re 240 N

. Bra nd Pa rtners, Ltd.) , 200 B.R . 653, 658 (9th C ir. BA P 1996). And appro val o f the c o m p ro m ise depended o n whether the c o m p ro m ise was fair and equitab le after c o nsideratio n o f the prob ab ility o f suc c ess in the State C o urt A ppeal, the diffic ulties in c o llec tio n, the c o m p lexity, expense, inc o nvenienc e, and delay in pro secu ting the appeal, and the param o unt interest o f c redito rs. Go o dwin v. M ickey Tho m pso n Entm ’ t Grp., Inc. (In re M ickey Tho m pso n Entm ’t Grp., Inc. ), 292 B.R . 415, 420 (9th C ir. BA P 2003). To the extent that either the b ankruptcy c o urt o r we c o nsidered the effec t o f the sale and c o m pro m ise o n the availab ility o f issue prec lusio n in the no ndischargeab ility ac t io n, such c o nsideratio n o c c urred within the
c o ntext o f assessing the value o f the sale and c o m pro m ise to the estate and addressing Delanno y’s assertio n that the sale wo uld im perm issib ly waive his right to a discharge. N either the b ankruptcy c o urt’s o rder no r o ur D ela nno y I dec isio n determ ined that W o o dlawn wo uld b e ab le to

14suc c essfully assert issue preclusio n as a c o nsequenc e o f its purchase o f the

A ppeal Rights. That rem a ined an o pen issue until the b ankruptcy c o urt adjudic ated W o o dlawn’s summ ary judgm ent m o tio n. A t m o st, W o o dlawn purchased the po ssib ility o f ob t a ining the finality nec essary tothen argue that issue prec lusio n c o uld and sho uld apply. It did no t secure c ertain vic to ry in asserting issue prec lusio n. Delanno y likewise o verstates the im po r t o f the sale and c o m pro m ise
o rder. He argues that the judic ial system ’s integrity is harm ed when a party o f m eans, such as W o o dlawn, c an purchase its desired result in litigatio n, rather than b y “full and fair” litigatio n o n the m erits. But, that is
no t what happened here. Delanno y defended against Plaintiffs’ c laim s in state c o urt up until the adverse Judgm ent was entered. R ather than pro secute his State C o u r t A ppeal to c o m pletio n, he vo luntarily filed a
chapter 7 b ankruptcy, thereb y relinquishing his A ppeal Rights to the Trustee. W o o dlawn then purchased the A ppeal Rights thro u gh a judic ially supervised b ankruptcy sale. This pro c ess was neither im p ro per no runfair; it did no t c all into questio n the judic ial system ’s integrity. A s fo r judic ial ec o no m y, applic atio n o f issue prec lusio n wo uld prevent the unnec essary retrial o f issues already fully and finally determ ined b y the state trial c o urt. Ba ldwin v. Kilpa trick (In re Ba ldwin) , 249 F.3d 912, 920 (9th Cir. 2001). Finally, with respec t to the pro t ec tio n o f parties fro mvexatio us
15litigatio n, Delanno y has no t sho wn that he was denied a full and fair

o ppo rtunity to litigate the issues in state c o urt. R ather, he sim ply disagrees with the o utc o m e and wo u ld like ano ther c hanc e to re-litigate the issues. A nd, im po rtantly, in the pro c ess o f granting the Trustee’s sale and
c o m p ro m ise m o tio n, the b a nkruptc y c o urt referred to the State C o urt A ppeal as a “lo ngsho t” and desc rib ed his chanc e o f prevailing as “prob ab ly highly unlikely.” It wo uld have b een unfair to W o o d lawn to require it to re-litigate the willful and m alic io us injury issues in the b ankruptcy c o urt when Plaintiffs had already suc c essfully do ne so in state c o urt and the State C o urt A ppeal likely had little o r no m erit. Id. A c c o rdingly, we find there is sub stantial evidenc e in the rec o r d dem o nstrating that applicatio n o f issue prec lusio n o n the fac ts b efo re the b ankruptcy c o urt was c o nsistent with so und and fair pub licpo licy. B. T he is s ues were identic al. Issue prec lusio n requires a c o m pariso n o f the issues presented in the b ankruptcy c ase and in the state c o urt ac tio n. The b ankruptcy c o urt held that the Judgm ent c o nstituted a no ndischargeab le deb tunder § 523(a)(6), which exem pts fro mdischarge a deb t“fo r willful and m alic io u s injury b y the deb to r to ano ther entity o r to the pro perty o f ano ther entity.” § 523(a)(6). The “willful” injury and “m alic io us” injury requirem ents o f § 523(a)(6) are separate and distinct fro mo ne ano ther. O r m sby v. F irst Am
.
16Title Co . o

f N ev. (In re O rm sby) , 591 F.3d 1199, 1206 (9th Cir. 2010). The “willful injury requirem ent is m et o nly when the deb t o r has a sub j ec tive
m o tive to inflic t injury o r when the deb to r b elieves that injury is sub stantially c ertain to result fro mhis o wn c o nduc t.” Ca rrillov. S u (In re S u) , 290 F.3d 1140, 1142 (9th Cir. 2002). “A‘m alic io us’ injury invo lves ‘(1) a
wro ngful ac t, (2) do ne intentio nally, (3) whic h nec essarily c auses injury, and (4) is do ne witho u t just c ause o rexc use.’” Id. at 1146-47 (quo ting Petra l ia v . Jercich (In re Jercich), 238 F.3d 1202, 1209 (9th Cir. 2001)). Deb ts incurred b y c o nversio n o f ano ther’s pro perty m ay qualify as
no ndischargeab le under § 523(a)(6). D el Binov. Ba iley (In re Ba iley) , 197 F.3d 997, 1000 (9th C ir. 1999).“Ac o nversio n, under C alifo rnia law, estab lishes the deb to r’s wro ngful exerc ise o f do m inio n o ver the perso nal pro p erty o f
ano ther, b ut it do es no t nec essarily dec ide the type o f wro ngful intent o n the part o f the deb to rthat is nec essary fo r the dam ages to b e a
no ndischargeab le deb t under § 523(a)(6).” Thia ra v. S p ycher Bro s. (In re Thia ra ) , 285 B.R . 420, 429 (9th C ir. BA P2002) (internal c itatio ns and quo tatio n m arks o m itted). Thus, a deb t fo r c o nversio n under C a lifo rnia law is exc epted fro mdischarge under § 523(a)(6) o nly if the injury was willful and m alic io us. Id. at 427. In this c ase, the Judgm ent awarded all c o m pensato ry dam ages “fo r
c o nversio n.” While the Judgm ent did no t inc lude the wo r ds “willful” o r “m alic io us” todesc rib e the c o nversio n, the punitive dam ages
17award— which was nec essarily requested and predic ated o n Delanno y’s

c o nversio n 6

— w as suppo rted b y the requisite findings o f intent to c ause injury and satisfied the willful and m alic io us injury requirem ents o f § 523(a)(6). It was b ased o n findings that Delanno y to o k Plaintiffs’ c ash and
o ther perso nal pro p erty with fraud, m a lic e, and an intent to c ause
ec o no m icinjury, and that Delanno y’s “ac ts sho wed a pattern o r prac tic e, and invo lved tric kery and/o rdec eit.” Such language c o llec tively dem o nstrates that Delann o y’s c o nversio n c o nstituted a willful and
m alic io us injury under § 523(a)(6). 7 The b ankruptcy c o urt did no t err in finding an identity o f issues. C. T he is s ues were ac tually litig ated. N either did it err in finding that the issues were ac tually litigated. Under C alifo rnia law, “an issue was actually litigated in a prio r pro c eeding if it was pro p erly raised, sub m itted fo r determ inatio n, and determ ined in

6 Puni ti v e damages wer e not r ecov er able on Plainti ffs’ alter nati ve money had and r ecei v ed clai m . Steiner v. Rowley, 35 Cal. 2d 713, 720 (1950).

7In analyzing the “i denti ty of i ssues” cr i ter i on for i ssue pr eclusi on, we need not deci de whether Plainti ffs’ money had and r ecei v ed clai m entai l ed the same i ssues as those under lyi ng a § 523(a)(6) claim because all damages awar ded by the state cour t ei ther exclusiv ely or alter nati v ely ar ose fr om and r elated to Delannoy’s conv er si on of Plainti ffs’ pr oper ty. And, whi le we need not, and do not, deci de the i ssue, we obser v e that ther e may be an i d enti ty of i ssues stemming fr om the quasi -contr actual money had and r ecei v ed clai m . A debt r esulting fr om an intenti onal br each of contr a ct clai m accompani ed by tor ti ous conduct that r esults in wi l lful and mali ci ous in j ur y i s excepted fr om di schar ge under § 523(a)(6). In re Jercich , 238 F.3d at 1205.

18that pro c eeding.” H erna ndezv. C ity o

f Po m o na, 46 C al. 4th 501, 511 (2009) (c itatio ns o m itted). Delanno y argues that his intent to harmwas no t
ac tually litigated b ec a use it was no t c learly raised in the pleadings. N o t so
. Plaintiffs alleged in b o th their c laim s that his ac ts were “willful, m alic io us, and o ppressive and were undertaken with the intent to c ause injury and dam age to Plaintiffs, therefo re justifying an award o f exem plary and punitive dam ages.” D . T he is s ues were nec es s arily dec ided. Delanno y also c o ntests that the issue o f his c o nversio n o f Plaintiffs’
c ash was nec essarily dec ided b ec a use the dam ages award fo r the c ash he to o k fro mPlaintiffs is b ased o n determ inatio ns o f b o th c o nversio n and
m o ney had and rec eived, either o f which standing independently wo uld b e suffic ient to suppo r t the result. And he c laim s that a judgm ent fo r m o ney had and rec eived c anno t satisfy a § 523(a)(6) claim

. 8 He c ites to C o m m enti to the R estatem ent (Sec o nd) o f Judgm ents § 27 (A m . Law Inst. 1982) (“C o m m ent I” ) in suppo rt, which states that “[i]f a judgm ent o f a c o urt o f first instanc e is b ased o n determ inatio ns o f two issues, either o f which standing independently wo uld b e suffic ient to suppo rt the result, the judgm ent is no t c o nc lusive with respec t to either issue standing alo ne.” W e

8 As we noted supra , the money had and r ecei v ed fin dings may match the elements of a § 523(a)(6) claim . To the extent they do, Delannoy’s ar gument her e i s utter ly lacking. 19disagree fo r a numb er o f reaso ns.

First, it is no t c lear that C alifo rnia c o urts fo llo wC o m m ent I
. S ee F lying J, Inc. v. Pista cchio, N o . C V-F-03-6706 O W W/ GSA, 2008 WL 906396, at *42 (E.D. C a l. Mar. 31, 2008), a ff’d , 351 F. A p p’x. 236 (9th C ir. 2009) (“Independent research reveals no repo rted C alifo rnia dec isio n discu ssing
o r applying c o m m ent i t o Sec tio n 27.”); Z evnik v. S uper. C t. , 159 C al. A pp. 4th 76, 83 (2008) (“We have fo und no C alifo rnia o pinio n o n po int dated after the R estatem ent Sec o nd.”). In fac t, when given the o ppo rtunity to
c larify whether C a lifo rnia fo llo w s C o m m entI , the Suprem e C o u rt o f C alifo rnia expressly “c autio n[ed]... that [it takes] no po s itio n o n the signific anc e o f an independently suffic ient alternative gro u nd reached b y the trial c o urt and no tchallenged o n appeal.” S a m a ra v. Ma ta r , 5 C al. 5th 322, 337 (2018). It did so after c o m m enting that “[c ]o u rts have understo o d the nec essarily dec ided pro ng to require o nly that the issue no t have b een entirely unnec essary tothe judgm ent in the initial pro c eeding— leaving
ro o mfo r a dec isio n b ased o n two gro unds to b e prec lusive as tob o th.” Id. at 327 (internal quo tatio n m a rks and c itatio n o m itted). Sec o nd, b efo re the R estatem ent was ado pted, C alifo rnia c o u rts fo llo wed a different rule set fo rth in C o m m ent n t o R estatem ent (First) o f Judgm ents § 68 (A m . Law Inst. 1942), whic h pro vided that issue prec lusio n
c o u ld b ar re-litigatio n o f an issue when a judgm ent is b ased o n alternative gro unds. S ee, e.g., Eva ns v. H o rto n , 115 C al. A p p. 2d 281 (1953).

20Third, even if C a lifo rnia c o urts emb rac e C o m m ent I , o ne o f its ratio nales is that “a determ inatio n in the alternative m ay no t have b een as
c arefully o r rigo r o usly c o nsidered as it wo uld have if it had b een nec essary to the result, and in that sense it has so m e o f the c harac teristic s o f dic ta.” S ee C o m m ent I

, illus. 15. It do es no t nec essarily address a scenario where
o ne set o f fac ts suppo rts liab ility under m ultiple c laim s . Here, the state
c o u rt fo und a unitary set o f fac ts that suppo r ted two c laim s, each prem ised
o n Delanno y’s takings do ne with fraud and intentio nal m alic e. Thus, the Judgm ent sho uld b e given prec lusive effec teven if C alifo rnia c o urts
emb r ac e C o m m entI
. Fo urth, o ne o f C o m m entI’s ratio nales is that “a determ inatio n in the alternative m a y no t have b een as c arefully o r rigo ro usly c o nsidered as it
wo uld have if it had b een nec essary to the result, and in that sense it has
so m e o f the c harac teristic s o f dic ta.” C o m m ent I . A nd it ac kno wledges that “there m ay b e c auses where” alternative gro unds m ay b e given prec lusive effec t “b ec ause o f the fullness with which the issue was litigated and dec ided in the first ac tio n.” Id. Such is the c ase here b ec ause the two c laim s relied o n identic al fac tual predic ates. Thus, Delanno y had inc entive and
o ppo rtunity to fully litigate the issues at trial. E . T he is s ues were dec ided on the m erits

. Delanno y c o ntends that the b ankruptcy c o urt erred in c o nc luding that the Judgm ent was final and o n the m erits b ec ause it “evaded appellate

21review” when W o o dlawn purchased his A ppeal Rights to dism iss the State

C o urt A ppeal. He relies o n a C alifo rnia Suprem e C o urt dec isio n, S a m a ra, 5 C al. 5th 322. But S a m a ra pro vides no b a sis fo r reversal. In S a m a ra, the c o urt held that when a trial c o urt has ruled against a party o n alternative gro unds and an appellate c o urt affirm s the judgm ent
o n o ne gro und witho ut reviewing the m erits o f the alternative gro und, the judgm ent do es no t have prec lusive effec t in a sub sequent ac tio n that is b ased o n the unreviewed gro und. In that situatio n, the “prec lusive effec t o f the judgm ent sho uld b e evaluated as tho ugh the trial c o urt had no t relied
o n the unreviewed gro und.” Id. at 326. Delanno y wishes us toc o nc lude fro m S a m a ra that whenever an appellate c o urt do es no t hear and dec ide the m erits o f a deb to r’s appeal o f a judgm ent b ased o n alternative gro unds, the judgm ent is no t final and o n the m erits fo r issue prec lusio n purpo ses. But that is no t the ho lding in S a m a ra . A ltho ugh the pro c edural setting in the present c ase m aterially diverges fro mthe situatio n in S a m a ra, the c o urt’s ratio nale is instruc tive: [t]he availab ility o f a direc t appeal reflec ts a sensib le determ inatio n that the pro c ess culm inating in a trial c o u rt’s disputed dec isio n is no t suffic ient to reso lve litigatio n c o nc lusively. O

f co urse, alitiga nt’s a bility tosecure appella te review m ay be wa ived o r fo rfeited , as when a litigant fails tofile a tim ely no tic e o f appeal o rfails to m ake an objec tio n in the trial c o urt. But when a litigant pro perly seeks appellate review o f a gro und underlying a trial c o u rt’s determ inatio n, the fo rtuity that the judgm ent m ay b e sustained o n so m e o ther gro und sho uld no t
22imb ue the challenged gro und with final and c o nc lusive effec t
.

The challenged gro und is no m o re reliab le— no m o r e deserving o f finality— m erely b ec ause it need no t b e evaluated to reso lve the appeal. Id. at 333 (em phasis added). Delanno y tim ely appealed the Judgm ent, objec ted to the Trustee’s sale o f his A ppeal Rights to W o o dlawn, and so ught ab ando nm ent o f the A ppeal Rights to himso that he c o uld c o ntinue the State C o urt A p peal. In that regard, he fac ially do es no t appear to have waived, fo r feited, o r untim ely so u ght to enfo rc e his A ppeal Rights. But his effo rts c am e to o late b ec ause he set the wheels in m o tio n fo r the Trustee to sell his A ppeal Rights b y filing a c hapter 7 c ase b efo re c o m pleting his State C o urt A ppeal. His prepetitio n A p p eal Rights nec essarily b ec am e pro perty o f his b ankruptcy estate subjec t to the Trustee’s exc lusive adm inistratio n, which
m ay (and did) inc lude a sale o f the A ppeal Rights to Delanno y’s adversary under § 363 and R

ule 9019. S ee D ela nno y I , 2018 WL 4190874, at *7. In that regard, his b ankruptcy filing was the func tio nal equivalent o f a relinquishm ent o f his A ppeal Rights. Thus, we c o nc lude that the fac t that the state appellate c o urt did no t hear and dec ide the m erits o f his appeal do es no t m ilitate against the b a nkruptc y c o urt’s applic atio n o f issue prec lusio n b ec ause he cho se to file a chapter 7 petitio n and thereb y
vo luntarily relinquished to the chapter 7 trustee the right to pursue, o r no t pursue, the appeal.
23F. Priv ity exis ts .

Delanno y finally argues that issue prec lusio n was no t availab le b ec ause privity was lacking. “Privity exists where the party against who m
c o llateral esto ppel is asserted was a party tothe prio r adjudic atio n where the issue to b e esto pped was finally dec ided.” Ayers v. City o f R ichm o nd, 895 F.2d 1267, 1271 (9th Cir. 1990). In addition, privity refers to a m utua l o r successive rela tio nship to the sa m erights o f property , o r to such an identific atio n in interest o f o ne perso n with ano ther as to represent the sam e legal rights and, m o re rec ently, to a relatio nship b etween the party to b e esto pped and the unsuc c essful party in the prio rlitigatio n which is “suffic iently c lo se” soas tojustify applic atio n o f the do c trine o f c o llateral esto ppel. This requirem ent o f identity o f parties o r privity is a requirem ent o f due pro c ess o f law. Even if these thresho ld requirem ents are satisfied, the do c trine will no tb e applied if such applic atio n wo uld no t serve its underlying fundam ental princ iples. The determ inatio n whether a party is in privity with ano ther fo r purpo ses o f c o llateral esto ppel is a po lic y dec isio n. Privity is essentia l ly asho r tha nd sta tem ent tha t co lla tera l estoppel is to be applied in agiven ca s e a ssum ing the o ther requirem ents a re sa tisfied; there is no universa lly applica ble definitio n o

f privity. In the fina l a na lysis, the determ ina tio n o f privity depends upo n the fa irness o f binding appella nt with the result o bta ined in ea rlier pro ceedings in which it did no t pa rticipa te
. Whether so m eo ne is in privity with the ac tual parties requires c lo se exam inatio n o f the c irc u m stanc es o f each c ase. R o dgers v. S a rgent Co ntro ls &Aero spa ce, 136 C al. A pp. 4th 82, 90-91 (2006), a s
m o d ified (Feb . 7, 2006) (em phasis added) (internal quo tatio n m arks and 24c itatio ns o m itted).

Privity exists here. Delanno y was a party tothe state c o urt ac tio n at all tim es leading up to entry o f the Judgm ent. While he was no t a party when the Judgm ent b ec am e final, he vo luntarily relinquished his A ppeal Rights to the Trustee upo n his b ankruptcy filing. This was tantam o unt to an assignm ent o f his interests. He c ites to no c a se law that persuades us that his surrender o f his A ppeal Rights to a third party after partic ipating in the c a se as a party until entry o f Judgm ent destro yed privity. CONCL U SION Based o n the fo rego ing, we A FFIRM.

25