The Honor able S. Thomas Ande rson, United States District Judge f or the Western D istrict * of Tenne ssee, sitting by

desig nation. NO T R EC OM M EN DE D F OR F UL L- TEX T P UB LIC AT ION F ile Nam e: 10a0222n.06 No. 08-1539 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT
In r e : BR IA N JA M ES LI VI NG STON and JOAN ELI Z

A BE TH LIV I N G STON, De bt or s.

______________________ _ _ _ ____________ BRIAN JAMES LIVINGSTON and JO AN ELIZABETH LIVINGSTON, De fend ant s- App e lla nt s,
v. TRANSNATION TITL E INSURANCE CO., P laintif

f-App ellee.

________________

_ _ _ __________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ON AP P EA L F RO M THE U NI TED STA TES D ISTRIC T C OU RT F OR THE EASTE RN DISTRICT OF M ICHIGAN

OP IN ION

Before: G ILMAN and GIBBONS, Circuit Jud ges; and ANDERSON, DistrictJudge. * JULIA SMITH G IBBO NS, C ircuit Judge. Br ian and Joan L ivingston have appea led the distr ic t c o u rt’ s o r d e r

a f f ir mi n g a d e c is io nb y

th e U n it e d

St a te s B an kr

u p tc y Co u rt f o r th e E a s tern District of Mi chig an gra

nting Transnation Title Insuranc e Co. (“T ransnation”) summary judgme nt in this adversar

y proce eding under 28 U .S.C. § 157(b)(2)(I ). F or the followin g re as o n s, we AF F IRM the de c isi on

of the ba nk ru ptc y c ourt
.No. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-2- I. Th e ba nk ru ptc y c ourt re c ounte d th e un de rl yingfa c ts: The De btors owned two p ro p er t ies, one located in Northville, Michig an and one loc a te d in De arb or n H e ig hts , M ic hig an. Ea c h o f t he m w a s e nc umb e re d b y a fi rs t mor tg a g e . O n M arc h 2 , 1 99 9, the De bto rs g ra nte d a sec on d mo rt g a g e on

bo th proper ties to Standa

rd Fe dera l B ank to se cure a loan in the amount of $166,000. On November

23, 1999, the Debtor s sold the Northville proper ty and convey ed title by wa rr an t y d ee d
. T h e f

i rs tm o rt gage wa s p ai d b u t t h e S t an d ar d Fe d er al Ba n k

m o rt gage was not paid. On A

pril 6, 2000, the Debtors sold the Dea rborn Heig hts pr operty

and conv e y e d ti tl e b y w ar r an ty d e e d
. A g a in , th e f

ir s t m o rtg a g e w a s p a id , b u t t he Standar d F e d e r a l B an k

mo rtg a g e w a s n o t. O nJanu ar y 2 4 , 2 0 0 1 , St an d ar d

F e d era l Ba nk fore closed its second mortg ag e on t h e t wo properties. Tra nsnation issued ow ne r’ s ti tle ins uran ce po lic ie s to the purc ha se rs of bo th o f t he se tw o p ro pe rt ie s. Ul tim a te ly , T ra

ns natio n p a id the Stan da rd F e de ra l B ank

mor tg a g e s and

be c a me su br og a te d to the ri g hts of

the purc ha se rs wi th r e sp e c t to the tw o p ro pe rt ie s. Transnati on Titl e Ins. Co. v

. Livingston ( In re Livingston) , 368 B.R. 610, 612-13 ( Ba nkr. E.D. Mich. 2007). For

at least one of the prope rties, J o an L i v i ng ston held only a dowe r intere st while her hu sb and , B ri an L ivi ng sto n, wa s th e ow ne r. I n g e ne ra l, i t a pp e ars that Joan le ft

fi na nc ia l matte rs to Br ian. At the signing of the sec ond mortg ag e, she me rely signe d documents as dire cted by Standard Fe d e ral B ank’s a g ents. Simi larly , at closing , J oan L ivingston sig ned the r equire d documents without
re a din g the m, b e lie vin g that th e c los inga g e nt w ou ld i nc lud e the se c on d mo rt g a g e s in the tit le information. She also g ave her husband broad power- of-attorney to sign doc uments relea sing he r d o we r i n t er es tan d

t o co n cl u d e a n o t h er

cl o s i n g. The re cord e stablishes the L ivingstons’ a ll e g e d mi s r e p r e s e nta

ti o n s . A s p a

r t o f the re financ ing transac tions, they

provided a

n owner ’s af

fidavit and a ffidavit of no- encumbr ance , both o f which
wer e re quired by

Transnation before it would insure the title to the purcha s er s . The owne r’s aff idavits clear ly

stated: “The undersig ned have no knowledg e of any restric tions other than shownNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-3- of re cord, or

ease ments or claims of e aseme nts ag ainst said proper ty nor does the unde rsig ned have any notice of c laims or disputes as to boun d ar y l i n es o n said proper ty .” Eve n though the second mortg ag es fr om Standard Fe dera l B ank wer e neve r fully satisfied, the a ffidavits of no- encumbr ance de c lare d th a t th e L ivi ng sto ns ’ m or tg a g e s h a d b e e n d isc ha

rg e d. Re ly ing on

the se state me nts , Transnation then issued titl e insuranc e policies to the purc haser s. I n Jun e 20 01 , Tr ans natio n fi le d su it in Way ne County Cir c uit Court a g a ins t the L ivi ng sto ns , alleg ing br eac h of contract, innocent misreprese ntation, fraud, a nd unjust enrichment. In May 2002, Transnation filed a motion for summary dispositi on under Mich. Ct. R. 2116(C)(10) , which the tria l court g rante d. The e x tent of t he trial court’s decision was that it “g rante d Summary Disposition on Pla int if f’ s Co mpl a int

in its e nti re ty .” I t a lso dis mis se d the L ivi ng sto ns ’ c ounte rc la ims and se t f or th the a mou nt of the jud g me nt. Th e L ivi ng sto ns tim e ly a pp e a le d, and

the Mic hig an Co ur

t of Ap pe a ls aff irmed. Transnati on Titl e Ins. Co. v. Livingston , No. 243509, 2004 WL 203075 (Mich. Ct. App. Fe b. 3, 2 0 0 4 )
. T h e M ic h ig anCo u rt o f A p p e a ls n o te d

in c o n s is te n c ie s in

th e tr ia l c o u rt’ s o r d er, specific ally

its gra nt of judgme nt on both f

raud and innoce nt misreprese ntation, but held the err or harmless in lig ht of the evide nce suppor ting the f raud c ount. Id . at *2-4. The L ivingstons did not
se e k le a ve to a

pp e a l to the Mic hig an Su pr e me Court
. On Octobe r 13, 2005, the L ivingstons filed a Chapter 7 bankruptc y

petition. Soon t here afte r, Transnation f

iled an adver sary proce eding seeking a deter mination that the judg ment in its favor wa s non-dischar g eable under 11 U .S.C. § 523(a) (2)( A). At the close of di scover y , Transnation filed for summary judgme nt, arguing that the state court judgme nt w as prec lusive on the issue of fr aud. The bankruptc y

court a g ree d and held that be cause the eleme nts of a state c ommon law fraud cla im areNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-4- virtually identical to those nec es s ary to determine non- discharg eability , the L ivingstons wer e
c oll a te ra lly

e sto pp e d f

ro m r e -l iti g a tin g the iss ue of fr a ud
. Th e L ivi ng sto ns the n tim e ly a pp e a le d to the district court, whic h aff irmed the ba

nkruptcy court opinion in full. II. I n a bankruptcy appea l, we review directly the decision of the ba nkruptcy court. Barlow v. M.J. W aterman & Assocs., Inc. ( In re M .J. W aterman &Assocs., Inc .) , 227 F.3d 604, 607 (6th Cir. 20 00 ). We re vie w the ba

nk ru ptc y c ourt ’s le g a l c on c lus ion s de novo and its findings of fac t for cle ar
err or. Behlkev. Eisen (

In re Be hlke) , 358 F.3d 429, 433 ( 6th Cir. 2004). The L ivingstons arg ue that the bankruptcy court erre d on two fronts. F irst, they contend that their debt should have been f ound discharg eable beca

use Tra nsnation’s alleg ation of fr aud ar ose out of the L ivingstons’ stateme nts reg ardingth ei r financial condition. 11 U.S.C. § 523(a)(2) (A). Second, they

asser t that the bankruptc y

court should not have g iven collater al estoppel eff ect to the state cour t judgment a g ainst them. We disagr ee. A. Statem ents Regar din g F inan cial Condition Under the bankr

uptcy laws, an individual is not discharg ed fr om an y debt in a Chapter

7 proce eding “for

money , proper

ty , . . . or an e x tension, rene wal, or r efina ncing of cr edit to the extent obtained by

–(A) f alse pre tenses, a fa l s e repr esentation, or actua l fraud, othe r than a statement resp ec ting the de btor’s . . . financ ial condition.” 11 U.S.C. § 523(a)( 2)(A) . The “ financ ial
c on dit ion ” e xce pti on

e xemp ts c e rt a in d e bts fr om the no n- dis c ha rg e a bil ity pr ov isi on s of

11 U. S.C. § 523(a) (2)( A). The L ivingstons contend that they are entitled to the protec tion of the “f inancial c ondition”No. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

See, e .g. , Re mb e rt v . A T& T Un iv e rsa l Ca rd Se rv s. , I nc . ( In re Re mb e rt) , 141 F.3d 277, 280- 1 83 (6 th C ir . 1 99 8) (a dd

re ssi ngwh e the r a de bto r mis re pr e se nte d he r a bil ity to p ay

an o bli g a tio n w hil e int e nd ing to d e fr a

ud the c re dit or ); Bank One

, Lexington, N.A. v. W

oolum ( In re W oolum) , 979 F.2d 71, 73 (6th Cir. 1992) (de btor failed to list al l o f his debts or liabiliti es in financ ial statements); BancBoston Mortgage Corp. v. Ledford ( In re Ledford) , 970 F.2d 1556, 1558 (6th Cir. 1992) (de btor obtained a loa

n modification without disclosing enc umbranc es on the c ollatera l). -5- e xce pti on be c a us e the “ c los ingdo c ume nts sig ne d b y [the L ivi ng sto ns c on sti tut e d] st ate me nts respe cting their financ ial condition.” I n support of this positi on , t h ey cite the Michig an Court of Appea ls’ ref

ere nce to “ defe ndants’ unper suasive ar g ument that they wer e uninforme d or mistaken reg ardingtheir own fina

ncial oblig ations.” Although w e have not defined e x haustively the boundar ies of this exception, it i s clea r that the L ivingstons’ stateme nts did not conce rn t heir financial condition. I n the closing documents, the 1 L ivi ng sto ns re pr e se nte d that the y we re un awa re of any oth e r e nc umb ra

nc e s on the re c or d tit le . T he se de c laratio ns did

no t li st the L ivi ng sto ns ’ f ina nc ia l ob lig a tio ns or

do c ume nt t

he ir a bil ity to p ay the ir
cre ditors. They

wer e not statements re spectingtheir “f inancial c ondition.” Moreove r, the L ivingstons’ re liance upon th e M ichig an Court of Appe als’ comment reg ardingtheir “f

inancial obliga t i o n s ” i s m isplaced. That court did not purport to applythe nondischarg eability

provisions of fede ral ban k ru p t cy law. The court’s r efe renc e to “f inancial obligations” applies to the sec ond mortg ag es held by Standard F eder al B ank that wer e not disclosed to Transnation. I n other wor ds, the court wa s not persuade d that the L ivingstons wer e unaw are of the enc umbranc es they

place d upon the prope rties they sold. B. Collater al Estopp el Principles of collate ral e stoppel apply in non-dischar g eability

actions. Se e Ba

yAr e a F ac tor sNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-6- v . Ca lv e rt (

In re Cal v e rt) , 1 05 F .3 d 3 15 , 3 18 -1 9 ( 6th Cir . 1 99 7) ; Spilman v. Harley , 656 F.2d 224, 227 (6th Cir. 1981) (“ T h at C ong ress intende d the bankr uptcy court to dete rmine the fina l result–dischar g eability

or not–does not re quire the ba nkruptcy c o u r t t o r e d e te r

mi n e all the under ly ing fa c ts. ” ). “ I n d e te rm ini ngwh e the r t o a c c or d p re c lus ive e ff e c t to a state -c ourt

jud g men t, we be g in with the fundame ntal principle that ‘judicia l proce eding s [of any court of any state] shall have the
s am e f u l l fa i t h an d

cr ed i ti nev ery

co u rt wi t h i nt h e U n i t edS t at es . . . as t h ey h av e b y l aw o r u s age in the courts of suc h State . . . from which the y are taken.’ ” Rally Hill Productions, Inc. v. Bursac k ( In re Bursack) , 65 F.3d 51, 53 (6th Cir. 1995) (alter ations in or igina l) (quoting 28 U.S.C. § 1738). Thus, “a f eder al cour

t must gi v e t o a s t ate- court judg ment the same pr eclusive e ffe ct as would be g iven that judg ment under the law of the State in which the judgme nt was render ed.” Id . (quoting Migra v. W

arren City Sc h. Dist. Bd. of Educ

. , 4 65 U. S. 7 5, 81 (1 98 4) ); se e als o Ed Sc ho ry & So ns , In c . v . F ra nc is ( In re Fran c is) , 2 26 B .R. 38 5, 38 8 ( B .A .P. 6th Cir . 1 99 8)
. Ac c or din g ly , we loo k to Mic hig an la

w t o d e te rm ine wh e the r M ic hig an c ou rt s w ou ld g ive the state c ourt jud g me nts in t

his
c a se pr e c lus ive e ff

e c t. The Michig an Supreme Court ha s held that “[c]oll ater al estoppel pre cludes re litigation of a n issue in a subsequent, differe nt cause of action betwee n the s ame pa rties wher e the pr ior proce eding
c ulm inate d in

a va lid , f ina l ju dg me nt a

nd the iss ue wa s ( 1) act ual ly li tig a te d, and (2 ) n e c e ssa

ri ly deter mined.” People v . Gates , 452 N.W.2d 627, 630 (Mich. 1990). Michig an cour ts have instructe d that an is sue “must be identical to that deter mined in the prior action” to have bee n actua lly litigated. Amalgamated Transit Union, L ocal 1564, AFL-CIO v. S.E. Mich. Transp. Auth., 473 N.W.2d 249, 254–55 (Mich. 1991). We look beyond the pleading s to consider both the “ fac tual focus” of theNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-7- pr ior pr oc e e din g s and “ wh e the r the pa rt y a g a ins t who m col late ra l est op pe l is a sse rt e d h a s h a d a fu ll and fa ir opportunity

to liti g ate the issue.” Gates , 4 5 2 N. W
. 2 d at 6 3 1 (c i t i n g Blonder-Tongue Labs., In c. v. Univ. of Ill. Found. , 4 0 2 U
. S
. 3 1 3 , 3 2 9 ( 1 9 7 1 ) )
. F o r ani s s u e t o h a v e b e e n“ n e c e ssa ri ly deter mined,” it must have bee n “esse n t i al t o the judg ment.” Id . (citing Restatement (Sec ond) of J udg ments § 27 (1982)). “ Collateral estoppe l applies only wher e the ba sis of the prior judgment ca n be asce rtained clea

rly , definitely , and unequivoc ally .” Id
. The inabili ty of a c ourt to determine the basis for the pr ior judgme nt “ is, by itself, enoug h to pr eclude the defe nse of collater al estoppel.” Id
. Thus , th e ke y qu e sti on s are wh e the r the iss ue of fr a ud wa s de c ide d b y

the state c ourt s c on sis te ntl y with fede ral ba

nkruptcy law and w hether

the issue was ne cessa

ry to their judg ment. B e c a us e fr a ud in t his c a se is d e fi ne d by fe de ra l bankr up tc y law a

nd by state c omm on

law i n st a t e c o u rt , t h e “ a c tu a l l y l i t i g a t e d ” p r o n g o f t h e c o l l a t e r a l e s t o p p e l an a l y s i s r e qu i r e s u s f ir st t o deter mine whether

the state lawcounts adjudicate d by the s tate trial court a nd the Michig an Court of Appe als requir e identica l elements to an a ction under 11 U .S.C. § 523(a)(2) (A). See Jelm v

. Malzeke( In re M alzeke ) , 56 F.3d 64, 1995 W L316787, at *1 (6th Cir. 1995) (Ta ble) (holdingthat the “f raud issue at stake in the ban k ru p tcy proce eding was identica l to that decided in the [Ohio] state cour t proce eding ” for

purposes of 11 U .S.C. § 523(a) (2)( A)). Under 11 U .S.C. § 523(a)(2) (A),
a cr editor must me et the following require ments to demonstrate a n exception to discharg e base d on fra ud: I n order

to except a debt from discharg e under § 523(a) (2)( A), a cr editor must prove the following elements: (1) the debtor obta ined money throug h a mater ial mis re pr e se ntation th a t, at th e tim e , th e de bto r k ne w w a s f

a lse or ma de wi th g ro ss rec klessn e s s a s to it s tr

u th ; ( 2 ) th e d e b to r in te n d e d to d e c e iv e th e c r e d it o r ; ( 3 ) the cre ditor justifiably relied on the false misre prese ntation; and (4) its relianc e wa s theNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-8- pr oximate c a

us e of the los s. In re Re mb e rt , 1 4 1 F. 3 d

at 2 8 0 -8 1 (c i t i n g Longo v. McLaren ( In re McLaren) , 3 F .3 d 9 58 , 9 61 (6 th Cir. 1993) ). The third e lement ar ticulates a subjec tive relianc e standa rd. Id
. at 2 8 1 n . 2 (c i t i n g Fi e ld v. Mans , 516 U.S. 59 (1995))
. To prove intent, the creditor m ust show “ac tual or posi tive fra ud, not
mere ly fra ud implied by

law,” me aning that the debtor must have ac t ed “m al i cious ly and in bad faith.” Id . at 28 1 ( c itatio ns and qu otatio n ma

rk s o mitte d) ; see also Sanderson Farms, In c. v. Ga sb arro , 2 99 F
. Ap p’ x 499 , 5 05 -0 6 ( 6th Cir . 2 00 8) (h old ingthat c oll a te ra l e sto pp e l di d n ot a pp ly wher e the state court’s r

ulin g s r e g a

r d ing f raud w ere “interna lly

inconsistent”). To pr evail, “a cre ditor must prove eac h of these elements by a pre pondera

nce of the evidenc e.” In re Re mb e rt , 141 F.3d at 281. Un de r M ic hig an la w, a c tio na

ble fr a ud re qu ir e s: (1) That defe ndant made a mater ial repr esentation; (2) that it was false ; (3) that whe n [t he def endant] made it he knew that it was false, or made it reckle ssly , without any kn ow le dg e of

its tr uth and a s a po sit ive a sse rt ion ; ( 4) that [ th e defe nd ant] m a de it wi th t he int e nti on

tha t it sh ou ld be a c te d u

po n b y pla int if f; (5 ) t hat pl a int if

f a c te d in relianc e upon it; and (6) that [ plaintiff] thereby suffe red injury
. Hi-W ay Motor Co. v. Int’l Harvester Co. , 247 N.W.2d 813, 816 ( Mich. 1976). “F raud w ill not be presumed but must be prove n by clea r, satisfac tory

and convinc ing e vidence .” Id
. We n o te that bankrupt cy courts in M ichig an have held uniformly that the eleme nts of a fr aud cla im under Michig an law are identical to those nece ssary to determine non- discharg eability under 11 U .S.C. § 523(a) (2)( A). Build i n g

Commc’ns, I

nc. v. R ahaim (

In re Rahaim) , 324 B.R. 29, 36 (B ankr. E.D
. Mich. 2005); Ro bin so n v . Cal le nd e r ( In re Cal le nd

e r) , 212 B.R. 276, 281 (B ankr. W.D. Mich. 1997); Cre sa p v . W ald or f ( In re W ald or f) , 206 B.R. 858, 863 (B ankr. E.D . Mich. 1997).No. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-9- We need not dete rmine, howe ver, a s a matter of law, whe ther the el em en t s o f fraud under Michig an law a

re ide ntical to the hig her fe d er al “g ross rec klessness” standa rd fornondischarg eability

under 11 U .S.C. § 523(a)(2) (A ) b ec au s e, in affir ming the state trial cour

t on the fr a ud c ount, the Mic hig an Co ur t of Ap pe a ls re pe a te dly inv ok e d the L ivi ng sto ns ’ kno wl e dg e of the ir mis re pr e se ntatio ns . T he state c ourt s re lie d on fou r und isp ute d fa c ts in the re c or d th a t c on c lus ive ly establish fra

ud under the bankruptc y -law standard. First, it noted t hat “the r etention and e x penditure of mon ie s b y

de fe nd ants that sh ou ld h a ve be e n u se d to dis c ha rg e the se c on d mo rt g a g e , c ou ple d w ith defe ndants’ unper suasive ar g uments that they wer e uninforme d or mistaken re g ardingtheir financ ial obligations, are suff

icient to establish fra

ud.” Second, the court emphasized J oan L ivingston’s “purpose ful ig noranc e” of the t erms of the documents she was signingas evide nce of fra ud. Third, again emphasizi ng that “she e lected to r emain ig norant,” the cour t found that J oan L ivingston’s “f a il u r e to a f

f ir mati v e ly ta

k e s te p s to ma

k e c e rta in s h e w a s p r o p e r ly in f o r me d r e g ar d ing the d ocuments she wa s signingdo not excuse her f rom liability

. . . particula

rly when she rec eived a monetary benef it.” Finally , the cour

t dismi s s ed J o an L ivingston’s a ssertion that the powe r-of

a tt o r n e y s h e g r an te d to h e r h u s b an d n e g a te d an in f e r e n c e o f f

r a u d o n h e r p art. I t f

ound that the power -of- attorney

was “ a broa d g rant of a

uthority and powe r and w as unambiguo u s i n g ranting authority to do all acts nec essar

y to convey

her inter est in t h e subjec t property . J oan L ivingston reta ined t he monetary

benef it from her attorney -in-fa ct’s exerc ise of author ity and neve r disclaimed his a c tio ns .” Th a t the L ivi ng sto ns sig ne d ow ne r’ s a ff ida vit s a nd a ff ida vit s o f n o- e nc umb ra

nc e on ly bolsters these c onclusions. Thus, on the streng th of the state c ourt ruling s and fa ctual finding s, w e co n cl u d e that theNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

-10- L ivi ng sto ns ’ c on du c t e vin c e d th e “ ba d f a ith ” and “ a c tua l or pos iti ve fr a ud ” re qu ir e d b y

11 U. S.C. § 523(a) (2)( A) for a findingof “g ross rec klessness.” Se e In re Re mb e rt , 1 41 F .3 d at 28 1- 82 . T hu s, the p ar t ies ac tually

litigated the issue of fr aud bef ore the state cour

ts, and the Michig an Court of Appea ls adjudicated it consistently with the standard of “g ross rec klessness” required for a f inding of non-discha

rg eability on g rounds of fr aud under 11 U.S.C. § 523(a)(2) (A). We now turn to whether

the issue of fra

ud was ne cessa

ry to the state cour

ts’ judgme nts. The L ivingstons ar g ue that the finding of fr aud wa s not “clea rly , definitely , and unequivoc ally ” nec essar y to the state court judgme nt be cause the trial court made no finding s of fa ct and the Mic higa n Court of Appeals aff

irmed t he trial court on alternative and indepe ndent g rounds. See G ates , 452 N.W.2d at 631. The Michig an Supreme Court has held: A judg ment aff

irmed on ap p ea l has conc lusive eff ect, but if the a

ppellate c ourt aff irms on gr ounds that d i ff er from those re lied upon by the lower

court, the c on c lus ive ne ss o f t

he jud g me nt a s re

s ju dic ata and as c ollatera l es t o p p el ar e g overne d by

the appe llate dec ision. Thus if the trial court rests its judgment on two g ro un ds , e a c h o f whic h is ind e pe nd e ntl y a de qu a te to s up po rt

it, the jud g me nt i s c on c lus ive a s to bo th; bu t i[f] the appellate court affirms on one ground without passing on the othe r, the second ground is no longer conclusive ly established under the collateral estoppel doctrine. Amalgamated Transit Union , 473 N.W.2d at 255 (emphasis adde d, alteration in orig inal) (c iting 1B Ja me s Wm
. M o o r e et al ., Mo or e ’s F e de ra l Pr a c tic e ¶ 0 .4 16 (2 )) ; se e als o Barber v. Re gents of the Univ. of Mich. , No. 250596, 2 0 0 5 WL 1335132, at *10 (Mich. Ct. App. June 7, 2005) (applying Amalgamated Transit Union ). The ba nkruptcy court prope rl y re l i ed u p on the dec ision of theNo. 08-1539

Livingston v. Trans nation Ti tle Ins. Co.

The ba nkruptcy court improper ly

relied upon Jean A lexande r Cosmetics, Inc. v . L’Oreal 2 USA, Inc

. , 458 F.3d 244 (3d Cir. 2006) , in c onducting its a naly sis. That case dealt with the collate ral estoppel ef

fec t of an a dmin i s t ra t i v e findingby a fe dera l ag ency . Id . at 256-57. B eca use fe dera l courts must apply state law in de termining the collater al estoppel e ffe ct of state c ourt judg ments, the bankruptc y court should have looked to Amalgamated Transit Union for guidanc e. In re Bursac k , 65 F.3d at 53. Howeve r, we rea ch the same conc lusions as the bankruptcy court. -11- Mic hig an Co ur

t of Ap pe a ls i n ap ply

ing c oll a te ra l e sto pp e l. Th e Mic hig an Co ur t of Ap pe a ls c le arl y 2 and unequivoc ally

aff irmed the judg ments of fra ud and bre ach of

contra ct “without passing ” on the other g rounds and he ld t h e i n co n s i s t encie s in the trial court’s de cision to be harmless e rror . See Amalgamated Transit Union , 4 7 3 N
. W. 2 d a t 2 5 5
. T h u s, under A mal gamated Transit Union and Gates , th e ba

nk ru ptc y c ourt pr op e rl y g a ve pr e c lus ive e ff

e c t on an is su e de c ide d b y the state c ourt s that was ne cessa

ry to their judg ment. III . For the fore g oing r easons, we AF F IRM
.