NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: RICHARD YIN-CHING HOUNG, 

AKA Richard Houng,

 Debtor,

______________________________

RICHARD YIN-CHING HOUNG,

 Appellant,

 v.

TATUNG COMPANY, LTD, a Taiwan 

limited company,

 Appellee.

No. 13-56656

D.C. No. 8:12-cv-01341-MMM

MEMORANDUM*

Appeal from the United States District Court

for the Central District of California

Margaret M. Morrow, District Judge, Presiding

Argued and Submitted November 3, 2015

Pasadena, California

Before: SCHROEDER, PREGERSON, and FRIEDLAND, Circuit Judges.

Richard Houng appeals the district court’s affirmance of the bankruptcy 

 

* This disposition is not appropriate for publication and is not precedent 

except as provided by 9th Cir. R. 36-3.

FILED

JAN 11 2016

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2

court’s holding that his debt to Tatung Company, Ltd. (“Tatung”) is 

nondischargeable under 11 U.S.C. § 523(a)(4). Specifically, Houng argues that 

the fiduciary duty that arises from California’s common law trust fund doctrine—

which the bankruptcy court, pursuant to preclusive findings1 made by an arbitrator 

in a separate proceeding, found Houng had violated—does not establish a 

“fiduciary” relationship within the meaning of § 523(a)(4) and thus is insufficient 

to trigger nondischargeability. We disagree with Houng and affirm.2

Section 523(a)(4) “provides that debts that arise from ‘fraud or defalcation 

while [the debtor was] acting in a fiduciary capacity, embezzlement or larceny,’ are 

nondischargeable.” Ragsdale v. Haller, 780 F.2d 794, 795-96 (9th Cir. 1986) 

(alteration in original) (quoting 11 U.S.C. § 523(a)(4)).3 Whether someone is a

 

1 Houng argues that the bankruptcy court erred in giving preclusive effect to the 

arbitrator’s findings regarding breach of fiduciary duty. At oral argument, 

Houng’s counsel acknowledged that Houng’s briefing was “deficient” for failing to 

adequately cite to the record and abandoned Houng’s challenge to the preclusion 

ruling because of that deficiency. Counsel later in oral argument suggested a 

desire to withdraw the abandonment, but never offered to supplement the excerpts 

of record or briefing. We conclude that, whether abandoned or not, Houng’s 

inadequately supported issue preclusion arguments fail. See First Card v. Hunt 

(In re Hunt), 238 F.3d 1098, 1105 (9th Cir. 2001).

2 Because we affirm on § 523(a)(4) grounds, we need not address Tatung’s 

alternative bases for affirmance.

3

“Defalcation” is defined as the “misappropriation of trust funds or money held in 

any fiduciary capacity; [or] [the] failure to properly account for such funds.” 

Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1186 (9th Cir. 1996) (second alteration 
3

“fiduciary” for purposes of § 523(a)(4) is a question of federal law. Id. at 796. 

We have “adopted a narrow definition of ‘fiduciary’ for purposes of § 523(a)(4)” 

as a type of relationship “arising from an express or technical trust that was 

imposed before and without reference to the wrongdoing that caused the debt.” 

Cal-Micro, Inc. v. Cantrell (In re Cantrell), 329 F.3d 1119, 1125 (9th Cir. 2003)

(quoting Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1185 (9th Cir. 1996)). 

Although the definition of “fiduciary” is a matter of federal law, “state law is to be 

consulted to determine when a trust in this strict sense exists.” Ragsdale, 780 

F.2d at 796. If state law does not “clearly and expressly impose trust-like 

obligations on a party,” courts “will not assume that such duties exist and will not 

find that there was a fiduciary relationship.” 4 Collier on Bankruptcy, ¶ 523.10 

(Alan N. Resnick & Henry J. Sommer eds., 16th ed.).

California courts adhere to the “trust fund doctrine,” pursuant to which “all 

of the assets of a corporation, immediately upon becoming insolvent, become a 

trust fund for the benefit of all [of the corporation’s] creditors[].”

4

 Berg & Berg 

Enter., LLC v. Boyle, 100 Cal. Rptr. 3d 875, 893 (Cal. Ct. App. 2009). In Berg, 

 

in original) (quoting Black’s Law Dictionary 417 (6th ed. 1990)). Houng does not 

dispute that the arbitrator’s factual findings satisfy the defalcation element.

4 Consistent with the choice of law clause in their Product Supply Agreement, the 

parties agree that California law is to be consulted to determine whether a trust was 

created when Westinghouse became insolvent. 
4

the court held that the duties directors owe to creditors upon insolvency are 

generally limited to “avoidance of actions that divert, dissipate, or unduly risk 

corporate assets that might otherwise be used to pay creditors[’] claims,” by 

“divert[ing] assets of the corporation for the benefit of insiders or preferred 

creditors.” Id. at 893-94.

5

We agree with Tatung that the duties created by the trust fund doctrine 

satisfy the criteria for a “fiduciary” relationship for purposes of 

nondischargeability under § 523(a)(4). The trust fund doctrine “clearly and 

expressly impose[s] trust-like obligations” on the controllers of an insolvent entity. 

4 Collier on Bankruptcy, ¶ 523.10. Because the duties arise at insolvency, see 

Berg, 100 Cal. Rptr. 3d at 893, and require the avoidance of “divert[ing], 

dissipat[ing], or unduly risk[ing] corporate assets,” id. at 894, the fiduciary 

relationship exists “prior to any wrongdoing” and “without reference to [the 

wrong],” as required by § 523(a)(4). Ragsdale, 780 F.2d at 796. This is in 

contrast to a trust “ex maleficio,” i.e., a trust that arises “by operation of law upon 

 

5 The district court considered but rejected the possibility that the trust fund 

doctrine has been preempted by the California Corporations Code. See In re 

Houng, 499 B.R. 751, 767 n.50 (C.D. Cal. 2013) (citing Pac. Scene v. Penasquitos, 

Inc., 758 P.2d 1182 (Cal. 1988) (In Bank) and concluding that, at least for purposes 

of the dischargeability inquiry, the doctrine has not been preempted). Houng has 

waived any argument that the district court erred in this determination by not 

raising the issue on appeal.
5

a wrongful act,” that we have held is outside of § 523(a)(4)’s purview. Blyler v. 

Hemmeter (In re Hemmeter), 242 F.3d 1186, 1189-90 (9th Cir. 2001). 

With regard to whether the trust doctrine creates an “express or technical” 

trust, “[m]ost courts . . . recognize that the ‘technical’ or ‘express’ trust 

requirement [for nondischargeability] is not limited to trusts that arise by virtue of 

a formal trust agreement, but includes relationships in which trust-type obligations 

are imposed pursuant to statute or common law.” LSP Inv. P’ship v. Bennett (In 

re Bennett), 989 F.2d 779, 784-85 (5th Cir. 1993); see also, e.g., Lovell v. Stanifer 

(In re Stanifer), 236 B.R. 709, 714 (BAP 9th Cir. 1999). Indeed, decades ago our 

court recognized that qualifying as a “fiduciary” for nondischargeability purposes 

does not require formalistically satisfying the technical requirements of specific 

categories of trusts. Runnion v. Pedrazzini (In re Pedrazzini), 644 F.2d 756, 758 

n.2 (9th Cir. 1981). Instead, in analyzing whether certain California statutory law 

could satisfy the precursor to § 523(a)(4), we held that “[t]he precise manner in 

which a trust is created . . . is of little importance. Rather, the focus should be on 

whether true fiduciary responsibilities have been imposed.” Id. We held that the 

“core requirements” for determining whether the requisite “trust-like obligations” 

are imposed, “are that the relationship exhibit characteristics of the traditional trust 

relationship, and that the fiduciary duties be created before the act of wrongdoing 

and not as a result of the act of wrongdoing.” Id. at 758-59. We have continued 
6

to apply these same standards to determine whether a trust is sufficient to create a 

“fiduciary” relationship within the meaning of § 523(a)(4). See In re Hemmeter, 

242 F.3d at 1189-90; Ragsale, 780 F.2d at 796.

Accordingly, in more recent cases, we have looked to state common law in

applying the trust requirement of § 523(a)(4), without strict regard to whether the 

trust created by common law was “express” or “technical.” See Ragsdale, 780 

F.2d at 797; In re Lewis, 97 F.3d at 1186; Lewis v. Short (In re Short), 818 F.2d 

693, 695 (9th Cir. 1987). Here, because California’s common law trust fund 

doctrine imposes “true fiduciary responsibilities” prior to “the act of wrongdoing 

and not as a result of the act of wrongdoing,” In re Pedrazzini, 644 F.2d at 758, 

758 n.2, the “express or technical” trust requirement for nondischargeability is 

satisfied. 

Our recent decision in Double Bogey, L.P. v. Enea, 794 F.3d 1047 (9th Cir. 

2015), is not to the contrary. Although we suggested in dicta in Double Bogey

that “[c]ommon-law doctrines . . . rarely impose the trust-like obligations sufficient 

to create a fiduciary relationship under Section 523(a)(4),” id. at 1051, we did not 

foreclose the possibility of common law doctrines from ever satisfying § 523(a)(4). 

To the extent that Double Bogey could be read to indicate that common law 

doctrines must heighten preexisting statutory duties in order to satisfy § 523(a)(4), 

see id., we do not interpret our discussion there as creating such a general 
7

requirement. Although the cases cited in Double Bogey—Ragsdale, In re Lewis, 

and In re Short—all referenced state statutes, each of those cases located the 

necessary trust relationship in case law, not in statutory law. Those cases all 

arrived at their holdings that a § 523(a)(4) trust obligation existed in spite of the 

lack of statutory law creating the necessary fiduciary relationship—basing their 

determinations instead on the state common law of partnership. See, e.g., 

Ragsdale, 780 F.2d at 796 (rejecting the argument that California statutes created a 

trust sufficient for § 523(a)(4), but then finding § 523(a)(4) satisfied because 

“California courts . . . have raised the duties of partners beyond those required by 

the literal wording of [the statute]”).6 These cases give no reason, and Double 

Bogey suggests none, for tethering the meaning of “fiduciary” under § 523(a)(4) to 

state statutory law that itself cannot satisfy that provision’s requirements. We 

therefore read the language from Double Bogey as saying nothing more than cases 

like In re Pedrazzini, Ragsdale, and In re Hemmeter have long held—that for a 

fiduciary relationship to satisfy § 523(a)(4), it must exhibit characteristics of a 

 

6 Although In re Short stated that “the Washington statute and case law make clear 

that Short was a fiduciary within the meaning of section 523(a)(4),” 818 F.2d at 

695, the Washington statute was “identical” to the California statute at issue in 

Ragsdale—which we found to be a trust ex maleficio and thus outside of § 

523(a)(4)’s purview. Ragsdale, 780 F.2d at 796. As in Ragsdale, it was only 

state common law that gave rise to the requisite fiduciary relationship in In re 

Short. See 818 F.2d at 695. Thus, whatever statutory duties existed under 

Washington law were insufficient to support our ultimate holding.
8

traditional trust relationship and must arise prior to the wrongdoing at issue. See 

In re Pedrazzini, 644 F.2d at 758-59, 758 n.2; Ragsdale, 780 F.2d at 796; In re 

Hemmeter, 242 F.3d at 1189-90.

Our conclusion in this regard is consistent with the vast majority of prior 

bankruptcy court decisions, which have held that duties created by the trust fund 

doctrine create a fiduciary relationship sufficient to trigger nondischargeability 

under to § 523(a)(4). See, e.g., Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 

28-29 (BAP 9th Cir. 2009); Nahman v. Jacks (In re Jacks), 266 B.R. 728, 737 

(BAP 9th Cir. 2001); Flegel v. Burt & Assocs., P.C. (In re Kallmeyer), 242 B.R. 

492, 496 (BAP 9th Cir. 1999) (addressing Oregon’s parallel trust fund doctrine). 

We have reviewed Houng’s arguments to the contrary and find them 

unpersuasive. 

AFFIRMED.