NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: PHILLIP MICHAEL SPENCER, 

Debtor, 

------------------------------

NEIL F. CAMPBELL, 

Appellant, 

 v. 

PHILLIP MICHAEL SPENCER; MARK S. 

BUCKMAN, Esquire, 

Appellees.

No. 17-60065

BAP Case No. SC-16-1253-FBJu

BK Nos. 3:14-bk-09514-MM, 

3:14-bk-08384-MM

MEMORANDUM*

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Jury, Faris, and Brand, Bankruptcy Judges, Presiding

Submitted February 8, 2019

**

Pasadena, California

Before: WARDLAW and BEA, Circuit Judges, and MURPHY,*** District Judge.

 

* 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).

*** The Honorable Stephen J. Murphy, III, United States District Judge 

for the Eastern District of Michigan, sitting by designation.

FILED

FEB 12 2019

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2 

Neil Campbell appeals the Bankruptcy Appellate Panel’s (“BAP”) 

affirmance of the bankruptcy court’s finding that the debt Phillip1 Spencer and 

Mark Buckman owed to him was dischargeable in bankruptcy. The bankruptcy 

court determined the debt was dischargeable because Spencer and Buckman’s 

reliance on the advice of their counsel precluded a finding of the requisite intent 

under 11 U.S.C. § 523(a)(4). We have jurisdiction under 28 U.S.C. § 158(d)(1).

We affirm.

We review decisions of the BAP de novo. In re Straightline Invs., Inc., 525 

F.3d 870, 876 (9th Cir. 2008). We independently review the bankruptcy court’s 

rulings on appeal from the BAP. In re Khan, 846 F.3d 1058, 1062 (9th Cir. 2017) 

(citation omitted). We review questions of law and mixed questions of fact and 

law—such as the dischargeability of a debt—de novo. Miller v. United States, 363 

F.3d 999, 1004 (9th Cir. 2004). We review factual findings for clear error, which 

means we “accept findings of fact made by the bankruptcy court unless [those] 

findings leave the definite and firm conviction that a mistake has been committed 

by the bankruptcy judge.” In re Khan, 846 F.3d at 1063 (alteration in original) 

(citation omitted). Finally, we review a bankruptcy court’s decision to apply issue 

preclusion for abuse of discretion. Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 

2006).

 

1 The record suggests that Spencer’s first name is spelled “Philip.”
3 

During bankruptcy proceedings, a debtor cannot discharge a debt that arises 

from “fraud or defalcation while [the debtor acted] in a fiduciary capacity.” 11 

U.S.C. § 523(a)(4). To prove defalcation, a creditor must establish a “culpable state 

of mind . . . involving knowledge of, or gross recklessness in respect to, the 

improper nature of the relevant fiduciary behavior.” Bullock v. BankChampaign, 

N.A., 569 U.S. 267, 269 (2013). Conduct satisfying this state-of-mind requirement 

includes bad faith, moral turpitude, other immoral conduct, or an intentional 

wrong—defined as “conduct that the fiduciary knows is improper” or when the 

fiduciary “consciously disregards (or is willfully blind to) a substantial and 

unjustifiable risk that his conduct will . . . violate a fiduciary duty.” Id. at 273–74 

(internal quotation marks omitted) (citation omitted).

First, the bankruptcy court did not abuse its discretion by rejecting the 

applicability of issue preclusion as to and conducting a trial on the question of 

Spencer and Buckman’s intent.

2 The bankruptcy court properly determined that the 

arbitrator’s findings regarding intent were not sufficiently clear.

In his fiduciary-duty analysis, the arbitrator found that Spencer and 

Buckman’s actions “were done purposefully (and therefore willfully),” “were 

harmful to [Campbell],” and were “designed to deny him the benefits of 

ownership.” In his constructive fraud analysis, however, the arbitrator determined 

 

2

Issue preclusion was available, and no party contends otherwise.
4 

that the same conduct lacked an “intent to deceive” and betrayed “more of a simple 

ignorance of and perhaps a cavalier attitude toward the formalities of business 

organization and governance.”

The bankruptcy court’s “reasonable doubts” about the arbitrator’s seemingly 

contradictory findings precluded application of issue preclusion. See In re 

Reynoso, 477 F.3d 1117, 1123 (9th Cir. 2007). The bankruptcy court’s application 

of the legal standard was not “illogical, implausible, or without support in 

inferences that may be drawn from the facts in the record.” United States v. 

Hinkson, 585 F.3d 1247, 1262–63 (9th Cir. 2009).

Second, the bankruptcy court’s factual findings do not leave us with the 

“definite and firm conviction that a mistake has been committed.” In re Khan, 846 

F.3d at 1063. The bankruptcy court detailed the testimony provided at trial. In 

particular, the bankruptcy court explained that it found the testimony of Spencer, 

Buckman, Paul Thomas (Spencer and Buckman’s attorney), Patricia Wissehr, Ken 

Bobadilla, and Jeanne Goddard (Spencer and Buckman’s accountant), more

credible than Campbell’s testimony. When considering the trial testimony, the 

undisputed facts, and the arbitrator’s findings, no factual error committed by the 

bankruptcy court was clear.

AFFIRMED.