Court Opinion

ID: 4125666
Source: CourtListenerOpinion
Date Created: 2017-02-13 21:01:07.533218+00
Date Added: 2024-06-11T07:46:25.279686
License: Public Domain

FILED
                                 NOT FOR PUBLICATION
                                                                            FEB 13 2017
                       UNITED STATES COURT OF APPEALS                   MOLLY C. DWYER, CLERK
                                                                         U.S. COURT OF APPEALS

                                 FOR THE NINTH CIRCUIT

In re: HAI LECONG,                                   No.   15-60039

               Debtor.                               BAP No. 14-1286

------------------------------
                                                     MEMORANDUM*
HAI LECONG,

               Appellant,

 v.

ASHLEY TRAN,

               Appellee.

                           Appeal from the Ninth Circuit
                            Bankruptcy Appellate Panel
              Kirscher, Kurtz, and Dunn, Bankruptcy Judges, Presiding

                                 Submitted February 7, 2017**
                                    Pasadena, California

Before: GRABER, BYBEE, and CHRISTEN, Circuit Judges.

      *
             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).
      Hai Lecong appeals the grant of summary judgment in favor of Ashley Tran,

entered by the bankruptcy court and upheld by the Bankruptcy Appellate Panel

(BAP), which held that the debt was nondischargeable under 11 U.S.C.

§ 523(a)(2)(A). We affirm.

      We review de novo a bankruptcy court’s grant of summary judgment.

Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1221–22 (9th Cir. 2010). We

also review de novo a bankruptcy court’s determination that issue preclusion is

available. Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006). If issue preclusion

is available, the decision to apply it is reviewed for abuse of discretion. Id.

      The doctrine of issue preclusion applies to dischargeability proceedings

pursuant to § 523(a). Grogan v. Garner, 498 U.S. 279, 284 n.11 (1991). Issue

preclusion, or collateral estoppel, bars relitigation of factual issues that have been

adjudicated in a prior action. Under the principles of “full faith and credit,” 28

U.S.C. § 1738, federal courts give prior state-court judgments the same preclusive

effect as the courts of the state from which the judgment derived. Cal-Micro, Inc.

v. Cantrell (In re Cantrell), 329 F.3d 1119, 1123 (9th Cir. 2003). Therefore, we

apply California’s collateral-estoppel principles.

      Under California law, the party asserting issue preclusion bears the burden

of establishing five threshold requirements:

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      (1) “the issue sought to be precluded from relitigation must be identical to
      that decided in a former proceeding”;

      (2) “this issue must have been actually litigated in the former proceeding”;

      (3) “it must have been necessarily decided in the former proceeding”;

      (4) “the decision in the former proceeding must be final and on the merits”;
      and

      (5) “the party against whom preclusion is sought must be the same as, or in
      privity with, the party to the former proceeding.”

Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001) (quoting

Lucido v. Superior Court, 795 P.2d 1223, 1225 (Cal. 1990) (in bank)).

Additionally, imposition of issue preclusion must be fair and consistent with sound

public policy. Id. These public policy considerations include “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.

      We disagree with Lecong’s argument that the first three requirements of

issue preclusion are not met in this case. Section 523(a)(2)(A) of the Bankruptcy

Code excepts from discharge any debt for money, property, services, or credit

obtained by “false pretenses, a false representation, or actual fraud.” In the Ninth

Circuit, to prove actual fraud under § 523(a)(2)(A), a creditor must show by a

preponderance of the evidence five elements:

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      (1) the debtor made . . . representations;

      (2) that at the time he knew they were false;

      (3) that he made them with the intention and purpose of deceiving the
      creditor;

      (4) that the creditor relied on such representations; [and]

      (5) that the creditor sustained the alleged loss and damage as the
      proximate result of the misrepresentations having been made.

In re Sabban, 600 F.3d at 1222 (alterations in original) (quoting Am. Express

Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th

Cir. 1996)). These requirements track the elements of common-law fraud. In re

Hashemi, 104 F.3d at 1125; Citibank (S. Dak.), N.A. v. Eashai (In re Eashai), 87

F.3d 1082, 1087 (9th Cir. 1996).

      In California, an action for actual fraud requires a plaintiff to show:

      (1) a misrepresentation (false representation, concealment, or
      nondisclosure);

      (2) knowledge of falsity;

      (3) intent to defraud, i.e., to induce reliance;

      (4) justifiable reliance; and

      (5) resulting damage.

Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 917 (Cal. 1997).

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      To begin, the issues are “identical” because the § 523(a)(2)(A) actual fraud

claim involves “identical factual allegations” as were at stake in Lecong’s state

court fraud trial. Lucido, 795 P.2d at 1225. The elements required to find actual

fraud in California are the same as the elements of actual fraud under

§ 523(a)(2)(A). And the jury’s special verdict found Lecong’s actions had satisfied

each of California’s elements of actual fraud.

      The jury verdict also affirms that these questions were actually litigated and

necessarily decided. An issue is “actually litigated” when both parties “presented

evidence and witnesses in support of their positions, and . . . had the opportunity to

present full cases.” Lucido, 795 P.2d at 1225. Here, both parties presented

evidence and argued the merits of the fraud claim. To conclude that an issue was

“necessarily decided,” California “courts have previously required only that the

issue not have been ‘entirely unnecessary’” to the judgment in the initial

proceeding. Id. at 1226. In reaching the verdict in this case, the question of fraud

was not “entirely unnecessary” in the initial proceeding. No public policy factors

weigh against application of the doctrine. Therefore, Tran has met the burden of

establishing the threshold requirements of issue preclusion. The bankruptcy court

and the BAP did not abuse their discretion in applying the doctrine.

      AFFIRMED.

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