Court Opinion

ID: 4192563
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:01:42.748322+00
Date Added: 2024-06-11T14:40:18.887095
License: Public Domain

FILED
                                                          JUL 14 2017
 1                         NOT FOR PUBLICATION
                                                     SUSAN M. SPRAUL, CLERK
                                                        U.S. BKCY. APP. PANEL
 2                                                      OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.    NC-16-1070-FBJu
                                   )
 6   JAMES PAUL GARRETT,           )      Bk. No.    14-41630
                                   )
 7                  Debtor.        )      Adv. Pro. 14–04090
     ______________________________)
 8                                 )
     NOBANTU ANKOANDA,             )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     JAMES PAUL GARRETT,           )
12                                 )
                    Appellee.      )
13   ______________________________)
14              Submitted Without Argument on June 22, 2017
15                           Filed – July 14, 2017
16            Appeal from the United States Bankruptcy Court
                  for the Northern District of California
17
          Honorable Charles D. Novak, Bankruptcy Judge, Presiding
18
19   Appearances:     David L. Olson on brief for appellant Nobantu
                      Ankoanda; appellee James Paul Garrett, pro se, on
20                    brief.
21
     Before: FARIS, BRAND, and JURY, Bankruptcy Judges.
22
23
24
25
26        *
            This disposition is not appropriate for publication.
27   Although it may be cited for whatever persuasive value it may
     have, see Fed. R. App. P. 32.1, it has no precedential value, see
28   9th Cir. BAP Rule 8024-1.
 1                                  INTRODUCTION
 2          Appellant Nobantu Ankoanda appeals from the bankruptcy
 3   court’s judgment in favor of chapter 71 debtor James Paul Garrett
 4   on her nondischargeability claim.        Ms. Ankoanda failed to make
 5   any reasonable effort to carry her burden of proof under
 6   § 523(a)(2), and she waived any claims under §§ 523(a)(4) and
 7   (6).       Accordingly, we AFFIRM.
 8                               FACTUAL BACKGROUND
 9          Mr. Garrett, an attorney licensed to practice law in
10   California, provided legal services to Ms. Ankoanda regarding
11   trust matters.       Around 2004, Mr. Garrett told Ms. Ankoanda that
12   he needed $100,000 for a down payment to purchase real property
13   located in Oakland, California (the “Oakland Property”).
14          The parties did not document the transaction, and
15   Ms. Ankoanda later gave conflicting testimony about its nature.
16   At one point, she testified that the money was payment for
17   Mr. Garrett’s legal services, but she also said that it was a
18   “temporary loan.”       Whatever the case, Ms. Ankoanda borrowed money
19   against her real property located in East Palo Alto, California
20   and used $100,000 as a down payment to purchase the Oakland
21   Property.       She took title to the Oakland Property.
22          According to Ms. Ankoanda, she was supposed to transfer the
23   Oakland Property to Mr. Garrett’s “business associates,” who
24   would refinance the Oakland Property and use the proceeds to
25
26          1
            Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
     all “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure.

                                          2
 1   repay Ms. Ankoanda’s loan.    The business associates took title to
 2   the Oakland Property, refinanced it, and got $115,000 in cash.
 3   However, Ms. Ankoanda said that she only received $10,000 from
 4   the transaction, while Mr. Garrett kept the remainder.
 5   Mr. Garrett currently resides at the Oakland Property.
 6        In 2007, Ms. Ankoanda sued Mr. Garrett and others in state
 7   court (the “State Court Action”) for fraud.     On the day of trial,
 8   before the trial court received any testimony, Ms. Ankoanda and
 9   Mr. Garrett reached a settlement of the State Court Action.
10   Mr. Garrett agreed to make a lump sum payment of $200,000 to
11   Ms. Ankoanda within a year.   He agreed to sign a promissory note
12   and a deed of trust on the Oakland Property.2
13        Mr. Garrett apparently never signed a promissory note or
14   deed of trust and failed to pay the debt when due.    Ms. Ankoanda
15   filed a second complaint against him in state court to enforce
16   the settlement.
17        On March 16, 2014, Mr. Garrett filed a chapter 7 petition in
18   the bankruptcy court for the Northern District of California.
19   Ms. Ankoanda initiated an adversary proceeding against
20   Mr. Garrett.   In her complaint, she offered a brief recitation of
21   the facts and requested that the court deny dischargeability of
22   his debt to her.   She did not identify any particular statutory
23   authority.
24        On January 20, 2016, the bankruptcy court held a trial on
25   Ms. Ankoanda’s complaint.    Ms. Ankoanda was the only witness; as
26
          2
27          The parties did not reduce the settlement agreement to
     writing. The terms of the settlement agreement were orally
28   placed on the record before the state court.

                                       3
 1   the bankruptcy court noted, her testimony was difficult to
 2   follow.   She failed to identify Mr. Garrett’s so-called “business
 3   associates” and gave conflicting testimony regarding the nature
 4   of her transaction with Mr. Garrett, her contact with the
 5   business associates, and what representations might be
 6   attributable to Mr. Garrett or the business associates.   She did
 7   not introduce any documents evidencing any of the relevant
 8   transactions.   Mr. Garrett did not testify.
 9        At the conclusion of Ms. Ankoanda’s testimony, her counsel
10   stated, in response to the bankruptcy court’s questions, that she
11   relied solely on § 523(a)(2).
12        The court asked both parties to discuss the elements of a
13   § 523(a)(2) claim.   Both parties repeatedly referred to the
14   settlement in the State Court Action, but the court explained
15   that the settlement was not sufficient on its own to prove fraud.
16   When neither Ms. Ankoanda’s counsel nor Mr. Garrett could
17   satisfactorily answer the court’s questions, it commented, “Does
18   anyone understand what a 523(a)(2) claim is here?   I’m beginning
19   to suspect not.”   It questioned why neither party had provided
20   evidence to substantiate their respective positions and stated,
21   “I’m just, again, I guess expressing some frustration here at the
22   level of evidence that’s been presented.”
23        On February 2, 2016, the bankruptcy court issued its
24   Decision After Trial.   It held that Ms. Ankoanda did not meet her
25   burden of proof regarding § 523(a)(2)(A) because she failed to
26   “demonstrate by a preponderance of the evidence exactly what
27   representations Garrett made to her regarding repayment of the
28   loan (in contrast to her testimony regarding the representations

                                      4
 1   made by the ‘business associates’), or the exact nature of
 2   [Mr.] Garrett’s relationship with his alleged ‘business
 3   associates.’”   It found her testimony “inconsistent at best” and
 4   stated that it could not determine if Mr. Garrett should be held
 5   liable for the business associates’ statements.
 6        The bankruptcy court also held that Ms. Ankoanda’s judicial
 7   estoppel argument (contending that Mr. Garrett was estopped from
 8   denying the facts that she alleged in the State Court Action)
 9   failed because Mr. Garrett had consistently denied liability in
10   both the state court and bankruptcy court.    The bankruptcy court
11   also ruled that issue preclusion did not apply.
12        The bankruptcy court issued its judgment in favor of
13   Mr. Garrett on February 2, 2016, and Ms. Ankoanda timely
14   appealed.
15                               JURISDICTION
16        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
17   §§ 1334 and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C.
18   § 158.
19                                  ISSUE
20         Whether the bankruptcy court erred in determining that
21   Mr. Garrett’s obligation to Ms. Ankoanda was not excepted from
22   discharge under § 523(a)(2).
23                           STANDARDS OF REVIEW
24        We review the bankruptcy court’s findings of fact after a
25   trial for clear error and conclusions of law de novo, and apply
26   de novo review to mixed questions of law and fact.   Oney v.
27   Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009),
28   aff’d, 407 F. App’x 176 (9th Cir. 2010) (citation omitted).

                                      5
 1   De novo review requires that we consider a matter anew, as if no
 2   decision had been rendered previously.   United States v.
 3   Silverman, 861 F.2d 571, 576 (9th Cir. 1988).
 4        We review the bankruptcy court’s findings of fact for clear
 5   error.   See Honkanen v. Hopper (In re Honkanen), 446 B.R. 373,
 6   378 (9th Cir. BAP 2011); see also Anastas v. Am. Sav. Bank
 7   (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996) (“A finding
 8   of whether a requisite element of section [ ] 523(a)(2)(A) claim
 9   is present is a factual determination reviewed for clear
10   error.”).   “To be clearly erroneous, a decision must strike us as
11   more than just maybe or probably wrong; it must . . . strike us
12   as wrong with the force of a five-week-old, unrefrigerated dead
13   fish.”   Papio Keno Club, Inc. v. City of Papillion (In re Papio
14   Keno Club, Inc.), 262 F.3d 725, 729 (8th Cir. 2001) (quoting
15   Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228,
16   233 (7th Cir. 1988)); see Anderson v. City of Bessemer City, 470
17   U.S. 564, 573 (1985) (A factual finding is clearly erroneous if,
18   after examining the evidence, the reviewing court “is left with
19   the definite and firm conviction that a mistake has been
20   committed.”).   The bankruptcy court’s choice among multiple
21   plausible views of the evidence cannot be clear error.   United
22   States v. Elliott, 322 F.3d 710, 714 (9th Cir. 2003).
23                               DISCUSSION
24   A.   Ms. Ankoanda failed to carry her burden of proof under
          § 523(a)(2).
25
26        Section 523(a)(2)(A) excepts from discharge any debt for
27   money, property, services, or credit obtained by false pretenses,
28

                                      6
 1   false representations, or actual fraud.3   Ms. Ankoanda argues
 2   that Mr. Garrett’s $200,000 debt is nondischargeable under
 3   § 523(a)(2)(A) because of his allegedly fraudulent statements.
 4   She does not articulate any reversible error.
 5        Ms. Ankoanda did not come close to meeting her burden of
 6   proof at trial.   At most, she proved that Mr. Garrett promised to
 7   pay her $200,000 and to sign a promissory note and deed of trust
 8   but did none of those things.   As the bankruptcy court correctly
 9   observed, she did not prove that Mr. Garrett made any
10   representations to her or that any representations made by the
11   “business associates” were attributable to him.   We also note
12   that she offered no evidence at all, direct or circumstantial,
13   supporting any of the other elements of § 523(a)(2)(A).
14        In sum, there was a complete failure of proof.   The
15   bankruptcy court did not err.
16
17        3
            To establish fraud under § 523(a)(2)(A), the creditor must
     prove each of the following elements by a preponderance of the
18   evidence:
19
          (1) the debtor made . . . representations;
20
          (2) that at the time he knew they were false;
21
          (3) that he made them with the intention and purpose of
22
          deceiving the creditor;
23
          (4) that the creditor relied on such representations;
24        [and]
25        (5) that the creditor sustained the alleged loss and
26        damage as the proximate result of the
          misrepresentations having been made.
27
     Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir.
28   2010) (citations omitted).

                                      7
 1   B.   Ms. Ankoanda cannot rely on judicial estoppel or issue
          preclusion.
 2
 3        Ms. Ankoanda argues that the settlement of the State Court
 4   Action was sufficient to sustain her nondischargeability claim.
 5   She is wrong.
 6        The legal basis for Ms. Ankoanda’s argument was unclear at
 7   best.    In her trial brief, she invoked judicial estoppel; in her
 8   oral argument at trial, she argued for issue preclusion;
 9   elsewhere, she referred to “collateral judicial estoppel,” a
10   doctrine unknown to us.
11        We agree with the bankruptcy court that Ms. Ankoanda argued
12   for issue preclusion, rather than judicial estoppel.    But she
13   could not prevail under either doctrine.
14        The doctrine of judicial estoppel is informed by several
15   factors: (1) whether a party’s later position is clearly
16   inconsistent with its earlier position; (2) whether the party has
17   succeeded in persuading a court to accept that party’s earlier
18   position, so that judicial acceptance of an inconsistent position
19   in a later proceeding would create the perception that either the
20   first or the second court was misled; and (3) whether the party
21   seeking to assert an inconsistent position would derive an unfair
22   advantage or impose an unfair detriment on the opposing party if
23   not estopped.    Ah Quin v. Cty. of Kauai Dep’t of Transp.,
24   733 F.3d 267, 270 (9th Cir. 2013).4   Mr. Garrett never changed
25
26        4
            Federal courts apply federal principles of judicial
27   estoppel, even when based on statements made in other tribunals.
     Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 603
28   (9th Cir. 1996).

                                       8
 1   his position; he always denied liability to Ms. Ankoanda.    His
 2   agreement to pay her in the settlement agreement did not include
 3   an admission of any facts.5   Further, he was not successful in
 4   the State Court Action.   He agreed to pay $200,000 to settle
 5   claims arising out of a $100,000 loan, which is hardly a
 6   favorable outcome for him, and the state court did not determine
 7   that any of his assertions were true.
 8        Similarly, issue preclusion did not apply.    That doctrine
 9   comes into play only when: (1) the issues to be precluded are
10   identical to the ones decided in the prior proceeding; (2) the
11   issues were actually litigated in the prior proceeding; (3) the
12   issues were necessarily decided; (4) the decision was final and
13   on the merits; and (5) the party to be precluded was identical to
14   or in privity with a party to the prior proceeding.    See Lopez v.
15   Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 104
16   (9th Cir. BAP 2007) (applying California law).    Ms. Ankoanda
17   failed to offer evidence that the state court issued a judgment,
18   or that any issues were litigated or decided.
19   C.   Ms. Ankoanda waived her claims of nondischargeability under
          §§ 523(a)(4) and (6) at trial.
20
21        Ms. Ankoanda argues that her claims are not dischargeable
22
23
          5
            Ms. Ankoanda seems to think that, because the parties
24   agreed to settle, all of her allegations in her State Court
     Action complaint are automatically admitted as true. She relies
25   on City of Lodi v. Randtron, 118 Cal. App. 4th 337, 350 n.18
26   (2004), and Rissetto, 94 F.3d at 605, but those cases are
     distinguishable because the parties had expressly stipulated to a
27   fact in a prior case. The transcript of the State Court Action
     hearing to memorialize the settlement does not reveal that
28   Mr. Garrett stipulated to or admitted anything.

                                      9
 1   under §§ 523(a)(4) and (6).    We reject this argument.
 2        Ms. Ankoanda waived these claims at trial.    In response to
 3   the court’s question, her counsel only identified § 523(a)(2) as
 4   the basis for her nondischargeability claim.    Thus, she waived
 5   subsections (a)(4) and (6).    See O’Rourke v. Seaboard Sur. Co.
 6   (In re E.R. Fegert, Inc.), 887 F.2d 955, 957 (9th Cir. 1989)
 7   (“appellate courts will not consider arguments that are not
 8   ‘properly raise[d]’ in the trial courts”).
 9        Even if she had not waived those claims, she did not carry
10   her burden of proof under either subsection.
11        Section § 523(a)(4) excepts from discharge any debt “for
12   fraud or defalcation while acting in a fiduciary capacity,
13   embezzlement, or larceny[.]”    The creditor must establish:
14   “(1) an express trust; (2) that the debt was caused by fraud or
15   defalcation; and (3) that the debtor was a fiduciary to the
16   creditor at the time the debt was created.”    Nahman v. Jacks
17   (In re Jacks), 266 B.R. 728, 735 (9th Cir. BAP 2001) (citation
18   omitted).   Additionally, the creditor must establish a culpable
19   state of mind.   Bullock v. BankChampaign, N.A., 133 S. Ct. 1754,
20   1757 (2013) (holding that defalcation requires a “culpable state
21   of mind . . . involving knowledge of, or gross recklessness in
22   respect to, the improper nature of the relevant fiduciary
23   behavior”).   Ms. Ankoanda did not offer any evidence that
24   Mr. Garrett acted in a “fiduciary capacity” (i.e., as trustee of
25   an express trust) or that he had the mental state required for
26   “fraud or defalcation.”
27        Section 523(a)(6) excepts from discharge debts for “willful
28   and malicious injury” by the debtor to another.    “Willful” means

                                      10
 1   that the debtor entertained “a subjective motive to inflict the
 2   injury or that the debtor believed that injury was substantially
 3   certain to occur as a result of his conduct.”   Petralia v.
 4   Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th Cir. 2001).
 5   Maliciousness is defined as “(1) a wrongful act, (2) done
 6   intentionally, (3) which necessarily causes injury, and (4) done
 7   without just cause or excuse.”   Id. at 1209.   Ms Ankoanda offered
 8   no direct or circumstantial evidence that Mr. Garrett intended to
 9   injure her or that he knew that his actions were substantially
10   certain to injure her.
11                              CONCLUSION
12        The bankruptcy court did not err.   Accordingly, we AFFIRM.
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

                                      11