Court Opinion

ID: 4514570
Source: CourtListenerOpinion
Date Created: 2020-03-11 00:01:42.226739+00
Date Added: 2024-06-11T09:44:10.922787
License: Public Domain

FILED
                                                                             AUG 9 2019
                           NOT FOR PUBLICATION
                                                                        SUSAN M. SPRAUL, CLERK
                                                                           U.S. BKCY. APP. PANEL
                                                                           OF THE NINTH CIRCUIT

             UNITED STATES BANKRUPTCY APPELLATE PANEL
                       OF THE NINTH CIRCUIT

In re:                                               BAP No. CC-19-1019-SKuTa

KAMAL ZEEB,                                          Bk. No. 8:13-bk-14883-CB

                    Debtor.                          Adv. No. 8:13-ap-01301-CB

KAMAL ZEEB,

                    Appellant,

v.                                                    MEMORANDUM*

SAMUEL FARAH,

                    Appellee.

                     Argued and Submitted on July 18, 2019
                            at Pasadena, California

                                Filed – August 9, 2019

               Appeal from the United States Bankruptcy Court
                    for the Central District of California

         *
        This disposition is not appropriate for publication. 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 9th Cir. BAP Rule 8024-1.

                                            1
          Honorable Catherine E. Bauer, Bankruptcy Judge, Presiding

Appearances:        Andrew Edward Smyth argued for appellant; Jeffrey
                    Valentine Weber of Briggs and Alexander, APC argued
                    for appellee.

Before: SPRAKER, KURTZ, and TAYLOR, Bankruptcy Judges.

                                 INTRODUCTION

      This is the third time we have considered an appeal arising from the

above-referenced adversary proceeding. We dismissed chapter 71 debtor

Kamal Zeeb’s first appeal as interlocutory because the summary judgment

on appeal only addressed and disposed of creditor Samuel Farah’s

§ 523(a)(6) claim (“Zeeb I”). After our dismissal, the parties stipulated to

dismiss all other claims for relief set forth in Farah’s complaint. In Zeeb’s

second appeal, we vacated the summary judgment in an unpublished

memorandum decision. Zeeb v. Farah (In re Zeeb), BAP No.

CC–15–1012–FKiKu, 2015 WL 6720934 (9th Cir. BAP Nov. 3, 2015) (“Zeeb

II”). We held in Zeeb II that Farah’s state court judgment did not establish

the willfulness and maliciousness required for non-dischargeability under

      1
        Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.

                                           2
§ 523(a)(6).

      Zeeb now appeals the bankruptcy court’s judgment after trial

excepting the debt he owes to Farah from discharge under § 523(a)(6). The

two arguments Zeeb raises on appeal have no merit. Zeeb first argues that

the state court jury’s award of zero damages on the conversion cause of

action conclusively established that Farah suffered no damages from the

tortious conduct. We disagree. Though the jury awarded Farah no damages

on his conversion claims, it also found that he had proven all the elements

of conversion, including harm. Moreover, the state court ultimately entered

judgment for Farah on his conversion claims. Given the conflict between

the award of no damages on the one hand, and the finding of harm and

entry of judgment on the conversion claims on the other, issue preclusion

did not prevent the bankruptcy court from determining damages in the

nondischargeability action.

      Zeeb’s second argument concerns the sufficiency of the evidence

before the bankruptcy court. He contends that the evidence was

insufficient to support a finding that he willfully injured Farah within the

meaning of § 523(a)(6). Again, we disagree. The trial record, when

combined with the state court jury’s findings regarding Zeeb’s conduct in

misappropriating inventory and cash from Farah’s company, was sufficient

to support the bankruptcy court’s inferences regarding willfulness.

      Accordingly, we AFFIRM.

                                      3
                                   FACTS

      Farah and Zeeb worked together in two businesses: Storm

Distribution, Inc. (“Storm Distribution”) and JSSA Enterprises, Inc.

(“JSSA”). Both businesses concerned the importation and sale of hookahs

and related accessories. Farah managed the sales and accounts, while Zeeb

managed the facilities and employees. Farah claimed Storm Distribution as

his wholly owned business. JSSA was a partnership between Farah, Zeeb,

and Ahmed Shamekh.

      When Farah traveled abroad for a vacation in September 2010, he left

Zeeb in charge of all aspects of Storm Distribution. According to Farah,

while he was traveling Zeeb misappropriated the inventory and cash of

both Storm Distribution and JSSA. Farah sued Zeeb and others in the

Superior Court for Orange County, California. Farah’s first amended

complaint stated thirteen causes of action, but only four of the causes of

action are relevant to this appeal. Farah stated two causes of action for

conversion – one pertaining to Storm Distribution and the other to JSSA –

and two corresponding causes of action for breach of contract. All four of

these causes of action relied on the allegations that Zeeb misappropriated

the assets of Storm Distribution and JSSA as the grounds for relief.

      In May 2013, the state court held a jury trial on Farah’s first amended

complaint. The jury rendered a special verdict that found, in relevant part,

that Farah and Zeeb entered into a contract pursuant to which Zeeb agreed

                                      4
to oversee Storm Distribution. The jury also found that Zeeb breached that

contract, which caused Farah to suffer $330,514.25 in damages. As for the

conversion cause of action pertaining to Storm Distribution, the jury found

that:

1.      Farah had a right to possess Storm Distribution’s inventory and

        funds.

2.      Zeeb intentionally and substantially interfered with Farah’s property

        by taking possession of Storm Distribution’s inventory and funds.

3.      Farah did not consent to Zeeb’s taking possession.

4.      Farah was harmed thereby.

5.      Zeeb’s conduct was a substantial factor in causing Farah’s harm.

6.      As a result of that harm, Farah suffered $0 in damages.

7       Zeeb engaged in the conduct with malice, oppression or fraud.

8.      Farah was entitled to a punitive damages award of $50,000.

        The jury’s breach of contract and conversion findings pertaining to

JSSA were substantially similar to the above-referenced findings, except

that the jury awarded $101,091.45 in compensatory damages for the breach

of contract pertaining to JSSA.

        Zeeb filed his chapter 7 case in June 2013. In August 2013, the

bankruptcy court granted Farah relief from stay to enter judgment in the

state court action. Notwithstanding the jury verdict awarding punitive

damages, the state court entered a minute order striking the jury’s punitive

                                        5
damages awards. The state court reasoned, in part, that the jury had not

awarded Farah any tort damages. As the state court explained:

      The Special Verdict and the evidence do not support an award
      for punitive damages. CC 3294(a) provides for punitive
      damages “In an action for the breach of an obligation not
      arising from contract.” Plaintiff's success on the breach of
      contract action does not support punitive damages. Plaintiff
      must prove compensatory tort damages to support [punitive]
      damages. Additionally, Plaintiff did not introduce evidence of
      defendant's financial condition. See Simon v. San Paolo U.S.
      Holding Co., Inc. (2009) 35 Cal. 4th 1159, 1185. Without this
      evidence the jury cannot calculate a proper award of punitive
      damages.

Zeeb II, 2015 WL 6720934, at *2 (quoting Minute Order, Orange Cnty. Sup.

Ct. Case No. 30-2011-00529564-CU-NP-CJC (Sept. 9, 2013)).

      Because the jury verdict did not award Farah any compensatory tort

damages, the state court’s original judgment entered in September 2013

provided that judgment was not awarded on the conversion causes of

action. The state court originally entered judgment against Farah and in

favor of Zeeb on the conversion claims.

      On September 16, 2013, Farah commenced his adversary proceeding

seeking, among other things, to except the judgment debts from discharge

under § 523(a)(6). Farah also filed a motion in the state court to amend the

underlying judgment to recognize that he had prevailed on the conversion

claims. The state court agreed with Farah. In February 2014, the state court

                                      6
entered a minute order granting Farah’s motion to amend the judgment.

The state court held that Farah was the “prevailing party” on both

conversion causes of action even though the jury verdict and the judgment

awarded him $0 in damages on those causes of action.

     The state court entered its amended judgment in February 2014. The

amended judgment provided in relevant part as follows:

     1. On the cause of action for breach of contract regarding Storm
     Distribution by Samuel Farah against Kamal Zeeb judgment is
     awarded in favor of Samuel Farah against Kamal Zeeb in the
     amount of $330,514.24[.]

     *   *   *

     3. On the cause of action for conversion regarding Storm
     Distribution by Samuel Farah against Kamal Zeeb, including a
     prayer for punitive damages, judgment is awarded in favor of
     Samuel Farah against Kamal Zeeb in the amount of $0.00 in
     compensatory damages and $0.00 in punitive damages.

     4. On the cause of action for breach of contract regarding JSSA
     Enterprises, Inc. by Samuel Farah against Kamal Zeeb and
     against Zeeb Brothers, Inc. judgment is awarded in favor of
     Samuel Farah jointly and severally against Kamal Zeeb and
     against Zeeb Brothers, Inc. in the amount of $101,091.45[.]

     *   *   *

     6. On the cause of action for conversion regarding JSSA
     Enterprises, Inc. by Samuel Farah against Kamal Zeeb and
     against Zeeb Brothers, Inc., including a prayer for punitive

                                     7
      damages, judgment is awarded in favor of Samuel Farah jointly
      and severally against Kamal Zeeb and against Zeeb Brothers,
      Inc. in the amount of $0.00 in compensatory damages and $0.00
      in punitive damages.

      7. Pursuant to the election of remedies, Samuel Farah has
      elected to take the remedies awarded under breach of contract.
      The aggregate judgment award to Samuel Farah, therefore, is
      $431.605.69, of which the entire amount is enforceable against
      Kamal Zeeb and of which $10l,091.45 is enforceable against
      Zeeb Brothers, Inc.

      In May 2014, Farah moved for summary judgment in the

nondischargeability action. He argued that the state court judgment

conclusively established that Zeeb had willfully and maliciously injured

him within the meaning of § 523(a)(6). The bankruptcy court agreed with

Farah and entered summary judgment on his § 523(a)(6) claim for relief. On

appeal, however, we vacated the summary judgment in favor of Farah. We

held that, as a matter of settled Ninth Circuit law, the preclusive effect of

the state court’s conversion judgment did not establish the requisite mental

state for finding a willful injury under § 523(a)(6). We also held that the

conversion judgment did not establish three of the four elements necessary

to establish a malicious injury. As for the effect of the award of $0 in

conversion damages, we stated:

      Mr. Zeeb argues that the jury’s award of zero dollars
      necessarily means that the jury did not find for Mr. Farah on
      the conversion claims. The fact that the judgment is for zero

                                       8
      dollars on the conversion claims raises the question of whether
      there is in fact a “debt” that could be nondischargeable.
      However, the bankruptcy court did not address this question,
      and the parties only tangentially raised this issue in their briefs.
      We make no determination on this question and will leave it for
      the bankruptcy court to consider on remand.

Zeeb II, 2015 WL 6720934, at *5 n.5

      On remand, the bankruptcy court held a one-day bench trial.2 The

court took direct testimony by declaration. Farah’s testimony was

consistent with the allegations he made in his state court complaint. Farah

testified that, in September 2010, he was the sole owner of Storm

Distribution, which sold hookahs and hookah-related accessories.

According to Farah, Storm Distribution stored its inventory in a warehouse

in Anaheim, California. Farah further testified that Zeeb worked for him as

a manager of Storm Distribution. When Farah took his overseas vacation in

September 2010, he left Zeeb in charge of all aspects of this business.

However, Farah maintained, soon after he left the country, Zeeb removed

all of the inventory from the Storm Distribution warehouse and removed

all of the cash from Storm Distribution’s bank accounts. Farah also

maintained that Zeeb removed these items and used them for his own

purposes, rather than for Storm Distribution’s business, without Farah’s

knowledge or consent. Farah concluded that, as a result of his loss of Storm

      2
       After our remand, Farah filed a second summary judgment motion, which the
bankruptcy court denied. The denial of that motion is beyond the scope of this appeal.

                                           9
Distribution’s inventory and cash, he was forced to close this business

down.

      As for JSSA, Farah testified that he invested $101,091.45 in JSSA

consisting of cash and inventory. According to Farah, during his September

2010 vacation, Zeeb wrongfully took all of JSSA’s inventory and other

assets and used them for his own purposes rather than for JSSA’s business.

Farah maintained that, as a result of Zeeb’s actions, he lost the full value of

his $101,091.45 investment.

      The court also heard the testimony of Fasi Ali Khan, who worked in

Storm Distribution’s warehouse in 2010. He testified that, while Farah was

out of the country in September 2010, Zeeb was left in charge of Storm

Distribution. According to Khan, shortly after Farah left the country, Zeeb

contacted Khan and asked him to help move all of the inventory in the

Storm Distribution warehouse to a location in downtown Los Angeles. In

accordance with Zeeb’s request, Khan stated that he helped move the

inventory, which he only later learned was moved without Farah’s

knowledge or consent. Around the same time, Khan started receiving calls

on the warehouse telephone from bill collectors indicating that Storm

Distribution’s bills were not being paid, including its rent payments for the

warehouse. According to Khan, when he asked Zeeb about the unpaid bills

and the rent payments, Zeeb told him it was not Zeeb’s problem and he did

not care because the warehouse was not in his name.

                                       10
      Zeeb’s testimony told a different story. Zeeb claimed that he and

Farah were business partners in Storm Distribution and that it was agreed

between them that Storm Distribution’s inventory could be “marketed”

from whatever outlet they chose. He further claimed that all transfers and

transactions he made were in furtherance of his partnership agreement.

But he never specifically said that Farah agreed that all of Storm

Distribution’s inventory should be moved prior to sale or stored

somewhere else.

      After trial, the bankruptcy court issued a statement of decision. The

court held that Farah was entitled to a judgment excepting Zeeb’s debt

from discharge under § 523(a)(6). In support of that holding, the court

recognized the state court’s amended judgment and then found that Zeeb’s

conduct was both willful and malicious within the meaning of § 523(a)(6).

The bankruptcy court more specifically found with respect to Storm

Distribution that, in late 2010, while Farah was out of the country, he left

Zeeb in charge. According to the court, without Farah’s knowledge, Zeeb

moved substantially all of Storm Distribution’s inventory to various stores

in downtown Los Angeles. And he wrote checks on Storm Distribution’s

bank account to himself or to cash. Based on these facts, the court

determined that “Debtor had to know and believe that what he had done

was substantially certain to cause Farah to lose his businesses and his

Money.” Statement of Decision after Trial (Dec. 21, 2018) at 6:4-5.

                                      11
      During trial, Zeeb argued that the state court award of zero damages

on Farah’s conversion causes of action precluded the bankruptcy court

from excepting the debt from discharge under § 523(a)(6). The bankruptcy

court rejected this argument. In its recitation of facts, the court emphasized

that Farah had elected to recover on his contract claim. The bankruptcy

court then explained:

      Debtor’s counsel makes much of the fact that the Amended
      Judgment had awards of $0 on the causes of action for
      conversion. He claims that the lack of money awards on the
      conversion causes of action means this Court cannot find in
      favor of Farah in this action. This argument has no merit. The
      Amended Judgement [sic] did rule in favor of Farah on the
      conversion causes of action on the merits. The fact that Farah
      chose to receive the damage awards under breach of contract
      was merely for the sake of avoiding duplicative awards of
      damages. Farah could have elected damages pursuant to the
      conversion causes of action.

Statement of Decision after Trial (Dec. 21, 2018) at 6:11-14. (Emphasis in

original).

      On January 24, 2019, the bankruptcy court entered judgment

excepting from discharge under § 523(a)(6) the state court judgment debt in

the amount of $431,605.69. Zeeb timely appealed.

                              JURISDICTION

      The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334

and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.

                                      12
                                    ISSUES

1.    Did issue preclusion bar the bankruptcy court from determining that

      Zeeb’s debt arose from tortious conduct?

2.    Was there sufficient evidence to support the bankruptcy court’s

      finding that Zeeb willfully injured Farah?

                         STANDARDS OF REVIEW

      “Because the bankruptcy court entered its judgment after trial, we

review the bankruptcy court’s findings of fact for clear error, and its

conclusions of law de novo.” Thiara v. Spycher Brothers (In re Thiara), 285

B.R. 420, 426-427 (9th Cir. BAP 2002) (citing Carrillo v. Su (In re Su), 290 F.3d

1140, 1142 (9th Cir. 2002)). The bankruptcy court’s factual findings are

clearly erroneous if they are illogical, implausible, or without support in

the record. United States v. Hinkson, 585 F.3d 1247, 1261–62 & n.21 (9th Cir.

2009) (en banc).

      We also review de novo the bankruptcy court’s determination as to

whether the threshold elements for the application of issue preclusion have

been satisfied. Plyam v. Precision Dev., LLC (In re Plyam), 530 B.R. 456, 461

(9th Cir. BAP 2015). When we engage in de novo review, we consider the

matter anew, as if the bankruptcy court did not address it. Francis v. Wallace

(In re Francis), 505 B.R. 914, 917 (9th Cir. BAP 2014).

      When issue preclusion is available, we review the bankruptcy court’s

decision whether to apply it for an abuse of discretion. In re Plyam, 530 B.R.

                                       13
at 461. The bankruptcy court abuses its discretion when it applies the

wrong rule of law, misapplies the correct rule of law, or if its factual

findings are illogical, implausible, or without support in the record. See

TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir.2011) (citing

Hinkson, 585 F.3d at 1262).

                                 DISCUSSION

      In Zeeb II, we set forth at length the legal principles governing

nondischargeability under § 523(a)(6) and the doctrine of issue preclusion.

We reiterate a number of these principles here to emphasize their

importance to our decision.

A.    Nondischargeability Under § 523(a)(6).

      Generally speaking, § 523(a)(6) excepts from discharge debts arising

from willful and malicious injuries to the creditor or the creditor’s

property. In re Plyam, 530 B.R. at 463. A debtor’s conduct is willful if he or

she had a subjective intent to harm or subjectively believed that harm was

substantially certain to occur as a result of his or her conduct. In re Su, 290

at 1144–45. As for maliciousness: “a ‘malicious’ injury involves ‘(1) a

wrongful act, (2) done intentionally, (3) which necessarily causes injury,

and (4) is done without just cause or excuse.’” Id. at 1146–47 (citations

omitted). Though the requirements for proving a willful and malicious

injury are simple enough, application of the statute is not always so

straightforward.

                                        14
      For instance, to properly apply § 523(a)(6) to a debt, the injury from

which the debt arises not only must be willful and malicious but also

tortious. Lockerby v. Sierra, 535 F.3d 1038, 1040–41 (9th Cir. 2008) (citing

Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1205 (9th Cir. 2001)). More

specifically, a debt arising from a breach of contract can qualify as

nondischargeable only under certain circumstances. Lockerby, 535 F.3d at

1040–41. The breach of contract must be “accompanied by malicious and

willful tortious conduct.” Id. at 1040 (citing In re Jercich, 238 F.3d at 1205)

[emphasis omitted]. A debtor’s conduct is intentionally tortious if that

conduct would constitute an intentional tort under state law. Id. at 1041-42.

      There are at least two relevant ways a creditor may take a judgment

consisting of damages for breach of contract and prove that it is

nondischargeable under § 523(a)(6). The first would be to establish that the

breach of contract also constituted a tort such as conversion that the debtor

undertook willfully and maliciously within the meaning of § 523(a)(6). See

In re Thiara, 285 B.R. 430-32 (citing Del Bino v. Bailey (In re Bailey), 197 F.3d

997, 1000 (9th Cir. 1999)). In California, “[t]he elements of a conversion are

the [creditor’s] ownership or right to possession of the property at the time

of the conversion; the [debtor’s] conversion by a wrongful act or

disposition of property rights; and damages.” Farmers Ins. Exch. v. Zerin, 53

Cal. App. 4th 445, 451 (1997). As we explained in Zeeb II, damages from

conversion in California need not be from a willful or malicious injury, so a

                                         15
creditor seeking to except a debt from discharge under § 523(a)(6) must

also prove that the conversion was undertaken willfully and maliciously.

Zeeb II, 2015 WL 6720934 at *5-6.

      Alternatively, the creditor could prove a “tortious breach of

contract.” But to do so, the creditor would need to show not only tortious

conduct, but also that the debtor’s conduct violated “a fundamental public

policy of the state.” Coastal Indus. Partners, LLC v. Lawson (In re Lawson),

BAP No. NC–14–1153–TaPaJu, 2015 WL 1291366, at *4 (9th Cir. BAP Mar.

20, 2015) (quoting In re Jercich, 238 F.3d at 1206) (emphasis supplied by In re

Lawson).

B.    Issue Preclusion.

      Zeeb does not challenge the amended judgment. In fact, he cannot.

Under full faith and credit principles, bankruptcy courts must give state

court judgments the same issue preclusive effect that the state court would

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

2001) (citing 28 U.S.C. § 1738). Instead, Zeeb contends that because the jury

awarded Farah no damages on the conversion claims, Farah was precluded

from relitigating his damages in the nondischargeability action. As Zeeb

points out, damages are an essential element of Farah’s conversion causes

of action. Zerin, 53 Cal. App. 4th at 451. Without damages, Zeeb maintains,

Farah cannot prove the underlying conversion claim necessary to prevail

                                       16
under § 523(a)(6).3 And herein lies the problem with Zeeb’s preclusion

argument; the jury awarded Farah zero damages, but at the same time it

specifically found all of the elements for conversion, including harm. To

determine the effect of the amended state court judgment, we begin with

the elements of issue preclusion.

       When applicable and appropriate, issue preclusion can be applied in

nondischargeability actions. Grogan v. Garner, 498 U.S. 279, 284–85 (1991).

“In California, issue preclusion prevents parties from relitigating issues

already decided in prior proceedings.” Zeeb II, 2015 WL 6720934, at * 4

(citing Lucido v. Super. Ct., 51 Cal.3d 335, 341 (1990)). For issue preclusion to

apply to a California judgment, five elements must be met: (1) identical

issues decided in the prior proceeding; (2) the issues were actually

litigated; (3) the issues were necessarily decided; (4) the prior proceeding

ended in a final decision on the merits; and (5) the party to be precluded

must be identical to or in privity with a party in the prior proceeding.

Lucido, 51 Cal.3d at 341.

       Even when the threshold elements are satisfied, this means only that

       3
         Citing Civil Rule 8(c) and Blonder-Tongue Labs., Inc. v. Univ. of Ill. Found., 402
U.S. 313, 350 (1971), Farah argues that defensive issue preclusion is an affirmative
defense that must be plead or is deemed waived. Farah thus contends that Zeeb waived
his issue preclusion defense. Assuming without deciding that issue preclusion based on
a prior state court judgment must be plead as an affirmative defense, the bankruptcy
court nonetheless considered the merits of the defense and substantively rejected it.
Because Farah did not file a cross-appeal, we decline to consider whether the court
erred in considering the merits of Zeeb’s issue preclusion argument.

                                            17
issue preclusion is “available.” The decision to apply issue preclusion to a

California judgment is discretionary. In exercising that discretion, the

bankruptcy court is obliged to consider whether application would

advance one or more of the policy considerations underlying issue

preclusion: preservation of the integrity of the judicial system, promotion

of judicial economy, and protection of parties from vexatious litigation. Id.

at 342-43; see also Khaligh v. Hadaegh (In re Khaligh), 338 B.R. 817, 824–25 (9th

Cir. BAP 2006), aff'd, 506 F.3d 956 (9th Cir. 2007) (there is an “‘additional’

inquiry into whether imposition of issue preclusion in the particular setting

would be fair and consistent with sound public policy.”).

      The party asserting issue preclusion bears the burden to establish the

threshold requirements. In re Harmon, 250 F.3d at 1245 (citing Lucido, 51

Cal. 3d at 341). Thus, the proponent must provide “a record sufficient to

reveal the controlling facts and pinpoint the exact issues litigated in the

prior action.” Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP

1995), aff'd, 100 F.3d 110 (9th Cir. 1996). Ultimately, “[a]ny reasonable

doubt as to what was decided by a prior judgment should be resolved

against allowing the [issue preclusive] effect.” Id.; see also In re Khaligh, 338

B.R. at 825 (“[T]he proponent bears the risk of nonpersuasion.”).

      To start with, the bankruptcy court was required to discern what

exactly was decided by the state court judgment, and then to give it effect.

Obviously, there is no dispute that the jury awarded Farah zero dollars on

                                        18
his conversion claims. Standing alone, the jury’s award of no damages for

the conversion claims could reasonably be viewed as a determination that

Farah did not suffer any damages from the conversion. However, this

finding does not stand alone. Rather, it is directly at odds with the jury’s

specific finding that Zeeb’s conversion harmed Farah. Zeeb’s construction

of the amended judgment is also contrary to the state court’s amended

judgment holding that Farah prevailed on his conversion claims.

      The bankruptcy court rejected Zeeb’s interpretation of the jury’s

findings and the amended judgment. Rather than construing the award of

zero damages on the conversion causes of action as evidence that Farah

suffered no damages, the bankruptcy court determined that the jury

awarded zero damages simply to avoid an award of duplicative damages

for different causes of action based on the same conduct. This finding is

supported by the state court’s jury instructions on this issue. The state court

gave the jury the following instruction, which was included in one or more

of Farah’s requests for judicial notice filed in the bankruptcy court:

      Samuel Farah has made claims against Kamal Zeeb . . . and
      Zeeb Brothers, Inc., for breach of contract and the torts of
      conversion and fraud. If you decide that Samuel Farah has
      proved both the contract and at least one tort claim, the same
      damages that resulted from these claims can be awarded only
      once.

                                      19
Pl.’s Req. For Jud. Notice (July 1, 2014) at p. 5 of 6.4

       We find no error in the bankruptcy’s court’s construction of the

amended judgment. It is consistent with the jury’s specific findings on the

conversion claims. Indeed, it is the only view that reconciles the otherwise

contradictory actions by the jury and state court, culminating with entry of

the amended judgment holding that Farah prevailed on his conversion

claims. Zeeb’s interpretation of the amended judgment cannot be

reconciled with the jury’s specific findings and the amended judgment. It

would require the bankruptcy court to elevate one finding over another,

while ignoring the jury instruction on double recovery and the state court’s

determination that Farah had prevailed on his conversion claims.

       Given the conflicting interpretations of the jury’s decision, Zeeb

failed to prove each of the elements necessary for issue preclusion. The

parties actually litigated Farah’s conversion claims, and the jury necessarily

decided that Zeeb converted Farah’s property. In doing so, the jury

       4
        The above-quoted jury instruction apparently is derived from the first
paragraph of a form jury instruction used in California civil trials. Judicial Council Of
California Civil Jury Instruction (“CACI”) 3934 provides basic instruction to jurors
when the plaintiff seeks “damages on multiple legal theories.” The first paragraph of
CACI 3934 provides:

       [Name of plaintiff] seeks damages from [name of defendant] under more
       than one legal theory. However, each item of damages may be awarded
       only once, regardless of the number of legal theories alleged.

CACI 3934.

                                            20
necessarily, and specifically, found that the conversion harmed Farah. But

the jury had already awarded damages to Farah under his breach of

contract claim. Given the jury instruction that it could only award damages

once, it became unnecessary that the jury award damages on Farah’s

conversion claims.

      This lead the bankruptcy court to find that the “damage awards

under breach of contract was [sic] merely for the sake of avoiding

duplicative awards of damages.” The court’s finding is well supported in

the record, and is the only one that reconciles the jury’s findings and the

amended judgment. Accordingly, the issue of conversion damages was not

necessarily decided by the state court judgment because the jury had

awarded damages for breach of contract. Nor was the issue of the

conversion damages identical to the issue before the bankruptcy court in

the nondischargeability case as the jury was instructed not to award

duplicative damages.

      This case is strikingly analogous to In re Lawson, 2015 WL 1291366. In

Lawson, the creditor obtained a state court judgment confirming an

arbitration award of damages for breach of contract, fees and costs, and

conversion. The underlying acts were the same for both causes of action. Id.

at *2. The judgment awarded separate damages for each cause of action;

roughly $92,000 for breach of contract together with $72,000 in fees and

costs, and $51,000 for conversion. Id. at *3.

                                       21
      After the debtor filed for bankruptcy, the creditor sought to except

from discharge the entirety of the state court judgment under § 523(a)(6).

Id. The bankruptcy court on summary judgment determined that the

damages awarded for conversion were excepted from discharge under

§ 523(a)(6), but the remaining damages were not. Id. The bankruptcy court

reasoned that the contract damages did not arise from the debtor’s tortious

conduct and that “even the worst breaches of contract do not result in a

nondischargeable debt absent some fundamental public policy.” Id. (citing

In re Jercich, 238 F.3d at 1206). The bankruptcy court therefore granted

partial summary judgment to the debtor based on the issue preclusive

effect of the sate court judgment. Id. at *2-3.

      On appeal, the sole issue in Lawson was whether the bankruptcy

court erred when it applied issue preclusion and granted partial summary

judgment based on its determination that, as a matter of law, the

arbitration award’s compensatory contract damages could not be excepted

from discharge under § 523(a)(6). Id. at *4. We acknowledged that, under In

re Jercich and California law, a breach of contract is not considered tortious

unless the breach violated some independent duty under state tort law and

also violated state public policy. Nonetheless, we held that the bankruptcy

court erred when it determined that the breach of contract damages could

not be excepted from discharge under § 523(a)(6) as a matter of law.

      As in the present case, the creditor in Lawson “did not just prevail on

                                        22
a breach of contract claim; it also prevailed on a tort claim based on

conversion.” Id. at *5. Lawson explained that the record from the state

arbitration proceedings indicated that the breach of contract damages were

equally recoverable under both the tort of conversion and the breach of

contract. In contrast, the state court judgments in Jercich, Lockerby, and their

progeny were not “based on both breach of contract and tort; instead, those

cases involved solely a breach of contract claim.” Id. Furthermore, nothing

in Lawson indicated that the arbitrator duplicated any amount of damages

awarded under the two causes of action. Therefore, we concluded that In re

Jercich’s limitations for tortious breaches of contract did not apply. Rather,

we held that, where a creditor prevails on both contract and tort causes of

action, the fact that the judgment ultimately awards damages on the

contract claim does not preclude a later determination in a subsequent

§ 523(a)(6) action that the damages also flowed from the tortious conduct.

Id. at *4. As Lawson put it:

      Resort to a Jercich analysis [and its requirement of conduct
      against public policy] . . . is unnecessary where the debt that a
      creditor seeks to except from discharge under § 523(a)(6)
      involves duplicative damages on account of both tort and
      breach of contract theories. In that context, the damages for tort
      independently support nondischargeability under § 523(a)(6),
      and there is no need to determine whether the breach of
      contract was tortious.

Id.

                                       23
      Farah prevailed in his prior state court action on both his contract

and tort claims based on the same conduct. As in Lawson, the fact that

compensatory damages were awarded only on his breach of contract

claims did not preclude Farah from litigating his § 523(a)(6) claim based

upon conversion. Because the jury was instructed not to award duplicative

damages, and had already awarded damages on the breach of contract

claim, Zeeb did not prove the state court judgment necessarily decided the

identical issue on damages. As a result, the bankruptcy court was not

bound to the state court’s determination to award Farah no damages on his

conversion claim, and correctly permitted Farah to litigate his claims under

§ 523(a)(6).

C.    Zeeb’s Sufficiency Of The Evidence Argument.

      The only other argument Zeeb has raised on appeal concerns the

sufficiency of the evidence. He asserts that the bankruptcy should not have

found willfulness within the meaning of § 523(a)(6) based on the record

before the bankruptcy court. More specifically, he points to certain trial

testimony, which he claims should have caused the bankruptcy court to

conclude that Zeeb did not intend to harm Farah and did not subjectively

believe he would harm Farah when he moved all of Storm Distribution’s

assets.5

      5
          Zeeb failed to specifically and distinctly argue that the bankruptcy court
                                                                               (continued...)

                                              24
       Section 523(a)(6)'s willful injury requirement requires proof of a

subjective intent to injure or a subjective belief that injury is substantially

certain to occur. Ormsby v. First Am. Title Co. of Nev. (In re Ormsby), 591 F.3d

1199, 1206 (9th Cir. 2010) (quoting In re Su, 290 F.3d at 1142). But “[t]he

[d]ebtor is charged with the knowledge of the natural consequences of his

actions.” Id. And, in addition to what the debtor might admit to knowing,

“the bankruptcy court may consider circumstantial evidence that tends to

establish what the debtor must have actually known when taking the

injury-producing action.” In re Su, 290 F.3d at 1146, n.6. This is exactly

what the bankruptcy court did here.

       While the parties presented conflicting evidence, Zeeb simply has not

persuaded us that the bankruptcy court’s inference of willfulness was

illogical, implausible, or unreasonable on this record. Therefore, the

bankruptcy court’s wilfulness finding was not clearly erroneous. Hinkson,

585 F.3d at 1261–62 & n.21.

                                    CONCLUSION

       For the reasons set forth above, we AFFIRM the bankruptcy court's

       5
        (...continued)
committed any error with respect to its finding of malicious injury. Nor did Zeeb make
any sufficiency of the evidence arguments pertaining to JSSA. Accordingly, he has
forfeited these arguments. See Leigh v. Salazar, 677 F.3d 892, 897 (9th Cir. 2012) (issues
not specifically and distinctly argued in appellant's opening appeal brief are forfeited);
Dietz v. Ford (In re Dietz), 469 B.R. 11, 22 (9th Cir. BAP 2012), aff'd and adopted, 760 F.3d
1038 (9th Cir. 2014) (same).

                                             25
nondischargeability judgment under § 523(a)(6).

                                   26