Court Opinion

ID: 4561968
Source: CourtListenerOpinion
Date Created: 2020-09-01 18:00:58.15728+00
Date Added: 2024-06-11T11:52:03.457531
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                  SEP 1 2020
                                                                           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-19-1214-SGF
                                                     BAP No. CC-19-1232-SGF
LISA M. GARCIA,                                      (Cross-Appeals)
          Debtor.
                                                     Bk. No. 6:18-bk-10058-SC

LISA M. GARCIA,                                      Adv. No. 6:18-ap-01065-SC
          Appellant/Cross-Appellee,
v.                                                   MEMORANDUM*

SAMEH FAWZY,
        Appellee/Cross-Appellant.

                Appeal from the United States Bankruptcy Court
                       for the Central District of California
                 Scott C. Clarkson, Bankruptcy Judge, Presiding

Before: SPRAKER, GAN, and FARIS, Bankruptcy Judges.

                                 INTRODUCTION

         The bankruptcy court entered judgment excepting from discharge an

Arizona state court judgment that creditor Sameh Fawzy obtained against

         *
        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.
Chapter 71 debtor Lisa Garcia. The state court judgment was based on

conversion and constructive fraud. The bankruptcy court granted Fawzy

relief under § 523(a)(6) but denied him relief under § 523(a)(2)(A). Garcia

appeals from the § 523(a)(6) ruling. Fawzy cross-appeals from the

§ 523(a)(2)(A) ruling.

      Both rulings hinged on whether Garcia’s state of mind, as found by

the Arizona jury, was the same as that required for nondischargeability

under either § 523(a)(6) or § 523(a)(2)(A). The bankruptcy court answered

this question in the affirmative for § 523(a)(6) but in the negative for

§ 523(a)(2)(A). With respect to § 523(a)(6), nothing in the state court record

demonstrates that the jury actually found, or needed to find, that Garcia

harbored an intent to injure Fawzy or subjectively believed that injury was

substantially certain to occur as a result of her conduct.

      As for § 523(a)(2)(A), the bankruptcy court correctly declined to

apply issue preclusion to satisfy the fraud element of intent to deceive. The

record from the state court trial did not establish that the jury actually and

necessarily decided that Garcia intended to deceive Fawzy.

      The record arguably suggests that the bankruptcy court may have

intended to alternately grant judgment on the § 523(a)(6) claim based on

      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
the parties’ stipulated facts and other evidence presented at the bankruptcy

court trial. But the bankruptcy court did not render a specific finding of fact

on the willfulness element. On this record, we only can speculate as to

what the bankruptcy court intended with respect to the evidence it

admitted at trial and what it believed this evidence established. Therefore,

we will remand the § 523(a)(6) claim for the bankruptcy court to clarify

whether, in the absence of issue preclusion, the admissible evidence

presented at the bankruptcy court trial, including specific parts of the state

court trial transcript, established that Garcia acted willfully and maliciously

within the meaning of § 523(a)(6).

      Consequently, we AFFIRM the bankruptcy court’s § 523(a)(2)(A)

ruling, but we VACATE its § 523(a)(6) ruling and REMAND for further

proceedings.

                                     FACTS

      Fawzy and Garcia met in 2000 and were engaged in 2003. At the time

of their engagement, the couple lived in Tennessee, where Fawzy had

purchased and operated a grocery store. Garcia loaned Fawzy $48,878.23 to

help fund the grocery store purchase. In 2004, however, Garcia moved to

New York to attend a two-year physician’s assistants program. Around this

same time, Fawzy enlisted in the United States Army. Before deploying to

Iraq, Fawzy executed a general power of attorney which enabled Garcia to

manage his financial affairs. He also leased the grocery store to a third

                                       3
party for a one-year term. At the end of the lease term, the third party

purchased the grocery store from Fawzy. During Garcia’s time in

Tennessee and New York, Fawzy financially supported her.

      Fawzy returned from his Iraq deployment in late 2005 or early 2006,

with several injuries requiring treatment. During the first half of 2006,

while Fawzy still was convalescing, Garcia withdrew a total of $76,134.10

from the couple’s joint bank accounts, without Fawzy’s knowledge or

approval. Of this amount, Garcia originally transferred $10,900.00 from

Fawzy’s separate business bank account to one of the couple’s joint

accounts, from which she later withdrew it.

      Additionally, Fawzy owned a Toyota 4Runner that Garcia had been

using for years. When Fawzy moved to Tennessee to open his grocery

store, he left the 4Runner with Garcia so she could use it. But he remained

the owner of record. When Garcia moved to Tennessee, she drove the

vehicle there from California, where she formerly lived. She next took the

4Runner with her to New York. In April 2006, she changed title to the

vehicle into her own name, without telling Fawzy. She signed Fawzy’s

name on the documentation transferring title, instead of signing her own

name and using her power of attorney. In September 2006, after taking

Fawzy to the Walter Reed Medical Hospital for further treatment, she

drove the vehicle to California, where she again relocated.

      Sometime in 2006, the couple ended their relationship. Afterwards,

                                       4
Fawzy unsuccessfully attempted to recover from Garcia his 4Runner and

his cash. Then, in 2007, Garcia again relocated – this time to Arizona. In late

2007, Fawzy filed a complaint in Arizona state court against Garcia seeking

to recover the vehicle and the cash.

       Garcia filed an answer and counterclaim. According to Garcia, when

Fawzy bought the grocery store, she became his partner by funding

roughly half of its purchase price. She also claimed that she worked full

time at the grocery store in 2003 and 2004, but she never received any

compensation for doing so. In contrast, she asserted that Fawzy paid

himself at least $4,000 per month over the same time period. She also

claims he withdrew thousands of dollars from their joint bank accounts for

his individual purposes and benefit. In October 2008, while the state court

lawsuit was pending, Garcia transferred back to Fawzy title to and

possession of the 4Runner.

       The state court held a jury trial in 2009. The jury found that Garcia

converted the 4Runner and the $10,900.00 she transferred from Fawzy’s

business bank account. The jury awarded Fawzy $7,400.00 for conversion

of the 4Runner but awarded no damages for conversion of the $10,900.00. 2

       2
         The jury appears to have awarded zero damages for conversion of the
$10,900.00 because it instead compensated Fawzy for that loss as part of his constructive
fraud damages for Garcia’s withdrawals from the couple’s joint accounts. Because
Garcia initially transferred the $10,900.00 to one of the couple’s joint bank accounts, and
later withdrew these and other funds from the joint accounts (which was the basis for
                                                                               (continued...)

                                             5
The jury next found that Garcia was liable for $76,134.10 plus interest for

constructive fraud, arising from her withdrawals from the couple’s joint

checking accounts in 2006. The jury also awarded Fawzy punitive damages

of $40,000.00, plus attorney’s fees. In addition to the jury verdicts granting

Fawzy relief, the jury denied Garcia relief on her breach of contract,

partnership, and conversion counterclaims.

      The punitive damages award against Garcia was based on the jury’s

finding that Garcia “acted with an evil mind and committed fraud against

Mr. Fawzy.” The state court instructed the jury in detail regarding what

constitutes an evil mind under Arizona law. It instructed the jury that any

of the following could support an evil mind finding: “1, intent to cause

injury; Or 2, wrongful conduct motivated by spite or ill will; Or 3,

Ms. Garcia acted to serve her own interests having reason to know and

consciously disregarding a substantial risk that [her] conduct may

significantly injure the rights of others.”

      In contrast, the jury was not given a jury instruction regarding what

it generally means to “commit fraud.” The only fraud-related claim on

which the court instructed the jury was constructive fraud. The

constructive fraud jury instruction made it clear that intent to deceive was

      2
        (...continued)
the constructive fraud claim), the jury only could award the $10,900.00 in damages one
time in order to avoid double-counting these funds in Fawzy’s damages award.

                                           6
not required in order to establish liability for constructive fraud. Indeed,

the constructive fraud jury instruction advised the jury that “intent of the

party charged” was irrelevant to the constructive fraud cause of action.3

      After the jury rendered its verdict in favor of Fawzy, the court

awarded $25,000.00 for attorney’s fees, prejudgment interest of $15,456.27,

and court costs and jury fees of $10,331.61. It then entered final judgment in

June 2009 in the aggregate amount of $174,321.98.

      Subsequently, Garcia commenced her bankruptcy case by filing a

voluntary chapter 7 petition. Fawzy timely filed a complaint seeking to

except the judgment debt from discharge under §§ 523(a)(2)(A) and (a)(6).

He then filed a motion for summary judgment based on the § 523(a)(6)

claim and the asserted issue preclusive effect of the state court judgment.

The bankruptcy court denied the summary judgment motion. According to

the court, the jury’s findings did not establish the requisite state of mind for

nondischargeability under § 523(a)(6).

      3
         The state court’s punitive damages instruction stated: “If you decide that
Ms. Garcia intended to defraud Mr. Fawzy in regard to the bank withdrawals, you must
decide whether that conduct justifies an award of punitive damages.” At oral argument,
we asked Fawzy’s counsel whether the reference to “intended to defraud” in the
punitive damages jury instruction might provide an alternate ground for the
application of issue preclusion to the state of mind issue. In response, Fawzy’s counsel
candidly acknowledged that intent to defraud was neither actually litigated nor
necessarily decided in the state court action. In light of this concession, we do not
consider whether the “intended to defraud” reference in the punitive damages jury
instruction could have supported the application of issue preclusion to the state of mind
issue.

                                           7
      Prior to trial, the parties stipulated to numerous admitted facts,

including many of the facts set forth above. The court approved the parties’

amended joint pretrial stipulation and set the matter for trial, with all direct

testimony to be submitted by declaration. At the pretrial conference, the

parties discussed the admission and use of the state court trial transcript as

an exhibit. The court indicated that the state court transcript would be

admitted but that any party seeking to use it to prove the truth of the

matter testified to would need to make the witness who previously testified

available at the bankruptcy court trial for potential additional cross-

examination.

      Fawzy presented a half-page declaration at the bankruptcy court trial

and relied on the admitted facts from the pretrial stipulation. He also

argued that the state court judgment, jury verdict, and state court trial

transcript demonstrated his entitlement to issue preclusion on all elements

necessary for relief under both §§ 523(a)(2)(A) and (a)(6). At the conclusion

of trial, the court rendered oral findings of fact and conclusions of law. The

court concluded that issue preclusion applied to establish all of the

elements for nondischargeability under § 523(a)(6) but not under

§ 523(a)(2)(A).

      The bankruptcy court supplemented its oral findings of fact and

conclusions of law with a memorandum decision after trial. With respect to

§ 523(a)(2)(A), the bankruptcy court stated that nothing in the state court

                                       8
jury instructions or jury verdict established that the jury found Garcia acted

with an intent to deceive. As for § 523(a)(6), the court relied on the state

court jury findings to reach its conclusion that Garcia willfully injured

Fawzy.

      The bankruptcy court entered its nondischargeability judgment on

August 27, 2019. Garcia timely appealed and Fawzy timely cross-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.

                                   ISSUES

1.    Did the bankruptcy court commit reversible error when it applied

      issue preclusion to establish Garcia’s state of mind for purposes of

      § 523(a)(6)?

2.    Did the bankruptcy court commit reversible error when it admitted

      into evidence the state court trial transcript?

3.    Did the bankruptcy court commit reversible error when it held that

      issue preclusion could not be applied to establish Garcia’s state of

      mind for purposes of § 523(a)(2)(A)?

                         STANDARDS OF REVIEW

      We review de novo the bankruptcy court’s determination that issue

preclusion was available. Tomkow v. Barton (In re Tomkow), 563 B.R. 716, 722

(9th Cir. BAP 2017); Plyam v. Precision Dev., LLC (In re Plyam), 530 B.R. 456,

                                       9
461 (9th Cir. BAP 2015). “De novo review requires that we consider a

matter anew, as if no decision had been made previously.” Francis v.

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

omitted).

      When issue preclusion is available, the bankruptcy court’s decision to

actually apply it is reviewed for abuse of discretion. In re Tomkow, 563 B.R.

at 722; In re Plyam, 530 B.R. at 461. “A bankruptcy court abuses its

discretion if it applies the wrong legal standard or misapplies the correct

legal standard, or if its factual findings are illogical, implausible, or without

support in inferences that may be drawn from the facts in the record.” In re

Tomkow, 563 B.R. at 722.

      We review a bankruptcy court’s evidentiary rulings for abuse of

discretion, and then only reverse if any error would have been prejudicial

to the appellant. Mbunda v. Van Zandt (In re Mbunda), 484 B.R. 344, 351 (9th

Cir. BAP 2012), aff'd, 604 F. App’x 552 (9th Cir. 2015).

                                DISCUSSION

A.    Appeal from § 523(a)(6) Ruling.

      1.    Application of issue preclusion in nondischargeability
            actions.

      The doctrine of issue preclusion applies in nondischargeability

proceedings. Grogan v. Garner, 498 U.S. 279, 284–85 n.11 (1991). Federal

courts must give full faith and credit to state court judgments. 28 U.S.C.

                                       10
§ 1738. This means that the bankruptcy court was required to give the

Arizona state court’s judgment the same preclusive effect it would be given

by Arizona courts. See Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 993 (9th

Cir.2001). Thus, Arizona law determines the preclusive effect of the state

court judgment. In Arizona, issue preclusion cannot be applied unless:

      (1) the issue or fact to be litigated was actually litigated in a
      previous suit,

      (2) a final judgment was entered, and

      (3) the party against whom the doctrine is to be invoked had a
      full opportunity to litigate the matter,

      (4) and actually did litigate it, [and]

      (5) such issue or fact was essential to the prior judgment.

Child v. Foxboro Ranch Estates, LLC (In re Child), 486 B.R. 168, 172-73 (9th Cir.

BAP 2013) (emphases omitted) (quoting Chaney Bldg. Co. v. City of Tucson,

716 P.2d 28, 30 (Ariz. 1986)). An issue is actually litigated when it “is

properly raised by the pleadings or otherwise, and is submitted for

determination, and is determined . . . .” Kopp v. Physician Grp. of Ariz., Inc.,

421 P.3d 149, 152 (Ariz. 2018) (quoting Chaney Bldg. Co., 716 P.2d at 30). An

issue is essential to the judgment when the prior decision could not have

been rendered without it. See Fuller v. Hartford Accident & Indem. Co., 601

P.2d 1360, 1362–63 (Ariz. Ct. App. 1979), cited with approval in Farmers Ins.

                                        11
Co. of Ariz. v. Vagnozzi, 675 P.2d 703, 705 (Ariz. 1983).4

       “The party asserting issue preclusion bears the burden of proof as to

all elements and must introduce a sufficient record to reveal the controlling

facts and the exact issues litigated.” In re Child, 486 B.R. at 172 (emphasis

added). “Any reasonable doubt as to what was decided by a prior

judgment should be resolved against allowing the collateral estoppel

effect.” Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP 1995),

aff'd, 100 F.3d 110 (9th Cir. 1996).

       2.     Legal standards governing § 523(a)(6).

       Section 523(a)(6) excepts from discharge debts arising from willful

and malicious injuries to an entity or its property. Ormsby v. First Am. Title

Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010); Barboza v. New

Form, Inc. (In re Barboza), 545 F.3d 702, 706 (9th Cir. 2008). The willfulness

and malice elements are legally distinct and require separate consideration.

Carrillo v. Su (In re Su), 290 F.3d 1140, 1146-47 (9th Cir. 2002). Under

§ 523(a)(6), a debt arises from a “willful” injury when the debtor

       4
         Even when the threshold requirements for issue preclusion are met, Arizona
courts may decline to apply issue preclusion when the underlying policies of judicial
economy and avoidance of inconsistent results are outweighed by other competing
policy concerns. Hullett v. Cousin, 63 P.3d 1029, 1035 (Ariz. 2003); see also Ferris v.
Hawkins, 660 P.2d 1256, 1258 (Ariz. Ct. App. 1983) (“Principles of issue preclusion
should not be applied, however, where ‘there is some overriding consideration of
fairness to a litigant, which the circumstances of the particular case would
dictate.”(quoting Di Orio v. City of Scottsdale, 408 P.2d 849, 852 (Ariz. Ct. App. 1965))).

                                              12
subjectively intended to cause injury to the creditor or subjectively believed

that injury was substantially certain to occur. In re Ormsby, 591 F.3d at 1206;

In re Su, 290 F.3d at 1144-46. A debt arises from a “malicious” injury when

it is based on: “(1) a wrongful act, (2) done intentionally, (3) which

necessarily causes injury, and (4) is done without just cause or excuse.” In

re Ormsby, 591 F.3d at 1207 (quoting Petralia v. Jercich (In re Jercich), 238 F.3d

1202, 1209 (9th Cir. 2001)).

      3.    Analysis.

            a.     Issue preclusion argument.

      Garcia principally argues on appeal that the state of mind required

for relief under § 523(a)(6) was not actually litigated or essential to the

judgment in the Arizona lawsuit. To support this argument, Garcia points

out that no particular state of mind is required for conversion or

constructive fraud. This is a correct statement of Arizona law. See Miller v.

Hehlen, 104 P.3d 193, 203 (Ariz. Ct. App. 2005) (stating elements for

conversion); see also Liberty Life Ins. Co. v. Myers, Case No. CV

10–2024–PHX–JAT, 2013 WL 530317, at *13 (D. Ariz. Feb. 12, 2013) (same);

McManus v. Am. Express Tax & Bus. Servs., Inc., 67 F. Supp. 2d 1083, 1089 (D.

Ariz. 1999) (“To establish constructive fraud, all elements of actual fraud

except the element of intent must be established.” (emphasis added)).

      The bankruptcy court did not rely on the state court jury’s verdict for

conversion or constructive fraud to establish Garcia’s intent to injure.

                                        13
Instead, the court relied on the jury’s finding that she acted with an evil

mind required to impose punitive damages. Yet Garcia asserts that to

award punitive damages, the state court jury neither found, nor needed to

find, the state of mind required for relief under § 523(a)(6). The jury was

instructed that to find that Garcia acted with an evil mind, it had to find:

      1, intent to cause injury;

      Or 2, wrongful conduct motivated by spite or ill will;

      Or 3, Ms. Garcia acted to serve her own interests having reason
      to know and consciously disregarding a substantial risk that
      [her] conduct may significantly injure the rights of others.

This instruction is consistent with Arizona case law holding that “[a]

tortfeasor manifests an ‘evil mind’ if he either ‘intended to injure the

plaintiff’ or ‘consciously pursued a course of conduct knowing that it

created a substantial risk of significant harm to others.’”Quintero v. Rogers,

212 P.3d 874, 879 (Ariz. Ct. App. 2009) (quoting Gurule v. Ill. Mut. Life &

Cas. Co., 734 P.2d 85, 87 (Ariz. 1987))

      As Garcia notes, this standard is stated in the disjunctive and the last

of the three disjunctive requirements sets forth a less culpable mental state

than that required under § 523(a)(6). Garcia reasons that in finding that she

acted with an “evil mind,” the jury did not necessarily find that she

intended to injure Fawzy or that she believed injury to Fawzy was

substantially certain to occur.

                                          14
      It is beyond cavil that a conscious disregard of substantial risk is

insufficient to qualify as a willful intent to injure under § 523(a)(6). The

Arizona standard focuses on creating a substantial risk of harm. Quintero,

212 P.3d at 879. In contrast, the willfulness component of § 523(a)(6)

requires proof that the debtor had a subjective intent to injure or a

subjective belief that injury was substantially certain to occur. In re Plyam,

530 B.R. at 463 (citing In re Su, 290 F.3d at 1144). We made clear in Plyam

that any level of risk below a substantial certainty is insufficient for

§ 523(a)(6) purposes. As we observed in Plyam, “[e]ven a strong probability

that consequences may result, however, is not equivalent to substantial

certainty for the purposes of intent.”5 Id. at 468 (citing Restatement

      5
        The following comment from the Restatement (Second) of Torts emphasizes this
point by explaining the differing levels of risk associated with different levels of
culpability:

      All consequences which the actor desires to bring about are intended, as
      the word is used in this Restatement. Intent is not, however, limited to
      consequences which are desired. If the actor knows that the consequences
      are certain, or substantially certain, to result from his act, and still goes
      ahead, he is treated by the law as if he had in fact desired to produce the
      result. As the probability that the consequences will follow decreases, and
      becomes less than substantial certainty, the actor’s conduct loses the
      character of intent, and becomes mere recklessness, as defined in § 500. As
      the probability decreases further, and amounts only to a risk that the
      result will follow, it becomes ordinary negligence, as defined in § 282. All
      three have their important place in the law of torts, but the liability
      attached to them will differ.

                                                                            (continued...)

                                           15
(Second) of Torts § 500 cmt. f (1965)).

       A conscious disregard of risk was, therefore, an insufficient state of

mind to establish § 523(a)(6) willfulness. The bankruptcy court nonetheless

applied issue preclusion. It reasoned that, notwithstanding the disjunctive

legal standard for evil mind, the jury actually litigated and needed to find

that Garcia intended to injure Fawzy. According to the bankruptcy court,

this conclusion logically followed from Fawzy’s testimony during the state

court trial that Garcia admitted to him she had withdrawn the funds from

the couple’s joint accounts for the purpose of hurting him.

       There are several problems with the bankruptcy court’s application

of issue preclusion to establish a willful injury. As a threshold matter,

Fawzy’s testimony only related to the withdrawn funds. There is nothing

in the record that ties this testimony to the 4Runner.

       More importantly, however, we cannot know whether the jury relied

on Fawzy’s testimony that Garcia wanted to injure him because it was not

essential to the jury’s evil mind finding. It is just as plausible that the jury

relied on conscious disregard in making this finding. In other words, intent

       5
        (...continued)
Restatement (Second) of Torts § 8A, cmt. b (1965). In Plyam we explained that: “Degrees
of recklessness may exist; but, again, whether recklessness is heightened or gross, it is
insufficient for a determination of § 523(a)(6) willfulness.” In re Plyam, 530 B.R. at 467.
Because conscious disregard of substantial risk falls below the standard for intent to
injure under §523(a)(6), we need not, and do not, express any opinion where Arizona’s
alternate basis for an evil mind of spite or ill will might fall on this continuum.

                                            16
to injure was not necessary for the jury to find that Garcia acted with an

evil mind. While the testimony cited by the bankruptcy court could have

supported a finding of intent to injure, that possibility did not make it

essential for purposes of issue preclusion. See In re Plyam, 530 B.R. at 470;

see also W. Cable v. Indus. Comm'n of Ariz., 698 P.2d 759, 763 (Ariz. Ct. App.

1985) (holding that finding of disability was not essential to the judgment

for issue preclusion purposes because it was not necessary for the

judgment awarded).

       The state court gave the jury three separate bases to find that Garcia

had acted with an evil mind. At least one of these bases did not require an

intent to injure. There is no means to determine which of these the jury

used. Accordingly, the bankruptcy court simply had no logical or legal

basis to find that the Arizona jury based its determination of evil mind on

an intent to injure. On this record, there is significant reason to doubt that

the evil mind finding was based on an implicit finding of intent to injure.

The bankruptcy court, therefore, erred in applying issue preclusion to

conclusively establish the requisite state of mind for willfulness under

§ 523(a)(6).6

       6
        Neither the bankruptcy court nor the parties focused much on the
maliciousness elements required under § 523(a)(6). For purposes of this decision, we
also express no opinion regarding the applicability of issue preclusion to § 523(a)(6)’s
maliciousness elements.

                                            17
            b.    Section 523(a)(6) judgment in the absence of issue
                  preclusion.

      In light of our holding that the bankruptcy court erred in its

application of issue preclusion, we next must consider whether the court’s

§ 523(a)(6) judgment may be affirmed without the application of issue

preclusion. As part of the trial, the parties presented the bankruptcy court

with admitted facts, and the court accepted into evidence a significant

amount of additional evidence, including the entirety of the state court trial

transcript. We also acknowledge that, in its memorandum decision, the

bankruptcy court noted that it was relying on both the admitted facts and

evidence presented during the bankruptcy court trial, in addition to issue

preclusion, to find that Garcia had willfully and maliciously intended to

injure Fawzy. Even so, in both the bankruptcy court’s oral ruling and in its

memorandum decision, when the bankruptcy court specifically discussed

willfulness, it relied exclusively on issue preclusion. It never stated that it

was independently finding willfulness based on the evidence presented

during the bankruptcy court trial.

      Under Civil Rule 52(a)(1), made applicable in adversary proceedings

by Rule 7052, “the court must find the facts specially and state its

conclusions of law separately.” Thus, the bankruptcy court needed to make

a specific finding of fact on willfulness. It did not. Indeed, the bankruptcy

court made no specific findings of fact with respect to any of the § 523(a)(6)

                                       18
elements. This, by itself, justifies remand in this matter. “In the absence of

complete findings, we may vacate a judgment and remand the case to the

bankruptcy court to make the required findings.” First Yorkshire Holdings,

Inc. v. Pacifica L 22, LLC (In re First Yorkshire Holdings, Inc.), 470 B.R. 864, 871

(9th Cir. BAP 2012) (citing United States v. Ameline, 409 F.3d 1073 (9th Cir.

2005)); see also Simeonoff v. Hiner, 249 F.3d 883, 891, 894 (9th Cir. 2001)

(holding that remand is required when a “full understanding” of the trial

court’s decision is not possible without additional findings).

      In sum, though we can affirm on any basis supported by the record,

Lakhany v. Khan (In re Lakhany), 538 B.R. 555, 559 (9th Cir. BAP 2015), we

cannot make findings on the bankruptcy court’s behalf in the first instance,

In re First Yorkshire Holdings, Inc., 470 B.R. at 871. Because the bankruptcy

court incorrectly applied issue preclusion to establish the willfulness

element and did not specifically find that Garcia willfully injured Fawzy,

we must remand so that the bankruptcy court can determine whether it

wants to find willfulness based on the trial record presented.

             c.    Evidentiary arguments.

      Finally, we address a number of evidentiary arguments raised by

Garcia. These arguments relate to the court’s admission and use of the state

court trial transcript in the nondischargeability trial. The bankruptcy court

stated that it was admitting the state court trial transcript for the truth of

matters asserted. Indeed, the memorandum decision points out that the

                                         19
“transcript is now part of this Court’s record pursuant to Defendant’s non-

objection to the admission into evidence of the State Court Trial

Transcript.” Garcia contends that she did object to the admission of the

transcript as substantive evidence, and that the bankruptcy court

erroneously denied her cross-examination on testimony presented in the

state court trial.

                     i.   The transcript was neither introduced as a
                          declaration nor authenticated.

      Garcia initially contends that the state court trial transcript

constituted “testimony” and that the bankruptcy court’s admission of it as

testimony violated its own order that all trial testimony needed to be

submitted by declaration. But the court’s self-imposed restriction regarding

presentation of direct testimony by declaration specifically did not apply to

the transcript. The court made this abundantly clear at the pretrial hearing.

Nor can Garcia claim that she suffered from any legitimate confusion

regarding the court’s decision at the pretrial hearing to admit the state

court transcript.

      Garcia also contends that Fawzy failed to authenticate the transcript.

This argument similarly has no merit. The certified copy of the transcript

the bankruptcy court admitted was self-authenticating. See Fed. R. Evid.

902(4); Ball v. A.O. Smith Corp., 321 B.R. 100 (N.D.N.Y. 2005) (holding that

trial transcripts are self-authenticating under Rule 902(4), where transcripts

                                       20
contained court reporter’s certification).7

                     ii.    The transcript constitutes inadmissable hearsay.

       Garcia next argues that the admission of the transcript violated the

rule against hearsay. Garcia did not raise a hearsay objection at trial when

Fawzy presented the transcript for admission into evidence. As a result,

Fawzy asserted – and the bankruptcy court concluded – that Garcia

waived her hearsay objection. See Fed. R. Evid. Rule 103(a); see also De

Saracho v. Custom Food Mach., Inc., 206 F.3d 874, 879-80 (9th Cir. 2000).

       We disagree that Garcia waived her hearsay objection. When the

court pressed Garcia to stipulate to admission into evidence of the entire

state court trial transcript at the pre-trial conference, Garcia demurred

citing hearsay as the specific basis for her demurrer. The court then stated

that,“[t]here’s no hearsay. It’s a trial record. It’s a court document. So,

there’s no – there’s a lot of exceptions to the hearsay rule with respect to

transcripts of trials . . . .” Pretrial Hr’g Tr. (Mar. 20 , 2019) 11:8-12.

       After Garcia attempted to re-frame her objection, the court

concluded:

       But I’m telling you that the trial transcripts are coming in. . . . If
       he is going to introduce the trial transcripts of the 2009 trial that

       7
        Garcia further claimed that the admission of the trial transcript violated Civil
Rule 32(a) regarding the use of deposition transcripts against a party at trial. But none of
the authority that Garcia relies on dealt with the use of a trial transcript from a prior
court proceeding.

                                             21
      resulted in a judgment . . . that train has left the station.

      * * *
      There is – and mark it down right now that you can appeal.
      That I said that that trial transcript is coming in and I will
      review it. . . . [T]he point is there are innumerous exceptions to
      the hearsay rule with respect to trial transcripts that have
      occurred.

Pretrial Hr’g Tr. (Mar. 20 , 2019) 12:24-13:23.

      Garcia sufficiently raised her hearsay objection to the admission of

the transcripts to preserve her objection for appeal. “Once the court makes

a definitive ruling on the record admitting or excluding evidence, either at

or before trial, a party need not renew an objection or offer of proof to

preserve a claim of error for appeal.” United States v. Sepulveda-Barraza, 645

F.3d 1066, 1070 (9th Cir. 2011) (quoting Fed. R. Evid. 103); see also Palmerin

v. City of Riverside, 794 F.2d 1409, 1413 (9th Cir. 1986). This is because “[t]he

purpose of requiring a party to timely object is to ensure that the district

court has an opportunity to cure any potential errors in the first instance.”

United States v. Palmer, 3 F.3d 300, 304 (9th Cir. 1993) (citation omitted). No

legitimate interest is served by requiring an objecting party to subsequently

renew its objection to the admission of evidence when the court clearly was

aware of the specific objection and already explicitly and definitively ruled

on it. Id. The bankruptcy court explicitly and definitively rejected Garcia’s

hearsay objection to admission of the trial transcript at the pre-trial

                                        22
conference. Garcia did not need to renew the hearsay objection at trial in

order to preserve it.

      As to the substance of the objection, we are concerned with

evidentiary rulings only to the extent they are prejudicial. Fed. R. Evid.

103(a). Harmless errors in evidentiary rulings must be ignored. See, e.g.,

Nautilus Marine Enters., Inc. v. Exxon Mobile Corp. (In re Exxon Valdez), 745 F.

App’x 262, 264-65 (9th Cir. 2018); In re Mbunda, 484 B.R. at 355.

Furthermore, to the extent the bankruptcy court sought to rely on state

court trial testimony to find willfulness, affording Garcia with an

opportunity to cross-examine witnesses on the relevant trial testimony

informs our hearsay analysis and our harmless error analysis. In other

words, the availability of a full and fair opportunity to cross-examine might

either except or exclude the former testimony from the rule against hearsay

or might render any error with respect thereto harmless. See Fed. R. Evid.

103(a), 801(d)(1), 804(b)(1).

      Here, we cannot meaningfully review the bankruptcy court’s hearsay

ruling or determine whether any error with respect to its hearsay ruling

was harmless. Nor can we meaningfully assess the impact of cross-

examination on the hearsay and harmless error analyses. In order to make

a reasoned ruling on a hearsay objection to the admission of prior hearing

testimony, the court needed to identify what portion(s) of the testimony it

was considering and to specify for what purpose(s) the testimony was

                                       23
being allowed into evidence. See, e.g., United States v. Innamorati, 996 F.2d

456, 475 (1st Cir. 1993); United States v. Burreson, 643 F.2d 1344, 1349 (9th

Cir. 1981); see also United States v. Coplan, 703 F.3d 46, 85 (2d Cir. 2012)

(affirming district court’s decision to admit selective portions of deposition

transcripts but refusing to admit them in their entirety).

       Thus, on remand, to the extent the bankruptcy court intended to find

that Garcia willfully injured Fawzy, it will need to identify which portions

(if any) of the state court trial transcript it is relying on in making that

finding. It also may wish to supplement or amend its hearsay ruling to

clarify why the rule against hearsay did not bar admission of the particular

state court trial testimony relied on. In the event of an appeal after remand,

this additional information should enable us to render the necessary

review of any lingering hearsay and cross-examination issues, as well as

assess whether any related error was harmless.8

       8
         We recognize that the bankruptcy court admitted the state court trial transcript
primarily to aid its determination of what the jury considered and what it found for
purposes of establishing the availability of issue preclusion. It is axiomatic that a party
advocating for issue preclusion can and must present an adequate record from the prior
court proceeding to establish exactly which issues actually were litigated in the prior
proceeding. See In re Child, 486 B.R. at 172 (citing In re Kelly, 182 B.R. at 258). Such an
adequate record sometimes may require submission of a transcript from the prior court
proceeding. The use of the transcript for this purpose is not in violation of the rule
against hearsay because the proponent is not offering the prior testimony to prove the
truth of what the declarant stated but rather to prove which issues were addressed and
resolved in the prior proceeding. See Tremont LLC v. Halliburton Energy Servs., Inc., 696 F.
                                                                                  (continued...)

                                              24
B.     Cross-Appeal From § 523(a)(2)(A) Ruling.

       1.     Legal standards governing § 523(a)(2)(A).

       Generally speaking, § 523(a)(2)(A) excepts from discharge debts

incurred by false pretenses, a false representation, or actual fraud. Oney v.

Weinberg (In re Weinberg), 410 B.R. 19, 35 (9th Cir. BAP 2009). The requisite

fraud typically is established when the creditor establishes the following

five elements:

       (1) misrepresentation, fraudulent omission or deceptive
       conduct by the debtor; (2) knowledge of the falsity or
       deceptiveness of his statement or conduct; (3) an intent to
       deceive; (4) justifiable reliance by the creditor on the debtor's
       statement or conduct; and (5) damage to the creditor
       proximately caused by its reliance on the debtor's statement or
       conduct.

Id. (quoting Turtle Rock Meadows Homeowners Ass'n v. Slyman (In re Slyman),

234 F.3d 1081, 1085 (9th Cir. 2000)) (emphasis added). 9

       8
       (...continued)
Supp. 2d 741, 752 n.8 (S.D. Tex. 2010).
       9
         Fawzy believes that, under Husky International Electronics, Inc. v. Ritz, 136 S. Ct.
1581, 1586-88 (2016), intent to deceive no longer is necessary to establish a claim for
relief under § 523(a)(2)(A). We disagree with Fawzy’s attempts to extend Husky to his
dispute with Garcia. Husky does not bring Fawzy’s garden-variety conversion and
constructive fraud damages within the ambit of § 523(a)(2)(A). Indeed, Husky
recognized that § 523(a)(2)(A) only covers “actual fraud” and not “implied fraud.” Id. at
1486. However broad Husky might be interpreted, we will not construe it as implicitly
overruling decades of Ninth Circuit nondischargeability law generally requiring proof
of intent to deceive to support a claim under § 523(a)(2)(A). See Am. Express Travel
                                                                                (continued...)

                                             25
       2.     Analysis.

       In Arizona, a claim of fraud requires the plaintiff to establish by clear

and convincing evidence:

       (1) A representation; (2) its falsity; (3) its materiality; (4) the
       speaker’s knowledge of its falsity or ignorance of its truth;
       (5) his intent that it should be acted upon by the person and in
       the manner reasonably contemplated; (6) the hearer’s ignorance
       of its falsity; (7) his reliance on its truth; (8) his right to rely
       thereon; (9) his consequent and proximate injury.

Nielson v. Flashberg, 419 P.2d 514, 517-18 (Ariz. 1966). These elements meet

or exceed what is required for nondischargeable fraud under

§ 523(a)(2)(A).

       However, the state court jury only was instructed to consider

conversion and constructive fraud. The state court jury did not consider –

and did not need to consider – actual fraud. Neither the conversion claim,

nor the constructive fraud claim, required Fawzy to establish that Garcia

harbored any particular state of mind. See Blau v. Am.'s Servicing Co., No.

CV-08-773-PHX-MHM, 2009 WL 3174823, at *3 (D. Ariz. Sept. 29, 2009)

(citing Dawson v. Withycombe, 163 P.3d 1034, 1057-58 (Ariz. Ct. App. 2007));

Miller, 104 P.3d at 203.

       Fawzy contends that, during the state court trial, he proved that

       9
        (...continued)
Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th Cir. 1996) (citing
Britton v. Price (In re Britton), 950 F.2d 602, 604 (9th Cir. 1991)).

                                             26
Garcia concealed her cash withdrawals and her transfer of ownership of

the 4Runner. Fawzy additionally insists that the jury found concealment as

part of its verdicts on conversion and constructive fraud. According to

Fawzy, concealment is equivalent to an intent to deceive. Assuming

without deciding that the jury found concealment, we still disagree with

Fawzy. Under both Arizona law and federal bankruptcy law, the scienter

of the defendant is a separate and distinct element from the defendant’s act

of misrepresenting or concealing facts. See Oney, 410 B.R. at 35; Nielson, 419

P.2d at 517–18. Simply put, Garcia’s conduct and her state of mind are

neither factual nor legal equivalents.

      Fawzy only attacks the bankruptcy court’s holding that issue

preclusion should not be applied. He does not specifically and distinctly

make any other arguments on appeal. As a result, there is nothing else we

need to address to dispose of his cross-appeal. See Brownfield v. City of

Yakima, 612 F.3d 1140, 1149 n.4 (9th Cir. 2010). Because Fawzy’s issue

preclusion argument lacks merit, we AFFIRM the bankruptcy court’s

§ 523(a)(2)(A) ruling.

                               CONCLUSION

      For the reasons set forth above, we AFFIRM in part and VACATE in

part the bankruptcy court’s nondischargeability judgment. Additionally,

we REMAND for further proceedings consistent with this decision.

                                         27