Court Opinion

ID: 2676219
Source: CourtListenerOpinion
Date Created: 2014-05-29 18:00:40.170079+00
Date Added: 2024-06-11T15:07:41.788395
License: Public Domain

FILED
                                                         MAY 12 2014
 1                         NO FO PUBL A IO
                             T R     IC T N
                                                     SUSAN M. SPRAUL, CLERK
 2                                                     U.S. BKCY. APP. PANEL
                                                       OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No. CC-13-1267-PaTaKu
                                   )
 6   ALLEN WILLIAMS BROWN,         )      Bankr. No. 12-49655-BR
                                   )
 7                  Debtor.        )      Adversary 13-01002-BR
     ______________________________)
 8                                 )
     ALLEN WILLIAMS BROWN,         )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      M E M O R A N D U M1
11                                 )
     HELEN ACOSTA; OSCAR ALEMAN,   )
12                                 )
                    Appellees.     )
13   ______________________________)
14                      Submitted Without Oral Argument2
                              on February 20, 2014
15
                              Filed - May 12, 2014
16
                 Appeal from the United States Bankruptcy Court
17                   for the Central District of California
18            Honorable Barry Russell, Bankruptcy Judge, Presiding
19
20   Appearances:     Appellant Allen Williams Brown, pro se on brief;
                      Appellees Helen Acosta and Oscar Aleman, pro se on
21                    brief.
22
     Before: PAPPAS, TAYLOR and KURTZ, Bankruptcy Judges.
23
24        1
             This disposition is not appropriate for publication.
25   Although it may be cited for whatever persuasive value it may
     have (see Fed. R. App. P. 32.1), it has no precedential value.
26   See 9th Cir. BAP Rule 8013-1.
27        2
             By order entered December 11, 2013, the Panel, after
28   examining the briefs and the record, unanimously determined that
     this appeal is suitable for submission without oral argument
     pursuant to Fed. R. Bankr. P. 8012.
 1        Chapter 73 debtor Allen Williams Brown (“Brown”) appeals the
 2   judgment of the bankruptcy court that a debt based upon a state
 3   court judgment in favor of appellees Helen Acosta (“Acosta”) and
 4   Oscar Aleman (“Aleman” and, together, “Appellees”) was excepted
 5   from discharge under § 523(a)(2)(A), and the order denying
 6   reconsideration of that judgment.     We AFFIRM.
 7                                  FACTS
 8                                   A.
 9               The State Court Proceedings and Judgment
10        Brown filed a petition under chapter 7 on November 30, 2012.
11   On his Schedule F, he listed a debt to Appellees for $200,000
12   stemming from a 2011 state court fraud judgment entered against
13   him (the “State Court Judgment”). On May 2, 2007, Appellees had
14   filed a complaint in Los Angeles Superior Court against Diana
15   Beard-Williams (“Williams”), Rod Flowers (“Flowers”),4 the F.A.B.
16   Partnership (“F.A.B.”), and Does 1-20.     The complaint was
17   thereafter amended, and Does 1 and 2 were subsequently identified
18   as Brown, the estranged husband of Williams, and Patricia
19   Ashburne (“Ashburne”), Williams’ sister.
20        Williams filed an answer to the complaint on April 10, 2008.
21   Though they had been served, neither Brown, Ashburne, nor F.A.B.
22   filed answers.   Notice of entry of defaults against Brown,
23
24        3
             Unless otherwise indicated, all chapter and section
25   references are to the Bankruptcy Code, 11 U.S.C. §§ 101 – 1532.
26        4
             Although Flowers was a named defendant in the complaint,
27   the record is silent regarding his participation in the state
     court proceedings. There was no award against him personally in
28   the State Court Judgment.

                                     -2-
 1   Ashburne, and F.A.B. were entered by the state court on July 9,
 2   2010; none of the defaulted defendants moved for relief from the
 3   default within the time provided by statute.
 4        Williams filed a chapter 7 bankruptcy petition on May 5,
 5   2010.    The bankruptcy court granted Appellees relief from
 6   automatic stay in Williams’ bankruptcy case on October 1, 2010,
 7   to allow the state court proceedings to continue.
 8        Trial was scheduled to begin in state court April 15, 2011.
 9   Neither Williams, Brown, nor Ashburne appeared.    Although
10   Williams had filed an answer to the complaint, her failure to
11   appear caused the state court to strike her answer.    Trial
12   proceeded by default against all defendants.    The state court
13   entered judgment on May 31, 2011 (the “State Court Judgment”), in
14   favor of Appellees and against Brown, Ashburne, Williams, and
15   F.A.B.
16        In the State Court Judgment, the court found that, in the
17   summer of 2006, Williams, a licensed real estate broker,
18   approached Acosta, inviting her to join a partnership with
19   Williams and a third party, Flowers, to invest in income
20   producing properties in Memphis, Tennessee, and to reinvest
21   income from those properties in continued acquisitions.    On
22   July 31, 2006, Williams, Flowers, and Acosta signed a written
23   partnership agreement creating F.A.B.    A few days earlier, Acosta
24   had given Williams a check for $10,000 representing her
25   contribution to the partnership.
26        Williams represented to Acosta that her sister, Ashburne, as
27   buyer, had four properties in escrow that would be quitclaimed to
28   the partnership upon close of escrow.    The four properties were:

                                      -3-
 1   220 North Willet Street, 8508 Tournament Drive, 3422 Tournament
 2   Drive and 1242 Peabody Avenue, all in Memphis.   Of the four
 3   properties, the 3422 Tournament Avenue property was particularly
 4   attractive for investment purposes because there was an agreement
 5   in place to lease the property to FedEx as an executive home and
 6   there would be a $100,000 cash-back bonus for the buyer of the
 7   property.   Williams represented to Acosta that the bonus money
 8   would be available to repay Acosta’s investment and to use for
 9   additional acquisitions.
10        In August 2006, Aleman was added to the F.A.B. partnership,
11   and the name of the partnership was changed to F.A.A.B. (Flowers,
12   Acosta, Aleman and [Beard-]Williams).   Aleman invested $10,000,
13   and would later increase that to $13,000.
14        Then, in an email to the partners dated October 18, 2006,
15   Williams indicated that she had decided to leave the partnership,
16   but that the investments made by Acosta and Aleman were secure.
17   Williams represented that Aleman and Acosta would be given trust
18   deeds on three properties to secure their investments.
19        In November 2006, the Appellees informed Williams that they
20   were not happy with the operation of the partnership, in that
21   they were not given information on the properties and were not
22   being included in decision-making.    The Appellees indicated their
23   intention to dissolve the partnership and recover their
24   investment.   In December 2006, Williams told Acosta that she was
25   consulting with an attorney to prepare a promissory note through
26   which Acosta and Aleman would be repaid their investments.
27        The state court found that Williams never provided a
28   promissory note or trust deeds to the Appellees.   However, on

                                     -4-
 1   January 31, 2007, Williams told Acosta: “There is no agreement
 2   between you and [Ashburne,] or [Ashburne] and any particular
 3   group . . . .   The [F.A.A.B. partnership] has one property and
 4   only one property.   There are no bank accounts with [F.A.A.B.]
 5   funds.”   State Court Judgment at 8.   The state court found that:
 6      These statements by Williams were a direct contradiction
        of statements that [Williams] had made both to Acosta and
 7      to Aleman in order to induce them to provide her with
        $23,000 in funds for the F.A.B. and F.A.A.B. Group and in
 8      order to assist her and her family to purchase the
        specific properties that she had told Acosta and Aleman
 9      were going to be purchased for the partnership by her and
        her sister and then placed into the name of the
10      partnership. Further, the statement that there were no
        profits to distribute, and that there were no bank
11      accounts with [F.A.A.B.] funds were false, in that — as
        reflected in the bank statement from Wells Fargo Bank for
12      account ending in 1084 and for the statement end date
        November 30, 2006 — on November 22, 2006, one day after
13      escrow had closed on the 3422 Tournament Drive property,
        Williams received a $112,000 wire transfer from Preferred
14      Title and Escrow LLC, representing the bonus monies that
        Williams had told Acosta and Aleman would be paid to the
15      buyer upon purchase of the 3422 Tournament Drive property.
16   State Court Judgment at 8-9.
17        The state court also found that, after receiving the
18   $112,000, Williams deposited $45,000 in her personal savings
19   account and $15,000 to her personal checking account, took $7,000
20   in cash, paid $8,000 on a family member’s Advanta Card [Stanley
21   Beard not otherwise identified by the state court], and wrote two
22   personal checks for $10,000 and $25,000.   According to the state
23   court, “Williams exhausted funds which should have belonged to
24   the partnership (based on the representations that she had made
25   to the partners) by paying more than half of those funds to
26   herself and her relatives or for their benefit.”   State Court
27   Judgment at 11.
28        Importantly for purposes of this appeal, the state court

                                     -5-
 1   made the following specific findings relating to Brown:
 2         Escrow closed on the property located at
           8508 Tournament, Memphis on September 23, 2006. The
 3         purchaser of that property was “Diana Williams.”
           Williams quitclaimed that property to her husband
 4         [Brown] on July 30, 2007. This is another of the
           properties that Williams had repeatedly represented to
 5         Acosta and Aleman was going to be partnership property
           that would be quitclaimed to the partnership after
 6         purchase.
 7   State Court Judgment at 10.
 8         Escrow closed on the property located at 1242 Peabody
           Avenue, Memphis, on November 17, 2006. The listed
 9         purchaser of that property was [Brown]. Again, this
           property was one of the properties which Williams
10         represented was to be a partnership property and which
           would be quitclaimed to the partnership after close of
11         escrow.
12   Id.
13         Defendants Ashburne and Brown benefitted from Williams’
           false and fraudulent representations in that the
14         properties which were supposed to be titled in the name
           of the partnership and the monies which Williams
15         received as a result of her use of the capital
           investment funds provided by [Appellees] were – in fact
16         — titled in [Ashburne and Brown’s] names, and the funds
           were used by Williams to pay their debts. By way of
17         example, bank records . . . reflect payment of
           mortgages on behalf of Brown and Ashburne during the
18         months November 2006 through February 2007. The court
           finds that Williams’ husband, Brown, and Williams’
19         sister, Ashburne, were thus co-conspirators and joint
           venturers with Williams in the fraud and breach of
20         fiduciary duty whereby they also took advantage of [the
           Appellees], and thus they should be held jointly
21         responsible with Williams for losses suffered by [the
           Appellees].
22
23   State Court Judgment at 11.   And finally,
24         The court therefore finds, based on the foregoing
           facts, that the plaintiffs have met their burden of
25         proof . . . and have also presented evidence sufficient
           for the court to find that defendants Williams,
26         Ashburne and Brown collaborated in a civil conspiracy
           and joint venture from which the defendants, and each
27         of them, benefitted at plaintiff’s expense.
28   State Court Judgment at 12 (emphasis added).

                                     -6-
 1        The State Court Judgment awarded Acosta damages of $38,000
 2   and $21,266.20 in attorneys fees, and awarded Aleman $41,000 in
 3   damages, all jointly and severally against Williams, Brown,
 4   Ashburne, and F.A.B.    Brown and Ashburne appealed the State Court
 5   Judgment to the California Court of Appeals.   Acosta v. Ashburne,
 6   case no. B233748.   On April 25, 2012, the state appellate court
 7   affirmed the decision of the trial court, noting in its decision
 8   only that “Beard-Williams converted partnership funds to purchase
 9   properties in her own name, and in the names of Ashburne and
10   Brown.”   Slip op. at 2.
11                                    B.
12                   The Bankruptcy Adversary Proceeding
13        When Brown filed for chapter 7 relief, the Appellees
14   commenced an adversary proceeding against him on January 2, 2013.
15   In the complaint, they alleged two claims, one for an exception
16   to discharge of Brown’s debts to them for fraud under
17   § 523(a)(2)(A), and the other for denial of discharge under
18   § 727(a) because Brown had allegedly made false and misleading
19   statements in his bankruptcy schedules.   Brown filed an answer
20   pro se to the complaint, generally denying the allegations, and
21   arguing that he should not be held liable based on the State
22   Court Judgment because it was a default judgment.
23        The bankruptcy court conducted a status conference in the
24   adversary proceeding.   Although the Appellees had not formally
25   asked it to do so, the bankruptcy court began the status
26   conference by informing the parties that it was prepared to rule
27   that Brown’s obligations to the Appellees based on the State
28   Court Judgment were excepted from discharge in Brown’s bankruptcy

                                      -7-
 1   case under § 523(a)(2)(A).   Speaking primarily to Brown, the
 2   bankruptcy court stated:
 3        The reason that I wanted you here is very important
          because there was a superior court judgment
 4        filed. . . . I’m bound by that, I’m stuck with that
          judgment. . . . It was basically your wife or ex-wife
 5        whatever [who] entered into this conspiracy and at the
          end of the day that the judge found that you were part
 6        of that. You may disagree, but I’m bound by what the
          superior court judge says. So you’re responsible for
 7        all of her fraud which the Court found. . . . I am
          bound by that. I can’t change that. . . In this
 8        particular case . . . I have to find that that is
          nondischargeable because of fraud, because of what the
 9        superior court did, not because of anything I’m doing.
          . . . I’m finding, looking at the superior court
10        judgment that you in fact engaged in this fraud and
          therefore this debt under section 523 is
11        nondischargeable.
12   Hr’g Tr. 2:16–3:3, March 20, 2013.
13        Given the bankruptcy court’s conclusion, and with the
14   agreement of the Appellees, the court dismissed the claim against
15   Brown for denial of discharge under § 727(a).   Hr’g Tr. 7:5-6.
16        The bankruptcy court entered findings and conclusions on
17   May 2, 2013.   They included the following:
18        [Finding] 2. The Court explained to the parties at the
          March 20, 2013 status conference that the state court
19        judgment contained a specific finding of fact that the
          debtor/defendant conspired with Diana Beard-Williams,
20        among others, to defraud the plaintiffs.
21        [Finding] 3. The Court further explained to the parties
          that as a result of the state court’s specific finding
22        of fraud, the elements of the plaintiffs’ claim for
          relief were met under the principles of collateral
23        estoppel and the debt was therefore non-dischargeable.
24        [Conclusion] 1. Under the principles of collateral
          estoppel, the finding in the state court’s judgment
25        that the debtor defrauded the plaintiffs renders the
          debt to plaintiffs nondischargeable under
26        § 523(a)(2)(A).
27   Findings of Fact at 2.   The same day, the bankruptcy court
28   entered a judgment determining that Brown’s debt to the Appellees

                                     -8-
 1   under the State Court Judgment was excepted from discharge under
 2   § 523(a)(2)(A) and dismissing the Appellees’ claim for denial of
 3   discharge under § 727(a)(2) and (4).
 4        Brown filed a motion for reconsideration of the bankruptcy
 5   court’s judgment on May 16, 2013.      The bankruptcy court denied
 6   the reconsideration motion without a hearing or any explanation
 7   in an order entered May 29, 2013.
 8        Brown filed a timely appeal on June 6, 2013.
 9                               JURISDICTION
10        The bankruptcy court had jurisdiction under 28 U.S.C.
11   §§ 1334 and 157(b)(2)(I).    We have jurisdiction under 28 U.S.C.
12   § 158.
13                                   ISSUE
14        Whether the bankruptcy court erred in ruling that Brown’s
15   debt to Appellees was excepted from discharge under
16   § 523(a)(2)(A) by application of issue preclusion based upon the
17   State Court Judgment.
18        Whether the bankruptcy court abused its discretion in
19   denying Brown’s motion for reconsideration.
20                            STANDARD OF REVIEW
21        Whether a claim is excepted from discharge under
22   § 523(a)(2)(A) presents mixed issues of law and fact which we
23   review de novo.   Diamond v. Kolcum (In re Diamond), 285 F.3d 822,
24   826 (9th Cir. 2001).    We review the bankruptcy court's findings
25   of fact for clear error.    Honkanen v. Hopper (In re Honkanen),
26   446 B.R. 373, 378 (9th Cir. BAP 2011).      Clear error is found when
27   the reviewing court has a definite and firm conviction that a
28   mistake has been committed.    Lewis v. Ayers, 681 F.3d 992, 998

                                      -9-
 1   (9th Cir. 2012).   De novo review requires the Panel to
 2   independently review an issue, without giving deference to the
 3   bankruptcy court's conclusions.     First Ave. W. Bldg., LLC v.
 4   James (In re Onecast Media, Inc.), 439 F.3d 558, 561 (9th Cir.
 5   2006).
 6        The availability of issue preclusion is reviewed de novo,
 7   and the bankruptcy court’s decision to apply it is reviewed for
 8   abuse of discretion.   Af-Cap Inc. v. Chevron Overseas (Congo)
 9   Ltd., 475 F.3d 1080, 1086 (9th Cir. 2007).
10        Denial of a motion for reconsideration under Rule 9023 is
11   reviewed for abuse of discretion.        Determan v. Sandoval
12   (In re Sandoval), 186 B.R. 490, 493 (9th Cir. BAP 1995).
13        A bankruptcy court abuses its discretion if it applies an
14   incorrect legal standard, or misapplies the correct legal
15   standard, or if its factual findings are illogical, implausible
16   or without support from evidence in the record.        United States v.
17   Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)(en banc)).
18                                DISCUSSION
19   I.   The bankruptcy court did not err in determining that issue
          preclusion was available based on the State Court Judgment.
20
                                       A.
21
22        The bankruptcy court ruled that, because the state court
23   found in the State Court Judgment that Brown conspired to defraud
24   the Appellees, under the doctrine of issue preclusion, Brown’s
25   debt to the Appellees was excepted from discharge under
26   § 523(a)(2)(A).    We conclude that the bankruptcy court correctly
27   determined that issue preclusion was available.
28         To determine the preclusive effect of a California state

                                       -10-
 1   court's findings in a judgment or order in a later bankruptcy
 2   case, the bankruptcy court must first determine if issue
 3   preclusion is available under California law.     See 28 U.S.C.
 4   § 1738 (the Full Faith and Credit Statute); Marrese v. Am. Acad.
 5   of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985).     When state
 6   preclusion law controls, a bankruptcy court’s discretion to apply
 7   the doctrine must be exercised in accordance with state and
 8   federal law.   Khaligh v. Hadegh (In re Khaligh), 338 B.R. 817,
 9   823 (9th Cir. BAP 2006), aff'd, 506 F.3d 956 (9th Cir. 2007).
10        Under California law, the party asserting issue preclusion
11   has the burden of establishing the following "threshold"
12   requirements for its availability:      First, the issue sought to be
13   precluded from relitigation must be identical to that decided in
14   a former proceeding.    Second, this issue must have been
15   actually litigated in the former proceeding.     Third, it
16   must have been necessarily decided in the former proceeding.
17   Fourth, the decision in the former proceeding must be final and
18   on the merits.    Finally, the party against whom preclusion is
19   sought must be the same as, or in privity with, the party to the
20   former proceeding.    Harmon v. Kobrin (In re Harmon), 250 F.3d
21   1240, 1245 (9th Cir. 2001) (the "Harmon" requirements).      A sixth
22   element requires a mandatory "additional" inquiry into whether
23   imposition of issue preclusion in a particular setting would be
24   fair and consistent with sound public policy.     Lucido v. Super.
25   Ct., 51 Cal. 3d    335, 341-43 (1990).
26        Section 523(a)(2)(A) provides that a debt for money,
27   property, services, or an extension, renewal, or refinancing of
28   credit is excepted from discharge to the extent obtained by

                                      -11-
 1   "false pretenses, a false representation, or actual fraud, other
 2   than a statement respecting the debtor's or an insider's
 3   financial condition."   Thus, the issues that must have been
 4   determined in the state court proceedings to permit exception to
 5   discharge under § 523(a)(2)(A) are:
 6        A creditor must show that (1) the debtor made the
          representations; (2) that at the time he knew they were
 7        false; (3) that he made them with the intention and
          purpose of deceiving the creditor; (4) that the
 8        creditor [justifiably] relied on such representations;
          (5) that the creditor sustained the alleged loss and
 9        damage as the proximate result of the representations
          having been made.
10
11   Am. Express Travel Related Servs. Co. v. Hashemi (In re Hashemi),
12   104 F.3d 1122, 1125 (9th Cir. 1996).
13        The State Court Judgment principally addresses the fraud
14   perpetrated on the Appellees by Williams.     The state court’s
15   findings would appear to satisfy the factors listed above, at
16   least as to Williams:
17        The Court finds that Williams made many fraudulent and
          false representations of material fact to Acosta and
18        Aleman upon which they relied to their detriment.
19   State Court Judgment at 10.
20        However, Williams is not the debtor in this case — Brown is.
21   And the State Court Judgment does not find that Brown made any
22   representations to Appellees.   Indeed, there is nothing in the
23   record to suggest that Brown ever communicated, or was otherwise
24   in contact, with the Appellees.     Thus, Brown can not be held
25   directly liable under § 523(a)(2)(A) for the fraudulent
26   representations made to the Appellees by Williams.
27        Even so, our case law has long held that fraud committed by
28   another can be imputed to the debtor, but only under limited

                                       -12-
 1   circumstances.   In March 2014, the Panel published an en banc
 2   Opinion concerning the imputation of liability for an exception
 3   to discharge under § 523(a)(2)(A).     Sachan v. Huh (In re Huh),
 4   506 B.R. 257 (9th Cir. BAP 2014).      As discussed in that Opinion,
 5   earlier BAP case law measured a debtor’s responsibility for
 6   another’s fraud under principles of agency, finding that
 7   liability for the actions of a partner could be imputed to the
 8   debtor under theories of partnership and agency.     Id. at 269-72
 9   (discussing   Tsurukawa v. Nikon Precision, Inc.
10   (In re Tsurukawa), 287 B.R. 515, 525 (9th Cir. BAP 2002)).
11   However, after a comprehensive review of the case law, the Panel
12   adopted the standard for imputation of fraud liability
13   articulated by the Eighth Circuit in Walker v. Citizens State
14   Bank (In re Walker), 726 F.2d 452 (8th Cir. 1984).     Id. at 266.
15   The Panel concluded that, to be true to the policies of the
16   Bankruptcy Code and later case law, instead of focusing primarily
17   on the debtor’s status as an agent of the fraudster, the emphasis
18   should instead be on the actions of the debtor.     As the Panel
19   explained, to shown that another’s fraud should be imputed to the
20   debtor, the creditor seeking an exception to discharge must show
21   that the debtor acted with “culpable state of mind,” and that the
22   debtor “knew or should have known” of the perpetrator’s
23   fraudulent activities.   Id. at 267.
24                                   B.
25        In this case, the bankruptcy court’s decision to except from
26   discharge Brown’s debt to Acosta and Aleman was based on its
27   conclusion that the State Court Judgment’s finding that Williams,
28   Brown, and Ashburne engaged in a “civil conspiracy” to defraud

                                     -13-
 1   the Appellees was entitled to preclusive effect.        We agree that,
 2   under California law, a finding of civil conspiracy may qualify
 3   for issue preclusion.
 4          Recall, the State Court Judgment provided, in relevant part,
 5   that
 6          Williams’ husband, Brown, and Williams’ sister,
            Ashburne, were thus co-conspirators and joint venturers
 7          with Williams in the fraud and breach of fiduciary duty
            whereby they also took advantage of Acosta and Aleman.
 8
 9   and
10          That the plaintiffs . . . have also presented evidence
            sufficient for the court to find that defendants
11          Williams, Ashburne and Brown collaborated in a civil
            conspiracy and joint venture from which the defendants,
12          and each of them, benefitted at plaintiffs’ expense.
13   State Court Judgment at 11, 12.
14          In California, “a civil conspiracy is the formation of a
15   group of two or more persons who have agreed to a common plan or
16   design to commit a tortious act."        Kidron v. Movie Acquisition
17   Corp., 40 Cal. App. 4th 1571, 1582 (1995) (citing 1 Levy et al.,
18   Cal. Torts Civil Conspiracy, § 9.03[2], p. 9-12 (1995)); see also
19   Youst v. Longo, 43 Cal. 3d 64, 79 (1987) ("the conspirators must
20   agree to do some act which is classified as a 'civil wrong'"].
21   Liability for civil conspiracy under California law requires that
22   three elements be satisfied: (1) formation of the conspiracy
23   (i.e., that there be an agreement to commit wrongful acts);
24   (2) operation of the conspiracy (i.e., the commission of the
25   wrongful acts); and (3) damage resulting from operation of the
26   conspiracy. People ex rel. Kennedy v. Beaumont Investment, Ltd.,
27   111 Cal. App. 4th 102, 137-38 (2003).
28          The first element, that there be an agreement to commit

                                       -14-
 1   wrongful acts, requires knowledge by the conspirators that the
 2   acts are wrongful.   Put another way, the conspiring defendants
 3   “must have actual knowledge that a tort is planned and concur in
 4   the tortious scheme with knowledge of its unlawful purpose.”
 5   Favila v. Katten Muchin Rosenman, LLP, 188 Cal. App. 4th 189, 206
 6   (2010); 1-800 Contacts, Inc. v. Steinberg, 107 Cal. App. 4th 568,
 7   589 (2003) (same); see also People v. Austin, 23 Cal. App. 4th
 8   1596, 1607 (1979) ("without knowledge of the illegal purpose
 9   there is no basis for inferring a [civil conspiracy] agreement”).
10        In addition, knowledge of the planned tort must be combined
11   with the intent by a conspirator to aid in its commission.
12   Kidron, 40 Cal. App. 4th at 1582 (“Knowledge and intent may be
13   inferred from the nature of the acts done, the relation of the
14   parties, the interest of the alleged conspirators, and other
15   circumstances.”).
16        In finding that Brown, Williams, and Ashburne were involved
17   in a civil conspiracy, the State Court Judgment highlighted
18   several facts concerning Brown’s participation in that
19   conspiracy.   The state court found that two of the four houses
20   that were supposed to be titled in the names of the partnership
21   were instead titled in Brown’s name; and that bank records for
22   the accounts, which contained the $122,000 that was to be used
23   for the partnership or distributed to the partners, were instead
24   used to pay Brown’s mortgages from November 2006 through February
25   2007.   State Court Judgment at 11.    On this record, then, it is
26   clear that the state court found that Brown’s actions were
27   sufficient to meet the elements for a civil conspiracy to
28   defraud.

                                     -15-
 1        The record also supports that, given the findings in the
 2   State Court Judgment, an exception to discharge is appropriate
 3   based upon the imputation of Williams’ fraud to Brown under the
 4   test announced in In re Huh.   In concluding that Brown
 5   participated in a civil conspiracy under California law, the
 6   state court necessarily concluded that Brown collaborated with
 7   Williams to defraud the Appellees and, thus, that Brown “knew or
 8   should have known” of Williams’ wrongdoings.
 9        In sum, the bankruptcy court did not err in determining that
10   the state court’s findings in the State Court Judgment were
11   preclusive.   Because those findings satisfy the standard the
12   Panel announced in In re Huh, Williams’ liability for fraud is
13   properly imputed to Brown for purposes of an exception from
14   discharge under § 523(a)(2)(A).
15                                     C.
16        As discussed above, even though issue preclusion is
17   available as to a judgment under state law, the bankruptcy court
18   must nonetheless exercise discretion concerning whether to apply
19   the doctrine.   In re Khaligh, 338 B.R. at 832.       Because the
20   bankruptcy court must use judgment, based on the facts, in
21   deciding to apply issue preclusion, the bankruptcy judge's
22   several statements to the parties at the status conference
23   indicating that he was "bound" by the State Court Judgment, that
24   "there's nothing really I can do about it," and that "I'm stuck
25   with it" are, at best, imprecise.        However, in examining the
26   context of those comments, we observe that the bankruptcy court
27   was attempting to explain issue preclusion to non-lawyers.          In
28   response to the arguments of both parties challenging the factual

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 1   findings of the state court, we perceive the bankruptcy court was
 2   attempting to explain, primarily to Brown, that, absent
 3   unfairness, he should accept the findings of the state court:
 4   "I'm stuck with that judgment.     So that judgment controls a good
 5   portion of this case.   That is, the findings in that judgment."
 6   Hr'g Tr. 2:8-10, March 20, 2010.         We conclude that the bankruptcy
 7   court's comments that it was "stuck with the judgment," and so on
 8   were at most harmless error.   The court correctly noted that it
 9   could not revisit the individual findings of the state court.
10         In re Khaligh instructs that we should find an abuse of
11   discretion by the bankruptcy court only if, in applying issue
12   preclusion, "the court applied an incorrect standard of law, a
13   clearly erroneous view of the facts, or otherwise did something
14   that leaves us with the definite and firm conviction that there
15   was a clear error of judgment."     Id. at 832.     Brown has the
16   burden of proof to establish that the court should not have
17   applied issue preclusion.   Id. at 831-32.       Brown has not
18   addressed this question and thus has not met that burden.        We
19   conclude that the bankruptcy court did not abuse its discretion
20   in deciding to apply issue preclusion.
21   II.   The bankruptcy court did not abuse its discretion in denying
           reconsideration of the judgment.
22
23         Brown’s motion asking the bankruptcy court to reconsider the
24   judgment excepting his debt to the Appellees from discharge was
25   filed fourteen days after entry of the judgment.        It is thus
26   treated as a motion to alter or amend judgment under Rule 9023,
27   which incorporates Civil Rule 59(e).        Heritage Pac. Fin., LLC v.
28   Edgar (In re Montano), 501 B.R. 96, 112 (9th Cir. BAP 2013).          A

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 1   motion for reconsideration under Civil Rule 59(e) should not be
 2   granted, absent highly unusual circumstances, unless the court is
 3   presented with newly discovered evidence, committed clear error,
 4   or if there is an intervening change in the controlling law.
 5   Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d
 6   873, 880 (9th Cir. 2009); Jeffries v. Carlson (In re Jeffries),
 7   468 B.R. 373, 380 (9th Cir. BAP 2012).
 8        In the reconsideration motion, Brown did not present newly
 9   discovered evidence, argue that there was a change in controlling
10   law, or contend that the bankruptcy court committed clear error.
11   Rather, as he has done in this appeal, Brown merely reargued his
12   position on the merits:   that the findings in the State Court
13   Judgment were wrong.   Brown has not demonstrated the existence of
14   the highly unusual circumstances needed to justify
15   reconsideration, and the bankruptcy court did not abuse its
16   discretion in denying the motion.
17                               CONCLUSION
18        We AFFIRM the judgment of the bankruptcy court.
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