Court Opinion

ID: 2803418
Source: CourtListenerOpinion
Date Created: 2015-05-26 20:01:52.528672+00
Date Added: 2024-06-11T12:11:41.056393
License: Public Domain

FILED
                            NOT FOR PUBLICATION                             MAY 26 2015

                                                                         MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                        U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In re: CHRISTOPHER A. EBERTS,                    No. 13-55691

              Debtor,                            D.C. No. 2:11-cv-08827-MWF

PALM FINANCE CORPORATION, a                      MEMORANDUM*
California corporation; et al.,

              Appellants,

 v.

CHRISTOPHER A. EBERTS,

              Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                  Michael W. Fitzgerald, District Judge, Presiding

                             Submitted May 7, 2015**
                               Pasadena, California

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
        **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: LIPEZ,*** WARDLAW, and MURGUIA, Circuit Judges.

      Palm Finance Corporation (“Palm”), Night Train Films, LLC (“NTF”), and

A-Mark Entertainment, LLC (“AME”) commenced an adversary proceeding

against Christopher A. Eberts during his Chapter 7 bankruptcy proceedings. Palm,

NTF, and AME sought the bankruptcy court’s determination that the debts owed to

them were nondischargeable under certain provisions of the bankruptcy code. The

bankruptcy court concluded that part of Palm’s claimed debt was nondischargeable

and that it was entitled to prejudgment interest pursuant to 28 U.S.C. § 1961, but

ruled in Eberts’s favor on the remaining claims. The district court affirmed, and

Palm, NTF, and AME appealed. We have jurisdiction pursuant to 28 U.S.C. §

158(d), and we affirm.

      1. The bankruptcy court properly concluded that NTF’s claim was not

excepted from discharge under 11 U.S.C. § 523(a)(4) because Eberts was not a

fiduciary of NTF. See Ragsdale v. Haller, 780 F.2d 794, 795 (9th Cir. 1986)

(“[D]ebts that arise from fraud or defalcation while [the debtor was] acting in a

fiduciary capacity . . . are nondischargeable.” (second alteration in original)

(internal quotation marks omitted)). NTF has identified no provision of California

        ***
               The Honorable Kermit V. Lipez, Senior Circuit Judge for the First
Circuit, sitting by designation.

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law creating a “second-tier fiduciary” relationship between Eberts and NTF. See

id. at 796 (“Although the concept of fiduciary is to be narrowly defined as a matter

of federal law, state law is to be consulted to determine when a trust in this strict

sense exists.”). Nor has NTF shown that the terms of the NTF Operating

Agreement, or Eberts’s responsibility for the NTF funds, amounted to an express

or technical trust creating a fiduciary relationship under § 523(a)(4). See id.; see

also Lewis v. Scott (In re Lewis), 97 F.3d 1182, 1185 (9th Cir. 1996); Teichman v.

Teichman (In re Teichman), 774 F.2d 1395, 1398-99 (9th Cir. 1985).

      2. The bankruptcy court properly held that NTF’s claim was not excepted

from discharge under § 523(a)(4). See 11 U.S.C. § 523(a)(4) (debts acquired as a

result of embezzlement are nondischargeable). The bankruptcy court did not

clearly err in finding that the third element of embezzlement—circumstances

indicating fraud—was not shown. Transamerica Commercial Fin. Corp. v.

Littleton (In re Littleton), 942 F.2d 551, 555-56 (9th Cir. 1991). The record

supports the bankruptcy court’s finding that Eberts was engaging in “sloppy

business practices” without an intent to defraud NTF. Eberts was juggling funds

among the various productions in which he was involved, and in which NTF had

no interest. And, in the end, Eberts was unable to repay his debt to NTF.

However, these facts plausibly lead to the bankruptcy court’s finding that Eberts

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had no intent to defraud NTF, and that no circumstances indicating fraud were

present. Id.

      3. The bankruptcy court did not clearly err in finding that NTF’s claim was

not excepted from discharge under 11 U.S.C. § 523(a)(6). See 11 U.S.C. §

523(a)(6) (debts acquired as a result of “willful and malicious injury by the debtor

to another entity or the property of another entity” are nondischargeable); Ormsby

v. First Am. Title Co. (In re Ormsby), 591 F.3d 1199, 1206 (9th Cir. 2010) (“In this

Circuit, § 523(a)(6)’s willful injury requirement is met only when the debtor has a

subjective motive to inflict injury or when the debtor believes that injury is

substantially certain to result from his own conduct.” (internal quotation marks

omitted)). Again, though Eberts engaged in “sloppy business practices,” the record

does not support either a subjective motive to inflict injury on NTF, or a belief that

such injury was substantially certain to result from his conduct. Ormsby, 591 F.3d

at 1206.

      4. The bankruptcy court correctly calculated the prejudgment interest

awarded to Palm in accordance with federal rather than state law. See Banks v. Gill

Distrib. Ctrs., Inc., 263 F.3d 862, 871 (9th Cir. 2001) (“The federal prejudgment

interest rate applies to actions brought under federal statute, such as bankruptcy

proceedings, unless the equities of the case require a different rate.”). Palm

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brought its claim against Eberts under 11 U.S.C. § 523(a)(2)(A), a federal statute,

and Palm does not contend that the equities warrant the application of state law.1

Id.

      AFFIRMED.

      1
       Otto v. Niles (In re Niles), 106 F.3d 1456, 1463 (9th Cir. 1997) held only
that where the underlying debt arose under state law, whether to award
prejudgment interest—not the rate of the prejudgment interest awarded—is
governed by state law. Thus, Niles does not control our determination of which
prejudgment interest rate applies to Palm’s claim.

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