Court Opinion

ID: 4192618
Source: CourtListenerOpinion
Date Created: 2017-08-03 17:01:54.834243+00
Date Added: 2024-06-11T14:40:19.521917
License: Public Domain

FILED
                                                               MAR 14 2017
 1                          NOT FOR PUBLICATION
                                                           SUSAN M. SPRAUL, CLERK
 2                                                           U.S. BKCY. APP. PANEL
                                                             OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
                              OF THE NINTH CIRCUIT
 4

 5   In re:                        )        BAP No.   CC-16-1195-CTaF
                                   )
 6   AZIZOLAH JAVAHERY,            )        Bk. No.   2:14-bk-33249-DS
                                   )
 7                  Debtor.        )        Adv. No. 2:15-ap-01056-DS
     ______________________________)
 8                                 )
     AZIZOLAH JAVAHERY,            )
 9                                 )
                                   )
10                  Appellant,     )
                                   )
11   v.                            )        MEMORANDUM*
                                   )
12   SORAYA JAVAHERI-LEITNER;      )
     SIMIN JAVAHERY-KHOJASTEGAN,   )
13                                 )
                    Appellees.     )
14   ______________________________)
15                  Argued and Submitted on February 23, 2017
                             at Pasadena, California
16
                             Filed - March 14, 2017
17
              Appeal from the United States Bankruptcy Court
18                for the Central District of California
19       Honorable Deborah J. Saltzman, Bankruptcy Judge Presiding
                          ________________________
20
     Appearances:      Michael L. Poole argued for Appellant Azizolah
21                     Javahery; M. Jonathan Hayes of Simon Resnik Hayes
                       LLP argued for Appellees Soraya Javaheri-Leitner
22                     and Simin Javahery-Khojastegan
                             ________________________
23

24

25

26        *
             This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
27
     have, see Fed. R. App. P. 32.1, it has no precedential value.
28   See 9th Cir. BAP Rule 8024-1.
                                        1
 1   Before: CLEMENT**, TAYLOR, and FARIS, Bankruptcy Judges.
 2        This case arises out of treachery practiced over years by a
 3   brother against his two younger sisters.     Lest one think our
 4   characterization of the brother’s actions to be unfairly harsh,
 5   we quote the state court who passed on this dispute before it
 6   landed in bankruptcy court.     The siblings are members of a
 7   “conservative and male-dominated Jewish Iranian family[,]” in
 8   which the eldest male was “the most respected and dominating
 9   member of the family.”    Guided by less than noble motives, the
10   brother had convinced his sisters to turn over antiques, jewelry
11   and money to him for safekeeping and for investment, and had
12   promised that he would return those assets to the sisters on
13   request.    And they did so.   The state court found that the
14   brother “waged a systematic campaign of fraud” against his
15   sisters and “long planned to claim ownership” of the “fruits of
16   their difficult labor.”    It also stated that he “took every
17   possible step to ensure their financial ruin.”
18        When the brother refused to return the sisters’ money and
19   other valuables, they brought suit in the California Superior
20   Court.    After trial, the state court found for the sisters on
21   each of ten different common law causes of action, including
22   fraud and conversion and awarded compensatory damages of
23   approximately $500,000 as well as punitive damages of $350,000 to
24   each sister.
25        The brother filed bankruptcy, and the sisters brought an
26

27
          **
             Hon. Fredrick E. Clement, United States Bankruptcy Judge
28   for the Eastern District of California, sitting by designation.
                                        2
 1   adversary proceeding to except from discharge the state court
 2   judgment entered in their favor.       11 U.S.C. § 523(a)(2), (6).1
 3   Armed with the state court judgment and asserting issue
 4   preclusion, the sisters obtained a summary judgment excepting
 5   their debt from discharge.
 6        The brother appeals the order granting summary judgment and
 7   appeals the order denying his motion to vacate the summary
 8   judgment order.   He argues that the state court did not make
 9   sufficient findings from which the bankruptcy court could apply
10   issue preclusion.   He also argues that his post-summary judgment
11   appeal of an amended judgment correcting a clerical error in the
12   underlying judgment, which had been otherwise long since final,
13   precluded the bankruptcy court from applying issue preclusion.
14   We disagree and AFFIRM.
15                                  FACTS
16        The appellant is Azizolah Javahery (“Azizolah”); appellees
17   are his younger sisters, Soraya Javaheri-Leitner (“Soraya”) and
18   Simin Javahery-Khojastegan (“Simin”) (collectively “the
19   sisters”).2
20   A.   The Sisters’ State Court Action
21        Starting with Azizolah, the siblings immigrated to the
22

23
          1
            Unless specified otherwise, all chapter and section
24   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
25
     Procedure, Rules 1001-9037. All “Civil” references are to the
26   Federal Rules of Civil Procedure, Rules 1-86.
          2
27          Because the parties share a common surname, the panel
     refers to the parties by their given names. No disrespect is
28   intended.

                                        3
 1   United States from Iran.   Because of Azizolah’s greater
 2   familiarity with business affairs in the United States and his
 3   culturally assigned role as head of the family, the sisters
 4   deposited with Azizolah personal property and hundreds of
 5   thousands of dollars for investment on their behalf and for
 6   safekeeping.   By way of example, Simin deposited with Azizolah
 7   $300,000, which she had earned by working as a dentist in Iran.
 8   Soraya entrusted Azizolah with antiques, gold and silver jewelry
 9   and eight years’ earnings.
10        When Azizolah refused to return the sisters’ personal
11   property and money, the sisters brought an action against him in
12   state court.   Their complaint alleged causes of action for breach
13   of contract, conversion (two counts), fraud (two counts),
14   accounting, breach of fiduciary duty, constructive trust,
15   interference with contractual relations, and fraudulent
16   transfers.
17        After trial, the state court issued a lengthy Statement of
18   Decision, which contained three main parts: (1) determining
19   Azizolah’s liability; (2) fixing compensatory damages; and
20   (3) deciding whether punitive damages should be awarded and the
21   amount of those damages.   As to the liability component of the
22   action, as pertinent here, the state court found for the sisters
23   on each of their causes of action, including conversion and
24   fraud.   As to conversion, the state court found:
25        Defendant [Azizolah] wrongfully converted certain items
          of antiques, silver and gold jewelry that were brought
26        by Soraya to the United States for her own use and
          ownership. Soraya brought $3500 that she had saved as
27        well as antiques including a handmade rung [sic],
          sterling silver and handmade artwork from the City of
28        Esfahan. Plaintiff Soraya estimated the weight of the

                                      4
 1        silver to be 30 to 40 kilograms. Besides the silver,
          Plaintiff Soraya also brought gold jewelry, including
 2        18 karat gold earrings, bracelet, necklace and rings
          estimated to be valued at $50,000-$60,000.3
 3

 4   With respect to fraud,4 the court stated, “Because Defendant
 5   [Azizolah] took various actions to affirm his trustworthiness to
 6   his younger sisters, Defendant was able to perpetrate the fraud
 7   upon them until 2006.”
 8        As to the amount of compensatory damages, the state court
 9   made findings rooted in the conversion causes of action.   It
10   awarded Soraya $459,959 and Simin $571,570.   The state court’s
11   treatment of the damages issue was confined to four paragraphs:
12             Plaintiff Soraya testified that Defendant had
          wrongfully converted antiques, gold, and silver which
13        belonged to her and were valued at $50,000-$60,000.00.
          The Court finds that the Plaintiff’s testimony was
14        credible.
15             California Civil Code Section 3336 states in
          pertinent part that a plaintiff may receive as damages
16        for conversion, “[t]he value of the property at the
          time of the conversion, with the interest from that
17        time [. . .] and [s]econd - [a] fair compensation for
          the time and money properly expended in pursuit of that
18        property.”
19             Plaintiff’s expert forensic account [sic] Mr. Jack
          Zuckerman testified that using the legal interest rate
20        of 10 percent, Plaintiff Soraya suffered damages of
          approximately $346,123.00 through September 20, 2009
21        for the cash damages. This does not include damages
          through the date of the adjudication of the matter, nor
22

23
          3
            The record is unclear whether the court’s findings
24   regarding conversion arose from the second cause of action
     (conversion) or the tenth cause of action (theft/conversion/
25
     embezzlement of plaintiff’s inheritance).
26        4
            The Statement of Decision addresses only the third cause
27   of action for fraud. For reasons not clear, the fourth cause of
     action, also for fraud, was not addressed in the Statement of
28   Decision.

                                     5
 1        does it include the value of the antiques and silver
          jewelry through the date of the adjudication of this
 2        matter. The amount of damages for the antiques and
          silver that Plaintiff Soraya brought from Iran, at a
 3        legal rate of interest, would be $113,836.00. Thus, in
          terms of actual damages alone, the Court finds that
 4        Plaintiff Soraya suffered actual [damages] in the
          amount of $459,959.00.
 5
               As to Plaintiff Simin, the Court finds that using
 6        a legal interest rate of 10 percent, Plaintiff Simin
          has suffered $571,570.00 in actual damages.
 7

 8        As to the punitive damages, the Statement of Decision also
 9   made findings of malice, oppression and fraud, as required by
10   Cal. Civ. Code § 3294, to support the imposition of punitive
11   damages.   It stated, “The Court found by clear and convincing
12   force that punitive damages are warranted in this matter finding
13   that Defendant Azizolah Javahery acted with ‘malice, oppression
14   and fraud’ given all his actions to wrongfully take the assets of
15   his two sisters . . . .”   (emphasis added).   The state court
16   explained, “Defendant knew that these funds and items of personal
17   property were the livelihood of his sisters, and the fruits of
18   their difficult labor.   Despite that, he waged a systematic
19   campaign of fraud against his sisters, in order to deprive them
20   of their hard earned assets.”
21        The court’s findings as to the amount of punitive damages
22   were cursory.   It stated: “As punitive damages are to be awarded
23   in an amount that will deter and punish the Defendant, punitive
24   damages are awarded by this Court in the amount of $350,000.00
25   for each Plaintiff.”
26        Thereafter, the state court entered judgment for the
27   sisters.   As relevant here, the judgment stated:
28        AS TO PLAINTIFF SIMIN JAVAHERY AND SORAYA JAVAHERY’S

                                      6
 1        SECOND CAUSE OF ACTION FOR CONVERSION:
 2        The Court rules that Plaintiffs should prevail on their
          second cause of action for conversion.
 3
          AS TO PLAINTIFF SIMIN JAVAHERY AND SORAYA JAVAHERY’S
 4        THIRD AND FOURTH CAUSE OF ACTION FOR FRAUD:
 5        The Court rules that Plaintiffs should prevail on their
          second cause of action for conversion [sic].
 6
          The Court rules that punitive damages are warranted . .
 7        .
 8        AS TO PLAINTIFF SIMIN JAVAHERY AND SORAYA JAVAHERY’S
          TENTH CAUSE OF ACTION FOR THEFT/CONVERSION/EMBEZZLEMENT
 9        OF PLAINTIFF’S INHERITANCE:
10        The Court rules that Plaintiffs should prevail on their
          tenth cause of action for theft/conversion/embezzlement
11        of Plaintiff’s inheritance.
12        AS TO DAMAGES, PLAINTIFFS SHALL TAKE THE FOLLOWING:
13        AS TO SORAYA JAVAHERI:
14        $346,123.00 (Cash Damages At Legal Interest of 10%)
15        $113,836 (Damages for Antiques and Silver at Legal
          Interest Rate of 10%)
16
          $350,000.00 (Punitive Damages)
17
          AS TO SIMIN SORAYA JAVAHERY:
18
          $571,570.00 (Cash Damages at Legal Interest Rate of
19        10%)
20        $350,000.00 (Punitive Damages)
21   (emphases added).
22        After this judgment was entered, neither side appealed.
23   B.   Azizolah’s Bankruptcy and the Sisters’ Adversary Proceeding
24        Almost three years after the state court entered judgment,
25   Azizolah filed a Chapter 7 bankruptcy, and the sisters responded
26   by filing this adversary proceeding to except from discharge
27   Azizolah’s debt to them.   11 U.S.C. § 523(a)(2), (6).
28        The sisters then filed a motion for summary judgment,

                                      7
 1   arguing that the state court judgment together with the doctrine
 2   of issue preclusion entitled them to judgment.    Azizolah opposed,
 3   arguing that the state court did not find that he committed
 4   fraud.   Believing that the state court judgment contained a
 5   clerical error and that the Statement of Decision demonstrated a
 6   clear intent to find fraud, the bankruptcy court applied the
 7   doctrine of issue preclusion and granted summary judgment for
 8   (1) Soraya in the amount of $113,836 as arising from
 9   nondischargeable conversion and (2) each sister in the amount of
10   $350,000 arising from a finding of fraud for purposes of punitive
11   damages under Cal. Civ. Code § 3294.    The bankruptcy court found
12   the record inadequate to award further damages and denied the
13   remainder of the motion for summary judgment.
14   C.   Azizolah’s Motion to Amend the State Court Judgment
15        After the bankruptcy court granted summary judgment and
16   three years after the entry of judgment by the state court,
17   Azizolah moved the state court to correct clerical mistakes in
18   the judgment, noting that the judgment incorrectly memorialized
19   the findings in the Statement of Decision, describing erroneously
20   the third and fourth causes of action as for conversion and
21   stating that the punitive damages award arose from “the entire
22   complaint,” rather than the third and fourth causes of action for
23   fraud (mischaracterized as conversion in the judgment).      The
24   sisters opposed Azizolah’s efforts.    Consistent with the
25   bankruptcy court’s interpretation of the original judgment, the
26   state court granted the motion to correct the judgment as to the
27   third and fourth causes of action to add fraud, but otherwise
28   denied the motion.   As in the original judgment, however, the

                                      8
 1   amended judgment appended the sisters’ entitlement to punitive
 2   damages to the fraud cause of action.
 3        An amended judgment was entered.    As corrected, in the
 4   pertinent part the judgment now reads:
 5        AS TO PLAINTIFF SIMIN JAVAHERY AND SORAYA JAVAHERY’S
          THIRD AND FOURTH CAUSE OF ACTION FOR FRAUD:
 6
          The Court rules that Plaintiffs should prevail on their
 7        second cause of action for fraud.
 8        The Court rules that punitive damages are warranted . .
          . .
 9

10        Azizolah’s appeal to the California Court of Appeals
11   followed.   That appeal remains unresolved.
12   D.   The Sisters’ Motion for Judgment under Civil Rule 54(b) and
          Azizolah’s Motion to Vacate the Order Granting Summary
13        Judgment
14        Before Azizolah’s appeal could be resolved, the sisters
15   moved to dismiss the remainder of their adversary complaint and
16   to enter judgment in their favor based on the bankruptcy court’s
17   order (partially) granting summary judgment.    See Fed. R. Civ. P.
18   54(b), incorporated by Fed. R. Bankr. P. 7054.    The court granted
19   the sisters’ motion, dismissed their remaining claims and entered
20   judgment for them excepting their judgment from discharge.
21        Armed with the unresolved appeal from the state court order
22   correcting the judgment, Azizolah requested the bankruptcy court
23   to vacate the order granting the summary judgment, arguing that
24   issue preclusion may not be applied where an appeal is pending of
25   the prior judgment for which preclusive effect is sought.    The
26   sisters opposed, and the court denied the motion.
27        This appeal followed.
28

                                      9
 1                               JURISDICTION
 2        The bankruptcy court had jurisdiction under 28 U.S.C.
 3   §§ 1334, 157(b)(2)(I).   This court has jurisdiction under
 4   28 U.S.C. § 158.
 5                                   ISSUES
 6        Three issues dominate this appeal:
 7        1.   Whether the bankruptcy court abused its discretion by
 8   refusing to vacate an order that was based on the issue-
 9   preclusive effect of an otherwise final state court judgment,
10   where the state court had later entered an amended judgment to
11   correct a clerical error and an appeal challenging the corrected
12   judgment remained unresolved;
13        2.   Whether the bankruptcy court erred in granting summary
14   judgment under 11 U.S.C. § 523(a)(2)(A) based on issue
15   preclusion; and
16        3.   Whether the state court’s conversion judgment made
17   sufficient findings of willfulness and maliciousness under
18   11 U.S.C. § 523(a)(6) for the bankruptcy court to apply issue
19   preclusion to that judgment in rendering summary judgment in
20   favor of the judgment creditors.
21                            STANDARDS OF REVIEW
22        This court reviews a denial of a Civil Rule 60(b) motion for
23   abuse of discretion.   Sch. Dist. No. 1J v. AC & S, Inc., 5 F.3d
24   1255, 1262 (9th Cir. 1993).   A trial court abuses its discretion
25   if it does “not apply the correct law or if it rests its decision
26   on a clearly erroneous finding of material fact.”    S.E.C. v.
27   Coldicutt, 258 F.3d 939, 941 (9th Cir. 2001).
28        Summary judgments are reviewed de novo.    Conestoga Serv.

                                       10
 1   Corp. v. Executive Risk Indem., Inc., 312 F.3d 976, 980 (9th Cir.
 2   2002).
 3        Issue preclusion requires a two-step review.     First, whether
 4   issue preclusion is available is reviewed de novo.     Krishnamurthy
 5   v. Nimmagadda (In re Krishnamurthy), 209 B.R. 714, 718 (9th Cir.
 6   BAP 1997), aff’d, 125 F.3d 858 (9th Cir. 1997).     Second, “[i]f
 7   issue preclusion is available, the decision to apply it is
 8   reviewed for abuse of discretion.”     Lopez v. Emergency
 9   Restoration, Inc. (In re Lopez), 367 B.R. 99, 103 (9th Cir. BAP
10   2007); Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006).
11                                 DISCUSSION
12   I.   Legal Standards
13        The court shall grant summary judgment where “there is no
14   genuine dispute as to any material fact” and the moving party “is
15   entitled to judgment as a matter of law.”     Fed. R. Civ. P. 56(a),
16   incorporated by Fed. R. Bankr. P. 7056.     “The court views the
17   evidence in the light most favorable to the non-moving party to
18   determine if there are any genuine issues of material fact and
19   whether the moving party is entitled to judgment as a matter of
20   law.”    Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d
21   1119, 1125 (9th Cir. 2014).
22        In federal courts, the preclusive effect of a state court
23   judgment is decided by the law of the state in which the judgment
24   was rendered.    Gayden v. Nourbakhsh (In re Nourbakhsh), 67 F.3d
25   798, 800 (9th Cir. 1995).    California has five prerequisites to
26   the availability of issue preclusion:
27        First, the issue sought to be precluded from
          relitigation must be identical to that decided in a
28        former proceeding. Second, this issue must have been

                                       11
 1         actually litigated in the former proceeding. Third, it
           must have been necessarily decided in the former
 2         proceeding. Fourth, the decision in the former
           proceeding must be final and on the merits. Finally,
 3         the party against whom preclusion is sought must be the
           same as, or in privity with, the party to the former
 4         proceeding.
 5   Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir.
 6   2001).
 7         The party seeking to employ issue preclusion bears the
 8   burden of showing its applicability.      Vella v. Hudgins, 20 Cal.
 9   3d 251, 257 (1977).      In deciding this issue, the court may
10   consider the entire record, including the rendering court’s
11   Statement of Decision.      Restatement (Second) of Judgments § 27
12   cmt. f (1982); In re Lopez, 367 B.R. at 105 (statement of
13   decision); Grenier v. Roback (In re Grenier), BAP No. NC-14-1396-
14   KiTaD, 2015 WL 3622712, at *2-3, *7 (9th Cir. BAP June 10, 2015)
15   (same).
16   II.   Motion to Vacate
17         Civil Rule 60 allows the bankruptcy court to vacate an order
18   where “it is based on an earlier judgment that has been reversed
19   or vacated; or applying it prospectively is no longer equitable,”
20   or for “any other reason that justifies relief.”      Fed. R. Civ. P.
21   60(b)(5), (6), incorporated by Fed. R. Bank. P. 9024.
22         The crux of Azizolah’s argument is that the bankruptcy court
23   abused its discretion in declining to vacate the order granting
24   summary judgment against him because the state court judgment,
25   which formed the basis of the bankruptcy court’s order, lost its
26   finality when he later appealed the amended judgment.
27         No known case directly addresses whether issue preclusion
28   may be    applied under this factual circumstance under California

                                        12
 1   law.    California law on issue preclusion provides for two kinds
 2   of attacks on a judgment, i.e., direct attacks (appeals) and
 3   collateral proceedings that assail a judgment.    And it treats the
 4   two attacks differently when deciding whether a judgment is final
 5   for the purposes of issue preclusion.    This disparate treatment
 6   suggests that an appeal from a judgment amended to correct a
 7   clerical error does not impact finality for issue preclusion
 8   purposes.
 9          As defined by state law, issue preclusion applies only to
10   judgments that are final and that are not subject to a direct
11   attack such as an appeal.    People v. Bank of San Luis Obispo,
12   159 Cal. 65, 82-83 (1910) (noting a “broad difference” between
13   judgments subject to “direct appeal,” which are not final, and
14   judgments subject to “collateral proceedings,” which are final
15   (quoting Spanagal v. Dellinger, 38 Cal. 278, 284 (1869) (Sawyer,
16   C.J., concurring))); see also Sandoval v. Super. Ct., 140 Cal.
17   App. 3d 932, 936-37 (1983); Cal. Code Civ. Proc. § 1049.      A
18   judgment is not final for purposes of issue preclusion while an
19   appeal remains pending or while the period for filing an appeal
20   has not yet expired.    Kay v. City of Rancho Palos Verdes,
21   504 F.3d 803 (9th Cir. 2007) (applying California law); Franklin
22   & Franklin v. 7 Eleven Owners for Fair Franchising, 85 Cal. App.
23   4th 1168, 1174 (2000); see also Cal. R. of Court 8.104(a)(1)(C)
24   (ordinarily an appeal must be filed not later than 180 days after
25   entry of judgment).    The deadline to file an appeal is
26   jurisdictional.    Van Beurden Ins. Servs. Inc. v. Customized
27   Worldwide Weather Ins. Agency, Inc., 15 Cal. 4th 51, 56 (1997).
28   It cannot be extended or reset by entering a subsequent judgment

                                      13
 1   or appealable order that renders the same result.    Laraway v.
 2   Pasadena Unified Sch. Dist., 98 Cal. App. 4th 579, 583 (2002).
 3   Once an appeal has concluded or the time to do so has expired,
 4   the judgment becomes final.
 5        In contrast, judgments that are the subject of an unresolved
 6   collateral attack, those “not in the direct line of the
 7   judgment,” such as motions for a new trial and actions to annul a
 8   judgment, remain final.    Bank of San Luis Obispo, 159 Cal. at
 9   82-83; see also Restatement (Second) of Judgments § 13 cmt. f
10   (1982).    More to the point, an unresolved appeal from an
11   unsuccessful collateral attack does not bar application of issue
12   preclusion.    In re McNeil’s Estate, 155 Cal. 333, 337 (1909)
13   (finding judgment was final for issue-preclusion notwithstanding
14   unsuccessful action to annul the judgment and unexpired time for
15   appeal).    It is only if and when a collateral attack actually
16   succeeds in overthrowing the judgment that the judgment loses
17   force and issue-preclusive effect.    Harris v. Barnhart, 97 Cal.
18   546, 551 (1893).
19        Juxtaposed, these authorities reveal a clear line of
20   demarcation.    While an appeal remains pending or during the
21   period in which an appeal might be filed, a judgment is not
22   final.    After that, the judgment is final, and an unresolved
23   effort to vacate or materially modify the judgment does not
24   affect finality, unless and until it actually overturns the
25   judgment.
26        As a result, Azizolah’s failure to appeal the original and
27   underlying judgment and the expiration of his time to do so means
28   that the judgment is final.    Its finality, moreover, is not

                                      14
 1   impacted by the correction of the clerical error in the judgment
 2   and his now pending appeal of the amended judgment.
 3        A narrow exception to the finality rule may exist for
 4   amended judgments that substantially change the original
 5   judgment.   An amended judgment reopens a party’s right to appeal
 6   only if the amended judgment “substantially modifies” the
 7   original judgment.    Ellis v. Ellis, 235 Cal. App. 4th 837, 843
 8   (2015).   A “substantial modification” is one that “materially
 9   affects the rights of the parties.”    Sanchez v. Strickland,
10   200 Cal. App. 4th 758, 765 (2011).    A substantially modified
11   judgment supersedes the original judgment and a new period to
12   appeal commences.    Neff v. Ernst, 48 Cal. 2d 628, 634 (1957).    By
13   contrast, amendments that rectify clerical errors and do not
14   involve the exercise of judicial discretion do not result in a
15   new and appealable judgment.5   Stone v. Regents of Univ. of Cal.,
16   77 Cal. App. 4th 736, 744-45 (1999).    And the aggrieved party’s
17   appeal period runs from the date of entry of the original
18   judgment, and not the date of entry of the amended judgment.      Id.
19        If California law recognizes such an exception, it is not
20   applicable here.    The amended judgment that is the subject of
21   Azizolah’s appeal merely conformed the judgment to the terms of
22   the state court’s Statement of Decision.    It did not materially
23   affect the rights of the parties or substantially modify the
24   original judgment.    Because it rectified only a clerical error in
25

26        5
            Unlike the   limited time for filing an appeal, a trial
27   court may correct   a clerical error at any time. Cal. Code Civ.
     P. § 473(d); Ames   v. Paley, 89 Cal. App. 4th 668, 572 (2001);
28   In re Marriage of   Kaufman, 101 Cal. App. 3d 147, 151 (1980).

                                      15
 1   the original judgment, the amended judgment does not fall within
 2   this exception to the finality rule for judgments.       Therefore,
 3   the amended judgment never restarted the deadline for an appeal
 4   of the original judgment, and did not diminish the preclusive
 5   effect of the original judgment.
 6        For these reasons, the original state court judgment was
 7   final for the purposes of issue preclusion, a fact not altered by
 8   Azizolah’s later appeal of the order amending the judgment, and
 9   the bankruptcy court did not abuse its discretion in denying the
10   motion to vacate.
11   III. Motion for Summary Judgment
12        A.      Availability of Issue Preclusion
13                1.   Section 523(a)(2) Fraud
14        Section 523(a)(2)(A) excepts from discharge debts for money,
15   property, or services “to the extent obtained by false pretenses,
16   a false representation or actual fraud.”     11 U.S.C.
17   § 523(a)(2)(A).     The creditor must demonstrate by a preponderance
18   of the evidence: “(1) the debtor made . . . representations;
19   (2) that at the time he knew they were false; (3) that he made
20   them with the intention and purpose of deceiving the creditor;
21   (4) that the creditor relied on such representations; [and]
22   (5) that the creditor sustained the alleged loss and damage as
23   the proximate result of the misrepresentations having been made.”
24   Am. Express v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th
25   Cir. 1997).
26        “The elements of fraud under § 523(a)(2)(A) match the
27   elements of common law fraud and actual fraud under California
28   law.”     Lee v. Tcast Commc’n, Inc. (In re Jung Sup Lee), 335 B.R.

                                       16
 1   130, 136 (9th Cir. BAP 2005) (quoting Younie v. Gonya
 2   (In re Younie), 211 B.R. 367, 373-74 (9th Cir. BAP 1997), aff’d
 3   163 F.3d 609 (9th Cir. 1998)).    As a result, a proper finding of
 4   fraud by a California state court satisfies the identity-of-issue
 5   requirement under the preclusion doctrine.
 6        Azizolah advances four arguments against the finding of
 7   nondischargeable fraud under § 523(a)(2)(A) based on issue
 8   preclusion.   First, he argues that the state court judgment did
 9   not render judgment based on fraud.    The argument assumes that
10   the bankruptcy court could not properly consider the state
11   court’s Statement of Decision.    This panel disagrees.   Resort to
12   the Statement of Decision is appropriate when applying issue
13   preclusion.   In re Lopez, 367 B.R. at 105; In re Grenier, 2015 WL
14   3622712, at *2-3, *7 (9th Cir. BAP June 10, 2015).    Here, the
15   Statement of Decision specifically found that Azizolah defrauded
16   his younger sisters.    Moreover, though containing a clerical
17   error, the original judgment fairly considered also found fraud
18   on Azizolah’s part.    As a consequence, the bankruptcy court
19   properly found that the state court judgment did, in fact, make a
20   finding of fraud.6
21        Second, Azizolah argues that the record is insufficient to
22   support issue preclusion on the element of damages under
23   § 523(a)(2)(A) because the state court awarded damages only for
24

25        6
            Hindsight strengthens the bankruptcy court’s finding.
26
     After the bankruptcy court granted summary judgment, Azizolah
     moved to clarify the state court judgment because it contained a
27   clerical error. Consistent with the bankruptcy court’s reading,
     the state court corrected the clerical error and amended the
28   judgment to include fraud.

                                      17
 1   conversion and because the judgment did not specify whether it
 2   found entitlement to punitive damages based on malice, oppression
 3   or fraud.    See, e.g., Plyam v. Precision Dev. LLC (In re Plyam),
 4   530 B.R. 456, 465 (9th Cir. BAP 2015) (under Cal. Civ. Code
 5   § 3294(a), only intentional malice or fraud will support a
 6   finding under § 523(a)(6)).    But the record is adequate in this
 7   regard.     The state court found that Azizolah acted with “malice,
 8   oppression and fraud.” (emphasis added).    Therefore, the state
 9   court awarded punitive damages for fraud, and that finding
10   satisfies the damages elements of § 523(a)(2)(A).
11        Third, Azizolah argues that actual damages are an absolute
12   predicate to an award of punitive damages.    See Kizer v. Cty. of
13   San Mateo, 53 Cal. 3d 139, 147 (1991); Mother Cobb’s Chicken
14   Turnovers, Inc. v. Fox, 10 Cal. 2d 203, 206 (1937).    And since
15   the state court did not expressly award damages for fraud, an
16   award of punitive damages based on a finding of fraud was also
17   not possible.7
18        California Civil Code § 3294(a) authorizes punitive damages
19   “in addition to the actual damages.”    Carefully parsed,
20   California decisional law does not require that there be an
21   express award of actual damages to support an award of punitive
22   damages, but rather that the plaintiff has suffered injuries from
23   a tortious act, even if compensatory damages were not awarded.
24   Compare Clark v. McClurg, 215 Cal. 279, 282-83, 285 (1932)
25

26        7
            One might wonder why punitive damages might not be
27   sustained under the conversion component of the judgment. The
     simple answer is that the state court only awarded punitive
28   damages under the fraud portion of the judgment.

                                       18
 1   (upholding $5,000 award of punitive damages, even though no

 2   general damages were awarded), and Gagnon v. Continental Cas.

 3   Co., 211 Cal. App. 3d 1598, 1603 n.5 (1989) (even though

 4   compensatory damages were not available, the plaintiff was

 5   entitled to a jury instruction that punitive damages bear a

 6   reasonable relationship to the “actual harm or injury,” rather

 7   than to “actual damages”), and Wayte v. Rollins Int’l, Inc.,

 8   169 Cal. App. 3d 1, 16 (1985) (“All that is required is proof of

 9   a tort which is of such a nature to warrant imposition of

10   punitive damages.”), with Berkley v. Dowds, 152 Cal. App. 4th 518

11   (2007) (because compensatory damages were not recoverable,

12   plaintiff could not pursue punitive damages), and Cheung v.

13   Daley, 35 Cal. App. 4th 1673 (1995) (punitive damages not

14   available where jury expressly determined that plaintiffs

15   entitled to $0.00 compensatory damages).

16        The case of Topanga Corp. v. Gentile, 249 Cal. App. 2d 681

17   (1967), is particularly illuminating.   In that case, the

18   plaintiff corporation sought equitable relief in the form of

19   reformation and cancellation of shares of stock from an allegedly

20   fraudulent transaction involving defendant stock promoters.

21   Punitive damages were requested but compensatory damages were not

22   sought or awarded.   The trial court granted equitable relief but

23   denied punitive damages apparently because compensatory damages

24   were not sought or awarded.   On that ground, the Court of Appeals

25   remanded the matter for further hearings stating,

26        However, the fact that plaintiffs were not given a
          grant of monetary damages of a certain amount is not
27        determinative. Plaintiff was indeed damaged by
          defendants’ fraud for defendants had, as the result of
28        the fraud, received stock in an amount not commensurate

                                     19
 1        with the value of their contribution to the
          corporation. . . . The requirement of “actual damages”
 2        imposed by section 3294 is simply the requirement that
          a tortious act be proven if punitive damages
 3        are to be assessed.
 4   Id. at 691.
 5        Here, there is no question that the state court found
 6   compensable fraud.   What the state court did not do was to
 7   articulate its findings artfully or to differentiate compensatory
 8   damages for that fraud from other relief awarded.
 9        Fourth, Azizolah argues that the amount of nondischargeable
10   damages attributable to fraud cannot be ascertained from the
11   record.   To the extent that the bankruptcy court found punitive
12   damages nondischargeable, this panel disagrees.   The bankruptcy
13   court found that the award of punitive damages of $350,000 to
14   each sister was sufficiently tied to fraud and granted summary
15   judgment as to those damages.
16        An award of punitive damages under California Civil Code
17   § 3294(a) based on a finding of fraud is nondischargeable under
18   11 U.S.C. § 523(a)(2).   Cohen v. de la Cruz, 523 U.S. 213, 218
19   (1998) (“The most straightforward reading of § 523(a)(2)(A) is
20   that it prevents discharge of ‘any debt’ respecting ‘money,
21   property, services, or . . . credit’ that the debtor has
22   fraudulently obtained, including treble damages, assessed on
23   account of the fraud.”); In re Plyam, 530 B.R. at 465 (only
24   intentional malice or fraud under Cal. Civ. Code § 3294(a) will
25   support a finding of nondischargeability under 11 U.S.C.
26   § 523(a)(6)).
27        Here, the underlying state court judgment awarded punitive
28   damages based on a finding of “malice, oppression and fraud.”

                                     20
 1   (emphasis added).    As a result, the bankruptcy court’s
 2   application of issue preclusion was not erroneous.
 3             2.      Section 523(a)(6) Willful and Malicious Injury
 4        Section 523(a)(6) excepts from discharge debts for “willful
 5   and malicious injury” by the debtor to another.      “Willful” means
 6   that the debtor entertained “a subjective motive to inflict the
 7   injury or that the debtor believed that injury was substantially
 8   certain to occur as a result of his conduct.”      Petralia v.
 9   Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th Cir. 2001);
10   Carrillo v. Su (In re Su), 290 F.3d 1140, 1144 (9th Cir. 2002).
11   Maliciousness is defined as “(1) a wrongful act, (2) done
12   intentionally, (3) which necessarily causes injury, and (4) done
13   without justification or excuse.”      Jercich, 238 F.3d at 1209;
14   Thiara v. Spycher Bros. (In re Thiara), 285 B.R. 420, 427 (9th
15   Cir. BAP 2002).
16        Debts incurred by conversion of another’s property may be
17   nondischargeable under § 523(a)(6).      Del Bino v. Bailey
18   (In re Bailey), 197 F.3d 997, 1000 (9th Cir. 1999).      The elements
19   of conversion in California are the creditor’s ownership or right
20   to possession of property at the time of conversion, a wrongful
21   act or disposition of that property by another, and damages.
22   In re Thiara, 285 B.R. at 427.     Proof of conversion under state
23   law is a necessary but not sufficient basis to deny discharge
24   under § 523(a)(6).    Id.   A creditor must also demonstrate that
25   the injury was willful and malicious.      Id.
26        Azizolah argues that the state court award of conversion
27   damages to Soraya in the amount of $113,836 was not supported by
28   the requisite findings of intent.      While the state court did not

                                       21
 1   use the words “willful” or “malicious,” the record contains
 2   sufficient findings of intent to support such findings under
 3   § 523(a)(6).    The most telling finding as to willfulness was that
 4   Azizolah held the subjective intent to injure:
 5        Defendant knew that these funds and items of personal
          property were the livelihood of his sisters, and the
 6        fruits of their difficult labor. Despite that, he
          waged a systematic campaign of fraud against his
 7        sisters, in order to deprive them of their hard earned
          assets. Defendant never showed any concern or mercy
 8        for the rights of his sisters, but rather took every
          possible step to ensure their financial ruin.
 9

10   (emphases added).
11        Additional findings buttress the conclusion that Azizolah
12   believed that injury to his sisters was substantially certain to
13   occur from his actions.   First, he used his position of
14   authority, i.e., his culturally assigned role as head of the
15   family, to obtain control of his sisters’ personal property and
16   money.   He knew that his sisters would not defy him and would
17   completely believe anything he told them.    He engaged in violence
18   against them.
19        Second, over a period of years he intentionally injured his
20   sisters by falsely representing that he would invest monies and
21   hold properties for their behalf, and he would return these
22   monies and assets when requested.     Soraya gave Azizolah antiques,
23   gold and silver jewelry, as well as large amounts of money, for
24   investment on her behalf and for safekeeping.    The silver weighed
25   30 to 40 kilograms.   The gold jewelry was worth $50,000 to
26   $60,000.   Soraya deposited all of her earnings for 8 years into a
27   joint account with Azizolah.   He repeatedly told Soraya that he
28   would hold and invest these funds on her behalf.    But Azizolah

                                      22
 1   never intended to keep his promises and “long planned to claim
 2   ownership” to both his sisters’ funds.    He exercised “complete
 3   control over his sister’s financial affairs.”    He placed his name
 4   on every bank account holding his sisters’ money and retained the
 5   interest paid on those accounts.
 6        Third, he took monies that were the sisters’ livelihood and
 7   the fruits of their difficult labors, as well as monies earmarked
 8   for them by their parents.   For example, when the siblings’
 9   parents died, Azizolah took for himself the inheritance his
10   parents intended to be jointly divided among the siblings.      He
11   also lied about this fact.   He gave some of those funds to a
12   third party and used some of the funds to pay for his defense of
13   the sisters’ state court action against him.    A similar event
14   occurred when the siblings’ father sent Azizolah money for
15   Soraya’s tuition, and Azizolah withheld it from her.
16        Fourth, Azizolah utilized deception to hide his acts and
17   make collection efforts by the sisters more difficult.    For
18   example, with respect to the conversion causes of action, he
19   denied indebtedness to the sisters.    And when the sisters brought
20   suit against him, he engaged in fraudulent transfers to hide the
21   assets and prevent the recovery of the assets.
22        The state court also found the underpinnings of malice.
23   Conversion committed over a period of years and motivated by the
24   desire to cause financial ruin easily demonstrates a wrongful act
25   done intentionally.   This wrongful act would necessarily cause
26   injury.   And it did cause injury.   The factual grounds for the
27   award of punitive damages eliminate justification or excuse.      As
28   a result, this panel has no difficulty in finding that Azizolah’s

                                     23
 1   actions were wrongful, intentional, injurious and unjustified.
 2        Accordingly, the bankruptcy court did not err.
 3        B.   Decision to Apply Issue Preclusion
 4        If available, the decision to apply issue preclusion falls
 5   within the broad discretion of the trial court.   Parklane Hosiery
 6   Co. v. Shore, 439 U.S. 322, 331 & nn. 14-16 (1979); In re Lopez,
 7   367 B.R. at   107 (applying California law).   That decision always
 8   involves “a measure of discretion and flexibility.”   In re Lopez,
 9   367 B.R. at 107 (citing Restatement (Second) of Judgments,
10   Title E, Introductory Note (1980)); Restatement (Second) Judgment
11   § 28 (specifying circumstances where application may not be
12   appropriate).
13        Azizolah argues that even if issue preclusion was available,
14   the bankruptcy court should have declined to apply issue
15   preclusion to this case.   Stated more specifically, he might
16   argue that the bankruptcy court should have declined to apply
17   issue preclusion for two reasons.    First, because the state court
18   judgment was sufficiently nonspecific as to the basis of its
19   findings or the amount of damages attributable to
20   nondischargeable causes of action, Azizolah lacked incentive to
21   prosecute an appeal in the state court.
22        Lack of “an adequate opportunity or incentive to obtain a
23   full and fair adjudication in the initial action” is a basis for
24   the bankruptcy court to refuse application of issue preclusion.
25   Restatement (Second) of Judgments § 28(5)(c).   Refusal to give
26   preclusive effect to a final judgment requires a “compelling
27   showing of unfairness,” and a showing that the first decision was
28   “patently erroneous” is insufficient.   Id. at cmt. j.   Examples

                                     24
 1   of such compelling circumstances include a judgment that was the
 2   product of concealed facts, the disability of a party that has
 3   since been resolved, a jury verdict that was the result of
 4   compromise, or a judgment based on a small amount in controversy
 5   compared to the amount in dispute in the action for which issue
 6   preclusion is sought.    Id.
 7          Here, Azizolah had sufficient incentive to challenge the
 8   adverse judgment to support application of issue preclusion.       The
 9   state court awarded the sisters upwards of $1.7 million against
10   him.    Measured by any standard, Azizolah had a strong incentive
11   to raise any and all grounds for overturning or reducing the
12   judgment against him.    The mere fact that the state court
13   judgment was flawed does not preclude the use of issue
14   preclusion.    Samuels v. CMW Joint Venture (In re Samuels),
15   273 Fed. App’x 691, 693-94 (9th Cir. 2008); Lucido v. Super. Ct.,
16   51 Cal. 3d 335, 344-45 (1990).    Azizolah’s decision not to
17   prosecute an appeal of the original judgment may have been a
18   calculated decision to leave the original judgment vague or
19   flawed so as to prevent application of issue preclusion.      In
20   contrast, an appeal of the original judgment might have resulted
21   in a remand with instruction to correct the judgment, foreclosing
22   arguments against issue preclusion.
23          Second, Azizolah might argue that as of the date of the
24   hearing on the motion to vacate, the appeal of the judgment
25   amended to correct a clerical error changed the complexion of the
26   case sufficiently that the court should have declined to apply
27   issue preclusion.
28          An “intervening change in the applicable legal context” is a

                                      25
 1   basis to refuse to apply issue preclusion.   An intervening change
 2   in the relative legal climate may justify the court’s actions if
 3   that change would “impose on one of the parties a significant
 4   disadvantage or confer on him a significant benefit, with respect
 5   to his competitors.”   Restatement (Second) of Judgments § 28
 6   cmt. c.
 7        Here, the pendency of Azizolah’s post-summary judgment
 8   appeal of an amended judgment correcting a clerical error in the
 9   underlying judgment offers neither the sisters, nor Azizolah,
10   disadvantage or benefit with respect to the other.   Rather, it
11   leaves their comparative positions in the adversary proceeding
12   unchanged, and the bankruptcy court did not abuse its discretion
13   in refusing to find an intervening change in the legal context.
14        For these reasons, we find that the bankruptcy court did not
15   abuse its discretion in deciding to apply issue preclusion.
16                               CONCLUSION
17        Finding no error in the bankruptcy court’s order denying
18   Azizolah’s motion to vacate or its order granting summary
19   judgment, we AFFIRM.
20

21

22

23

24

25

26

27

28

                                     26