Paul Johnson v. W3 Investment Partners, Lp ( 2019 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS NOV 12 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: PAUL Y. JOHNSON; CELESTE C. No. 18-60025
JOHNSON,
BAP No. 17-1194
Debtors,
------------------------------ MEMORANDUM*
PAUL Y. JOHNSON; CELESTE C.
JOHNSON,
Appellants,
v.
W3 INVESTMENT PARTNERS, LP,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Faris, Lafferty III, and Brand, Bankruptcy Judges, Presiding
Submitted November 7, 2019**
Pasadena, California
Before: SCHROEDER, FRIEDLAND, and R. NELSON, Circuit Judges.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Appellants Paul and Celeste Johnson appeal the Bankruptcy Appellate
Panel’s (“BAP”) affirmance of the bankruptcy court’s summary judgment in an
adversary proceeding brought by W3 Investment Partners, LP. We have
jurisdiction under 28 U.S.C. § 158(d), and we affirm. “We review decisions of the
BAP de novo.” In re Cellular 101, Inc., 539 F.3d 1150, 1154 (9th Cir. 2008).
First, the BAP correctly affirmed the bankruptcy court because all parties
intended the stipulated judgment to be given collateral estoppel effect on the issue
of fraud. In particular, the stipulated judgment satisfied the “actually litigated”
element for collateral estoppel because that was the parties’ intent, see Cal. State
Auto. Ass’n Inter-Ins. Bureau v. Superior Court, 788 P.2d 1156, 1159 (Cal. 1990),1
and Appellants admitted to fraud in the settlement documents and in the stipulated
judgment. The stipulated judgment is thus nondischargeable pursuant to 11 U.S.C.
§ 523(a)(2)(A).
Second, the stipulated judgment does not violate public policy or amount to
a prepetition waiver of discharge. Contrary to Appellants’ assertions, In re Cole,
226 B.R. 647 (B.A.P. 9th Cir. 1998), and In re Wank, 505 B.R. 878 (B.A.P. 9th
Cir. 2014), are inapposite. In Cole, the underlying state court complaint contained
no allegations of fraud in connection with the promissory note that gave rise to the
1
In evaluating the issue preclusive effect of a state court judgment, we apply
the forum state’s law of issue preclusion. In re Harmon, 250 F.3d 1240, 1245 (9th
Cir. 2001).
2
debt at issue. In this case, the factual admissions in the stipulated judgment
directly relate to the fraud claim at issue. And unlike the declaration in Wank,
which was only to be unsealed and presented if the debtor filed for bankruptcy,
here the stipulation to the facts in the state court was made at the time of settlement
and relied upon by the state court when it entered the judgment.
AFFIRMED.
3