(BK) In Re Joseph H. Akins ( 2023 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 DOMINIQUE BLACK, No. 2:21-cv-02371-DJC 12 Appellant, 13 v. ORDER 14 JOSEPH H. ATKINS, Jr., 15 Appellee. 16 17 Dominique Black, Appellant, brought an adversary action in the Bankruptcy 18 Court for the Eastern District of California seeking a judgement that his claim was non- 19 dischargeable under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6). The Bankruptcy Court 20 granted judgement in Appellee Joseph H. Atkins, Jr.’s favor, and Appellant now seeks 21 reversal of the Bankruptcy’s Court’s decision. 22 I. Background 23 On February 19, 2010, Appellant secured a default judgement in the Superior 24 Court of California, Marin County, against Joseph H. Atkins, Sr. (deceased) (“Debtor”)1 25 and three other defendants in Appellee’s suit for breach of contract and fraudulent 26 inducement related to an oral contract and payments for repair and customization 27 1 All references to “Debtor” are to Joseph H. Atkins Sr., not his successor, Appellee Joseph H. Atkins, Jr. 28 (See Appellee’s Brief (ECF No. 20) at 5.) 1 work on Appellant’s Motorhome (“the vehicle”). (Appellee’s Excerpts of R. (“the 2 Record” or “R.”) (ECF No. 22) 114–115.) Prior to securing the judgement, Appellant 3 settled with one other named defendant, David Tirpak. (Id.) 4 After Debtor filed for bankruptcy, Appellant initiated an adversary proceeding 5 on April 3, 2019 seeking judgement that his claim against Debtor was a non- 6 dischargeable claim under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6), because the 7 debt was acquired through fraud, embezzlement or larceny, or a willful and malicious 8 injury by the debtor, respectively. (Id. at 73–87.) Debtor passed away while the case 9 was ongoing and was not able to testify. (See id. at 16.) Following a bench trial, the 10 Bankruptcy Court found that Appellant had not produced clear and convincing 11 evidence that Debtor either personally engaged in any fraud, embezzlement, larceny, 12 or willful and malicious conduct, nor that Debtor was in partnership with those who 13 had engaged in such conduct. (Id. at 28–31.) The Bankruptcy Court also did not find 14 sufficient evidence that Appellant had personally the funds at issue. (Id. at 21–27.) 15 Appellant now seeks reversal of the Bankruptcy Court’s judgement on the basis 16 that the Bankruptcy Court was bound by the default judgment to find that Debtor had 17 engaged in fraud, select factual findings were clearly erroneous, and that Appellant 18 was deprived of due process.2 Both Parties have issued multiple briefs (ECF Nos. 19, 19 20, 24, 25, and 27), and the Appellant has indicated this matter is ready for review 20 (ECF No. 30). This matter is hereby submitted upon the briefs and record without oral 21 argument pursuant to Local Rule 230(g). 22 II. Legal Standard 23 An appellant may petition the district court for review of a bankruptcy court's 24 decision. Fed. R. Bankr. P. 8013. The applicable standard of review is identical to that 25 employed by circuit courts of appeal in reviewing district court decisions. See 26 Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir. 1997). Thus, legal 27 2 As discussed below in Section III, Appellant has asserted other bases for appeal which the Court has 28 found meritless. 1 conclusions are reviewed on a de novo basis, and factual determinations are assessed 2 pursuant to a “clearly erroneous” standard. In re Tucson Ests., Inc., 912 F.2d 1162, 3 1166 (9th Cir. 1990); Murray v. Bammer (In re Bammer), 131 F.3d 788, 792 (9th Cir. 4 1997) (en banc). 5 Findings of fact are “clearly erroneous” only if the reviewing court is “left with 6 the definite and firm conviction that a mistake has been committed.” In re Marquam 7 Inv. Corp., 942 F.2d 1462, 1466 (9th Cir.1991) (quoting United States v. United States 8 Gypsum Co., 333 U.S. 364, 395 (1948)). “Appellant has the burden of proving such 9 error has been committed, and the reviewing court should not reverse simply because 10 another decision could have been reached.” Frazier v. Real Time Resols., Inc., 469 B.R. 11 889, 894 (E.D. Cal. 2012) (quoting In re Windor Indus., Inc., 459 F. Supp. 270, 275 12 (N.D. Tex. 1978)). 13 III. Discussion 14 As an initial matter, Appellant’s appeal is procedurally deficient. In their brief, 15 an appellant is required to, at the introduction, “identify[] the rulings presented for 16 review, with appropriate references to the record,” Fed. R. Bankr. P. 8014(a)(6), and, 17 within the appellant’s argument, describe “appellant’s contentions and the reasons for 18 them, with citations to the authorities and parts of the record on which the appellant 19 relies,” id. at (a)(8). Further, the appellant must produce “any opinion, findings of fact, 20 and conclusions of law relating to the issues on appeal, including transcripts of all oral 21 rulings” and “[i]f the appellant intends to argue on appeal that a finding or conclusion 22 is unsupported by the evidence or is contrary to the evidence, the appellant must 23 include in the record a transcript of all relevant testimony and copies of all relevant 24 exhibits.” Fed. R. Bankr. P. 8009(a)(4) and (b)(5) (formerly cited as Rule 8006). If 25 “findings of fact and conclusions of law are rendered orally on the record, it is 26 mandatory that an appellant designate the transcript under Rule 800[9].” In re 27 McCarthy, 230 B.R. 414, 417 (B.A.P. 9th Cir. 1999) (emphasis added). 28 //// 1 Appellant failed to produce any portion of the record to the Court or cite to any 2 portion of the record in his Opening Brief. In Appellee’s Brief, (ECF No. 20), and 3 Appellee’s Motion to Identify Portions of the Record, (ECF No. 25), Appellee pointed 4 out these deficiencies. Despite Appellant filing two subsequent pleadings 5 (Appellant’s Reply Brief (“Reply”) (ECF No. 24) and Response to Motion to Identify 6 Portions of the Record (“Response”) (ECF No. 27)), Appellant did not produce any 7 portion of the record. In his Response, Appellant identified portions of the record he 8 believed to support his arguments, but again failed to produce the portions of the 9 record to this Court. (Response at 1, 3–4.) Appellant thereafter filed a Notice of Case 10 Readiness for Oral Argument (ECF No. 30) indicating that he does not intend to 11 produce any additional materials. These procedural defects alone are grounds for the 12 Court to dismiss the appeal. See Sw. Administrators, Inc. v. Lopez, 781 F.2d 1378, 13 1380 (9th Cir. 1986) (collecting cases). Appellant’s pro se status does not excuse him 14 from complying with the applicable rules, particularly where Appellant was granted 15 additional time to file his Opening Brief, (Minute Order Granting Extension of Time 16 (ECF No. 16)), and Appellant was made aware of and failed to cure the defects. See In 17 re Genaro, No. BAP AK-06-1358-ZRB, 2007 WL 7535064, at *3 (B.A.P. 9th Cir. May 14, 18 2007). 19 However, Appellee has provided the relevant portions of the record, including 20 the portion of the transcript reciting the Bankruptcy Court’s findings of fact and 21 conclusions of law. (See R. (ECF No. 22).) While “[a]n appellate court is not obligated 22 to search the record for error,” the Court will nevertheless review the portions of the 23 record produced by Appellee. See Friedman v. Sheila Plotsky Brokers, Inc. (In re 24 Friedman), 126 B.R. 63, 68–69 (9th Cir. BAP 1991), overruled on other grounds by 25 Zachary v. Cal. Bank & Tr., 811 F.3d 1191 (9th Cir) (reviewing the record for error 26 despite Appellant failing to reference the record or provide the transcript); In re 27 McCarthy, 230 B.R. at 417 (exercising the court’s discretion to review the record 28 before the court instead of dismissing the appeal). 1 In his Opening Brief, Appellant initially asserted that the Bankruptcy Court 2 erred in finding that “the debt did not rightfully belong to Plaintiff . . . on the sole fact 3 that the Plaintiff had the debt provided to the debtor through a third-party 4 intermediary,” and in declaring the debt a voidable preference under 11 U.S.C. 5 § 547(b). (Appellant Opening Brief (ECF No. 19) at 1–2.) However, in the same 6 document, Appellant confirms that the only issues before the Bankruptcy Court were 7 whether the Appellant’s claim was non-dischargeable pursuant to 11 U.S.C. 8 §§ 523(a)(2)(A), (a)(4), and (a)(6). (Id. at 4.) As Appellee has noted, and the Court has 9 confirmed in its review of the Record, the Bankruptcy Court did not make findings or 10 issue ruling related to whether there was a third-party intermediary, or whether the 11 debt was a voidable preference. (Appellee’s Brief at 21–22.) Because the Bankruptcy 12 Court did not make the findings complained of, the appeal on these bases is 13 dismissed. See In re Mortg. Store, Inc., 773 F.3d 990, 998 (9th Cir. 2014) (“In general, 14 ‘a federal appellate court does not consider an issue not passed upon below.’” 15 (quoting Singleton v. Wulff, 428 U.S. 106, 120 (1976)). 16 In Appellant’s Reply Brief, Appellant raised a new argument that the Bankruptcy 17 Court abused its discretion in finding there was no fraud because the issue had 18 already been decided by the prior state court judgement. (Reply at 9–11.) Appellant 19 also asserted that the Bankruptcy Court erred in its factual findings that Debtor had 20 not personally committed fraud, and that there was insufficient evidence that 21 Appellant had personally paid the funds at issue. (Id. at 5–6, 9.) Appellant claims he 22 was denied due process because of the failure to find that the debt was non- 23 dischargeable as a matter of law. (Id. at 9.) 24 In his Response, Appellant also claimed that he had ineffective assistance of 25 counsel which warrants reversal of the judgement. (Response at 1–2.) Because civil 26 litigants do not have a constitutional right to effective assistance of counsel, the 27 appeal on this basis is dismissed. See In re Tolley, No. 3:20-AP-03112-DWH, 2021 WL 28 6067046, at *6 (B.A.P. 9th Cir. Dec. 21, 2021); Pioneer Inv. Servs. Co. v. Brunswick 1 Assocs. Ltd. P'ship, 507 U.S. 380, 396 (1993) (civil litigants are “held accountable for 2 the acts and omissions of their attorneys.”). 3 The Court will therefore review the Bankruptcy Court’s legal ruling that the state 4 court judgement was not preclusive, the Bankruptcy’s Court’s factual findings with 5 respect to whether Debtor engaged in fraud and whether Appellant had personally 6 paid the funds to the Debtor, and Appellant’s due process claim. 7 A. Collateral Estoppel 8 Preclusion principles, including collateral estoppel, apply in bankruptcy 9 proceedings, and may be used to establish the non-dischargeability of a debt 10 pursuant to section 523(a). See Grogan v. Garner, 498 U.S. 279, 284 n.11 (1991); In re 11 Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001). “[F]ederal courts [must] give preclusive 12 effect to state–court judgments whenever the courts of the State from which the 13 judgments emerged would do so.” Allen v. McCurry, 449 U.S. 90, 96 (1980); see also 14 In re Nourbakhsh, 67 F.3d 798, 800 (9th Cir. 1995) (the estoppel law of the state 15 issuing judgement controls). 16 In California, the collateral estoppel doctrine provides that “an issue ‘necessarily 17 decided in prior litigation may be conclusively determined as against the parties 18 thereto or their privies . . . in a subsequent lawsuit on a different cause of action.’” 19 Vandenberg v. Superior Ct., 21 Cal. 4th 815, 828 (1999) (quoting Teitelbaum Furs, Inc. 20 v. Dominion Ins. Co., Ltd., 58 Cal. 2d 601, 604 (1962)) (emphasis is original) (cleaned 21 up). Collateral estoppel differs from res judicata in that the latter prevents only re- 22 litigation of the same cause of action. Id. An issue is subject to preclusion where 23 there has been a (1) final decision; (2) of an identical issue; (3) which was actually 24 litigated and necessarily decided; and (4) is asserted against a party to the first suit or 25 a party in privity with the original party. Grande v. Eisenhower Med. Ctr., 13 Cal. 5th 26 313, 323 (2022); see also In re Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001) (reciting 27 California’s collateral estoppel standard). 28 //// 1 Appellant asserts that “it was not for the Bankruptcy Court to decide whether or 2 not fraudulent representation had taken place . . . [because] the Bankruptcy Court had 3 a legally binding obligation to respect and adhere to the State Court judgement 4 entered against the debtor . . . .” (Reply at 11.) In the state court case, Appellant 5 brought two causes of action, one for breach of contract, and one for fraudulent 6 inducement, and was granted a declaratory judgement. (See ECF No. 25 at 13; Reply 7 at 9.) The Bankruptcy Court held that the issue of fraud was not subject to collateral 8 estoppel because the complaint was for two causes of action, and the judgement did 9 not contain findings or state on which cause of action judgement was being granted. 10 (ECF No. 22 at 18–19; see also ECF No. 25 at 13.) The Court reviews this legal 11 conclusion de novo. See In re Tucson Ests., Inc., 912 F.2d at 1166. 12 While a default judgement may have preclusive effect as any other judgement, 13 it does not necessarily result in issue preclusion. See In re Harmon, 250 F.3d at 1246– 14 47. For a default judgement to meet the “actually litigated and necessarily decided” 15 factors, the proponent must show that the court made “express findings” as to the 16 issue, or that such a finding was necessary for the judgement, even if it was not 17 express. Id. at 1247–49 (citing Williams v. Williams (In re Williams' Estate), 36 Cal.2d 18 289, 223 (1950) (in bank)). The state court judgement does not meet these standards. 19 As the transcript shows, the state court judge merely resolved issues of whether the 20 Appellant was entitled to attorneys’ fees, and the amount of the judgement. (ECF No. 21 25 at 18–21.) The state court did not issue findings of fact or law and did not state 22 which cause(s) of action the court was entering judgement for. (Id.) “[A] court's 23 silence concerning a pleaded allegation does not constitute adjudication of the issue.” 24 In re Harmon, 250 F.3d at 1247. Because it was possible for the state court to have 25 entered judgement only on the breach of contract claim and not the fraudulent 26 inducement claim, it was not necessary for the judgement that the state court had 27 found in favor of Appellant on the issue of fraud. Because it is not clear that the issue 28 //// 1 of fraud was actually adjudicated or necessarily decided by the state court, the 2 Bankruptcy Court did not error in determining that the issue was not precluded. 3 B. Factual Findings 4 The Court must grant great deference to the Bankruptcy Court’s factual 5 findings, which can only be set aside if there is clear error. Stern v. Marshall, 564 U.S. 6 462, 487 (2011). “A court's factual determination is clearly erroneous if it is illogical, 7 implausible, or without support in the record.” In re Retz, 606 F.3d 1189, 1196 (9th 8 Cir. 2010). “When factual findings are based on determinations regarding the 9 credibility of witnesses, we give great deference to the bankruptcy court's findings, 10 because the bankruptcy court, as the trier of fact, had the opportunity to note 11 ‘variations in demeanor and tone of voice that bear so heavily on the listener's 12 understanding of and belief in what is said.’” Id. (quoting Anderson v. City of 13 Bessemer City, 470 U.S. 564, 575 (1985)). 14 Because the Bankruptcy Court found that the fraud issue was not precluded, 15 the court made its own finding of fact as to whether the Debtor committed the fraud 16 required for a finding of non-dischargeability under section 523(a). The Bankruptcy 17 Court concluded that Appellant did not establish by clear and convincing evidence 18 that Debtor himself had committed fraud, or that the Debtor was associated with 19 those who committed the alleged fraud. (R. at 28–29.) The Bankruptcy Court also 20 found that the Appellant had not himself made the payments at issue because the 21 Appellant paid for the repairs through multiple business entities and could not 22 provide evidence regarding whether he reconciled those payments. (R. at 21, 26–27.) 23 Although the Court does not have the benefit of the full transcript of 24 Appellant’s testimony due to Appellant’s failure to produce the record, based on the 25 portions of the record before it, including Appellant’s Complaint filed in the 26 Bankruptcy Court, the Court has surmised the following: the Appellant entered the 27 initial agreement to perform work on the vehicle in 1999 with two different individuals 28 named David Tirpak and Anthony Sarganis, who owned a Motorhome repair business. 1 (R. at 74.) Appellant alleges that Debtor was also an owner of the business and 2 associate of Tirpak and Sarganis. (Id.) Appellant alleges Tirpak and Sarganis 3 misrepresented whether they had appropriate licensing to perform work on the 4 vehicle before they entered into an oral contract for the repairs. (Id. at 75.) Between 5 2000 and 2006, the business issued multiple invoices for various repairs and 6 Appellant provided advanced payments for the repairs. (Id.) In January 2006 Tirpak 7 admitted to creating fraudulent invoices and embezzling the advanced funds. (Id. at 8 75–76.) Appellant did not meet Debtor until late 2005 or early 2006, but alleges that 9 Tirpak told Appellant in 2002 that Debtor was associated with business and 10 performed “finish work.” (Id. at 76.) Tirpak assigned the lease for the repair business 11 to Debtor on September 22, 2006, after which Debtor took possession of the vehicle, 12 asserted a mechanic’s lien on the vehicle, and allegedly dismantled the vehicle for 13 parts. (Id. at 77.) On August 31, 2007, after the lease on the facility expired, Appellant 14 worked with the landlord of the property to recover his vehicle. (Id.) 15 The Bankruptcy Court determined that only Tirpak and Sarganis had engaged 16 in fraudulent activity and collected the funds from Appellant, and that there was not 17 clear and convincing evidence that Debtor was in partnership with Tirpak and 18 Sarganis. The Court finds this conclusion to be well supported by the record, 19 including by Appellant’s own allegations. All the allegedly fraudulent interactions 20 occurred only with Tirpak and Sarganis, the allegedly false license had only the names 21 of Tirpak and Sarganis on it, and all of the invoices were from before Debtor was 22 assigned the lease for the business. (Id. at 23, 89–105.) Appellant did not provide the 23 Court with other documentary evidence that Debtor was also an owner or operator of 24 the business. (Id. at 17, 20.) The only documentary evidence of Debtor’s association 25 with the business was the lease assignment from September 2006, after the invoices 26 had been charged. (Id. at 25, 107–09.) The Appellant also produced a declaration 27 from Tirpak which did not state that Debtor was a partner in the business. (Id. 25–26.) 28 In fact, the only evidence that Appellant produced to show that Debtor was a partner 1 in the business is Appellant’s testimony that Tirpak told Appellant that Debtor was 2 responsible for finish work in 2002, and Appellant’s testimony of his own belief that 3 Debtor was a partner, which the Bankruptcy Court found to not be credible evidence. 4 The Bankruptcy Court’s finding that Appellant had failed to meet his burden of 5 establishing that the Debtor committed a fraud or misrepresentation or was in 6 partnership with Tirpak and Sarganis who allegedly committed fraud is not clearly 7 erroneous. 8 The Bankruptcy Court also found that Appellant did not personally make the 9 payments to the Debtor both because Debtor was not part of the business before 10 2006, and because the funds were paid by various LLCs that Appellant was involved 11 in. In California, “[c]orporations and LLCs are distinct legal entities, separate from 12 their stockholders or members. The acts of a corporation or LLC are deemed 13 independent of the acts of its members.” Abrahim & Sons Enterprises v. Equilon 14 Enterprises, LLC, 292 F.3d 958, 962 (9th Cir. 2002). Appellant apparently attempted 15 to argue that the payments were all made out of a central pot, and that he himself 16 effectively made the payments because he reconciled the funds. (R. at 21–27.) The 17 Bankruptcy Court found that Appellant’s testimony that he had reconciled the funds 18 was not credible because there were no records to show that any of the payments 19 could be traced back to Appellant. (Id.) Instead, the Bankruptcy Court found that 20 Appellant’s testimony showed that he disregarded the independent corporate 21 structure of the LLCs and was unclear about his role in each of the various corporate 22 entities. (Id. at 19–27.) The Bankruptcy Court also pointed to the evidence that the 23 title to the vehicle was in the name of an LLC and not in Appellant’s name. (Id. at 25.) 24 Given that the testimony about reconciling the funds was not credible, and that 25 Appellant provided no other evidence that he made the payments or reconciled the 26 payments, the Bankruptcy Court did not commit error in determining that Appellant 27 had not provided clear and convincing evidence that he himself made the payments. 28 1 Because the Bankruptcy Court's factual findings were not clearly erroneous, the 2 || Court AFFIRMS the Bankruptcy Court's judgement. 3 C. Due Process 4 The touchstone of due process is fundamental fairness. Walters v. Nat'l Ass'n of 5 || Radiation Survivors, 473 U.S. 305, 321 (1985). Generally, a procedure is fundamentally 6 | fair if a party is given an “opportunity to be heard ‘at a meaningful time and ina 7 || meaningful manner.” Mathews v. Eldridge, 424 U.S. 319, 333 (1976) (quoting 8 || Armstrong v. Manzo, 380 U.S. 545, 552 (1965)). Appellant does not appear to 9 || challenge whether he was given a meaningful opportunity to be heard, nor could he 10 || considering that he was afforded the opportunity to present evidence and testify in 11 || the proceedings. Instead, Appellant alleges that he was denied due process because 12 || of the Bankruptcy Court's allegedly erroneous rulings and findings of fact. Because 13 | the Court has found that the Bankruptcy Court did not commit error, Appellant's due 14 || process claim on this basis must fail. 15 IV. Conclusion 16 For the above reasons, the Court hereby AFFIRMS the Bankruptcy Court's ruling. 17 || The Clerk of the Court is directed to close this case. 18 19 IT IS SO ORDERED. 20 | Dated: _November 27, 2023 “Daniel J CoD □□□□ Hon. Daniel alabretta 21 UNITED STATES DISTRICT JUDGE 22 23 24 25 26 | DJC2—Atkins21cv02371.BnkrAppl 27 28 11