In re: Nancy Ann Howell

FILED
APR 9 2021
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP Nos. CC-20-1172-SGF
NANCY ANN HOWELL, CC-20-1218-SGF
Debtor. (Consolidated Appeals)
NANCY ANN HOWELL, Bk. No. 6:13-bk-29922-MH
Appellant,
v. Adv. No. 6:14-ap-01070-MH
LAW OFFICES OF ANDREW S. BISOM;
EISENBERG LAW FIRM, APC, MEMORANDUM∗
Appellees.
Appeal from the United States Bankruptcy Court
for the Central District of California
Mark D. Houle, Bankruptcy Judge, Presiding
Before: SPRAKER, GAN, and FARIS, Bankruptcy Judges.
INTRODUCTION
Chapter 71 debtor Nancy Ann Howell appeals from a judgment
under § 523(a)(2)(A) excepting from discharge a state court judgment debt
∗ This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
1 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules
of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of
Civil Procedure.
1
entered in favor of her former attorneys (“Counsel”), who represented her
in litigation involving a homeowners’ association and its board members.
The California Court of Appeal affirmed the judgment. The bankruptcy
court granted Counsel summary judgment based on the preclusive effect of
the state court judgment and the jury findings supporting that judgment.
The state court entered judgment for Counsel on both their fraud and
breach of contract claims. The state court jury found fraud based on
Howell’s intentional concealment. At the time she retained Counsel, she
failed to disclose her prior litigation with the homeowners’ association and
the resulting $240,404.71 judgment against her.
On appeal, Howell focuses heavily on a single element of fraudulent
concealment. She contends that her duty to disclose the concealed facts was
neither actually litigated nor necessarily decided in the state court action
because the term “duty to disclose” is not used in either the jury
instructions or the jury verdict. Nor was it expressly stated in the state
court’s judgment. But the judgment unequivocally is based on fraudulent
concealment and the California Court of Appeal affirmed the judgment on
that basis. Under binding precedent, we presume that California fraud
judgments necessarily include a factual determination of all elements
required for fraud under California law even if all of those elements were
not specifically mentioned in the judgment.
Howell alternately argues that her omissions regarding her prior
litigation with the homeowners’ association qualify as a statement
2
respecting her financial condition, so they are excepted from the scope of
§ 523(a)(2)(A) based on the plain language of statute. However, this Panel
has held that fraudulent omissions are not “statements” within the
meaning of the statute. Thus, her argument lacks merit.
Accordingly, we AFFIRM.
FACTS
A. Counsel’s representation of Howell and Counsel’s state court
lawsuit against Howell.
Howell retained Counsel in 2006 to represent her, on a contingency-
fee basis, in ongoing litigation she commenced against the Oso Valley
Greenbelt Association and others (“HOA Defendants”). In the already-
pending lawsuit, Howell sought damages from the HOA Defendants based
on their alleged conduct leading to her arrest and false imprisonment.
After they commenced providing services, Counsel learned the HOA
already held a $240,404.71 judgment against Howell. They later found out
while they were prosecuting the false imprisonment lawsuit that Howell
had settled the litigation and obtained a release of the prior judgment
without their knowledge or involvement. Howell never paid Counsel for
their services.
In 2007, Counsel sued Howell to recover their fees in the Orange
County Superior Court. In their complaint, Counsel sought damages for
fraud and breach of contract, among other causes of action. In relevant
part, Counsel alleged that Howell intentionally and deceitfully led them to
3
believe that she desired to prosecute her false imprisonment claim to
judgment, when in reality she only wanted them to prosecute the claim as
leverage to dissuade the HOA from enforcing the $240,404.71 judgment.
More particularly, Counsel alleged that she defrauded them by “knowingly
and purposefully fail[ing] to disclose” the prior HOA litigation and the
resulting judgment.
In 2008, a jury trial was held in Counsel’s action to recover its fees. At
the conclusion of testimony, the court read its approved set of jury
instructions. This included a jury instruction based on Judicial Council of
California Civil Instruction (“CACI”) 1901, which deals with the elements
for fraudulent concealment. The version of CACI 1901 read to the jury was
modified and approved by the attorneys for both parties. It provided:
1901 Concealment
The Law Office of Andrew S. Bisom and Day/Eisenberg claim that
they were harmed because Nancy Howell concealed certain
information. To establish this claim, The Law Office of Andrew S.
Bisom and Day/Eisenberg must prove all of the following:
1. That Nancy Howell actively concealed an important fact from The
Law Office of Andrew S. Bisom and Day/Eisenberg or prevented
them from discovering that fact;
2. That The Law Office of Andrew S. Bisom and Day/Eisenberg did
not know of the concealed fact;
3. That Nancy Howell intended to deceive The Law Office of Andrew
S. Bisom and Day/Eisenberg by concealing the fact;
4
4. That The Law Office of Andrew S. Bisom and Day/Eisenberg
reasonably relied on Nancy Howell's deception;
5. That The Law Office of Andrew S. Bisom and Day/Eisenberg were
harmed; and
6. That Nancy Howell's concealment was a substantial factor in
causing The Law Office of Andrew S. Bisom and Day/Eisenberg's
harm.
Attachment 8 to Howell’s Nov. 1, 2019 Request for Judicial Notice in
opposition to Counsel’s summary judgment motion (brackets omitted). 2
The jury rendered a verdict finding that Howell had breached its
contract with Counsel and had committed fraud. The jury’s special verdict
included the following fraud-related findings: (1) “Howell intentionally
fail[ed] to disclose important fact(s) that plaintiffs . . .did not know and
could not reasonably have discovered,” (2) “Howell intend[ed] to deceive
plaintiffs . . . by concealing the fact(s),” (3) “plaintiffs . . . rel[ied] on . . .
Howell’s deception” and such reliance was reasonable under the
circumstances, (4) Howell’s concealment was a “substantial factor” in
harming Counsel, and (5) Counsel suffered $48,080.94 in damages resulting
from Howell’s fraud.
2
Howell’s November 1, 2019 request for judicial notice was not included in the
parties’ excerpts of record. Even so, we exercise our discretion to take judicial notice of
the November 1, 2019 request and all other documents filed in Counsel’s
nondischargeability action and in Howell’s bankruptcy cases. See Atwood v. Chase
Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003).
5
The jury additionally awarded Counsel another $48,080.94 in contract
damages and $144,243.71 in punitive damages, though the state court
ultimately struck the punitive damages award. Furthermore, when it
entered its final judgment, the state court without explanation halved the
amount of Counsel’s compensatory damages award. The court’s final
award granted $24,040.47 to each Counsel, respectively ($24,040.47 to the
Law Offices of Andrew S. Bisom and $24,040.47 to Day|Eisenberg). The
judgment did not specify any apportionment of the damages between the
breach of contract cause of action and the fraud cause of action.
B. Howell’s first bankruptcy case.
On October 28, 2008, just before the state court entered its final
judgment in favor of Counsel, Howell commenced her first chapter 7 case.
As a result, the November 3, 2008 judgment (the “2008 Judgment”) was
entered while the automatic stay was in effect. The bankruptcy case was
dismissed in January 2009 based on her failure to attend the § 341(a)
meeting of creditors.
C. Howell’s second bankruptcy case and Counsel’s
nondischargeability action.
1. First summary judgment motion and the stay annulment
motion.
In December 2013, Howell filed her second chapter 7 petition. In
March 2014, Counsel (Law Offices of Andrew S. Bisom and
Day|Eisenberg’s successor) commenced the nondischargeability action.
6
Counsel alleged essentially the same facts they had alleged in their state
court fraud cause of action. They asserted that these same facts supported
entry of a judgment excepting the judgment debt from discharge under
§ 523(a)(2)(A) and (a)(6).
Counsel filed their first summary judgment motion in October 2014.
They claimed that the preclusive effect of the state court’s judgment
conclusively determined the nondischargeability of the judgment debt
under § 523(a)(2)(A). Howell pointed out that the state court judgment was
void because it was entered in violation of the automatic stay in Howell’s
first bankruptcy case. At the hearing on the first summary judgment
motion, the parties and the court discussed at length: (1) the effect of the
automatic stay on the 2008 Judgment; (2) the ability of Counsel to address
the resulting lack of a final judgment in the state court action; and (3) how
those matters affected prosecution of the nondischargeability action. The
court then denied the first summary judgment motion without prejudice
and set a pretrial conference. 3
In April 2015, the bankruptcy court in the 2007 bankruptcy case
granted Counsel’s motions to reopen the case and to annul the stay —
3Howell argues that the court’s comments and thoughts expressed at the
December 10, 2014 hearing evidence bias in favor of Counsel. She claims that the court
improvidently advised Counsel about how they could negate the legal effect arising
from entry of the November 3, 2008 order while the automatic stay was in effect.
Having reviewed the hearing transcript in its entirety, we see nothing of the sort.
Though Howell characterizes some of the court’s comments as legal advice to Counsel,
the comments merely reflect the court’s thought processes in trying to make sense of the
7
thereby retroactively validating the 2008 Judgment. Howell then sought
relief under Civil Rules 59 and 60 from the case reopening and the stay
annulment. After the court orally ruled against her, she twice objected to
the form of Counsel’s proposed order and twice sought and obtained
hearings on her objections. The court entered its order denying her motion
for relief in October 2015.
2. Second summary judgment motion and Howell’s appeals
from the stay annulment order and the 2008 Judgment.
Within days of entry of the order annulling the stay, Counsel filed
their second summary judgment motion in the nondischargeability
adversary. Meanwhile, Howell filed two separate appeals, one in state
court from the 2008 Judgment and the other in federal court from the
orders reopening the 2007 bankruptcy case, annulling the stay, and
denying her reconsideration motion. These appeals caused the bankruptcy
court to continue the second summary judgment motion multiple times.
The district court affirmed the bankruptcy court’s rulings entered in the
2007 bankruptcy case, and the Ninth Circuit also affirmed. In re Howell,
Case No. SACV15–1883–CAS, 2016 WL 10679428 (C.D. Cal. Dec. 22, 2016),
aff'd, 698 F. App’x 470 (9th Cir. 2017).
In August 2019, the California Court of Appeal affirmed the 2008
Judgment. The Court of Appeal construed the entire amount of damages as
arising from both Howell’s fraud and breach of contract. It held that there
arguments presented by both sides at the hearing.
8
was sufficient evidence to support the entire amount of damages on both
fraud and breach of contract grounds.
Howell additionally challenged the fraud ground by arguing that the
jury never found she had a duty to disclose and that there was insufficient
evidence to support any such finding. The Court of Appeal held that she
forfeited the first argument by failing to provide an adequate record on
appeal. As for the sufficiency of the evidence, the court rejected Howell’s
position, holding that there was sufficient evidence in the record to support
a finding of a duty to disclose. Ultimately, the Court of Appeal affirmed the
judgment in its entirety.
3. The decision on the second summary judgment motion.
By November 2019, the bankruptcy court was poised to rule on
Counsel’s second summary judgment motion. Howell filed voluminous
amended opposition papers, in which she made the following arguments:
• The jury was instructed incorrectly regarding fraudulent concealment
because there was no specific statement that the jury must find a duty
to disclose.
• Counsel failed to specifically plead or prove in the state court that
Howell had a duty to disclose, and the jury did not specifically find
that Howell had a duty to disclose.
• When the trial court, without explanation, halved the compensatory
damages award from $96,161.88 to $48,080.94, it must have done so
to attribute damages solely to breach of contract and none to fraud.
9
• Alternately, the trial court’s reduction of the compensatory damages
award rendered it impossible to determine what portion of that
award, if any, was attributable to Howell’s fraud.
• For issue preclusion purposes, fraudulent concealment was neither
actually litigated nor necessarily decided in light of the above-
referenced problems concerning the duty to disclose issue and the
compensatory damages issue.
• Section 523(a)(2)(A) does not apply because the statute specifically
excepts from its coverage “statement[s] respecting the debtor’s . . .
financial condition.” And her concealment of the adverse $240,404.71
judgment qualifies as such a statement.
In a reasoned memorandum decision, the bankruptcy court rejected
all of Howell’s arguments and held that issue preclusion conclusively
established Howell’s judgment debt to Counsel was nondischargeable
under § 523(a)(2)(A). On June 29, 2020, the court entered judgment against
Howell on Counsel’s § 523(a)(2)(A) claim for relief. Howell timely
appealed.4
4
On August 17, 2020, the court entered a separate order dismissing Counsel’s
§ 523(a)(6) claim. Howell filed a separate appeal from this order, which has been
consolidated with the appeal from the entry of summary judgment, per order of this
Panel entered September 11, 2020. Nothing in Howell’s appeal brief specifically
addresses the dismissal of the § 523(a)(6) claim. Nor would reversal of that ruling
provide Howell with any meaningful relief. Consequently, we will not further discuss
it. See Christian Legal Soc'y v. Wu, 626 F.3d 483, 487–88 (9th Cir. 2010) (declining to
address matters not specifically and distinctly argued in the appellant’s opening brief).
10
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court err in granting summary judgment on
Counsel’s § 523(a)(2)(A) claim based on issue preclusion?
STANDARD OF REVIEW
We review de novo the bankruptcy court’s grant of summary
judgment. Plyam v. Precision Dev., LLC (In re Plyam), 530 B.R. 456, 461 (9th
Cir. BAP 2015). We also review de novo the bankruptcy court’s
determination that issue preclusion is available. Id.; Honkanen v. Hopper (In
re Honkanen), 446 B.R. 373, 378 (9th Cir. BAP 2011). When we review an
issue under the de novo standard of review, “we consider [the] matter
anew, as if no decision had been rendered previously.” Kashikar v. Turnstile
Cap. Mgmt., LLC (In re Kashikar), 567 B.R. 160, 164 (9th Cir. BAP 2017).
If we determine that issue preclusion is available, we then review the
bankruptcy court’s decision to apply it for an abuse of discretion. Khaligh v.
Hadaegh (In re Khaligh), 338 B.R. 817, 823 (9th Cir. BAP 2006). A bankruptcy
court abuses its discretion if it applies the wrong legal standard or its
findings of fact are illogical, implausible or without support in the record.
TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
11
DISCUSSION
A. Summary judgment and issue preclusion legal standards.
A bankruptcy court may grant summary judgment when the
pleadings and evidence demonstrate “that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a
matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); In re Plyam,
530 B.R. at 462 (citing Civil Rule 56(a), made applicable in adversary
proceedings by Rule 7056).
The issue preclusive effect of a prior state court judgment may serve
as the basis for granting summary judgment. See In re Khaligh, 338 B.R. at
832; see also Grogan v. Garner, 498 U.S. 279, 284 (1991) (holding that issue
preclusion applies in nondischargeability actions).
We apply California issue preclusion law to determine the preclusive
effect of Counsel’s California state court judgment. See Exxon Mobil Corp. v.
Saudi Basic Indus. Corp., 544 U.S. 280, 293 (2005) (stating that federal courts
must give full faith and credit to state court judgments and citing 28 U.S.C.
§ 1738). Under California issue preclusion law, the proponent must
establish the following threshold elements:
(1) the issue sought to be precluded from relitigation is
identical to that decided in a former proceeding; (2) the issue
was actually litigated in the former proceeding; (3) the issue
was necessarily decided in the former proceeding; (4) the
decision in the former proceeding is final and on the merits;
and (5) the party against whom preclusion is sought was the
same as, or in privity with, the party to the former proceeding.
12
In re Plyam, 530 B.R. at 462 (citing Lucido v. Super. Ct., 51 Cal. 3d 335, 341
(1990)).
Before applying issue preclusion, the bankruptcy court also must
determine “whether imposition of issue preclusion in the particular setting
would be fair and consistent with sound public policy.” In re Khaligh, 338
B.R. at 824-25 (citing Lucido, 51 Cal. 3d at 341-43).
The party asserting issue preclusion has the burden of proof to
establish each of the above threshold requirements. See Harmon v. Kobrin (In
re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001). To satisfy this burden, the
moving party “must introduce a record sufficient to reveal the controlling
facts” and must “pinpoint the exact issues litigated in the prior action.”
Kelly v. Okoye (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP 1995), aff'd, 100
F.3d 110 (9th Cir.1996). Any reasonable doubt regarding what the prior
court decided is resolved against the moving party. Id.B. Howell’s arguments on appeal.
As a threshold matter, we note that there is no dispute in this appeal
that the bankruptcy court articulated and applied the correct legal
standards governing issue preclusion. In addition, Howell has conceded
that all issues other than duty to disclose and damages were fully and
fairly litigated in the state court. She has not advanced any argument —
either in the bankruptcy court or on appeal — why any other issues needed
to be retried in the bankruptcy court. Thus, even if Howell were to wholly
prevail on appeal, the other elements for a cause of action of fraudulent
13
concealment — nondisclosure, intent to deceive, materiality, and reliance
— have been conclusively established for purposes of Counsel’s
nondischargeability action. Compare Boschma v. Home Loan Ctr., Inc., 198
Cal. App. 4th 230, 248 (2011) (stating California fraudulent concealment
elements), with Oregon v. Mcharo (In re Mcharo), 611 B.R. 657, 660-61 (9th
Cir. BAP 2020) (identifying elements for finding nondischargeable
fraudulent omissions).
1. Howell’s arguments against the application of issue
preclusion.
On appeal, Howell largely asserts the same arguments she made in
the bankruptcy court. Most of these arguments challenge the bankruptcy
court’s application of issue preclusion and hinge on the same two premises:
(1) because the state court jury was not specifically instructed that
fraudulent concealment requires a duty to disclose its fraudulent
concealment findings were fatally flawed; and (2) the judgment for
fraudulent concealment is not entitled to issue preclusive effect because her
duty to disclose and the damages arising from her fraudulent conduct were
neither actually litigated nor necessarily decided. As explained below, both
of these premises are meritless.
a. Correctness of fraudulent concealment instruction and
findings.
Concerning the correctness of the fraudulent concealment instruction
and jury findings, the state trial court entered a fraudulent concealment
14
judgment against Howell, and the California Court of Appeal affirmed this
judgment. In the process, the Court of Appeal specifically rejected Howell’s
arguments challenging the fraudulent concealment instruction and
findings. We cannot and will not second-guess the Court of Appeal’s ruling
rejecting her argument that the fraudulent concealment instruction and
findings were improper. See Exxon Mobil Corp., 544 U.S. at 283-84; Lopez v.
Emerg. Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 105-06 (9th Cir. BAP
2007).
Even if we were to inquire into the correctness of the state court’s
concealment jury instruction, we note that both parties jointly sought and
obtained the state trial court’s approval of their modified version of CACI
1901 – the fraudulent concealment jury instruction. Moreover, we perceive
no error in that instruction. There is no dispute here that, under California
law, a duty to disclose could arise from the contractual relationship
between Counsel and Howell provided that any one of the following three
additional circumstances existed:
(1) the defendant makes representations but does not disclose
facts which materially qualify the facts disclosed, or which
render his disclosure likely to mislead; (2) the facts are known
or accessible only to defendant, and defendant knows they are
not known to or reasonably discoverable by the plaintiff; [or]
(3) the defendant actively conceals discovery from the plaintiff.
15
Warner Constr. Corp. v. City of L.A., 2 Cal. 3d 285, 294 (1970) (citations and
footnotes omitted); see also LiMandri v. Judkins, 52 Cal. App. 4th 326, 336
(1997) (same).5
Here, the parties’ modified CACI 1901 jury instruction — which
Howell included in her summary judgment opposition papers —
specifically referenced “active concealment” — one of the three recognized
circumstances from which a duty to disclose can arise. Howell has not
offered any explanation why instructing the jury to look for active
concealment was not sufficient to address the duty to disclose issue. Nor
are we aware of any such explanation.
b. Preclusive effect of fraudulent concealment judgment.
Howell contends that there are problems with the 2008 Judgment that
prevented the bankruptcy court from giving it any preclusive effect in the
nondischargeability action. Specifically, she reiterates her argument that
her duty to disclose was not litigated. So, she contends, the issue was not
actually litigated or necessarily decided as part of the 2008 Judgment. She
also contends that the state court’s reduction of the damages suggests that
the court awarded no damages to Counsel for fraud. She concludes,
therefore, that the 2008 Judgment cannot have any preclusive effect in
determining the nondischargeability of that debt. Once again, entry of the
2008 Judgment precludes Howell’s arguments.
California law recognizes a fourth scenario, not applicable to this appeal, from
5
which a duty to disclose can arise: if the defendant was acting in a fiduciary capacity to
16
We hold that both the duty to disclose and the damages issues were
actually litigated and necessarily decided when judgment was entered on
Counsel’s fraud claim based on the jury’s special verdict. Issues are
“actually litigated” when they are properly raised by a party’s pleadings,
when they are submitted to the court or jury for determination, and when
the court or jury actually decides them. In re Harmon, 250 F.3d at 1247
(citing People v. Sims, 32 Cal. 3d 468 (1982)). When an element is essential to
entry of judgment, it necessarily follows that if judgment is rendered the
element was actually litigated. See id. at 1248–49 (applying California law).
Issues are “necessarily decided” so long as they are at least somewhat
necessary to the decision. Samara v. Matar, 5 Cal. 5th 322, 327 (2018) (citing
Lucido, 51 Cal. 3d at 342).
Where, as here, a California court enters a judgment based on fraud
after a jury or bench trial, we generally do not look behind the judgment to
ascertain whether all of the required fraud elements specifically were
found. In other words, we presume that the fraud judgment “necessarily
included a determination of all of the facts required for actual fraud under
California law.” Zuckerman v. Crigler (In re Zuckerman), 613 B.R. 707, 718
(9th Cir. BAP 2020) (quoting Younie v. Gonya (In re Younie), 211 B.R. 367, 374
(9th Cir. BAP 1997)).
Howell recognizes that a duty to disclose is a fundamental
prerequisite for a fraudulent concealment judgment. See LiMandri, 52 Cal.
the plaintiff at the time of the nondisclosure. See LiMandri, 52 Cal. App. 4th at 336 & n.3.
17
App. 4th at 336-37. The state court entered judgment for Counsel on their
fraud cause of action based on the agreed upon jury instructions and
special verdict for fraudulent concealment. Following Zuckerman and
Younie, the state trial court’s fraud judgment necessarily decided the duty
to disclose and damages issues. Furthermore, following Harmon, because
these issues were essential to the fraudulent concealment judgment, they
also were actually litigated.
With respect to the jury’s damages finding, and the trial court’s
reduction of the jury’s damages award, Howell argues the trial court’s
reduction of the compensatory damages award makes it impossible to tell
whether any of the award flowed from her fraud. She claims it is just as
likely that the court’s adjustment of the jury’s damages award was meant
to attribute all of the damages to her breach of contract instead of her
fraud. Alternately, she insists that the court must have reduced the award
to remove any fraud damages because of the problems she perceives with
the jury’s fraud findings, as discussed above. Howell reasons that, because
of the uncertainty regarding the damages award, the damages issue was
not necessarily decided for issue preclusion purposes.
Damages, like the duty to disclose, also is an essential element for an
action based on fraudulent concealment. See Boschma, 198 Cal. App. 4th at
248 (identifying damages as one the elements for fraudulent concealment).
Howell’s damages argument ignores the presumption flowing from the
fraudulent concealment judgment – that the judgment necessarily included
18
a determination of all factual issues required for actual fraud under
California law, including damages. See In re Zuckerman, 613 B.R. at 718; In re
Younie, 211 B.R. at 374.
Any possible doubt (which we do not have) that the state trial court
entered the $48,080.94 judgment for fraud as well as breach of contract was
resolved by the California Court of Appeal’s decision. Affirming the trial
court’s judgment, the Court of Appeals specifically upheld the judgment
on fraud grounds. In doing so, it rejected all of Howell’s arguments
attacking the merits of the fraud ruling. For issue preclusion purposes, the
Court of Appeal’s affirmance on the ground of fraudulent concealment is
controlling. See, e.g., Delannoy v. Woodlawn Colonial, L.P. (In re Delannoy),
615 B.R. 572, 586–87 (9th Cir. BAP 2020); Newport Beach Country Club, Inc. v.
Founding Members of Newport Beach Country Club, 140 Cal. App. 4th 1120,
1123 (2006).
Howell counters that, under California law, when an appeal is
pending from an adverse judgment in the first action, the court in the
second action cannot give the judgment on appeal any issue preclusive
effect, because the finality requirement is not satisfied. This is an
unremarkable statement of California law. See Sandoval v. Super. Court, 140
Cal. App. 3d 932, 936–37 (1983). However, Howell attempts to take this
argument too far. She posits that, if an appeal from a state court judgment
is pending at the time of a bankruptcy filing — or later when a subsequent
nondischargeability action is filed — issue preclusion never can be applied
19
in the nondischargeability action, even if the appeal from the state court
judgment is disposed of before the nondischargeability action is concluded.
She cites no authority for this novel proposition of law. Nor are we aware
of any. Indeed, it is contrary to the well-accepted notion that California
judgments become sufficiently final for issue preclusion purposes
whenever (and however) the appeal rights in the first action are disposed
of. See, e.g., In re Delannoy, 615 B.R. at 586–87; Sandoval, 140 Cal. App. 3d at
936–37; see also Exxon Mobil Corp., 544 U.S. at 293 (stating in the context of
parallel, concurrent actions in state and federal court that “Disposition of
the federal action, once the state-court adjudication is complete, would be
governed by preclusion law.”).
Thus, we reject as meritless all of Howell’s arguments challenging the
preclusive effect of the state court’s fraudulent concealment judgment.
2. Treatment of Howell’s omissions as a statement respecting
the debtor’s financial condition.
Citing Lamar, Archer & Cofrin, LLP v. Appling, ___ U.S. ___, 138 S. Ct.
1752, 1758, (2018), Howell contends that her omissions regarding her
involvement in prior litigation with the HOA Defendants — and the
judgment they held against her — constituted statements respecting her
financial condition. As Appling observed, statements respecting the
debtor’s financial condition are not actionable under § 523(a)(2)(A). Id. at
1758. Instead, such statements only are actionable under § 523(a)(2)(B) and,
20
hence, must be in writing in order to fall within the stated scope of the
nondischargeability statute. Id. at 1758-59.6
Appling held that the debtor’s oral misrepresentation regarding the
value of a single asset – his claimed $100,000 expectancy interest in a tax
refund – qualified as a statement respecting his financial condition. Id. at
1757-58. Consequently, Appling concluded that the creditor could not
prevail on its § 523(a)(2)(A) claim because the type of misrepresentation at
issue was specifically excepted from the scope of the statute. Id. at 1764.
Howell’s reliance on Appling is misplaced. Here, Counsel’s
§ 523(a)(2)(A) claim was not based on an affirmative misstatement of fact,
but rather on a fraudulent omission of fact. This Panel has held that Appling
does not extend to fraudulent omissions. See In re Mcharo, 611 B.R. at 661-
6
The relevant part of the nondischargeability statute provides:
(a) A discharge under . . . this title does not discharge an individual debtor from
any debt—
* * *
(2) for money, property, services, or an extension, renewal, or refinancing of
credit, to the extent obtained by—
(A) false pretenses, a false representation, or actual fraud, other than a
statement respecting the debtor's or an insider's financial condition;
(B) use of a statement in writing—
(i) that is materially false;
(ii) respecting the debtor's or an insider's financial condition;
(iii) on which the creditor to whom the debtor is liable for such
money, property, services, or credit reasonably relied; and
(iv) that the debtor caused to be made or published with intent to
deceive[]
11 U.S.C. § 523 (emphasis added).
21
62. In Mcharo, we explained that the plain language of the statute refers to
“a statement respecting the debtor’s . . . financial condition” and a
fraudulent omission is not a “statement.” Id. at 662 (emphasis added).
Accordingly, we reject Howell’s argument based on Appling.
3. Howell’s other grievances do not justify reversal.
Howell references numerous procedural decisions the bankruptcy
court made during the course of the nondischargeability action (for
example, the granting of continuances), which she claims were unfair to
her or evidence the court’s bias. But she never specifically and distinctly
argues or explains how these decisions constituted reversible error. Nor is
any reversible error evident to us. Accordingly, we decline to address them
further. See Christian Legal Soc'y, 626 F.3d at 487–88.
Similarly, Howell states, in passing, that the bankruptcy court erred
by not granting her motion to dismiss Counsel’s nondischargeability
complaint. To support this assertion, she merely states without legal
support that Counsel’s § 523(a)(2)(A) claim for relief failed to specifically
allege that she had a duty to disclose. However, neither Civil Rule 8(a) nor
Civil Rule 9 (made applicable in adversary proceedings by Rules 7008 and
7009) required Counsel to include the specific words “duty to disclose.”
Civil Rule 8(a) merely requires the complaint’s allegations to include
a short and plain statement of the grounds for relief. This pleading
standard is relatively minimal and is satisfied when the complaint contains
“sufficient allegations to put defendants fairly on notice of the claims
22
against them.” Tevis v. Hoseit (In re Tevis), BAP No. EC–10–1320–JuKiD,
2011 WL 7145712, at *8 (9th Cir. BAP Dec. 9, 2011) (quoting McKeever v.
Block, 932 F.2d 795, 798 (9th Cir. 1991)).
In turn, Civil Rule 9(b) requires plaintiffs to plead fraud claims for
relief with greater particularity. This requirement has been construed to
mean: “the complaint must (1) specify the averred fraudulent
representations; (2) aver the representations were false when made;
(3) identify the speaker; (4) state when and where the statements were
made; and (5) state the manner in which the representations were false and
misleading.” Id. at *9 (citing Lancaster Cmty. Hosp. v. Antelope Valley Hosp.
Dist., 940 F.2d 397, 405 (9th Cir. 1991)).
Neither of these standards required the nondischargeability
complaint to specifically use the term “duty to disclose.” More to the point,
the notion that Howell was not sufficiently apprised of the grounds for
Counsel’s nondischargeability complaint is ludicrous. The adversary
complaint referenced Counsel’s state court judgment against Howell and
made clear that Counsel’s exception to discharge claims were premised on
the same transaction and omissions from which the state court judgment
arose. Counsel further alleged that Howell knowingly failed to disclose the
prior judgment and settlement negotiations while reassuring them of her
intent to proceed with the claims against the HOA Defendants. Under
these circumstances, we reject Howell’s argument that Counsel
insufficiently pleaded fraud in their nondischargeability complaint.
23
Finally, Howell points out that the Eisenberg Law Firm, APC was not
a party to the state court judgment and argues that it lacks standing. But
she has not disputed that the Eisenberg Law Firm received an assignment
of rights under the judgment from Day|Eisenberg, which was a named
party to state court judgment. Instead, Howell argues that the assignment
was invalid.
Howell believes that Eisenberg Law Firm could not acquire any
rights in the judgment while the judgment was void as in violation of the
automatic stay arising from her 2008 bankruptcy case. But Howell is
mistaken. She ignores the fact that Counsel obtained an annulment of the
stay to retroactively validate the state court judgment. See Fjeldsted v. Lien
(In re Fjeldsted), 293 B.R. 12, 21 (9th Cir. BAP 2003) (stating that court order
annulling stay retroactively validated foreclosure sale that otherwise
would have been void as a stay violation). Because the judgment was
retroactively validated, nothing prevented Day|Eisenberg from assigning
its interest in the state court judgment to the Eisenberg Law Firm. Thus, we
reject Howell’s standing argument.7
7
To the extent Howell claims that the assignment is invalid on other grounds,
Howell lacks standing to challenge the validity of an assignment to which she is not a
party. See Yvanova v. New Century Mortg. Corp., 62 Cal. 4th 919, 936 (2016) (“When an
assignment is merely voidable, the power to ratify or avoid the transaction lies solely
with the parties to the assignment; the transaction is not void unless and until one of the
parties takes steps to make it so.”).
24
CONCLUSION
Based on the foregoing, we AFFIRM the bankruptcy court’s summary
judgment excepting the judgment debt from discharge under
§ 523(a)(2)(A).
25