Hai Lecong v. Ashley Tran

FILED
NOT FOR PUBLICATION
FEB 13 2017
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: HAI LECONG, No. 15-60039
Debtor. BAP No. 14-1286
------------------------------
MEMORANDUM*
HAI LECONG,
Appellant,
v.
ASHLEY TRAN,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Kirscher, Kurtz, and Dunn, Bankruptcy Judges, Presiding
Submitted February 7, 2017**
Pasadena, California
Before: GRABER, BYBEE, and CHRISTEN, 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).
Hai Lecong appeals the grant of summary judgment in favor of Ashley Tran,
entered by the bankruptcy court and upheld by the Bankruptcy Appellate Panel
(BAP), which held that the debt was nondischargeable under 11 U.S.C.
§ 523(a)(2)(A). We affirm.
We review de novo a bankruptcy court’s grant of summary judgment.
Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1221–22 (9th Cir. 2010). We
also review de novo a bankruptcy court’s determination that issue preclusion is
available. Dias v. Elique, 436 F.3d 1125, 1128 (9th Cir. 2006). If issue preclusion
is available, the decision to apply it is reviewed for abuse of discretion. Id.The doctrine of issue preclusion applies to dischargeability proceedings
pursuant to § 523(a). Grogan v. Garner, 498 U.S. 279, 284 n.11 (1991). Issue
preclusion, or collateral estoppel, bars relitigation of factual issues that have been
adjudicated in a prior action. Under the principles of “full faith and credit,” 28
U.S.C. § 1738, federal courts give prior state-court judgments the same preclusive
effect as the courts of the state from which the judgment derived. Cal-Micro, Inc.
v. Cantrell (In re Cantrell), 329 F.3d 1119, 1123 (9th Cir. 2003). Therefore, we
apply California’s collateral-estoppel principles.
Under California law, the party asserting issue preclusion bears the burden
of establishing five threshold requirements:
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(1) “the issue sought to be precluded from relitigation must be identical to
that decided in a former proceeding”;
(2) “this issue must have been actually litigated in the former proceeding”;
(3) “it must have been necessarily decided in the former proceeding”;
(4) “the decision in the former proceeding must be final and on the merits”;
and
(5) “the party against whom preclusion is sought must be the same as, or in
privity with, the party to the former proceeding.”
Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001) (quoting
Lucido v. Superior Court, 795 P.2d 1223, 1225 (Cal. 1990) (in bank)).
Additionally, imposition of issue preclusion must be fair and consistent with sound
public policy. Id. These public policy considerations include “preservation of the
integrity of the judicial system, promotion of judicial economy, and protection of
litigants from harassment by vexatious litigation.” Lucido, 795 P.2d at 1227.
We disagree with Lecong’s argument that the first three requirements of
issue preclusion are not met in this case. Section 523(a)(2)(A) of the Bankruptcy
Code excepts from discharge any debt for money, property, services, or credit
obtained by “false pretenses, a false representation, or actual fraud.” In the Ninth
Circuit, to prove actual fraud under § 523(a)(2)(A), a creditor must show by a
preponderance of the evidence five elements:
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(1) the debtor made . . . representations;
(2) that at the time he knew they were false;
(3) that he made them with the intention and purpose of deceiving the
creditor;
(4) that the creditor relied on such representations; [and]
(5) that the creditor sustained the alleged loss and damage as the
proximate result of the misrepresentations having been made.
In re Sabban, 600 F.3d at 1222 (alterations in original) (quoting Am. Express
Travel Related Servs. Co. v. Hashemi (In re Hashemi), 104 F.3d 1122, 1125 (9th
Cir. 1996)). These requirements track the elements of common-law fraud. In re
Hashemi, 104 F.3d at 1125; Citibank (S. Dak.), N.A. v. Eashai (In re Eashai), 87
F.3d 1082, 1087 (9th Cir. 1996).
In California, an action for actual fraud requires a plaintiff to show:
(1) a misrepresentation (false representation, concealment, or
nondisclosure);
(2) knowledge of falsity;
(3) intent to defraud, i.e., to induce reliance;
(4) justifiable reliance; and
(5) resulting damage.
Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 917 (Cal. 1997).
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To begin, the issues are “identical” because the § 523(a)(2)(A) actual fraud
claim involves “identical factual allegations” as were at stake in Lecong’s state
court fraud trial. Lucido, 795 P.2d at 1225. The elements required to find actual
fraud in California are the same as the elements of actual fraud under
§ 523(a)(2)(A). And the jury’s special verdict found Lecong’s actions had satisfied
each of California’s elements of actual fraud.
The jury verdict also affirms that these questions were actually litigated and
necessarily decided. An issue is “actually litigated” when both parties “presented
evidence and witnesses in support of their positions, and . . . had the opportunity to
present full cases.” Lucido, 795 P.2d at 1225. Here, both parties presented
evidence and argued the merits of the fraud claim. To conclude that an issue was
“necessarily decided,” California “courts have previously required only that the
issue not have been ‘entirely unnecessary’” to the judgment in the initial
proceeding. Id. at 1226. In reaching the verdict in this case, the question of fraud
was not “entirely unnecessary” in the initial proceeding. No public policy factors
weigh against application of the doctrine. Therefore, Tran has met the burden of
establishing the threshold requirements of issue preclusion. The bankruptcy court
and the BAP did not abuse their discretion in applying the doctrine.
AFFIRMED.
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