In re: Bill Martin Parker

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: May 29, 2012
• Docket: NC-11-1566-JuKiJo
• Status: Published

Opinion

FILED MAY 29 2012 1 SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 ORDERED PUBLISHED O F TH E N IN TH C IR C U IT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 6 In re: ) BAP No. NC-11-1566-JuKiJo ) 7 BILL MARTIN PARKER, ) Bk. No. 09-43245 ) 8 Debtor. ) Adv. No. 09-04301 ______________________________) 9 ) ALBERT P. WILCOX, ) 10 ) Appellant, ) 11 v. ) O P I N I O N ) 12 BILL MARTIN PARKER, ) ) 13 Appellee. ) ______________________________) 14 15 Argued and Submitted on May 17, 2012 at San Francisco, California 16 Filed - May 29, 2012 17 Appeal from the United States Bankruptcy Court 18 for the Northern District of California 19 Honorable Roger L. Efremsky, Bankruptcy Judge, Presiding _____________________________________ 20 21 Appearances: Andrew Steinfeld, Esq. argued for appellant Albert P. Wilcox; Richard C. Raines, Esq., 22 argued for appellee Bill Martin Parker. ____________________________________ 23 24 Before: JURY, KIRSCHER, and JOHNSON,1 Bankruptcy Judges. 25 26 27 28 1 Hon. Wayne E. Johnson, Bankruptcy Judge for the Central District of California, sitting by designation. 1 JURY, Bankruptcy Judge: 2 3 Appellant-creditor, Albert P. Wilcox (“Wilcox”), appeals 4 the bankruptcy court’s order denying his motion for summary 5 judgment on a § 523(a)(2)(A)2 fraud claim against chapter 7 6 debtor, Bill Martin Parker (“Parker”). This appeal follows a 7 trial on the merits on the fraud claim with judgment entered in 8 favor of Parker and Wilcox’s claim found dischargeable. We 9 AFFIRM. 10 I. FACTS 11 Parker is a real estate broker. He also was the owner and 12 principal officer of BT Investment & Loan, Inc. (“BT 13 Investments”), a company which facilitated hard money loans for 14 purchasers of real estate. 15 On November 13, 2006, BT Investments acted as the broker 16 for a $290,000 loan made by Wilcox, a retiree, to Mark and 17 Kathleen Taylor (the “Taylors”) in connection with the Taylors’ 18 purchase of real property located on 65th Street, Sacramento, 19 California.3 The loan was secured by trust deeds encumbering 20 the property on 65th Street and the Taylors’ family residence 21 22 2 Unless otherwise indicated, all chapter and section 23 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, “Rule” references are to the Federal Rules of Bankruptcy 24 Procedure and “Civil Rule” references are to the Federal Rules of 25 Civil Procedure. 3 26 Mark Taylor owned a construction company and purchased properties to rehabilitate them and sell for a profit. The 27 Taylors had worked with Parker and BT Investments for over four years, obtaining up to fifteen loans during that time frame. 28 -2- 1 located on Grant Street in Brentwood, California. 2 On May 17, 2007, BT Investments acted as the broker for two 3 additional loans made by Wilcox to the Taylors for $120,000 and 4 $230,000. These loans were for the renovation of property 5 located on Beatrice Street in Brentwood, California. Both loans 6 were secured by trust deeds encumbering the Beatrice property. 7 The $230,000 loan was also secured by a trust deed encumbering 8 the Taylors’ family residence on Grant Street. 9 The State Court Litigation 10 The Taylors did not repay their loans to Wilcox. On 11 November 23, 2008, Wilcox filed a lawsuit against Parker, BT 12 Investments and Parker’s wife (collectively, “Parker”), Wilcox 13 v. Parker, et al., in the Contra Costa Superior Court (Case No. 14 C08-00149) (the “State Court Action”). On March 12, 2008, 15 Parker filed a cross-complaint against the Taylors for equitable 16 indemnity and declaratory relief.3 17 The Taylors’ Bankruptcy 18 About two months later, on May 15, 2008, the Taylors filed 19 their chapter 7 petition. On August 18, 2008, Parker filed an 20 21 3 Cal. Code of Civ. Proc. § 428.10(b) states: 22 A party against whom a cause of action has been asserted in 23 a complaint or cross-complaint may file a cross-complaint setting forth . . . [a]ny cause of action he has against a 24 person alleged to be liable thereon, whether or not such 25 person is already a party to the action . . . .

26 Under this section, a defendant may file a cross-complaint against any person from whom he seeks indemnity. Daon Corp. v. 27 Place Homeowners Assn., 255 Cal. Rptr. 448, 451 (Cal Ct. App. 1989). 28 -3- 1 adversary proceeding against the Taylors asserting claims for 2 relief under § 727(a)(2), (3), and (4) and § 523(a)(2).4 With 3 respect to the § 523(a)(2) fraud claim, Parker alleged that the 4 Taylors provided him with false information so that they could 5 obtain the loans from Wilcox. Parker further alleged that the 6 Taylors misrepresented the status of their other loans and 7 financial condition. In the prayer for relief on the fraud 8 claim, Parker sought equitable indemnification from the Taylors 9 for any damages arising out of their fraudulent actions in 10 obtaining the loans in the event Parker was found liable for the 11 Taylors’ obligation in the State Court Action. 12 The Taylors did not answer the complaint. On September 29, 13 2008, the clerk of the court entered a default against them. 14 Parker then filed an application for entry of a default 15 judgment. On February 17, 2009, the bankruptcy court entered a 16 default judgment against the Taylors, denying them a discharge 17 under § 727. On the § 523 fraud claim, the judgment provided: 18 Defendants shall be obligated to indemnify and to repay Plaintiffs for any monetary damage award entered 19 against Plaintiffs (if any) in accordance with a final judgment in the State Court Action in Contra Costra 20 Superior court, Case Number C08-00149, Wilcox v. Parker, et al. . . . To the extent that Defendants do 21 not indemnify and repay Plaintiffs, as required by this Judgment, Plaintiffs may pursue Defendants and 22 each of them for repayment of any sums that Plaintiffs and each of them are obligated to pay in the State 23 Court Action, in accordance with this Judgment. 24 4 25 We have taken judicial notice of the pleadings which were docketed and imaged in In re Taylor, Bankruptcy Case No. 08-42427 26 and the related adversary proceeding, Parker v. Taylor, Adv. No. 08-4239. Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 27 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 28 -4- 1 Shortly thereafter, the Taylors moved to set aside the 2 default judgment. On April 29, 2009, the bankruptcy court 3 entered a conditional order setting the default judgment aside 4 which required the Taylors to pay Parker’s attorneys’ fees. 5 After the Taylors provided proof of payment of the court- 6 approved fees, the court entered a final order setting aside the 7 default on March 8, 2010. 8 On June 2, 2011, Parker filed a motion for summary judgment 9 (“MSJ”) on the § 727 claims against the Taylors. On June 3, 10 2011, Parker voluntarily dismissed the § 523(a)(2) claim.5 The 11 bankruptcy court denied Parker’s MSJ. 12 After amending his complaint, Parker abandoned his pursuit 13 of the Taylors. On November 2, 2011, the bankruptcy court 14 dismissed the adversary proceeding for lack of prosecution. On 15 November 18, 2011, the adversary proceeding closed. 16 Parker’s Bankruptcy 17 Meanwhile, on April 20, 2009, just prior to the bankruptcy 18 court’s conditional set aside of Parker’s default judgment 19 against the Taylors, Parker filed his chapter 7 petition. 20 Parker’s Schedule F showed $1,037,000 in unsecured debt with $1 21 million of that amount attributed to his potential liability to 22 Wilcox in the State Court Action. 23 On July 20, 2009, Wilcox filed an adversary proceeding 24 against Parker alleging claims for relief under §§ 727 and 25 26 5 By this time, as further discussed below, the bankruptcy 27 court had found after a trial that Parker did not have the requisite intent to defraud Wilcox. 28 -5- 1 523(a)(2). Wilcox filed an MSJ on all claims for relief. With 2 respect to the § 523(a)(2)(A) fraud claim, Wilcox sought summary 3 judgment on judicial estoppel grounds based on the default 4 judgment Parker had obtained in the Taylors’ bankruptcy case. 5 According to Wilcox, Parker could only obtain a judgment for 6 equitable indemnity if he was jointly and severally liable with 7 the Taylors for fraud. Therefore, Wilcox reasoned that Parker’s 8 application for entry of the default judgment and the judgment 9 itself constituted Parker’s admission that he had committed 10 fraud against Wilcox. 11 On November 19, 2010, the bankruptcy court entered its 12 order denying Wilcox’s MSJ. On the § 523(a)(2)(A) fraud claim, 13 the court found that there was a genuine dispute on the issue of 14 Parker’s intent to defraud Wilcox.6 15 The bankruptcy court bifurcated the trial into two phases. 16 In the first phase, the bankruptcy court would decide the fraud 17 claim under § 523(a)(2)(A), and in the second phase the court 18 would decide the § 727 claims for relief. On December 3, 2010, 19 Wilcox filed a motion for leave to appeal the interlocutory 20 order denying his MSJ with the bankruptcy court. In that 21 6 22 In support of his MSJ, Wilcox evidently included a letter from the California Department of Real Estate (the “DRE”) that 23 found Parker had an obligation to disclose the fact that his wife had a senior trust deed on one of the properties that Wilcox 24 loaned money on. That letter is not part of the record on 25 appeal. However, from what we can tell, the DRE found Parker was negligent or incompetent and that he was overly optimistic that 26 the transaction would be successful. Hr’g Tr. November 4, 2010 at 10:9-13. Although the bankruptcy court referred to that 27 factual issue in denying the § 523(a)(2) MSJ, it made no reference whatsoever to the judicial estoppel argument. 28 -6- 1 motion, Wilcox stated that the issue for appeal was whether the 2 doctrine of judicial estoppel should apply to bar Parker from 3 denying his liability to Wilcox for fraud. Wilcox also moved to 4 stay the trial pending appeal. 5 On December 13, 2010, the bankruptcy court held a trial on 6 the § 523(a)(2)(A) claim. At that hearing, the court denied 7 Wilcox’s motion for leave to appeal.7 Ultimately, the court 8 ruled in Parker’s favor, finding that the alleged debts owed to 9 Wilcox were discharged. On April 4, 2011, the bankruptcy court 10 entered judgment for Parker on the § 523(a)(2)(A) fraud claim. 11 On September 28, 2011, the bankruptcy court entered the 12 order granting Wilcox’s motion to dismiss the remaining claims 13 under § 727. At that point, the interlocutory order denying 14 Wilcox’s MSJ on the § 523(a)(2) claim merged into the final 15 judgment disposing of Wilcox’s claim under § 523(a)(2). United 16 States v. Real Prop. Located at 475 Martin Lane, Beverly Hills, 17 Cal., 545 F.3d 1134, 1141 (9th Cir. 2008) (under merger rule 18 interlocutory orders entered prior to the judgment merge into 19 the judgment and may be challenged on appeal). 20 On October 6, 2011, the adversary proceeding closed. On 21 the same day Parker was granted a discharge. 22 On October 11, 2011, Wilcox timely appealed the bankruptcy 23 court’s order denying his MSJ. 24 II. JURISDICTION 25 The bankruptcy court had jurisdiction over this proceeding 26 27 7 Wilcox was required to seek leave to appeal the interlocutory order from this Panel under Rule 8003(b). 28 -7- 1 under 28 U.S.C. §§ 1334 and 157(b)(2)(I). We have jurisdiction 2 under 28 U.S.C. § 158. 3 III. ISSUE 4 Did the bankruptcy court err in denying Wilcox’s MSJ on 5 judicial estoppel grounds? 6 IV. STANDARD OF REVIEW 7 We review de novo the bankruptcy court’s denial of a motion 8 for summary judgment. Padfield v. AIG Life Ins. Co., 290 F.3d 9 1121, 1124 (9th Cir. 2002). 10 V. DISCUSSION 11 We first consider whether review of the order denying 12 Wilcox’s MSJ is appropriate under these circumstances. 13 Generally, the denial of a motion for summary judgment is not 14 reviewable on appeal after a full trial and final judgment on 15 the merits of the case. Lum v. City and Cnty. of Honolulu, 963 16 F.2d 1167, 1170 (9th Cir. 1992); Locricchio v. Legal Servs. 17 Corp., 833 F.2d 1352, 1358 (9th Cir. 1987); see also Allahar v. 18 Zahora, 59 F.3d 693, 695 (7th Cir. 1995) (“Once a trial has been 19 completed and all the facts presented, it is almost always 20 immaterial whether or not summary judgment should have been 21 granted at an earlier point in the proceedings.”). In 22 Locricchio, the Ninth Circuit explained the rationale for the 23 rule: 24 To be sure, the party moving for summary judgment suffers an injustice if his motion is improperly 25 denied. This is true even if the jury decides in his favor. The injustice arguably is greater when the 26 verdict goes against him. However, we believe it would be even more unjust to deprive a party of a jury 27 verdict after the evidence was fully presented, on the basis of an appellate court’s review of whether the 28 -8- 1 pleadings and affidavits at the time of the summary judgment motion demonstrated the need for a trial. 2 3 833 F.2d at 1359. However, the rule does not apply to denials 4 of summary judgment motions “where the [bankruptcy] court made 5 an error of law that, if not made, would have required the 6 [bankruptcy] court to grant the motion.” Banuelos v. Const. 7 Laborers’ Trust Funds for S. Cal., 382 F.3d 897, 902 (9th Cir. 8 2004). 9 Here, the bankruptcy court did not make any findings on 10 Wilcox’s judicial estoppel theory. However, the record shows 11 that the question of whether the doctrine of judicial estoppel 12 applied did not concern disputed factual issues that were later 13 addressed at trial. Indeed, the record reveals that the only 14 disputed issues of material fact for trial were whether Parker 15 had the requisite intent to defraud Wilcox and whether Wilcox 16 justifiably relied on material misrepresentations which resulted 17 in damage. Thus, the bankruptcy court implicitly decided the 18 question of whether judicial estoppel applied under these facts 19 as an issue of law. Accordingly, the court’s denial of summary 20 judgment had the effect of ending any further consideration of 21 Wilcox’s judicial estoppel theory.8 22 Moreover, had the bankruptcy court applied the doctrine of 23 8 Parker also argues that Wilcox waived his claim of 24 judicial estoppel for purposes of appeal because he never 25 referred to it at trial, did not adduce any testimony relating to detriment or unfair advantage, did not introduce any documentary 26 evidence on the issue and never sought a ruling by the trial court on the issue at trial. For the same reasons noted above, 27 we conclude that Wilcox did not waive the issue for purposes of this appeal. 28 -9- 1 judicial estoppel on the issue of Parker’s fraud, that ruling 2 would have negated the need for a trial on the issue. Under 3 these circumstances, we find it appropriate to review the order 4 denying Wilcox’s MSJ under our traditional de novo review. 5 Judicial Estoppel 6 We now consider whether the doctrine of judicial estoppel 7 applies to the undisputed facts as a matter of law. “Judicial 8 estoppel, sometimes also known as the doctrine of preclusion of 9 inconsistent positions, precludes a party from gaining an 10 advantage by taking one position, and then seeking a second 11 advantage by taking an incompatible position.” Whaley v. 12 Belleque, 520 F.3d 997, 1002 (9th Cir. 2008). It is “an 13 equitable doctrine invoked by a court at its discretion,” N.H. 14 v. Maine, 532 U.S. 742, 750 (2001), and “is intended to protect 15 the integrity of the judicial process by preventing a litigant 16 from playing fast and loose with the courts.” Whaley, 520 F.3d 17 at 1002. 18 In deciding whether judicial estoppel should be applied, we 19 typically consider three elements: “(1) whether a party’s later 20 position is ‘clearly inconsistent’ with its original position; 21 (2) whether the party has successfully persuaded the court of 22 the earlier position, and (3) whether allowing the inconsistent 23 position would allow the party to ‘derive an unfair advantage or 24 impose an unfair detriment on the opposing party.’” United 25 States v. Ibrahim, 522 F.3d 1003, 1009 (9th Cir. 2008); see also 26 Cheng v. K&S Diversified Invs., Inc. (In re Cheng), 308 B.R. 27 448, 452-3 (9th Cir. BAP 2004). 28 Before moving on to the determination as to whether these

-10- 1 elements have been met, we briefly address Wilcox’s reasoning to 2 support application of judicial estoppel under this set of 3 facts. His argument goes like this: 4 (1) A judgment based on equitable indemnity was not 5 available to Parker absent his joint and several 6 liability with the Taylors; 7 (2) The judgment Parker obtained against the Taylors 8 presupposes joint liability for fraud; 9 (3) Ergo, Parker’s judgment against the Taylors based 10 on equitable indemnity constitutes a judicial 11 admission of Parker’s liability for fraud. 12 Wilcox’s major premise is correct: equitable indemnity is 13 only available among tortfeasors who are jointly and severally 14 liable for the plaintiff’s injury. Leko v. Cornerstone Bldg. 15 Inspection Serv., 103 Cal. Rptr. 2d 858, 863 (Cal. Ct. App. 16 2001). The key here is that there can be no indemnity without 17 liability. Only when the indemnitee is found responsible for 18 the acts of the indemnitor does the obligation to indemnify 19 apply. Restatement (Second) of Torts § 886B(1) (1979) (“If two 20 persons are liable in tort to a third person for the same harm 21 and one of them discharges the liability of both, he is entitled 22 to indemnity from the other if the other would be unjustly 23 enriched at his expense by the discharge of the liability.”). 24 However, as discussed below, the rest of Wilcox’s analysis fails 25 because his minor premises are incorrect. 26 Our independent review of Parker’s application for entry of 27 default in the Taylors’ adversary and the default judgment 28 itself show that Parker asserted a conditional, or contingent

-11- 1 claim for common law indemnity against the Taylors. We 2 characterize Parker’s equitable indemnity claim as conditional 3 because, on the one hand, Parker denied that he was liable for 4 any of the claims Wilcox may have asserted against him. Yet, on 5 the other hand, Parker asserted that he could incur liability 6 for the Taylors’ debt and, if so, the Taylors should be required 7 to equitably indemnify him due to their fraud. The plain 8 language of the default judgment shows that the Taylors’ 9 obligation to indemnify Parker and repay him was conditional9 on 10 Wilcox obtaining a monetary damage award against Parker in the 11 State Court Action. Accordingly, the conditional nature of the 12 judgment does not, as Wilcox puts it, “presuppose” Parker’s 13 fraud. 14 It follows then that the judgment cannot constitute a 15 judicial admission by Parker that he committed fraud. “Judicial 16 admissions are formal admissions in the pleadings which have the 17 effect of withdrawing a fact from issue and dispensing wholly 18 with the need for proof of the fact.” Am. Title Ins. v. Lacelaw 19 Corp., 861 F.2d 224, 226 (9th Cir. 1988). There are no formal 20 admissions in the record before us. At all times, Parker denied 21 he was liable for the claims Wilcox asserted against him. 22 Due to the conditional nature of Parker’s claim for 23 equitable indemnity the doctrine of judicial estoppel has no 24 application under this set of facts. There is no “conflict” 25 between the default judgment that Parker obtained in the 26 9 Generally, conditional judgments are not final under 27 Civil Rule 54(a), incorporated by Rule 7054, until the 28 contingency has been removed. Wright, Miller & Cooper, 15B Federal Practice and Procedure § 3915.3 (2nd ed. 1998).

-12- 1 Taylors’ bankruptcy and the judgment in favor of Parker at issue 2 in this appeal. Further, the record does not reveal any 3 inconsistencies in Parker’s position. 4 Wilcox also failed to establish judicial estoppel based on 5 the success element. There is nothing in the record that shows 6 Parker was asserting a vested right to indemnification against 7 the Taylors based on his admission of fraud. Accordingly, by 8 entering the conditional judgment, the bankruptcy court could 9 not have “accepted” the position that Wilcox advocates. 10 Finally, we are hard pressed to conclude that Parker sought 11 an unfair advantage by seeking equitable indemnity from the 12 Taylors in their bankruptcy and then later defending himself in 13 this nondischargeability proceeding. Parker obtained no 14 advantage by obtaining the default judgment against the Taylors 15 which was later set aside. In the end, the bankruptcy court 16 held a trial on the issue of Parker’s fraud where Wilcox had 17 ample opportunity to cross examine Parker and other witnesses. 18 A trial on the merits cannot be considered to impose an “unfair 19 detriment” on Wilcox when, at the time of his MSJ, the record 20 demonstrated the need for a trial. 21 Accordingly, we conclude that, as a matter of law, Wilcox 22 failed to establish the elements necessary to support the 23 application of the doctrine of judicial estoppel. 24 VI. CONCLUSION 25 For the reasons stated, we AFFIRM. Wilcox’s motion to 26 27 28 -13- 1 supplement the record is DENIED.10 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 10 On May 3, 2012, Wilcox filed a motion to supplement the record with the state court cross-complaint filed by Parker 23 against the Taylors for indemnity and Parker’s Schedule B listing 24 his contingent claim against the Taylors. On May 7, 2012, Parker objected to the inclusion of these documents in the record. On 25 that same day, the Panel issued an order stating that the motion would be considered along with the merits. The documents 26 included with the supplement were not presented to the bankruptcy court and therefore were not properly considered as part of the 27 record on appeal. They are not necessary to our ruling. 28 Therefore, the motion is denied.

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