In re: Bryce Peltier and Kristine Diane Peltier

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: August 16, 2022
• Docket: OR-22-1000-FBG
• Status: Published

Opinion

FILED AUG 16 2022 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. OR-22-1000-FBG BRYCE PELTIER and KRISTINE DIANE PELTIER, Bk. No. 3:21-bk-30450-DWH Debtors. Adv. No. 3:21-ap-03018-DWH BRYCE PELTIER; KRISTINE DIANE PELTIER, Appellants, v. OPINION VAN LOO FIDUCIARY SERVICES, LLC, Appellee.

Appeal from the United States Bankruptcy Court for the District of Oregon David W. Hercher, Bankruptcy Judge, Presiding

Filed – August 16, 2022 Ordered Published – September 12, 2022

APPEARANCES: Michael Fuller of OlsenDaines argued for appellants; Darlene Pasieczny of Samuels Yoelin Kantor LLP argued for appellee.

Before: FARIS, BRAND, and GAN, Bankruptcy Judges.

FARIS, Bankruptcy Judge: INTRODUCTION

The Oregon state court entered a judgment against Kristine Diane

Peltier and Bryce Peltier for financial elder abuse of a family member. The

Peltiers filed for chapter 71 bankruptcy protection, and appellee Van Loo

Fiduciary Services LLC (“Van Loo”) sought to have the judgment debt

declared nondischargeable under §§ 523(a)(2), (4), and (6). The bankruptcy

court entered judgment against Kristine 2 on the § 523(a)(4) claim, based on

the issue preclusive effect of the state court judgment.

Kristine appeals, arguing that issue preclusion was inappropriate

because the issues that the state court necessarily determined were not the

same as those before the bankruptcy court.

We disagree with the bankruptcy court’s reasoning but agree with its

conclusion. We AFFIRM.

FACTS

A. The state court judgment

Van Loo is the court-appointed conservator for Kristine’s mother,

Leah D. Hudson, and the personal representative for the estate of Jon W.

Hudson, who was Mrs. Hudson’s husband and Kristine’s father.

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. 2 We sometimes refer to Kristine and Bryce by their first names for convenience and clarity. We intend no disrespect. 2 In June 2020, Van Loo filed a complaint in the Oregon circuit court

for financial elder abuse, unjust enrichment, and breach of fiduciary duty

against Kristine, Bryce, Kristine’s sister, and her sister’s husband.

Van Loo alleged that, while the Hudsons suffered from declining

mental and physical health, the defendants misused the Hudsons’ funds,

credit, and assets to benefit themselves. It alleged that Kristine had

accomplished this by abusing powers of attorney that the Hudsons had

granted her.

The complaint stated three claims for relief: (1) elder abuse under

Oregon Revised Statutes (“ORS”) 124.110 against all defendants; (2) unjust

enrichment against all defendants; and (3) breach of fiduciary duty against

Kristine.

The Peltiers did not respond to the complaint, and the circuit court

entered an order of default against the Peltiers.3 After a prima facie hearing

at which Van Loo’s principal testified, the court stated that “it’s very clear

that . . . the plaintiffs have made a prima facie showing of elder abuse,

unjust enrichment, and a breach of fiduciary duties by the remaining

defendants, so I do find in favor of the plaintiffs on their claims.” It did not

offer any detailed findings or conclusions.

The circuit court granted Van Loo a limited judgment4 against the

3 The other defendants apparently settled with Van Loo and were dismissed from the case. 4 A “limited judgment” under ORS 18.005(13) and Oregon Rule of Civil 3 Peltiers on all claims for relief. Pursuant to ORS 124.100, it awarded Van

Loo treble damages totaling $1,069,606.86 against Kristine and Bryce and

an additional judgment against Kristine for treble damages of $887,276.16 –

exactly what Van Loo requested. It also issued a second limited judgment

awarding Van Loo attorneys’ fees and costs and conservator fees.

B. The chapter 7 bankruptcy case and adversary proceeding

The Peltiers sought chapter 7 bankruptcy protection. Van Loo filed a

timely complaint to determine the nondischargeability of the state court

judgment debts pursuant to §§ 523(a)(2)(A), (4), and (6).

As to § 523(a)(4), Van Loo alleged that the Peltiers had committed

fraud or defalcation by a fiduciary, larceny, and embezzlement.

The Peltiers filed an answer generally denying the allegations in the

adversary complaint.

C. Van Loo’s motion for summary judgment

Van Loo filed a motion for summary judgment on all claims. It

argued that the state court’s findings were entitled to issue preclusive

effect, so the judgments were nondischargeable under §§ 523(a)(2), (4), and

(6).

The Peltiers opposed the motion for summary judgment. They

argued that Van Loo could not establish each element of issue preclusion

under Oregon law. The Peltiers contended that the issues were not

Procedure 67 B is essentially the same as a judgment on fewer than all claims or parties under Civil Rule 54(b).

4 identical and the issues were not “necessarily decided.” They emphasized

that the state court had not made any findings on the record. With regard

to § 523(a)(4), they argued that the default judgment did not establish gross

recklessness or felonious intent necessary to a nondischargeability ruling.

After a hearing, the bankruptcy court announced that it would grant

summary judgment against Kristine, but not Bryce, and only under

§ 523(a)(4).

The bankruptcy court recited the five elements of issue preclusion

under Oregon law. It noted that the Peltiers conceded that Oregon affords

issue preclusive effect to default judgments. It also held that the Peltiers

had a full and fair opportunity to litigate the state court proceedings and

that issue preclusion was appropriate for this type of proceeding.

It acknowledged that, because the state court “made no specific

findings of fact, except for its quantification of damages, it’s difficult to

know exactly what was determined.” Therefore, to determine the issue

preclusive effect of the default judgment, the court analyzed “which of the

many allegations of the complaint are the minimum that the [state] Court

had to find to enter its judgment.”

The bankruptcy court held that issue preclusion did not bar

relitigation of any issue under the §§ 523(a)(2)(A) and (6) claims. However,

it held that the state court’s elder abuse findings satisfied § 523(a)(4) as to

Kristine. It explained that § 523(a)(4) requires that the debt arose from

either fraud or defalcation while acting in a fiduciary capacity or

5 embezzlement or larceny. It quickly rejected embezzlement or larceny,

because the complaint did not allege that the Peltiers feloniously took

property from the Hudsons.

However, the bankruptcy court said that the allegations against

Kristine aligned with defalcation while acting in a fiduciary capacity. It

stated that Kristine was a fiduciary based on her power of attorney and

concluded that the state court must have found defalcation.

Later, Van Loo agreed to dismiss its claims against Bryce. The

bankruptcy court entered judgment against Kristine and declared

nondischargeable the first limited judgment debt for $1,069,606.86 plus

post-judgment interest.

The Peltiers timely appealed.5 Van Loo did not cross-appeal.

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

Whether the bankruptcy court erred in granting Van Loo summary

judgment on its § 523(a)(4) nondischargeability claim against Kristine.

5 Counsel for the Peltiers acknowledged at oral argument that, although both Bryce and Kristine filed the notice of appeal, Bryce was not a party to the appeal. Van Loo argues that the judgment should be affirmed as to Bryce, with costs awarded to Van Loo. We DENY this request, because Bryce was a prevailing party, not an aggrieved party, and was therefore not entitled to appeal, and Van Loo did not cross- appeal that portion of the judgment.

6 STANDARDS OF REVIEW

We review de novo the bankruptcy court’s decisions to grant

summary judgment and to except a debt from discharge. Plyam v. Precision

Dev., LLC (In re Plyam), 530 B.R. 456, 461 (9th Cir. BAP 2015). “De novo

review requires that we consider a matter anew, as if no decision had been

made previously.” Francis v. Wallace (In re Francis), 505 B.R. 914, 917 (9th

Cir. BAP 2014).

“We also review de novo the bankruptcy court’s determination that

issue preclusion was available. If issue preclusion was available, we then

review the bankruptcy court’s application of issue preclusion for an abuse

of discretion.” In re Plyam, 530 B.R. at 461 (quoting Black v. Bonnie Springs

Fam. Ltd. P’ship (In re Black), 487 B.R. 202, 210 (9th Cir. BAP 2013)).

To determine whether the bankruptcy court has abused its discretion,

we conduct a two-step inquiry: (1) we review de novo whether the

bankruptcy court “identified the correct legal rule to apply to the relief

requested” and (2) if it did, we consider whether the bankruptcy court’s

application of the legal standard was illogical, implausible, or without

support in inferences that may be drawn from the facts in the record.

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc).

“We may affirm on any ground fairly supported by the record.”

Jimenez v. ARCPE 1, LLP (In re Jimenez), 613 B.R. 537, 543 (9th Cir. BAP

2020).

DISCUSSION

7 Kristine argues that the bankruptcy court erred in granting Van Loo

summary judgment under § 523(a)(4) because it was inappropriate to

afford the state court judgment issue preclusive effect.

Under Civil Rule 56(a), made applicable by Rule 7056, summary

judgment is appropriate when “there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a matter of law.”

The movant bears the initial burden of demonstrating an absence of a

genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio

Corp., 475 U.S. 574, 585 (1986). We must view the evidence in the light most

favorable to the non-moving party and draw all justifiable inferences in her

favor. Fresno Motors, LLC v. Mercedes Benz USA, LLC, 771 F.3d 1119, 1125

(9th Cir. 2014).

We hold that the record before the bankruptcy court was sufficient to

support summary judgment on Van Loo’s § 523(a)(4) claim.

A. Issue preclusion in nondischargeability proceedings

Issue preclusion applies in nondischargeability actions under

§ 523(a). Grogan v. Garner, 498 U.S. 279, 284 n.11 (1991).

Federal courts must give full faith and credit to state court

judgments. 28 U.S.C. § 1738. This means that the bankruptcy court was

required to give the Oregon state court’s judgment the same preclusive

effect it would be given by other Oregon courts. See Far Out Prods., Inc. v.

Oskar, 247 F.3d 986, 993 (9th Cir. 2001). We thus apply Oregon issue

preclusion law. 8 Under Oregon law, “[i]ssue preclusion applies to preclude

relitigation of an issue or fact when that issue or fact has been determined

by a valid and final determination in a prior proceeding.” McCall v. Dynic

USA Corp., 906 P.2d 295, 297 (Or. Ct. App. 1995) (cleaned up). Issue

preclusion is appropriate if five required elements are met:

1. The issue in the two proceedings is identical.

2. The issue was actually litigated and was essential to a final decision on the merits in the prior proceeding.

3. The party sought to be precluded has had a full and fair opportunity to be heard on that issue.

4. The party sought to be precluded was a party or was in privity with a party to the prior proceeding [and]

5. The prior proceeding was the type of proceeding to which this court will give preclusive effect.

Nelson v. Emerald People’s Util. Dist., 862 P.2d 1293, 1296-97 (Or. 1993)

(citations omitted). “[T]he party asserting issue preclusion bears the burden

of proof on the first, second, and fourth factors, after which the party

against whom preclusion is asserted has the burden on the third and fifth

factors.” Barackman v. Anderson, 167 P.3d 994, 999 (Or. Ct. App. 2007).

The fourth and fifth elements require no discussion. There is no

doubt that Kristine was a party to both the state court case and the

adversary proceeding and the state court case was the type of proceeding

which may be afforded issue preclusive effect.

9 The third element requires only brief consideration. Kristine argued

in the bankruptcy court that she was not afforded a full and fair

opportunity to litigate the state court proceeding because she could not

afford to obtain counsel. But under Oregon law, a party’s choice not to

respond to a complaint, or the party’s inability to afford counsel, is not a

denial of a full and fair opportunity to be heard for purposes of issue

preclusion. See id. at 1000 n.3 (“The question under the third factor is

whether plaintiff was denied the opportunity to adduce the evidence or

make the arguments that she needed to prevail on her claim.”); Skeen v.

Dep't of Hum. Res., 17 P.3d 526, 528-29 (Or. Ct. App. 2000) (Litigants are

denied “full and fair opportunity” to be heard under Nelson if they

establish either that “the procedures provided for . . . are insufficient to

justify the application of issue preclusion or that they were not permitted to

use those procedures.”). Therefore, the third element was satisfied.

The first and second elements require more attention: (1) whether the

issues in the two proceedings were identical; and (2) whether the issues

were essential to the state court’s judgment.

Kristine points out that the state court made no express findings. But

this does not deprive its judgment of issue preclusive effect. Under Oregon

law, a judgment has issue preclusive effect as to all issues that the court

expressly decided or were necessary to the court’s judgment. Chase v.

Gordon, Aylworth & Tami, P.C., Case No. 3:18-cv-568-AC, 2019 WL 5085417,

at *7 (D. Or. Oct. 10, 2019) (“In Oregon, the doctrine of res judicata,

10 including collateral estoppel, as to matters essential to the judgment,

applies to judgments by default. To satisfy the ‘actually litigated and

essential to a final decision’ requirement, a prior court’s resolution of an

issue must either be apparent from the face of a judgment or order or, if not

apparent from the face of a judgment or order, must have been necessary to

the resolution of the prior adjudication.” (cleaned up)); Sturgis v. Asset

Acceptance, LLC, No. 3:15-CV-00122-AC, 2016 WL 223708, at *3 (D. Or. Jan.

19, 2016) (“[C]ourts in Oregon apply issue preclusion to cases where the

first case ended in a default judgment and the defendant did not appear in

court or otherwise take advantage of the opportunity to ‘actually litigate’

the issues at stake. Because an issue may be deemed ‘actually litigated’ in

an action where a default judgment is entered after one party fails to

appear or otherwise actually litigate the pertinent issue, analysis of this

element should focus on whether the issue was ‘essential to the [first]

judgment.’” (citation omitted)).

Therefore, we will describe the required elements of § 523(a)(4) and

compare those elements with what the state court must have necessarily

decided to support its judgment on the statutory elder abuse claim.

B. Elements of § 523(a)(4)

Section 523(a)(4) precludes the discharge of debts “for fraud or

defalcation while acting in a fiduciary capacity, embezzlement, or larceny.”

In other words, because “while acting in a fiduciary capacity” does not

modify “embezzlement” or “larceny,” and the statute is written in the 11 disjunctive, a debt is nondischargeable if it was incurred due to (1) fraud or

defalcation while acting in a fiduciary capacity, (2) embezzlement, or

(3) larceny. See Bullock v. BankChampaign, N.A., 569 U.S. 267, 275 (2013)

(“The statutory provision makes clear that [embezzlement and larceny]

apply outside of the fiduciary context[.]”); Transamerica Com. Fin. Corp. v.

Littleton (In re Littleton), 942 F.2d 551, 555 (9th Cir. 1991) (“Clearly, a debt

can be nondischargeable for embezzlement under 523(a)(4) without the

existence of a fiduciary relationship.”).

1. Fraud or defalcation

Fraud or defalcation while acting in a fiduciary capacity under

§ 523(a)(4) requires that “1) an express trust existed, 2) the debt was caused

by fraud or defalcation, and 3) the debtor acted as a fiduciary to the

creditor at the time the debt was created.” Mele v. Mele (In re Mele), 501 B.R.

357, 363 (9th Cir. BAP 2013) (quoting Otto v. Niles (In re Niles), 106 F.3d

1456, 1459 (9th Cir. 1997)).

“Defalcation” “includes a culpable state of mind requirement akin to

that which accompanies application of the other terms in the same

statutory phrase. We describe that state of mind as one involving

knowledge of, or gross recklessness in respect to, the improper nature of

the relevant fiduciary behavior.” Bullock, 569 U.S. at 269.

“To prevail on a nondischargeability claim under § 523(a)(4) the

plaintiff must prove not only the debtor’s fraud or defalcation, but also that

the debtor was acting in a fiduciary capacity when the debtor committed

12 the fraud or defalcation.” Honkanen v. Hopper (In re Honkanen), 446 B.R. 373,

378 (9th Cir. BAP 2011). “The fiduciary relationship must be one arising

from an express or technical trust that was imposed before and without

reference to the wrongdoing that caused the debt. We consult state law to

determine whether the requisite trust relationship exists.” In re Mele, 501

B.R. at 363 (cleaned up).

2. Embezzlement and larceny

Embezzlement is defined as “the fraudulent appropriation of

property by a person to whom such property has been entrusted or into

whose hands it has lawfully come.” In re Littleton, 942 F.2d at 555 (quoting

Moore v. United States, 160 U.S. 268, 269 (1885)). Thus, the proponent of the

nondischargeability determination must prove: “(1) property rightfully in

the possession of a nonowner; (2) nonowner’s appropriation of the

property to a use other than which [it] was entrusted; and

(3) circumstances indicating fraud.” Id. (quoting Nat’l Bank of Com. of Pine

Bluff v. Hoffman (In re Hoffman), 70 B.R. 155, 162 (Bankr. W.D. Ark. 1986)).

We have stated that “circumstances indicating fraud, as an element of

embezzlement, is not coterminous with an intent to defraud . . . .” Newman

v. Lee (In re Newman), BAP Nos. CC-21-1228-GTL, CC-21-1250-GTL, 2022

WL 2100905, at *7 (9th Cir. BAP June 10, 2022); see Phillips v. Estate of Ronald

M. Arnold (In re Phillips), BAP No. WW-15-1178-TaKuJu, 2016 WL 7383964,

at *5 (9th Cir. BAP Dec. 16, 2016) (“The finding required for a

determination of § 523(a)(4) embezzlement is that Debtor’s actions

13 indicated fraud. Such a determination is not synonymous with an intent to

defraud as required under § 523(a)(2)(A).”).

As for scienter, the U.S. Supreme Court has stated that

“embezzlement requires a showing of wrongful intent.” Bullock, 569 U.S. at

274. The Court noted that wrongful intent in this context has been

described as “moral turpitude or intentional wrong” or “felonious intent.”

Id. (quoting Neal v. Clark, 95 U.S. 704, 709 (1877); Moore, 160 U.S. at 269-70).

Further, in the criminal context, the Ninth Circuit has relied on the Seventh

Circuit’s statement that “cases indicate that the ‘felonious’ intent with

which embezzlement is committed consists of the intent to appropriate or

convert the property of the owner; the simultaneous intent to return the

property or to make restitution does not make the offense any less

embezzlement.” United States v. Anderson, 850 F.2d 563, 565 (9th Cir. 1988)

(quoting United States v. Waronek, 582 F.2d 1158, 1161 n.4 (7th Cir. 1978)).

Larceny is the “felonious taking of another’s personal property with

intent to convert it or deprive the owner of the same.” Ormsby v. First Am.

Title Co. of Nev. (In re Ormsby), 591 F.3d 1199, 1205 (9th Cir. 2010) (quoting 4

Collier on Bankruptcy ¶ 523.10[2] (15th ed. rev. 2008)). “Felonious is

defined as ‘proceeding from an evil heart or purpose; malicious; villainous

. . . Wrongful; (of an act) done without excuse of color of right.’” Id. at 1205

n.4 (quoting Elliott v. Kiesewetter (In re Kiesewetter), 391 B.R. 740, 748 (Bankr.

W.D. Pa. 2008)).

There is only one difference between embezzlement and larceny: for

14 embezzlement, the perpetrator initially had the right to possess property

and then stole it; while for larceny, the perpetrator stole property that the

perpetrator never had a right to possess. Hopper v. Lewis (In re Lewis), 551

B.R. 41, 50 (Bankr. E.D. Cal. 2016) (“Larceny is distinguished from

embezzlement in that the original taking of the property was unlawful.”

(citation omitted)). The offenses of embezzlement and larceny require

essentially the same mental state. As the Supreme Court held in Bullock, 569

U.S. at 269, the scienter required for the three offenses described in

§ 523(a)(4) – fiduciary fraud and defalcation, embezzlement, and larceny –

are “akin,” or closely related, to each other. See Urban v. BSC West, LLC (In

re Urban), BAP No. SC-13-1047-PaJuKu, 2014 WL 1492717, at *14 (9th Cir.

BAP Apr. 16, 2014) (noting that Bullock “observed that the ‘linquistic

neighbors’ of defalcation – larceny and embezzlement – have always

required felonious intent. . . . [U]nder the noscitur a sociis rule, the Supreme

Court decided that, for an exception to discharge, a defalcation, like

fiduciary fraud, larceny and embezzlement, required a culpable state of

mind.”). We see no reason why the offenses of larceny and embezzlement

should require different mental states.

C. Elements of elder abuse under ORS 124.100

The state court entered judgment on a claim for statutory elder

abuse.6 ORS 124.100(2) provides that “[a] vulnerable person who suffers

6 We agree with the bankruptcy court that the state court’s findings concerning unjust enrichment and breach of fiduciary duty were not entitled to issue preclusive 15 injury, damage or death by reason of physical abuse or financial abuse may

bring an action against any person who has caused the physical or financial

abuse or who has permitted another person to engage in physical or

financial abuse.” Financial abuse occurs “[w]hen a person wrongfully takes

or appropriates money or property of a vulnerable person, without regard

to whether the person taking or appropriating the money or property has a

fiduciary relationship with the vulnerable person.” ORS 124.110(1)(a).7

Oregon courts have recognized that “there are four elements to a

claim for financial abuse of an elderly or incapacitated person: There must

be ‘(1) a taking or appropriation (2) of money or property (3) that belongs

to an elderly or incapacitated person, and (4) the taking must be

wrongful.’” Gibson v. Bankofier, 365 P.3d 568, 577-78 (Or. Ct. App. 2015)

(quoting Church v. Woods, 77 P.3d 1150, 1153 (Or. Ct. App. 2003)).

Oregon courts have relied on the “ordinary” dictionary definition of

effect. Unjust enrichment does not necessarily require a culpable mind. See Larisa’s Home Care, LLC v. Nichols-Shields, 404 P.3d 912, 921 (Or. 2017) (declining to adopt a precise test for unjust enrichment or impose a state-of-mind requirement). Similarly, intent is not an element of a breach of fiduciary duty claim under Oregon law. See Chapman v. Bond (In re Bond), 548 B.R. 570, 577 n.5 (Bankr. D. Or. 2016) (“There is no intent or bad faith element needed to establish the [breach of fiduciary duty] claim . . . .” (citation omitted)). Further, as we have noted, “fiduciary capacity” under § 523(a)(4) refers only to an express trust, not to the wide range of relationships that can support a “fiduciary duty” under state law. See Ragsdale v. Haller, 780 F.2d 794, 796 (9th Cir. 1986) (“The broad, general definition of fiduciary – a relationship involving confidence, trust and good faith – is inapplicable in the dischargeability context.”); In re Mele, 501 B.R. at 363. 7 ORS 124.110(1) also includes other types of financial elder abuse, but they are inapplicable to the present case. 16 “take”: “to transfer into one’s own keeping [or to] enter into or arrange for

possession, ownership, or use of[.]” Church, 77 P.3d at 1153 (quoting

Webster’s Third New Int’l Dictionary 2330 (1993)).

Similarly, “appropriate” is not defined, but Oregon courts have relied

on the “ordinary” definition of the word. The District Court for the District

of Oregon considered the Oregon appellate courts’ use of the term and

relied on the dictionary definition (“to claim or use as if by an exclusive

preeminent right”) and the definition in the companion criminal statute (to

“[e]xercise control over property of another, . . . permanently or for so

extended a period or under such circumstances as to acquire the major

portion of the economic value or benefit of such property”). Russi v.

Wissenback, No. 6:18-CV-01028-AA, 2019 WL 1965830, at *3 (D. Or. Apr. 28,

2019) (quoting Webster’s Third New Int’l Dictionary 160 (2002); ORS

164.005(1)).

Additionally, the plaintiff must show that the defendant took or

appropriated money or property “wrongfully,” meaning “in pursuit of an

improper motive or by improper means. A defendant’s motives or means

may be wrongful by reason of a statute or other regulation, or a recognized

rule of common law, or perhaps an established standard of a trade or

profession.” Gibson, 365 P.3d at 578 (cleaned up); see Church, 77 P.3d at 1153

(“Improper means, for example, include ‘violence, threats, intimidation,

deceit, misrepresentation, bribery, unfounded litigation, defamation and

disparaging falsehood.’ The use of undue influence also constitutes an

17 ‘improper means,’ in that it involves the procurement of an unfair

advantage.” (citation omitted)).

D. Comparison of issues in state court with issues in bankruptcy court

The bankruptcy court held that the elder abuse claim could not

satisfy the larceny or embezzlement element of § 523(a)(4) but that it

satisfied the element of “defalcation while acting in a fiduciary capacity.”

We disagree with the bankruptcy court’s reasoning but agree that it was

appropriate to afford the elder abuse ruling issue preclusive effect.

In order to enter judgment on the statutory elder abuse claim, the

state court had to find that Kristine (1) took or appropriated (2) money or

property (3) that belongs to Mr. or Mrs. Hudson, who was incapacitated,

and (4) the taking was wrongful. See Gibson, 365 P.3d at 577-78. But the

court did not need to find that Kristine was a fiduciary for the Hudsons:

ORS 124.110(1)(a) explicitly states that financial elder abuse is actionable

“without regard to whether the person taking or appropriating the money

or property has a fiduciary relationship with the vulnerable person.” In

contrast, the “fraud or defalcation” portion of § 523(a)(4) requires a finding

that Kristine committed fraud or defalcation while acting as the Hudsons’

fiduciary. Thus, a finding of a fiduciary relationship (or that Kristine

violated her fiduciary duties) was not essential to the state court judgment

based on statutory elder abuse.

The bankruptcy court focused on the allegations of the complaint,

especially the allegation that Kristine abused the powers of attorney that 18 her mother and father had granted. At oral argument before the Panel, Van

Loo’s counsel took this one step further by contending that, because

Kristine did not answer the complaint, its allegations were deemed

admitted. This approach misses the mark because the preclusive effect of a

judgment does not depend on what the plaintiff alleged and proved;

rather, it depends on what the court expressly found or, if there are no

express findings, what it had to find to support its judgment. See Chase,

2019 WL 5085417, at *7. Because ORS 124.110(1)(a) does not require the

existence of a fiduciary relationship, a finding of a fiduciary relationship

was not “essential” to the state court’s judgment. 8

But the state court judgment does satisfy the “larceny” and

“embezzlement” portions of § 523(a)(4).

The conduct proscribed by ORS 124.110(1)(a) is the same as either

“larceny” or “embezzlement” under § 523(a)(4). To support its judgment

for statutory elder abuse, the state court must have found that Kristine

either “took” or “appropriated” the Hudsons’ money or property. See

Gibson, 365 P.3d at 578. The conduct involved in the offense of larceny is a

“taking” of the property of another; embezzlement requires a

“[mis]appropriation” of property. The match is exact.

8 We also note that, even if Van Loo’s allegations were determinative, the state court could have found elder abuse based on allegations in the complaint that were apparently accomplished independent of the powers of attorney, such as the appropriation of four automobiles, the mismanagement of the Hudsons’ business, and the execution of a future receivables contract.

19 Similarly, there is no discernable difference between the mental states

required by the Oregon elder abuse statute and “larceny” and

“embezzlement” under § 523(a)(4). Under the Oregon statute, the conduct

must be “wrongful,” meaning that it was undertaken with “an improper

motive or by improper means,” such as by deceit, misrepresentation, or

undue influence. Gibson, 365 P.3d at 578; Church, 77 P.3d at 1153. Under

§ 523(a)(4), embezzlement and larceny require “wrongful” or “felonious”

intent, Bullock, 569 U.S. at 274, similar to “a culpable state of mind . . .

involving knowledge of, or gross recklessness in respect to, the improper

nature of the relevant . . . behavior[,]” id. at 269. Although the words of

these definitions are not identical, in substance we see no daylight between

them.

Thus, the financial elder abuse claim presented issues “identical” to

larceny and embezzlement under § 523(a)(4) that were “essential” to the

state court judgment.

CONCLUSION

The bankruptcy court did not err in granting Van Loo summary

judgment on its § 523(a)(4) claim against Kristine. We AFFIRM.