In re: James Paul Garrett

• Court: United States Bankruptcy Appellate Panel for the Ninth Circuit
• Decided: July 14, 2017
• Docket: NC-16-1070-FBJu
• Status: Unpublished

Opinion

FILED JUL 14 2017 1 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL 2 OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. NC-16-1070-FBJu ) 6 JAMES PAUL GARRETT, ) Bk. No. 14-41630 ) 7 Debtor. ) Adv. Pro. 14–04090 ______________________________) 8 ) NOBANTU ANKOANDA, ) 9 ) Appellant, ) 10 ) v. ) MEMORANDUM* 11 ) JAMES PAUL GARRETT, ) 12 ) Appellee. ) 13 ______________________________) 14 Submitted Without Argument on June 22, 2017 15 Filed – July 14, 2017 16 Appeal from the United States Bankruptcy Court for the Northern District of California 17 Honorable Charles D. Novak, Bankruptcy Judge, Presiding 18 19 Appearances: David L. Olson on brief for appellant Nobantu Ankoanda; appellee James Paul Garrett, pro se, on 20 brief. 21 Before: FARIS, BRAND, and JURY, Bankruptcy Judges. 22 23 24 25 26 * This disposition is not appropriate for publication. 27 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 28 9th Cir. BAP Rule 8024-1. 1 INTRODUCTION 2 Appellant Nobantu Ankoanda appeals from the bankruptcy 3 court’s judgment in favor of chapter 71 debtor James Paul Garrett 4 on her nondischargeability claim. Ms. Ankoanda failed to make 5 any reasonable effort to carry her burden of proof under 6 § 523(a)(2), and she waived any claims under §§ 523(a)(4) and 7 (6). Accordingly, we AFFIRM. 8 FACTUAL BACKGROUND 9 Mr. Garrett, an attorney licensed to practice law in 10 California, provided legal services to Ms. Ankoanda regarding 11 trust matters. Around 2004, Mr. Garrett told Ms. Ankoanda that 12 he needed $100,000 for a down payment to purchase real property 13 located in Oakland, California (the “Oakland Property”). 14 The parties did not document the transaction, and 15 Ms. Ankoanda later gave conflicting testimony about its nature. 16 At one point, she testified that the money was payment for 17 Mr. Garrett’s legal services, but she also said that it was a 18 “temporary loan.” Whatever the case, Ms. Ankoanda borrowed money 19 against her real property located in East Palo Alto, California 20 and used $100,000 as a down payment to purchase the Oakland 21 Property. She took title to the Oakland Property. 22 According to Ms. Ankoanda, she was supposed to transfer the 23 Oakland Property to Mr. Garrett’s “business associates,” who 24 would refinance the Oakland Property and use the proceeds to 25 26 1 Unless specified otherwise, all chapter and section 27 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, all “Rule” references are to the Federal Rules of Bankruptcy 28 Procedure.

2 1 repay Ms. Ankoanda’s loan. The business associates took title to 2 the Oakland Property, refinanced it, and got $115,000 in cash. 3 However, Ms. Ankoanda said that she only received $10,000 from 4 the transaction, while Mr. Garrett kept the remainder. 5 Mr. Garrett currently resides at the Oakland Property. 6 In 2007, Ms. Ankoanda sued Mr. Garrett and others in state 7 court (the “State Court Action”) for fraud. On the day of trial, 8 before the trial court received any testimony, Ms. Ankoanda and 9 Mr. Garrett reached a settlement of the State Court Action. 10 Mr. Garrett agreed to make a lump sum payment of $200,000 to 11 Ms. Ankoanda within a year. He agreed to sign a promissory note 12 and a deed of trust on the Oakland Property.2 13 Mr. Garrett apparently never signed a promissory note or 14 deed of trust and failed to pay the debt when due. Ms. Ankoanda 15 filed a second complaint against him in state court to enforce 16 the settlement. 17 On March 16, 2014, Mr. Garrett filed a chapter 7 petition in 18 the bankruptcy court for the Northern District of California. 19 Ms. Ankoanda initiated an adversary proceeding against 20 Mr. Garrett. In her complaint, she offered a brief recitation of 21 the facts and requested that the court deny dischargeability of 22 his debt to her. She did not identify any particular statutory 23 authority. 24 On January 20, 2016, the bankruptcy court held a trial on 25 Ms. Ankoanda’s complaint. Ms. Ankoanda was the only witness; as 26 2 27 The parties did not reduce the settlement agreement to writing. The terms of the settlement agreement were orally 28 placed on the record before the state court.

3 1 the bankruptcy court noted, her testimony was difficult to 2 follow. She failed to identify Mr. Garrett’s so-called “business 3 associates” and gave conflicting testimony regarding the nature 4 of her transaction with Mr. Garrett, her contact with the 5 business associates, and what representations might be 6 attributable to Mr. Garrett or the business associates. She did 7 not introduce any documents evidencing any of the relevant 8 transactions. Mr. Garrett did not testify. 9 At the conclusion of Ms. Ankoanda’s testimony, her counsel 10 stated, in response to the bankruptcy court’s questions, that she 11 relied solely on § 523(a)(2). 12 The court asked both parties to discuss the elements of a 13 § 523(a)(2) claim. Both parties repeatedly referred to the 14 settlement in the State Court Action, but the court explained 15 that the settlement was not sufficient on its own to prove fraud. 16 When neither Ms. Ankoanda’s counsel nor Mr. Garrett could 17 satisfactorily answer the court’s questions, it commented, “Does 18 anyone understand what a 523(a)(2) claim is here? I’m beginning 19 to suspect not.” It questioned why neither party had provided 20 evidence to substantiate their respective positions and stated, 21 “I’m just, again, I guess expressing some frustration here at the 22 level of evidence that’s been presented.” 23 On February 2, 2016, the bankruptcy court issued its 24 Decision After Trial. It held that Ms. Ankoanda did not meet her 25 burden of proof regarding § 523(a)(2)(A) because she failed to 26 “demonstrate by a preponderance of the evidence exactly what 27 representations Garrett made to her regarding repayment of the 28 loan (in contrast to her testimony regarding the representations

4 1 made by the ‘business associates’), or the exact nature of 2 [Mr.] Garrett’s relationship with his alleged ‘business 3 associates.’” It found her testimony “inconsistent at best” and 4 stated that it could not determine if Mr. Garrett should be held 5 liable for the business associates’ statements. 6 The bankruptcy court also held that Ms. Ankoanda’s judicial 7 estoppel argument (contending that Mr. Garrett was estopped from 8 denying the facts that she alleged in the State Court Action) 9 failed because Mr. Garrett had consistently denied liability in 10 both the state court and bankruptcy court. The bankruptcy court 11 also ruled that issue preclusion did not apply. 12 The bankruptcy court issued its judgment in favor of 13 Mr. Garrett on February 2, 2016, and Ms. Ankoanda timely 14 appealed. 15 JURISDICTION 16 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 17 §§ 1334 and 157(b)(2)(I). We have jurisdiction under 28 U.S.C. 18 § 158. 19 ISSUE 20 Whether the bankruptcy court erred in determining that 21 Mr. Garrett’s obligation to Ms. Ankoanda was not excepted from 22 discharge under § 523(a)(2). 23 STANDARDS OF REVIEW 24 We review the bankruptcy court’s findings of fact after a 25 trial for clear error and conclusions of law de novo, and apply 26 de novo review to mixed questions of law and fact. Oney v. 27 Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009), 28 aff’d, 407 F. App’x 176 (9th Cir. 2010) (citation omitted).

5 1 De novo review requires that we consider a matter anew, as if no 2 decision had been rendered previously. United States v. 3 Silverman, 861 F.2d 571, 576 (9th Cir. 1988). 4 We review the bankruptcy court’s findings of fact for clear 5 error. See Honkanen v. Hopper (In re Honkanen), 446 B.R. 373, 6 378 (9th Cir. BAP 2011); see also Anastas v. Am. Sav. Bank 7 (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996) (“A finding 8 of whether a requisite element of section [ ] 523(a)(2)(A) claim 9 is present is a factual determination reviewed for clear 10 error.”). “To be clearly erroneous, a decision must strike us as 11 more than just maybe or probably wrong; it must . . . strike us 12 as wrong with the force of a five-week-old, unrefrigerated dead 13 fish.” Papio Keno Club, Inc. v. City of Papillion (In re Papio 14 Keno Club, Inc.), 262 F.3d 725, 729 (8th Cir. 2001) (quoting 15 Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 16 233 (7th Cir. 1988)); see Anderson v. City of Bessemer City, 470 17 U.S. 564, 573 (1985) (A factual finding is clearly erroneous if, 18 after examining the evidence, the reviewing court “is left with 19 the definite and firm conviction that a mistake has been 20 committed.”). The bankruptcy court’s choice among multiple 21 plausible views of the evidence cannot be clear error. United 22 States v. Elliott, 322 F.3d 710, 714 (9th Cir. 2003). 23 DISCUSSION 24 A. Ms. Ankoanda failed to carry her burden of proof under § 523(a)(2). 25 26 Section 523(a)(2)(A) excepts from discharge any debt for 27 money, property, services, or credit obtained by false pretenses, 28

6 1 false representations, or actual fraud.3 Ms. Ankoanda argues 2 that Mr. Garrett’s $200,000 debt is nondischargeable under 3 § 523(a)(2)(A) because of his allegedly fraudulent statements. 4 She does not articulate any reversible error. 5 Ms. Ankoanda did not come close to meeting her burden of 6 proof at trial. At most, she proved that Mr. Garrett promised to 7 pay her $200,000 and to sign a promissory note and deed of trust 8 but did none of those things. As the bankruptcy court correctly 9 observed, she did not prove that Mr. Garrett made any 10 representations to her or that any representations made by the 11 “business associates” were attributable to him. We also note 12 that she offered no evidence at all, direct or circumstantial, 13 supporting any of the other elements of § 523(a)(2)(A). 14 In sum, there was a complete failure of proof. The 15 bankruptcy court did not err. 16 17 3 To establish fraud under § 523(a)(2)(A), the creditor must prove each of the following elements by a preponderance of the 18 evidence: 19 (1) the debtor made . . . representations; 20 (2) that at the time he knew they were false; 21 (3) that he made them with the intention and purpose of 22 deceiving the creditor; 23 (4) that the creditor relied on such representations; 24 [and] 25 (5) that the creditor sustained the alleged loss and 26 damage as the proximate result of the misrepresentations having been made. 27 Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 28 2010) (citations omitted).

7 1 B. Ms. Ankoanda cannot rely on judicial estoppel or issue preclusion. 2 3 Ms. Ankoanda argues that the settlement of the State Court 4 Action was sufficient to sustain her nondischargeability claim. 5 She is wrong. 6 The legal basis for Ms. Ankoanda’s argument was unclear at 7 best. In her trial brief, she invoked judicial estoppel; in her 8 oral argument at trial, she argued for issue preclusion; 9 elsewhere, she referred to “collateral judicial estoppel,” a 10 doctrine unknown to us. 11 We agree with the bankruptcy court that Ms. Ankoanda argued 12 for issue preclusion, rather than judicial estoppel. But she 13 could not prevail under either doctrine. 14 The doctrine of judicial estoppel is informed by several 15 factors: (1) whether a party’s later position is clearly 16 inconsistent with its earlier position; (2) whether the party has 17 succeeded in persuading a court to accept that party’s earlier 18 position, so that judicial acceptance of an inconsistent position 19 in a later proceeding would create the perception that either the 20 first or the second court was misled; and (3) whether the party 21 seeking to assert an inconsistent position would derive an unfair 22 advantage or impose an unfair detriment on the opposing party if 23 not estopped. Ah Quin v. Cty. of Kauai Dep’t of Transp., 24 733 F.3d 267, 270 (9th Cir. 2013).4 Mr. Garrett never changed 25 26 4 Federal courts apply federal principles of judicial 27 estoppel, even when based on statements made in other tribunals. Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 603 28 (9th Cir. 1996).

8 1 his position; he always denied liability to Ms. Ankoanda. His 2 agreement to pay her in the settlement agreement did not include 3 an admission of any facts.5 Further, he was not successful in 4 the State Court Action. He agreed to pay $200,000 to settle 5 claims arising out of a $100,000 loan, which is hardly a 6 favorable outcome for him, and the state court did not determine 7 that any of his assertions were true. 8 Similarly, issue preclusion did not apply. That doctrine 9 comes into play only when: (1) the issues to be precluded are 10 identical to the ones decided in the prior proceeding; (2) the 11 issues were actually litigated in the prior proceeding; (3) the 12 issues were necessarily decided; (4) the decision was final and 13 on the merits; and (5) the party to be precluded was identical to 14 or in privity with a party to the prior proceeding. See Lopez v. 15 Emergency Serv. Restoration, Inc. (In re Lopez), 367 B.R. 99, 104 16 (9th Cir. BAP 2007) (applying California law). Ms. Ankoanda 17 failed to offer evidence that the state court issued a judgment, 18 or that any issues were litigated or decided. 19 C. Ms. Ankoanda waived her claims of nondischargeability under §§ 523(a)(4) and (6) at trial. 20 21 Ms. Ankoanda argues that her claims are not dischargeable 22 23 5 Ms. Ankoanda seems to think that, because the parties 24 agreed to settle, all of her allegations in her State Court Action complaint are automatically admitted as true. She relies 25 on City of Lodi v. Randtron, 118 Cal. App. 4th 337, 350 n.18 26 (2004), and Rissetto, 94 F.3d at 605, but those cases are distinguishable because the parties had expressly stipulated to a 27 fact in a prior case. The transcript of the State Court Action hearing to memorialize the settlement does not reveal that 28 Mr. Garrett stipulated to or admitted anything.

9 1 under §§ 523(a)(4) and (6). We reject this argument. 2 Ms. Ankoanda waived these claims at trial. In response to 3 the court’s question, her counsel only identified § 523(a)(2) as 4 the basis for her nondischargeability claim. Thus, she waived 5 subsections (a)(4) and (6). See O’Rourke v. Seaboard Sur. Co. 6 (In re E.R. Fegert, Inc.), 887 F.2d 955, 957 (9th Cir. 1989) 7 (“appellate courts will not consider arguments that are not 8 ‘properly raise[d]’ in the trial courts”). 9 Even if she had not waived those claims, she did not carry 10 her burden of proof under either subsection. 11 Section § 523(a)(4) excepts from discharge any debt “for 12 fraud or defalcation while acting in a fiduciary capacity, 13 embezzlement, or larceny[.]” The creditor must establish: 14 “(1) an express trust; (2) that the debt was caused by fraud or 15 defalcation; and (3) that the debtor was a fiduciary to the 16 creditor at the time the debt was created.” Nahman v. Jacks 17 (In re Jacks), 266 B.R. 728, 735 (9th Cir. BAP 2001) (citation 18 omitted). Additionally, the creditor must establish a culpable 19 state of mind. Bullock v. BankChampaign, N.A., 133 S. Ct. 1754, 20 1757 (2013) (holding that defalcation requires a “culpable state 21 of mind . . . involving knowledge of, or gross recklessness in 22 respect to, the improper nature of the relevant fiduciary 23 behavior”). Ms. Ankoanda did not offer any evidence that 24 Mr. Garrett acted in a “fiduciary capacity” (i.e., as trustee of 25 an express trust) or that he had the mental state required for 26 “fraud or defalcation.” 27 Section 523(a)(6) excepts from discharge debts for “willful 28 and malicious injury” by the debtor to another. “Willful” means

10 1 that the debtor entertained “a subjective motive to inflict the 2 injury or that the debtor believed that injury was substantially 3 certain to occur as a result of his conduct.” Petralia v. 4 Jercich (In re Jercich), 238 F.3d 1202, 1208 (9th Cir. 2001). 5 Maliciousness is defined as “(1) a wrongful act, (2) done 6 intentionally, (3) which necessarily causes injury, and (4) done 7 without just cause or excuse.” Id. at 1209. Ms Ankoanda offered 8 no direct or circumstantial evidence that Mr. Garrett intended to 9 injure her or that he knew that his actions were substantially 10 certain to injure her. 11 CONCLUSION 12 The bankruptcy court did not err. Accordingly, we AFFIRM. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28