FILED APR 13 2026 SUSAN M. SPRAUL, CLERK NOT FOR PUBLICATION U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
In re: BAP No. WW-25-1072-CNG OLIVIER FRANCOIS P. RIGON and CHRISTINE HUI SEOUN KWON, Bk. No. 2:21-bk-11641-CMA Debtors. Adv. No. 2:22-ap-01012-CMA OLIVIER FRANCOIS P. RIGON; CHRISTINE HUI SEOUN KWON, Appellants, v. MEMORANDUM* EUROPAKIDS PRESCHOOL, LLC, Appellee.
Appeal from the United States Bankruptcy Court for the Western District of Washington Christopher M. Alston, Chief Bankruptcy Judge, Presiding
Before: CORBIT, NIEMANN, and GAN, Bankruptcy Judges.
INTRODUCTION
Chapter 71 debtors Olivier Rigon and Christine Kwon (“Debtors”)
* 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 appeal the bankruptcy court’s summary judgment order determining the
amount of debt owed to creditor, EuropaKids Preschool, LLC
(“EuropaKids”). Because the bankruptcy court did not err in granting
summary judgment, we AFFIRM.
FACTS 2
Debtors moved to Washington and married in 2016. Ms. Kwon, a
licensed real estate broker, formed Rock PI, LLC (“Rock PI”) to purchase,
renovate, rent, and sell real properties. Since its formation, Ms. Kwon has
been the sole managing member of Rock PI, and she managed its finances.
For a few years, Rock PI was profitable and expanded using a model of
purchasing older or rundown homes, renovating them, and selling or
renting the properties for a profit.
Mr. Rigon was employed by Rock PI although he often held himself
out as a co-founder. His primary role was to manage projects. Mr. Rigon
attended various real estate networking events where he marketed Rock
PI’s projects to potential investors.
To fund Rock PI’s projects, the Debtors used conventional bank loans
and funds invested by “friends and family.” In July 2019, Ms. Kwon sent an
email to Kelly Milbrandt, a member and manager of EuropaKids, inquiring
Civil Procedure. 2 We exercise our discretion, when appropriate, to take judicial notice of
documents electronically filed in the underlying bankruptcy case and related proceedings. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood), 293 B.R. 227, 233 n.9 (9th Cir. BAP 2003). 2 whether EuropaKids wanted to invest $50,000 in Rock PI, for a twelve-
month term at 12% interest. Ms. Milbrand was told by Ms. Kwon that the
funds would be used to renovate and add a detached accessory dwelling
unit (“DADU”) to the real property located on 29th Ave. E. in Seattle,
Washington (“Pink Property”).
Based on Ms. Kwon’s representations about a favorable return,
EuropaKids loaned the funds (“Loan”). The Loan was memorialized in a
promissory note between EuropaKids and Rock PI, executed on July 22,
2019 (“Loan Agreement”). Although the Loan was personally guaranteed
by Ms. Kwon, the Loan was not secured by the Pink Property.
Rock PI made some interest-only payments on the Loan in 2019 and
2020, but it stopped making regular payments in June 2020. When the Loan
maturity date (July 19, 2020) passed without the required payment from
Rock PI, EuropaKids sent a notice of Loan default.
On August 30, 2021, the Debtors filed a voluntary chapter 7 petition
and Michael P. Klein was appointed the chapter 7 trustee (the “Trustee”).3
The Trustee informed the Debtors that information and assets were missing
from their schedules and statement of financial affairs. 4 Despite being
3 Rock PI filed a separate chapter 7 petition in February 2021. 4 For example, the Trustee noted that the Debtors had not scheduled: their interest in an irrevocable trust which named Ms. Kwon as trustor and Mr. Rigon as primary beneficiary; their interest in an AIG life insurance policy owned by the Trust with Mr. Rigon named as beneficiary; the rent and sale proceeds from certain “Denny Street Properties;” Ms. Kwon’s interest in other companies including a 50% interest in Sands Partners, LLC and her 25% interest in Sands Holdings, LLC which held title to a 3 aware of the errors, the Debtors did not timely correct their schedules.
Indeed, their ongoing failure to provide necessary information and disclose
all their assets resulted in eleven § 341 meetings of creditors. The Debtors’
single amendment to their bankruptcy schedules was filed in March 2022,
and the amendment simply reduced the value of one vehicle from
approximately $9,000 to $6,000. Additionally, the Debtors failed to timely
provide their tax returns. The Debtors did not finalize their 2018 return
until November 2022 and still had not produced their 2019 and 2020
returns as of September 27, 2023.
Consequently, on March 30, 2022, the United States Trustee (the
“UST”) filed an adversary complaint to deny each Debtor’s discharge
pursuant to § 727 (“§ 727 Action”). The UST alleged that the Debtors were
not entitled to a discharge because the Debtors failed to keep adequate
records, concealed assets, made false oaths, and failed to adequately
explain the loss of community assets.
On the same day the UST filed the § 727 Action, EuropaKids filed a
complaint (“Complaint”) seeking to except from discharge the debt of Rock
PI that was personally guaranteed by Ms. Kwon (“Nondischargeability
Proceeding”). The Complaint sought liquidation of the amount of the debt
and a determination that the debt was nondischargeable based on fraud
pursuant to § 523(a)(2)(A). In its “Prayer For Relief,” EuropaKids sought a
hotel in Ocean Shores, Washington; their interest in a Bank of America savings account; and payments made by their Trust totaling over $100,000. 4 determination that its “claim, in an amount to be proven at trial but no less
than $60,694.52, and including all interests, fees, costs, and additional
damages allowed under contract and/or statute, should be excepted from
any discharge otherwise awarded to the Debtors.” EuropaKids also
requested an award of costs and attorney’s fees, along with “other relief as
the Court deems just and equitable.”
The Debtors answered the Complaint on May 16, 2022, admitting to
the Loan but generally denying the facts as alleged in the Complaint.
On May 26, 2022, the parties presented a “stipulated motion for entry
of order staying” the Nondischargeability Proceeding until the § 727 Action
was resolved. The motion acknowledged the UST’s pending § 727 Action.
The parties contended that if the UST was successful “and both of the
Debtors’ discharges are denied,” the Nondischargeability Proceeding
would “become[] meaningless.” The parties asserted that “[g]iven . . . the
likelihood that certain issues in the [Nondischargeability Proceeding] will
be resolved or mooted by findings” in the § 727 Action, it would be
“reasonable” to wait to prosecute the Nondischargeability Proceeding.
The bankruptcy court agreed and entered an order staying the
Nondischargeability Proceeding. The stay order granted leave to either
party to “request an order lifting this stay and for a new pretrial conference
and scheduling order following partial dispositive motions practice or the
conclusion” of the § 727 Action.
The bankruptcy court conducted a trial in the § 727 Action in October
5 2023. After trial, the bankruptcy court entered an order denying
Ms. Kwon’s discharge under § 727(a)(2)(B), (a)(3), (a)(4), and (a)(5). The
bankruptcy court denied Mr. Rigon’s discharge under § 727(a)(3), (a)(4),
and (a)(5), (together, the “Discharge Denial Order”). The denial of
Mr. Rigon’s discharge was affirmed by this Panel. Ms. Kwon did not
appeal the denial of her discharge.
After entry of the Discharge Denial Order, EuropaKids filed a motion
to lift the stay in the Nondischargeability Proceeding solely to seek a
determination and judgment as to the amount of the Debtors’ debt to
EuropaKids. EuropaKids contended that although the “denial of the
Debtors’ discharges makes that portion of Plaintiff’s complaint seeking an
exception to discharge under § 523 moot,” the amount of Debtors’ liability
remained unresolved. EuropaKids asserted it was “entitled to seek entry of
a judgment and to collect upon that judgment going forward.”
The Debtors objected. The Debtors reasoned that because their
discharge was denied, none of their debts would be discharged. Therefore,
Debtors argued, the Nondischargeability Proceeding was moot, and no
reason existed to lift the stay. The Debtors further argued that because the
bankruptcy court is a court of limited jurisdiction, pursuant to Pacor, Inc. v.
Higgins, 743 F.2d 984, 994 (3d Cir. 1984), the court lacked jurisdiction
because “the outcome” of the Nondischargeability Proceeding could not
“conceivably have any effect on the estate being administered in
bankruptcy.” The Debtors asserted that EuropaKids should prosecute the
6 Loan Agreement dispute in state court.
In its reply, EuropaKids discounted the Debtors’ new jurisdictional
argument by pointing out that the Debtors had not objected to the
bankruptcy court’s jurisdiction in their answer. EuropaKids further argued
the Debtors’ had implicitly consented to jurisdiction pursuant to local
bankruptcy rule (“LBR”) 7012-1(c) by failing to file a notice regarding
adjudication and consent. 5 EuropaKids also disagreed that its claim was
moot because the Complaint raised both the issue of the Debtors’ “liability
under a personal guarantee included in a promissory note, and that the
guaranty obligation should be excepted from any discharge otherwise
granted due to fraud.” Finally, EuropaKids argued that it was unfair to
make it start over and adjudicate the issue in state court “because the
[D]ebtors were found to have behaved so badly that they lost their right to
5 LBR 7012-1states in relevant part: (a) Notice Regarding Final Adjudication and Consent. In an adversary proceeding before a bankruptcy judge, in addition to the statements in the pleadings required by Fed. R. Bankr. P. 7008(a) and 7012(b), each party shall file a separate document with its initial pleading (the complaint, counterclaim, cross-claim, third party complaint, answer or other responsive pleading) to be entitled Notice Regarding Final Adjudication and Consent. The Notice Regarding Final Adjudication and Consent shall include a repetition of the statements required by Fed. R. Bankr. P. 7008(a) and 7012(b). .... (c) Deemed Consent. Failure by a party to file a Notice Regarding Final Adjudication and Consent as required by this rule or by a date certain fixed by court order shall constitute that party’s consent to entry of final orders or judgments by the bankruptcy judge. 7 a bankruptcy discharge.”
After a hearing, the court issued an oral ruling granting EuropaKids’s
motion to lift the stay. The bankruptcy court found that “even though the
discharge issue ha[d] been decided, the liability amount ha[d] not, and at
least at some point, the parties agreed that this court could make that
determination.” The court opined that although there might be grounds for
the bankruptcy court to abstain or dismiss given the denial of the Debtors’
discharge, the Debtors had not presented any such motions. The
bankruptcy court issued a written order consistent with its oral ruling.
EuropaKids subsequently filed a motion for summary judgment.
EuropaKids asserted that it was entitled to summary judgment as a matter
of law because the material facts supporting each element of its claim were
undisputed and supported by documentary evidence. EuropaKids asserted
it was undisputed that: (1) the Debtors solicited a $50,000 loan from
EuropaKids to develop a Seattle property even though the Debtors “never
intended to do so”; (2) EuropaKids loaned the Debtors $50,000 in reliance
on the Debtors’ false representations; (3) the Loan was personally
guaranteed by Ms. Kwon; (4) the Debtors failed to repay the Loan; and
(5) EuropaKids suffered $60,694.52 in damages as of the date of the
Debtors’ bankruptcy filing.
The Debtors did not respond with any evidence or argument
demonstrating the facts as alleged by EuropaKids were erroneous. Rather,
the Debtors argued that summary judgment was not appropriate because
8 EuropaKids was attempting to litigate a contract claim that no longer had a
relationship to the bankruptcy case. The Debtors asserted that only a single
cause of action was pled in the Complaint—nondischargeability pursuant
to § 523(a)(2)—not breach of contract. Because EuropaKids did not intend
to prosecute a nondischargeability claim, the Debtors argued that the
bankruptcy court had no jurisdiction to liquidate the unpled contract claim.
EuropaKids moved to strike the Debtors’ response because it was
untimely. EuropaKids additionally argued that the bankruptcy court
retained jurisdiction “to enter a money judgment on a disputed state law
claim in the course of determining the dischargeability of that debt under
§ 523.”
On March 31, 2025, the bankruptcy court held a hearing on
EuropaKids’s motion for summary judgment.6 At the hearing, Debtors’
counsel maintained that the court lacked jurisdiction to liquidate the
unpled breach of contract claim because the determination of
dischargeability was moot. While Debtors’ counsel admitted that the
bankruptcy court had the authority and jurisdiction to liquidate a contract
claim in conjunction with determining the nondischargeability of such
claim, he argued those were not the facts of the present case. Rather,
contended counsel, because the bankruptcy court was not being asked to
adjudicate dischargeability, the bankruptcy court lost jurisdiction over the
6 The bankruptcy court granted EuropaKids’s motion to strike the Debtors’ late- filed response but allowed counsel to present the Debtors’ argument at the hearing. 9 Complaint. Debtors’ counsel further argued that the court had not made a
fraud finding in the § 727 Action and that EuropaKids had failed to plead
sufficient facts to support a finding that the Loan was acquired through
fraud as required under § 523(a)(2)(A).
EuropaKids rejected the Debtors’ premise, arguing that “[t]here’s no
authority for the proposition that bankruptcy court jurisdiction goes away
if the discharge action is mooted by a [§] 727 finding.” EuropaKids also
asserted that although the Debtors alleged that the bankruptcy court had
no jurisdiction, they had not sought affirmative relief to litigate the action
in a court they believed had jurisdiction (e.g., by filing a motion to dismiss
or by removing the action to state court).
After hearing from the parties, the bankruptcy court issued an oral
ruling granting EuropaKids’s summary judgment motion. The bankruptcy
court made several findings of fact and conclusions of law including the
following: (1) the adversary case was a core matter under 28 U.S.C.
§ 157(b)(2)(A), (I), and (O); (2) the Debtors consented to the bankruptcy
court’s jurisdiction by filing the bankruptcy; (3) the bankruptcy court also
had jurisdiction under 28 U.S.C. § 1334(b) because there was “still an
underlying main case”; (4) the Debtors had failed to provide any case law
demonstrating that “once a [§] 727 action is adjudicated, the court loses
jurisdiction to determine liability in a [§] 523 matter”; (5) the court could
find no binding Ninth Circuit decisions on the jurisdiction issue raised by
the Debtors; (6) the Judgment was a community debt because “the
10 signatures of both spouses is not necessary to bind the community where
the judgment being sought is for money only”; (7) EuropaKids provided
evidence of the Loan, the failure to repay the Loan, and the amount of
damages; (8) the Debtors had not provided evidence rebutting the
“calculation of the debt or Ms. Kwon’s responsibility for it”; and (9) the
Debtors had not sought dismissal of the Nondischargeability Proceeding.
The bankruptcy court entered a written order and judgment
consistent with its oral ruling awarding EuropaKids $95,464.52 in damages
(“Judgment”).
Debtors timely appealed the Judgment.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Whether the bankruptcy court had jurisdiction over the
Nondischargeability Proceeding after entry of the Discharge Denial Order.
Whether the bankruptcy court erred in granting EuropaKids’s
summary judgment motion.
Whether the Debtors’ appeal is frivolous.
STANDARDS OF REVIEW
Whether the bankruptcy court has authority to enter a final order is
an issue we review de novo. See Hasse v. Rainsdon (In re Pringle), 495 B.R.
447, 455 (9th Cir. BAP 2013). The bankruptcy court’s decision whether to
11 retain jurisdiction is reviewed for abuse of discretion. See Linkway Inv. Co. v.
Olsen (In re Casamont Invs., Ltd.), 196 B.R. 517, 522-23 (9th Cir. BAP 1996).
We review de novo the bankruptcy court’s decision to grant
summary judgment. 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) (citations
omitted).
We may affirm on any basis supported by the record. Caviata Attached
Homes, LLC v. U.S. Bank, N.A. (In re Caviata Attached Homes, LLC), 481 B.R.
34, 44 (9th Cir. BAP 2012).
DISCUSSION
A. The bankruptcy court’s jurisdiction.
“Like all federal courts, the jurisdiction of the bankruptcy courts is
created and limited by statute.” Wilshire Courtyard v. Cal. Franchise Tax Bd.
(In re Wilshire Courtyard), 729 F.3d 1279, 1284 (9th Cir. 2013) (citing Celotex
Corp. v. Edwards, 514 U.S. 300, 307 (1995); Battle Ground Plaza, LLC v. Ray (In
re Ray), 624 F.3d 1124, 1131 (9th Cir. 2010)). A bankruptcy court’s
jurisdiction is governed by 28 U.S.C. §§ 157 and 1334.
I. The entry of the Discharge Denial Order did not moot the issue of whether the debt to EuropaKids was dischargeable.
The jurisdiction of federal courts is limited to actual cases and
controversies. U.S. Const. art. III, § 2, cl. 1. “The test for mootness . . . is
12 whether the . . . court can give the [party] any effective relief in the event
that it decides the matter on the merits in his favor.” Motor Vehicle Cas. Co.
v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869, 880 (9th
Cir. 2012) (quotation marks and citation omitted). If it cannot grant such
relief, the matter is moot. Id.
From the record it is clear that both EuropaKids and the bankruptcy
court believed that the issue of dischargeability was mooted upon the entry
of the Discharge Denial Order. This was error.
If a debtor is denied a discharge pursuant to § 727, no debts are
discharged in the current bankruptcy and no debts which were listed or
could have been listed can be discharged in any future chapter 7 case
(“§ 523(a)(10) Debts”). 7 See § 523(a)(10), (b); Paine v. Griffin (In re Paine), 283
B.R. 33, 37 (9th Cir. BAP 2002) (“The rule is that res judicata principles
apply in bankruptcy so that once a debt is ‘excepted from discharge’ in a
judgment . . . it is . . . ‘excepted from discharge’ in all subsequent chapter 7
cases . . . .”) (citation modified).
However, pursuant to § 1328(a), it may be possible for the debtor
who was denied a discharge in a current chapter 7 case to discharge some
or all of the § 523(a)(10) Debts in a future chapter 13 bankruptcy case after
7 Section 523(a)(10) describes a debt “that was or could have been listed or scheduled by the debtor in a prior case concerning the debtor under this title or under the Bankruptcy Act in which the debtor waived discharge, or was denied a discharge under section 727(a)(2), (3), (4), (5), (6), or (7) of this title, or under section 14c(1), (2), (3), (4), (6), or (7) of such Act.” 13 successfully completing all confirmed plan payments. This is because
“Congress secured a broader discharge for debtors under Chapter 13 than
Chapter 7 by extending to Chapter 13 proceedings some, but not all of
§ 523(a)’s exceptions to discharge.” Pa. Dept. of Public Welfare v. Davenport,
495 U.S. 552, 563 (1990); see also 8 Collier on Bankruptcy § 1328.01 (16th ed.
2026) (describing the Chapter 13 discharge as “broader than the discharge
received in any other chapter of the Code, encompassing many types debts
that would be nondischargeable in chapter 7, chapter 11, or chapter 12.”).
The discharge in chapter 13 is often referred to as a “super discharge”
because it encompasses the discharge of many debts that would not be
dischargeable under other chapters of the Bankruptcy Code.
Congress has since added some sections restricting the chapter 13
“super discharge.” See In re Lavilla, 425 B.R. 572, 581 (Bankr. E.D. Cal. 2010)
(explaining that “[p]rior to the enactment of BAPCPA, chapter 13 included
the ‘super discharge’ whereby debtors could complete their chapter 13 plan
and discharge certain debts that would not otherwise be dischargeable in
chapter 7 pursuant to § 523”). Importantly, the § 1328(a) super discharge
continues to discharge § 523(a)(10) Debts.
Consequently, § 523(a)(10) Debts may be dischargeable in a future
chapter 13 bankruptcy unless there is an independent basis for excepting
that debt. Applicable to this case are the exceptions added to § 1328(a)(2)
which now except from the super discharge, § 523(a)(2) debts. Waag v.
Permann (In re Waag), 418 B.R. 373, 377 (9th Cir. BAP 2009) (explaining that
14 in 2005, Congress restricted the chapter 13 “super discharge” by
“expand[ing] the list of nondischargeable debts in section 1328(a)(2) to
include, inter alia, those described in section 523(a)(2), (a)(3), or (a)(4).” 8
Therefore, unless a creditor obtains an independent reason to preclude the
debt from being discharged (e.g. § 523(a)(2) nondischargeability
determination),9 § 523(a)(10) Debts may be discharged in a future chapter
13 bankruptcy.
Based on the foregoing, the Discharge Denial Order did not moot
EuropaKids’s § 523(a)(2)(A) claim. Rather, without commenting on the
likelihood of the Debtors’ ability to both confirm and complete a chapter 13
plan, the possibility exists that the Judgment could be discharged in the
future pursuant to § 1328(a). Thus, both the amount and the
dischargeability of the Debtors’ liability to EuropaKids remained live
controversies after entry of the Discharge Denial Order.
8 In relevant part § 1328(a)(2) provides that the bankruptcy “court shall grant the debtor a discharge of all debts provided for by the plan . . . except any debt— .... (2) of the kind specified in section 507(a)(8)(C) or in paragraph (1)(B), (1)(C), (2), (3), (4), (5), (8), or (9) of section 523(a);” 9 This premise depends on the debtor obtaining a full compliance discharge
pursuant to § 1328(a). Section 1328(b), on the other hand, provides for a “hardship discharge” under chapter 13. In contrast to the typical discharge under § 1328(a)— which incorporates some but not all the provisions of § 523(a)—the entirety of § 523(a) is made applicable to chapter 13 debtors receiving a hardship discharge under § 1328(b). See § 1328(c); see also Lafferty v. Off-Spec Sols., LLC (In re Off-Spec Sols., LLC), 651 B.R. 862, 869-71 (9th Cir. BAP 2023) (examining to which sections of the Bankruptcy Code § 523(a) applies). 15 The issue is also not moot because EuropaKids is likely precluded
from seeking such a determination in future proceedings. The doctrine of
claim preclusion, prohibits relitigation “of all grounds for, or defenses to,
recovery that were previously available to the parties, regardless of
whether they were asserted or determined in the prior proceeding.” Lucky
Brand Dungarees, Inc. v. Marcel Fashions Grp., Inc., 590 U.S. 405, 412 (2020)
(quoting Brown v. Felsen, 442 U.S. 127, 131 (1979)). Thus, the doctrine of
claim preclusion likely prevents EuropaKids from litigating the
dischargeability of the Judgment in future proceedings.
II. EuropaKids’s decision not to litigate all aspects of its claim did not affect the bankruptcy court’s jurisdiction.
“Subject matter jurisdiction defines the court’s authority to hear a
given type of case; it represents the extent to which a court can rule on the
conduct of persons or the status of things.” Carlsbad Tech., Inc. v. HIF Bio,
Inc., 556 U.S. 635, 639 (2009) (citation modified). Subject matter jurisdiction
is measured at the time a complaint is filed. Grupo Dataflux v. Atlas Global
Group, L.P., 541 U.S. 567, 570–71 (2004).
Bankruptcy courts, via referral from the district courts, “may hear
and determine all cases under title 11 and all core proceedings arising
under title 11, or arising in a case under title 11.” 28 U.S.C. § 157(b)(1). The
terms “arising under” and “arising in” are “terms of art.” Eastport Assocs. v.
City of L.A. (In re Eastport Assocs.), 935 F.2d 1071, 1076 (9th Cir. 1991).
16 Core proceedings are considered synonymous with “arising under”
and “arising in” jurisdiction. See Maitland v. Mitchell (In re Harris Pine
Mills), 44 F.3d 1431, 1435 (9th Cir. 1995) (“claims that arise under or in Title
11 are deemed to be ‘core’ proceedings, while claims that are related to
Title 11 are ‘noncore’ proceedings”) (citation omitted). “A matter ‘arises
under’ the Bankruptcy Code if its existence depends on a substantive
provision of bankruptcy law, that is, if it involves a cause of action created
or determined by a statutory provision of the Bankruptcy Code.” In re Ray,
624 F.3d at 1131 (citations omitted). A proceeding “arises in” a case under
the Code “if it is an administrative matter unique to the bankruptcy
process that has no independent existence outside of bankruptcy and could
not be brought in another forum, but whose cause of action is not expressly
rooted in the Bankruptcy Code.” Id. (citation omitted). An action is “related
to” a bankruptcy case if the outcome of the proceeding could conceivably
“alter the debtor’s rights, liabilities, options, or freedom of action (either
positively or negatively)” in such a way as to impact the administration of
the bankruptcy estate. Fietz v. Great W. Sav. & Loan Assoc. (In re Fietz), 852
F.2d 455, 457 (9th Cir. 1988) (adopting test announced in Pacor, Inc., 743
F.2d at 994).
“[D]eterminations as to the dischargeability of particular debts” are
core proceedings. 28 U.S.C. § 157(b)(2)(I). Thus, the bankruptcy court had
not just core but exclusive jurisdiction over the Complaint. See Ackerman v.
Eber (In re Eber), 687 F.3d 1123, 1128 (9th Cir. 2012); Golman v. Gerard, (In re
17 Gerard), BAP No. CC141028KiTaD, 2014 WL 6892733, at *6 (9th Cir. BAP
Dec. 8, 2014) (“The adversary proceeding involves the dischargeability of a
debt. Such a proceeding ‘arises under’ the Bankruptcy Code, because it is a
cause of action created by § 523 and is a ‘core’ proceeding the bankruptcy
court may hear and determine.”) (citation omitted).
By agreement of the parties, the Nondischargeability Proceeding was
stayed until the § 727 Action concluded. After the Debtors were denied
their discharge, the stay was lifted in the Nondischargeability Proceeding
and EuropaKids pursued liquidation of the Loan debt. Importantly,
EuropaKids did not withdraw its Complaint or withdraw its claim that the
debt owed by the Debtors was not dischargeable. Rather, EuropaKids
simply chose not to litigate whether the Debtors’ liability qualified as a
nondischargeable debt pursuant to § 523(a)(2)(A) because it was “obtained
by . . . false pretenses, a false representation, or actual fraud” based on the
mistaken belief that the issue was moot. As explained above, the issue of
dischargeability of the debt was not moot. Regardless, EuropaKids’s
decision to litigate only part of its claim did not deprive the bankruptcy
court of jurisdiction as jurisdiction is determined at the time a complaint is
filed.
III. The bankruptcy court had discretion to retain jurisdiction.
The correct inquiry is whether the bankruptcy court properly
retained jurisdiction. Here, because the only issue brought before the
bankruptcy court was the liquidation of damages resulting from the
18 alleged breach of the Loan Agreement, the bankruptcy court should have
considered whether retaining jurisdiction was proper. “[A] federal court
has a continuing obligation to consider the appropriateness of retaining
jurisdiction throughout the course of the proceeding.” In re Casamont Invs.,
196 B.R. at 525 (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350,
(1988)). “Unlike nondischargeability determinations, claims for money
damages do not ‘arise in’ or ‘arise under’ the Bankruptcy Code. They exist
independent of the bankruptcy process. They are claims against the debtor,
not against the estate.” Dietz v. Ford (In re Deitz), 760 F.3d 1038, 1053 (9th
Cir. 2014).
While no binding authority exists, 10 an adversary action continuing
after discharge is denied is comparable to an adversary action continuing
10 In Menk v. Lapaglia (In re Menk), 241 B.R. 896, 905 (9th Cir. BAP 1999) there is a statement which, at first blush, appears to be inconsistent with our jurisdictional analysis. The Panel stated in dicta “[i]f the bankruptcy discharge has been denied or revoked, then the exercise of [28 U.S.C.] § 1334(b) jurisdiction to determine any exception to discharge would be a purely theoretical exercise, hence moot.” Id. However, Menk is distinguishable and not controlling. In Menk, the issue was whether the bankruptcy court erred in reopening a closed bankruptcy case. There, unlike the facts in this case, the debtor received a discharge and was attempting to prevent omitted creditors from reopening his case to file a § 523(a)(3)(B) nondischargeability adversary action. The bankruptcy court allowed the creditors to reopen the case and Menk appealed. The Menk Panel dismissed the appeal as moot, holding that “[r]eopening is irrelevant to the bankruptcy court’s jurisdiction to determine whether a debt is excepted from discharge. Hence, no effective relief could be fashioned if we were to reverse the reopening.” Id. at 902. The Menk Court explained that 28 U.S.C. § 1334 containes no explicit requirement that a “case” be open under 28 U.S.C. § 1334(a) for a court to act in a “civil proceeding” under 28 U.S.C. § 1334(b). Id. at 904-05. Rather, 28 U.S.C. § 1334(b) grants concurrent jurisdiction over civil proceedings, separate and distinct from exclusive jurisdiction over bankruptcy cases under § 1334(a). “Since this 19 after the dismissal of the underlying bankruptcy case.11 In the Ninth
Circuit, bankruptcy courts are not automatically divested of jurisdiction
over related cases when the underlying bankruptcy case has been
dismissed. Carraher v. Morgan Elecs., Inc. (In re Carraher), 971 F.2d 327, 328
(9th Cir. 1992) (per curiam) (rules governing bankruptcy court’s
jurisdiction over claims related to a terminated bankruptcy proceeding are
guided by rules governing “the authority of federal district courts to retain
pendent state claims after the federal claims have been dismissed”).
Instead, courts should consider whether judicial economy, convenience,
fairness, and comity favor retaining jurisdiction. Id. at 328.
Here, the bankruptcy court did not engage in an analysis of whether
retaining jurisdiction was proper based on considerations of “economy,
convenience, fairness and comity.” Id. However, it is not necessary to
remand to the bankruptcy court when the Panel has a sufficient record to
perform the same analysis. See Hopkins v. Asset Acceptance LLC (In re
Salgado-Nava), 473 B.R. 911, 922 (9th Cir. BAP 2012); Moen v. Hull (In re
Hull), 251 B.R. 726, 731 (9th Cir. BAP 2000).
straightforward language does not refer to the existence of a ‘case’ under [28 U.S.C.] § 1334(a), the text of the statute does not appear to require that the bankruptcy case must be open in order to exercise [28 U.S.C.] § 1334(b) ‘arising under’ jurisdiction.” Id. at 905. 11 The Debtors cite cases from other circuits determining that a § 523 action is
moot after a § 727(a) determination. The holdings are not binding on this Panel and importantly fail to recognize that debts, not discharged solely because a debtor is denied a discharge, are potentially dischargeable in a future chapter 13 bankruptcy case. 20 After examining the record and applying the Carraher factors, we
determine the bankruptcy court did not abuse its discretion by retaining
jurisdiction.
Judicial economy and convenience to the parties are often analyzed
together due to their similarity. Both factors relate to the amount of time
and effort the court and parties have spent on the adversary proceeding.
Judicial economy relates to the interests of the court currently presiding
over the case in question while convenience focuses on the efforts already
expended by the litigants.
Here, the underlying dispute between the Debtors and EuropaKids
arose prepetition. Although filed in 2022, the Nondischargeability
Proceeding was stayed for nearly three years, and the docket reveals scant
activity by the litigants or the court until the stay was lifted. However,
forcing the parties to start over in another forum would require additional
expense and inconvenience for all parties. Therefore, these factors weigh in
favor of retaining jurisdiction.
The fairness factor also weighs in favor of retaining jurisdiction.
Requiring EuropaKids to start over in another forum would be unfair. By
choosing to file a petition in the bankruptcy court, the Debtors chose the
forum in which EuropaKids had to assert its rights as a creditor. The record
demonstrates that EuropaKids intended to simultaneously litigate the
amount and dischargeability of liability in the forum chosen by the
Debtors. Additionally, EuropaKids voluntarily agreed to wait for three
21 years to litigate its claim (allowing the § 727 Action and its appeal to
conclude). If the bankruptcy court declined to exercise jurisdiction, this
would further delay the adjudication of EuropaKids’s claim, placing
EuropaKids at an unfair disadvantage.
Comity is a principle that means “all else being equal, state issues
ought to be decided by state courts.” In re Casamont Investors, Ltd., 196 B.R.
at 524. The breach of contract issue was not complex and was well within
the bankruptcy court’s expertise. As a result, concerns regarding comity do
not weigh against the retention of jurisdiction.
Based on the foregoing, the bankruptcy court did not abuse its
discretion in retaining jurisdiction over the Nondischargeability
Proceeding after entry of the Discharge Denial Order. Because exercising
jurisdiction was proper, the bankruptcy court had authority to liquidate the
debt. See, e.g., Locke v. United States Tr. (In re Locke), 205 B.R. 592, 600 (9th
Cir. BAP 1996) (“There is no meaningful distinction between the
determination of liability and damages for the purpose of dischargeability,
and the determination of liability and damages for the purpose of allowing
or disallowing an unliquidated and disputed proof of claim.”); Stanbrough
v. Valle (In re Valle), 469 B.R. 35, 43 (Bankr. D. Idaho 2012) (“In the case of an
unliquidated debt, the bankruptcy court must necessarily determine
liability and damages in order to establish the underlying debt.”).
22 B. The bankruptcy court did not err in granting summary judgment.
I. Summary judgment standards.
Under Civil Rule 56(a), made applicable in adversary proceedings by
Rule 7056, summary judgment should be granted when “there is no
genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” A factual issue is genuine when sufficient
evidence exists for a reasonable trier of fact to find in favor of the
nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001). And an issue
is material when it could affect the outcome of the case under the
controlling substantive law. Anderson, 477 U.S. at 248; Far Out Prods., Inc.,
247 F.3d at 992.
The moving party bears the initial burden of demonstrating an
absence of a genuine issue of material fact. Anderson, 477 U.S. at 256-57. If
the movant meets this burden by presenting sufficient uncontroverted facts
to demonstrate its entitlement to relief, the burden then shifts to the
responding party to establish that there is a specific and genuine issue of
material fact for trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 n.3 (1986);
Barboza v. New Form, Inc. (In re Barboza), 545 F.3d 702, 707 (9th Cir. 2008).
The nonmovant “may not rely on denials in the pleadings but must
produce specific evidence, through affidavits or admissible discovery
materials, to show that the dispute exists.” In re Barboza, 545 F.3d at 707
(quoting Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir.1991)).
23 In deciding whether a genuine factual issue exists, the court must
draw all reasonable inferences in favor of the non-moving party. Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). But the court
must do so only if a non-moving party submits specific evidence that
contradicts a fact specifically averred by the moving party. Lujan v. Nat'l
Wildlife Fed'n, 497 U.S. 871, 888 (1990). If a motion for summary judgment is
properly supported and the non-movant does not set forth specific facts
showing a genuine issue for trial, the court must grant summary judgment.
Civil Rule 56(a).
II. The bankruptcy court determined liability not dischargeability.
On appeal, the Debtors argue the bankruptcy court erred in granting
summary judgment because insufficient evidence was presented for the
bankruptcy court to find the Judgment nondischargeable pursuant to
§ 523(a)(2)(A). Specifically, the Debtors argued that EuropaKids failed to
establish the Loan was obtained by fraud, false pretenses, or false
representation. We agree. 12 We also determine that the Debtors
12Section 523(a)(2)(A) excepts from a debtor’s discharge any debt for money obtained by false pretenses, a false misrepresentation or actual fraud. In order to prevail on a § 523(a)(2)(A) cause of action, a creditor must establish five separate elements by a preponderance of the evidence: (1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2) knowledge of the falsity or deceptiveness of his statement or conduct; (3) an intent to deceive; (4) justifiable reliance by the creditor on the debtor's statement or conduct; and (5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct. 24 misconstrue the Judgment.
The bankruptcy court did not make a specific § 523(a)(2)(A)
determination.13 Rather, the bankruptcy court reduced to judgment its
determination of the amount of damages EuropaKids suffered as a result of
Rock PI’s breach of the Loan Agreement.
III. Application of summary judgment standards.
The bankruptcy court determined that EuropaKids was entitled to
summary judgment because no genuine issues of material fact existed as to
the formation and breach of the Loan Agreement or the damages that
resulted.
The Debtors have not pointed to evidence demonstrating the
bankruptcy court’s findings to be clearly erroneous and we do not find
Ghomeshi v. Sabban (In re Sabban), 384 B.R. 1, 5 (9th Cir. BAP 2008) (citing Turtle Rock Meadows Homeowners Ass’n v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000)). An intentional breach of contract generally will not give rise to a nondischargeable debt. In re Jercich, 238 F.3d 1202, 1205 (9th Cir. 2001). “[F]ailure to perform as promised, standing alone, gives rise to a case for breach of contract, not actionable fraud.” In re Yaikian, 508 B.R. 175 (Bankr. S.D. Cal. 2014) (quoting Stominger v. Giquinto (In re Giquinto), 388 B.R. 152, 166 (Bankr. E.D. Pa. 2008)). EuropaKids did not present evidence of specific fraudulent statements or comments or evidence of the intention not to perform when the Loan Agreement was formed as required to succeed on a § 523(a)(2)(A) claim. See Rubin v. West (In re Rubin), 875 F.2d 755, 759 (9th Cir. 1989). 13 The Judgment identifies the parties, the judgment amount ($95,464.52), and the
rate of accrual for post-judgment interest (18%). The Judgment does not include a § 523(a)(2)(A) determination. Thus, although a blanket of nondischargeability covers the Judgment because of the denial of Debtors’ discharge pursuant to § 727(a)(3), (a)(4), and (a)(5), the bankruptcy court did not make a separate determination that the Judgment was not dischargeable pursuant to § 523(a)(2). 25 them to be so. Indeed, the record supports the findings and the bankruptcy
court’s determination that EuropaKids was entitled to summary judgment.
In support of its motion, EuropaKids submitted admissible evidence
(copies of the documents related to the Loan Agreement) establishing the
formation of a valid contract between Rock PI and EuropaKids. The Loan
Agreement demonstrated that EuropaKids agreed to loan Rock PI $50,000
which Rock PI agreed to repay within twelve months with interest. The
Loan Agreement evidenced Ms. Kwon’s intent to personally guaranteed
the debt. EuropaKids also presented admissible evidence demonstrating
that Rock PI failed to repay the Loan and EuropaKids was entitled to
damages, in the amount calculated and presented to the court via
declaration and spreadsheet.
The burden then moved to the Debtors to establish a genuine issue as
to the validity of the Loan Agreement, the breach, the signature and
personal guarantee of Ms. Kwon, or the amount of damages. The Debtors
failed to meet this burden. The Debtors provided the bankruptcy court
with no contrary admissible evidence. Rather, the Debtors’ response
focused almost exclusively on the bankruptcy court’s alleged lack of
jurisdiction.14
14 The Debtors argue for the first time in their Reply Brief that the bankruptcy court erred in relying on the declaration of Kelly Milbrant because she added the qualifier “to the best of my knowledge” after declaring under penalty of perjury that her declaration was “true and correct.” We decline to consider an argument that was not raised in the bankruptcy court or in the appellant’s opening brief. See Rose Ct., LLC 26 Viewing the evidence in the light most favorable to the Debtors, we
agree with the bankruptcy court that there were no genuine issues of
material fact for trial. Thus, the bankruptcy court did not err in granting
EuropaKids’s motion for summary judgment.
C. The Debtors’ appeal was not frivolous.
EuropaKids seeks sanctions against the Debtors based on the alleged
frivolousness of the Debtors’ appeal. The Panel has power to issue
sanctions for a frivolous appeal under Rule 8020(a). Because Rule 8020
mirrors Federal Rule of Appellate Procedure (“Appellate Rule”) 38, courts
often look to cases applying Appellate Rule 38 when determining whether
to find an appeal frivolous and award costs under Rule 8020(a). See Ghadimi
M.D. v. Ashai (In re Ashai), 211 F. Supp. 3d 1215, 1240-43 (C.D. Cal. 2016)
(collecting cases).
“An appeal is frivolous if the results are obvious, or the arguments of
error are wholly without merit.” George v. City of Morro Bay (In re George),
322 F.3d 586, 588 (9th Cir. 2003) (quoting Maisano v. United States, 908 F.2d
408, 411 (9th Cir.1990)). An appeal does not become “wholly without
merit” for purposes of Rule 8020(a) merely because it rested on arguments
that the appellate court ultimately found unpersuasive or “novel.” See
Orange Blossom Ltd. P'ship v. IBT Int'l, Inc. (In re So. Cal. Sunbelt Devs., Inc.),
v. Select Portfolio Servicing, Inc., 119 F.4th 679, 688–89 (9th Cir. 2024) (listing circumstances where courts exercise discretion to consider new arguments on appeal); Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (“[O]n appeal, arguments not raised by a party in its opening brief are deemed waived.”). 27 412 F. App’x. 990 (9th Cir. 2011).
Here, EuropaKids argues that Debtors’ appeal is sanctionable
because their “position is contrary to well-settled Ninth Circuit authority.”
There is no support for EuropaKids’s assertion. The bankruptcy court
found there were no Ninth Circuit cases on point. Therefore, we DENY
EuropaKids’s motion for sanctions.
CONCLUSION
Based upon the foregoing, we AFFIRM.