Jun Yang v. Fund Management Intl, LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 26, 2021
• Docket: 20-55051
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS FEB 26 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

JUN HO YANG; HO SOON HWANG No. 20-55051 YANG, D.C. No. 2:18-cv-10183-JAK Appellants,

v. MEMORANDUM*

FUND MANAGEMENT INTERNATIONAL, LLC,

Appellee.

Appeal from the United States District Court for the Central District of California John A. Kronstadt, District Judge, Presiding

Argued and Submitted February 2, 2021 Pasadena, California

Before: GOULD, LEE, and VANDYKE, Circuit Judges.

Jun Ho Yang (“Jun Ho”) and his wife, Ho Soon Hwang Yang (“Ho Soon”)

(collectively, the “Yangs”), appeal the district court’s affirmance of the bankruptcy

court’s grant of judgment in favor of Fund Management International, LLC

(“FMI”) on its claim of non-dischargeability under 11 U.S.C. § 523(a)(2). Because

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. the parties are familiar with the facts and procedural history of the case, we recite

only those facts necessary to decide this appeal. We have jurisdiction under 28

U.S.C. § 1291, and we affirm.

We review a district court’s decision on appeal from a bankruptcy court

decision de novo. Preblich v. Battley, 181 F.3d 1048, 1051 (9th Cir. 1999). When

reviewing a bankruptcy court order, we review conclusions of law de novo and

factual findings for clear error. Id. We review the application of collateral

estoppel de novo. See United States v. 22 Santa Barbara Drive, 264 F.3d 860, 868

(9th Cir. 2001).

The bankruptcy court did not err in interpreting our mandate in Yang v. Fund

Mgmt. Int’l, LLC (In re Jun Ho Yang), 698 F. App’x 374 (9th Cir. 2017). The rule

is settled that “[a] district court that has received the mandate of an appellate court

cannot vary or examine that mandate for any purpose other than executing it.”

Hall v. City of Los Angeles, 697 F.3d 1059, 1067 (9th Cir. 2012). But the district

court may “decide anything not foreclosed by the mandate.” Id. Here, our prior

decision required the bankruptcy court to determine whether the parties manifested

an intent for the State Court Stipulation and Judgment to bind them in subsequent

proceedings—including this one. See In re Jun Ho Yang, 698 F. App’x at 374.

Because we left the bankruptcy court free to decide other issues on remand, its

decision to confine the evidentiary hearing to the issue of intent was consistent

2 with our mandate, and was not error.

Nor did the bankruptcy court err in determining that the requirements of

issue preclusion were met. “[T]he preclusive effect of a state court judgment in a

subsequent bankruptcy proceeding is determined by the preclusion law of the state

in which the judgment was issued.” Harmon v. Kobrin (In re Harmon), 250 F.3d

1240, 1245 (9th Cir. 2001) (citing 28 U.S.C. § 1738). Under California law, “a

stipulated judgment may properly be given collateral estoppel effect, at least when

the parties manifest an intent to be collaterally bound by its terms.” Cal. State

Auto. Ass’n Inter-Ins. Bureau v. Superior Court, 50 Cal. 3d 658, 664 (1990).1

Applying these principles, the bankruptcy court found that the parties

intended for the state court judgment to bind them in subsequent proceedings.

That factual finding withstands clear error review. Under the Settlement

Agreement, Jun Ho stipulated to the “facts supporting the claims made against

him”—including fraud—and admitted in Paragraph 12 that the facts and claims in

the State Court Complaint “are within the meaning of 11 U.S.C.A. 523,” which is

the same statute under which FMI brought its non-dischargeability claim in these

1 The California Supreme Court went on to observe: “It seems fair to say that by specifically stipulating to the issue of liability, the parties intended the ensuing judgment to collaterally estop further litigation on that issue.” Cal. State Auto., 50 Cal. 3d at 664 n.2. “Were their intent otherwise, the parties easily could have expressly restricted the scope of the agreement.” Id.

3 proceedings.

Moreover, Paragraph 12 of the Settlement Agreement does not amount to a

prepetition waiver. Generally, “[i]t is against public policy for a debtor to waive

the prepetition protection of the Bankruptcy Code.” Bank of China v. Huang (In re

Huang), 275 F.3d 1173, 1177 (9th Cir. 2002). Collateral estoppel is an exception

to that rule. When “the parties stipulate[] to the underlying facts that support a

finding of nondischargeability, [a] Stipulated Judgment would then be entitled to

collateral estoppel application.” Hayhoe v. Cole (In re Cole), 226 B.R. 647, 655

(B.A.P. 9th Cir. 1998).

The factual admissions in the Settlement Agreement directly relate to the

fraud alleged in FMI’s complaint for non-dischargeability. As noted above, Jun

Ho stipulated to the facts supporting a finding of fraud under California law, which

contains the same elements as the fraud exception to discharge in 11 U.S.C.

§ 523(a)(2). See Younie v. Gonya (In re Younie), 211 B.R. 367, 373–74 (B.A.P.

9th Cir. 1997), aff’d, 163 F.3d 609 (9th Cir. 1998).

Finally, the bankruptcy court did not err in entering judgment against Jun

Ho’s wife, Ho Soon. Under California law, collateral estoppel may be asserted

against a party who “was a party or in privity with a party at the prior proceeding.”

Mueller v. J. C. Penney Co., 173 Cal. App. 3d 713, 723 (1985). “[S]pouses are in

privity with each other where the cause of action in the prior litigation was

4 ‘community in nature’ and the ‘proceeds of any judgment that might have been

recovered . . . would have belonged to both husband and wife, as community

property.’” Id. (omission in original) (quoting Zaragosa v. Craven, 33 Cal. 2d 315,

321 (1949)).

Ho Soon was named in the State Court Complaint, which alleged that she

“participated in the fraud by knowingly accepting the benefits of the FMI funds

diverted by [Jun Ho] for their personal use as husband and wife,” that she “was

fully aware of the facts of the fraud at the time it was occurring,” and that “the FMI

funds fraudulently taken . . . by [Jun Ho] were funneled to family trusts in which

[Ho Soon] is a beneficiary.” Because the fraudulently obtained funds were

deposited into accounts shared by the Yangs, the bankruptcy court properly gave

collateral effect to the state court judgment against Ho Soon.

AFFIRMED.