Paul Johnson v. W3 Investment Partners, Lp

• Court: Court of Appeals for the Ninth Circuit
• Decided: November 12, 2019
• Docket: 18-60025
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS NOV 12 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: PAUL Y. JOHNSON; CELESTE C. No. 18-60025 JOHNSON, BAP No. 17-1194 Debtors,

------------------------------ MEMORANDUM*

PAUL Y. JOHNSON; CELESTE C. JOHNSON,

Appellants,

v.

W3 INVESTMENT PARTNERS, LP,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Faris, Lafferty III, and Brand, Bankruptcy Judges, Presiding

Submitted November 7, 2019** Pasadena, California

Before: SCHROEDER, FRIEDLAND, and R. NELSON, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). Appellants Paul and Celeste Johnson appeal the Bankruptcy Appellate

Panel’s (“BAP”) affirmance of the bankruptcy court’s summary judgment in an

adversary proceeding brought by W3 Investment Partners, LP. We have

jurisdiction under 28 U.S.C. § 158(d), and we affirm. “We review decisions of the

BAP de novo.” In re Cellular 101, Inc., 539 F.3d 1150, 1154 (9th Cir. 2008).

First, the BAP correctly affirmed the bankruptcy court because all parties

intended the stipulated judgment to be given collateral estoppel effect on the issue

of fraud. In particular, the stipulated judgment satisfied the “actually litigated”

element for collateral estoppel because that was the parties’ intent, see Cal. State

Auto. Ass’n Inter-Ins. Bureau v. Superior Court, 788 P.2d 1156, 1159 (Cal. 1990),1

and Appellants admitted to fraud in the settlement documents and in the stipulated

judgment. The stipulated judgment is thus nondischargeable pursuant to 11 U.S.C.

§ 523(a)(2)(A).

Second, the stipulated judgment does not violate public policy or amount to

a prepetition waiver of discharge. Contrary to Appellants’ assertions, In re Cole,

226 B.R. 647 (B.A.P. 9th Cir. 1998), and In re Wank, 505 B.R. 878 (B.A.P. 9th

Cir. 2014), are inapposite. In Cole, the underlying state court complaint contained

no allegations of fraud in connection with the promissory note that gave rise to the

1 In evaluating the issue preclusive effect of a state court judgment, we apply the forum state’s law of issue preclusion. In re Harmon, 250 F.3d 1240, 1245 (9th Cir. 2001).

2 debt at issue. In this case, the factual admissions in the stipulated judgment

directly relate to the fraud claim at issue. And unlike the declaration in Wank,

which was only to be unsealed and presented if the debtor filed for bankruptcy,

here the stipulation to the facts in the state court was made at the time of settlement

and relied upon by the state court when it entered the judgment.

AFFIRMED.