Sturgeon-Garcia v. Cagno

567 B.R. 364, 2017 WL 1164177, 2017 U.S. Dist. LEXIS 47100
CourtDistrict Court, N.D. California
DecidedMarch 29, 2017
DocketCase No. 16-cv-00526-YGR
StatusPublished

This text of 567 B.R. 364 (Sturgeon-Garcia v. Cagno) is published on Counsel Stack Legal Research, covering District Court, N.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sturgeon-Garcia v. Cagno, 567 B.R. 364, 2017 WL 1164177, 2017 U.S. Dist. LEXIS 47100 (N.D. Cal. 2017).

Opinion

Order Affirming Bankruptcy Court

Re: Dkt. No, 10

Yvonne Gonzalez Rogers, United States District Court Judge

Appellant David Sturgeon-Garcia appeals a bankruptcy court decision finding that (1) a stipulated state court judgment entered against Debtor-Appellee, Joseph Cagno, was not a debt for money obtained by “false pretenses, a false representation, or actual fraud” under section 523(a)(2)(A),1 even though it encompassed a count for fraudulent inducement and (2) discovery sanctions orders entered against Cagno in the state court were not the result of “willful and malicious” conduct under section 523(a)(6). Having carefully considered the papers submitted and the record in this ease, the Court Affirms the judgment of the bankruptcy court.

I. Factual and Procedural Background

A. The Stipulated Judgment

This case centers on Appellant’s efforts to collect on a stipulated judgment in the amount of $297,897.50 entered by the Superior Court of Santa Clara County in February 2011 in favor of Stanley R. Car-nekie against Debtor-Appellee Joseph Cagno. (Dkt. No. 11-2.) In that case, Appellant represented Carnekie who subsequently assigned the judgment to Appellant in May 2013. (Dkt. No. 11-6.) In the state proceedings, the entirety of the stipulated judgment provided:

Joseph Cagno (“Cagno,”) defendant in the above-entitled action, hereby stipulates to entry of judgment against him and in favor of plaintiff Stanley R. Car-nekie on all counts in the Complaint in the total amount of $297,897.50, together with post judgment interest thereon as provided by law.

(Dkt. No. 11-2.) Cagno and the superior court judge signed' the document. (Id.) Thus, judgment was entered against Cag-no on all four counts alleged in the complaint: breach of contract, breach of the duty of good faith and fair dealing, money lent, and fraudulent inducement.2 (M; Dkt. No. 11-1.) However, when the superi- or court went on the record to enter the judgment, it asked counsel for both parties, including Appellant, to confirm that the basis for the monetary award did not include any claim of fraud. (Dkt. No. 11-3 at 3.) Counsel for both parties agreed. Thus:

THE COURT: Okay. It’s my understanding that this matter is going to be resolved by way of a stipulated judgment. And that stipulated judgment reflects that, although it is a stipulated judgment as to all counts in the complaint, the plaintiff acknowledges that the damages reflected in the stipulated judgment do not relate to any claim of fraud. And certainly the issue of any punitive damages is going to be resolved [368]*368by virtue of the stipulated judgment. Have I got that correct?
MR. STURGEON-GARCIA: Yes, Your Honor.
MR. HERNS: Yes, Your Honor.

(Id.) In particular, Mr. Herns, counsel for Cagno then represented: “[Tjhere’s no secret that this matter is going to find its way into the bankruptcy court. That’s why it’s important we have a clear record and a complete record.:... As we discussed in chambers this morning, Mr. Cagno disavows any fraudulent conduct in this case ... I appreciate Your Honor’s remarks which I expect a bankruptcy judge to read in a transcript a year or two from now in the inevitable adversary proceeding matter.” (Id. at 3-4.) Appellant, in his role as counsel for Camekie, did not dispute any of this, but simply stated that they had the stipulated judgment ready for Cagno to sign so that the Court could also sign and enter it. (Id. at 4.)

Later, after being assigned the judgment in 2013, Appellant alleged that the stipulated judgment was nondischargeable in bankruptcy, pursuant to section 523(a)(2)(A), as a debt arising out of fraud. (Dkt. No. 11-10.) The bankruptcy court disagreed. After a four-day trial on the merits of the claim, the bankruptcy court found that when the “Superior Court entered the stipulated judgment, the colloquy among the court and counsel was sufficient to establish that the fraud elements of Carnekie’s claims against Cagno were excluded ... and thus left property subject to adjudication by this court in Cagno’s subsequent bankruptcy.” (Dkt. No. 1-3 at 2.) The bankruptcy court then found that Cagno had hot intended to deceive Car-nekie and that Carnekie did not “justifiably rely upon any untruths stated to him or facts withheld from him by Cagno.” (Id. at 3-4.) The bankruptcy court held that Cagno’s debt on the stipulated judgment did not qualify as a nondischargeable debt under section 523(a)(2)(A). (Id.) Accordingly, the bankruptcy court discharged the debt. (Id. at 5.)

B. Discovery Sanctions Orders

During the pendency of the superior court case, that court sanctioned Cagno $5,750 for discovery violations. Appellant argues that the bankruptcy court should have found these discovery sanctions were nondischargeable as “willful and malicious injuries]” under section 523(a)(6). Appellant asserts that the bankruptcy court discharged the orders “on the basis that no evidence was presented [at trial] with respect to the dischargeability of the sanctions.” (Dkt. No. 10 at 51.) However, Appellant does not cite to a specific place in the record where the bankruptcy court either made this ruling or was presented with evidence to the contrary. Although not required to do so, the Court endeavored to ascertain for itself the relevant information.'

After reviewing the record, it appears that the bankruptcy court did find that there was “no evidence presented” with regard to “the willful and malicious element” pertaining to the discovery sanctions. (Dkt. No. 11-14 at 77.) From the record, it appears that the main evidence presented at trial were the sanction orders themselves (Dkt. No. 11-4), the declarations of Cagno’s prior counsel filed in conjunction with the superior court hearings that led to the sanctions (Dkt. No. 11-5), and Cagno’s testimony confirming what his prior lawyer stated in the declarations regarding his failure to comply with discovery orders (Dkt, No. 8-4 at 105). (See Dkt. No. 8-4 at 104-111.) Cagno also testified that, at the time that he was served with discovery in the superior court, his lawyer from a previous matter had all of the documentation, and he himself had moved [369]*369without retaining any of the documentation. (Id. at 212-13.) Finally, Cagno testified that he did not intend to do something malicious or harmful to Camekie by not cooperating with the discovery orders. (Id. at 214.)

II. Jurisdiction

Under 28 U.S.C. § 158(a)(1), the Court has jurisdiction to hear appeals from final judgments of the United States Bankruptcy Court for the Northern District of California. The Court reviews the bankruptcy court’s findings of fact for clear error and its conclusions of law de novo. Sigma Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 783 (9th Cir. 2007).

III. Discussion

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Cite This Page — Counsel Stack

Bluebook (online)
567 B.R. 364, 2017 WL 1164177, 2017 U.S. Dist. LEXIS 47100, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sturgeon-garcia-v-cagno-cand-2017.