In re: Benjamin Moonkang Huh
506 B.R. 257
9th Cir. BAP2014Background
- Sachan sought to except a debt from Huh’s discharge under §523(a)(2)(A) based on fraud by Huh’s agent, Kim, who assisted in marketing the Market; Huh held the broker license and operated Amerity, Inc. while maintaining the America Realty & Investment DBA; Kim acted as a part-time agent under Huh’s supervision; Sachan relied on representations about Market profits and compliance which proved false; the Market closed with profits overstated and with significant code violations, leading to a state-court fraud judgment against Kim and Amerity/Huh; the California Department of Real Estate registration was canceled by Huh after the sale; the state court later held Huh jointly and severally liable in the Amended Judgment, which Sachan later sought to discharge in bankruptcy; the bankruptcy court adopted a detrimental view of imputing agent fraud to a principal but ultimately applied the Walker standard and dismissed Sachan’s claim; the Ninth Circuit affirmed the bankruptcy court’s dismissal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Huh’s liability can be imputed for Kim’s fraud under §523(a)(2)(A). | Sachan contends imputation is proper under agency/partnership principles. | Huh argues imputation requires debtor’s culpable knowledge, not merely agency. | Affirmed; imputation not allowed unless debtor knew or should have known of fraud. |
Key Cases Cited
- Neal v. Clark, 95 U.S. 704 (1877) (fraud means positive fraud, not implied or fraudulent by law)
- Strang v. Bradner, 114 U.S. 555 (1885) (partners liable for fraud in partnership; agency/partnership imputation)
- Cecchini v. Robustelli, 780 F.2d 1440 (9th Cir. 1986) (imputing partner’s fraud to others under §523(a) debated by Ninth Circuit)
- Lansford, 822 F.2d 902 (9th Cir. 1987) (cited regarding imputing liability in §523(a) context (Lansford dicta))
- Ledford, 970 F.2d 1556 (6th Cir. 1992) (receipt of benefits approach rejected by some circuits; imputation depends on culpability)
- Geiger (Kawaauhau v. Geiger), 523 U.S. 57 (1998) (clarifies culpable state of mind for fiduciary defalcation; narrow construction of discharge exceptions)
- Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013) (holds culpable state of mind required for certain §523(a) exceptions)
- Sabban, 600 F.3d 1219 (9th Cir. 2010) (discusses imputed fraud in §523(a)(2)(A) context)
- Sherman v. Sec. & Exch. Comm’n, 658 F.3d 1009 (9th Cir. 2011) (discusses scope of §523(a)(19) and underlying assumption that fraud is debtor’s)