In re: James Paul Garrett
NC-16-1070-FBJu
| 9th Cir. BAP | Jul 14, 2017Background
- Garrett, a California attorney, solicited $100,000 from Ankoanda around 2004; she used funds borrowed against her East Palo Alto property to provide a $100,000 down payment for an Oakland property that initially titled in her name.
- Ankoanda claims the Oakland property would be transferred to Garrett’s "business associates," who would refinance and repay her loan; associates refinanced and obtained $115,000, of which Ankoanda says she received only $10,000. Garrett currently lives at the Oakland property.
- In 2007 Ankoanda sued Garrett for fraud; on the day of trial they orally settled: Garrett agreed to pay $200,000 within a year and to sign a promissory note and deed of trust. Garrett did not sign the documents or pay.
- Garrett filed Chapter 7 in 2014; Ankoanda brought an adversary proceeding seeking nondischargeability of Garrett’s debt. At trial Ankoanda was the sole witness, gave inconsistent testimony, and offered no documentary evidence; counsel limited the legal theory at trial to Section 523(a)(2).
- The bankruptcy court found Ankoanda failed to prove the elements of § 523(a)(2)(A) (no clear proof of representations by Garrett or that associates’ statements were attributable to him), rejected judicial estoppel and issue preclusion arguments, and held Ankoanda waived claims under §§ 523(a)(4) and (6). Judgment for Garrett entered and Ankoanda appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Garrett’s $200,000 obligation is nondischargeable under 11 U.S.C. § 523(a)(2)(A) (fraud/false representations) | Ankoanda: Garrett made fraudulent representations (including promises to pay and to sign security instruments) inducing her to provide funds; settlement evidence supports nondischargeability | Garrett: No proof he made representations to Ankoanda; settlement does not equal admission; insufficient evidence at trial | Held for Garrett — Ankoanda failed to prove the required elements of § 523(a)(2)(A); complete failure of proof |
| Whether the state-court settlement precludes Garrett from denying liability (judicial estoppel) | Ankoanda: Settlement and state-court proceedings support estoppel or preclusion of Garrett’s denials | Garrett: He never admitted liability; settlement was not a judicial admission; he consistently denied liability | Held for Garrett — judicial estoppel does not apply because Garrett’s positions were not inconsistent and settlement did not reflect judicial acceptance of facts |
| Whether issue preclusion bars Garrett from relitigating (claims decided in state court) | Ankoanda: Prior proceedings resolved issues in her favor and should preclude Garrett | Garrett: No final adjudication or findings; issues were not actually litigated and decided | Held for Garrett — issue preclusion inapplicable: no identical, actually litigated, necessarily decided final judgment established |
| Whether claims under §§ 523(a)(4) (fiduciary fraud/defalcation) and 523(a)(6) (willful and malicious injury) are viable | Ankoanda: Alternative nondischargeability theories based on fiduciary wrongdoing and willful injury | Garrett: Those theories were not tried and lack evidentiary support | Held for Garrett — Ankoanda waived (abandoned) §§ 523(a)(4) and (6) at trial; even on merits she failed to prove elements |
Key Cases Cited
- Ghomeshi v. Sabban, 600 F.3d 1219 (9th Cir. 2010) (elements required to prove fraud under § 523(a)(2)(A))
- Petralia v. Jercich, 238 F.3d 1202 (9th Cir. 2001) (definition of "willful" and "malicious" for § 523(a)(6))
- Bullock v. BankChampaign, N.A., 133 S. Ct. 1754 (2013) (defalcation requires a culpable state of mind)
- Anastas v. American Savings Bank, 94 F.3d 1280 (9th Cir. 1996) (standard that factual determinations of § 523 elements reviewed for clear error)
- Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597 (9th Cir. 1996) (federal judicial estoppel principles)