*1 the holder of such lifetime cy estate as powers pay interest and and to

income

future distributions Unitrust

Amount, Jeffrey payable otherwise C.

Mack, to the Trustee. holding binding upon

4. This shall be

all Defendants and the Minnesota Attor-

ney in accordance with the stand- General

ing under Minnesota Statute 501B.41.

LET JUDGMENT BE ENTERED AC-

CORDINGLY. Gregory CANTRELL, Dewitt

Debtor.

Gregory Cantrell, Appellant, Dewitt

Cal-Micro, Inc.; Cal-Micro, Inc. Em

ployee Option Plan; Stock The Pau Countryman Trust, Appel

line

lees. NC-01-1114-RRyK.

BAP No.

Bankruptcy No. 99-49461-TS.

Adversary No. 00-4136-AT. Bankruptcy Appellate

United States Panel

of the Ninth Circuit.

Argued Sept. and Submitted 2001.

Filed Oct.

I. FACTS Cal-Micro, May appellees, Cal-Micro, Inc., Employee Op- Inc. Stock Plan, Countryman tion and The Pauline (collectively, Trust the CMI Plain- tiffs) complaint in state court filed appellant Gregory Cantrell and against served the others. The CMI Plaintiffs publication rath- complaint on Cantrell Day Corporation, Law Vaught, R. Jon by personal than service. The com- er Cantrell, Oakland, CA, Gregory Dewitt plaint alleged separate twelve causes *4 appellant. including action several counts of conver- fraud, trust, sion, conspiracy, constructive Grove, CA, Gill, Brian Pacific for Cal- duty. accounting, fiduciary and breach of Cal-Micro, Inc., Micro, Inc., Op- Employee complaint sought recovery compen- The Plan, Countryman The Pauline tion satory damages aggregate in the amount Trust, appellees. $1,271,985,plus additional unascertained amounts, and each of the tort-based claims RUSSELL, KLEIN, RYAN and Before punitive damages. against sought Cantrell Bankruptcy Judges. The claims arose from a failed stock

purchase complaint transaction. The al- that, defendant Omni leged June OPINION (“Omni”) Enterprises, purchased Inc. from RUSSELL, Bankruptcy Judge. Countryman 1990 plaintiff The Pauline Trust”) (“Countryman controlling Trust appellees, judgment creditors of the The percentage co-plaintiff of stock in Cal-Mi- appellant, brought appel- an action (“CMI”). cro, complaint further Inc. The to determine the lant’s case alleged that Cantrell and another individu- judgment debt un- dischargeability of the officers, al named Marvin Wilcher were 523(a)(4).1 appellees der The filed a mo- Omni, sole stockholders of directors and/or summary judgment, appel- tion for and the that Cantrell and were and Wilcher also summary lant filed a cross-motion officers, majority directors stock- and/or judgment. granted The CMI, held the holders of while Omni CMI summary appellees’ judgment motion for According complaint, by stock. to the Au- appellant’s cross-motion for and denied pay- had gust Omni defaulted summary judgnent based on the collateral purchase ments owed under the stock appellees’ was rescind- estoppel agreement, agreement effect of the state-court so and the stock was returned to the ed ruling, In so the bank- Countryman Trust. ruptcy appellant court determined that the meaning within the was that, Complaint The further appellant thereafter filed CMI, directors of and as officers and/or (the appeal. We REVERSE and RE- egos the alter of Omni CMI), stockholder of Cantrell and Wilcher MAND. indicated, Procedure, chapter, Bankruptcy Rules 1. Unless otherwise all sec- eral Rules of tion, Bankrupt- to the and rule references are 1001-9036. 101-1330, Code, cy §§ 11 U.S.C. and the Fed- argued which the CMI Plaintiffs that Cantrell’s plaintiffs fiduciary duties owed to motion to aside was time barred. Ac- According to the com- set they breached. cording opposition, to the admit- plaint, engaged and Wilcher Cantrell Cantrell receiving ted to actual notice of the default following conduct in contravention of judgment in November when there their duties: enough bring timely was still time to Expropriated A. and converted to motion, bring but waited to his Cantrell corpo- ... own use and their April two-year motion until after plaintiff assets of Cal- rate funds and period bringing limitations had run for his Micro, Inc.... motion to set aside. The court de- state B. loans of cor- Made unauthorized nied motion to set aside. Cantrell’s porate plaintiff funds and assets of Cal- Micro, Inc to themselves and to the De- In December Cantrell filed a vol- Corporations ... fendant untary chapter bankruptcy petition, in March the CMI Plaintiffs filed extensions of C. Made used credit, complaint their to determine the dis- cards credit accounts credit Cal-Micro, chargeability of their state-court default procure Inc plaintiff goods against Cantrell under and the De- services for themselves *5 523(a)(2) (4).2 §§ and The CMI Plaintiffs Corporations ... fendant summary thereafter filed their motion for funds, corporate D. Failed to use the a judgment, and Cantrell filed cross-mo- plain- income and accounts receivable of summary judgment. tion for Cal-Micro, Inc. payment tiff for the of plaintiffs operational expenses, said ac- February On the payable, payroll expenses, counts and court issued its Memorandum of Decision expenses of taxes and insurance.... summary judg- on the cross-motions for ment. The the court determined 1996, April In the CMI Plaintiffs ob- presented by discharge- same issues the judgment against tained a default Cantrell ability action were decided the state- $1,271,985 in compensatory damages for gave court and the CMI Plaintiffs’ lawsuit $10,000 punitive damages, plus and at- judgment preclusive effect. The fees, torney’s interest and costs. The de- granted bankruptcy court therefore specified fault neither summary judg- Plaintiffs’ motion for cause(s) it of action on which was based ment cross-motion and denied Cantrell’s any express findings nor made of fact con- summary judgment. for cerning allegations contained in the complaint. determination, In the bank- making its April ruptcy heavily Ragsdale

In filed a motion to court relied on v. Cantrell Haller, (9th Cir.1986). In set aside the default 780 F.2d aside, largely Ragsdale, Based on the court con- motion to set Cantrell claimed he that, law, personally never served with the sum- cluded as a matter of California was director, rather, complaint; position as a mons and CMI Cantrell’s controlling Plaintiffs had leave to serve the officer or shareholder of CMI obtained type complaint by publication. on made Cantrell the of cov- Cantrell 523(a)(4): aside, § opposition their to the motion to set ered 523(a)(2) agreed § subsequently 2. The conceded to dismissal of their CMI Plaintiffs allege complaint that their state court did not claim. 523(a)(2), § requisites a claim under for law, which de Ragsdale apparently question found we also review The that, Stanifer, In re given partners’ duties to novo. 236 B.R. 1999). other, BAP partner’s ability a to exercise Cir. each partnership property over the control partner a trustee of a statuto-

made the IV.DISCUSSION ry trust for U.S.C. Judg- A. Preclusive Effect of Default princi- no The Court sees ment distinguishing pled basis between hand, director, partner, on one estoppel, pre or Collateral issue officer, shareholder, controlling or clusion, applies in dischargeability pro other, Therefore, respect. Garner, Grogan ceedings. 498 U.S. that an di- the Court concludes 654, 112 n. 284 & S.Ct. L.Ed.2d 755 rector, shareholder is the (1991). preclusive In determining the ef a statutory trustee of trust to the extent judgment, fect of state court 28 U.S.C. position gives power his him the to exer- courts, requires as a matter federal corporate control cise over assets. credit, full faith apply that state’s Cantrell, (Bankr. 258 B.R. estoppel principles. collateral In re Nour N.D.Cal.2001). (9th Cir.1995). bakhsh, 67 F.3d court thereafter entered law, Under California five a judgment nondischargeability against requirements” “threshold must be met for Cantrell, timely ap- and Cantrell filed this estoppel collateral to apply: peal. First, sought precluded the issue to be relitigation from must be identical II.ISSUES *6 in proceeding. that decided a former A. proper- Whether the court Second, this issue must have been actu- ly gave estoppel collateral effect to the ally litigated in the proceeding. former judg- CMI state court Plaintiffs’ default Third, it necessarily must have been de- ment. Fourth, in proceeding. cided the former B. proper- Whether the the in proceeding decision the former ly concluded that the a “fi- appellant was must be final and on the merits. Final- 523(a)(4) duciary” meaning within the of ly, party preclusion the against whom is position virtue of his as, sought privi- must be the same or in majority with, director shareholder. ty party proceed- the to the former and/or

ing. party ... The asserting collateral estoppel bears the burden of establish- III.STANDARD OF REVIEW ing requirements. these summary judgment We review a de Baldwin, 131, novo. In re 245 B.R. (9th Harmon, 250 F.3d 2000), BAP aff'd, Cir. 249 F.3d 912 Cir.2001) (quoting Superior Lucido v. (9th Cir.2001). Court, 335, 341, Cal.Rptr. 51 Cal.3d (1990)). 767, 795 P.2d 1223 If ah of the We also review de novo the bank met, requirements threshold are the court ruptcy availability court’s decision on the application then must decide whether of estoppel. of collateral Id. estoppel poli collateral would “further the person “fiduciary” cy underlying Whether a is a interests doctrine.” the 523(a)(4) Harmon, meaning (citing within the is a 250 F.3d at n. 6 Lucido, 342-43, less, Cal.Rptr. argue the Plaintiffs that at Can- Cal.3d 1223). April trell was aware of the 1996 default 795 P.2d judgment by no later than November party seeks to invoke When 1997, while there was still time to file a estoppel judg collateral based on a default motion, timely to set aside the default ment, two threshold California mandates judgment.3 claim The CMI Plaintiffs First, judg for a default requirements. that, knew of because Cantrell the effect, preclusive ment to have the default judgment bring in to to time motion set “full ing defendant must have had a and aside, knowledge he had actual of the liti- de opportunity” litigate fair to issues gation purposes for of the collateral es- Har the default termined toppel requirements. threshold dis-We mon, (citing 250 F.3d at n. 6 agree. Williams, Williams 36 Cal.2d express purpose of the actual (1950)). a de Accordingly, 223 P.2d 248 to knowledge requirement ensure precluded will faulting defendant not be defaulting defendant had full and fair unless the relitigating from such issues “ opportunity litigate allegations made personally defendant ‘has been served complaint. Cantrell did not have a knowledge with or has actual summons ” full fair opportunity litigate when Harmon, litigation.’ the existence of the personally process, he was not served with Williams, (quoting 250 F.3d at 1247 litiga- he know when did not about the 248). at 223 P.2d Cal.2d tion until after the default had Second, context, default judgment Williams, been entered. See at 36 Cal.2d given the determination of an issue will be (stating 223 P.2d 248 the default- preclusive only effect where the court ing litigation must learn of the defendant prior “express action rendered an find- entry judgment). before of the default issue, express ing” on that or where this fact, knowledge Neither after the nor an finding requirement has been waived. unconsummated offer to set aside the de- Harmon, at 1247-48. The ex- F.3d knowledge fault judgment, constituted press finding requirement is deemed satisfying litigation pro- prior waived where the court in the actually litigated requirement. ceeding implicitly necessarily decided sum, while the CMI Plaintiffs indis- *7 the issue. Id. at 1248. putably obtained a valid and enforceable case,

In this Cantrell did not Cantrell, judgment against any state-court full opportunity litigate have a and fair to by duly that judgment issues determined in the state court action. The record re in may relitigated proceedings be other per that the Plaintiffs did not flects CMI that the same issues because the raise sonally serve Cantrell with their Com Plaintiffs have not shown that Can- plaint, nor did Cantrell have actual opportunity trell had a full and fair to estoppel de knowledge litigation litigate of the before the those issues for collateral purposes.4 judgment fault was entered. Neverthe- argue they of- the CMI Plaintiffs’ set aside offer. If the CMI

3. The CMI Plaintiffs also that unconditionally sought set aside Plaintiffs to stipulate with Cantrell to set aside the fered they presumably judgment, the default could (but judgment that Cantrell refused to partic- or have done so without the consent stipulate) and that offer either satisfied so ipation of Cantrell. actually litigated requirement. or waived the disagree. reveal We The record does not that collateral es- 4. Cantrell further contends conditions, any, imposed upon what if were apply toppel also not here because the does 420

Accordingly, good inapplicable trust and faith —are granting summary judgment erred in Lewis, dischargeability context. See favor Plaintiffs based on the of the CMI 1185; Baird, at F.3d In re 114 B.R. preclusive effect of the state-court default (9th 1990). BAP inapplicable Cir. Also judgment.5 fiduciary are relationships arising from im- plied trusts, or constructive and trusts ex 523(a)(4) Fiduciary § B. Status Under (trusts merely created on the maleficio 523(a)(4) excepts discharge from Section conduct). wrongful basis of Stanifer, 236 or act- a debt “for fraud defalcation while Short, B.R. at 714 (citing re 818 F.2d capacity.” ing fiduciary (9th Cir.1987)). 693, 695 The trust must arise “before and without reference to the “fiduciary capaci The definition of that wrongdoing caused the debt.” Id. 523(a)(4) ty” by § governed under is feder 1185). Lewis, (quoting 97 F.3d at Gergely, al law. In re See F.3d (9th Cir.1997) (quoting Ragsdale the definition While of “fiducia Haller, (9th Cir.1986)). 780 F.2d 523(a)(4) § ry capacity” under governed is narrowly Federal law construes (see supra), federal law we must look “fiduciary” the term to state law to' determine req whether the 523(a)(4). Only relationships arising relationship uisite Ragsdale, trust exists. express qualify from or technical trusts as 796; Stanifer, 780 F.2d at 236 B.R. at 714. relationships under A trust under may California law be (9th Lewis, In re 97 F.3d Cir. by express agreement, by formed statute 1996) 796); (citing Ragsdale, 780 F.2d at Stanifer, case law. B.R. at Stanifer, B.R. 713-14 Ragsdale, See also 780 F.2d at 796.6 1999). BAP Cir. Relying heavily

Consequently, Ragsdale, broader defini fiduciary relationships tions of court in this case concluded —definitions confidence, relationships that include person that a who is director or "express finding requirement” judgment has neither the issue of whether the default been satisfied nor waived. The CMI Plaintiffs estoppel entitled to collateral effect because requirement counter that the has been waived issue was not identified in Cantrell’s because the state court default im- appeal. disagree. statement of issues on We plicitly necessarily decided Cantrell Baldwin, Rewald, Bishop, Dilling See In re had breached his duties to the CMI (9th Cir.1997) Wong, ham & 104 F.3d 1147 However, Plaintiffs. we do not need to reach (holding that failure to include an issue in above, this issue. As set forth collateral es- appellant of issues did statement not bar the toppel apply does not here because Cantrell brief). raising opening from issue in its opportunity did not have a full and fair Moreover, below, litigate. explained *8 motion, summary judgment 6. In their the complaint sufficiently state court did not al- argued CMI Plaintiffs that Cantrell was the lege estoppel purposes for collateral that Can- by trustee of a trust created statute as well as purposes trell was a for of Decision, by case law. In its Memorandum 523(a)(4). Consequently, § the state court de- bankruptcy rejected argument the court the possibly fault could not have decid- by that a trust had been created statute. On ed, otherwise, implicitly or that Cantrell appeal, apparently the CMI Plaintiffs have any fiduciary duty breached within the mean- argument. opening abandoned this Their 523(a)(4). ing §of exclusively argue brief relied on case law to Citing Rule the CMI Plaintiffs contend that Cantrell was the trustee of a trust. raising appeal that Cantrell is barred from on 425-26, corporation, is at 106 P.2d 423. success- of a Stoner controlling shareholder fully complaint, trust under to the statutory a trustee of a Cali- demurred and the therefore, and, person such plaintiffs appealed. appeal, plain- fornia law On the purposes of qualifies limitations, as a for that of argued tiffs the statute 523(a)(4). supposedly which had run filing before the complaint, not apply of their did to their Ragsdale that “California has made held complaint lawsuit because their stated a the partners all trustees over the assets of cause of action to declare a trust and for partnership,” partners so California are accounting. According plaintiffs, to the fiduciaries for of lapse a trust claim “does not while the Ragsdale, Rags- 780 F.2d at 796-97. The trust continues and the statute does not on particularly dale court relied state- begin to run until there is of a knowledge Supreme in several California ments made breach trust is Id. at or the terminated.” that, according Rags- cases to the Court 426-27,106 P.2d 423. court, partners raised the duties of dale beyond expressly required by those Cali- process rejecting plaintiffs’ In the of the fornia statute. Id. at 796. Bainbridge explained: the argument, The court below stated that corporation is a director One who principled distinguish it basis for saw “no fiduciary capacity, acts in a law hand, ing partner, between a on the one any person- does not allow him to secure director, officer, controlling or advantage against corporation al as shareholder, other, in respect.” on the However, or its stockholders.... strict- (Bankr. Cantrell, 258 B.R. ly speaking, relationship is not one N.D.Cal.2001). However, key question trust, agency.... but of court, is not whether the or (citations 427-28, Id. at 106 P.2d 423 omit matter, any other federal court for that ted). Bancrof-Whitney See also Co. v. otherwise, basis, principled sees a Glen, & n. Cal.2d 345-46 distinguishing partners between and cor (1966) Cal.Rptr. 411 P.2d (stating 921- rather, porate principals; key issue is corporate officers and directors are whether California law makes such a dis trustees,” “technically referring not tinction. conclude that it does. We agency analyzing corporate law in offi partnership pro- law Whereas California duties). Servs., cer’s Accord GAB Bus. Ragsdale vided a for the court to basis Servs., Lindsey Inc. v. & Newsom Claim partners conclude that of a are trustees Inc., Cal.App.4th 99 Cal. trust, statutory corporations California law (2000). Rptr.2d 665 provides under which no similar basis we Bainbridge court therefore conclud- corporate principals can conclude that are plaintiffs alleged ed that the had not Supreme trustees. The California Court posi- existence of a trust virtue Stoner’s Stoner, Bainbridge case Cal.2d tion as an director and (1940), directly 106 P.2d 423 shareholder; rather, best, plaintiffs, at point. Bainbridge, plaintiffs, had a constructive trust cause minority corporation, shareholders of a action, was barred the statute of which complaint against filed a B.L. Stoner and 428-29, limitations. Id. at 106 P.2d 423. complaint alleged others. The Stoner *9 Thus, a of the we cannot conclude in the face of president was the director recognizes corporation, Bainbridge that “he and his that California law associ- officers, majority ates a of its stock.” Id. directors or sharehold- own[ed] 422 express of either an or a ring corporate principals

ers as trustees to as trustees.9 statutory trust.7 Even if the characterization were consid necessary ered holdings, to the two of the reached the same conclusion under

We pre-date three Bainbridge, cases which ex Washington Hultquist, law in In re 101 (9th 1989). pressly rejected and necessarily such a Hultquist B.R. Cir. BAP 180 law, that, Washington corpo- case, held under a characterization. The third a recent rate officer a trustee of an is not either case, California Appeal Court of neither trust, express statutory so the debtor Bainbridge. referred to nor discussed See fiduciary was not a for Artists, Interactive Multimedia Inc. v. Su 523(a)(4). court, here, Court, 1546, perior Cal.App.4th 62 73 Cal. distinguished Hultquist because it was (1998). Rptr.2d 462 To the extent Interac Washington based on law rather than Cali- tive is with Bainbridge, inconsistent a Cali Hultquist fornia law. not directly While is case, Supreme fornia Court we must follow point, neither California nor Washing- Bainbridge and not Interactive.10 corporate corporate princi- ton law make

pals express trustees of or statutory ignore To the distinction between the trusts. trustee of a corporate technical trust and a principal would do violence to the narrow

Three by California cases cited the CMI construction of the “fiduciary” term appear corporate Plaintiffs to characterize Supreme United States Court estab However, principals as trustees.8 bankruptcy discharge lished context arguably characterization those cases is years easily ago. Chapman dictum: over 150 See v. those cases could have been For 202, decided in the same manner syth, without refer- 43 2 U.S. How. 11 Yarnell, 714, Bainbridge 7. equity); While focused on whether Cal.App. Poor v. 28 (1915) express pled, holding (affirming trust had been P. its also 976 writ of defendants, precluded implicitly possibility directing mandate that a stat- as officers and agents utory pled. Bainbridge corporation, permit plaintiff of the trust had been af- inspect sustaining corporate shareholder to firmed the lower court’s order certain rec- ords). Stoner's demurrer based on the conclusion plaintiffs complaint had a cause trust, Indeed, Yarnell, of action for and that constructive 9. the court in Poor v. period bringing Cal.App. interchangeably limitations for an action 153 P. re- based on constructive trust had run before fers officers and directors as “trust- both filing complaint. "agents.” Cal.App. of the Id. at ees” and as at statutory P.2d 423. If a trust been suffi- had 153 P. 976. ciently pled, Bainbridge presumably not have could affirmed the order on the side, Although not cited either we re- running demurrer based on the of the con- Jades, cently held in In re 266 B.R. 728 period. structive trust limitations 2001), Corpora- Cir. BAP that "California's provides remedy tion Code for an insolvent Angeles corporation's 8. Fanners' & Merchants' Bank Los director’s violations (1879) creditors,” Downey, (holding 53 Cal. duties to which could be action- that a bank who obtained his for own able under Id. at 737. We also profit participation benefit a in a real estate noted: "Because a director’s duties exchange loaning money, venture in bank corporation to creditors do not until the arise asset); insolvent, misappropriated corporate timing insolvency Interac- is of the Artists, Court, Superior tive Multimedia Inc. v. critical.” Id. at 738. Since the issue of insol- 1546, 1555-56, Cal.App.4th Cal.Rptr.2d vency was not raised the CMI Plaintiffs in (1998) (holding majority complaint, they that a sharehold- the state court and because creditors, juiy er was not entitled to a trial on breach of are not Jades is not relevant to the fiduciary duty claim because claim sounded case before us. *10 (“The (1844) spoken of act this is not the relation in the [bankruptcy] L.Ed. 286 act. trusts, first section of the and not speaks of technical those contract.”). implies from which the law at 208. Chapman, U.S. has

This construction been reiter- narrow C. Cantrell’s Cross-Motion for Sum- many Chapman, ated on occasions since mary Judgment applicable dischargeabil- under each of the above, As set forth Cantrell filed a since ity statutes that have been enacted summary judgment, cross-motion for Lewis, e.g. In re 97 F.3d Chapman. See bankruptcy which the court denied. The Cir.1996). (9th See also Davis supported by cross-motion is Cantrell’s Co., 328, 333, 293 U.S. Acceptance v. Aetna in which asserted own declaration he (1934) (listing 79 L.Ed. 393 S.Ct. any corporate not expropriate he did upheld that have supreme court cases funds, any did make not unauthorized construction). narrow funds, corporate loans or of transfers and Moreover, Chapman’s reasoning for appropriate not or did otherwise embezzle just adhering to a narrow construction is his own or for the benefit benefit of years cogent today ago: as it was any person entity. other or debt, If a embrace such it will the act opposition to Cantrell’s application. limit its It be difficult to cross-motion, Plaintiffs the CMI relied ex must all arising include debts from clusively theory on of their collateral es all cases agencies; and indeed where the toppel based on the state court default implies obligation law from the trust than judgment.11 Other Cantrell’s titles a reposed in the debtor. Such construc- positions director as an tion left but few would have debts on CMI, of stockholder which we operate. which the law could In almost have concluded were insufficient to make all the commercial transactions of the 523(a)(4) § fiduciary, a Cantrell CMI reposed in country, confidence alleged, provided any Plaintiffs nor neither debtor, integrity of, of the punctuality any evidence alternative basis under is, and a these in a violation of commer- could which conclude 523(a)(4) sense, § cial of a disregard fiduciary.12 trust. But Cantrell was clear, § entirely the record is not insufficient state a claim under While conjunction opposition Hemmeter, with their Cantrell's 242 F.3d cross-motion, apparently the CMI Plaintiffs Cir.2001). judicial asked court to take suggested CMI The Plaintiffs also their pleadings notice same state court of the brief that the Rooker-Feldman doctrine alter- support which relied in the CMI Plaintiffs natively precludes litigating Cantrell from summary judgment their motion. 523(a)(4) against § the CMI Plaintiffs' claim. suggested 12. CMI Plaintiffs their brief However, only doctrine the Rooker-Feldman qualified alternatively that Cantrell as a applies subject already if have issues been 523(a)(4) fiduciary by alleged virtue of his e.g. determined court. See District state control Cal-Micro ESOP. if over the Even Feldman, Appeals v. Columbia Court qualify arguably could as a Cantrell 1303, 75 U.S. 103 S.Ct. L.Ed.2d ESOP, respect with to the Cal-Micro the CMI above, (1983). For reasons set forth we allege any misappropriation Plaintiffs did not conclude that the Rooker-Feldman doctrine ESOP failure to account for assets. The here, 523(a)(4) apply does not because the only in the Plaintiffs diminution by the issues were not determined stale-court value held of Cal Micro stock the ESOP. The diminution in value ESOP-held stock is *11 summary judgment summary judgnent should record at Consequently, stage this litigation. Accordingly, I in DISSENT. have entered favor Cantrell. been'

y. CONCLUSION above,

For the reasons set forth

bankruptcy granting court erred in sum- in

mary judgment favor of the CMI Plain- preclusive tiffs based on effect In Re FIRST ALLIANCE MORTGAGE judg- CMI Plaintiffs’ state-court default COMPANY, corporation; a California bankruptcy ment. The court should have Corporation, First Alliance a Dela- granted Cantrell’s cross-motion for sum- corporation; ware First Alliance mary judgment. Mortgage Company, a Minnesota cor- poration; Accordingly, court’s and First Alliance Portfolio Services, corporation. a Nevada summary in judgment favor of the CMI REVERSED, Plaintiffs is and this matter AARP; Forrest, Appellants, Ida Mae is hereby REMANDED the summary in entry judgment favor of Cantrell. Mortgage Company, Alliance First al., Appellees.

et KLEIN, Bankruptcy Judge, dissenting No. SA CV 01-539 DOC. in part. Bankruptcy DOC, Nos. SA CV 01-540 LR, LR, SA 00-12370 SA 00-12371 SA join majority opinion ques I on the LR, 00-12372 LR. SA 00-12373 tion of preclusion following issue a Califor Adversary No. SA 00-1324 LR. nia default The recent Ninth (In decision, Circuit Harmon v. Kobrin re Court, United States District Harmon), Cir.2001), 250 F.3d 1240 C.D. California. compels the conclusion that the California Sept. question does not have preclusive issue effect.

The balance of the an unnec- decision is

essary advisory opinion a question far majority sug- less settled than the Indeed, view,

gests. my conflicting two regarding

lines of decisions 11 U.S.C. 523(a)(4), yet which not have been recon-

ciled, subject in disarray. leave the entire developed

The record at the trial that

should occur on remand would affect the

analysis putative of the defendant’s fiducia-

ry obligations light of It is

premature appropriate and not to decide important question incomplete on an