Appeal from the United States Bankruptcy Court for the Eastern District of California Honorable Christopher M. Klein, Chief Bankruptcy Judge, Presiding Bankr. No. 09-36284-C Adv. No. 09-02626-C
SUSAN M SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT
Argued and Submitted on March 22, 2012 at Sacramento, California
Before: PAPPAS, DUNN and MARKELL, Bankruptcy Judges.
Chapter 7*fn2 debtor Christine M. Emmerson ("Emmerson") appeals the bankruptcy court's judgment entered June 28, 2011, declaring that a state court judgment against her in favor of creditor Tony D. Regis ("Regis") was excepted from discharge under § 523(a)(6) based on the application of issue preclusion. We AFFIRM.
This is the second appeal to the Panel from the bankruptcy court's judgment in this adversary proceeding. Our Memorandum deciding the previous appeal contained a detailed recitation of the relevant facts. Emmerson v. Regis (In re Emmerson), BAP case no. EC-10-1150-MoDH (9th Cir. BAP Mar. 25, 2010). Because the parties are also familiar with the facts, we need only summarize them here, and describe the events following our remand of the judgment to the bankruptcy court in connection with the first appeal.
Emmerson and Regis are the parents of a minor child ("the Child"). Their relationship ended acrimoniously, prompting a multi-year child custody battle in Sacramento Superior Court, Family Court Department (the "Family Court Proceeding"). While the Family Court Proceeding was pending, Emmerson commenced an action against Regis seeking a partition of the parties' jointly- owned former residence in Sacramento Superior Court, Civil Court Department (the "Partition Action"). Regis filed a cross- complaint in the Partition Action, alleging claims against Emmerson for child abduction and child enticement in which he 1 sought, inter alia, an award of compensatory and punitive damages 2 pursuant to Cal. Civ. Code § 49.*fn3
3 In August 2008, before the trial in the Partition Action, the 4 Family Court awarded full legal custody of the Child to Emmerson, 5 with no visitation rights to Regis unless initiated and sought by 6 the Child.
7 Trial was scheduled in the Partition Action for October 6, 8 2008. Emmerson failed to appear at trial, and the state court 9 conducted a non-jury trial. The evidence and testimony offered by 10 Regis were uncontroverted. On February 5, 2009, the state court 11 entered an Order Following Trial in the Partition Action (the 12 "Civil Court Order") awarding Regis $473,500 in damages, including 13 $50,000 in punitive damages, and $400,000 in general damages as 14 compensation for the "loss of his relationship with [the Child] 15 for a period of eight years and extreme and severe emotional 16 distress suffered by that loss [at $50,000 per year]." The state 17 court also awarded Regis $23,500 in damages for breach of 18 contract.*fn4 Emmerson did not appeal the Civil Court Order.
The rights of personal relations forbid: (a) The abduction or 22 enticement of a child from a parent, or from a guardian entitled to its custody; (b) The seduction of a person under the age of 23 legal consent; (c) Any injury to a servant which affects his ability to serve his master, other than seduction, abduction or 24 criminal conversation.
When Emmerson thereafter filed a petition under chapter 7, Regis commenced this adversary proceeding seeking to except the entire amount awarded to him by the state court, $473,500, from discharge by Emmerson under § 523(a)(6). After Emmerson filed an answer, Regis filed a motion for summary judgment relying on the issue preclusive effects of the Civil Court Order. Emmerson opposed the motion.
The bankruptcy court conducted a hearing on Regis's motion for summary judgment on April 27, 2010. After hearing from counsel for both Regis and Emmerson, the court held that the Civil Court Order's award of damages under Cal. Civ. Code § 49 met the requirements for an exception to discharge under § 523(a)(6), and thus, issue preclusion applied. The bankruptcy court granted the summary judgment motion and entered a judgment on April 29, 2010, declaring that $450,000 of the award in the Civil Court Order to Regis was non-dischargeable under § 523(a)(6). Emmerson appealed the bankruptcy court's judgment to the Panel.
On appeal, the Panel agreed with the bankruptcy court that, under the facts of the case and applicable state law, the award of damages to Regis made by the state court under Cal. Civ. Code § 49 met the five threshold requirements for issue preclusion. In re Emmerson, Mem. Dec. at 17 ("[W]e conclude that all five threshold elements have been satisfied."). However, the Panel noted that, under California law, a bankruptcy court's decision to apply issue 1 preclusion does not end with analysis of the five threshold 2 elements. Instead, in California, a trial court is required to 3 conduct a "mandatory 'additional' inquiry into whether imposition 4 of issue preclusion would be fair and consistent with sound public 5 policy." Mem. Dec. at 15, citing Khaligh v. Hadegh (In re 6 Khaligh), 338 B.R. 817, 824-25 (9th Cir. BAP 2006). The Panel 7 determined that "the record [in this appeal] is devoid of any 8 indication that the bankruptcy court conducted the mandatory 9 fairness/public policy inquiry." In re Emmerson, Mem. Dec. at 17.
Therefore, although affirming that the bankruptcy court had 11 properly determined that issue preclusion was available in this 12 case, the Panel remanded the action to the bankruptcy court with 13 instructions that it make an inquiry whether application of issue 14 preclusion in this case would be fair and consistent with 15 California public policy. Id. at 18.
16 On remand, Emmerson filed a motion for summary judgment, 17 arguing that the state court did not have subject matter 18 jurisdiction to enter its order, and that principles of fairness 19 and public policy warranted against the application of issue 20 preclusion. Emerson asserted that the Civil Court Department 21 lacked subject matte jurisdiction of the child abduction and child 22 endangerment claims which should instead have been raised in the 23 Family Court Proceeding pending before the Family Court 24 Department. Emmerson argued that because the Civil Court 25 Department lacked subject matter jurisdiction, it would be unfair 26 to apply issue preclusion to the Civil Court Order. Regis opposed 27 Emmerson's motion and filed yet another motion for summary 28 judgment.
1 The bankruptcy court held another hearing on June 21, 2011.
2 After taking the issues under submission, the bankruptcy court 3 entered a memorandum of decision on ...