Davis.v. Asphalt Professionals, Inc. (In re Davis)

Case Type:
Case Status:
BAP Nos. CC-18-1158-FKuTa & CC-18-1163-FkuTa (9th Circuit, Jan 31,2019) Not Published
BAP for 9th Circuit affirmed defense judgment of bankruptcy court (CD Cal.) on creditor's 11 USC 523/727 suit. Bankruptcy court correctly followed California discretionary law of issue preclusion to prior state court proceedings. Issues in state court proceeding were not identical to 523/727 issues. State court findings on breach of contract and alter ego claims did not address requisite fraudulent intent elements 523/727 claims. Fraud findings related to alter ego were limited to remedy rather than substantive claim, and fraud was not necessary finding to balancing test of alter ego.
Procedural context:
Bankruptcy court (CD Cal) entered judgment in favor of defendant-debtor on creditor's 11 USC 523/727 suit. Plaintiff-creditor appealed to BAP for 9th Circuit.
Debtor, a contractor, subcontracted with engineer (API) for construction of median in public roadway. API ceased work on project when it discovered problem with outdated site plans. Third party project manager (D&S) terminated agreement and charged API with remediation cost to replacement contractor. API sued debtor in state court for breach of contract, mechanic's lien foreclosure, fraud, conspiracy, and quantum meruit. Before claims went to trial, debtor filed bankruptcy under chapter 7. API initiated 11 USC 523/727 suit against debtor. Bankruptcy court stayed adversary to allow state court proceeding to continue. State court bifurcated trials on separate claims. After state court adjudicated breach of contract, mechanic's lien, quantum meruit, and alter ego claims, bankruptcy court lifted stay and proceeded on 523/727 claims.
Faris, Kurtz, Taylor

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