Ghadimi v. Ashai (In re Ashai)

• Decision Date: 29 September 2016
• Docket Number: Case No. LA CV 14–05057–VBF
• Citation: 211 F.Supp.3d 1215
• Parties: IN RE Tony ASHAI, Debtor (Kamran Ghadimi M.D. and Haleh Turkaman, Plaintiffs–Appellants v. Tony Ashai, Defendant–Appellee)
• Court: U.S. District Court — Central District of California

211 F.Supp.3d 1215

IN RE Tony ASHAI, Debtor

(Kamran Ghadimi M.D. and Haleh Turkaman, Plaintiffs–Appellants

v.Tony Ashai, Defendant–Appellee)

Case No. LA CV 14–05057–VBF

United States District Court, C.D. California.

Signed September 29, 2016

Donald W. Sieveke, Donald W. Sieveke Law Offices, Santa Ana, CA, for Plaintiffs–Appellants.

Kamiar Kooshki, Sammy Zreik, Whitbeck Kooshki and Zreik LLP, Torrance, CA, for Defendant–Appellee.

Proceedings in chambers: Order Denying Creditors' Appeal:

Affirming Bankruptcy Court's June 9, 2014 Judgment that § 523(a)(2)(A) Does Not Render Tony Ashai's Debt Non–Dischargeable;

Directing Creditors to Show Cause By Friday, October 28, 2016 Why the Court Should Not Find their Appeal to be Frivolous and Award Attorney Fees or Other Damages Under Fed. R. Bankr. P. 8020(a) ;

Permitting Debtor–Appellee to Respond By Friday, November 12, 2016 ;

Permitting Creditor–Appellants to Reply by Friday, November 26, 2016

HONORABLE VALERIE BAKER FAIRBANK, SENIOR U.S. DISTRICT JUDGE

In the United States Bankruptcy Court for the Central District of California ("bankruptcy court"), plaintiff-creditors Kamran Ghadimi, M.D. and his wife Haleh Turkaman (together "Ghadimi") filed a claim seeking to declare that defendant-debtor Ashai's debt to them was rendered not-dischargeable in bankruptcy pursuant to 11 U.S.C. section 523(a)(2)(A).¹ On May 30, 2014, United States Bankruptcy Judge Robles issued an oral ruling, denying plaintiff-creditors' claim and holding that Ashai's debt to them was indeed dischargeable. The bankruptcy judge issued a corresponding judgment in the adversary proceeding on June 9, 2014.

The Ghadimis filed a notice of appeal with the Clerk of the U.S. Bankruptcy Court, and debtor Ashai has not contended that the appeal was untimely under FRBP 8002(a).² See FRBP 8003(a)(1) ("An appeal from a judgment, order, or decree of a bankruptcy court to a district court or BAP under 28 U.S.C. § 158(a)(1) or (a)(2) may be taken only by filing a notice of appeal with the bankruptcy clerk within the time allowed by Rule 8002.").

As permitted by Fed. R. Bankr. P. 8005, the Ghadimi creditors elected to have a district court hear the appeal rather than the Bankruptcy Appellate Panel of the Ninth Circuit ("BAP"). See Fed. R. Bankr. P. 8001(b) (defining BAP as "a bankruptcy appellate panel established by a circuit's judicial council and authorized to hear appeals from a bankruptcy court under 28 U.S.C. section 58"); cf. Fed. R. Bankr. P. 8006 (providing for certification of a direct appeal from the bankruptcy court to the United States Court of Appeals).

According to Fed. R. Bankr. P. 8001(a), Part VIII of the Federal Rules of Bankruptcy Procedure "govern the procedure in a United States district court and a bankruptcy appellate panel on appeal from a judgment, order, or decree of a bankruptcy court." This includes Fed. R. Bankr. P. 8001 through 8028.

In deciding this appeal, the Court will apply the Federal Rules of Civil Procedure and Evidence unless the FRBP or Local Bankruptcy Rules provide otherwise. See C.D. Cal. L. Bankr. R. 1 with nn. 1–2.

As encouraged by our Federal Rules of Bankruptcy Procedure and our Local Rules Governing Bankruptcy Appeals, Cases, and Proceedings As Amended Effective December 1, 2015 ("C.D. Cal. L. Bankr. R.") 4.1, Ghadimi and Turkaman filed joint briefs on appeal. The Court finds that both the Ghadimi creditors' appellate brief and debtor Ashai's appellee brief comply with the substantive, structural, and length requirements of Fed. R. Bankr. P. 8014 and 8015, and were timely under Fed. R. Bankr. P. 8018.

For the reasons that follow, the Court will deny the creditors' appeal and affirm the bankruptcy judge's June 9, 2014 Judgment of dischargeability .³ Pursuant to FRBP 8019(b)(2), the Court determines that oral argument is unnecessary "because ... the dispositive issue or issues have been authoritatively decided."

The Court will deny creditor Ghadimi's appeal on a ground not discussed by the parties' appellate briefs. In In re Pateel Boyajian, Debtor (New Falls Corp. v. Boyajian) , 367 B.R. 138 (9th Cir. BAP 2007) (Dunn , Klein, Montali), aff'd , 564 F.3d 1088 (9th Cir. 2009) (" Boyajian "), the U.S. Court of Appeals for the Ninth Circuit held that a deceptive misrepresentation or omission cannot render a debt non-dischargeable under section 523(a)(2)(A) unless the misrepresentation or omission occurred prior to the creditor lending the money and played a role in inducing the creditor to lend the money. According to Boyajian , if the misrepresentation occurred after the creditor lent the money, it cannot be said that the loan was "obtained by" the misrepresentation as required for non-dischargeability under section 523(a)(2). Here, even according to the creditors' version of events, all of the alleged misrepresentations or omissions by Ashai occurred after Vineyard Bank (the creditors' predecessor) extended the loan at issue.

The Bankruptcy Court's stated rationale for the dischargeability ruling was erroneous. The Bankruptcy Court—like the parties—proceeded on the erroneous legal premise that a debtor's post-loan-issuance fraud can render a loan debt non-dischargeable under section 523(a)(2). The Ninth Circuit's decision in Boyajian expressly rejects and logically forecloses that premise.

Nonetheless, the Bankruptcy Court was right to deny the Ghadimi creditors' section 523(a)(2)(A) non-dischargeability claim.See Lambert v. Blodgett , 393 F.3d 943, 965 (9th Cir. 2004) ("We may affirm the district court's decision on any ground supported by the record, even if it differs from the district court's rationale.") (citing Paradis v. Arave , 240 F.3d 1169, 1175–76 (9th Cir. 2001) ); see, e.g., IMO Daniel Lee Ritz Jr., Debtor (Husky Int'l Electronics, Inc. v. Ritz) , 832 F.3d 560, 564 (5th Cir. 2016) ("On appeal, the district court affirmed the judgment of the bankruptcy court but for different reasons than those given by the bankruptcy court."); cf., e.g., In re Keeley & Grabanski Land P'ship, Debtor (Kaler as Trustee v. Slominski) and 832 F.3d 853, 858 (8th Cir. 2016) ("The BAP corrected the bankruptcy court's calculation of the setoff ... but affirmed the bankruptcy court's ruling that the newly discovered evidence would not likely have produced a different result at a new trial.").

BINDING AND PERSUASIVE AUTHORITIES IN A BANKRUPTCY APPEAL

Today's Order cites decisions of the United States Bankruptcy Appellate Panel of the Ninth Circuit ("BAP"). The BAP's decisions, however, do not bind the federal district courts and are cited only for their logical persuasive value.See Medina v. Vander Poel , 523 B.R. 820, 828 (E.D. Cal. Jan. 21, 2015) ("[The] holdings of bankruptcy appellate courts are not binding on federal district courts.") (citing Bank of Maui v. Estate Analysis, Inc. , 904 F.2d 470, 472 (9th Cir.1990) ), appeal dismissed , No. 15–15301 (9th Cir. May 11, 2015). Accord Morris v. Ark Valley Credit , 536 B.R. 887, 895 n.3 (D. Kan. 2015) (Marten, J.) ("Decision[s] of the B.A.P. are not binding on this court.") (citing Weber v. United States , 484 F.3d 154, 157 (2d Cir. 2007) and In re Barakat , 173 B.R. 672 (C.D. Cal. Bankr. 1994) ); see also " Precedential Effect of Bankruptcy Court, Bankruptcy Appellate Panel, or District Court Bankruptcy Case Decisions", 8 A.L.R. Fed. 2d at 168–69. "Indeed, in enacting the [title 11 U.S.C.] section 158(d)(2) amendments, Congress emphasized that ‘decisions rendered by a district court as well as a bankruptcy appellate panel are generally not binding and lack stare decisis value.’ " In re R e vel AC, Inc. et al., Debtors (Idea Boardwalk, LLC v. R e vel AC, Inc.) , 2015 WL 333341, *3 (D.N.J. Jan. 23, 2015) (quoting Weber , 484 F.3d at 158 (quoting H.R. Rep. No. 109–31(1) at 148 (2005)).

The decision which compels affirmance today is a published panel opinion of our U.S. Court of Appeals. That decision is precedentially binding on this Court. "[A] published decision of [the Ninth Circuit] constitutes binding authority which must be followed unless and until overruled by a body competent to do so." State Farm Fire & Cas. Ins. Co. v. GP West, Inc. , 2016 WL 3189187, *10, 190 F. Supp.3d 1003, 1018 (D. Haw. June 7, 2016) (citation and internal quotation marks omitted). See Lair v. Bullock , 798 F.3d 736, 747 (9th Cir. 2015) ("[W]e are bound by a prior three-judge panel's published opinions, ....") (citing Miller v. Gammie , 335 F.3d 889, 892–93 (9th Cir. 2003) (en banc)); United States v. Sanchez , 2013 WL 8291618, *5 n.3 (C.D. Cal. Nov. 7, 2013) (Fairbank, J.) ("This Court is bound only by U.S. Supreme Court holdings and published Ninth Circuit decisions.").

BACKGROUND: Plaintiff Ghadimi's Predecessor Loaned Money to the LLC, Guaranteed By Defendants Ashai and Youssefzadeh

On October 26, 2006, Tony Ashai ("Ashai") and Emil Youssefzadeh ("Youssefzadeh") personally guaranteed a construction loan in the amount of $4.241 million ("the loan") from Vineyard Bank N.A. ("the bank"), executing a promissory note and a deed of trust against the parcel of land known as 374 West Eighth Street in San Pedro, California ("the property"). Ashai and Youssefzadeh created a limited liability corporation named 374 West Eighth Street, LLC ("the LLC"). See FAC at 2 ¶¶ 5–6; see also Joint Pretrial Order Issued by Bankruptcy Judge Earl Robles on January 17, 2014 ("JO") ¶¶ (A)1–(A)3. Ashai and Youssefzadeh wanted to construct eighteen townhouses on the property, JO ¶¶ (A)1

On April 11, 2008, the parties modified the Construction Deed of Trust by an instrument recorded on April 29, 2008, increasing the loan amount from $4.241 million to $4.856 million, see JO at 2 ¶ 4.

In December 2008, Youssefzadeh decided to sell his interest in the property/LLC. To effectuate this decision, Youssefzadeh signed a Settlement and Indemnity Agreement wherein (1) he gave Ashai authority to act in his place and (2) he agreed to hold Ashai harmless for any default. See Ashai Ex 5 (Defs' Trial Ex C).

BACKGROUND: Plai...