In re Krishnamurthy
| Decision Date | 27 February 1997 |
| Docket Number | Bankruptcy No. 94-47652,BAP No. NC-96-1409-MeOV,Adv. No. 94-4751. |
| Citation | 209 BR 714 |
| Parties | In re Srinivasan KRISHNAMURTHY; Annapoorna Krishnamurthy, Debtors. Srinivasan KRISHNAMURTHY; Annapoorna Krishnamurthy, Appellants, v. Prasad NIMMAGADDA; Lih Guin Nimmagadda, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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Srinivasan and Annapoorna Krishnamurthy, Santa Clara, CA, pro se.
Roger T. Ritter, Law Offices of Joel D. Adler, San Francisco, CA, for Prasad and Lih Guin Nimmagadda.
Before: MEYERS, OLLASON and VOLINN, Bankruptcy Judges.
I
The appellants' disorganized and nonsensical arguments notwithstanding, this case is quite simple. A state court jury assessed punitive damages against the appellants under Section 3294 of the California Civil Code which requires a finding of "oppression, fraud or malice." A finding of oppression or malice satisfies Bankruptcy Code § 523(a)(6). A finding of fraud coupled with the undisputed fact that appellants and appellees were partners, and hence fiduciaries, satisfies § 523(a)(4). Either way the state court judgment established that appellees have a valid claim and that such claim is nondischargeable. The Freeman & Mills case relied upon by the appellants does not apply to the facts of this case. The appellants' claim of extrinsic fraud was supported by neither sufficient evidence nor satisfactory factual allegations. The appellees were entitled to collateral estoppel and summary judgment. We AFFIRM.
II
On January 20, 1988, Prasad and Lih Guin Nimmagadda, ("Nimmagaddas"), filed a "Second Amended Complaint," ("Complaint"), in Superior Court asserting seven causes of action against Srinivasan and Annapoorna Krishnamurthy, ("Debtors"): dissolution and accounting; breach of contract; fraud; constructive fraud; breach of covenant of good faith and fair dealing; and breach of fiduciary duty — the Debtors and the Nimmagaddas were, at the time of the Debtors' misdeeds, partners.
The trial took more than a month. The jury returned general verdicts against the Debtors and in favor of the Nimmagaddas. The verdicts did not indicate upon which cause(s) of action damages were awarded, however, the jury did award punitive damages under California's "oppression, fraud or malice" standard.1 On April 1, 1988, judgment was entered on the general verdicts awarding damages in the amount of $234,847 and punitive damages in the amount of $25,000 against each of the Debtors.
The Debtors filed motions for a new trial and for judgment notwithstanding the verdict, both of which were denied. The Nimmagaddas filed a motion for a new trial with respect to damages, which was granted "because of inadequate damages."2
In June of 1988, the Debtors appealed the April 1, 1988 judgment and the order granting the Nimmagaddas a new trial. The California Court of Appeals affirmed the trial court on both issues and awarded the Nimmagaddas costs on appeal.
In September of 1992 a new trial was held on the issue of the amount of damages. The jury was instructed that "Defendants have been found liable to plaintiffs for punitive damages." The jury was instructed on fraud and breach of fiduciary duty; the breach of contract cause of action had been dismissed against both of the Debtors — no instructions were given for breach of contract.
In this second trial the jury awarded, in addition to compensatory damages, punitive damages in the amount of $125,000 against both of the Debtors.
On September 17, 1992, the Nimmagaddas obtained a state court judgment against the Debtors. The Debtors appealed, attacking both the determination of liability and the award of damages.
On November 20, 1992, the trial judge found that the award of punitive damages with respect to Srinivasan Krishnamurthy was excessive and granted a new trial on that issue.
On January 28, 1994, the California Court of Appeals dismissed the Debtors' appeal with respect to the determination of liability stating:
On the merits, Krishnamurthy first argues that the punitive damages award is void as a matter of law because there was no clear and convincing evidence of fraud, oppression or malice. At the first trial, the issue of entitlement to punitive damages was determined. The jury was instructed on the need for clear and convincing evidence of oppression, fraud or malice to support its finding that punitive damages were warranted. Its finding of liability —including the determination to award punitive damages — was affirmed in our previous appeal. That decision constitutes the law of the case, conclusively establishing the liability issue for our purposes. At the second trial, the only issue was the amount of damage that the Nimmagaddas suffered.
The Court of Appeals affirmed the judgment awarding the compensatory and punitive damages and provided the following evaluation of the Debtors' appeal:
That decision was filed nearly three years ago.
On November 15, 1994, the Debtors filed a petition under Chapter 7.
On December 7, 1994, the Nimmagaddas filed a nondischargeability action under Bankruptcy Code §§ 523(a)(4) and 523(a)(6). The Debtors filed a motion to strike and motion to dismiss, both of which were denied. The Debtors answered on March 27, 1995.
Both the Debtors and the Nimmagaddas filed motions for summary judgment. The Bankruptcy Court granted the Nimmagaddas' motion determining that all of the necessary findings had been made by the state court and that the Debtors were collaterally estopped from relitigating those issues. The Debtors filed a motion for reconsideration which was denied.
III
First we will address the impact of the intervening case, Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal.4th 85, 44 Cal.Rptr.2d 420, 900 P.2d 669 (1995), on the Nimmagaddas entitlement to collateral estoppel. Next we will consider whether the Bankruptcy Court properly granted summary judgment in light of the Debtors' bald allegations of extrinsic fraud. Finally we will determine whether the record supported a grant of summary judgment in favor of the Nimmagaddas.
IV
The Panel determines its jurisdiction sua sponte. In re Peters, 191 B.R. 411, 416 (9th Cir.BAP1996).
The availability of collateral estoppel is a question of law reviewed de novo. In re Nourbakhsh, 67 F.3d 798, 800 (9th Cir.1995). The bankruptcy court's findings of fact are reviewed under the "clearly erroneous" standard while conclusions of law are reviewed de novo. In re A & C Properties, 784 F.2d 1377, 1380 (9th Cir.1986).
The granting of summary judgment is reviewed de novo, making all reasonable inferences in favor of the non-movant to determine whether there exists any genuine issue of material fact precluding judgment in favor of the movant as a matter of law. In re Lewis, 97 F.3d 1182, 1185 (9th Cir.1996).
V
On April 18, 1996, the Debtors filed their "Notice of Appeal," purporting to appeal from the following orders:
The orders and judgment entered on April 9, 1996, were timely appealed — the period did not begin running until the Debtors' timely motion for reconsideration was denied, April 17, 1996. In re D.W.G.K. Restaurants, Inc., 42 F.3d 568, 569 (9th Cir.1994); In re Watson, 192 B.R. 739, 742 n. 3 (9th Cir. BAP 1996).
With respect to the June 16, 1995 order granting the Nimmagaddas' motion to dismiss the Debtors' counterclaim, the Debtors had filed a "timely" notice of appeal on June 26, 1995. On August 10, 1995, the Panel, finding the order to be interlocutory, entered an order denying the Debtors "Motion for Leave to Appeal," and dismissing the appeal. The June 16, 1995 order became final upon entry of the motion for summary judgment and was thus timely appealed with the April 9, 1996 orders.
The order entered April 12, 1995, extending the time to file a complaint objecting to discharge under § 727, on the other hand, remains interlocutory. In re Travers, 202 B.R. 624, 626 (9th Cir. BAP 1996). Since the judgment was limited to the causes of...
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