Lee et al v. Adair

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
GERALD F. ADAIR, No. 08-10704
Debtor(s).
______________________________________/
TERRY LEE, et al.,
Plaintiff(s),
v. A.P. No. 08-1075
GERALD F. ADAIR,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment
_________________
In a state court lawsuit before bankruptcy, plaintiff Terry Lee filed a cross-complaint against debtor
and defendant Gerald Adair for breach of contract, fraud and deceit, negligent and intentional
misrepresentation and money had and received. Lee obtained a default judgment which included punitive
damages. Adair appealed, and the judgment was affirmed on appeal save for the punitive damages, which
were reversed. Lee seeks summary judgment declaring his state court judgment nondischargeable in this
adversary proceeding based on principles of issue preclusion.
Entered on Docket
January 14, 2009
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 08-01075 Doc# 27 Filed: 01/10/09 Entered: 01/14/09 10:00:58 Page 1 of 2

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The state court made no specific finding of fraud. However, such a finding would have been implicitly
necessary to support the punitive damages. Therefore, if the entire judgment had been affirmed on appeal
principles of issue preclusion would make a trial in this court unnecessary and Lee would be entitled to a
declaration that his judgment is nondischargeable. See In re Cantrell, 329 F.3d 1119, 1125 (9th Cir. 2003).
Lee argues that the appellate court reversed the punitive damages only because the trial court failed to
take Adair’s financial status into consideration, so that there is still an implicit finding of fraud. However,
whatever the reason articulated by the appellate court, the fact is that all Lee now has is a default judgment
with no finding of fraud and no basis for the court to infer fraud. When there is an appellate reversal, the
parties' rights are left wholly unaffected by the determination that was reversed; the effect is the same as if it
had never been entered. County of San Diego v. Miller, 102 Cal.App.3d 424, 430 (1980); 5 Cal Jur 3d,
Appellate Review, § 697; 5 Am. Jur. 2d, Appellate Review, § 803. Accordingly, Lee’s motion for
summary judgment must be denied. Either party may submit an appropriate order.
Dated: January 10, 2009
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 08-01075 Doc# 27 Filed: 01/10/09 Entered: 01/14/09 10:00:58 Page 2 of 2