FILED DEC 21 2021 SUSAN M. SPRAUL, CLERK NOT FOR PUBLICATION U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. OR-21-1129-SLB ANNETTE IRENE TOLLEY, Debtor. Bk. No. 3:20-bk-32467-DWH

ANNETTE IRENE TOLLEY, Adv. No. 3:20-ap-03112-DWH Appellant, v. MEMORANDUM* JESS FITZHUGH, Appellee.

Appeal from the United States Bankruptcy Court for the District of Oregon David W. Hercher, Bankruptcy Judge, Presiding

Before: SPRAKER, LAFFERTY, and BRAND, Bankruptcy Judges.

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. INTRODUCTION

Judgment creditor Jess Fitzhugh filed a nondischargeability

complaint against chapter 71 debtor Annette Irene Tolley under

§ 523(a)(2)(A). Shortly thereafter, Fitzhugh obtained summary judgment on

his nondischargeability claim based on the issue preclusive effect of the

$21,000 fraud judgment Fitzhugh had obtained against Tolley in Oregon

state court.

Tolley argues that the bankruptcy court erred when it applied issue

preclusion because it was unfair given the surrounding circumstances. She

insists that, at a minimum, the bankruptcy court needed to hold an

evidentiary hearing on the fairness issue. We disagree, so we AFFIRM.

FACTS2

The litigation between the parties arose from a dispute regarding

possession of four mules — Wyatt, Tater, Janet, and Adrian — as well as a

horse named Big Sue. In March 2018, Fitzhugh unilaterally took possession

of these five animals in partial payment of a loan he had made to John

Wesley Gorbett. According to Fitzhugh, the debt was secured in part by

three of the mules – Wyatt, Tater and Janet. In December 2018, Tolley, her

1 Unless specified otherwise, all chapter and section references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule” references are to the Federal Rules of Bankruptcy Procedure, and all “Civil Rule” references are to the Federal Rules of Civil Procedure. 2 We exercise our discretion to take judicial notice of documents electronically

filed in the underlying bankruptcy case and adversary proceeding. See Atwood v. Chase Manhattan Mortg. Co. (In re Atwood),

, 233 n.9 (9th Cir. BAP 2003). 2 family’s ranch known as Tolley Ranch and Cattle, LLC, and Gorbett sued

Fitzhugh for conversion in the Wallowa County Circuit Court, alleging that

he wrongfully seized and retained possession of the animals. According to

the conversion plaintiffs, Wyatt, Tater, and Janet were owned by either

Tolley or the ranch. Adrian and Big Sue allegedly were owned by a third

party named Ralph Eyre. Apparently, the animals were being boarded at

Gorbett’s premises when Fitzhugh seized them in partial payment of the

loan.

Fitzhugh counterclaimed against the conversion plaintiffs. He

claimed that in 2016 Tolley, the ranch, and Gorbett acted in concert to

induce him to loan Gorbett $55,000 on false pretenses. 3 According to

Fitzhugh, Tolley and the ranch committed fraud by concealing from him

that either she or the ranch claimed an ownership interest in Wyatt, Tater,

and Janet. He claimed that Tolley and the ranch led him to believe that

Gorbett owned the livestock, that the livestock was free of encumbrances,

and that Gorbett was pledging the livestock to secure the loan. Tolley later

claimed that she owned the livestock and that she had used it as collateral

for a loan that she and her mother used to finance their purchase of cattle.

After a two-day jury trial, the jury returned a verdict against the

plaintiffs on their conversion claim and in favor of Fitzhugh on his fraud

3Fitzhugh asserted, and recovered judgment, on additional claims against Tolley. But he limited his nondischargeability action to the $21,000.00 awarded on his fraud claim. Accordingly, we need not discuss or consider the additional amounts the jury awarded to Fitzhugh. 3 claims against Tolley and the ranch. The jury specifically found that both

Tolley and the ranch committed fraud and that Fitzhugh suffered damages

of $21,000 as a result. The Oregon court entered judgment in accordance

with the jury’s verdict. Tolley did not appeal the judgment or otherwise

seek relief from it.

Tolley commenced her chapter 7 case, and Fitzhugh timely filed his

nondischargeability complaint under § 523(a)(2)(A) against her. The

§ 523(a)(2)(A) claim largely mirrored Fitzhugh’s state court fraud claim, but

he also attached to the nondischargeability complaint the principal

pleadings, jury verdict, and judgment rendered in the Oregon court.

In April 2021, Fitzhugh filed his motion for summary judgment. 4 He

based his motion on the issue preclusive effect of the state court jury’s

fraud findings and the resulting judgment. In addition to relying on the

documents attached to the nondischargeability complaint, Fitzhugh

submitted the jury instructions used in the Oregon action. In relevant part,

the jury was instructed that based on Gorbett’s admission, they were to

consider as conclusively established with respect to Gorbett only that:

(1) Tolley gave him permission to pledge to Fitzhugh as collateral Wyatt

and Tater; and (2) in May 2016, Tolley knew that some of the “horses” she

alleges were owned by her were included in the “Collateral List.” By

“Collateral List,” the jury instructions were referring to a listing of assets

In the bankruptcy court, Tolley moved under Civil Rule 56(d) for deferral of the 4

summary judgment proceedings so that she could conduct discovery. The bankruptcy 4 that was attached as Exhibit 1 to Fitzhugh’s state court counterclaims. The

Collateral List included several horses and several mules. Wyatt and Tater

were listed but Janet was not. It also included a pickup truck, a trailer, and

various items of tools and equipment.

Tolley opposed the summary judgment motion and included a

declaration in which she detailed the reasons why she believed she did not

have a full and fair opportunity to litigate in the state court. She also

explained why she believed it would be unfair to give the judgment issue

preclusive effect in the nondischargeability action. She maintained that she

submitted sufficient evidence to raise a triable issue of fact regarding the

full and fair opportunity and ultimate fairness questions. She claimed that

a trial or evidentiary hearing was needed on these two issues. Tolley

conceded, however, that apart from the full and fair opportunity and

ultimate fairness questions the remaining issue preclusion elements were

satisfied.

The bankruptcy court rejected Tolley’s arguments and determined

that Tolley had a full and fair opportunity to litigate, that applying issue

preclusion to the Oregon judgment was not inequitable under the

circumstances, and that no trial was necessary on these issues. On May 26,

2021, the bankruptcy court entered judgment against Tolley on Fitzhugh’s

§ 523(a)(2)(A) claim for relief. Tolley timely appealed.

court denied that motion. On appeal, Tolley has not challenged that denial. 5 JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(I). We have jurisdiction under

.

ISSUES

1. Did the bankruptcy court commit reversible error when it gave issue

preclusive effect to the Oregon state court fraud judgment?

2. Was a trial or an evidentiary hearing necessary to resolve the full and

fair opportunity issue or the ultimate fairness issue?

STANDARD OF REVIEW

We review de novo the bankruptcy court’s grant of summary

judgment. Plyam v. Precision Dev., LLC (In re Plyam),

(9th

Cir. BAP 2015). We also review de novo the bankruptcy court’s

determination that issue preclusion is available. Lopez v. Emergency Serv.

Restoration, Inc. (In re Lopez),

(9th Cir. BAP 2007). When we

review a matter de novo, “we consider [the] matter anew, as if no decision

had been rendered previously.” Kashikar v. Turnstile Cap. Mgmt., LLC (In re

Kashikar),

(9th Cir. BAP 2017).5

5 The Oregon Supreme Court has identified both the full and fair opportunity issue and the ultimate fairness issue as questions of law subject to de novo review on appeal. State Farm Fire & Cas. Co. v. Century Home Components, Inc.,

(Or. 1976) (“Century Home”). 6 DISCUSSION

A. Federal summary judgment and issue preclusion standards.

Summary judgment is appropriate when there are no genuine issues

of material fact and the movant is entitled to judgment as a matter of law.

Civil Rule 56 (made applicable in adversary proceedings by Rule 7056);

Celotex Corp. v. Catrett,

, 322–23 (1986). For summary judgment

purposes, material facts are those which may affect the outcome of the case

under applicable substantive law. Anderson v. Liberty Lobby, Inc.,

(1986). Thus, substantive law determines which facts are material.

An issue is considered genuine and will bar entry of summary judgment

if a reasonable factfinder could find in favor of the non-moving party. Id.;

Far Out Prods., Inc. v. Oskar,

, 992 (9th Cir. 2001).

Civil Rule 56 requires courts to enter summary judgment if the non-

moving party fails to present evidence in response to the summary

judgment motion sufficient to support the existence of an essential element

of that party’s case, on which that party would bear the burden of proof at

trial. Celotex,

. If the party seeking summary judgment

meets his initial burden, “the opposing party must then set out specific

facts showing a genuine issue for trial to defeat the motion.” InteliClear,

LLC v. ETC Glob. Holdings, Inc.,

(9th Cir. 2020) (citing

Anderson,

).

Issue preclusion applies in exception to discharge actions. Grogan v.

Garner,

, 284 n.11 (1991). As required under

, 7 the Full Faith and Credit Act, we apply Oregon issue preclusion law to

determine the issue preclusive effect of a final judgment rendered by a

state court judge sitting in Oregon. See Harmon v. Kobrin (In re Harmon),

(9th Cir. 2001) (“the preclusive effect of a state court

judgment in a subsequent bankruptcy proceeding is determined by the

preclusion law of the state in which the judgment was issued.”).

B. Oregon issue preclusion standards.

Under Oregon law, issue preclusion only will be applied when:

1. The issue in the two proceedings is identical.

2. The issue was actually litigated and was essential to a final decision on the merits in the prior proceeding.

3. The party sought to be precluded has had a full and fair opportunity to be heard on that issue.

4. The party sought to be precluded was a party or was in privity with a party to the prior proceeding.

5. The prior proceeding was the type of proceeding to which preclusive effect applies.

Nelson v. Emerald People’s Util. Dist.,

(Or. 1993)

(cleaned up). When these threshold considerations are satisfied, the court

still must decide whether under the circumstances presented it would be

unfair to preclude the adverse party from relitigating the issues in

question. Century Home.,

.

8 Tolley conceded in the bankruptcy court all but the third issue

preclusion element — the full and fair opportunity to litigate — and the

ultimate fairness question. When as here it has been established that the

identical issue was actually and necessarily decided in the prior action, the

adverse party then bears the burden to establish either that she lacked a full

and fair opportunity to litigate those issues in the prior action or that other

circumstances would make it inequitable to preclude her from re-litigating

those issues in the second action.

“Whether a full and fair opportunity to be heard existed depends on

whether the forum presented a full and fair opportunity to be heard, not

whether the party used their opportunity.” Graham v. U.S. Bank, Nat'l

Ass'n, Case No. 3:15-CV-0990-AC,

, at *8 (D. Or. Dec. 2,

2015), report and recommendation adopted, No. 3:15-CV-00990-AC,

(D. Or. Feb. 1, 2016) (emphasis added) (citing Barackman v. Anderson,

(Or. 2005) (“Barackman I”)); see also Massey v. Knowles,

Case No. CV 05-921 PK,

, at *5 n.1 (D. Or. Sept. 1, 2006)

(stating that respondent Knowles had a full and fair opportunity to litigate

the issues even though he deliberately chose not to defend himself).6

6 Many Oregon courts have considered the adverse party’s incentive to litigate in the first action as part of the full and fair opportunity test. E.g., Stewart Title Guar. Co. v. State ex rel. Dep't of Consumer & Bus. Servs.,

(Or. App. 2015). However, the Oregon Supreme Court has held that the adverse party’s incentive to litigate is not properly part of the full and fair opportunity test. Barackman I,

. Rather, the adverse party’s incentive is more properly considered as part of Oregon’s fifth issue preclusion element — regarding whether the prior proceeding was of the type and 9 Thus, when a litigant’s own decisions and conduct in the first action

result in them being denied their day in court, their later full and fair

opportunity argument will be rejected in a second action raising the same

issues. See Hunt v. City of Eugene,

(Or. App. 2012).

Moreover, a disappointed litigant who chooses not to appeal after

unsuccessfully litigating in the trial court typically cannot complain that

she was deprived of a full and fair opportunity to litigate. See Stewart Title

Guar. Co. v. State ex rel. Dep't of Consumer & Bus. Servs.,

(Or. App. 2015).

Oregon courts treat a formal judicial proceeding in another Oregon

court as a presumptively “full and fair opportunity to be heard.” Graham,

, at *8. The adverse party can overcome that presumption

by showing that under all the circumstances, it would be unfair to apply

issue preclusion in that particular case.

. This fairness test is one and

the same with the ultimate fairness inquiry mandated by Century Home. See

Graham,

, at *9. (citing Century Home,

).

The Oregon courts consider it inequitable to apply issue preclusion

when the evidence presented by the adverse party “severely undermine[s]”

the integrity of the prior judgment or when the evidence establishes that

nature which properly qualifies for preclusive effect. See Barackman v. Anderson,

(Or. App. 2007) (appeal after remand from Barackman I). Regardless, nothing in the record suggests that Tolley lacked the incentive to defend against Fitzhugh’s fraud allegations in the state court action.

10 the court in the second action likely would reach a different result. State v.

Manwiller,

, 775–76 (Or. App. 2018); accord, Century Home,

. Circumstances that might justify a determination of

unfairness include: (1) where it is apparent a jury verdict was the result of

juror compromise; (2) an obvious and fatal error in the prior determination;

(3) the discovery of new evidence not available to the adverse party in the

prior litigation, where it is apparent that the new evidence would have a

significant impact on the outcome; and (4) the existence of multiple

decisions addressing the same issue but with inconsistent results. Century

Home,

.

C. Tolley’s arguments on appeal.

As we indicated above, formal judicial proceedings in Oregon courts

presumptively provide the parties with a full and fair opportunity to

litigate. Graham,

, at *8. The state court held a two-day

jury trial in which the parties were represented by counsel. The action that

resulted in the fraud judgment against Tolley was just such a formal

judicial proceeding. Thus, the presumption applies. A litigant like Tolley

challenging this presumption must establish the same indicia of unfairness

as she would need to establish in order to successfully challenge the

ultimate fairness of applying issue preclusion. Graham,

,

at *9. Thus, for purposes of this appeal, the full and fair opportunity

question and the ultimate fairness question reduce into a single inquiry.

11 With this methodology in mind, we turn our attention to Tolley’s

allegations of unfairness.

1. The summary judgment record does not support Tolley’s contentions regarding the full and fair opportunity and ultimate fairness issues.

a. General allegations of error by the state court.

In her appeal, Tolley relies on the same allegations contained in her

declaration opposing summary judgment. Many of Tolley’s statements in

her declaration are confusing and relate to matters not relevant to whether

Tolley committed fraud. And review of her fairness arguments is further

hamstrung by her failure to provide transcripts from the state court

proceeding. This denied the bankruptcy court the ability to place her

arguments within the context of the jury trial.

For instance, Tolley insists that the ranch did not own any of the

mules that Fitzhugh claimed as collateral. She also maintains that the ranch

was owned by her parents and that providing labor as a ranch hand was

her only role in the ranch. But the ranch is a separate defendant and its

liability for fraud was not at issue in the nondischargeability action. As

with most of her allegations, Tolley never tied any of the statements

concerning the ranch to any circumstances that would either negate her

liability for fraud or demonstrate the unfairness of applying issue

preclusion to the state court fraud judgment.

12 Tolley contends that the state court denied her the opportunity to

present all of her evidence. She similarly maintains that it denied her the

chance to call several witnesses. Tolley also stated that her attorney failed

to present all of her evidence. Yet, Tolley provides only her summary of

events within the trial and her opinion as to the significance of the

excluded evidence. Because she did not provide a transcript of the trial,

there is no evidence of what evidence was excluded or why it was

excluded.

In opposition to Fitzhugh’s motion for summary judgment, Tolley

presented the bankruptcy court with a generalized narrative of her

grievances against her own counsel, the trial court, and even opposing

counsel. Her declaration largely consisted of what she believed she could

prove if the matter went to an evidentiary hearing. Additionally, most of

her allegations establish only that she disagrees with the decisions of the

state court and her own counsel. Tolley’s disagreement with the state

court’s rulings and the jury’s verdict amount to nothing more than claims

of error which she could have raised in a direct appeal from the fraud

judgment. But they do not raise a genuine dispute as to the fairness of her

trial. In short, her declaration failed to provide specific evidence to create a

genuine issue as to the fairness of her state court trial.

b. Tolley’s allegations concerning her trial counsel.

As the bankruptcy court observed, the vast majority of Tolley’s

specific, concrete complaints about the state court litigation are directly

13 linked to things she believes her own counsel should or should not have

done that allegedly prejudiced her interests. She charges her state court

counsel with misconduct and omissions in her representation during the

state court action.

The bankruptcy court correctly noted that civil litigants generally

have no constitutional right to the effective assistance of counsel. Johnson v.

County of San Bernardino, ___ F. App’x ___, Case No. 20-55186,

, at *2 (9th Cir. Oct. 15, 2021) (citing Nicholson v. Rushen,

(9th Cir. 1985) (per curiam)). Furthermore, Tolley did not cite

any relevant authority supporting her position that a judgment otherwise

qualifying for the application of issue preclusion should be denied

preclusive effect when the adverse party had ineffective assistance of

counsel. Nor did we find any Oregon authority on point.7 But if accepted,

Tolley’s arguments would impose a novel constraint on preclusion doctrine

that inappropriately would force prevailing parties to bear the expense and

aggravation of relitigating matters already resolved in their favor based on

the incompetence of the adverse party’s counsel.

7 As the bankruptcy court discussed, several decisions from other jurisdictions have rejected the notion that the complete absence of counsel bars the application of issue preclusion. See DeGuelle v. Camilli,

(7th Cir. 2013) (listing cases and describing as “absurd” the idea that pro se litigants are insulated from the principles of res judicata, including issue preclusion). The bankruptcy court here reasoned that if the complete absence of counsel does not negate the issue preclusive effect of a prior judgment, neither should the assistance of incompetent counsel. 14 Contrary to Tolley’s argument, the United States Supreme Court has

recognized that in civil matters “clients must be held accountable for the

acts and omissions of their attorneys.” Pioneer Inv. Servs. Co. v. Brunswick

Assocs. Ltd. P'ship,

(1993). The Oregon Supreme Court has

articulated and followed a similar rule, holding that litigants are

responsible for the consequences arising from the negligence of their own

attorneys. Ebel v. Boly,

(Or. 1971). The Ebel court further

remarked that while this rule might lead to harsh results under certain

circumstances, “it would be almost impossible to conduct the courts’

business on any other basis.”

.

Tolley was given the opportunity to litigate her case with counsel she

selected. And she proceeded to participate in a two-day trial with the

assistance of her counsel. Accordingly, we reject Tolley’s challenge that she

was denied a full and fair opportunity to litigate her defenses to the fraud

claim in the state court and that the resulting adverse jury verdict was

ultimately unfair based on inadequate assistance from her own counsel.

Accepting as true the statements in her declaration, she may have claims

against her counsel, but she did not raise any genuine dispute as to the

fairness of her trial for purposes of issue preclusion. 8

8 To be clear, we offer no opinion as to whether any claims exist against Tolley’s former counsel. 15 c. Allegations concerning opposing counsel and the court.

Aside from the incompetence of her counsel, Tolley offered nothing

in the way of concrete specific facts tending to “severely undermine” the

integrity of the state court judgment or to establish that the bankruptcy

court likely would have reached a different result if it had permitted Tolley

to relitigate the issue of her fraud. See Century Home,

. She

talked in conclusory terms about the potential for juror and judge bias in

light of Fitzhugh’s general standing in the community and his counsel’s

alleged “personal relationship” with the judge. She similarly spoke vaguely

about ex parte contacts between the judge and Fitzhugh’s counsel —

without identifying the nature and subject matter of those alleged contacts

or establishing their connection (if any) to the resolution of the party’s

litigation. Nor did she offer any coherent explanation indicating how she

might have learned of any alleged ex parte contacts.

Similarly, Tolley refers to “corruption” in the county where the trial

occurred. But she again offers no indication of what this corruption

consisted of, her personal knowledge of its existence, or its connection (if

any) to the state court litigation. Moreover, she refers by name to a friendly

witness who supposedly has personal knowledge of the corruption, but she

failed to provide any declaration testimony from this friendly witness to

support her corruption claim.

16 Again, Tolley’s speculation and unsupported conclusions in her

declaration did not raise a genuine dispute as to the fairness of her trial and

the resulting fraud judgment.

d. The Collateral List.

Finally, Tolley places significant emphasis on a document referred to

as the “Collateral List” which was found to identify the collateral securing

Fitzhugh’s loan. Tolley contends that without the Collateral List, Fitzhugh

could not have proven that Gorbett pledged the livestock and equipment

listed as collateral for his loan from Fitzhugh. According to Tolley, she

learned for the first time after the trial that this document was forged. She

discovered this, she says, by studying Fitzhugh’s counsel’s billing records.

She argues that the bankruptcy court erred by granting summary judgment

in light of this newly discovered evidence.

Oregon law indicates that subsequently discovered evidence may

under appropriate circumstances preclude application of issue preclusion.

Century Home,

. However, Tolley has failed to provide

specific facts regarding her so-called newly discovered evidence. She failed

to explain to the bankruptcy court how opposing counsel’s billing records

demonstrated that Fitzhugh forged the Collateral List. Nor did she submit

these billing records with her summary judgment response to establish the

existence of this newly discovered evidence. Moreover, it is impossible to

tell from Tolley’s statements whether she actually considered Gorbett’s

signature on the Collateral List to be forged or whether she merely

17 questioned the authenticity of the version admitted into evidence during

the state court trial because it contained two lines of handwritten text.

Tolley insisted that this text was not on the “original version” she gave to

her counsel before trial. But Tolley did not include that document either.

She stated that her counsel misplaced the original version of the Collateral

List.

Tolley also admits that she unsuccessfully attempted to prevent the

allegedly altered version of the Collateral List from being admitted into

evidence during the state court trial. But, as noted above, she has not

provided a transcript of what happened at trial. In her declaration, Tolley

never even describes the nature of the evidentiary objection she made or

the court’s basis for overruling the evidentiary objection. The failure to

provide admissible evidence as to what happened at trial precludes any

meaningful challenge to the fairness of that judicial proceeding.

2. Tolley did not present sufficient evidence to raise a genuine issue of material fact regarding fairness.

Tolley argues that trial was necessary on the ultimate fairness issue.

This argument is foreclosed by entry of summary judgment which is based

on the absence of any genuine dispute of material fact. As such, Fitzhugh is

entitled to judgment as a matter of law.

Tolley claims that the bankruptcy court improperly weighed her

evidence in granting Fitzhugh summary judgment. It did not. Instead, the

court examined Tolley’s evidence, largely comprised of her declaration, to

18 determine whether she presented particular facts establishing a genuine

dispute as to the ultimate fairness of applying issue preclusion to the state

court fraud judgment. At bottom, Tolley presented a patchwork of her own

conclusory allegations and speculation challenging the merits of the

underlying state court judgment. But her disagreement with the state

court’s trial rulings and the resulting judgment does not come close to

undermining the integrity of that judgment — as would be necessary to

establish a genuine issue regarding the integrity or fairness of that judicial

proceeding. Nor do Tolley’s allegations come close to establishing any of

the specific grounds the Oregon Supreme Court has recognized as

rendering it inequitable to give issue preclusive effect to a prior judgment.

Having independently reviewed the entire record and having given

no deference to the bankruptcy court’s decision, we nonetheless have

reached the same conclusion as the bankruptcy court: Tolley failed to

present sufficient evidence that would enable a reasonable trier of fact to

find that she had established any indicia of unfairness. Thus, there was no

genuine issue of material fact that needed to be tried pertaining to the

ultimate fairness issue. See Celotex,

; Far Out Prods., Inc.,

247 F.3d at 992.

CONCLUSION

For the reasons set forth above, we AFFIRM the bankruptcy court’s

summary judgment against Tolley on Fitzhugh’s § 523(a)(2)(A) claim for

relief.

19