ROBERT KWAN, Bankruptcy Judge.
The following facts are uncontroverted.
1. On December 13, 2013, Jose L. Dumas filed a Second Amended Complaint ("the SAC") in the case of Jose L. Dumas v. Anthony C. Wells, et al., Superior Court of California, County of Los Angeles, Case No. BC 451348. ("The Action"). A true and correct copy of the SAC was filed herein on July 6, 2018, as Exhibit 1 in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
2. Dumas alleged in the SAC that in 2007, Defendant Anthony C. Wells ("Wells") and Dumas had been friends for 10 years and that in August 2007, at Wells's request, Dumas agreed to sell his small avocado ranch in Temecula ("the Temecula Property") to Wells for $1,400,000. (Paras. 7-8 of Ex. 1)
3. Dumas alleged in the SAC a First Cause of Action for Fraud under California Civil Code § 1572(5). (Fraud includes any "act fitted to deceive.") In this Cause of Action, Dumas alleged that Wells established an escrow for the sale of the ranch at Premiere Capital Escrow and that Wells conspired with the other Defendants to steal and did steal from the escrow almost $500,000 of funds due Dumas. (Paras. 1-38 of Ex. 1)
4. Dumas also alleged a Second Cause of Action for Promissory Fraud. In this Cause of Action Dumas alleged that Wells proposed to Dumas and promised Dumas that the consideration for the Temecula Property would include a $835,000 purchase money loan from Countrywide ("the Countrywide Loan"), a $300,000 carry back loan ("the Carryback Loan") and a $300,000 business loan ("the Business Loan"), that Wells told Dumas that Gary Nishida was Wells's partner in Chartex, an import-export business, that Nishida would sign all the papers for the transaction and make all the payments on the three loans, that Wells never intended anyone would make any payments on any of the loans and that instead, Wells intended to steal the Temecula Property from Dumas so Wells could refinance it to obtain funds for Chartex before Countrywide or Dumas could foreclose. (Paras. 8-16, 39-45 of Ex. 1)
5. On both causes of action in the SAC Dumas sought compensatory and punitive damages. (Page 7 of Ex. 1)
6. On January 14, 2014, Wells filed by counsel an answer to the SAC in which he denied all its allegations. A true and correct copy of the answer was filed herein on July 6, 2018, as Exhibit 2 in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
7. On July 29, 2015, the Superior Court filed its First Amended Statement of Decision ("the Decision"). A true and correct copy of the Decision was filed herein on July 6, 2018 as Exhibit 3 in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
8. The matter was tried in November 2013 and October and November 2014. The Superior Court heard and denied all Wells's pre-trial motions. Testimony and exhibits were received in evidence, and the Superior Court heard oral arguments thereon. The Superior Court heard, read and considered all Wells' post-trial motions. Based on this, the Superior Court found that Dumas was entitled to $1,485,603.24 with interest for compensatory damages for California Civil Code § 1572(5) fraud on the First Cause of Action and promissory fraud on the Second Cause of Action. The Superior Court also found Wells was liable for punitive damages. (Page 2 of Ex. 3)
9. The Superior Court made the following findings in the following paragraphs of the Decision:
10. On December 18, 2015 the Superir Court entered Judgment. After noting that Dumas waived his claim for punitive damages the Superior Court entered judgment in the amounts set forth in its Statement of Decision. A true and correct copy of the judgment was filed herein on July 6, 2018 as Exhibit 4 in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
11. On July 29, 2016 Dumas in this adversary proceeding filed a Complaint for Non-Dischargeability of Debt (11 U.S.C. § 523(a)(2)(A) and (a)(6)). A true and correct copy of the Complaint was filed herein on July 6, 2018 as Exhibit 5 in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
12. On April 26, 2018, the California Court of Appeal affirmed the Judgment of the Superior Court but corrected the Superior Court's arithmetic error to reduce the compensatory damages to $1,185, 603.25. On June 27, 2018 the Court of Appeal issued the Remittitur. True and correct copies of the Decision of the Court of Appeal and the Remittitur were filed herein on July 6, 2018 as Ex. 6.
13. The Judgment of the Superior Court is now final.
14. The debt from the Judgment of the Superior Court is nondischargeable under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6)) for reasons set forth below.
15. "[A] creditor must demonstrate five elements to prevail on any claim arising under § 523(a)(2)(A). The five elements, each of which the creditor must demonstrate by a preponderance of the evidence, are: (1) misrepresentation, fraudulent omission or deceptive conduct by the debtor; (2) knowledge of the falsity or deceptiveness of his statement or conduct; (3) an intent to deceive; (4) justifiable reliance by the creditor on the debtor's statement or conduct; and (5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct." Slyman v. Slyman (In re Slyman), 234 F.3d 1081, 1085 (9th Cir. 2000) (internal citation omitted).
16. "[E]ither actual knowledge of the falsity of a statement, or reckless disregard for its truth, satisfies the scienter requirement for nondischargeability of a debt." In re Grabau, 151 B.R. 227, 234 (N.D. Cal. 1993) (quoting In re Houtman, 568 F.2d 651, 656 (9th Cir. 1978) (construing predecessor statute in Bankruptcy Act))).
17. "The term `actual fraud' in 11 U.S.C. § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation." Husky International Electronics, Inc. v. Ritz, 136 S.Ct. 1581, 1586 (2016).
18. The Superior Court Judgment meets the five requirements of 11 U.S.C. § 523(a)(2)(A):
19. Collateral estoppel applies in dischargeability proceedings in bankruptcy courts. Grogan v. Garner, 498 U.S. 279, 284 n. 11 (1991).
20. "In determining the collateral estoppel effect of a state court judgment, the federal courts must, as a matter of full faith and credit, apply that state's law of collateral estoppel." Bugna v. McArthur (In re Bugna), 33 F.3d. 1054, 1057 (9th Cir. 1994) (citing, inter alia, 28 U.S.C. § 1738). Bankruptcy Courts must therefore give the preclusive effect to a state court judgment that it would receive in the courts of that state. Gayden v. Nourbakhash (In re Nourbakhsh), 67 F.3d 798, 800-801 (9th Cir. 1995).
21. Five requirements for collateral estoppel under California are: "First, the issue sought to be precluded from relitigation must be identical to that decided in a former proceeding. Second, this issue must have been actually litigated in the former proceeding. Third, it must have been necessarily decided in the former proceeding. Fourth, the decision in the former proceeding must be final and on the merits. Finally, the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding." Lucido v. Superior Court, 51 Cal.3d 335, 341-343 (1990); Harmon v. Kobrin (In re Harmon), 250 F.3d 1240, 1245 (9th Cir. 2001). The party asserting collateral estoppel has the burden to establish these requirements. In re Harmon, 250 F.3d at 1245; Plyam v. Precision Development, LLC (In re Plyam), 530 B.R. 456, 462 (9th Cir. BAP 2015).
22. "The identical issue requirement addresses whether `identical factual allegations' are at stake in the two proceedings, not whether the ultimate issues or dispositions are the same." Lucido, 51 Cal.3d at 342 (rejecting argument that sanctions in separate proceedings must be identical and holding it is sufficient if the basic facts are the same).
23. An issue is "necessarily decided in the former proceeding" if it was not "`entirely unnecessary' to the judgment in the initial proceeding." Id.
24. California also imposes a notice requirement in addition to the above threshold requirements. In re Harmon, 250 F.3d at 1244-1245, 1247 n. 7; Baldwin v. Kilpatrick (In re Baldwin), 249 F.3d 912, 919 (9th Cir. 2001).
25. Finally, California courts will not give preclusive effect to a previous litigation of issues unless they find the public policies underlying the collateral estoppel doctrine would be furthered by application of preclusion to the particular issue before the court. "[T]he public policies underlying collateral estoppel [are] preservation of the integrity of the judicial system, promotion of judicial economy, and protection of litigants from harassment by vexatious litigation." Lucido v. Superior Court, 51 Cal.3d at 343.
26. The Superior Court Decision meets the seven requirements for Collateral Estoppel:
27. The decision in the prior proceeding is final and on the merits. (Exhibit 6 to Motion in Support of Motion for Summary Judgment, Docket No. 25, filed on July 6, 2018.
28. 11 U.S.C. § 523(a)(6) excepts from discharge debts arising from a debtor's "willful and malicious" injury to another person or to the property of another. The "willful" and "malicious" requirements are conjunctive and subject to separate analysis. Plyam v. Precision Development, LLC (In re Plyam), 530 B.R. 456, 463 (9th Cir. BAP 2015).
29. The willful injury requirement speaks to the state of mind necessary for nondischargeability. An exacting requirement, it is satisfied when a debtor harbors "either a subjective intent to harm, or a subjective belief that harm is substantially certain. The injury must be deliberate or intentional, "not merely a deliberate or intentional act that leads to injury." Id.
30. A "malicious" injury involves "(1) a wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse." Petralia v. Jercich (In re Jercich), 238 F.3d 1202, 1209 (9th Cir. 2001); In re Sicroff, 401 F.3d 1101, 1106-1107 (9th Cir. 2005). This definition "does not require a showing of biblical malice, i.e. personal hatred, spite or ill-will." Murray v. Bammer (In re Bammer), 131 F.3d 788, 791 (9th Cir. 1997) (emphasis in original).
31. "The `willful' and `malicious' requirements are conjunctive and subject to separate analysis." In re Plyam, 530 B.R. at 463-464.
32. Exceptions to dischargeability of debt under 11 U.S.C. § 523(a) must be proven by the creditor by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 286 (1991).
33. The creditor may prove these elements by circumstantial as well as direct evidence. Jett v. Sicroff (In re Sicroff), 401 F.3d 1101, 1106 (9th Cir. 2005) (malice inferred from graduate student's defamatory statements about a professor); In re Khaligh, 338 B.R. 817, 831-832 (9th Cir. BAP 2006) (malice established because "there is no assertion that the defamation by Khaligh was directed towards a goal that might implicate just cause or excuse").
34. A bankruptcy court may rely on the issue preclusive effect of an existing state court judgment as the basis for granting summary judgment. In re Plyam, 530 B.R. at 462.
35. The Decision of the Superior Court establishes that Wells's acts were "willful" because he had a subjective intent to harm Dumas or a subjective belief that harm was substantially certain. This is established by the findings regarding Wells's elaborate lies to Dumas and Nishida which Wells made to induce Dumas to sell the Temecula Property to Wells without anyone paying for it. Wells's intent is further established by Wells's participation in the conspiracy to steal from the escrow almost $500,000 of the funds due Dumas. (See Para. 9, supra, citing Paras. 4-29 of Decision.)
36. Wells's acts were malicious because they: (1) were wrongful, (2) were done intentionally, (3) necessarily caused injury and (4) were without just cause. Importantly, both Sicroff and Khaligh, supra, establish the elements of intent for willful and malicious misconduct do not require direct evidence, such as an admission from the Debtor. Rather, the requisite intent can be inferred from the natural attributes and consequences of the Debtor's wrongful acts. Both cases recognize the obvious fact that it is highly unlikely any debtor would admit he intended to harm a creditor.
37. The issues in the Superior Court action and this one are "identical" because in the SAC and in his complaint here, Dumas alleged facts to show that Wells's acts were intentional, certain to cause harm, wrongful, and were without just cause.
38. These issues were "necessarily decided" in the Superior Court Action because the supporting evidence was not "entirely unnecessary" to a determination of those issues.
39. Wells committed willful and malicious injury to another within the meaning of 11 U.S.C. § 523(a)(6).
40. Wells's debt to Dumas from the Superior Court judgment in the sum of $1,185,603.25 is non-dischargeable.
IT IS SO ORDERED.
