In re: David William Bartenwerfer and Kate Marie Bartenwerfer ( 2020 )

FILED
APR 23 2020
NOT FOR PUBLICATION
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NC-19-1016-TaFB
NC-19-1025-TaFB
DAVID WILLIAM BARTENWERFER and (Cross Appeals)
KATE MARIE BARTENWERFER,
Bk. No. 3:13-bk-30827
Debtors.
Adv. No. 3:13-ap-03185
KIERAN BUCKLEY,
Appellant/Cross-Appellee,
v. MEMORANDUM*
DAVID WILLIAM BARTENWERFER;
KATE MARIE BARTENWERFER,
Appellees/Cross-Appellants.
Argued and Submitted on March 26, 2020
Filed – April 23, 2020
Appeal from the United States Bankruptcy Court
for the Northern District of California
*
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.
Honorable Hannah L. Blumenstiel, Bankruptcy Judge, Presiding
Appearances: Janet Marie Brayer argued on behalf of appellant/cross-
appellee; Iain A. Macdonald of Macdonald Fernandez
LLP argued on behalf of appellees/cross-appellants.
Before: TAYLOR, FARIS, and BRAND, Bankruptcy Judges.
INTRODUCTION
In earlier cross-appeals,1 we reviewed the bankruptcy court’s
judgment determining that the debt from a state court judgment owed to
Kieran Buckley was excepted from the discharge of David and Kate
Bartenwerfer (“Debtors”) under § 523(a)(2)(A). 2 While we affirmed the
exception to Mr. Bartenwerfer’s discharge, we vacated the portion of the
judgment excepting the debt from Mrs. Bartenwerfer’s discharge because
the bankruptcy court imputed Mr. Bartenwerfer’s fraud to her for purposes
of § 523(a)(2)(A) without finding that she “knew or had reason to know” of
his fraud, as required by Sachan v. Huh (In re Huh), 506 B.R. 257 (9th Cir.
BAP 2014) (en banc). We remanded for findings in that regard.
On remand, the bankruptcy court found that Mrs. Bartenwerfer did
1
BAP Nos. NC-16-1277-BJuF and NC-16-1299-BJuF.
2
Unless specified otherwise, chapter and section references are to the Bankruptcy
Code, 11 U.S.C. §§ 101–1532, and “Civil Rule” references are to the Federal Rules of
Civil Procedure.
2
not “know or have reason to know” of her husband’s fraud, and, thus, it
could not impute his fraudulent intent to her. And it declined to address
Mr. Buckley’s alternative theory of her direct liability for fraud. It entered
judgment in favor of Mrs. Bartenwerfer.
Both sides appealed. Mr. Buckley requests reversal. He argues that
the bankruptcy court erred by interpreting our mandate as precluding it
from considering Mrs. Bartenwerfer’s direct liability, by declining to enter
judgment against Mrs. Bartenwerfer on imputed and direct liability bases,
and in its conduct of the trial. We only agree insofar as we hold that our
mandate did not preclude the bankruptcy court from deciding whether she
was directly liable for fraud. Nevertheless, we AFFIRM because the
bankruptcy court’s findings sufficiently support the judgment. 3
FACTS
A. Prepetition Events
Prepetition, Debtors purchased a home in San Francisco, California
(“Property”) to remodel and sell at a profit. They lived elsewhere during
the remodel. Unemployed, Mr. Bartenwerfer assumed full responsibility
for managing the remodel and supervising the contractors and
subcontractors. And he did so even though he lacked construction
experience or a contractor’s license.
3
Debtors cross-appealed, arguing that the bankruptcy court abused its discretion
in reopening the record. Because we affirm, we do not consider the cross-appeal.
3
After the remodel, Debtors sold the Property to Mr. Buckley. In
connection with the sale, they signed a Cal. Civ. Code § 1102 et seq. transfer
disclosure statement and a supplement thereto (collectively, the “TDS”),
that purported to detail the Property’s physical condition. The TDS,
however, contained false representations regarding, inter alia, water leaks,
defective window conditions, open permit issues, and fire escape
non-compliance (“Defects”).
Mr. Buckley discovered the Defects after the sale. Thus, he sued
Debtors in state court on various theories including intentional fraud or
deceit and willful failure to disclose information in the TDS.
After a 19-day trial, the jury found in Mr. Buckley’s favor on his
failure to disclose claims and others that facially would not support a
nondischargeability claim. As to the failure to disclose determination, the
jury found: (1) Debtors did not disclose information that they “knew or
reasonably should have known” about the Defects; (2) Mr. Buckley did not
know and could not have reasonably discovered the Defects; (3) Debtors
knew or reasonably should have known that he did not know and could
not have reasonably discovered the Defects; (4) the Defects affected the
Property’s value; (5) Mr. Buckley was harmed; and (6) Debtors’ failure to
disclose the Defects was a substantial factor in causing his harm.
The jury awarded Mr. Buckley damages for, inter alia, nondisclosure
of the Defects but awarded him $0 for “intentional fraud” and no punitive
4
damages. The state court entered judgment accordingly.
B. The Adversary Complaint and Pretrial Motions
Then Debtors filed their chapter 7 bankruptcy, and Mr. Buckley filed
a § 523(a)(2)(A) adversary complaint to except from their discharge the
debt owed to him under the state court judgment. Mr. Buckley alleged that
Debtors knowingly failed to disclose information that they knew was
material to him with the intent to induce him to purchase the Property in
reliance on the nondisclosures. He alleged that he justifiably relied on the
nondisclosures and suffered damages as found by the jury.
Mr. Buckley and Debtors filed cross-motions for summary judgment,
each arguing that the doctrine of issue preclusion entitled them to
judgment as a matter of law. The bankruptcy court denied the motions
because it could not determine from the record whether a finding of actual
fraud was necessary to the state court judgment—the jury could have
found Debtors liable on Mr. Buckley’s failure to disclose claim on the basis
of actual fraud or something requiring a lower scienter standard.
C. The Adversary Trial
The bankruptcy court held a two-day trial to determine the sole
disputed issue of whether Debtors fraudulently failed to disclose the
Defects to Mr. Buckley (“Trial”).
Once Mr. Buckley rested his case-in-chief, Debtors moved for
judgment on partial findings under Civil Rule 52(c) as to
5
Mrs. Bartenwerfer. They asserted that there was no evidence that she knew
of the Defects and intentionally failed to disclose them or that she knew
anything represented in the TDS was false. In the absence of such evidence,
they posited that Mr. Buckley was relying on an agency theory in which
she could nevertheless be held vicariously liable for the fraud of her agent,
Mr. Bartenwerfer. But they contended that she could not be held so liable,
arguing that Mr. Buckley failed to prove: (1) the existence of an agency
relationship; and (2) any culpable conduct by Mrs. Bartenwerfer.
The bankruptcy court denied Debtors’ motion on the sole basis that
there was an agency relationship between Debtors arising from their
partnership in the remodel project.
D. The Judgment I
After the Trial, the bankruptcy court entered its memorandum
decision, Buckley v. Bartenwerfer (In re Bartenwerfer), 549 B.R. 222 (Bankr.
N.D. Cal. 2016) (“Bartenwerfer I”), finding in favor of Mr. Buckley and
against Debtors on Mr. Buckley’s § 523(a)(2)(A) claim.
It found that Debtors had the requisite knowledge and intent to
deceive Mr. Buckley by failing to disclose the Defects in the TDS. Id. at 229.
It issued extensive findings regarding Mr. Bartenwerfer’s actual knowledge
of the falsity of the TDS representations and his lack of credibility. Id. at
229-32. But it did not do the same with regard to Mrs. Bartenwerfer. It
simply: (1) observed in a footnote that Mr. Bartenwerfer’s fraudulent
6
conduct could be imputed to her based on Debtors’ partnership in the
remodel project; and (2) found that the misrepresentations belong to her
because she signed the TDS. Id. at 225 n.3 & 227.
Accordingly, the bankruptcy court entered a judgment in favor of
Mr. Buckley and against Debtors. It later amended the amount of the
judgment to add attorneys’ fees and interest (“Judgment I”).
E. The First Cross-Appeals
Cross-appeals followed.4 We affirmed the Judgment I as to
Mr. Bartenwerfer because there was ample evidence in the record that he
knowingly and intentionally concealed the Defects from Mr. Buckley.
Bartenwerfer v. Buckley (In re Bartenwerfer), BAP Nos. NC-16-1277-BJuF,
NC-16-1299-BJuF, 2017 WL 6553392, at *10 (9th Cir. BAP Dec. 22, 2017)
(“Bartenwerfer II”). However, as to Mrs. Bartenwerfer, while we agreed
with the bankruptcy court’s agency finding, we concluded that it erred by
imputing Mr. Bartenwerfer’s fraudulent intent to her on the sole basis of
agency. Id. at *9. Therefore, we vacated Judgment I, in part, and remanded
for further findings, as follows:
To deny Mrs. Bartenwerfer’s Civil Rule 52(c) motion, the court
had to also find that she “knew or had reason to know” of
Mr. Bartenwerfer’s fraudulent omissions. Sachan v. Huh (In re
Huh), 506 B.R. 257, 271–72 (9th Cir. BAP 2014) (en banc). The
4
The attorneys’ fees and interest included in the Judgment I were part of these
cross-appeals but are not at issue in the current cross-appeals.
7
court made no such finding. Accordingly, we REMAND this
issue for further findings as to Mrs. Bartenwerfer’s actual
knowledge.
In addition, because the bankruptcy court appears to have
imposed judgment against Mrs. Bartenwerfer solely on the
basis of her agency relationship with Mr. Bartenwerfer, we
VACATE the portion of the Second Amended 523 Judgment
determining that Buckley’s debt was nondischargeable under
§ 523(a)(2)(A) as to Mrs. Bartenwerfer.
Id. at *10.
F. The Hearing on Remand
On remand,5 the bankruptcy court reopened the record and held an
evidentiary hearing to determine Mrs. Bartenwerfer’s knowledge of the
fraud (“Hearing”). During the Hearing, Mr. Buckley extensively examined
Mrs. Bartenwerfer, which did nothing for his case. She testified repeatedly
that Debtors treated the remodel as Mr. Bartenwerfer’s job while she
worked elsewhere. Consequently, she testified, she was absent from the
Property, did not engage the professionals handling the remodel, was
unaware of the day-to-day activities at the Property, and was not involved
in obtaining permits. She testified she lacked access to, or knowledge of,
sources of information concerning the remodel, including where or how to
access the budget, plans, permits, and other documents for the remodel.
5
Before we issued our mandate, both parties appealed to the Ninth Circuit. See
Nos. 18-60001 and 18-60007. They voluntarily dismissed these appeals.
8
She also testified that she played a minimal role in preparing the
TDS; she merely verified whatever information she could by visually
inspecting the Property and relied on her husband to confirm the accuracy
of everything else disclosed in the TDS. She acknowledged that she did not
take any steps to confirm what he told her but also testified that she had no
reason to question what he said.
G. The Judgment II
After the Hearing, the bankruptcy court issued a memorandum
decision, Buckley v. Bartenwerfer (In re Bartenwerfer), 596 B.R. 675 (Bankr.
N.D. Cal. 2019) (“Bartenwerfer III”). Therein, it defined the remand issue as
“limited to whether Mrs. Bartenwerfer knew or should have known of her
husband’s fraud, such that it can be imputed to her for purposes of section
523(a)(2)(A).” Id. at 682. After noting that the parties “no longer seriously
dispute[d] that Mrs. Bartenwerfer had no actual knowledge of
Mr. Bartenwerfer’s fraud,” it addressed what it characterized as the only
remaining dispute on remand: “whether she ‘should have known’ of his
fraud.” Id. at 681.
Addressing this issue, it found that Mr. Buckley failed to prove that
Mrs. Bartenwerfer knew of but ignored any facts that would require
investigation into Mr. Bartenwerfer’s conduct, and it concluded that
Mr. Bartenwerfer’s fraud could not be imputed to her. Id. at 686.
It declined to address arguments that it perceived as beyond the
9
scope of the remanded issue, including Mr. Buckley’s argument that
Mrs. Bartenwerfer could be held directly liable for the misrepresentations.
On January 7, 2019, the bankruptcy court entered judgment in favor
of Mrs. Bartenwerfer and against Mr. Buckley (“Judgment II”). These
timely cross-appeals followed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Did the bankruptcy court err by not imputing Mr. Bartenwerfer’s
fraud to Mrs. Bartenwerfer for purposes of § 523(a)(2)(A)?
Did the bankruptcy court abuse its discretion by not ruling on
whether Mrs. Bartenwerfer was directly liable for fraud for purposes of
§ 523(a)(2)(A)?
Did the bankruptcy court abuse its discretion in its conduct of the
Hearing?
STANDARDS OF REVIEW
We review the bankruptcy court’s findings of fact for clear error and
its conclusions of law de novo. Carrillo v. Su (In re Su), 290 F.3d 1140, 1142
(9th Cir. 2002). A finding of fact is clearly erroneous if it is illogical,
implausible, or without support in the record. Retz v. Samson (In re Retz),
606 F.3d 1189, 1196 (9th Cir. 2010). “Where there are two permissible views
10
of the evidence, the factfinder’s choice between them cannot be clearly
erroneous.” Anderson v. City of Bessemer City, 470 U.S. 564, 574 (1985). When
factual findings are based on credibility determinations, we must give even
greater deference to the bankruptcy court’s findings. Id. at 575.
We review the bankruptcy court’s evidentiary rulings for an abuse of
discretion. See Lee-Benner v. Gergely (In re Gergely), 110 F.3d 1448, 1452 (9th
Cir. 1997). A bankruptcy court abuses its discretion if it applies the wrong
legal standard, misapplies the correct legal standard, or if its factual
findings are illogical, implausible, or without support in the record. See
TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
We review de novo whether the bankruptcy court complied with our
mandate on remand. de Jong v. JLE-04 Parker, L.L.C. (In re de Jong), 588 B.R.
879, 888 (9th Cir. BAP 2018), aff’d, 793 F. App’x 659 (9th Cir. 2020). We
review the bankruptcy court’s decision to consider an issue on remand that
the mandate does not foreclose for an abuse of discretion. Id.
We may affirm on any basis supported by the record. Shanks v.
Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).
DISCUSSION
A. The bankruptcy court did not err in its determination that
Mr. Bartenwerfer’s fraud cannot be imputed to Mrs. Bartenwerfer.
Mr. Buckley contends that the bankruptcy court erred by failing to
impute Mr. Bartenwerfer’s fraud to Mrs. Bartenwerfer for purposes of
11
§ 523(a)(2)(A). We disagree; the bankruptcy court identified and
appropriately applied the applicable legal standard in Bartenwerfer III.
The bankruptcy court correctly indicated that In re Huh, 506 B.R. at
266 adopted the rule announced in Walker v. Citizens State Bank (In re
Walker), 726 F.2d 452 (8th Cir. 1984), for determining whether to impute
liability, as follows: “imputation of an agent’s fraud to the agent’s principal
requires proof of the principal’s culpability, i.e., that the principal knew or
should have known of the agent’s fraud.” Bartenwerfer III, 596 B.R. at 683.
As Huh does not set forth efforts Mrs. Bartenwerfer must have taken to
avoid a finding that she “should have known” of her agent’s fraud, the
bankruptcy court appropriately consulted cases where courts imputed
liability under the Huh and Walker “should have known” rule for guidance
in determining if she “should have known” of Mr. Bartenwerfer’s fraud. It
noted commonalities among these cases: “[i]n each of the foregoing cases,
the debtor knew of—but ignored—facts and circumstances that should
have prompted him to investigate the truth of representations made by his
agent” and “the debtor’s willful refusal to pay minimal attention to the
activities of their agents amounted to reckless indifference.” Id. at 685.
The bankruptcy court then distinguished these cases, finding
Mrs. Bartenwerfer’s conduct reasonable with respect to the representations
made in the TDS. Id. at 686. Specifically, it found that she credibly testified
that she visually confirmed whatever information she could and asked
12
Mr. Bartenwerfer to confirm the veracity of the other disclosures. Id. at 679.
It found that her reliance on his knowledge to make the disclosures was
neither reckless nor unreasonable given that it was his full-time job to
supervise the construction in her physical absence. Id. at 686.
We find no error in the bankruptcy court’s findings, especially in
light of the special deference we must give its credibility determinations.
See Leon v. IDX Sys. Corp., 464 F.3d 951, 958 (9th Cir. 2006).
B. The bankruptcy court did not commit reversible error by declining to
rule on whether Mrs. Bartenwerfer was directly liable for fraud.
Mr. Buckley also contends that the bankruptcy court erred by failing
to hold Mrs. Bartenwerfer directly liable for fraud. He argues she can be
held directly liable because she allegedly showed reckless indifference to
the facts that she represented in the TDS. To demonstrate her reckless
indifference, he claims that she failed to examine sources of knowledge that
lay at her hand and that she signed the TDS certifying that the
representations were true and correct to the best of her knowledge with no
reasonable ground to believe that they were true. And Mr. Buckley
contends, in the alternative, that the bankruptcy court could have held her
directly liable for fraud under California common law, statutory law, and
contractual law imposing a duty to disclose.
When confronted with such arguments, the bankruptcy court simply
stated: “[t]he court respectfully declines to address arguments beyond the
13
Remanded Issue. The BAP did not invite the parties to offer or this court to
consider new theories relating to Mrs. Bartenwerfer’s knowledge or
intent.” Bartenwerfer III, 596 B.R. at 682. Accordingly, as a threshold issue,
we must address whether the bankruptcy court had the discretion to
determine whether Mrs. Bartenwerfer was directly liable for fraud and, if
so, whether it was obliged to do so. This requires us to first consider the
extent to which our mandate was binding on the bankruptcy court.
1. Our mandate did not preclude the bankruptcy court from
deciding whether Mrs. Bartenwerfer was directly liable for fraud.
Under the “rule of mandate,” on remand, a trial court cannot vary or
examine the appellate court’s mandate for any purpose other than
executing it. Stacy v. Colvin, 825 F.3d 563, 568 (9th Cir. 2016). It “commits
‘jurisdictional error’ if it takes actions that contradict the mandate.” Id. But
the rule of mandate does not preclude a trial court from deciding anything
not foreclosed by the mandate. Id. “[A]ny issue not expressly or impliedly
disposed of on appeal is available for consideration by the trial court on
remand.” Id. (internal quotation marks and citation omitted).
We remanded for the bankruptcy court to issue further findings
regarding Mrs. Bartenwerfer’s intent, and we vacated Judgment I, because
the bankruptcy court appeared to have denied her Civil Rule 52(c) motion
and found her liable for fraud on the sole basis of the existence of an agency
relationship between Debtors without examining whether she “knew or
14
should have known” of Mr. Bartenwerfer’s fraud. See Bartenwerfer II, 2017
WL 6553392, at *10. Neither of the parties argued, nor did we conclude,
that the bankruptcy court ruled on whether Mrs. Bartenwerfer could be
held directly liable for fraud. Therefore, we did not expressly or impliedly
dispose of the issue in Bartenwerfer II. Thus, it was available for
consideration by the bankruptcy court on remand so long as Mr. Buckley
had not waived the issue. We conclude that he did not.
2. Mr. Buckley did not waive the issue of Mrs. Bartenwerfer’s direct
liability for fraud.
Mr. Buckley did not limit his theory of Mrs. Bartenwerfer’s liability to
imputed liability in his complaint and trial brief. Neither document even
mentions imputed liability. While Debtors posited during the Trial that he
was relying on an agency theory to establish her liability, he argued that he
needed to prove either that she knew or should have known of
Mr. Bartenwerfer’s fraud or that “she was recklessly indifferent” to the
facts. Despite this, as discussed supra, the bankruptcy court appeared to
have imposed the initial judgment against Mrs. Bartenwerfer solely on the
basis of Debtors’ agency relationship.
This brings us to the first cross-appeals. In his appellate briefing,
Mr. Buckley defended the bankruptcy court’s Judgment I and denial of
Debtors’ Civil Rule 52(c) motion without arguing that the bankruptcy court
could have, and should have, alternatively found Mrs. Bartenwerfer
15
directly liable for fraud. See BAP No. NC-16-1277-BJuF, ECF No. 19.
Neither did he include the issue in his cross-appeal of the Judgment I. Id.
He could have done so. See St. John v. United States, 951 F.2d 232, 233 n.1
(9th Cir. 1991). But he was not required to do so to preserve his argument
in this appeal. See In re de Jong, 588 B.R. at 892.
3. The bankruptcy court abused its discretion in declining to rule
on Mrs. Bartenwerfer’s direct liability for fraud, but the error is harmless.
As Mr. Buckley preserved the issue of Mrs. Bartenwerfer’s direct
liability for fraud and the issue was never addressed by the bankruptcy
court or on appeal, the bankruptcy court was incorrect in its conclusion
that it could not and need not decide the issue. Thus, it misapprehended its
powers and applied an incorrect legal standard on remand.
But we need not vacate Judgment II and remand for additional
findings regarding Mrs. Bartenwerfer’s intent because Judgment II is
sufficiently supported by the record. See Shanks, 540 F.3d at 1086. While
Mr. Buckley asserts that Mrs. Bartenwerfer failed to examine accessible
sources of knowledge, knew that the status of the permits as disclosed on
the TDS was inaccurate, and knew of other defects not disclosed on the
TDS, the evidence at Trial indicated that she did not have such access or
knowledge of such facts. The bankruptcy court found that she consistently
and credibly testified that she verified what she could in the TDS and relied
on Mr. Bartenwerfer to confirm anything that she did not know in
16
completing the TDS. It found that her conduct was reasonable “and
certainly not reckless” with respect to the representations made in the TDS,
notwithstanding any specialized knowledge she may have had regarding
TDS documents at the time as a real estate broker. These findings are
inconsistent with Mr. Buckley’s theory of Mrs. Bartenwerfer’s direct
liability for fraud. Her actions and attitude toward the truth were simply
not found to be “reckless” or “indifferent,” but reasonable. And the record
supports the bankruptcy court’s view of the evidence as set forth in its
findings.
Accordingly, we affirm the bankruptcy court’s conclusion that
Mrs. Bartenwerfer is not liable for fraud for purposes of § 523(a)(2)(A). We
do so notwithstanding Mr. Buckley’s objections to the bankruptcy court’s
conduct of the Hearing, which we will now address.
C. The bankruptcy court did not abuse its discretion in denying
Mr. Buckley rebuttal time.
By way of background, at the parties’ suggestion, the bankruptcy court
ordered the remanded issue of Mrs. Bartenwerfer’s knowledge to be
addressed through briefing. Mr. Buckley then changed his mind and
requested that the bankruptcy court reopen the record should it find the
record lacking as to her knowledge. The bankruptcy court entered an order
(“Scheduling Order”) reopening the record for the limited evidentiary
hearing on Mrs. Bartenwerfer’s knowledge.
17
The Scheduling Order provided that each side would be limited to
90 minutes of time on the record and could only introduce new exhibits
(that were not already admitted during the Trial) if solely for impeachment
or rebuttal. At a status conference before the Hearing, the bankruptcy court
reiterated these time and exhibit limitations and explained that Mr. Buckley
could reserve part of his 90 minutes for rebuttal. Mr. Buckley’s counsel
agreed that 90 minutes would be adequate.
Despite the narrow scope of the Hearing and the bankruptcy court’s
clear instructions regarding its time and exhibit limitations, Mr. Buckley
attempted to present extraneous evidence for purposes other than
impeachment or rebuttal and to consume more time than he was allotted.
Rather than save any time for rebuttal as explicitly authorized by the
bankruptcy court, he consumed his entire 90 minutes, plus an additional
five minute extension, in his case-in-chief. Now he complains that the
bankruptcy court should have allowed him even more time to rebut
Mrs. Bartenwerfer’s cross-examination testimony because she allegedly
provided “false testimony” during cross-examination pertaining to
whether she was on title to the Property and received proceeds from the
sale of the Property.
Courts have broad discretion to impose time. See Navellier v. Sletten,
262 F.3d 923, 941 (9th Cir. 2001). The bankruptcy court in this case did not
abuse its discretion. Mr. Buckley had no time for rebuttal due to his poor
18
time management during the Hearing and not by fault of the bankruptcy
court. And if any of Mrs. Bartenwerfer’s testimony was indeed false, the
bankruptcy court apparently did not rely on such evidence in reaching its
decision, as such evidence was relevant only to the resolved issue of
Debtors’ agency relationship. See Bartenwerfer III, 596 B.R. at 682.
D. The bankruptcy court appropriately limited the introduction of
additional evidence for impeachment and rebuttal purposes.
Mr. Buckley further complains that the bankruptcy court improperly
prohibited him from refreshing Mrs. Bartenwerfer’s recollection with a
writing as permitted by Fed. R. Evid. 612. We disagree; the bankruptcy
court merely limited the universe of exhibits to those admitted during the
Trial and any additional exhibits to the extent used for impeachment and
rebuttal purposes. Mr. Buckley was free to impeach Mrs. Bartenwerfer with
her prior testimony or the exhibits admitted during the Trial, at which he
had a full opportunity to prove his case against her.
E. The bankruptcy court appropriately weighed discovery responses.
At the Hearing, Mrs. Bartenwerfer testified that she was unaware of
the Defects. Mr. Buckley attempted to impeach her testimony by
confronting her with her contradictory interrogatory responses, executed
under penalty of perjury as true of her own knowledge. The bankruptcy
court addressed the conflict between her testimony and discovery
responses, as follows:
19
She claimed that she intended her responses—which were
clearly drafted as hers and hers alone—to be interpreted as both
hers and Mr. Bartenwerfer’s. This feeble explanation does
nothing for her credibility.
All of that said, the court believes that Mrs. Bartenwerfer
told the truth on the stand.
Id. at 681.
Mr. Buckley asserts that the bankruptcy court was obliged to accept
her discovery responses over her testimony for two reasons. First, he
argues that her testimony is akin to a self-serving declaration contrary to
prior sworn testimony that is proffered in an attempt to defeat a summary
judgment motion in violation of the “sham affidavit” doctrine. See
Radobenko v. Automated Equip. Corp., 520 F.2d 540, 544 (9th Cir. 1975)
(“When confronted with the question of whether a party should be allowed
to create his own issue of fact by an affidavit contradicting his prior
deposition testimony . . . [the purported issues of fact created by a
plaintiff’s contradictory declaration] are sham issues which should not
subject the defendants to the burden of a trial.”). But this is not a summary
judgment case. Mr. Buckley has failed to cite authority holding that the
“sham affidavit” doctrine compels a trial court to reject a witness’s trial
testimony in the face of contradictory discovery responses.
Even if the doctrine applied, an affidavit is not considered a “sham”
if: (1) it merely elaborates, explains, or clarifies prior testimony; or (2) the
20
witness was confused when giving the prior testimony and is providing an
explanation for the confusion. See Messick v. Horizon Indus., Inc., 62 F.3d
1227, 1231 (9th Cir. 1995); Pac. Ins. Co. v. Kent, 120 F. Supp. 2d 1205, 1213
(C.D. Cal. 2000).
Next, citing to Civil Rules 26(e) and 37(c)(1), Mr. Buckley argued in
his reply brief and at oral argument that the bankruptcy court should not
have considered Mrs. Bartenwerfer’s testimony because it improperly
modified her discovery responses. He waived this argument by failing to
object to her testimony during the Hearing and by failing to include this
argument in his opening brief. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th
Cir. 1999).
We conclude that the bankruptcy court admitted and gave due
consideration of the discovery responses and it did not abuse its discretion
in believing Mrs. Bartenwerfer’s testimony over the responses.
F. The bankruptcy court appropriately limited the evidence to the issues.6
Nor did it abuse its discretion in deeming inadmissible documents
about Mrs. Bartenwerfer’s marketing of real estate other than the Property.
Mr. Buckley failed to explain why the documents were relevant to her
knowledge regarding the TDS misrepresentations. He submitted that the
6
Debtors moved to strike portions of Mr. Buckley’s excerpts of record on the
ground that certain documents were not part of the record below. We grant the motion
to the extent unopposed. To the extent opposed, we consider the documents for the
purpose of deciding whether the bankruptcy court erred in deeming them inadmissible.
21
documents showed that she was involved in the business of “flipping”
properties. While this may have been relevant to the issue of whether an
agency relationship existed between Debtors, that was a non-issue at the
time of the Hearing.
Even if the bankruptcy court erred in deeming the documents
inadmissible, there is no indication that the evidentiary exclusion, or the
bankruptcy court’s other evidentiary rulings, prejudiced Mr. Buckley’s
case. The best indication of Mrs. Bartenwerfer’s intent was her live
testimony and the bankruptcy court’s contemporaneous assessment of her
credibility. Nothing in the excluded evidence was likely to have altered its
finding regarding her intent. Thus we discern no reversible error.
CONCLUSION
Based on the foregoing, we AFFIRM.
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