                                                             FILED
                                                              MAR 15 2017
 1                          NOT FOR PUBLICATION
                                                          SUSAN M. SPRAUL, CLERK
 2                                                          U.S. BKCY. APP. PANEL
                                                            OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )       BAP No.    NC-15-1315-SKuB
                                   )
 6   STANLEY HERBERT BRODY,        )       Bk. No.    13-11721
                                   )
 7                  Debtor.        )       Adv. No. 14-01039
     ______________________________)
 8                                 )
     LYNN H. CHOU,                 )
 9                                 )
                    Appellant,     )       MEMORANDUM1
10                                 )
     v.                            )
11                                 )
     STANLEY HERBERT BRODY,        )
12                                 )
                    Appellee.      )
13   ______________________________)
14                  Argued and Submitted on January 19, 2017
                          at San Francisco, California
15
                             Filed - March 15, 2017
16
                 Appeal from the United States Bankruptcy Court
17                   for the Northern District of California
18        Honorable Alan Jaroslovsky, Bankruptcy Judge, Presiding
                          ________________________
19
     Appearances:      Mark T. Young of Donahoe & Young LLP argued for
20                     appellant Lynn H. Chou; Michele M. Poteracke
                       argued for appellee Stanley Herbert Brody.
21                          ________________________
22   Before: SPRAKER,2 KURTZ and BRAND, Bankruptcy Judges
23
24
          1
              This disposition is not appropriate for publication.
25 Although it may be cited for whatever persuasive value it may
26 have (see Fed. R. App. P. 32.1), it has no precedential value.
     See 9th Cir. BAP Rule 8024-1.
27        2
              Hon. Gary A. Spraker, Chief Bankruptcy Judge for the
28 District of Alaska, sitting by designation.
 1                                INTRODUCTION3
 2           Appellant Lynn Chou appeals the bankruptcy court’s decision
 3   after trial that she failed to prove her claims under 11 U.S.C.
 4   § 523(a)(2) and (a)(6) to except from discharge a prepetition
 5   judgment against appellee/debtor Stanley Brody for unpaid real
 6   estate commissions.     She contends that the court improperly
 7   credited illogical and implausible reasons offered by the debtor
 8   for the nonpayment of her commissions to find that the debtor
 9   lacked an intent to defraud for purposes of § 523(a)(2).
10   Additionally, she contends the debtor’s failure to pay the
11   commissions constitutes tortious conduct under California law
12   sufficient to establish a willful and malicious injury under
13   § 523(a)(6).     Ms. Chou further argues that the state court
14   judgment precludes consideration of the debtor’s testimony and
15   arguments presented at trial.     Because the bankruptcy court’s
16   findings are neither illogical, nor implausible, and are
17   supported by facts in the record, we AFFIRM that court’s
18   decision.
19                           I.   FACTUAL BACKGROUND
20           A.   Ms. Chou’s Employment with Multisource.
21           Multisource was a mortgage brokerage firm operated by Saul
22   Brody as the broker.4    Stanley Brody was Multisource’s branch
23   office manager, responsible for its day to day operations.
24
         3
             Unless otherwise indicated, all chapter, section, and rule
25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26 to the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.
         4
27        The record does not reveal whether Multisource was a
   business entity or sole proprietorship, nor does it explain what
28 has become of the business.

                                        2
 1           In the summer of 1992, Multisource placed a small written
 2   advertisement in a local Chinese newspaper soliciting a
 3   salesperson with the promise of paying 100% of commissions
 4   earned on loans closed.     Chou saw the ad and telephoned
 5   Multisource for more information.     At the time, Chou was working
 6   for another mortgage broker, All Star Investments.5    Chou met
 7   Mr. Brody to discuss the ad, and employment with Multisource,
 8   around June 10, 1992.     She testified that Brody confirmed she
 9   could retain 100% of her commissions, subject to a monthly
10   payment of $650.00 as a desk fee.     No written contract was
11   presented at that time.
12           At trial, Brody did not directly contradict Chou’s
13   recollection of their first meeting, or that Multisource agreed
14   to pay her 100% commissions.     Rather, he explained that agent
15   compensation at Multisource was based upon 100% of the
16   commissions net of expenses and costs rather than the gross
17   commissions generated.     He also testified that a monthly fee of
18   $650.00 would be deducted from Chou’s net commissions as the
19   minimum desk fee.     Further, if she closed more than three loans
20   in any month she would be charged an additional $250.00 fee for
21   every loan closed after the third loan.
22           Chou began to work for Multisource sometime in June 1992.
23   Her exact starting date is unclear, but Brody presented Chou
24   with a pre-printed form entitled “Broker Salesperson Contract”
25
26       5
          Chou testified that, overall, she had four to five years
27 of experience in the mortgage business, but it is not clear how
   many years of experience she had at the time she approached
28 Multisource.

                                       3
 1   dated June 28, 1992 (“Salesperson Contract”).   The first page of
 2   the contract, marked as page 8, provided:
 3                  Whereas, Salesperson is now engaged in
               business as a real estate licensee, duly
 4             licensed by the State of California.
 5                                 . . . .
 6                  When Salesperson shall have performed
               any work hereunder whereby any commission
 7             shall be earned and when such commission
               have [sic] been collected, Salesperson shall
 8             be entitled to a share of such commission as
               determined by the current commission
 9             schedule set forth Broker’s written policy,
               except as may otherwise be agreed in writing
10             by Broker and Salesperson before completion
               of any parties transaction. See Addendum A
11             & B.
12                                 . . . .
13                  7.   In compliance with Section 10138
               of the California Business and Professions
14             Code, all commissions will be received by
               Broker; S[sic] person’s share of such
15             commissions, however, shall be payable to
               Salesperson immediately upon collection or
16             as soon thereafter as practica [sic]
17        Brody explained that he obtained both the Salesperson
18   Contract and its Addendum A from the California Department of
19   Real Estate.   Addendum A, which is specific to mortgage brokers,
20   was attached to the contract to detail the calculation of the
21   commission payable to Chou.   It provides that “[a]ny money not
22   collected from the borrower but which is identified as a cost of
23   processing (i.e.: courier services, Express mail, lender
24   statements, long distance calls, etc.) for each transaction
25   shall be subtracted from the gross commission.”   From this
26   “Adjusted Gross Commission,” Addendum A further provided:
27             Salesperson shall pay broker a minimum
               rental for office space equal to $650 per
28             month, for the first THREE (3) TRANSACTIONS

                                      4
 1               (BASE) FUNDED, PLUS $250 PER TRANSACTION
                 FUNDED ABOVE THE BASE. Salesperson shall
 2               receive 100% of the net commissions after
                 rental deductions.
 3
 4        An Addendum B was also attached to the Salesperson
 5   Contract.    This addendum clarified that Chou’s date of
 6   termination from All Star Investments was June 28, 1992.      It
 7   also required her to specifically identify all loans released to
 8   Multisource by All Star Investments, and to certify that she had
 9   not originated, processed, or caused any other lender to approve
10   and fund any loan application.
11        Chou viewed the additional $250.00 fee per loan above the
12   base as departing from the newspaper ad and the terms initially
13   discussed with Brody.    She testified that she did not sign the
14   Salesperson Contract because she was not comfortable with it.
15   Instead, she asked Brody to explain the legal terms used in the
16   contract, but stated that he never got back to her.     After
17   receiving the Salesperson Contract, she became concerned that
18   she was bringing loans into Multisource without any written
19   agreement.    So, Chou hand wrote a one page summary of her
20   understanding of the terms of her employment and compensation,
21   and presented it to Brody.    Both she and Brody signed this
22   document.    It reads:
23               This is the confirmation to verify our
                 conversation for commission split between
24               Multisource and Lynn H. Chou (real estate
                 agent). Multisource will charge Lynn H.
25               Chou $650.00 for month of July if Lynn H.
                 Chou can submit at least 3 loan packages to
26               Multisource.
27   The document is undated.
28        Brody testified that the handwritten document memorialized

                                      5
 1   their understanding, but he did not consider it to be a
 2   contract, in part, because it was not dated.     Instead,
 3   Multisource still required her to sign the Salesperson Contract.
 4   He was also adamant that the commission payable to Chou remained
 5   net of expenses or deductions.
 6           Multisource nonetheless permitted Chou to close loans under
 7   its broker license.     The parties always anticipated that Chou
 8   would bring three or four loans with her from All Star
 9   Investments that would close quickly after she changed brokers.
10   Although these loans closed, Multisource did not pay Chou any
11   commissions from them.     Chou testified that she closed a number
12   of additional loans in July 1992, also without receiving
13   compensation.
14           Brody testified that he repeatedly asked Chou to sign the
15   Salesperson Contract and to provide him with her real estate
16   license.     Despite these requests, he never received either of
17   them.     The record is unclear as to why Chou never provided her
18   license to Multisource,6 but she explained that she never
19   received answers to her questions regarding the Salesperson
20   Contract.
21           Despite its concerns, Multisource paid Chou $4,102.00 on
22   August 17, 1992.     This represented her net commission for one
23   loan, less the $650 desk fee for August 1992.     When asked why
24   Multisource paid Chou without having received either a signed
25   Salesperson Contract or her real estate license, Brody answered
26
27
         6
             Chou was never asked whether she provided her license to
28 Brody during her examination.

                                       6
 1   that he discovered Chou had improperly personally reimbursed a
 2   client for closing costs on that loan.    This was significant
 3   because only brokers were authorized to reimburse clients for
 4   closing costs.    He discussed the matter with Chou and was
 5   convinced that she understood why it was improper to directly
 6   reimburse clients’ closing costs.    She also agreed not to do so
 7   in the future.    Based on their discussion, Brody was willing to
 8   “stick his neck out” to pay her this commission, which he viewed
 9   as remedying the problem.
10        Around this time, Brody had also become concerned with
11   other aspects of Chou’s performance.    He generally objected to
12   Chou’s working outside of Multisource’s offices, and her
13   personal retention of loan files.    He explained that this
14   conduct impaired Multisource’s ability to supervise her work or
15   verify disbursements at loan closings.    In particular, the
16   disbursement information was needed to calculate her net
17   commissions.   Chou testified, however, that she regularly worked
18   in Multisource’s office.
19        On October 10, 1992, Brody terminated Chou’s employment
20   with Multisource.    Chou testified that she was terminated
21   without reason.    Brody stated that she was terminated after he
22   discovered her “rummaging through his office.”    After her
23   termination, Brody discovered a number of irregularities in her
24   loan files that frustrated Multisource’s ability to calculate
25   the amount of the commissions owed to Chou.
26        B.   The State Court Litigation.
27        On April 12, 1994, Chou filed a complaint in the California
28   Superior Court, San Mateo County, against Multisource and Brody

                                      7
 1   to recover her commissions.     Originally, she pled causes of
 2   action for breach of contract and fraud, specifically, for the
 3   tort of making a promise without an intention to perform.        She
 4   amended her complaint shortly before trial to include a separate
 5   claim to recover $7,800.00 in monies advanced “to cover the fees
 6   incurred by defendants’ clients pursuant to ‘no-points’ loans.”
 7   In both the original and amended complaint, Chou sought
 8   exemplary damages for the defendants’ fraud.
 9           The case proceeded to a five day bench trial.   At the
10   conclusion of trial, the superior court ruled that Chou was
11   entitled to recover commissions, but also awarded credits or
12   deductions against those commissions.7    It also found that Chou
13   was no longer an employee of defendant as of October 10th, by
14   which date 13 cases had been substantially completed while the
15   remainder of cases “had substantial noncompletion of
16   information.”     The court further found that the parties had
17   “continued to function under the basis of the original written
18   agreement as that agreement had never been replaced by another
19   agreement.”8    The court awarded Chou commissions in the amount
20   of $44,892.43 for the 13 completed cases less $6,733.86 in
21
         7
22        Although both Multisource and Brody were named as
   defendants in the state court action, the court generically
23 referred to only a single, unnamed defendant in both its oral
   ruling and its subsequent Judgment dated October 1, 1997
24 (“Judgment”). Brody does not deny his individual liability under
   the Judgment.
25
         8
26        The state court does not identify the “original contract,”
   although Chou’s handwritten document is the only one that was
27 ever signed. Nor does that court explain or discuss the
   deductions credited against the commissions, other than listing
28 them as “processing fees” for rechecking or completing the files.

                                       8
 1   processing fees for rechecking files; commissions of $29,317.94
 2   for the noncompleted cases less $10,261.28 in processing fees
 3   for completing files; and awarded defendant credits in the
 4   amount of $13,800.00 for rebates paid by the defendant, as well
 5   as $1,950.00 for desk fees at $650 per month for August-October
 6   1992.   In total, the court calculated the net commissions
 7   payable to Chou to be $41,465.23.    The court also awarded costs
 8   to plaintiff, but did not award interest on her claim.
 9        On October 1, 1997, the superior court entered its
10   Judgment, but revised the gross amount of the commissions
11   awarded to Chou to $55,266.23.    The court also reduced
12   defendant’s credits or deductions to $18,945.14, which equals
13   the processing and desk fees previously awarded, but excludes
14   the award of rebates.    Consistent with its oral findings, the
15   court awarded Chou costs, but no interest.    The court also
16   memorialized its findings that: (1) Chou was no longer an
17   employee of defendant as of October 10, 1992, (2) 13 cases had
18   been substantially completed, and the balance “had substantial
19   noncompletion of information,” and (3) the parties continued to
20   function under the original written agreement.
21        Although Chou originally asserted a fraud/tort claim
22   against Brody for a promise without intent to perform, there is
23   no evidence that this claim was presented at trial.    The minutes
24   of the court’s oral ruling are devoid of any reference to the
25   tort claim or the request for exemplary damages.    Similarly, the
26   Judgment fails to mention either the tort claim or the request
27   for exemplary damages.    Further, neither the minutes of the oral
28   ruling, nor the Judgment, address Chou’s amended claim for

                                      9
 1   monies advanced to pay client costs.       Rather, the Judgment
 2   merely states that she was “entitled to recover commissions
 3   totaling $55,266.23,” and provides for credits against those
 4   commissions.
 5           Chou renewed her Judgment on September 14, 2007, in the
 6   total amount of $127,588.46.     She has not been paid any amount
 7   owed under the Judgment.
 8           C.   Bankruptcy and Trial on the Nondischargeability
                  Claims.
 9
10           Brody filed a chapter 13 petition on September 6, 2013.    He
11   converted his bankruptcy to chapter 7 on November 11, 2013.
12   Chou timely filed her complaint objecting to the
13   dischargeability of the Judgment.       She seeks relief on two
14   grounds.     She asserts   Brody falsely represented his intention
15   to pay her commissions, rendering the debt nondischargeable
16   under § 523(a)(2)(A), and that the nonpayment of commissions
17   willfully and maliciously injured her under § 523(a)(6).
18           The bankruptcy court conducted a trial on Chou’s
19   nondischargeability claims on August 20, 2015.       Chou and Brody
20   were the only witnesses.     After argument, the court took the
21   matter under submission.
22           That afternoon, the bankruptcy court entered written
23   findings of facts and conclusions of law under Fed. R. Civ.
24   P. 52(a), made applicable to adversary proceedings by Fed. R.
25   Bankr. P. 7052.9    It ruled in Brody’s favor on both claims.     As
26
         9
27        At the conclusion of Chou’s case, Brody’s counsel
   nominally made a motion for directed verdict. A motion for
28                                                    (continued...)

                                        10
 1   to the fraud claim under § 523(a)(2), the court concluded that
 2   Chou’s “argument that Brody caused Multisource’s ad to be placed
 3   in order to lure salespeople to work for Multisource with no
 4   intent to compensation [sic] them was so lacking in evidence as
 5   to be preposterous.”      It specifically focused upon fraudulent
 6   intent, and found that “Chou was hired in good faith, and her
 7   failure to receive her commissions was the result of [Brody’s]
 8   good faith belief that she could not be compensated without a
 9   signed contract and delivery of her license.”      The court further
10   concluded that Brody’s reasonable, good faith beliefs negated
11   any subjective intent to harm Chou, which precluded any finding
12   of willful and malicious injury under § 523(a)(6).
13        The bankruptcy court entered its Judgment dismissing Chou’s
14   claims, with prejudice, on August 31, 2015.      Chou timely
15   appealed this decision.
16                              II.   JURISDICTION
17        The bankruptcy court had jurisdiction under 28 U.S.C.
18
19        9
              (...continued)
20 directed verdict is treated as a motion for judgment as a matter
     of law under Fed. R. Civ. P. 50, and applies only in jury trials.
21 Fed. R. Bankr. P. 9015(c); Fed. R. Civ. P. 50(a).    In bench
     trials, such a motion is treated as one for judgment on partial
22
     findings under Fed. R. Civ. P. 52(c), made applicable to
23   adversary proceedings by Fed. R. Bankr. P. 7052. Here, the
     bankruptcy court entered its decision under Rule 52(a), rather
24   than (c). The difference between the two subsections is
     immaterial for purposes of this appeal, however. Even under
25   Rule 52(c), the bankruptcy court was entitled to weigh the
26   evidence presented and the credibility of witnesses. Kuan v.
     Lund (In re Lund), 202 B.R. 127, 130 (9th Cir. BAP 1996);
27   27A Fed.Proc., L.Ed. § 62:701 (March 2017). Moreover, the court
     was still obligated to make “findings of fact and conclusions of
28   law as required by Rule 52(a).” Fed. R. Civ. P. 52(c).

                                        11
 1   §§ 1334 and 157(b)(2)(I).     This court has jurisdiction under
 2   28 U.S.C. § 158.
 3                                 III.   ISSUES
 4        Whether the bankruptcy court erred when it determined that
 5   Chou did not establish her § 523(a)(2)(A) and (a)(6) claims.
 6                          IV.   STANDARDS OF REVIEW
 7        Whether a claim is excepted from discharge under § 523(a)
 8   presents mixed issues of law and fact which we review de novo.
 9   Carillo v. Su (In re Su), 290 F.3d 1140, 1142 (9th Cir. 2002);
10   Diamond v. Kolcum (In re Diamond), 285 F.3d 822, 826 (9th Cir.
11   2002).   “De novo means review is independent, with no deference
12   given to the trial court’s conclusion.”       Mwangi v. Wells Fargo
13   Bank, N.A. (In re Mwangi), 432 B.R. 812, 818 (9th Cir. BAP
14   2010).
15        We review the bankruptcy court’s findings of fact for clear
16   error.   Honkanen v. Hopper (In re Honkanen), 446 B.R. 373, 378
17   (9th Cir. BAP 2011).    “The clear error standard is significantly
18   deferential and is not met unless the reviewing court is left
19   with a ‘definite and firm conviction that a mistake has been
20   committed.’”   Fisher v. Tucson Unified School Dist., 652 F.3d
21   1131, 1135 (9th Cir. 2011)(citation omitted).      There is no clear
22   error unless the findings of fact are “‘(1) illogical,’
23   (2) ‘implausible,’ or (3) without ‘support in inferences that
24   may be drawn from the facts in the record.’”       United States v.
25   Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009)(en banc)(quoting
26   Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 577
27   (1985)).   “Where there are two permissible views of the
28   evidence, the factfinder’s choice between them cannot be clearly

                                          12
 1   erroneous.”   Anderson, 470 U.S. at 574; see also Lewis v. Ayers,
 2   681 F.3d 992, 999 (9th Cir. 2012).
 3        The bankruptcy court’s credibility determinations are
 4   entitled to special deference.   Leon v. IDX Systems Corp.,
 5   464 F.3d 951, 958 (9th Cir. 2006)(citation omitted).   Findings
 6   based upon determinations of credibility are given greater
 7   deference “for only the trial judge can be aware of the
 8   variations in demeanor and tone of voice that bear so heavily on
 9   the listener’s understanding of and belief in what is said.”
10   Anderson, 470 U.S. at 574.
11                             V.   DISCUSSION
12        In a nondischargeability action under § 523(a), the
13   creditor has the burden of proving all the elements of its claim
14   by a preponderance of the evidence.    Grogan v. Garner, 498 U.S.
15   279, 291 (1991).   Exceptions to discharge are strictly construed
16   against an objecting creditor and in favor of the debtor to
17   effectuate the fresh start policies under the Bankruptcy Code.
18   Snoke v. Riso (In re Riso), 978 F.2d 1151, 1154 (9th Cir. 1992).
19        A.   The Court Did Not Err by Dismissing Appellant’s
               § 523(a)(2) Claim.
20
21        Debts for money or property are excepted from discharge to
22   the extent obtained by “false pretenses, a false representation,
23   or actual fraud, other than a statement respecting the debtor’s
24   or an insider’s financial condition.”   11 U.S.C. § 523(a)(2)(A).
25   To sustain a claim of non-dischargeability under § 523(a)(2)(A),
26   a creditor must prove five elements:
27             (1) the debtor made . . . representations;
28             (2) that at the time he knew they were

                                      13
 1             false;
 2             (3) that he made them with the intention and
               purpose of deceiving the creditor;
 3
               (4) that the creditor relied on such
 4             representations; [and]
 5             (5) that the creditor sustained the alleged
               loss and damage as the proximate result of
 6             the misrepresentations having been made.
 7   Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir.
 8   2010) (quoting Am. Express Travel Related Servs. Co. v. Hashemi
 9   (In re Hashemi), 104 F.3d 1122, 1125 (9th Cir.1996)).
10        Chou’s Judgment establishes a debt based in contract.     Mere
11   breaches of contract, without more, do not support
12   nondischargeability under § 523(a)(2).   Businger v. Storer
13   (In re Storer), 380 B.R. 223, 235 (Bankr. D. Mont. 2007); see
14   also Ubriaco v. Martino (In re Martino), 429 B.R. 66, 72 (Bankr.
15   E.D.N.Y. 2010)(collecting cases).   To support her claim under
16   § 523(a)(2)(A), Chou was required to show that Multisource,
17   acting through Brody, had no intent to perform.   Cripe v. Mathis
18   (In re Mathis), 360 B.R. 662, 666 (Bankr. C.D. Ill. 2006); Brann
19   v. Oxford (In re Oxford), 440 B.R. 772, 777 (Bankr. W.D. Ky.
20   2010); Duncan v. Bucciarelli (In re Bucciarelli), 429 B.R. 372,
21   375 (Bankr. N.D. Ga. 2010); Mozeika v. Townsley
22   (In re Townsley), 195 B.R. 54, 61 (Bankr. E.D. Tex. 1996).
23   Moreover, the debtor’s lack of intent to perform must exist at
24   the time he entered the contract.   Paik v. Lee (In re Lee),
25   536 B.R. 848, 855 (Bankr. N.D. Cal. 2015)(citing New Falls Corp.
26   v. Boyajian (In re Boyajian), 367 B.R. 138, 147 (9th Cir. BAP
27   2007)).
28        Although the bankruptcy court stated that Chou failed to

                                    14
 1   establish any of the elements of her claim under § 523(a)(2),
 2   its analysis was primarily directed to whether Brody acted with
 3   fraudulent intent.   Chou’s appeal is similarly focused.     She
 4   acknowledges that Brody testified at length regarding his
 5   understanding that a broker could not pay a salesperson absent
 6   both a signed contract and possession of that person’s original
 7   real estate license.   But, she argues that his explanation was
 8   not credible; so much so that when properly viewed it actually
 9   proves his fraudulent intent.   As an initial matter, Chou argues
10   that the state court Judgment precludes Brody from challenging
11   the nondischargeability of the debt.    Alternatively, she
12   contends that Brody’s reasons for nonpayment of her commissions
13   are illogical and implausible because they are legally
14   incorrect.
15             1.   The Judgment Did Not Preclude Brody from
                    Presenting Evidence of his Intent.
16
17        It is well settled that “[p]rinciples of collateral
18   estoppel apply to proceedings seeking exceptions from discharge
19   brought under 11 U.S.C. § 523(a).”10   Baldwin v. Kilpatrick
20   (In re Baldwin), 249 F.3d 912, 917 (9th Cir. 2001)(citing
21   Grogan, 498 U.S. at 284 n.11)).    If a state court judgment
22   determines the elements necessary to establish an exception to
23   the debtor’s discharge, the debtor is precluded from contesting
24   the basis for denial of the dischargeability of that debt.
25
26       10
          Collateral estoppel is now referred to as “issue
27 preclusion.”  Yaikian v. Yakian (In re Yaikian), 508 B.R. 175,
   182 (Bankr. S.D. Cal. 2014); Lucido v. Superior Court, 51 Cal.3d
28 335, 341 n.3 (1990).

                                       15
 1   In re Diamond, 285 F.3d at 826.
 2        The preclusive effect of a state court judgment is
 3   determined by application of that state’s laws.    Id.;
 4   In re Baldwin, 249 F.3d at 917.    California law, therefore,
 5   governs the preclusive effect of the Judgment.    For collateral
 6   estoppel to apply, California requires that the issue sought to
 7   be precluded be identical to that previously decided, that the
 8   issue was actually litigated and necessarily decided on the
 9   merits, and that the party to be precluded was the same as, or
10   in privity with, the party in the prior litigation.    Lucido v.
11   Superior Court, 51 Cal.3d 335, 341 (1990).    As a final
12   requirement, California courts must determine “whether
13   imposition of issue preclusion in the particular setting would
14   be fair and consistent with sound public policy.”    Khaligh v.
15   Hadaegh (In re Khaligh), 338 B.R. 817, 824–25 (B.A.P. 9th Cir.
16   2006), aff'd, 506 F.3d 956 (9th Cir. 2007)(citing Lucido,
17   51 Cal.3d at 341-43).
18        As the party seeking preclusion, Chou “must introduce a
19   record sufficient to reveal the controlling facts and pinpoint
20   the exact issues litigated in the prior action.”    Kelly v. Okoye
21   (In re Kelly), 182 B.R. 255, 258 (9th Cir. BAP 1995), aff’d,
22   100 F.3d 110 (9th Cir. 1996).   Any reasonable doubt as to what
23   was decided for purposes of issue preclusion is resolved against
24   the moving party.   Id.
25          Chou contends that the bankruptcy court erred by
26   considering Brody’s explanation for Multisource’s nonpayment of
27   the commissions based on his understanding of California law
28   governing a real estate broker’s employment of salespersons.

                                       16
 1   She maintains the state court rejected Brody’s defenses because
 2   it entered the Judgment notwithstanding her failure to sign the
 3   Salesperson Contract or provide her original realtor’s license.
 4        There is nothing in the record to establish that the state
 5   court considered, much less decided, why Multisource failed to
 6   pay Chou’s commissions.    Originally, Chou asserted a separate
 7   tort claim that Brody hired her without any intent to pay her
 8   the commissions she generated.    Neither the Judgment, nor
 9   anything in the record, suggests that she actually litigated
10   this claim at trial in the state court.    Indeed, Chou now
11   acknowledges that the state court made no findings of fraud in
12   the 1997 trial.
13        Chou has failed to establish that the parties actually
14   litigated, or the state court necessarily decided, the issue of
15   Brody’s intent as to the nonpayment of Chou’s commissions.
16   Therefore, collateral estoppel does not preclude Brody from
17   litigating his subjective beliefs and intent before the
18   bankruptcy court on Chou’s nondischargeability claims.
19             2.      The Bankruptcy Court Did Not Err in Finding that
                       Brody Lacked the Fraudulent Intent Required to
20                     Except a Debt from Discharge under
                       § 523(a)(2)(A).
21
22        Because intent to deceive is rarely subject to direct
23   evidence, creditors must generally rely upon circumstantial
24   evidence to establish fraudulent intent.    Citibank (South
25   Dakota), N.A. v. Eashai (In re Eashai), 87 F.3d 1082, 1090 (9th
26   Cir. 1996).    For this reason, courts may draw inferences from
27   the debtor’s actions and the surrounding circumstances.    Devers
28   v. Bank of Sheridan, Montana (In re Devers), 759 F.2d 751, 754

                                       17
 1   (9th Cir. 1985); In re Lee, 536 B.R. at 855.
 2        Chou points to the fact that she was not paid her
 3   commissions as proof of Brody’s fraudulent intent.         She cites
 4   Sharma v. Salcido, (In re Sharma), 2013 WL 1987351 (9th Cir. BAP
 5   May 14, 2013), in support of the proposition that “intent to
 6   deceive may be inferred if a debtor takes no steps to perform
 7   under a contract.”    Id. at *10.    In In re Sharma, the debtor
 8   promised an investor a 20% return on monies invested with him
 9   for the purpose of refurbishing and selling houses.         Although
10   some interest was paid, the debtor never worked on the houses to
11   be sold, and let them go to waste.         From this, the BAP held that
12   the bankruptcy court did not err in its determination that the
13   debt was nondischargeable under § 523(a)(2)(A), concluding that
14   “[a]lthough there may be other permissible views of the
15   evidence, [the debtor] has put forth none that render this view
16   clearly erroneous.”    Id. at *13 (citing Anderson, 470 U.S. at
17   574).
18        In re Sharma demonstrates Chou’s burden to establish clear
19   error.   While nonpayment of her commission could support an
20   inference of fraudulent intent, it does not compel such a
21   conclusion.   This determination was for the trial court to make
22   based upon Brody’s testimony and its measure of his credibility.
23   It found his explanation to be credible.         To prevail on appeal,
24   Chou must point to evidence that contradicts Brody’s testimony,
25   or suggests that “the story itself [is] so internally
26   inconsistent or implausible on its face that a reasonable
27   factfinder would not credit it.”         Anderson, 470 U.S. at 575.
28        Chou contends that Brody’s explanations are a sham,

                                         18
 1   unsupported by California law.    She cites Grant v. Marinell,
 2   112 Cal.App.3d 617, 619 (1980), to show that California’s
 3   statute of frauds does not bar oral contracts to share
 4   commissions between brokers, or between brokers and
 5   salespersons.    Grant establishes that a salesperson may recover
 6   commissions under an oral contract with a broker.     Grant does
 7   not, however, negate the licensing requirements imposed by the
 8   California Code of Regulations, which mandate that a real estate
 9   broker “shall have a written agreement with each of his
10   salesmen.”11    Cal. Code Regs. tit. 10, § 2726.   The regulations
11   further require that the written contract be dated and signed by
12   the parties, and cover the “material aspects of the relationship
13   between the parties, including supervision of licensed
14   activities, duties and compensation.”12   Id.
15
         11
16        One treatise has reconciled the requirement for a written
   agreement between brokers and salespersons with the right to
17 recover on oral agreements as follows:
18
               The regulations of the Real Estate
19             Commissioner require that the salesperson’s
               employment agreement must be in writing, but
20             the Real Estate Law does not specifically
               provide that an oral agreement between a
21             broker and salesperson is unenforceable.
22             Therefore, while the absence of the required
               written agreement may subject the broker to
23             discipline by the Real Estate Commissioner,
               the oral agreement for compensation remains
24             enforceable between the parties.
25 Miller and Starr, 2 Cal. Real Estate § 5:15 (4th ed. Dec. 2016
26 update).
         12
27        Similarly, California’s Labor Code § 2751(a) requires
   employers who use employees compensated through commissions to
28                                                    (continued...)

                                      19
 1        Although Brody signed Chou’s handwritten document, it is
 2   undated and fails to cover the material aspects of her
 3   employment by Multisource.    California’s regulatory requirements
 4   support Brody’s understanding regarding the need for a signed
 5   Salesperson Agreement as well as Addendum A.    They also explain
 6   his testimony as to why he believed the lack of a date on Chou’s
 7   handwritten document was significant.
 8        As for Brody’s understanding that a salesperson must
 9   provide her broker with an original license, he specifically
10   referenced “§ 10160” as the basis for this requirement during
11   his testimony at trial.    This section provides:
12              The real estate salesman’s license shall
                remain in the possession of the licensed
13              real estate broker employer until canceled
                or until the salesman leaves the employ of
14              the broker, and the broker shall make his
                license and the licenses of his salesman
15              available for inspection by the commissioner
                or his designated representative.
16
17   California Bus. & Prof. Code § 10160.    It is also “unlawful” for
18   a licensed real estate broker to employ or compensate any
19   unlicensed brokers or salespersons.    Cal. Bus. & Prof. Code
20   § 10137.   Both statutes provide for the suspension or revocation
21   of the real estate license for violations.    Cal. Bus. & Prof.
22   Code §§ 10160 and 10137.    California’s regulatory scheme
23   governing real estate agents supports Brody’s understanding that
24   real estate brokers must verify and hold the license of a
25   salesperson before compensating that person, or face serious
26
          12
27        (...continued)
   have a written contract that “shall set forth the method by which
28 the commissions shall be computed and paid.”

                                      20
 1   consequences.
 2        Chou argues that Brody’s explanation is merely a cover for
 3   keeping her commissions.    This is one possible inference to be
 4   drawn from his testimony.    Alternatively, one may infer that
 5   Brody sincerely, but erroneously, believed that Multisource
 6   could not pay her commissions until Chou complied with
 7   applicable state laws and regulations.    Which of the competing
 8   inferences to make was for the bankruptcy court to decide,
 9   taking into account credibility issues and observation of the
10   witnesses uniquely available at the trial.    That court chose to
11   credit Brody’s testimony and explanation.    Chou’s disagreement
12   with that determination and the resulting inference is
13   insufficient, by itself, to overcome the considerable deference
14   given to the bankruptcy court.    Anderson, 470 U.S. at 574; see
15   also Rodriquez v. Holder, 683 F.3d 1164, 1171 (9th Cir. 2012).
16   Brody’s explanation for why Multisource did not immediately pay
17   Chou her commissions is neither illogical, nor implausible.
18        Chou fails to point to any other evidence or inconsistency
19   within the record to support her contention that the bankruptcy
20   court clearly erred in determining that Brody lacked fraudulent
21   intent.    To the contrary, the remainder of the evidence
22   presented at trial is consistent with both Brody’s explanation
23   and the court’s finding that he lacked fraudulent intent.
24   First, the Salesperson Contract presented to Chou specifically
25   detailed the proposed calculation of commissions, the duties of
26   the parties, was to be dated, and required signatures of both
27   parties.    The agreement tracks Brody’s understanding that
28   California law required the parties to sign a detailed, written

                                      21
 1   contract.
 2        Second, Chou never testified that she rejected the
 3   Salesperson Contract.    Rather she stated only that she was
 4   uncomfortable with it and wanted more information.    This
 5   suggests that both parties acknowledged the need for a more
 6   detailed, written contract despite the signing of her
 7   handwritten document. The fact that the state court credited
 8   deductions against Chou’s claimed commissions further indicates
 9   that the handwritten document did not encompass all the
10   contractual terms of the parties’ relationship.
11        Third, Multisource, acting through Brody, did pay Chou one
12   commission despite not having an executed Salesperson Contract.
13   Brody explained that he approved the payment only after he
14   discovered that Chou had improperly paid a client for closing
15   costs.    Brody discussed the situation with Chou and obtained
16   assurances that she would not directly pay clients in the
17   future.    His testimony on this point is uncontradicted, and
18   demonstrates a significant attempt to work with Chou, rather
19   than defraud her.
20        Most importantly, Brody testified that due to the problems
21   with Chou’s files Multisource could not determine the expenses
22   to be deducted from the gross commissions on Chou’s loans.      The
23   amounts actually due to Chou were not determined until the state
24   court trial; and then her net commissions were reduced by
25   roughly $19,000.00.
26        Tellingly, the state court declined to award interest on
27   the net commissions awarded to her.    Under Cal. Civ. Code
28

                                      22
 1   3287(a),13 interest is recoverable on “damages certain, or
 2   capable of being made certain by calculation,” from the time the
 3   right to recover is vested.    The state court’s denial of
 4   interest on Chou’s claims further supports Brody’s argument that
 5   the amounts of the commissions owed were not ascertainable until
 6   trial.
 7        Brody’s explanation as to why Multisource did not pay Chou
 8   is both consistent with the other evidence admitted at trial,
 9   and supported by California’s statutes and regulations governing
10   a real estate broker’s employment of salespersons.    The
11   bankruptcy court’s reliance on that explanation to find that
12   Brody acted in good faith and without fraudulent intent is well
13   supported.     Chou’s view to the contrary does not render this
14   finding clearly erroneous.
15             B.     The Court Did Not Err by Dismissing Appellant’s
                      § 523(a)(6) Claim.
16
17        Section 523(a)(6) excepts from discharge debts “for willful
18   and malicious injury by the debtor to another entity or to the
19
         13
20          The version of Cal. Civ. Code § 3287(a) in effect in
     1992, when the Judgment was entered, provided:
21
         Every person who is entitled to recover damages
22
         certain, or capable of being made certain by
23       calculation, and the right to recover which is vested
         in him upon a particular day, is entitled also to
24       recover interest thereon from that day, except during
         such time as the debtor is prevented by law, or by the
25       act of the creditor from paying the debt. This section
26       is applicable to recovery of damages and interest from
         any such debtor, including the state or any county,
27       city, city and county, municipal corporation, public
         district, public agency, or any political subdivision
28       of the state.

                                      23
 1   property of another entity.”    11 U.S.C. § 523(a)(6).      To
 2   establish a claim under § 523(a)(6), the creditor must prove
 3   “not only that the debtor acted willfully, but also that the
 4   debtor inflicted the injury willfully and maliciously rather
 5   than recklessly or negligently.”      Petralia v. Jercich
 6   (In re Jercich), 238 F.3d 1202, 1207 (9th Cir. 2001)(citing
 7   Kawaauhau v. Geiger, 523 U.S. 57, 64 (1998)(emphasis in
 8   original)).    “Willful” and “malicious” are separate components;
 9   both must be found to except a debt from discharge under
10   § 523(a)(6).    In re Su, 290 F.3d at 1146.
11        As with actions under § 523(a)(2)(A), “a simple breach of
12   contract is not the type of injury addressed by § 523(a)(6).”
13   Snoke v. Riso (In re Riso), 978 F.2d 1151, 1154 (9th Cir. 1992).
14   The Ninth Circuit requires “[s]omething more than a knowing
15   breach of contract . . . before conduct comes within the ambit
16   of § 523(a)(6),” and has “defined that ‘something more’ as
17   tortious conduct.”    Lockerby v. Sierra, 535 F.3d 1038, 1041 (9th
18   Cir. 2008); see also In re Riso, 978 F.2d at 1154.      Whether
19   conduct is tortious depends upon state law.      Lockerby, 535 F.3d
20   at 1041-42.    To prevail on her § 523(a)(6) claims, therefore,
21   Chou must prove a tortious breach of contract that resulted in a
22   willful and malicious injury.    Id.
23        Evaluating Chou’s § 523(a)(6) claim, the bankruptcy court
24   again focused on Brody’s belief that Multisource could not pay
25   Chou her commissions until she signed the proposed form contract
26   and provided her license.    The bankruptcy court properly
27   recognized that a willful injury is shown only if the creditor
28   proves “either a subjective intent to harm, or a subjective

                                      24
 1   belief that harm is substantially certain.”    In re Su, 290 F.3d
 2   at 1144.    It reemphasized that “[r]egardless of whether
 3   [Brody’s] understanding of state law was correct, there was a
 4   good faith disagreement as to whether Chou was entitled to be
 5   paid.”    For this reason, the court found that Brody did not
 6   subjectively intend to harm Chou, nor did he believe that harm
 7   was substantially certain.
 8        Chou does not distinguish between subjective intent to harm
 9   and a subjective belief that injury was substantially certain.
10   She simply argues that the bankruptcy court erred by crediting
11   Brody’s explanations for Multisource’s decision not to pay
12   commissions to her.    As explained above, however, the bankruptcy
13   court’s findings as to Brody’s subjective beliefs and intent
14   were neither implausible, nor illogical, and were supported by
15   the record.    That another trier of fact might draw different
16   inferences from Brody’s testimony does not render the bankruptcy
17   court’s factual finding clearly erroneous.    Lewis v. Ayers,
18   681 F.3d at 999-1000.    Such findings support the bankruptcy
19   court’s determination that Brody lacked a subjective intent to
20   harm Chou.
21        Chou also argues that damages from a breach of contract
22   were substantially certain and, therefore, Brody must have known
23   that withholding the commissions would injure her.    This
24   argument, however, strays beyond the subjective inquiry required
25   under In re Su, 290 F.3d at 1145-46.    The intent to injure is
26   not measured objectively, by what a reasonable person should
27   have known, or understood, to be substantially certain.      Id. at
28   1145.    For this reason, “recklessly inflicted injuries do not

                                      25
 1   satisfy the § 523(a)(6) willfulness requirement.”   Plyam v.
 2   Precision Dev., LLC (In re Pylam), 530 B.R. 456, 464 (9th Cir.
 3   BAP 2015).   It is the debtor’s actual, subjective state of mind
 4   that is dispositive.   In re Su, 290 F.3d at 1145-46.   Even when
 5   evaluating whether a debtor had actual knowledge that harm was
 6   substantially certain, the focus remains “on what was actually
 7   going through the mind of the debtor at the time he acted.”    Id.
 8   at 1146 n.6.
 9         Brody subjectively believed that state law prohibited
10   payment of Chou’s commissions until Multisource received the
11   signed form contract and license from her.   As recognized by the
12   bankruptcy court, his legal analysis may have been faulty, but
13   that does not equate to a subjective belief of certain harm.
14   Multisource’s failure to pay Chou her commissions was attributed
15   to Brody’s efforts to comply with state law rather than a
16   willful refusal to pay outstanding commissions.   As credited by
17   the bankruptcy court, Brody necessarily lacked the subjective
18   belief that harm to Chou was substantially certain; in his view
19   she was not entitled to payment of those commissions until she
20   complied with California law.   Chou failed to prove that Brody
21   had a subjective belief that nonpayment was substantially
22   certain to injure her for purposes of establishing a willful
23   injury to support her claim under § 523(a)(6).
24        Because a willful injury has not been established, analysis
25   of the other two elements of her § 523(a)(6) claim – whether
26   Brody tortiously breached any contractual obligations under
27   California law, or whether such conduct resulted in malicious
28

                                     26
 1   injury – is unnecessary.14
 2                                 CONCLUSION
 3         The bankruptcy court found that the failure to pay Chou was
 4   borne of a good faith misunderstanding of controlling law rather
 5   than any wrongful refusal to pay her.      Its finding negated any
 6   intent to defraud or to willfully injure Chou.     Despite her
 7   continued disagreement with these findings, the bankruptcy
 8   court’s findings, and the resulting decision, are neither
 9   illogical, nor implausible.    Moreover, the remainder of the
10   record supports denial of Chou’s claims under §§ 523(a)(2) and
11   (a)(6).   We perceive no clear error in the bankruptcy court’s
12   decision.   It is, therefore, AFFIRMED.
13
14
          14
15          Chou argues that the Ninth Circuit’s decision in Petralia
     v. Jercich (In re Jercich), 238 F.3d 1202 (9th Cir. 2001),
16   requires reversal of the bankruptcy court’s decision. In
     Jercich, an unpaid employee sought to hold his prepetition
17   judgment for unpaid wages nondischargeable under § 523(a)(6).
     The debtor in Jercich was found to have willfully refused to pay
18   outstanding wages while having the clear ability to do so.
19   Instead, the debtor diverted the monies for his personal benefit,
     leading the state court to find that he had committed oppression
20   under California Civil Code § 3294, warranting an award of
     punitive damages. Based on those particular circumstances, the
21   debtor’s nonpayment of wages was found to constitute tortious
     conduct resulting in willful and malicious injury. Here,
22
     however, the state court made no findings of oppression, and no
23   punitive damages were awarded. There were also substantial
     issues regarding the calculation of Chou’s commissions, resulting
24   in sizeable credits against the amounts she claimed were due her.
     Thus, unlike Jercich, Chou’s state court Judgment did not
25   dispositively resolve the elements of her claim under
26   § 523(a)(6). The bankruptcy court did not address whether there
     was tortious conduct or a malicious injury because Chou failed to
27   prove a willful injury, and we agree that this failure of proof
     moots the need to make a finding on these other elements of
28   § 523(a)(6).

                                       27
