                                                              FILED
                                                              APR 26 2017
 1                         NOT FOR PUBLICATION
                                                         SUSAN M. SPRAUL, CLERK
                                                           U.S. BKCY. APP. PANEL
 2                                                         OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.     CC-16-1226-FLKu
                                   )
 6   BRENT ROY SEPULVEDA,          )      Bk. No.     8:13-bk-17965-SC
                                   )
 7                  Debtor.        )      Adv. Pro. 8:14-ap-01003-SC
     ______________________________)
 8                                 )
     BRENT ROY SEPULVEDA,          )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )      MEMORANDUM*
11                                 )
     GEORGE ADAMS, JR.,            )
12                                 )
                    Appellee.      )
13   ______________________________)
14                   Argued and Submitted on March 23, 2017
                             at Pasadena, California
15
                             Filed – April 26, 2017
16
              Appeal from the United States Bankruptcy Court
17                for the Central District of California
18       Honorable Scott C. Clarkson, Bankruptcy Judge, Presiding
19
     Appearances:     David C. Codell argued on behalf of appellant
20                    Brent Roy Sepulveda; Ryan Daniel O’Dea of Shulman
                      Hodges & Bastian LLP argued on behalf of appellee
21                    George Adams, Jr.
22
     Before: FARIS, LAFFERTY, and KURTZ, Bankruptcy Judges.
23
24
25
26        *
            This disposition is not appropriate for publication.
27   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
28   9th Cir. BAP Rule 8024-1.
 1                              INTRODUCTION
 2        Chapter 71 debtor Brent Roy Sepulveda appeals from the
 3   bankruptcy court’s judgment in favor of creditor George Adams,
 4   Jr. on Mr. Adams’s § 523(a)(2)(A) nondischargeability claim.       He
 5   argues that the court erred by (1) finding that he intended to
 6   defraud Mr. Adams and (2) miscalculating the damages award to
 7   Mr. Adams.   We reject both arguments.      Accordingly, we AFFIRM.
 8                           FACTUAL BACKGROUND
 9   A.   The joint business venture
10        This dispute arises from a business partnership between
11   Mr. Sepulveda and Mr. Adams.   In 2000, the parties agreed to form
12   a joint venture whereby they would acquire real property and
13   construct and sell custom homes.       In November 2000, they executed
14   a written agreement to construct four custom homes.       Mr. Adams
15   was responsible for financing and obtaining construction loans,
16   and Mr. Sepulveda was responsible for the construction of the
17   homes through his company, Sepulveda Builders.       Mr. Adams said
18   that Mr. Sepulveda represented that he maintained liability
19   insurance that would cover the construction of the custom homes.
20        Under the 2000 agreement, the parties constructed a home for
21   Ray and Tracy Arriola in Orange, California (the “Arriola
22   Property”) for $1.365 million.    In 2004, Mr. Adams and
23   Mr. Sepulveda executed a second written agreement consistent with
24   the terms of the 2000 agreement.       The 2004 agreement concerned
25
          1
26          Unless specified otherwise, all chapter and section
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532,
27   all “Rule” references are to the Federal Rules of Bankruptcy
     Procedure, and all “Civil Rule” references are to the Federal
28   Rules of Civil Procedure.

                                        2
 1   the construction of a custom home for Robert and Liz Kofdarali in
 2   Anaheim, California (the “Kofdarali Property”) for $3.1 million.
 3   (For convenience, we will refer to the 2000 and 2004 agreements
 4   collectively as the “Partnership Agreement.”)
 5   B.   The construction defect lawsuits
 6        1.   The Kofdarali lawsuit
 7        In September 2007, the Kofdaralis filed suit (the “Kofdarali
 8   Lawsuit”) against Mr. Adams and Mr. Sepulveda in state court for
 9   construction defects related to the Kofdarali Property.
10   Mr. Adams asserted that, around this time, he discovered that
11   Mr. Sepulveda’s liability insurance did not cover home
12   construction; rather, it only covered home improvement and
13   remodeling.   Accordingly, Mr. Sepulveda’s insurance carrier
14   refused to defend or indemnify Mr. Sepulveda and Mr. Adams in the
15   Kofdarali Lawsuit.   Mr. Adams filed cross-claims against
16   Mr. Sepulveda for indemnity, contribution, and other causes of
17   action relating to fraud and misrepresentation.
18        The parties to the Kofdarali Lawsuit reached a settlement in
19   September 2010 that excluded Mr. Adams’s cross-claims against
20   Mr. Sepulveda.   Neither Mr. Sepulveda nor his insurer contributed
21   to the costs of defense or the settlement.
22        2.   The Arriola lawsuit
23        In May 2008, the Arriolas filed a state court lawsuit (the
24   “Arriola Lawsuit”) against Mr. Adams and Mr. Sepulveda for
25   construction defects associated with the Arriola Property.
26   Again, Mr. Sepulveda’s insurance carrier denied coverage, and
27   Mr. Adams filed cross-claims against Mr. Sepulveda for
28   contribution and reimbursement.

                                       3
 1        3.   The settlement agreement
 2        In January 2011, Mr. Adams and Mr. Sepulveda entered into a
 3   settlement agreement (“Settlement Agreement”) that resolved
 4   Mr. Adams’s cross-claims against Mr. Sepulveda in the Arriola
 5   Lawsuit and the Kofdarali Lawsuit.    The Settlement Agreement
 6   provided that: (1) Mr. Sepulveda would transfer real properties
 7   in Yorba Linda, California to Mr. Adams in consideration of the
 8   expenses Mr. Adams incurred in defending and settling the
 9   Kofdarali Lawsuit and defending the Arriola Lawsuit; (2) the
10   parties would share equally the future costs of defense of the
11   Arriola Lawsuit; and (3) the parties would share equally the
12   costs of the judgment or settlement of the Arriola Lawsuit.      In
13   return, Mr. Adams agreed to dismiss the cross-claims and waive
14   his rights to reimbursement from Mr. Sepulveda for all
15   previously-incurred attorneys’ fees, costs, and expenses.
16        4.   The Arriola Lawsuit judgment
17        In September 2011, the referee in the Arriola Lawsuit
18   awarded the Arriolas $370,116.66 (the “Arriola Judgment”) jointly
19   and severally against Mr. Adams and Mr. Sepulveda.    The state
20   court entered the Arriola Judgment on October 17, 2011.
21   C.   Mr. Adams’s state court action
22        Mr. Sepulveda partially performed under the Settlement
23   Agreement by transferring the Yorba Linda properties to
24   Mr. Adams.   However, he failed to pay his share of the Arriola
25   Judgment and contribute to the post-January 2011 defense costs of
26   the Arriola Lawsuit.   Therefore, Mr. Adams paid the entire
27   Arriola Judgment himself.
28        On January 27, 2012, Mr. Adams sued Mr. Sepulveda in state

                                      4
 1   court for fraud and breach of contract arising from
 2   Mr. Sepulveda’s breach of the Settlement Agreement.        In March, he
 3   obtained an order for contribution against Mr. Sepulveda in the
 4   Arriola Lawsuit for $185,058.28 and recorded an abstract of
 5   judgment in that amount against Mr. Sepulveda’s residence.        In
 6   August, he recorded another abstract of judgment against
 7   Mr. Sepulveda’s residence for $287,517.20, this time in
 8   connection with the Kofdarali Lawsuit.
 9   D.     Mr. Sepulveda’s chapter 7 bankruptcy
10          On September 23, 2013, Mr. Sepulveda filed his chapter 7
11   petition.
12          On January 3, 2014, Mr. Adams filed his complaint to
13   determine nondischargeability of debt under §§ 523(a)(2)(A) and
14   (6).       He requested a nondischargeable judgment in the amount of
15   at least $472,575.48.2
16          As to his § 523(a)(2)(A) claim, he alleged that
17   Mr. Sepulveda committed fraud by making multiple false statements
18   of material fact: (1) he falsely represented in 2000 that he had
19   liability insurance coverage for the construction of the custom
20   homes, despite knowing that his liability insurance covered only
21   home remodeling; and (2) he promised in 2011 to pay half of the
22   defense costs of the Arriola Lawsuit and subsequent judgment, but
23   never had any intention to do so.        Mr. Adams said that he was
24   ignorant of the true facts and, had he known the truth about the
25   lack of insurance, he would not have gone into business with
26
            2
27          By order dated July 9, 2014, the bankruptcy court
     dismissed Mr. Adams’s § 523(a)(6) claim. That order is not the
28   subject of this appeal.

                                          5
 1   Mr. Sepulveda; he also would not have entered into the Settlement
 2   Agreement if he had known that Mr. Sepulveda did not intend to
 3   comply fully with the terms of the settlement.
 4        In advance of trial on Mr. Adams’s § 523(a)(2)(A) claim, the
 5   parties submitted their respective trial briefs and declarations
 6   and a joint pretrial stipulation.     Mr. Sepulveda agreed that he
 7   lacked insurance coverage for construction of the custom homes.
 8   However, he declared that he never represented to Mr. Adams that
 9   he maintained contractor’s commercial general liability insurance
10   and that Mr. Adams never expressed to him that liability
11   insurance was important to him or was a requirement for agreeing
12   to the joint venture.    In any event, he said that his then-wife
13   and office manager, Chelly Moore, handled all office duties and
14   paperwork, including managing Sepulveda Builders’s insurance
15   coverage.   He said that she had “complete autonomy” in obtaining
16   and renewing liability insurance for the company and was solely
17   responsible for ensuring proper coverage.
18        Mr. Sepulveda further stated that he fully intended to
19   comply with the terms of the Settlement Agreement when he
20   executed it.   His financial condition deteriorated after he and
21   Mr. Adams executed the Settlement Agreement due to his
22   contentious and lengthy divorce proceedings and declining
23   business income.    He planned to borrow money to fulfill his
24   obligations.   He offered Mr. Adams $300,000 in settlement of any
25   amounts due on the Settlement Agreement, but Mr. Adams did not
26   accept the offer.
27        At trial, Mr. Adams’s counsel cross-examined Mr. Sepulveda
28   about $200,000 that he received from the sale of his residence in

                                       6
 1   January 2011.   Mr. Sepulveda admitted that, although he received
 2   the funds around the time that he entered into the Settlement
 3   Agreement, he did not set aside any of the monies to pay for
 4   defense costs or judgment in the Arriola Lawsuit.    Following
 5   trial, the bankruptcy court took the matter under advisement.
 6   E.   The memorandum decision
 7        The bankruptcy court entered its memorandum of decision on
 8   July 5, 2016.   It analyzed whether Mr. Sepulveda made a
 9   misrepresentation or engaged in fraudulent conduct in connection
10   with the Partnership Agreement and the Settlement Agreement.      It
11   concluded that both agreements resulted from Mr. Sepulveda’s
12   misrepresentations or fraudulent actions.
13        The court found that Mr. Sepulveda misrepresented his
14   construction liability coverage in order to induce Mr. Adams to
15   enter into the Partnership Agreement.    Mr. Adams discussed
16   insurance coverage with Mr. Sepulveda and made clear that he was
17   concerned with the possibility of future construction defect
18   litigation.   Mr. Sepulveda presented Mr. Adams with a certificate
19   of general liability insurance and told him that the policy
20   covered liability for “ground-up” construction of the custom
21   homes.
22        The court also found that Mr. Sepulveda knew that he lacked
23   proper liability insurance.    The court pointed to Ms. Moore’s
24   testimony that Mr. Sepulveda instructed her to keep costs down
25   and only maintain remodeling insurance and that she only filled
26   out insurance applications at Mr. Sepulveda’s direction.    The
27   court found Ms. Moore’s testimony credible, while Mr. Sepulveda’s
28   testimony was “evasive and not credible.”

                                       7
 1        The court further said that Mr. Sepulveda intended to
 2   deceive Mr. Adams when he represented that he had proper
 3   construction liability insurance.     Ms. Moore testified that
 4   Mr. Sepulveda told her that he understood that Mr. Adams wanted
 5   construction liability insurance.     However, the court said that
 6   Mr. Sepulveda “deliberated and conducted a cost-benefit analysis”
 7   and determined that he would save money by not obtaining the
 8   additional coverage.
 9        The court found that Mr. Adams justifiably relied on
10   Mr. Sepulveda’s representations that he held construction
11   liability insurance; Mr. Adams had no reason to believe that
12   Mr. Sepulveda was lying about the insurance coverage.
13        The court determined that Mr. Sepulveda’s misrepresentation
14   was a direct and substantial cause of Mr. Adams’s damages
15   incurred during the Arriola Lawsuit.     Because Mr. Adams relied on
16   Mr. Sepulveda’s representations, he was not covered by insurance
17   when construction defects arose and had to pay for defense costs
18   and damages in the Arriola Lawsuit.
19        Regarding the Settlement Agreement, the court said that
20   Mr. Sepulveda lacked a present intent to perform or had a
21   positive intent not to perform.   The court did not find credible
22   Mr. Sepulveda’s testimony that he intended to perform and had the
23   financial ability to do so.
24        The court found that Mr. Sepulveda knew or should have known
25   that he could not perform under the Settlement Agreement, because
26   he lacked the financial wherewithal to do so.     Mr. Sepulveda was
27   living off of his savings, his business income had declined by
28   ninety-five percent, and he was involved in a contentious

                                       8
 1   divorce.    He knew that the Settlement Agreement required him to
 2   pay for prospective defense costs, but he did not allocate any of
 3   the $200,000 he received from the sale of his home toward the
 4   Arriola Lawsuit.
 5        The court determined that the transfer of the Yorba Linda
 6   properties did not indicate an intent to perform; rather, the
 7   partial performance was just enough to allow Mr. Sepulveda to
 8   obtain a dismissal of Mr. Adams’s cross-claims against him.
 9   Moreover, the court found that Mr. Sepulveda recklessly
10   disregarded the truth of his representation that he intended to
11   perform fully because he knew that he did not have sufficient
12   assets and was not earning sufficient income to satisfy the
13   Settlement Agreement.
14        The court found that Mr. Adams justifiably relied on
15   Mr. Sepulveda’s representations, even though, by the time he
16   signed the Settlement Agreement, Mr. Adams knew that
17   Mr. Sepulveda had misrepresented the status of his insurance
18   coverage.
19        The court found that Mr. Sepulveda’s misrepresentation was a
20   substantial and important cause of the damages Mr. Adams
21   incurred.   It said that there was no dispute that, if Mr. Adams
22   had known that Mr. Sepulveda did not intend to comply with the
23   Settlement Agreement, he would not have agreed to it and could
24   have continued to pursue his cross-claims against Mr. Sepulveda.
25        Regarding damages, the court granted Mr. Adams’s request in
26   full (excluding attorneys’ fees).     It awarded Mr. Adams damages
27   for his costs of defending the Arriola Lawsuit and satisfying the
28   Arriola Judgment, but subtracted the amount that Mr. Adams

                                       9
 1   recovered from the foreclosure sale of Mr. Sepulveda’s residence:
 2        Arriola Judgment:                       $370,116.55
          Arriola Lawsuit Defense:                $195,199.91
 3        Arriola Lawsuit Consultant Fees:         $18,401.81
          State Court Action Fees/Costs:           $94,993.43
 4        (Recovery from Sepulveda foreclosure): ($151,000.00)
          Total damages:                          $527,711.70
 5
 6        The court entered its judgment in the amount of $527,711.70
 7   in favor of Mr. Adams, and Mr. Sepulveda timely appealed.
 8                               JURISDICTION
 9        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
10   §§ 1334 and 157(b)(2)(I).    We have jurisdiction under 28 U.S.C.
11   § 158.
12                                   ISSUE
13        Whether the bankruptcy court erred in awarding Mr. Adams
14   $527,711.70 and determining that the award was nondischargeable
15   under § 523(a)(2)(A).
16                            STANDARDS OF REVIEW
17            In bankruptcy discharge appeals, we review the bankruptcy
18   court’s findings of fact for clear error and conclusions of law
19   de novo, and apply de novo review to mixed questions of law and
20   fact.    Oney v. Weinberg (In re Weinberg), 410 B.R. 19, 28 (9th
21   Cir. BAP 2009), aff’d, 407 F. App’x 176 (9th Cir. 2010) (citation
22   omitted).    De novo review requires that we consider a matter
23   anew, as if no decision had been rendered previously.    United
24   States v. Silverman, 861 F.2d 571, 576 (9th Cir. 1988).
25        We review the bankruptcy court’s findings of fact for clear
26   error.    See Honkanen v. Hopper (In re Honkanen), 446 B.R. 373,
27   378 (9th Cir. BAP 2011); see also Anastas v. Am. Sav. Bank
28   (In re Anastas), 94 F.3d 1280, 1283 (9th Cir. 1996) (“A finding

                                      10
 1   of whether a requisite element of section [ ] 523(a)(2)(A) claim
 2   is present is a factual determination reviewed for clear
 3   error.”).   “To be clearly erroneous, a decision must strike us as
 4   more than just maybe or probably wrong; it must . . . strike us
 5   as wrong with the force of a five-week-old, unrefrigerated dead
 6   fish.”    Papio Keno Club, Inc. v. City of Papillion (In re Papio
 7   Keno Club, Inc.), 262 F.3d 725, 729 (8th Cir. 2001) (quoting
 8   Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228,
 9   233 (7th Cir. 1988)); see Anderson v. City of Bessemer City,
10   470 U.S. 564, 573 (1985) (A factual finding is clearly erroneous
11   if, after examining the evidence, the reviewing court “is left
12   with the definite and firm conviction that a mistake has been
13   committed.”).    The bankruptcy court’s choice among multiple
14   plausible views of the evidence cannot be clear error.    United
15   States v. Elliott, 322 F.3d 710, 714 (9th Cir. 2003).
16        “The bankruptcy court’s witness credibility findings are
17   entitled to special deference, and are also reviewed for clear
18   error.”    In re Weinberg, 410 B.R. at 28 (citing Rule 8013;
19   Anderson, 470 U.S. at 573).
20        “[W]e review the legal standards used in the calculation of
21   damages de novo.”    R.B. Matthews, Inc. v. Transamerica Transp.
22   Servs., Inc., 945 F.2d 269, 272 (9th Cir. 1991) (citing Galindo
23   v. Stoody Co., 793 F.2d 1502, 1516 (9th Cir. 1986)); see Oswalt
24   v. Resolute Indus., Inc., 642 F.3d 856, 859-60 (9th Cir. 2011)
25   (“We review de novo the legal conclusion that damages are
26   available and review for clear error factual findings underlying
27   the damages award.”); Ambassador Hotel Co. v. Wei-Chuan Inv.,
28   189 F.3d 1017, 1024 (9th Cir. 1999) (“The district court’s

                                      11
 1   computation of damages following a bench trial is reviewed for
 2   clear error.   However, the issue of whether the district court
 3   applied the correct legal standard in computing damages receives
 4   de novo review.”) (citations omitted).
 5                                DISCUSSION
 6   A.   The bankruptcy court correctly determined that Mr. Sepulveda
          committed fraud in connection with the Partnership Agreement
 7        and the Settlement Agreement.
 8        Section 523(a)(2)(A) excepts from discharge a debt resulting
 9   from “false pretenses, a false representation, or actual fraud,
10   other than a statement respecting the debtor’s or an insider’s
11   financial condition.”    Regarding the elements necessary to prove
12   a § 523(a)(2)(A) claim, we have said:
13             A creditor seeking to except a debt from discharge
          based on fraud bears the burden of proof by a
14        preponderance of the evidence to establish each of five
          elements: (1) misrepresentation, fraudulent omission or
15        deceptive conduct; (2) knowledge of the falsity or
          deceptiveness of such representation(s) or omission(s);
16        (3) an intent to deceive; (4) justifiable reliance by
          the creditor on the subject representation(s) or
17        conduct; and (5) damage to the creditor proximately
          caused by its reliance on such representation(s) or
18        conduct.
19   Sachan v. Huh (In re Huh), 506 B.R. 257, 262 (9th Cir. BAP 2014)
20   (citing Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222
21   (9th Cir. 2010); In re Weinberg, 410 B.R. at 35).
22        The court found that Mr. Adams satisfied all of these
23   elements for both the Partnership Agreement and the Settlement
24   Agreement.   On appeal, Mr. Sepulveda argues that the bankruptcy
25   court erred in finding that he had a fraudulent intent or
26   fraudulently induced Mr. Adams to enter into the Settlement
27   Agreement.   He fails to establish that the bankruptcy court
28   committed clear error.

                                      12
 1        1.   Mr. Sepulveda does not appeal the court’s finding of
               misrepresentation and fraud concerning the Partnership
 2             Agreement.
 3        In its memorandum decision, the bankruptcy court made clear
 4   that Mr. Sepulveda committed fraud concerning both the
 5   Partnership Agreement and the Settlement Agreement.   It
 6   independently analyzed each agreement and determined that both
 7   satisfied the elements of § 523(a)(2)(A).   Mr. Sepulveda’s
 8   misrepresentations under either agreement form a sufficient basis
 9   to deny dischargeability of the debt.
10        But on appeal, Mr. Sepulveda does not challenge the court’s
11   findings regarding the Partnership Agreement.   He focuses
12   exclusively on the court’s purported errors concerning the
13   Settlement Agreement.   On this basis alone, we can affirm the
14   bankruptcy court’s finding of fraud under § 523(a)(2)(A).
15        2.   The bankruptcy court did not err in finding that
               Mr. Sepulveda committed fraud regarding the Settlement
16             Agreement.
17        Mr. Sepulveda argues that the bankruptcy court erred in
18   finding that he had an intent to deceive Mr. Adams and that he
19   fraudulently induced Mr. Adams to enter into the Settlement
20   Agreement.   We discern no error.
21        All of Mr. Sepulveda’s arguments challenge the bankruptcy
22   court’s factual findings and its findings of credibility.     We
23   review these determinations for clear error, giving special
24   deference to the bankruptcy court’s credibility findings.     See
25   In re Weinberg, 410 B.R. at 28.
26             a.    Fraudulent intent
27        Mr. Sepulveda argues that the court erred by finding,
28   despite his partial performance, that he did not intend to

                                       13
 1   perform fully under the Settlement Agreement.    He claims that the
 2   court erroneously interpreted his financial situation and that he
 3   could have performed on the day the Settlement Agreement was
 4   executed.
 5        But the court considered a number of factors when finding
 6   that Mr. Sepulveda knew that he could not satisfy the terms of
 7   the Settlement Agreement.    It found that Mr. Sepulveda could not
 8   fully perform because of: (1) Mr. Sepulveda’s lack of income
 9   caused by a ninety-five percent decline in his income in the two
10   years prior to the execution of the Settlement Agreement; (2) his
11   need to borrow $40,000 from his parents, but his ability to only
12   pay back $20,000; (3) his lengthy, contentious, and expensive
13   divorce proceedings; (4) his inability to work due to childcare
14   responsibilities caused by the divorce; and (5) his failure to
15   set aside for the Arriola Lawsuit any of the $200,000 received
16   from the sale of his home.    It also said that, even if
17   Mr. Sepulveda did not have an affirmative intention to not
18   perform, he acted with reckless disregard for the truth.    The
19   court found that Mr. Sepulveda’s testimony was not credible.      The
20   court made proper factual findings supported by the record and
21   did not clearly err.
22        Mr. Sepulveda argues that his partial performance evidenced
23   his good faith, because he otherwise had no reason to surrender
24   the Yorba Linda properties.    The bankruptcy court correctly
25   observed that Mr. Sepulveda surrendered the Yorba Linda
26   properties to Mr. Adams so that he could obtain a quick dismissal
27   of Mr. Adams’s cross-claims against him in the Arriola Lawsuit.
28   The court also stated that Mr. Sepulveda’s testimony on this

                                      14
 1   topic was not credible.    Again, we do not discern any clear
 2   error.
 3        Mr. Sepulveda argues that the court should not have relied
 4   on his ex-wife’s testimony.    But the court made specific findings
 5   that Ms. Moore’s testimony was credible, while Mr. Sepulveda’s
 6   testimony was not.   Mr. Sepulveda does not convince us that these
 7   findings were clearly erroneous.
 8             b.   Fraudulent inducement
 9        Mr. Sepulveda argues that the bankruptcy court erred in
10   finding that he fraudulently induced Mr. Adams to enter into the
11   Settlement Agreement.    We reject this argument.
12        He contends that the bankruptcy court conflated its analysis
13   of the Partnership Agreement with the Settlement Agreement, but
14   does not explain how the bankruptcy court confused the issues.
15   He says that the court “relied on previous inaccuracies in
16   testimony in assuming that Appellant did not intend to perform
17   when the Settlement Agreement was made.”    But there is no
18   indication that the court assumed fraudulent intent in connection
19   with the Settlement Agreement based on its analysis of the
20   Partnership Agreement.    Nor does Mr. Sepulveda identify the
21   supposed “previous inaccuracies in testimony.”      We find no error.
22        Mr. Sepulveda also argues that he acted in good faith
23   because the Kofdarali Lawsuit settled without further litigation
24   and he offered to satisfy his remaining obligations under the
25   Settlement Agreement for $300,000.    But neither of these factors
26   has anything to do with his intent when he entered into the
27   Settlement Agreement.    The disposition of the Kofdarali Lawsuit
28   has little or no bearing on his agreement to pay for fees, costs,

                                      15
 1   and judgment in the Arriola Lawsuit.    Moreover, Mr. Adams was not
 2   obligated to accept the $300,000 settlement offer.
 3        Finally, Mr. Sepulveda argues that the court erred by
 4   finding that Mr. Adams had met his burden as to each element of
 5   the § 523(a)(2)(A) claim because Mr. Adams did not provide
 6   adequate evidence.    Mr. Sepulveda fails to expand on this
 7   argument.   As the bankruptcy court discussed extensively,
 8   Mr. Adams provided sufficient evidence to prevail on each element
 9   of his claim.
10        Therefore, we hold that the bankruptcy court did not clearly
11   err in finding that Mr. Sepulveda intended to defraud Mr. Adams.
12   B.   The bankruptcy court did not err in calculating Mr. Adams’s
          damages.
13
14        Mr. Sepulveda argues that the bankruptcy court erred in
15   calculating the damages award.    His argument is not a model of
16   clarity, but he appears to contend that the bankruptcy court
17   (1) should have applied the profit that Mr. Adams received from
18   the construction of the Arriola Property against the damages
19   award and (2) should have charged him for only half of the
20   Arriola Lawsuit costs and judgment.    We disagree on both counts.
21        1.     Mr. Sepulveda failed to raise the purported error
                 regarding Mr. Adams’s profit from the sale of the
22               Arriola Property with the bankruptcy court.
23        Mr. Sepulveda did not specifically argue to the bankruptcy
24   court that he must be credited for the profit that Mr. Adams
25   received from the Arriola Property.    Absent extraordinary
26   circumstances (none of which exist in this case), we will only
27   consider on appeal issues that were distinctly raised before the
28   bankruptcy court.    See Yamada v. Nobel Biocare Holding AG,

                                      16
 1   825 F.3d 536, 543 (9th Cir. 2016) (“[g]enerally, an appellate
 2   court will not hear an issue raised for the first time on
 3   appeal”); O’Rourke v. Seaboard Sur. Co. (In re E.R. Fegert,
 4   Inc.), 887 F.2d 955, 957 (9th Cir. 1989) (“appellate courts will
 5   not consider arguments that are not ‘properly raise[d]’ in the
 6   trial courts”); Ezra v. Seror (In re Ezra), 537 B.R. 924, 932
 7   (9th Cir. BAP 2015) (“Ordinarily, federal appellate courts will
 8   not consider issues not properly raised in the trial courts.”).
 9   An issue “must be raised sufficiently for the trial court to rule
10   on it” in the first instance.    In re E.R. Fegert, Inc., 887 F.2d
11   at 957.
12        Further, Mr. Sepulveda offered no evidence to establish the
13   amount, if any, of profit that Mr. Adams realized from the sale
14   of the Arriola Property.    Mr. Sepulveda only uses an estimate or
15   example (“e.g. <$300,000>”) of Mr. Adams’s profit.
16        Therefore, we will not consider Mr. Sepulveda’s argument
17   that the bankruptcy court should have reduced the damages award
18   by the amount of Mr. Adams’ alleged profit on the Arriola
19   project.3
20        2.     The bankruptcy court did not err in compensating
                 Mr. Adams for the full litigation costs.
21
22        Mr. Sepulveda argues that the award overcompensates
23   Mr. Adams.    He says that the court should have awarded Mr. Adams
24   only half of the costs of the Arriola Lawsuit.    We disagree.
25
          3
26          Even if we were to consider this argument, we would affirm
     the bankruptcy court’s decision. The measure of damages which
27   the bankruptcy court correctly selected, and which we discuss in
     the following section, does not require any reduction for such
28   profits.

                                      17
 1        In this case, Mr. Adams offered a calculation of his damages
 2   without much explanation, and the bankruptcy court accepted it
 3   without much discussion.   We may affirm, however, on any basis
 4   supported by the record, see Caviata Attached Homes, LLC v. U.S.
 5   Bank, N.A., 481 B.R. 34, 44 (9th Cir. BAP 2012), and the record
 6   supports that damage award.
 7         Under California law, “[a] plaintiff fraudulently induced
 8   to enter into a contract has the power to elect to affirm the
 9   contract and sue for damages resulting from the fraud; the
10   plaintiff may recover out-of-pocket damages in addition to
11   benefit-of-the-bargain damages.”     Wang v. Massey Chevrolet,
12   97 Cal. App. 4th 856, 872 (2002); see Ifeorah v. Flegal
13   (In re Ifeorah), BAP No. CC–14–1363–KuDTa, 2015 WL 3895502, at *8
14   (9th Cir. BAP June 24, 2015), aff’d in part, rev’d in part,
15   2017 WL 1046203 (9th Cir. Mar. 20, 2017) (“The overarching goal
16   of compensatory tort damages is to make the plaintiff whole.      In
17   order to accomplish this goal, the trial court typically may
18   consider out-of-pocket damages, benefit-of-the-bargain damages
19   and other measures of damages.”).     “The benefit-of-the-bargain
20   measure places a defrauded plaintiff in the position he would
21   have enjoyed had the false representation been true, awarding him
22   the difference in value between what he actually received and
23   what he was fraudulently led to believe he would receive.”       Henry
24   v. Lehman Commercial Paper, Inc. (In re First All. Mortg. Co.),
25   471 F.3d 977, 1001 (9th Cir. 2006) (citations omitted).
26   Conversely, “[t]he out-of-pocket measure restores a plaintiff to
27   the financial position he enjoyed prior to the fraudulent
28   transaction, awarding the difference in actual value between what

                                     18
 1   the plaintiff gave and what he received.”   Id.
 2        A plaintiff may choose to affirm or rescind a contract
 3   procured by fraud.   Under California law, “[i]t is settled law
 4   that if a defrauded party is induced by false representations to
 5   execute a contract, the party has the option of rescinding the
 6   contract or affirming it and recovering damages for the fraud.”
 7   Persson v. Smart Inventions, Inc., 125 Cal. App. 4th 1141, 1153
 8   (2005) (citation omitted); see Denevi v. LGCC, 121 Cal. App. 4th
 9   1211, 1220 (2004) (“To be sure, the law requires one who has been
10   defrauded into entering into a contract to choose either to
11   ‘affirm or rescind’ the contract.”).4
12
          4
13          When seeking to rescind a contract for fraud, the
     defrauded party:
14
15        may rescind a contract “[i]f the consent of the party
          rescinding, or of any party jointly contracting with
16        him, was given by mistake, or obtained through duress,
          menace, fraud, or undue influence, exercised by or with
17        the connivance of the party as to whom he rescinds, or
          of any other party to the contract jointly interested
18        with such party.” Cal. Civ. Code § 1689. Where, as
19        here, a party seeks to rescind a contract due to
          alleged fraud in the inducement, the party must allege
20        that he or she justifiably relied on misrepresentations
          made with the intent to induce him or her to execute
21        the contract. Wilke v. Coinway, Inc., 257 Cal. App. 2d
          126, 136 (1967). Additionally, the party must allege
22
          that but for his or her reliance on the
23        misrepresentations, the contract would not have been
          executed. Merced County Mut. Fire Ins. Co. v. State of
24        California, 233 Cal. App. 3d 765, 772 (1991).
25   Eisenberg v. Citibank N.A., No. 2:13-CV-01814CAS-JPRx, 2016 WL
26   3410171, at *3 (C.D. Cal. June 15, 2016). The bankruptcy court
     made appropriate findings that (1) Mr. Sepulveda obtained
27   Mr. Adams’s assent to the Partnership Agreement and Settlement
     Agreement by fraud; (2) Mr. Adams justifiably relied on
28                                                      (continued...)

                                     19
 1        It is important to recall that there are two relevant
 2   contracts in this case, and that the bankruptcy court found that
 3   Mr. Sepulveda committed fraud in connection with both of the
 4   contracts.
 5        The first contract is the Partnership Agreement, pursuant to
 6   which the parties developed and sold the Arriola Property and the
 7   Kofdarali Property.   The bankruptcy court found (and we have
 8   affirmed the finding) that Mr. Sepulveda defrauded Mr. Adams in
 9   connection with Partnership Agreement by misrepresenting the
10   status of his insurance.   The bankruptcy court’s award is
11   consistent with the “benefit of the bargain” measure of damages.
12   (Although Mr. Adams did not explicitly elect to affirm the
13   contracts and sue for damages, the damages calculation he
14   presented to the bankruptcy court makes sense only if he made
15   that election.)   If Mr. Sepulveda had proper liability insurance
16   as he represented, Mr. Adams (1) would have received his share of
17   the profits from the sale of the Arriola Property and (2) would
18   not have had to pay any of the costs of resolving the Arriola
19   Lawsuit.   To put Mr. Adams in the position he would have occupied
20   had Mr. Sepulveda told the truth about his insurance,
21   Mr. Sepulveda must pay Mr. Adams all of the costs that Mr. Adams
22   paid to resolve the Arriola Lawsuit.   In other words, Mr. Adams
23   is entitled to both the profit and all of the litigation and
24   judgment costs arising from the Arriola Lawsuit.
25        The second contract is the Settlement Agreement.   As noted
26
          4
27         (...continued)
     Mr. Sepulveda’s misrepresentations; and (3) if Mr. Adams had
28   known the truth, he would not have executed the contracts.

                                     20
 1   above, the bankruptcy court found (and we have affirmed the
 2   finding) that Mr. Sepulveda defrauded Mr. Adams in connection
 3   with the Settlement Agreement because Mr. Sepulveda never
 4   intended to perform all of his obligations under that agreement.
 5   Based on this fraud, Mr. Adams could elect to rescind the
 6   Settlement Agreement (and his damages calculation only makes
 7   sense on that basis).   The rescission of the Settlement Agreement
 8   means that the 50/50 sharing of expenses under that agreement
 9   became inoperative.
10        Mr. Sepulveda argues that the damages award was punitive in
11   nature.   This argument has no support.    The bankruptcy court did
12   not award Mr. Adams punitive damages.     All of the damages are
13   compensatory in nature.
14        Therefore, the bankruptcy court did not err in calculating
15   damages awarded to Mr. Adams.
16                               CONCLUSION
17        The bankruptcy court did not err in determining that
18   Mr. Sepulveda’s nondischargeable debt to Mr. Adams totaled
19   $527,711.70.   Therefore, we AFFIRM.
20
21
22
23
24
25
26
27
28

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