                                                        FILED
 1                         ORDERED PUBL ED
                                       ISH               MAR 11 2014

 2                                                   SUSAN M. SPRAUL, CLERK
                                                       U.S. BKCY. APP. PANEL
                                                       OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5
 6   In re:                        )      BAP No.      CC-12-1633-En Banc
                                   )
 7   BENJAMIN MOONKANG HUH,        )      Bk. No.      2:10-bk-53971-BR
                                   )
 8                  Debtor.        )      Adv. No.     2:11-ap-01143-BR
     ______________________________)
 9                                 )
     ANIL SACHAN,                  )
10                                 )
                    Appellant,     )
11                                 )
     v.                            )      O P I N I O N
12                                 )
     BENJAMIN MOONKANG HUH,        )
13                                 )
                    Appellee.      )
14   ______________________________)
15
               Argued and Submitted En Banc on November 21, 2013
16                          at Pasadena, California
17                           Filed - March 11, 2014
18               Appeal from the United States Bankruptcy Court
                     for the Central District of California
19
              Honorable Barry Russell, Bankruptcy Judge, Presiding
20
21
     Appearances:     Allen B. Felahy of Felahy Law Group argued for
22                    Appellant Anil Sachan; J. Scott Bovitz of Bovitz &
                      Spitzer argued for Appellee Benjamin Moonkang Huh.
23
24
     Before: DUNN, Chief Judge, PAPPAS, KIRSCHER, TAYLOR, and KURTZ,
25   Bankruptcy Judges.
26
27
28
 1   DUNN, Chief Judge:
 2
 3                              INTRODUCTION
 4        Appellant Anil Sachan (“Sachan”) appeals the bankruptcy
 5   court’s judgment in an adversary proceeding (“Adversary
 6   Proceeding”) in favor of appellee and defendant/debtor Benjamin
 7   Huh (“Huh”) on Sachan’s exception to discharge claim under
 8   § 523(a)(2)(A) of the Bankruptcy Code.1    In light of the Supreme
 9   Court’s recent decision in Bullock v. BankChampaign, N.A., 133 S.
10   Ct. 1754 (2013), we voted to hear this appeal en banc to
11   reconsider the Panel’s prior published opinions on the question
12   of when, if ever, it is appropriate to impute vicarious liability
13   in an exception to discharge action based on fraud.      See Ninth
14   Circuit BAP Rule 8012-2(a), (c) and (d).    We AFFIRM.
15                        I.   FACTUAL BACKGROUND2
16        Huh is a licensed real estate broker.      From some time in
17   2001 until August 2004, Huh operated a real estate and business
18   brokerage business as a sole proprietorship under the dba
19   “America Realty & Investment,” which he had registered with the
20   State of California Department of Real Estate.      In August 2004,
21   Huh incorporated his business as Amerity, Inc., but he did not
22
23        1
            Unless otherwise indicated, all chapter and section
24   references are to the federal Bankruptcy Code, 11 U.S.C. §§ 101-
     1532.
25
          2
            The facts are essentially undisputed by the parties. We
26   rely in large part on the bankruptcy court’s Findings of Fact and
27   Conclusions of Law entered on November 26, 2012 (“Findings and
     Conclusions”), as supplemented by other parts of the record, for
28   the factual narrative included herein.

                                    -2-
 1   cancel his personal registration of the America Realty &
 2   Investment dba and transfer it to Amerity, Inc.    At all relevant
 3   times, Huh personally held the California real estate broker’s
 4   license for his business.
 5        At some point in time, not clear from the record but
 6   encompassing the period 2004 through early 2005, Mr. Jay Kim
 7   (“Kim”) was associated with Amerity, Inc. and Huh as a part-time
 8   sales agent.   Kim engaged in real estate sales activities as an
 9   agent in reliance on Huh’s real estate broker’s license.      While
10   they were affiliated, the record reflects that Huh generally
11   supervised and provided some training to Kim.
12        In August 2004, Sachan, a resident of England, was looking
13   for a business to purchase in Southern California.    His
14   background was as an avionics engineer.   Sachan obtained
15   information about “La Mexicana Market” in Long Beach, California
16   (the “Market”) over the internet, targeted the Market as a
17   potential acquisition and traveled to Southern California to
18   investigate the Market.
19        In September 2004, Sachan met with Kim at the America Realty
20   & Investment office to discuss his potential acquisition of the
21   Market.   As Sachan remembered the meeting, Kim explained to him
22   that the Market “could be managed from another country with
23   minimal involvement and expense on my part.”    Kim further
24   represented that the Market “generated $35,000 in monthly
25   profits” and “had a monthly gross of $340,000.”
26        At a meeting several days later, again at the offices of
27   America Realty & Investment, Kim gave Sachan a “Disclosure
28   Regarding Real Estate Agency Relationships” form (“Disclosure

                                     -3-
 1   Form”), advising sellers and buyers, among other things, that the
 2   sales agent might represent both sides in a transaction.     The
 3   only agent identified on the Disclosure Form is America Realty &
 4   Investment, with Huh named as contact.3   At the same meeting,
 5   Sachan signed a purchase contract for the Market that identified
 6   America Realty & Investment as the Selling Agent and Broker.
 7        The Market purchase closed on or about March 2, 2005, with a
 8   total purchase price of $1,021,877.48 for the Market and its
 9   inventory.   Kim received a commission on the purchase of $38,750,
10   and Amerity, Inc. received $1,080.
11        Within weeks following the closing, Sachan received notice
12   from the City of Long Beach Department of Planning and Building
13   (“Planning Department”) that his request for an operating license
14   for the Market would be denied unless various code violations
15   were corrected and approved plans and permits were provided for
16   various structures.   Due to the costs of complying over a
17   relatively short timetable, Sachan was unable to satisfy the
18   Planning Department’s requirements and ultimately was denied a
19   business license.   In addition, the Market was cited for five
20   fire code violations and forty-seven health code violations.
21        Sachan further discovered that the Market was generating
22   sales at a far lower rate than had been represented to him,
23   closer to $250,000 a month than the represented $340,000-
24   $350,000.    After suffering heavy losses, Sachan resold the Market
25   for $660,000.   A lawsuit in the Los Angeles Superior Court
26
27        3
            The Disclosure Form reflects that it was signed by Sachan
28   on September 22, 2004.

                                      -4-
 1   (“State Action”) followed.
 2        In the State Action, Sachan alleged a number of claims,
 3   including fraud, against multiple defendants, including the
 4   former owner of the Market, Kim and America Realty & Investment.
 5   On October 22, 2007, the jury in the State Action rendered a
 6   special verdict4 in favor of Sachan.   The Los Angeles Superior
 7   Court (“State Court”) entered a Judgment on Special Verdict in
 8   the State Action including the following questions and answers:
 9        “Did Jay Kim and/or America Realty & Investment make an
          untrue representation of an important fact to Anil
10        Sachan and/or Orion Sachan Corporation [Sachan’s
          wholly-owned corporation]? (Yes.)”
11
          “Did Jay Kim and/or America Realty & Investment know
12        that the representation was false, or did he/it make
          the representation recklessly and without regard for
13        its truth? (Yes.)”
14        “Did Jay Kim and/or America Reality & Investment intend
          that Anil Sachan and/or Orion Sachan Corporation rely
15        on the representation? (Yes.)”
16        “Did Anil Sachan and/or Orion Sachan Corporation
          reasonably rely on the representation? (Yes.)”
17
          “Was Anil Sachan and/or Orion Sachan Corporation’s
18        reliance on Jay Kim and/or America Realty &
          Investment’s representation a substantial factor in
19        causing harm to Anil Sachan and/or Orion Sachan
          Corporation? (Yes.)”
20
          “[P]lease state Anil Sachan and/or Orion Sachan
21        Corporation’s economic loss: $678,000.00.”
22        “[P]lease state Anil Sachan’s non-economic loss,
          including physical pain/mental suffering: $39,500.00.”
23
24   Judgment on Special Verdict at 2-10.
25        In the meantime, on November 16, 2007, Huh quietly cancelled
26
27        4
            See Cal. Civ. Proc. Code § 624 (distinguishing between
28   general and special verdicts).

                                    -5-
 1   his registration of the America Realty & Investment dba with the
 2   California Department of Real Estate.
 3        In 2010, Sachan moved the State Court to add Huh as a
 4   defendant in the State Action.   Following an evidentiary hearing,
 5   the State Court granted the motion based on its findings that
 6   Huh, as the holder of the real estate broker’s license for his
 7   business, was the only person who legally could engage in the
 8   subject transaction, and that Huh’s exculpatory evidence and
 9   arguments were inadequate and not credible.
10        On August 16, 2010, the State Court entered an Amended
11   Judgment on Special Verdict in the State Court Action (“Amended
12   Judgment”), determining and ordering that Huh was jointly and
13   severally liable to pay a judgment to Sachan in the amount of
14   $913,867.96, with interest at 10% from October 30, 2007.    We
15   confirmed at oral argument that the Amended Judgment was not
16   appealed; so, for purposes of this appeal, the Amended Judgment
17   is final under California law.
18        On October 13, 2010, Huh filed for bankruptcy relief under
19   chapter 7.   On January 18, 2011, Sachan filed a timely complaint
20   initiating the Adversary Proceeding to except the Amended
21   Judgment debt from Huh’s discharge under § 523(a)(2)(A).
22        In denying a motion for summary judgment, the bankruptcy
23   court concluded that issue preclusion did not support a
24   determination that Huh committed fraud for purposes of
25   § 523(a)(2)(A).   That conclusion is not challenged in this
26   appeal.   Thereafter, the bankruptcy court conducted a trial in
27   the Adversary Proceeding, at which direct testimony of Sachan and
28   Huh was submitted by declaration, but both Sachan and Huh further

                                      -6-
 1   appeared and testified live.   At the conclusion of the
 2   proceedings on April 3, 2012, the bankruptcy court stated that it
 3   was going to rule for Sachan based on its understanding that it
 4   was bound by the decision in Tsurukawa v. Nikon Precision, Inc.
 5   (In re Tsurukawa), 287 B.R. 515 (9th Cir. BAP 2002), hereinafter
 6   referred to as “Tsurukawa II.”   The bankruptcy court further made
 7   the following fact findings orally:
 8        I think that the facts were that we have Huh, who was
          running the operation through his dba America Realty
 9        and Investment, and clearly Kim was his agent under any
          definition, real estate agent, but aside from that,
10        just agency relationship. He [Huh] was the only person
          who had the license who could do this. So, it was
11        clearly that was the relationship.
12   April 3, 2012 Hr’g Tr. at 182:18-24.
13        After post-trial briefing, in further proceedings, the
14   bankruptcy court noted that it was incorrect in its assumption at
15   the trial that it was bound by this Panel’s decision in Tsurukawa
16   II as a decision of the Ninth Circuit and advised counsel that it
17   would consider carefully their post-trial briefs and would
18   investigate relevant authorities further before coming to a final
19   decision.
20        At a further hearing on October 2, 2012, the bankruptcy
21   court announced its conclusion that imputed liability of a
22   principal for the active fraud of an agent would not support an
23   exception to discharge under § 523(a)(2)(A).   Although it
24   reiterated its finding that Kim was Huh’s agent, the bankruptcy
25   court declined to impute Kim’s fraud to Huh.   Accordingly, the
26   bankruptcy court found in favor of Huh on Sachan’s claim and
27   directed counsel for Huh to prepare findings of fact and
28   conclusions of law and a judgment in favor of Huh consistent with

                                      -7-
 1   its rulings.
 2        In the Findings and Conclusions, the bankruptcy court found
 3   the following facts, among others:
 4        20. Benjamin Huh never communicated directly or
          indirectly with Anil Sachan or any representative of
 5        Orion Sachan Corporation regarding the purchase of [the
          Market].
 6
          21. Huh made no misrepresentations to Anil Sachan or
 7        any representative of Orion Sachan Corporation
          regarding the purchase of [the Market].
 8
          22. Neither Jay Kim, nor anyone else, made any
 9        misrepresentations to Sachan on Huh’s behalf regarding
          the sale of [the Market].
10
          23. Prior to the sale of [the Market] on March 2,
11        2005, Benjamin Huh was not aware of [the Market] (and
          so Huh knew of no defects therein).
12
          24. Prior to the sale of [the Market] on March 2,
13        2005, Benjamin Huh was not aware of [the Market] (and
          so Huh did not know if [the Market] was generating
14        profits or not).
15        25. Huh was not aware of the Sachan/Orion Sachan
          Corporation purchase of [the Market] until after the
16        sale closed on March 2, 2005.
17   Findings and Conclusions at 8-9.
18        A dismissal judgment was entered in favor of Huh in the
19   Adversary Proceeding on November 26, 2012.    Sachan filed a timely
20   Notice of Appeal.
21                           II.    JURISDICTION
22        The bankruptcy court had jurisdiction under 28 U.S.C.
23   §§ 1334 and 157(b)(2)(I).     We have jurisdiction under 28 U.S.C.
24   § 158.
25                                 III.    ISSUE
26        Did the bankruptcy court err in declining to impute the
27   fraud of Huh’s agent, Kim, to Huh for purposes of excepting Huh’s
28   debt to Sachan from discharge under § 523(a)(2)(A)?

                                          -8-
 1                         IV.   STANDARDS OF REVIEW
 2        We review a bankruptcy court’s legal conclusions, including
 3   its interpretation of provisions of the Bankruptcy Code, de novo.
 4   Roberts v. Erhard (In re Roberts), 331 B.R. 876, 880 (9th Cir.
 5   BAP 2005), aff’d, 241 Fed. Appx. 420 (9th Cir. 2007).     De novo
 6   review requires that we consider a matter anew, as if no decision
 7   had been rendered previously.     United States v. Silverman, 861
 8   F.2d 571, 576 (9th Cir. 1988); B-Real, LLC v. Chaussee (In re
 9   Chaussee), 399 B.R. 225, 229 (9th Cir. BAP 2008).
10        We may affirm on any basis supported by the record.     Shanks
11   v. Dressel, 540 F.3d 1082, 1086 (9th Cir. 2008).
12                               V.   DISCUSSION
13        Section 523(a)(2)(A) excepts from a debtor’s discharge debts
14   resulting from “false pretenses, a false representation, or
15   actual fraud, other than a statement respecting the debtor’s or
16   an insider’s financial condition.”      A creditor seeking to except
17   a debt from discharge based on fraud bears the burden of proof by
18   a preponderance of the evidence to establish each of five
19   elements:   (1) misrepresentation, fraudulent omission or
20   deceptive conduct; (2) knowledge of the falsity or deceptiveness
21   of such representation(s) or omission(s); (3) an intent to
22   deceive; (4) justifiable reliance by the creditor on the subject
23   representation(s) or conduct; and (5) damage to the creditor
24   proximately caused by its reliance on such representation(s) or
25   conduct.    Ghomeshi v. Sabban (In re Sabban), 600 F.3d 1219, 1222
26   (9th Cir. 2010); Oney v. Weinberg (In re Weinberg), 410 B.R. 19,
27   35 (9th Cir. BAP 2009).
28        It is axiomatic that one of the major policy objectives of

                                       -9-
 1   the Bankruptcy Code is to provide the “honest but unfortunate”
 2   debtor with a fresh start.     Bugna v. McArthur (In re Bugna), 33
 3   F.3d 1054, 1059 (9th Cir. 1994), citing Grogan v. Garner, 498
 4   U.S. 279, 286-87 (1991).     Consequently, the exception to
 5   discharge provisions of the Bankruptcy Code are interpreted
 6   strictly in favor of debtors.     In re Bugna, 33 F.3d at 1059.
 7   A.   Imputed Fraud and § 523(a)(2)(A)
 8   1.   The Impact of Two Early Supreme Court Decisions
 9        Interpretation of § 523(a)(2)(A) has been impacted by two
10   late nineteenth century Supreme Court opinions interpreting a
11   predecessor provision of the Bankruptcy Act of 1867 (the “1867
12   Act”).    The subject statute provided that “no debt created by the
13   fraud or embezzlement of the bankrupt, or by defalcation as a
14   public officer, or while acting in a fiduciary capacity, shall be
15   discharged under this act.”     1867 Act, Ch. 176, § 33, 14 Stat.
16   517, 533 (1867) (repealed 1878).
17        In Neal v. Clark, 95 U.S. 704 (1877), the debtor had
18   purchased assets from the executor of an estate.     It later was
19   determined that the executor had sold the assets in violation of
20   his fiduciary duties.     In spite of the debtor’s discharge in
21   bankruptcy, the Virginia state courts held that the debtor still
22   was liable vicariously for the executor’s breach of fiduciary
23   duty.    Id. at 704-05.
24        The Supreme Court reversed in a unanimous decision authored
25   by Justice John Marshall Harlan.     In its decision, the Supreme
26   Court interpreted the term “fraud” to mean positive or active
27   fraud, and not “implied fraud, or fraud in law, which may exist
28   without the imputation of bad faith or immorality.”     Id. at 709.

                                      -10-
 1        Eight years later, the same provision of the 1867 Act was
 2   before the Supreme Court again for interpretation under different
 3   factual circumstances in Strang v. Bradner, 114 U.S. 555 (1885).
 4   In Strang, the question was whether the debts of all partners,
 5   based on one partner’s fraud, were excepted from their discharge
 6   in bankruptcy.   The record reflected that the other partners did
 7   not actively participate in their partner’s fraud, but the
 8   proceeds from his fraud went into the partnership business.    Id.
 9   at 558.
10        The decision of the Supreme Court again was unanimous and
11   again was authored by Justice Harlan.   While noting the
12   continuing validity of its decision in Neal, the court ultimately
13   concluded that the debts of the innocent partners were not
14   dischargeable, based on the following analysis:
15        [W]e are of [the] opinion that [a partner’s] fraud is
          to be imputed . . . to all the members of his firm.
16        The transaction between him and the plaintiffs is to be
          deemed a partnership transaction, because, in addition
17        to his representation that the notes were for the
          benefit of his firm, he had, by virtue of his agency
18        for the partnership, and as between the firm and those
          dealing with it in good faith, authority to negotiate
19        for promissory notes and other securities for its use.
          Each partner was the agent and representative of the
20        firm with reference to all business within the scope of
          the partnership. And if, in the conduct of partnership
21        business, and with reference thereto, one partner makes
          false or fraudulent misrepresentations of fact to the
22        injury of innocent persons who deal with him as
          representing the firm, and without notice of any
23        limitations upon his general authority, his partners
          cannot escape pecuniary responsibility therefor upon
24        the ground that such misrepresentations were made
          without their knowledge. This is especially so when,
25        as in the case before us, the partners, who were not
          themselves guilty of wrong, received and appropriated
26        the fruits of the fraudulent conduct of their associate
          in business.
27
28   Id. at 561.

                                    -11-
 1          The apparent contradictions between the Neal and Strang
 2   decisions are best explained in light of the late nineteenth
 3   century view as to what relief a debtor was entitled to in
 4   bankruptcy.
 5          Unlike the current Bankruptcy Code, the provisions of the
 6   1867 Act were not liberally construed in favor of debtors.
 7   Obtaining a discharge in bankruptcy proved exceedingly difficult;
 8   less than one-third of debtors obtained one.    See Charles Jordan
 9   Tabb, The Historical Evolution of the Bankruptcy Discharge, 65
10   AM. BANKR. L.J. 325, 357 (1991).   This was due, in part, to the
11   lengthy list of exceptions to discharge contained in the 1867
12   Act.    Id. at 358 (citing 1867 Act § 29).   The 1867 Act included
13   “[v]irtually every ground for denying discharge included in any
14   of the previous English or American bankruptcy laws . . . along
15   with several new additions.” Id. at 358-59.
16          The exceptions to discharge were, in fact, considerably
17   broader than under the subsequent Bankruptcy Act of 1898 (the
18   “1898 Act”).    See Crawford v. Burke, 195 U.S. 176, 189 (1904)
19   (noting that under § 33 of the 1867 Act, any debt created by the
20   debtor while acting in a fiduciary capacity was excepted from
21   discharge).    In contrast, under the 1898 Act, the category of
22   debts excepted from discharge was narrowed to debts for “frauds,
23   or obtaining property by false pretenses or false
24   representations, or for willful and malicious injuries to the
25   person or property of another,” and debts “created by [the
26   debtor’s] fraud, embezzlement, misappropriation, or defalcation
27   while acting as an officer or in any fiduciary capacity.”    1898
28   Act, 30 Stat. 544 § 17 (1898) (repealed 1978).

                                     -12-
 1        Against this background, the Strang court imputed fraud
 2   (and, thus, liability for exception to discharge purposes) based
 3   on general theories of partnership and agency.    As was
 4   characteristic at the time, these theories were based on the
 5   common law rather than on any specific state statutes.     Closer
 6   inspection reveals that most, if not all, of the case authorities
 7   relied on by the Strang court involved matters where the
 8   application of agency principles involved partnership law, as
 9   well as reliance on three leading treatises on partnership law.
10   Strang, 114 U.S. at 561-62.   Agency law, as we understand it
11   today, was not well developed.
12        While the current Bankruptcy Code is derived in part from
13   the 1898 Act and its predecessors (including the 1867 Act), the
14   Bankruptcy Code embodies a shift in the fundamental policies and
15   purposes of bankruptcy law.   Among other changes, the concept of
16   the discharge under the Bankruptcy Code is much more expansive.
17   Clearly, Congress did not legislatively address Strang directly
18   when it enacted the Bankruptcy Code.    But, it appears that the
19   Bankruptcy Code undercut some of the assumptions upon which the
20   1867 Act and, by extension, Strang rested.
21        Nevertheless, neither Neal nor Strang subsequently has been
22   overruled, and they constitute part of the background to the
23   adoption of § 523(a)(2)(A) by Congress in the Bankruptcy Code and
24   its subsequent amendments.    See, e.g., United States v. Alvarez-
25   Hernandez, 478 F.3d 1060, 1065 (9th Cir. 2007):
26        Under the rules of statutory construction, we presume
          that Congress acts “with awareness of relevant judicial
27        decisions.” United States v. Male Juvenile, 280 F.3d
          1008, 1016 (9th Cir. 2002); accord United States v.
28        Hunter, 101 F.3d 82, 85 (9th Cir. 1996) (“[A]s a matter

                                      -13-
 1        of statutory construction, we ‘presume that Congress is
          knowledgeable about existing law pertinent to the
 2        legislation it enacts.’”) (quoting Goodyear Atomic
          Corp. v. Miller, 486 U.S. 174, 184-85 . . . (1988)).
 3        We also “presume that when Congress amends a statute,
          it is knowledgeable about judicial decisions
 4        interpreting the prior legislation,” Porter v. Bd. of
          Trs. of Manhattan Beach Unified Sch. Dist., 307 F.3d
 5        1064, 1072 (9th Cir. 2002)[.]
 6   2.   Subsequent Circuit Court Decisions Outside the Ninth Circuit
 7        In attempting to reconcile Neal and Strang in § 523(a)(2)(A)
 8   cases dealing with imputed fraud, at least three lines of
 9   authority have developed among the circuit courts of appeals:
10   a) decisions generally denying discharge in all such cases;
11   b) decisions denying discharge only if the debtor benefitted from
12   the subject fraud; and c) decisions denying discharge only if the
13   subject debtor knew or should have known of the fraud.   See
14   Theresa J. Pulley Radwan, Determining Congressional Intent
15   Regarding Dischargeability of Imputed Fraud Debts in Bankruptcy,
16   54 MERCER L. REV. 987, 1008 (Spring 2003).
17        Exemplary of the most “absolute” approach is the decision of
18   the Fifth Circuit in Deodati v. M.M. Winkler & Assocs. (In re
19   M.M. Winkler & Assocs.), 239 F.3d 746 (5th Cir. 2001).   In
20   Winkler, the Fifth Circuit held that innocent partners were
21   precluded from discharging debts generated by their partner’s
22   fraud even if they did not benefit monetarily from the fraud.
23   Id. at 748.   It noted that the language of § 523(a)(2)(A) did not
24   include a “receipt of benefits” requirement.
25        The statute focuses on the character of the debt, not
          the culpability of the debtor or whether the debtor
26        benefitted from the fraud. See Lawrence Ponoroff,
          Vicarious Thrills: The Case for Application of Agency
27        Rules in Bankruptcy Dischargeability Litigation, 70
          Tul. L. Rev. 2515, 2542 (1996) (arguing that
28        § 523(a)(2) makes all debts that are the product of

                                    -14-
 1        fraud nondischargeable). Thus, the plain meaning of
          the statute is that debtors cannot discharge any debts
 2        that arise from fraud so long as they are liable to the
          creditor for the fraud.
 3
 4   Id. at 749.   It further cited Strang for the proposition that
 5   “benefit to an innocent partner is an aggravating factor and not
 6   a requirement to impute nondischargeable fraud liability.”    Id.
 7   See Tummel & Carroll v. Quinlivan (In re Quinlivan), 434 F.3d
 8   314, 318-19 (5th Cir. 2005).
 9        The “receipt of benefits” approach was adopted by the Sixth
10   Circuit in BancBoston Mortg. Corp. v. Ledford (In re Ledford),
11   970 F.2d 1556 (6th Cir. 1992), cert. denied, 507 U.S. 916 (1993).
12   In Ledford, the Sixth Circuit, citing Strang, concluded that a
13   partner, innocent of active fraud, could nonetheless be subject
14   to an exception to discharge for a debt generated by the fraud of
15   his partner, acting in the ordinary course of the partnership’s
16   business, where the innocent partner shared in the financial
17   benefit of the fraud.   Id. at 1561-62.   See Luce v. First Equip.
18   Leasing Corp. (In re Luce), 960 F.2d 1277 (5th Cir. 1992)
19   (distinguished in Winkler, 239 F.3d at 749-51).
20        The third line of authority, characterized as “knew or
21   should have known,” is represented by the Eighth Circuit’s
22   decision in Walker v. Citizens State Bank (In re Walker), 726
23   F.2d 452 (8th Cir. 1984).   In Walker, the Eighth Circuit held
24   with regard to a principal/agent relationship, that before an
25   agent’s fraud can be imputed to a principal-debtor, proof was
26   required that the principal “knew or should have known of the
27   fraud.”   Id. at 454.
28        If the debtor was recklessly indifferent to the acts of

                                    -15-
 1         his agent, then the fraud may also be attributable to
           the debtor-principal. E.g., David v. Annapolis Banking
 2         & Trust Co., 209 F.2d 343, 344 (4th Cir. 1953). . . .
           The debtor who abstains from all responsibility for his
 3         affairs cannot be held innocent for the fraud of his
           agent if, had he paid minimal attention, he would have
 4         been alerted to the fraud. See In re Savarese, 209 F.
           [830,] 832 [(2d Cir. 1913)]; David, 209 F.2d at 344.
 5
                Thus, we agree with the district court that more
 6         than the mere existence of an agent-principal
           relationship is required to charge the agent’s fraud to
 7         the principal. However, . . . actual participation in
           the fraud by the principal is not always required. If
 8         the principal either knew or should have known of the
           agent’s fraud, the agent’s fraud will be imputed to the
 9         debtor-principal. When the principal is recklessly
           indifferent to his agent’s acts, it can be inferred
10         that the principal should have known of the fraud.
11   Id.   See, e.g., Reuter v Cutcliff (In re Reuter), 686 F.3d 511,
12   514, 518-19 (8th Cir. 2012) (Exceptions to discharge affirmed
13   based on vicarious liability where the debtor had lent his “clean
14   background [as a successful real estate developer] and verifiable
15   ownership of [an] impressive office building” to the fraudulent
16   activities of his partner.); David v. Annapolis Banking & Trust
17   Co., 209 F.2d 343, 344 (4th Cir. 1953) (Discharge denied to
18   debtor wife whose husband obtained a bank loan in her name.     The
19   bank refused to make the loan unless she provided a financial
20   statement.   The debtor signed a financial statement that “grossly
21   misrepresented her financial condition,” which was submitted to
22   the bank by her husband, and her only excuse was that “she relied
23   upon her husband, whom she allowed to carry on business in her
24   name.”); and In re Lovich, 117 F.2d 612, 614-15 (2d Cir. 1941)
25   (“[W]e believe that when a false statement is made by an agent,
26   some additional facts must exist justifying an inference that the
27   bankrupt knew of the statement and in some way acquiesced in it
28   or failed to investigate its accuracy.”).

                                    -16-
 1        In addition, there is arguably a fourth line of circuit
 2   authority, characterized as “minimalist,” that recognizes the
 3   continuing vitality of the Strang precedent, but limits its
 4   application to its specific partnership/agency context.   See,
 5   e.g., Owens v. Miller (In re Miller), 276 F.3d 424, 428-29 (8th
 6   Cir. 2002) (declining to impute fraud for exception to discharge
 7   purposes under § 523(a)(2)(A) to “control persons” under § 20(a)
 8   of the Securities Exchange Act of 1934, 15 U.S.C. § 78t(a)); and
 9   Hoffend v. Villa (In re Villa), 261 F.3d 1148, 1151-54 (11th Cir.
10   2001) (same).
11        For the reasons stated in the following discussion, we
12   explicitly adopt the “knew or should have known” standard from
13   Walker (hereinafter referred to as the “Walker Standard”) as most
14   legally and logically appropriate and most consistent with our
15   prior published precedents and the direction of Supreme Court and
16   Ninth Circuit decisions.
17   3.   Relevant Supreme Court Decisions
18        The Supreme Court has not recently examined the question of
19   whether fraud liability can be imputed under § 523(a)(2)(A), but
20   two decisions, one recent and one from approximately 15 years
21   ago, are relevant to the disposition in this appeal.
22        In Kawaauhau v. Geiger, 523 U.S. 57 (1998), the Supreme
23   Court considered whether the exception to discharge in
24   § 523(a)(6) for “willful and malicious injury by the debtor to
25   another” could be applied to a debt resulting from medical
26   malpractice, attributable to negligent or reckless conduct.    The
27   bankruptcy court had ruled in favor of the creditor, concluding
28   that since the debtor doctor’s treatment of the creditor was far

                                    -17-
 1   below an “appropriate standard of care,” it qualified as “willful
 2   and malicious,” and the resulting damages were excepted from
 3   discharge.   After the district court affirmed, a divided Eighth
 4   Circuit en banc reversed, holding that the § 523(a)(6) exception
 5   to discharge was limited to intentional torts.     The Eighth
 6   Circuit’s decision was in conflict with decisions of the Sixth
 7   and Tenth Circuits.     The Supreme Court accepted the case to
 8   resolve the circuit split.
 9        The question before the Supreme Court was, “Does
10   § 523(a)(6)’s compass cover acts, done intentionally, that cause
11   injury . . . , or only acts done with the actual intent to cause
12   injury?”   Id. at 61.    The Supreme Court concluded that
13   establishing § 523(a)(6) nondischargeability “takes a deliberate
14   or intentional injury, not merely a deliberate or intentional act
15   that leads to injury. . . . [T]he (a)(6) formulation triggers in
16   the lawyer’s mind the category ‘intentional torts,’ as
17   distinguished from negligent or reckless torts.”     Id. (emphasis
18   in original).   Interpreting § 523(a)(6) more broadly would
19   contravene the guiding principle that exceptions to discharge
20   “should be confined to those plainly expressed.”     Id. at 62,
21   quoting Gleason v. Thaw, 236 U.S. 558, 562 (1915).
22        Last year, in Bullock v. BankChampaign, N.A., 133 S. Ct.
23   1754 (2013), the Supreme Court considered the exception to
24   discharge in § 523(a)(4) “for fraud or defalcation while acting
25   in a fiduciary capacity, embezzlement, or larceny.”
26   Specifically, the question was whether excepting a debt for
27   fiduciary defalcation from discharge required a showing of the
28   debtor’s subjective bad or extremely reckless state of mind, or

                                      -18-
 1   would a more objective showing suffice, a question on which a
 2   number of circuits, including the Ninth Circuit, had split.
 3        Based on its analysis of the statutory language, citing
 4   Neal, and reiterating its commitment to interpreting the
 5   exceptions to discharge narrowly, the Supreme Court held that
 6   excepting a claim for fiduciary defalcation from a debtor’s
 7   discharge required that the creditor claimant establish the
 8   debtor’s “culpable state of mind.”     Id. at 1757, 1759-60.   “We
 9   describe that state of mind as one involving knowledge of, or
10   gross recklessness in respect to, the improper nature of the
11   relevant fiduciary behavior.”   Id. at 1757.
12        The Geiger and Bullock decisions appear to cut strongly
13   against applying imputed fraud under § 523(a)(2)(A) to except a
14   debt from discharge in the absence of some showing of culpability
15   on the part of the debtor.
16   4.   Ninth Circuit Analysis
17        While the Ninth Circuit has never directly ruled on the
18   question of whether imputed fraud liability can support an
19   exception to discharge under § 523(a)(2)(A), it has expressed a
20   number of views relevant to the subject in discharge exception
21   cases.   In Impulsora Del Territorio Sur, S.A. v. Cecchini (In re
22   Cecchini), 780 F.2d 1440 (9th Cir. 1986), a § 523(a)(6) case, one
23   of the issues considered was whether a partner’s (Cecchini’s)
24   willful conversion of the plaintiff’s funds would be imputed to
25   another partner (Robustelli) for exception to discharge purposes.
26        The Ninth Circuit concluded that § 523(a)(6), which, as
27   noted above, excepts from a debtor’s discharge debts for willful
28   and malicious injury, did not require that the debtor have an

                                     -19-
 1   intent to injure, but rather required only that the debtor commit
 2   an intentional act leading to injury.   Id. at 1442-43.
 3        On the question of whether Robustelli’s debt to the
 4   plaintiff should be excepted from his discharge, the Ninth
 5   Circuit came to the following conclusions:
 6        [A]lthough there is no evidence in the record
          concerning Robustelli’s direct involvement in
 7        converting the funds, it is undisputed that Robustelli
          and Cecchini were partners in C.V.R. It is also
 8        undisputed that Cecchini was acting on behalf of the
          partnership and in the ordinary course of the business
 9        of the partnership when he converted the funds.
          Robustelli, at a minimum, participated in the benefits
10        of the conversion, as evidenced by his entering into
          the stipulated judgment in favor of plaintiff.
11        Therefore, applying basic partnership law, Cecchini’s
          knowledge and intent are imputed to Robustelli.
12        [citations omitted] We find that, as to Robustelli as
          well, the debt cannot be discharged.
13
14   Id. at 1444.
15        As discussed above, the lack of a specific intent to injure
16   holding in Cecchini was effectively overruled by the Supreme
17   Court in its Geiger decision.   Consequently, the continued
18   efficacy of Cecchini as precedent on related questions is
19   compromised.   However, to the extent that imputed conversion can
20   be analogized to imputed fraud, the limited analysis in Cecchini
21   would appear to place the Ninth Circuit in the “receipt of
22   benefits” camp.   Generally, that seems anomalous in light of the
23   Ninth Circuit’s consistent subsequent holdings that a receipt of
24   benefits is not a required element to establish an exception to
25   discharge for fraud under § 523(a)(2)(A).    See, e.g., Ghomeshi v.
26   Sabban (In re Sabban), 600 F.3d 1219, 1222-23 (9th Cir. 2010);
27   Muegler v. Bening, 413 F.3d 980, 983-84 (9th Cir. 2005).
28        In La Trattoria, Inc. v. Lansford (In re Lansford), 822 F.2d

                                     -20-
 1   902, 904-05 (9th Cir. 1987), a § 523(a)(2)(B) case, the Ninth
 2   Circuit panel questioned the application of imputed liability to
 3   except a debt from discharge under the standard outlined in
 4   Cecchini.   However, since the Ninth Circuit ultimately concluded
 5   that the bankruptcy court did not clearly err in finding that Ms.
 6   Lansford was directly involved and bore some responsibility for
 7   the false and misleading financial statement at issue, its qualms
 8   regarding the Cecchini standard for imputing liability to except
 9   a debt from discharge are stated in dicta.     See id. at 905.
10        Most recently, the Ninth Circuit discussed the scope of
11   § 523(a)(2)(A) in Sherman v. Sec. & Exch. Comm’n (In re Sherman),
12   658 F.3d 1009 (9th Cir. 2011).     The issue in In re Sherman was
13   whether the exception to discharge in § 523(a)(19), dealing with
14   state and federal securities frauds, extended to a debtor who
15   “himself [was] not culpable for the securities violation that
16   caused the debt.”   Id. at 1010.
17        In analyzing § 523(a)(19), the Ninth Circuit compared the
18   range of other exception to discharge provisions, including
19   § 523(a)(2)(A).   In its discussion of § 523(a)(2)(A), the court
20   stated that an underlying assumption reflected in the Ninth
21   Circuit’s § 523(a)(2)(A) decisions is that “the fraudulent
22   conduct must have been the debtor’s.”     Id. at 1014-15.   However,
23   the discussion does not refer either to Strang or to any of the
24   decisions from other circuits that have wrestled with the
25   questions as to whether or when the fraud of a partner or agent
26   can be imputed to another partner or principal for exception to
27   discharge purposes.
28        As a bottom line matter, from the foregoing discussion of

                                      -21-
 1   Ninth Circuit authorities that have touched on issues relevant to
 2   resolution of this appeal, we cannot predict with certainty how
 3   the Ninth Circuit would decide whether the fraud of an agent can
 4   ever be imputed to a principal for purposes of excepting a debt
 5   from discharge under § 523(a)(2)(A).   However, what does seem
 6   clear is that the Ninth Circuit currently would be unlikely to
 7   follow either the “absolute” or “receipt of benefits” lines of
 8   authority.
 9   5.   Tsurukawa II and Related Opinions of this Panel
10        We previously have addressed the issue of imputed fraud
11   liability for § 523(a)(2)(A) purposes in a trilogy of published
12   opinions.    In Tobin v. Sans Souci Ltd. P’ship (In re Tobin), 258
13   B.R. 199 (9th Cir. BAP 2001), this Panel confronted the following
14   question: “[M]ay a fraudulent representation, imputed to an
15   individual debtor/defendant as a corporate alter ego, be the
16   basis for nondischargeability where there is no evidence the
17   debtor himself made any representations to the creditor or
18   knowingly participated in the fraudulent scheme?”   Id. at 204.
19        The debtor/defendant was a real estate agent in a real
20   estate development corporate business (“Corporation”) that had
21   been formed by his father.   When the Corporation’s business
22   failed, its lender sued father, son and the Corporation and
23   obtained a joint and several state court judgment against all
24   three for fraud, among other claims.   The state court made no
25   findings as to the debtor’s individual conduct, but found him
26   liable as an alter ego, determining that there was a “unity of
27   interest” among him, his father and the Corporation.   Id. at 201.
28   In other words, the debtor was liable not because he was an agent

                                     -22-
 1   of the Corporation; he was liable because, in effect, he was the
 2   Corporation.    The bankruptcy court held that the state court
 3   judgment debt was excepted from the debtor’s discharge,
 4   determining on summary judgment that it was bound by the state
 5   court’s fraud findings as a matter of issue preclusion.     Id. at
 6   202.
 7          The Panel reversed, noting that the Ninth Circuit had
 8   questioned application of the Cecchini standard to impute
 9   liability for exception to discharge purposes in Lansford.     Id.
10   at 205 (also citing Cal. State Bank v. Lauricella (In re
11   Lauricella), 105 B.R. 536, 539 n.3 (9th Cir. BAP 1989)).     From
12   the record before it, the Panel further noted that the debtor had
13   submitted a declaration in opposition to the lender’s motion for
14   summary judgment, stating that he “neither knowingly participated
15   in the fraudulent scheme nor made representations” to the lender
16   in connection with its loans to the Corporation.     258 B.R. at
17   205-06.    Since the lender had not submitted any contravening
18   evidence, summary judgment in its favor was not appropriate.       Id.
19   at 206.
20          On the same day it issued the Tobin opinion, this Panel
21   issued its first opinion in a Tsurukawa appeal, Tsurukawa v.
22   Nikon Precision, Inc. (In re Tsurukawa), 258 B.R. 192 (9th Cir.
23   BAP 2001) (hereinafter referred to as “Tsurukawa I”).     The debtor
24   Etsuko Tsurukawa (“Mrs. Tsurukawa”) was married to Takehiko
25   Tsurukawa (“Mr. Tsurukawa”).    Mr. Tsurukawa was employed by Nikon
26   Precision, Inc. (“Nikon”), where his duties included managing
27   repairs and refurbishing of parts for customers’ equipment.       The
28   actual repairs were made off-site.     Mr. Tsurukawa determined

                                     -23-
 1   whether parts in fact should be repaired, and he selected the
 2   repair facilities.    Id. at 193-94.
 3         In 1991, Mr. Tsurukawa asked Mrs. Tsurukawa to register a
 4   business in her name, and in May 1991, she “executed and
 5   submitted an application for a fictitious business statement for
 6   High Innovation.”    Id. at 194.    On the application, she
 7   represented that she was the sole owner of High Innovation and
 8   stated its mailing address as 1765 Buchanan Street, San
 9   Francisco, California.    High Innovation never conducted business
10   at that address, and in fact, Japan Trading Company, the business
11   that was located at the Buchanan Street address, was operated by
12   Mrs. Tsurukawa’s parents.    Id.    Mrs. Tsurukawa actually leased
13   property at 2636 Judah Street, San Francisco, California from
14   which High Innovation’s business was run.      Id.   In 1991,
15   Mrs. Tsurukawa also opened a bank account (“Account”) for High
16   Innovation and listed herself as the sole signatory on the
17   Account, with the Buchanan Street address listed as High
18   Innovation’s business address.      Id.
19              At some point in 1991, [Mr. Tsurukawa] began
           directing Nikon’s repair work to High Innovation. He
20         represented to Nikon that High Innovation was a
           reputable company capable of performing repair work on
21         Nikon’s parts. However, High Innovation did not
           perform the majority of the repair work. Instead, [Mr.
22         Tsurukawa] sent the parts to third parties and billed
           Nikon for the repairs at prices significantly in excess
23         of the actual costs of the repairs.
24   Id.   Mrs. Tsurukawa did not participate in the management of High
25   Innovation’s business and had no business contact with Nikon.
26   Id.
27         Nikon eventually discovered the High Innovation scheme and
28   fired Mr. Tsurukawa.    State court litigation followed in which

                                        -24-
 1   the Tsurukawas ultimately stipulated to a judgment in favor of
 2   Nikon for $2,000,000 on Nikon’s claims for “(1) fraud and deceit,
 3   (2) conversion, and (3) misappropriation of trade secrets.”      Id.
 4        Mrs. Tsurukawa later filed for relief under chapter 7, and
 5   Nikon filed an adversary proceeding complaint to except the
 6   stipulated judgment debt from her discharge.      After a trial, the
 7   bankruptcy court found in favor of Nikon on what this Panel
 8   interpreted as Nikon’s § 523(a)(2)(A) and (a)(6) claims against
 9   Mrs. Tsurukawa.     Id. at 195 n.7.   The bankruptcy court’s decision
10   was supported by its following conclusions:
11        [T]he wrongful acts of a spouse can be attributed to
          the debtor at least where the following facts are
12        established: (1) the debtor participates significantly
          in the operation of the business; (2) the wrongful
13        conduct of the spouse occurs in the ordinary course of
          the operation of that business; (3) the debtor has
14        reason to suspect that the spouse is engaged in
          wrongful activity; (4) the debtor enjoys benefits from
15        the wrongful activity; and (5) no unusual circumstances
          make it unjust to attribute the wrongful conduct of the
16        spouse to the debtor.
17   Id. at 195.
18        The issue before the Panel in Tsurukawa I was “[w]hether the
19   wrongful conduct of one spouse can be attributed to the other
20   spouse for purposes of nondischargeability of debt under
21   § 523(a).”    Id.   After considering Neal, Strang, various circuit
22   authorities, including Cecchini and Lansford, and the legislative
23   history of § 523(a)(2)(A), the Panel answered that question in
24   the negative.    “[W]e hold that a marital union alone, without a
25   finding of a partnership or other agency relationship between
26   spouses, cannot serve as a basis for imputing fraud from one
27   spouse to the other.”     Id. at 198.   The Panel reversed and
28   remanded the adversary proceeding to the bankruptcy court to

                                      -25-
 1   determine “whether (1) an agency relationship existed between
 2   [the Tsurukawas] or (2) [Mrs. Tsurukawa] had the requisite
 3   fraudulent intent to deceive Nikon.”    Id.
 4          Following remand, the bankruptcy court found that a business
 5   partnership and agency relationship existed between Mr. and Mrs.
 6   Tsurukawa supporting an exception to discharge judgment against
 7   Mrs. Tsurukawa under § 523(a)(2)(A), thereby setting the stage
 8   for this Panel’s decision in Tsurukawa II.
 9          The factual background summarized in Tsurukawa II tracked
10   the factual summary in Tsurukawa I with the addition that the
11   Tsurukawas used much of the money received through High
12   Innovation for “personal consumption, such as buying two
13   additional houses and new cars.”    287 B.R. at 519.   The legal
14   issue on which the Tsurukawa II Panel focused was whether “fraud
15   may be imputed to a spouse under partnership/agency principles in
16   a § 523(a)(2)(A) action.”    Id. at 520.
17          After concluding that the bankruptcy court did not clearly
18   err in its fact findings that the Tsurukawas were in partnership
19   together and that Mr. Tsurukawa acted as the partnership’s agent,
20   the Panel again examined the legislative history of
21   § 523(a)(2)(A), Neal, Strang, and various circuit and other
22   authorities, again including Cecchini and Lansford, and comparing
23   the Panel’s prior recent opinion in Tobin.    After a careful and
24   thorough review, the Panel ultimately concluded that married
25   business partners are liable for their mutual partnership
26   obligations “under well-established agency principles.”     Id. at
27   527.    Accordingly, it held “that fraud may be imputed to a spouse
28   under partnership/agency principles in a § 523(a)(2)(A) action”

                                     -26-
 1   and affirmed the bankruptcy court’s judgment.   Id.
 2        Although this Panel did not expressly base its conclusions
 3   in Tobin, Tsurukawa I and Tsurukawa II on the Walker Standard,
 4   the dispositions in all three decisions are consistent with
 5   application of the Walker Standard.
 6   B.   The Current Appeal
 7        The bankruptcy court stated two rationales for its decision:
 8   First, “[t]his idea of imputation simply is not what Congress
 9   intended.   And that’s my understanding of the law.”   October 2,
10   2012 Hr’g Tr. at 1:24-2:1.   Based on the foregoing historical
11   analysis and discussion, we disagree, but our disagreement on
12   that point is not dispositive in this appeal.
13        The second rationale for the bankruptcy court’s decision in
14   this case is, even if fraud liability can be imputed for purposes
15   of § 523(a)(2)(A) in certain circumstances, it is not appropriate
16   to do so where the debtor and the person who committed active
17   fraud have no more than a principal-agent relationship.   We are
18   not comfortable concluding that under no circumstances can the
19   fraud of an agent be imputed to his principal for exception to
20   discharge purposes under § 523(a)(2)(A).   However, based on the
21   reasoning in the cases decided by the Supreme Court, the Ninth
22   Circuit and other courts, as discussed above, debts incurred as
23   the result of the debtor’s agent’s fraud should not be excepted
24   from discharge unless the debtor is culpable.   See, e.g., Bullock
25   v. BankChampaign, N.A., 133 S. Ct. at 1757; and Sherman, 658 F.3d
26   at 1014-15.   Accordingly, as stated above, we adopt the Walker
27   Standard.
28        Under that standard, more than a principal/agent

                                    -27-
 1   relationship is required to establish a fraud exception to
 2   discharge.   While the principal/debtor need not have participated
 3   actively in the fraud for the creditor to obtain an exception to
 4   discharge, the creditor must show that the debtor knew, or should
 5   have known, of the agent’s fraud.      Because this standard focuses
 6   on the culpability of the debtor, and not solely on the actions
 7   of the agent, we think it most properly comports with the recent
 8   holdings of the Supreme Court and the Ninth Circuit regarding
 9   discharge exceptions.    While this conclusion does not adopt the
10   second rationale propounded by the bankruptcy court in support of
11   its decision, we nonetheless can and will affirm its decision
12   based on its unchallenged findings of fact supporting discharge
13   under the Walker Standard.
14        In the Amended Judgment, the State Court held Huh
15   vicariously liable for Kim’s fraud as a sales agent for America
16   Realty & Investment.    The Amended Judgment is final, but it is
17   not necessarily dispositive in this case because the
18   interpretation of exceptions to discharge under the Bankruptcy
19   Code, while informed by relevant state law, ultimately is a
20   matter of federal law.    See Grogan v. Garner, 498 U.S. at 284
21   (“Since 1970, . . . the issue of nondischargeability has been a
22   matter of federal law governed by the terms of the Bankruptcy
23   Code.”), citing Brown v. Felsen, 442 U.S. 127, 129-30, 136
24   (1979).
25        The bankruptcy court made the following specific findings
26   with respect to Huh’s knowledge and conduct concerning Sachan’s
27   acquisition of the Market:
28        1) Huh never communicated with Sachan or any

                                     -28-
 1        representative of his corporation regarding purchase of
          the Market.
 2
          2) Huh never made any representations to Sachan or any
 3        representative of Sachan’s corporation regarding
          purchase of the Market.
 4
          3) Prior to the sale of the Market, Huh was not even
 5        aware of the Market and certainly was not aware of any
          defects in the Market or whether it was generating
 6        profits or not.
 7        4) Huh was not aware of the Sachan/Orion Sachan
          Corporation purchase of the Market until after the sale
 8        closed on March 2, 2005.
 9   None of these fact findings has been challenged as erroneous on
10   appeal.   In addition, the record reflects that a substantial
11   majority of the economic benefits to the broker from the Market
12   sale went to Kim individually ($38,750 or 97.3%), rather than to
13   Amerity, Inc. or Huh personally ($1,080 or 2.7%).
14        In these circumstances, mindful of the admonition to
15   interpret the exception to discharge provisions of the Bankruptcy
16   Code narrowly in favor of the debtor and against creditors, we
17   conclude that the record does not establish that Huh knew or had
18   reason to know of any misrepresentations made by Kim to Sachan or
19   Orion Sachan Corporation with respect to the Market.   In fact,
20   Huh was not aware of the Market or of Sachan’s interest in
21   acquiring it until after the purchase closed.   Based on the
22   bankruptcy court’s fact findings, we cannot conclude that Huh
23   knew or should have known of the frauds of his agent, Kim, in
24   this case.
25        Accordingly, we hold, applying the Walker Standard, that
26   imputing Kim’s fraud to Huh for exception to discharge purposes
27   under § 523(a)(2)(A) where Huh did not know or have reason to
28   know of his agent’s fraud, is not consistent with the provisions

                                    -29-
 1   or objectives of the Bankruptcy Code.
 2                            VI.   CONCLUSION
 3        For the foregoing reasons, we AFFIRM the bankruptcy court’s
 4   judgment dismissing Sachan’s § 523(a)(2)(A) claim against Huh.
 5
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