Hamilton v. Charalambous (In re Charalambous)
- Citation:
- BAP No. CC-13-1042-PaDKi (B.A.P. 9th Cir. July 3, 2013)
- Tag(s):
-
- Ruling:
- The Bankruptcy Appellate Panel of the Ninth Circuit VACATED the bankruptcy court's order denying creditor-plaintiff's request for attorney's fees in connection with an adversary proceeding and REMANDED the matter back to the bankruptcy court for a determination of fees.
- Procedural context:
- Creditor-plaintiff appealed the bankruptcy court's order denying her request for attorney's fees incurred in connection with an adversary proceeding.
- Facts:
- Creditor contacted the debtor, a home design consultant, to discuss a project to remodel her home. Things went sour when creditor sued debtor in state court, alleging breach of contract and fraud; debtor asserted a cross-complaint against creditor for defamation and emotional distress. Before trial commenced, debtor filed his chapter 7 petition. Creditor commenced an adversary proceeding against debtor, seeking an exception to discharge under 11 U.S.C. §§ 523(a)(2)(A), (a)(4), and (a)(6). After trial, the bankruptcy court held that creditor-plaintiff had not met her burden in proving the (a)(2) and (a)(6) claims. The bankruptcy court, however, found in favor of creditor-plaintiff on her (a)(4) claim. Thereafter, creditor-plaintiff filed a motion for an award of attorney's fees, and debtor-defendant did not oppose the motion. The bankruptcy court denied creditor-plaintiff's motion. In so ruling, the court did not discuss the application of Code of Civil Procedure § 1021 to the request. Rather, the court analayzed the request under Civil Code § 1717. This appeal ensued.
First, the BAP held that debtor-defendant had standing to appear in the appeal even though he did not oppose creditor-plaintiff's motion for an award of attorney's fees in the bankruptcy court. Second, the panel held that the bankruptcy court abused its discretion because it applied the incorrect statute in its decision concerning creditor-plaintiff's motion for attorney's fees. California law allows enforcement of agreements for attorney's fees in Civil Code § 1717 and Code of Civil Procedure § 1021. Whereas Civil Code § 1717 applies only in contract disputes, Code of Civil Procedure § 1021 applies in tort as well as contract disputes. An agreement existed between the parties that provides for an award of attorney's fees to the prevailing party in any litigation between them. The dispute between creditor-plaintiff and debtor-defendant, which resulted in a decision in favor of creditor-plaintiff under 11 U.S.C. § 523(a)(4) for defalcation was, at bottom, a tort dispute. Thus, the bankruptcy court's reliance on Civil Code § 1717 to dispose of creditor-plaintiff's request for attorney's fees was misplaced and an abuse of discretion. California courts have uniformly ruled that Civil Code § 1717 is to be narrowly applied and is available to a party only if the dispute involves litigation of a contract claim.
- Judge(s):
- PAPPAS, DUNN, and KIRSCHER
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