In re Bartenwerfer

Case Type:
Case Status:
BAP No. NC-19-1178-TaFB (9th Circuit, Apr 23,2020) Published
BAP for 9th Circuit affirmed ruling of bankruptcy court (ND Cal.) entering non-dischargeable judgment against debtor including attorneys' fees. Start court fraud and non-fraud claims were inextricably intertwined, making fee apportionment impossible. Record supported conclusion that because fees were intertwined, all fees were nondischargeable.
Procedural context:
Bankruptcy court (ND California) entered judgment against debtor excepting state court judgment from discharge. Debtor appealed to BAP for 9th Circuit. BAP vacated and remanded portion of judgment that included state court attorneys' fees. On remand, bankruptcy court again included attorneys' fees in non-dischargeable judgment. Debtor appealed to BAP for 9th Circuit.
Prepetition, Debtors purchased a home in San Francisco, California (“Property”), which they remodeled and sold to Mr. Buckley. Before the sale, Debtors signed a transfer disclosure statement and a supplement thereto (collectively, the “TDS”), which contained false representations regarding, inter alia, water leaks, defective window conditions, open permit issues, and fire escape non-compliance (“Defects”). Mr. Buckley discovered the Defects after the sale and sued the Debtors in state court. His complaint included eight claims: (1) strict liability; (2) breach of express warranty; (3) breach of implied warranty; (4) negligence; (5) breach of contract; (6) negligent misrepresentation; (7) fraud/deceit; and (8) rescission. All of the claims relied on and incorporated the core factual allegations that Debtors engaged in the business of remodeling and selling residences to the general public and failed to construct the Property in accordance with proper and approved techniques and failed to hire and adequately manage capable contractors, subcontractors, and failed to perform work at the Property in compliance with California building code standards. After a 19-day trial, the jury found in Mr. Buckley’s favor on his breach of contract, negligence, and failure to disclose information but in Debtors’ favor on his intentional and negligent misrepresentation claims. The jury found against Debtors on their breach of contract claim. And the jury awarded Mr. Buckley $444,671 in damages, which the state court reduced in an amended judgment (“State Court Judgment”) to $234,671, plus 10% interest, attorneys’ fees, and costs, pursuant to a noticed motion. Mr. Buckley then filed a motion seeking attorneys’ fees, but the Debtors filed their chapter 7 bankruptcy before the state court could hear it. Mr. Buckley filed adversary complaint to except debt from discharge. The bankruptcy court excepted the entire judgment from discharge. Mr. Buckley moved for attorneys' fees incurred in State Court Action. The bankruptcy court awarded approximately $350,000 as nondischargeable.
Taylor, Faris, Brand

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