Condie v. Condie

• Citation: 139 P.3d 271,2006 UT App 243
• Decision Date: 15 June 2006
• Docket Number: No. 20050450-CA.,20050450-CA.
• Parties: Sarah S. CONDIE nka Sarah S. Seals, Petitioner and Appellant, v. David C. CONDIE, Respondent and Appellee.
• Court: Court of Appeals of Utah

139 P.3d 271

2006 UT App 243

Sarah S. CONDIE nka Sarah S. Seals, Petitioner and Appellant, v. David C. CONDIE, Respondent and Appellee.

No. 20050450-CA.

Court of Appeals of Utah.

June 15, 2006.

COPYRIGHT MATERIAL OMITTED

Scott B. Mitchell, Salt Lake City, for Appellant.

Jarrod H. Jennings, Corporon Williams & Bradford, Salt Lake City, for Appellee.

Before Judges GREENWOOD, BILLINGS, and McHUGH.

OPINION

McHUGH, Judge:

¶ 1 Sarah S. Seals appeals from a trial court order denying her motion for an award of attorney fees she incurred in filing an adversary proceeding in her ex-husband David C. Condie's bankruptcy case. We remand for further proceedings consistent with this opinion.

BACKGROUND

¶ 2 Condie and Seals divorced on November 22, 1999. The Decree of Divorce (the Decree) contained a hold harmless provision ordering Condie to "assume complete responsibility for all loans, debts[,] and obligations, whether incurred by [Condie] or incurred jointly as husband and wife, with the exception of the loan on the 1995 Eagle Vision automobile, which [Seals] shall assume." One of the debts Condie assumed was a promissory note executed in favor of the Hopkinsville Federal Savings Bank in Kentucky for a home Condie and Seals purchased in April 1997 while married (the Hopkinsville debt). The promissory note was secured by real property in Tooele County, Utah (the Tooele property), that Seals owned. The Decree's only reference to attorney fees is a statement that "[e]ach party shall assume and pay their respective attorney fees and costs incurred in this matter."

¶ 3 After the divorce, Condie began to suffer severe financial hardship and, consequently, failed to make payments on the Hopkinsville debt. In August 2000, the bank filed an action in Kentucky against both Condie and Seals to collect the outstanding debt.

¶ 4 On December 29, 2000, Condie filed for voluntary Chapter 7 bankruptcy in Utah. Condie did not originally list Seals as a creditor on his bankruptcy schedules. The parties dispute whether Condie ever had the intention of attempting to discharge the Hopkinsville debt and whether Seals demanded to be listed as a creditor. Nonetheless, on January 24, 2001, Condie sent Seals a letter informing her that she was "inadvertently not listed as a creditor in the initial creditor matrix, lists[,] and schedules filed with the court" and that she would "be listed as a creditor on an amended matrix." The letter further stated,

Accordingly, you are hereby given notice of this case, and informed that the debt due you will be discharged the same as if your debt had been duly listed and scheduled....

. . . . If you do not file a claim with the bankruptcy court to determine whether the debt to Hopkinsville Federal Savings Bank is nondischargeable under the Decree of Divorce ... or the [relevant Bankruptcy Code provision] ... then the debt may be discharged ... and discharge operates as an injunction against any act to collect a discharged debt.

¶ 5 Seals hired an attorney to file an adversary proceeding in Condie's bankruptcy case, because, according to her testimony, she believed that it was necessary to protect the Tooele property. The parties attempted to settle the dispute but were unsuccessful. Seals received partial summary judgment in her favor in the United States Bankruptcy Court for the District of Utah, which ruled that the debt owed to the bank was nondischargeable. After considering arguments from both parties at a hearing on January 14, 2002, the bankruptcy court stated,

Well, I'm not sure that we've reached a meeting of the minds here[,] but under the circumstances I can't see that there is any dispute. There is certainly no contested issue of fact and, therefore, as a matter of law I'm going to find that [the hold harmless provision of the Decree] represents an obligation that the debtor owed as of the date of filing to the plaintiff, and that it arose in the context of the divorce proceeding and is nondischargeable under [Bankruptcy Code section] 523(a)(15).

¶ 6 Seals's attorney fees for the bankruptcy proceeding were $6715.75. The bankruptcy court allowed Seals additional time after summary judgment to request attorney fees; however, Seals never asked the bankruptcy court to determine in that proceeding whether she was entitled to attorney fees.

¶ 7 Meanwhile, around April 2001, Condie received a loan from his friend and then-employer Brian Steffensen to satisfy the Hopkinsville debt. After receiving payment, the bank assigned the promissory note and mortgage on the Tooele property to a limited liability company owned by Steffensen. The bank then dismissed the lawsuit against Seals and Condie. In April 2004, Condie paid the remaining balance on the promissory note, and on April 26, 2004, Steffensen executed a Release of Note and Mortgage that cleared title to the Tooele property.

¶ 8 In August 2004, Seals filed a Motion for Judgment of Support Arrears Etc. and for a Finding of Contempt in the state trial court. The motion requested that Condie be held in contempt for allegedly failing to remain current on his child support payments and also requested attorney fees for several discrete matters, including the filing of the adversary proceeding in Condie's bankruptcy case. After conducting an evidentiary hearing, the trial court denied Seals's request to have Condie held in contempt and also declined to award her the attorney fees she incurred in the bankruptcy action. The trial court, however, awarded her nearly all of the attorney fees she incurred as a result of other matters.¹ In denying Seals's request for the fees incurred in the bankruptcy proceeding, the trial court concluded,

The [b]ankruptcy [c]ourt in its ruling on Seals'[s] Motion for Partial Summary Judgment did not award attorney[] fees, nor did the parties in their subsequent Stipulation and Settlement provide for recoupment of attorney[] fees for the services of Steven Rupp in pursuing an adversarial proceeding against Condie. Those proceedings were the appropriate time and place for the parties to ask for attorney[] fees and this [c]ourt will not grant such fees on that basis. Furthermore, the evidence suggests that the adversarial proceeding was wholly unnecessary initially, as Seals was not a named creditor in the bankruptcy proceedings. Thereafter, the evidence is contested as to whether Seals requested to be named a creditor under the bankruptcy proceedings or not, and thus Seals has not met her burden of proof on that issue. Finally, this [c]ourt notes that the Hopkinsville obligation was satisfied in April 2001, thus making any subsequent proceedings in bankruptcy wholly unnecessary as is underscored by the [b]ankruptcy [c]ourt's own musings after listening to the parties' argument in Seals'[s] Motion for Partial Summary Judgment that "... under the circumstances I can't see that there is any dispute." ... Accordingly, this [c]ourt denies Judgment for any fees incurred by Seals in the bankruptcy proceedings.

¶ 9 Seals filed a Motion to Alter or Amend the Order on February 11, 2005. The trial court entered its final order denying this motion on April 27, 2005. This appeal followed.

ISSUE AND STANDARDS OF REVIEW

¶ 10 The issue on appeal is whether the trial court should have awarded Seals attorney fees for the adversarial proceeding she filed in Condie's bankruptcy case. We review the trial court's decision regarding attorney fees for an abuse of discretion. "The award of attorney fees is ... in the `sound discretion of the trial court.'" Willey v. Willey, 951 P.2d 226, 230 (Utah 1997) (quoting Dixie State Bank v. Bracken, 764 P.2d 985, 988 (Utah 1988)). "[T]his is due to the trial judge's familiarity with [the] particular litigation and with attorney fees in general." Id. To conduct this review, however, it is necessary for us to examine the conclusions of law underlying the trial court's decision. We review the trial court's conclusions of law for correctness and do not defer "in any degree" to the trial court's legal determinations. State v. Pena, 869 P.2d 932, 936 (Utah 1994) (citations omitted).

ANALYSIS

¶ 11 In the trial court, Seals argued for attorney fees incurred in the bankruptcy proceeding pursuant to Utah Code section 30-3-3(2), which states,

In any action to enforce an order of custody, visitation, child support, alimony, or division of property in a domestic case, the court may award costs and attorney fees upon determining that the party substantially prevailed upon the claim or defense. The court, in its discretion, may award no fees or limited fees against a party if the court finds the party is impecunious or enters in the record the reason for not awarding fees.

Utah Code Ann. § 30-3-3(2) (Supp.2005). The trial court made three conclusions of law in support of its denial of Seals's motion for attorney fees: (1) the bankruptcy proceedings were the appropriate time and place for the parties to ask for attorney fees; (2) the adversarial proceedings in bankruptcy court were unnecessary because Seals was not a named creditor in the bankruptcy proceedings; and (3) the Hopkinsville debt was satisfied in April 2001, rendering any subsequent proceedings in bankruptcy on that debt unnecessary. We address each of these conclusions in turn.

¶ 12 The first ground upon which the trial court denied attorney fees was that the bankruptcy proceedings, rather than the subsequent state trial court proceedings, "were the appropriate time and place for the parties to ask for attorney[] fees." Seals asserts that it would have been futile to ask for attorney fees during the bankruptcy proceedings because, as a general rule, attorney fees are not awardable under federal bankruptcy law for enforcement of obligations contained in a divorce decree. We agree.

¶ 13 Seals argued in bankruptcy court that Condie could not discharge the Hopkinsville debt because it was subject to Bankruptcy Code section 523(a)(15), which...