In re Bennett

• Decision Date: 05 August 2002
• Docket Number: No. 01-55547.,No. 01-55762.,01-55547.,01-55762.
• Citation: 298 F.3d 1059
• Parties: In re Roberta BENNETT, Debtor. Martin Renwick and Annette Renwick, Plaintiffs-Appellants-Cross-Appellees, v. Roberta Bennett, Defendant-Appellee-Cross-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

298 F.3d 1059

In re Roberta BENNETT, Debtor Martin Renwick and Annette Renwick, Plaintiffs-Appellants-Cross-Appellees, v. Roberta Bennett, Defendant-Appellee-Cross-Appellant.

No. 01-55547.

No. 01-55762.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 7, 2002.

Filed August 5, 2002.

COPYRIGHT MATERIAL OMITTED

Stanley P. Lieber, Michelle C. Weinstein, Law Offices of Stanley P. Lieber, Woodland Hills, CA, for the plaintiffs-appellants-cross-appellees.

Carol F. Anderson, George F. Robertie, Anderson & Bennett, Los Angeles, CA, for the defendant-appellee-cross-appellant.

Appeal from the United States Bankruptcy Appellate Panel for the Ninth Circuit, Brandt, Klein, and Montali, Bankruptcy Judges, Presiding. B.A.P. Nos. CC 99-01776-BKMo, CC 99-01791-BKMo.

Before THOMAS and RAWLINSON, Circuit Judges, and ARMSTRONG, District Judge.^*

OPINION

ARMSTRONG, District Judge:

This matter comes before this Court on Appellants Martin and Annette Renwicks' ("the Renwicks") appeal of the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's grant of summary judgment in favor of Appellee Roberta Bennett ("Bennett"). Appellants contend that the bankruptcy court erred in (1) refusing to admit parol evidence to clarify an ambiguity in an underlying settlement agreement and (2) finding unenforceable Bennett's promise to remain liable to the Renwicks on a debt discharged in a previous bankruptcy proceeding. Bennett cross-appeals the Bankruptcy Appellate Panel's decision affirming the bankruptcy court's denial of Bennett's motion for attorneys' fees. Bennett argues that the bankruptcy court erred in concluding that an award of attorneys' fees was unavailable under federal law and that the attorneys' fees provision in the contract at issue did not provide for fees incurred after the filing of a lawsuit.

We find that the bankruptcy court did not err in excluding the Renwicks' proffered parol evidence and determining that there was no enforceable promise by Appellee to pay a debt which was discharged in the bankruptcy proceedings. However, the bankruptcy court erred in failing to consider whether attorneys' fees and sanctions were available under federal law and whether the attorneys' fees provision in the Settlement Agreement was enforceable against the Renwicks.

I. BACKGROUND

A. Factual Background

Appellee Roberta Bennett and Diane Abbitt ("Abbitt") were law partners. In 1991, they sought a loan from Abbitt's parents, Martin and Annette Renwick, to finance their law firm. On June 21, 1991, Bennett, Abbitt, and the Renwicks entered into a written loan agreement ("Loan Agreement") under which the Renwicks loaned Bennett and Abbitt $150,000.00. Bennett and Abbitt were required to repay the full amount of the loan on or before May 17, 1993.

On May 18, 1993, Bennett and Abbitt each filed a separate petition for bankruptcy under Title 7 of the United States Bankruptcy Code. The debt to the Renwicks was listed on each of their schedules and the debt was discharged by the bankruptcy court on April 8, 1994.

On June 12, 1996, Bennett and Abbitt dissolved their partnership. However, disputes soon arose between Bennett and Abbitt based on the dissolution of the partnership and each filed suit against the other as well as third parties with related claims. On October 26, 1996, Bennett, Abbitt, and the third parties entered into a written settlement agreement and general release ("Settlement Agreement"). Of importance to this appeal is Paragraph 11, which provided:

11. No Effect on Joint Personal Debts to the Renwicks, David Wexler and/or Karen Blanchard

Abbitt and Bennett expressly agree that, notwithstanding anything to the contrary contained herein, they shall each remain liable for one half of the debt that Abbitt and Bennett currently owe to Martin and Annette Renwick, David Wexler and/or Karen Blanchard. Abbitt and Bennett will remain liable to those creditors in the same manner as before this Settlement Agreement was executed.

(Emphasis added). The Renwicks were not parties to the Settlement Agreement.

Following the Settlement Agreement, Bennett made interest-only payments to the Renwicks. However, in July of 1998, the Renwicks sent a letter to Bennett demanding payment in full within ten days of the letter. Bennett refused and litigation ensued.

B. Procedural History

On October 8, 1998, the Renwicks filed suit against Bennett in California state court alleging breach of contract (i.e., the Settlement Agreement) under a third-party beneficiary theory of liability. Bennett removed the action to federal court on the basis that it was governed by bankruptcy law and sought to reopen the bankruptcy proceedings. In March of 1999, Bennett moved for summary judgment on the ground that the Renwicks were improperly attempting to collect a debt discharged by Bennett's bankruptcy. The Renwicks filed a counter-motion for summary judgment.

On August 5, 1999, the bankruptcy court granted summary judgment in favor of Bennett and denied the Renwicks' counter-motion. The bankruptcy court granted summary judgment in favor of Bennett on two grounds: (1) the Settlement Agreement did not create a new binding promise upon Bennett to pay the Renwicks and (2) even if there were a binding promise, it was unenforceable in light of applicable bankruptcy law. Subsequently, the bankruptcy court denied Bennett's motion for attorneys' fees.

On August 23, 1999, the Renwicks filed a Notice of Appeal to the Bankruptcy Appellate Panel ("BAP"). On February 15, 2001, the BAP issued an unpublished decision affirming the grant of summary judgment in favor of Bennett and denying her motion for attorneys' fees. In affirming the bankruptcy court, the BAP focused on the unenforceability of the agreement. The Renwicks filed the present Notice of Appeal on March 13, 2001.

II. STANDARDS OF REVIEW

We review the decisions of the BAP de novo. See In re Filtercorp, Inc., 163 F.3d 570, 576 (9th Cir.1998). The bankruptcy court's findings of fact are reviewed for clear error and conclusions of law are reviewed de novo. Id. The Court applies the same legal standard for summary judgment in reviewing the bankruptcy court's decision, viewing the evidence in a light most favorable to the non-moving party to determine if there is a genuine issue of material fact presented. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); In re Advent Mgmt. Corp., 104 F.3d 293, 295 (9th Cir.1997). The bankruptcy court's attorneys' fee determination will only be reversed if the court abused its discretion or erroneously applied the law. Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir.1997) (citing Law Offices of Ivan W. Halperin v. Occidental Fin. Group, Inc. (In re Occidental Fin. Group, Inc.), 40 F.3d 1059, 1062 (9th Cir. 1994)).

III. RENWICKS' APPEAL

The Renwicks appeal the bankruptcy court's entry of summary judgment and the BAP's affirmance, contending that the bankruptcy court should have admitted parol evidence concerning the interpretation of Paragraph 11 of the Settlement Agreement. They also argue that the lower courts erred in concluding that, under California and federal law, there was no enforceable promise by Bennett to pay the Renwicks a new debt.

A. Contract Interpretation and Admission of Parol Evidence

1. Legal Standard

As provided in the Settlement Agreement, California law governs disputes arising under the contract. Under California law, the interpretation of a contract is a question of law which the court reviews de novo. Oceanside 84, Ltd. v. Fid. Fed. Bank, 56 Cal.App.4th 1441, 66 Cal.Rptr.2d 487, 491 (1997); Ellis v. McKinnon Broadcasting Co., 18 Cal. App.4th 1796, 23 Cal.Rptr.2d 80, 82 (1993). "The fundamental goal of contract[] interpretation is to give effect to the mutual intention of the parties. If contractual language is clear and explicit, it governs." Bank of the West v. Superior Court, 2 Cal.4th 1254, 10 Cal.Rptr.2d 538, 833 P.2d 545, 552 (1992) (citing Cal. Civ.Code, §§ 1636, 1638); see also Shaw v. Regents of Univ. of Cal., 58 Cal.App.4th 44, 67 Cal.Rptr.2d 850, 856 (1997) ("Although the intent of the parties determines the meaning of the contract ([Cal.] Civ.Code, §§ 1636, 1638), the relevant intent is `objective' — that is, the objective intent as evidenced by the words of the instrument, not a party's subjective intent.").

In interpreting the contract, a court must consider two questions: (1) whether the writing was intended to be the complete and final expression of the parties' intent and (2) whether the agreement is susceptible to the meaning given to it by the parties. See Brinderson-Newberg Joint Venture v. Pac. Erectors, 971 F.2d 272, 276-77 (9th Cir.1992); Banco Do Brasil, S.A. v. Latian, Inc., 234 Cal.App.3d 973, 285 Cal.Rptr. 870, 885 (1991). In this case, the parties agree that the Settlement Agreement was fully integrated. As such, parol evidence concerning the terms not specifically included in the written agreement is generally not permitted. Banco Do Brasil, 285 Cal.Rptr. at 885 ("where the parties to a contract have set forth the terms of their agreement in a writing which they intend as the final and complete expression of their understanding, it is deemed integrated and may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement.") (citing Cal.Code of Civ. Proc. § 1856; 2 Witkin, Cal. Evidence (3d ed.1986) § 967, pp. 915-916).

However, the parol evidence rule does not bar extrinsic evidence to interpret the meaning of express terms. See Brinderson-Newberg, 971 F.2d at 277 (citing Pac. Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 69 Cal.Rptr. 561, 442 P.2d 641, 643-45 (1968)). In order to prevent the rule from being eviscerated by the exception, the contract must be ambiguous and reasonably susceptible to the proffered meaning before parol evidence is permitted. See id. "Whether...