In re Carey

• Decision Date: 04 March 2011
• Docket Number: BAP No. EC–10–1309–DHKi.,Adversary No. 09–02531.,Bankruptcy No. 09–31861.
• Citation: 11 Cal. Daily Op. Serv. 3565,446 B.R. 384,2011 Daily Journal D.A.R. 4112,11 Cal. Daily Op. Serv. 3514
• Parties: In re Robert J. CAREY, Debtor.Charlie Y., Inc., Appellant,v.Robert J. Carey, Appellee.
• Court: U.S. Bankruptcy Appellate Panel, Ninth Circuit

446 B.R. 384

11 Cal. Daily Op. Serv. 3514

11 Cal. Daily Op. Serv. 3565

2011 Daily Journal D.A.R. 4112

In re Robert J. CAREY, Debtor.Charlie Y., Inc., Appellant,

v.Robert J. Carey, Appellee.

BAP No. EC–10–1309–DHKi.

Bankruptcy No. 09–31861.

Adversary No. 09–02531.

United States Bankruptcy Appellate Panel of the Ninth Circuit.

Argued and Submitted on Feb. 17, 2011.Decided March 4, 2011.

Elizabeth Shoemaker, San Francisco, CA, for Appellant Charlie Y., Inc.Kenrick Young, Sacramento, CA, for Appellee Robert J. Carey.Before: DUNN, HOLLOWELL, and KIRSCHER, Bankruptcy Judges.

OPINION

DUNN, Bankruptcy Judge.

Following trial of an adversary proceeding (“Adversary Proceeding”), the bankruptcy court excepted from discharge Charlie Y., Inc.'s (“Appellant”) claim against Robert J. Carey (“Debtor”) for breach of a guarantee obligation in circumstances in which Appellant alleged that the Debtor had made written misrepresentations regarding his financial condition. After a judgment was entered in Appellant's favor for $35,000, Appellant moved for an award of attorney's fees in the amount of $43,155.25. Debtor opposed the motion. After a hearing, the bankruptcy court denied Appellant's motion for attorney's fees based on its conclusion that Appellant's complaint in the Adversary Proceeding did not state a claim for attorney's fees consistent with the requirements of Federal Rule of Bankruptcy Procedure 7008(b).¹ For the reasons set forth below, we VACATE the bankruptcy court's dismissal of Appellant's Fee Motion and REMAND to the bankruptcy court to determine an appropriate award of attorney's fees in Appellant's favor.

FACTS ²

This appeal results from collection efforts concerning defaults on a restaurant purchase obligation. In 2003, Appellant sold its restaurant business to SGBD Restaurant I LLC, a Delaware limited liability company (“SGBD”). The unpaid balance of the purchase price was to be paid pursuant to a promissory note (“Promissory Note”) in the principal amount of $90,000, bearing interest at 8% per annum, signed on behalf of SGBD by David A. Zebny (“Zebny”) and Virginia Ann George (“George”) as its Member Managers. The Promissory Note provided that,

If any action be instituted on this Promissory Note, the undersigned agree to pay such sums as the Court may fix as attorney's fees, costs and expenses associated therewith.

Payment of the Promissory Note was supported by the personal guarantees (“Guarantee”) “jointly and severally, unconditionally and irrevocably” of Zebny and George. The Guarantee provided that,

The undersigned jointly and severally agree to pay on demand ... all expenses of collecting and enforcing this guarantee including, without limitation, expenses and fees of legal counsel, court costs and the cost of appellate proceedings.

In February 2005, the Debtor replaced George as a personal guarantor of payment of the Promissory Note. The Debtor's acceptance of guarantee obligations was documented by a First Addendum to Promissory Note and Personal Guaranty (the “Replacement Guarantee”), dated February 18, 2005, and signed by the Debtor “as an Individual and Member of SGBD ... and Guarantor.” Appellant and SGBD agreed in the Replacement Guarantee that the Promissory Note and Guarantee would “remain in full effect” subject to the modifications set forth in the Replacement Guarantee. The Replacement Guarantee further provided that,

[The Debtor and Zebny] agree to act as responsible parties for all liability under the [Promissory] Note as members of [SGBD] and under the [Guarantee] as individuals. [The Debtor] has been a member of [SGBD] since its inception.

Following a default by SGBD of its payment obligations under the Promissory Note, Appellant began collection efforts against SGBD and Zebny, resulting in collection of part of the balance owed on the Promissory Note. However, by late 2008, Zebny ceased communicating with Appellant, and Appellant received notice that SGBD had filed for bankruptcy protection. At that point, Appellant contacted the Debtor to collect under the Replacement Guarantee, without success. On or about May 6, 2009, Appellant filed a complaint in Marin County, California Superior Court against the Debtor for collection of the outstanding balance under the Promissory Note. The Debtor filed his chapter 7 bankruptcy petition on or about June 10, 2009.

On or about August 17, 2009, Appellant filed its complaint (“Complaint”) to except the Debtor's debt to Appellant under the Replacement Guarantee from discharge pursuant to § 523(a)(2)(B). In the preamble to the Complaint, Appellant stated:

Plaintiff requests entry of a non-dischargeable judgment against the Debtor for the full amount of any debt (including, but not limited to principal, interest, costs, and attorney's fees ) determined to be owing to Plaintiff by the Debtor and determined to be non-dischargeable pursuant to 11 U.S.C. § 523. (Emphasis added.)

In Paragraph 1 of the Complaint, Appellant alleged that,

Plaintiff received a promissory note guaranteed by Defendant, and on May 6, 2009, Plaintiff filed a complaint in Marin County Superior Court to collect from Defendant the amount owed on the promissory note.

In Paragraph 7 of the Complaint, Appellant alleged, among other things, that the Debtor signed the Replacement Guarantee. In Paragraph 10 of the Complaint, Appellant alleged that,

On or about May 6, 2009, Plaintiff filed a complaint against Defendant in Marin County Superior Court demanding payment of damages in the amount of $37,040.45, interest on such damages, and attorney's fees. (Emphasis added.)

In its First Claim for Relief under 11 U.S.C. § 523(a)(2)(B), in Paragraph 19 of the Complaint, Appellant “re-alleges and incorporates by reference the previous allegations of paragraphs 1 through 18 above as though fully set forth herein.” In its Prayer for Relief, Paragraph B, Appellant requests “judgment for such non-dischargeable debt in the full amount of Plaintiff's damages (including principal, accrued and accruing interest, costs, and attorney's fees ) to be proved at trial....” (Emphasis added.)

In his Answer to the Complaint, the Debtor “prays that Plaintiff's Complaint be dismissed and Defendant be awarded reasonable attorney's fees and for any other relief the court may deem appropriate.” (Emphasis added.)

The Adversary Proceeding was tried by the bankruptcy court on May 13, 2010. In her opening statement at the trial, counsel for Appellant requested an exception to discharge determination as to Appellant's damages “plus legal costs and attorneys' fees” but otherwise did not present any evidence as to the attorney's fees that Appellant sought to collect from the Debtor at the trial.

Following the presentation of evidence, the bankruptcy court made oral findings in favor of Appellant on its § 523(a)(2)(B) claim for relief. An exception to discharge judgment (“Judgment”) in favor of Appellant, awarding damages of $35,000 against the Debtor, was entered on May 13, 2010. Neither party appealed the Judgment.

On or about May 27, 2010, Appellant filed a Bill of Costs requesting a total costs award of $1,688.56. The bankruptcy court denied Appellant an award of costs, stating as the reason:

The judgment entered in this case on May 13, 2010 does not award costs to the Plaintiff, so your Bill of Costs will not be entered.

Appellant did not appeal the denial of its Bill of Costs.

On or about June 10, 2010, Appellant filed a motion (“Fee Motion”) for approval of an award of attorney's fees in the Adversary Proceeding, consistent with the terms of the Promissory Note. Appellant supported the Fee Motion with a Declaration of its counsel itemizing her time with respect to the collection efforts against the Debtor under the Replacement Guarantee. Debtor opposed the Fee Motion.

Following a hearing, the bankruptcy court dismissed the Fee Motion based on its conclusion that the Complaint did not state a claim for attorney's fees as required by Rule 7008(b). The bankruptcy court entered a minute order (“Minute Order”) dismissing the Fee Motion on August 13, 2010.

Appellant filed a Notice of Appeal of the Minute Order on August 17, 2010.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and 157(b)(2)(B) and (I). We have jurisdiction to determine our jurisdiction. Hupp v. Educational Credit Management Corp. (In re Hupp), 383 B.R. 476, 478 (9th Cir. BAP 2008). In this appeal, we conclude that we have jurisdiction under 28 U.S.C. § 158, as discussed below.

ISSUES

1) Was Appellant's Notice of Appeal filed timely?

2) Did the bankruptcy court err in dismissing the Fee Motion based on its conclusion that the Complaint did not state a claim for attorney's fees consistent with the requirements of Rule 7008(b)?

STANDARD OF REVIEW

Review of the bankruptcy court's decision to dismiss the Fee Motion based on failure to state a claim for attorney's fees in the Complaint is analogous to review of a decision on a motion to dismiss for failure to state a claim upon which relief can be granted under Civil Rule 12(b)(6). The standard for review is de novo. Movsesian v. Victoria Versicherung AG, 629 F.3d 901, 905 (9th Cir.2010). De novo means that we look at the matter anew, the same as if it had not been heard before, and as if no decision previously had been rendered, giving no deference to the bankruptcy court's determinations. McComish v. Bennett, 611 F.3d 510, 519 (9th Cir.2010).

DISCUSSION

I. Appellant's Notice of Appeal was timely.

The Debtor argues that we have no jurisdiction to hear Appellant's appeal because the notice of appeal was not filed timely. In relevant part, Rule 8002(a) states, “The notice of appeal shall be filed with the clerk within 14 days of the date of the entry of the judgment, order, or decree appealed from.” The untimely filing of a notice of appeal deprives us of jurisdiction. Slimick v. Silva (In re Slimick), 928 F.2d 304, 306 (9th Cir.1990); Greene v. United States (In re Souza), ...