Renfrow v. Draper, 99-35144

• Citation: 232 F.3d 688
• Decision Date: 14 November 2000
• Docket Number: No. 99-35144,99-35144
• Parties: (9th Cir. 2000) LUANN RENFROW, Plaintiff-Appellee, v. DANNY J. DRAPER, Defendant-Appellant. BANKRUPTCY APPEALS, Interested Party
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 688

232 F.3d 688 (9th Cir. 2000)

LUANN RENFROW, Plaintiff-Appellee, v. DANNY J. DRAPER, Defendant-Appellant. BANKRUPTCY APPEALS, Interested Party.

No. 99-35144

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 4, 2000

Filed November 14, 2000

[Copyrighted Material Omitted]

Richard J. Wotipka, Broihier & Wotipka, Seattle, Washing-ton, for the defendant-appellant.

J. Mark Weiss, Law Office of J. Mark Weiss, P.S., Seattle, Washington, for the plaintiff-appellee.

Appeal from the United States District Court for the Western District of Washington John C. Coughenour, Chief District Judge, Presiding. D.C. No.CV-98-00269-JCC

Before: Alfred T. Goodwin, Arthur L. Alarcon, and M. Margaret McKeown, Circuit Judges.

ALARCON, Circuit Judge:

Danny J. Draper appeals from a judgment by the district court under 11 U.S.C S 523(a)(15) awarding attorney's fees and costs to his creditor and former spouse, Luann Renfrow. On appeal, Mr. Draper maintains that Renfrow had no right to an award of attorney's fees notwithstanding a provision providing for such fees in the couple's divorce decree. Mr. Draper further contends that the district court erred by reversing the bankruptcy court's award of partial costs and replacing it with an award of full costs.

We conclude that Ms. Renfrow was entitled to the attorney's fees she incurred litigating state law issues, both in her state court proceeding and before the bankruptcy court. We vacate the district court's award of full costs and hold that, upon remand, the bankruptcy court should award only those costs that are "reasonable," as required by the divorce decree.

I

On Valentine's Day, 1994, the marriage of Mr. Draper and Ms. Renfrow ended with the filing in the state court of a decree of dissolution (the "divorce decree" or "decree") that distributed their assets and liabilities in a roughly equitable manner. During the course of their union, and owing to Mr. Draper's previous bankruptcy, Mr. Draper and Ms. Renfrow incurred joint obligations in Ms. Renfrow's sole name. As part of the divorce decree, Mr. Draper was ordered to make regular payments to Ms. Renfrow so that she could pay her creditors. Almost immediately, however, Mr. Draper failed to meet his payment schedule. Fearing that her credit would suffer, Ms. Renfrow paid the creditors herself and filed an action in Washington state court to enforce Mr. Draper's obligations under the divorce decree.

Ms. Renfrow filed a motion for summary judgment in the state court action. The state trial court denied the motion "because of factual disputes" regarding the existence and the amount of Ms. Renfrow's claims against Mr. Draper.

Ms. Renfrow's state action was automatically stayed when Mr. Draper filed a petition under Chapter 7 of the Bankruptcy Code. Ms. Renfrow filed a complaint in the bankruptcy court objecting to the discharge of the debts set forth in the divorce decree pursuant to 11 U.S.C. S 523(a)(15). ¹ She also prayedfor an award of attorney's fees, an order requiring Mr. Draper to purchase life insurance until the debts were paid in full, and other "just and equitable relief." In his answer, Mr. Draper denied the allegation in the complaint that he failed to make payments as required in the divorce decree on a loan on a 1992 Toyota Celica, and the amounts owing to American Express Optima, First Interstate, First Card, Bon Marche, and Nordstrom. He also denied failing to procure life insurance. He further denied the allegation in Ms. Renfrow's complaint that she was required to incur attorney's fees in filing and prosecuting the action she filed in state court to enforce the divorce decree. In addition, he claimed that each of the debts was dischargeable pursuant to 11 U.S.C. S 523(a)(5), (15).

Mr. Draper filed a motion for summary judgment in the bankruptcy action to defeat Ms. Renfrow's adversary complaint. In his memorandum in support of his motion, Mr. Draper alleged that "[i]t is disputed whether and to what extent [the Toyota loan and the American Express Optima, First Interstate, First Card, Bon Marche, and Nordstrom credit cards] claims exist." In a subsequent portion of his memorandum, however, Mr. Draper asserted that "[a]lthough [the state trial judge] previously ruled that there were issues of material fact regarding the existence and amount of Renfrow's other claims against the Debtor, for purposes of this Summary Judgment Motion only, the existence and validity of her other claims amounts [sic] is assumed" (emphasis added).

Ms. Renfrow filed a response to Mr. Draper's motion for summary judgment and a cross motion for summary judgment. In his reply to Ms. Renfrow's response to his motion for summary judgment, Mr. Draper alleged as follows:

For purposes of Debtor's Motion for Summary Judgment only, Debtor has assumed that Renfrow could establish her claims as to the existence and amounts set forth in her adversary complaint. However, for Renfrow to establish that any claims she may have against Debtor are non-dischargeable, Renfrow must first prove the existence and amounts of such claims at trial (emphasis added).

The bankruptcy court granted Ms. Renfrow's motion for summary judgment. It held nondischargeable the debts assigned to Mr. Draper pursuant to the divorce decree in the amount of $19,258.48 for the Toyota loan, the American Express Optima, First Interstate, Bon Marche and the Nordstrom credit card debts. The bankruptcy court also ruled that it could not "resolve the issue surrounding First Card without further testimony." It ordered a trial limited to that issue. Thereafter, the parties stipulated that Ms. Renfrow should have judgment entered for $775 on the First Card claim. The bankruptcy court accepted the stipulation.

After judgment was entered in her favor, Ms. Renfrow petitioned the bankruptcy court for prejudgment interest, attorney's fees, and costs. Her motion was denied with respect to attorney's fees, partly denied regarding costs, and granted with regard to the prayer for prejudgment interest. In rejecting her claim for attorney's fees, the court reasoned that the bankruptcy proceeding had involved only the question of the discharge ability of Mr. Draper's debt, and that under the law of this circuit an award of attorney's fees is not permitted if only federal issues construing bankruptcy law were litigated, notwithstanding the express "hold harmless" provision contained within the divorce decree.² The bankruptcy court explained its ruling in the following words: "What's happened here is that we were litigating discharge ability under [S] 523(a)(15) that has no basis in [s]tate . . . law, and that the cases cited by [Mr. Draper] . . . are applicable. Concordantly, I conclude that [Ms. Renfrow] is not entitled to attorney's fees and that will be the order." The bankruptcy court denied a substantial portion of Ms. Renfrow's costs on the basis that they were not recoverable under 28 U.S.C. S 1920.³

Both parties appealed from the bankruptcy court's judgment to the district court. Before the district court, Mr. Draper maintained that (1) the bankruptcy court had misapplied 11 U.S.C. S 523(a)(15)(B), (2) Ms. Renfrow's cross-motion for summary judgment had been granted improperly, and (3) the bankruptcy court erred in awarding prejudgement interest. Ms. Renfrow argued that the bankruptcy court erred in denying her request for attorney's fees and full costs.

The district court rejected Mr. Draper's contention that the debt was dischargeable. It reversed that portion of the order of the bankruptcy court denying attorney's fees and full court costs. The district court based its determination that Ms. Renfrow was entitled to attorney's fees and costs on the fact that "Mr. Draper disputed not only the nondischarge ability of the debts under S 523(a)(15)(B), but also the validity of the underlying obligations." The district court noted that "in opposing Renfrow's motion for summary judgment, Mr. Draper expressly stated that he considered the validity of the debts to be a matter of dispute." Finally, the district court concluded that "the determination of the contract's enforce ability under state law in this case is integral to the discharge ability determination."

Mr. Draper has timely appealed from that portion of the district court's order awarding attorney's fees and costs to Ms. Renfrow. This court has jurisdiction under 28 U.S.C. S 158(d).

II

Mr. Draper contends that the bankruptcy court properly refused to grant Ms. Renfrow her attorney's fees and that the district court erred in reversing the bankruptcy court's ruling. Ms. Renfrow maintains that she is entitled to recover the attorney's fees incurred during the bankruptcy proceeding because she was required to demonstrate the validity of the provisions of the state court's divorce decree under Washington law that Mr. Draper pay certain debts and hold her harmless from any collection action in order to prevail on her claim that the debts were nondischargeable under S 523(a)(15)(A)(B).

A district court's decision on appeal from a bankruptcy court order is reviewed de novo, applying the same standard of review to the bankruptcy court's findings as did the district court. See Kord Enterprises II v. California Commerce Bank (In re Kord Enterprises II), 139 F.3d 684, 686 (9th Cir. 1998); Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439 441 (9th Cir. 1997). We will not disturb the bankruptcy court's refusal to award attorney's fees to Ms. Renfrow unless the court erroneously applied the law or abused its discretion. See Cedic Dev. Co. v. Warnicke (In re Cedic Dev. Co.), 219 F.3d 1115, 1116 (9th Cir. 2000).

There is no general right to recover attorney's fees under the Bankruptcy Code. See In re Kord Enterprises II, 139 F.3d at 687 (stating the rule and one of its statutory exceptions pursuant to 11 U.S.C. S 506(b)); In re Baroff, 105 F.3d at 441. Debts incurred in a divorce proceeding are...