Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-01233/USCOURTS-cand-5_05-cv-01233-0/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 28:0158 Notice of Appeal re Bankruptcy Matter (BAP)

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 1 This disposition is not designated for publication and may not be cited. 

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

 **E-filed 3/22/06**

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

In re: SAN JOSE MEDICAL MANAGEMENT,

INC.

_______________________________________

ONCOLOGY THERAPEUTICS NETWORK

JOINT VENTURE, L.P.,

 Appellant,

 v.

CHARLES VOLD,

 Respondent.

Case Number C 05-01233 JF

ORDER1 AFFIRMING JUDGMENT

OF BANKRUPTCY COURT 

[Docket No. 1]

I. BACKGROUND

The facts underlying the present appeal are undisputed. San Jose Medical Management,

Inc. (“San Jose Medical”) runs infusion centers to treat cancer patients. San Jose Medical

contracted with Oncology Therapeutics Network Joint Venture, L.P. (“OTN”) to purchase

supplies to operate the infusion centers. As part of the arrangement, OTN required San Jose

Medical to establish a vendor account to purchase oncology pharmaceuticals and supplies. 

On March 23, 2001, OTN sent a Credit Application and Agreement (“the agreement”) to

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 1 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

2

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

San Jose Medical. The agreement named “San Jose Medical Management, Inc.” in the space

reserved for “Applicant Company’s Full Legal Name.” The agreement also set forth the

following clause above the space marked “Authorized Person’s Signature”:

AGREEMENT. BY SIGNING BELOW YOU AGREE THAT IF

YOUR APPLICATION IS APPROVED THIS ACCOUNT

SHALL BE USED ONLY FOR THE PURCHASE OF

MERCHANDISE FOR COMMERCIAL OR BUSINESS AND

NOT FOR PERSONAL, FAMILY, HOUSEHOLD OR

AGRICULTURAL PURPOSES. Any person signing below on

behalf of a business entity attests that the buyer is a valid business

entity and that such person is authorized to enter into this

Agreement on behalf of the buyer. . . . By signing below,

Applicant agrees to the terms set forth in the Commercial Credit

Agreement on the reverse side and in the Oncology Therapeutics

Network Sourcebook. Applicant authorizes Oncology

Therapeutics Network to investigate the references listed regarding

the credit and financial responsibilities of Applicant. The person

signing below personally guarantees that Applicant will pay all

amounts due under this Agreement and shall be responsible for

such amounts being paid. 

AUTHORIZED PERSON’S SIGNATURE: DATE: 

Print Name and Title: 

Appellant’s Opening Brief, Addendum 2. 

Charles Vold (“Vold”) was the chief financial officer (“CFO”) of San Jose Medical from

August 2000 through November 2002. On March 29, 2001, Vold signed and dated the

agreement. In the space following “Authorized Person’s Signature,” Vold signed his name. In

the space following “Print Name and Title,” Vold wrote, “Charles Vold, CFO.” Vold then faxed

the agreement back to OTN. 

On September 30, 2002, San Jose Medical filed for bankruptcy under Chapter 11 of Title

11 of the United States Code. At the time of filing, San Jose Medical was indebted to OTN for

$355,874.41 for materials supplied to the infusion centers. On November 6, 2002, OTN filed a

state court complaint for breach of contract against Vold, seeking to hold Vold personally liable

for the $355,874.41. OTN asserted that Vold signed the agreement in both his representative and

personal capacity, and thus, that the agreement is a valid personal guarantee. On June 12, 2003,

San Jose Medical removed the case to the bankruptcy court.

On July 8, 2004, the bankruptcy court granted summary judgment in favor of Vold and

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 2 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28 2 Oncology Therapeutics Network Joint Venture, L.P. v. Vold, A.P. No. 03-5252. 

3

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

found that: (1) the credit application and agreement was not “reasonably susceptible” to the

meaning that OTN proffered; and (2) Vold signed the agreement in his corporate capacity and not

in his personal capacity.2 On July 21, 2004, Vold filed a motion for attorney’s fees and costs. 

On March 4, 2005, the bankruptcy court granted Vold’s motion and awarded $22,550.00 in

attorney’s fees and $1,475.12 in costs pursuant to California Civil Code § 1717.

On March 25, 2005 OTN filed the present appeal. OTN does not challenge the

bankruptcy court’s summary judgment ruling, and has appealed only the award of attorney’s fees

and costs. On June 30, 2005, Vold filed an opposition brief, OTN filed a reply brief on July 11,

2005. Having considered the briefs and relevant evidence, the Court will affirm the judgment.

II. LEGAL STANDARD

This Court has jurisdiction over the instant case under 28 U.S.C. § 158(a). Section 158(a)

provides in pertinent part that “district courts of the United States shall have jurisdiction to hear

appeals . . . from final judgments, orders, and decrees . . . of bankruptcy judges entered in cases

and proceedings referred to the bankruptcy judges under section 157 of this title.” 28 U.S.C. §

158(a). 

In reviewing the bankruptcy court’s decision, the Court reviews its findings of fact under

a clearly erroneous standard and its conclusions of law de novo. Higgins v. Vortex Fishing

Systems, Inc., 379 F.3d 701, 705 (9th Cir. 2004); Takisaki v. Alpine Group, Inc. (In re Alpine

Group, Inc.), 151 B.R. 931, 934 (9th Cir. BAP 1993). Under California law, the interpretation of

a contract is a question of law which is reviewed de novo. Renwick v. Bennett (In re Bennett),

298 F.3d 1059, 1064 (9th Cir. 2002). 

III. DISCUSSION

Both OTN and Vold agree that in the instant case there are no issues of fact on appeal. 

OTN further states that it is appealing “only the award of attorney fees and costs — not the

underlying summary judgment.” Appellant’s Opening Brief at 2. The Court agrees with Vold

that the sole issue on appeal thus is one of law: whether or not the bankruptcy court erroneously

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 3 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3 Section 1717 provides in relevant part: 

(a) In any action on a contract, where the contract

specifically provides that attorney’s fees and costs, which are

incurred to enforce that contract, shall be awarded either to one of

the parties or to the prevailing party, then the party who is

determined to be the party prevailing on the contract, whether he or

she is the party specified in the contract or not, shall be entitled to

reasonable attorney’s fees in addition to other costs.

. . . .

(b)(1) The court, upon notice and motion by a party, shall

determine who is the party prevailing on the contract for purposes

of this section, whether or not the suit proceeds to final 

judgment. . . . [T]he party prevailing on the contract shall be the

party who recovered a greater relief in the action on the contract.

The court may also determine that there is no party prevailing on

the contract for purposes of this section.

Cal. Civ. Code § 1717.

4

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

applied California Civil Code § 1717 in awarding attorney’s fees and costs to Vold.3 The Court

reviews the bankruptcy court’s conclusions of law on this issue de novo. 

As argued by Vold “[t]he Bankruptcy Court expressly stated in its Order of Summary

Judgment that no personal guarantee existed” in the agreement. Opposition at 8. The bankruptcy

court held that “[o]ne would assume that if Vold signed personally, he would be using the

account for personal purposes and not for business purposes; Vold’s business purpose would

exist as an officer of [San Jose Medical].” Ex. A at 14. Vold signed the agreement as a

corporate officer of San Jose Medical and not in his individual capacity. The agreement’s

signature line specifically asked for the “Authorized Person’s Signature,” and below the

signature line the agreement asked that Vold print his name and title, which he did.

The Court also agrees with Vold that “one of the key matter[s] resolved in Vold’s favor in

the Bankruptcy Court’s Order of Summary Judgment was that no second, separate, independent

contract for personal guarantee existed” in the agreement, and that OTN’s attempt to raise on

appeal the argument that a personal “Guarantee Agreement” exists within or separately of the

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 4 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

5

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

overall agreement is “partly a back-door attempt to re-litigate the Bankruptcy Court’s Order of

Summary Judgment.” Opposition at 7. 

Even if this Court were to consider OTN’s argumnts with respect to the guarantee issue,

the Court would not find them persuasive. OTN argues that the last sentence before the

“Authorized Person’s Signature” states that “[t]he person signing below personally guarantees

that Applicant will pay all amounts due under this Agreement and shall be responsible for such

amounts being paid.” Appellant’s Opening Brief, Addendum 2. However, “[t]he whole of a

contract is to be taken together, so as to give effect to every part, if reasonably practicable, each

clause helping to interpret the other.” California Civil Code § 1641 (emphasis added). When the

alleged “guarantee agreement” is read together with every part of the overall agreement, it is

clear that Vold signed the agreement as a corporate officer of San Jose Medical and not in his

individual capacity. As the bankruptcy court stated, “[e]ven the instruction states that the

signatory is entering into the Agreement ‘on behalf of the Applicant.’” Ex. A at 8. 

The Court thus turns to the sole issue on appeal, which is whether the bankruptcy court

erroneously applied California Civil Code § 1717 in awarding attorney’s fees and costs to Vold. 

“No general right to attorney fees exists under the Bankruptcy Code. However, a prevailing party

in a bankruptcy proceeding may be entitled to an award of attorney fees in accordance with

applicable state law if state law governs the substantive issues raised in the proceedings.” 

Heritage Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir. 1997). “Because state law

necessarily controls an action on a contract,” attorney’s fees may be awarded when: (1) the

contract provides for an award; and (2) state law permits the awarding of attorney’s fees. In re

Bennett, 298 F.3d at 1064. For two reasons, the Court concludes that there was no error.

First, the agreement at issue clearly contains an attorney’s fees clause. The clause reads: 

DEFAULT/COLLECTION COSTS: If you fail to pay us any

amount when due, or if you declare bankruptcy, or if other similar

proceedings are commenced by or against you, your Account will

be in default, and subject to any right you may have under state law

to receive notice of and to cure such default, we may declare the

entire unpaid balance in the Account due and payable. In addition

to the full amount owed and any allowable court costs, if the

Account is referred to an attorney-, you agree to pay our

reasonable attorney’s fees. 

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 5 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

Appellant’s Opening Brief, Addendum 2 (emphasis added). The agreement provides that “the

words ‘you’ and ‘your’ refer to the Applicant that signs the Application or on whose behalf the

Application is signed” and “‘we’, ‘us’ and ‘our’ refer to the Sellers-named above and includes

any Assignee to which the indebtedness created under this Agreement is assigned.” Appellant’s

Opening Brief, Addendum 2. The bankruptcy court determined that “[i]n the context of this

agreement, ‘you’ and ‘your’ is referring to [San Jose Medical] and is not referring to Vold in his

personal capacity.” Ex. A at 14.

Second, as set forth in footnote three, Section 1717 permits an award of attorney’s fees in

the present situation. Under Section 1717, if a “contract specifically provides that attorney’s fees

and costs, which are incurred to enforce that contract, shall be awarded either to one of the

parties or to the prevailing party,” regardless of which party is actually named in the contract as

the recipient of attorney’s fees. Cal. Civ. Code § 1717(a). The California Supreme Court has

held that “[t]he primary purpose of Section 1717 is to ensure mutuality of remedy for attorney fee

claims under contractual attorney fee provisions.” Santisas v. Goodin, 17 Cal.4th 599, 610

(1998). Section 1717 has this effect in two distinct situations. Id. “The first situation in which

section 1717 makes an otherwise unilateral right reciprocal, thereby ensuring mutuality of

remedy, is when the contract provides the right to one party but not the other.” Id. at 610-11

(citation omitted). “In this situation, the effect of section 1717 is to allow recovery of attorney

fees by whichever contracting party prevails, ‘whether or not he or she is the party specified in

the contract or not.’” Id. (citing Cal. Civ. Code § 1717). The second situation that makes “an

otherwise unilateral right reciprocal, thereby ensuring mutuality of remedy, is when a person

sued on a contract containing a provision for attorney fees to the prevailing party defends the

litigation by successfully arguing the inapplicability . . . of the same contract.” Id. (citation and

internal quotation omitted). 

The second situation is present here. Vold was sued pursuant to an agreement containing

an attorney’s fees provision. Vold successfully defended against OTN’s claim by establishing

the inapplicability of the agreement to himself individually as a personal guarantor. Thus, “to

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 6 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

ensure mutuality of remedy in this situation, it has been consistently held that when a party

litigant prevails in an action on a contract by establishing that the contract is . . . inapplicable . . .

section 1717 permits that party’s recovery of attorney fees whenever the opposing parties would

have been entitled to attorney fees under the contract had they prevailed.” Id. There is no

question that had it prevailed on its claims against Vold, OTN could have collected attorney’s

fees pursuant to the agreement’s attorney’s fees provision. Accordingly, the bankruptcy court did

not erroneously apply California Civil Code § 1717 in awarding attorney’s fees and costs to

Vold, and Vold is entitled to recover attorney’s fees and costs from OTN as a matter of law. 

IV. ORDER

Good cause therefore appearing, the judgment of the bankruptcy court is affirmed.

IT IS SO ORDERED. 

DATED: March 21, 2006

 

JEREMY FOGEL

United States District Court

This Order has been served upon the following persons:

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 7 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

Case No. C 05-3580 JF

ORDER AFFIRMING JUDGMENT OF BANKRUPTCY COURT

(JFEX1)

Fred S. Hjelmeset

Law Offices of Stephen Benda 

750 Menlo Avenue #350 

Menlo Park, CA 94025 

Email: fred@bendalaw.com 

Jennifer J. Hagan 

The Hagan Law Firm, Inc. 

350 Cambridge Avenue, Suite 150 

Palo Alto, CA 94306 

Email: JHagan@Haganlaw.com 

Jeffrey H. Butwinick 

Foley & Lardner 

One Maritime Plaza, 6th Floor 

San Francisco, CA 94111 

Email: jbutwinick@foleylaw.com 

Judge James R. Grube, Judge Arthur S. Weissbrodt, USBC Manager-San Jose

U.S. Bankruptcy Court 

280 South First Street, Room 3035 

San Jose, Ca 95113 

Case 5:05-cv-01233-JF Document 19 Filed 03/22/06 Page 8 of 8