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1 This disposition is not appropriate for publication. 

Although it may be cited for whatever persuasive value it may have

(see Fed. R. App. P. 32.1), it has no precedential value. See 9th

Cir. BAP Rule 8013-1.

2 The Hon. Robert Kwan is the presiding judge in this

bankruptcy case and adversary proceeding. The Hon. Gregg W. Zive

was designated to preside over the trial in this adversary

proceeding and he entered the order on appeal.

-1-

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. CC-13-1042-PaDKi

)

JAMES CHARLES CHARALAMBOUS, ) Bankr. No. 11-40184-RK

)

Debtor. ) Adv. Proc. 11-02796-RK

___________________________________)

)

SHARON HAMILTON, )

)

Appellant, )

)

v. ) M E M O R A N D U M1

)

JAMES CHARALAMBOUS, )

)

Appellee. )

___________________________________)

Argued and Submitted on June 20, 2013

at Pasadena, California

Filed - July 3, 2013

Appeal from the United States Bankruptcy Court

for the Central District of California

Honorable Gregg W. Zive, U.S. Bankruptcy Judge, Presiding2

 

Appearances: Sidney Lanier of Ayscough & Marar argued for

appellant Sharon Hamilton; Andrew James Thomas of

Thomas & Thomas, LLP argued for appellee James

Charles Charalambous. 

Before: PAPPAS, DUNN and KIRSCHER, Bankruptcy Judges.

FILED

JUL 03 2013

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT
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3 Unless otherwise indicated, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. All

rule references are to the Federal Rules of Bankruptcy Procedure,

Rules 1001-9037.

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Creditor Sharon Hamilton (“Hamilton”) appeals the order of

the bankruptcy court denying her request for attorney’s fees in

connection with an adversary proceeding. We VACATE and REMAND.

FACTS

In April 2007, Hamilton first contacted chapter 73

 debtor

James Charles Charalambous (“Charalambous”), a home design

consultant, to discuss a project to remodel her home. Four or

five meetings between the parties occurred though July 2007. At

some point, Charalambous gave Hamilton a brochure describing his

services, which contained the following:

Attorney Fees

In any litigation, arbitration, or other proceeding by

which one party either seeks to enforce its rights under

this Agreement (whether in contract, tort, or both) or

seeks a declaration of any rights or obligations under

this Agreement, the prevailing party shall be awarded

reasonable attorney fees, together with any costs and

expenses, to resolve the dispute and to enforce the

final judgment.

On July 1, 2007, Hamilton made her first payment to

Charalambous, a check for $10,000. Over the next two years,

Hamilton would give thirteen checks to Charalambous totaling

$224,517.34. 

Charalambous obtained plans, city permits, and referred a

contractor, JLJ Construction, Inc. (“JLJ”) to Hamilton, which

began work on the project in 2008. There was no written agreement

between Hamilton and JLJ, or between JLJ and Charalambous.

The relationship between Hamilton and Charalambous ended in
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December 2009. On January 29, 2010, Hamilton sued Charalambous in

state court, alleging breach of contract and fraud; Charalambous

asserted a cross-complaint against Hamilton for defamation and

emotional distress. Hamilton v. Charalambous, case no. LASC YC

061580 (Los Angeles Superior Court).

Trial in the state court was scheduled to begin on July 26,

2011. However, Charalambous filed a petition for bankruptcy

relief under chapter 7 on July 14, 2011. 

Hamilton commenced an adversary proceeding against

Charalambous in the bankruptcy court on September 21, 2011. In

the complaint she sought an exception to discharge under

§ 523(a)(2)(A), alleging that Charalambous had engaged in 

intentional fraud in his dealings with Hamilton, including his

representation to her that he was “fully licensed.” Hamilton also

sought an exception to discharge under § 523(a)(4) for breach of

fiduciary duty, and under § 523(a)(6) for willful and malicious

injury to Hamilton. Before trial, Charalambous placed the

remaining funds in his possession provided to him by Hamilton,

$126,663.00, in a separate account on the advice of his attorney.

The trial in the adversary proceeding occurred on October 9,

10 and 11, 2011. Hamilton and Charalambous were present and

represented by counsel. Witnesses testified, including Hamilton

and Charalambous; the parties also submitted declaratory evidence.

The bankruptcy court entered Findings of Fact and Conclusions

of Law on November 19, 2012. The court determined “after

considering the facts and credibility of the witnesses, the court

is not persuaded that plaintiffs have shown defendant acted with

an intent to deceive.” As to Hamilton’s § 523(a)(6) claim, the
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28 4 Hamilton did not request costs as part of the Fee Motion,

only fees based on attorney time records.

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court found that “plaintiff has not proved by a preponderance of

the evidence that defendant deliberately or intentionally injured

plaintiff.” 

However, the bankruptcy court held in Hamilton’s favor on her

claim for an exception to discharge under § 523(a)(4). The court

determined that an express trust existed between Hamilton and

Charalambous; that Charalambous was in a fiduciary relationship

with Hamilton; and that Charalambous committed defalcation. Since

Hamilton established by a preponderance of the evidence all of the

elements required by § 523(a)(4), the court concluded that

“plaintiff is entitled to a judgment that $126,663.00 is a

nondischargeable debt pursuant to 11 U.S.C. § 523(a)(4).” A

judgment incorporating these findings was entered on November 29,

2012. That judgment was not appealed.

Hamilton filed a motion for an award of prejudgment interest

on November 28, 2012. The same day, Hamilton also filed a motion

for an award of attorney’s fees (the “Fee Motion”).4 Charalambous

did not oppose either motion in the bankruptcy court. 

In the Fee Motion, Hamilton asserted that she was entitled to

recover her attorney’s fee incurred in the discharge litigation

under the provision in the brochure given to her by Charalambous.

Relying upon Cal. Code Civ. P. § 1021, which allows recovery of

attorney’s fees by a prevailing party, Hamilton submitted time

records indicating a total of $254,291.25 in charges, which she

sought to recover from Charalambous.

Since Charalambous did not oppose the Fee Motion, the court
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did not hold a hearing. Instead, on January 22, 2013, it entered

a Memorandum of Decision disposing of both of Hamilton’s motions. 

While it granted Hamilton’s request for prejudgment interest, the

bankruptcy court denied Hamilton’s motion for an award of

attorney’s fees. 

In the Memorandum of Decision, the bankruptcy court did not

discuss the application of Cal. Code Civ. P. § 1021 to Hamilton’s

fee request. Instead, the court analyzed Hamilton’s request under

Cal. Civ. Code § 1717, which provides, in pertinent part, “where

the contract specifically provides that attorney’s fees . . .,

which are incurred to enforce that contract, shall be awarded

. . . to the prevailing party, then the [prevailing] party . . .

shall be entitled to reasonable attorney’s fees . . . .” Under

Cal. Civ. Code § 1717(d)(1), “the prevailing party on the contract

shall be the party who recovered a greater relief in the action on

the contract. The trial court may also determine that there is no

party prevailing on the contract for purposes of this section.” 

Because the bankruptcy court ruled in Charalambous’ favor on

Hamilton’s claims under §§ 523(a)(2)(A) and (a)(6), and because

the bankruptcy court did not rely upon the existence of a contract

to grant Hamilton relief under § 523()(4), the bankruptcy court

declined to award Hamilton attorney’s fees under the California

statute.

Hamilton filed a timely appeal of the denial of attorney’s

fees in the Memorandum of Decision on February 1, 2012.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334

and 157(b)(2)(B) and (I). We have jurisdiction under 28 U.S.C.
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§ 158.

ISSUES

1. Whether Charalambous has standing to appear in this appeal.

2. Whether the bankruptcy court abused its discretion in denying

an award of attorney’s fees and costs to Hamilton under state

law.

STANDARD OF REVIEW

Whether an appellee has standing to appear in an appeal is

reviewed de novo. Caudill v. N.C. Machinery, Inc. (In re Am.

Eagle Machinery, Inc.), 231 B.R. 320 (9th Cir. 1999).

A bankruptcy court’s denial of attorney’s fees is reviewed

for abuse of discretion. Renwick v. Bennett (In re Bennett),

298 F.3d 1059, 1063 (9th Cir. 2002). Whether a state statute

permits an award of attorney’s fees is reviewed de novo. Kona

Entm’t, Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir.

2000).

A bankruptcy court abuses its discretion if it applies the

wrong legal standard or its factual findings are illogical,

implausible or without support in the record. TrafficSchool.com

v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).

DISCUSSION

I.

Charalambous has standing to appear in this appeal.

Hamilton argued in her Reply Brief that because Charalambous

did not oppose the motion for attorney’s fees in the bankruptcy

court, his positions should not be considered on appeal. We

disagree. 

The Panel has previously decided this question in a case
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precisely on point. Caudill v. N.C. Mach., Inc., (In re Am. Eagle

Mach., Inc.), 231 B.R. at 320 (9th Cir BAP 1999). In that case,

the appellant argued that since the appellee had not opposed or

participated in the proceedings leading to entry of the order on

appeal, the appellee should not be allowed to argue its position

or participate in the appeal. The BAP ruled that opposition in

the bankruptcy court to the issue on appeal was not a prerequisite

to the appellee’s participation on appeal. Instead, the Panel

noted that the only requirement for appellee standing in that case

was whether that appellee was “directly and adversely affected

pecuniarily by an order of the bankruptcy court . . . .” 

In re Am. Eagle Mach., Inc. 231 B.R. at 238, citing

In re Fondiller, 707 F.2d 441, 442-43 (9th Cir. 1983).

Although Charalambous did not oppose Hamilton’s motion for an

award of attorney’s fees in the bankruptcy court, he would 

obviously hold a direct pecuniary interest in the outcome of this

appeal. Thus, Charalambous has standing to appear in this appeal

and we have considered his arguments in resolving the issues.

II.

The bankruptcy court abused its discretion because

it applied the incorrect statute in its decision

concerning Hamilton’s motion for attorney’s fees.

Hamilton argues that she was entitled to recover attorney’s

fees incurred in the litigation in the bankruptcy court. As

instructed by the Supreme Court in Traveler’s Cas. & Sur. Co. of

Am. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007), in bankruptcy

cases,

The American rule that “the prevailing litigant is

ordinarily not entitled to collect a reasonable

attorney’s fees from the loser, Alyeska Pipe Line Serv.
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5

 CC § 1717 provides that:

(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 to

. . . the prevailing party, . . . the party prevailing on the

contract . . . shall be entitled to reasonable attorney's

fees in addition to other costs.”

6

 CCP § 1021 provides that:

“Except as attorney's fees are specifically provided for by

statute, the measure and mode of compensation of attorneys

and counselors at law is left to the agreement, express or

implied, of the parties. . . ."

-8-

Co. v. Wilderness Soc’y, 421 U.S. 240 . . . may be

overcome by, inter alia, an “enforceable contract”

allocating such fees, Fleishchman Distilling Corp. v.

Maier Brewing Co., 386 U.S. 714 . . . . A contract

allocating attorney’s fees that is enforceable under

substantive, nonbankruptcy law is allowable in

bankruptcy except where the Bankruptcy Code provides

otherwise.

Id. at 443. 

Here, the applicable “substantive, nonbankruptcy law” is

California state law. S. Cal. Permanente Med. Grp. v. Ehrenberg

(In re Moses), 215 B.R. 27, 32 (9th Cir. BAP 1997). California

law allows enforcement of agreements for attorney’s fees in Civil

Code § 1717 (“CC § 1717")5

 and Code of Civil Procedure § 1021

(“CCP § 1021")6. Although the parties do not dispute that these

provisions of the California codes govern attorney’s fees, they

contest which of these two provisions should be applied in this

case. As we discuss below, CCP § 1021 applies in tort as well as

contract disputes, but CC § 1717 applies only in contract

disputes. The dispute between Hamilton and Charalambous that

resulted in a decision in favor of Hamilton under § 523(a)(4) for

defalcation was, at bottom, a tort dispute. Thus, the bankruptcy
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court’s reliance on CC § 1717 to dispose of Hamilton’s request for

attorney’s fees was misplaced and an abuse of discretion.

A. There was an agreement between Hamilton and Charalambous

providing for an award of attorney’s fees to the prevailing

party in a tort dispute.

Under either CC § 1717 or CCP § 1021, an agreement or

contract must exist between the parties that provides for an award

of attorney’s fees to the prevailing party in any litigation

between them. Such an agreement existed in this case.

In their pretrial order, the parties stipulated as an agreed

fact that:

9. Charalambous gave Hamilton a brochure which

contained names of prior clients who would recommend

him. The brochure is the written part of the agreement

with Charalambous.

Joint Pretrial Order at 3, July 31, 2012 (emphasis added). 

The bankruptcy court accepted this stipulated fact and

incorporated it verbatim as a finding of fact in its Findings of

Fact and Conclusions of Law entered on November 19, 2012. Finding

of Fact 16 additionally noted that the brochure had been admitted

into evidence. Elsewhere in the Findings/Conclusions, the court

referred to this brochure as part of the “contract” between the

parties:

Finding of Fact 46: “The court finds that there is no

indication that defendant was attempting to fraudulently

induce plaintiff to enter into the contract (Exhibit 1)

with defendant.” 

* * * 

Conclusion of Law 59: “Defendant denied stating he was

fully licensed and qualified. The contract (Exhibit 1)

does not contain any reference or assertion that

defendant or JCD was a licensed contractor. The scope of

the work described in Exhibit 1 does not describe the

work of a general contractor but states the contractor
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7 In the Memorandum of Decision, the bankruptcy court stated

that it “did not address the validity or existence of a contract

between the parties. The court’s Findings of Fact and Conclusions

of Law are explicitly silent on that issue.” This observation is

somewhat perplexing. In granting relief to Hamilton under

§ 523(a)(4), the bankruptcy court determined that an “express

trust” existed between the parties. The court’s insistence that

it did not rule explicitly on the existence or validity of the

parties’ contract is also seemingly at odds with its Findings 16,

46 and Conclusion 59 quoted above.

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will have to be selected . . . .” 

As noted above, the brochure included a broad attorney’s fee

provision:

Attorney Fees

In any litigation, arbitration, or other proceeding by

which one party either seeks to enforce its rights under

this Agreement (whether in contract, tort, or both) or

seeks a declaration of any rights or obligations under

this Agreement, the prevailing party shall be awarded

reasonable attorney fees, together with any costs and

expenses, to resolve the dispute and to enforce the

final judgment.

The parties do not dispute that this clause in the brochure was 

part of their agreement, or that its meaning is plain. Therefore,

on this record, we conclude that there was a contract between

Hamilton and Charalambous concerning the remodeling project, and

that the contract (the written part of which was the brochure)

provided for recovery of attorney’s fees by the prevailing party

in any tort or contract dispute between the parties.7

The parties also do not dispute that Hamilton prevailed on

one of her claims in the bankruptcy court, that Charalambous’ debt

to her should be excepted from discharge under § 523(a)(4) for

defalcation. Defalcation in California law is a tort. Brown v.

Kenney, 2012 Bankr. LEXIS 4127, 2012 WL 3867425 (Bankr. N.D. Cal.

September 4, 2012) (agreeing with an arbitrator’s finding that,
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8 In fact, although Hamilton asserted a cause of action for

breach of contract in the state lawsuit, she dropped that claim in

this adversary proceeding.

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under California law, defalcation was the tort of constructive

fraud). See also Cal. Civ. Code § 1573 (“Constructive Fraud: In

any breach of duty which, without an actually fraudulent intent,

gains an advantage to the person in fault, or any one claiming

under him, by misleading another to his prejudice, or to the

prejudice of any one claiming under him[.]” Accordingly, the

dispute between Hamilton and Charalambous resulting in exception

to discharge of Charalambous’ debt to Hamilton was a tort, not a

contract, dispute.8

B. CC § 1717 only applies in contract disputes. In this case,

CCP § 1021 is applicable to determine whether Hamilton may

recover attorneys fees.

In the bankruptcy court, Hamilton sought an award of

attorney’s fees under CCP § 1021. The bankruptcy court did not

consider Hamilton’s request under CCP § 1021, but rather analyzed

the request under CC § 1717. Since CC § 1717 is only implicated

in contract disputes, the bankruptcy court abused its discretion

by applying an incorrect rule of law to resolve Hamilton’s motion.

CC § 1717(a) provides:

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.

By its terms, then, CC § 1717 only applies in an “action on a

contract, where the contract specifically provides that attorney's
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9

 Ordinarily, published BAP decisions are binding on future

panels. However, the Ninth Circuit instructs that interpretations

of state law are not binding precedent. In re Complaint of

McLinn, 739 F.2d 1395, 1401 (9th Cir. 1984). Nevertheless, a BAP

opinion founded upon a California Supreme Court decision is

persuasive authority in resolving a question of California law.

-12-

fees and costs, which are incurred to enforce that contract . . .

.” California courts have uniformly ruled that CC § 1717 is to be

narrowly applied, and is available to a party only if the dispute

involves litigation of a contract claim. Santisas v. Goodin,

951 P.2d 399, 409 (Cal. 1998) (“[S]ection 1717 applies only to

attorney fees incurred to litigate contract claims.”). The BAP

has previously relied upon Santisas on this specific issue. 

Redwood Theaters, Inc. v. Davison (In re Davison), 289 B.R. 716,

723 (9th Cir. BAP 2003) (“[W]e will follow [Santisas’] holding and

narrowly apply CCC § 1717 and approve attorney's fees only if the

action involves a contract claim.”). Therefore, under both

California controlling law and BAP authority,9 we must hold that

CC § 1717 can only be applied to attorney’s fees disputes based on

contract claims.

The California Supreme Court has been equally clear that

CC § 1717 is inapplicable in actions involving tort claims. 

Santisas, 951 P.2d at 409 (tort claims are “outside the ambit of

section 1717"); accord Redwood Theaters, Inc., 289 B.R. at 724

(attorney’s fees for tort claims are not recoverable under

CC § 1717). Our decision in Redwoods Theaters provides additional

guidance on the dispute in this appeal. After noting that

CC § 1717 only applies in contract disputes, the panel noted that,

“CCP § 1021 does not limit the recovery of attorney's fees to

[contract] claims. . . . [A]ttorney's fees may be recoverable
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under CCP § 1021 even though they are not recoverable under

CC § 1717. . . . California law permits recovery of attorney's

fees by agreement, for tort as well as contract actions.” Id. at

724.

Hamilton requested an award of attorney’s fees under

CCP § 1021. That statute provides:

Except as attorney's fees are specifically provided for

by statute, the measure and mode of compensation of

attorneys and counselors at law is left to the

agreement, express or implied, of the parties. . . ." 

CCP § 1021(a). CCP § 1021 also implicates Cal. Code Civ. P.

§§ 1032 and 1033(5):

(a) As used in this section, unless the context clearly

requires otherwise: . . . (4) “Prevailing party”

includes the party with a net monetary recovery, a

defendant in whose favor a dismissal is entered, a

defendant where neither plaintiff nor defendant obtains

any relief, and a defendant as against those plaintiffs

who do not recover any relief against that defendant. 

When any party recovers other than monetary relief and

in situations other than as specified, the “prevailing

party” shall be as determined by the court, and under

those circumstances, the court, in its discretion, may

allow costs or not. . . . (b) Except as otherwise

expressly provided by statute, a prevailing party is

entitled as a matter of right to recover costs in any

action or proceeding.

CC 1032(a) and (b). CCP 1033.5(a)(10)(A) provides: 

(a) The following items are allowable as costs under

Section 1032: . . . (10) Attorney fees, when authorized

by any of the following: . . . (A) Contract.

Collectively, by their terms, CCP § 1021, and Cal. Code Civ.

P. §§ 1032 and 1033 make clear that attorney’s fees may be sought

by a prevailing party in disputes sounding in either tort or

contract. Indeed, as the California courts have uniformly ruled,

CCP § 1021 and Cal. Code Civ. P. § 1032 are the only bases for

awards of attorney’s fees in tort disputes when provided by
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10 On May 30, 2013, Hamilton submitted a request that the

Panel take judicial notice of the recent Maynard decision. More

appropriately, we elect to treat this request as one to submit

supplemental authorities pursuant to Fed. R. App. P. 28(j). 

Charalambous was given notice of Hamilton’s request and has not

objected. In addition, we note that this new decision merely

restates existing case law, and would not in itself affect our

decision in this case. We therefore GRANT Hamilton’s request.

11 On remand, the bankruptcy court must necessarily consider

whether Hamilton was a prevailing party in this litigation for

purposes of CCP § 1021. While the court apparently determined in

its Memorandum of Decision that Hamilton was not a prevailing

party under CC § 1717, largely because Charalambous successfully

defended against Hamilton’s claims for exceptions to discharge

under §§ 523(a)(2)(A) and 523(a)(6), the legal standard for a

prevailing party under CCP § 1021 allows for the exercise of less

discretion by the trial court, and CCP § 1021, through Cal. Code

Civ. P. § 1032(a)(4), defines a prevailing party to include:

“(1) the party with a net monetary recovery, (2) a defendant in

whose favor a dismissal is entered, (3) a defendant where neither

plaintiff nor defendant obtains any relief, and (4) a defendant as

against those plaintiffs who do not recover any relief against

that defendant. See Michell v. Olick, 49 Cal. App.4th 1194, 1198

(Cal. Ct. App. 1996) (holding that a prevailing party under

CCP § 1021 is "entitled to costs as a matter of right; the trial

(continued...)

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agreement of the parties. Xuereb v. Marcus & Millichap, Inc.,

3 Cal. App. 4th 1338, 1342 (1992); Maynard v. BTI Grp, Inc.,

___ Cal. App.4th ___, slip op. at 1 (Cal. Ct. App. May 29, 2013).10

As discussed above, the bankruptcy court’s ruling in favor of

Hamilton under § 523(a)(4) for defalcation in effect settled a

tort dispute. As such, CC § 1717 was not to be applied to resolve

Hamilton’s motion for attorney’s fees, and the bankruptcy court’s

reliance on that statute constitutes an abuse of discretion. The

proper statute for consideration of Hamilton’s request for

attorney’s fees is CCP § 1021. We will therefore vacate the

bankruptcy court’s order denying Hamilton’s motion, and remand

this matter to the bankruptcy court for consideration of

Hamilton’s request under CCP § 1021.11
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11(...continued)

court has no discretion to order each party to bear his or her own

costs.").

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CONCLUSION

We VACATE that portion of the bankruptcy court’s decision 

denying Hamilton’s motion for attorney’s fees and REMAND this

matter for further proceedings.