Court Opinion

ID: 6338578
Source: CourtListenerOpinion
Date Created: 2022-05-06 20:00:32.59479+00
Date Added: 2024-06-11T15:49:07.889294
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        MAY 6 2022
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

In re: DENNIS G. CURTIS,                        No.    21-55850

             Debtor,                            D.C. No.
______________________________                  3:20-cv-02515-AJB-DEB

BANK OF THE WEST,
                                                MEMORANDUM*
                Plaintiff-Appellee,

 v.

DENNIS G. CURTIS,

                Defendant-Appellant.

                  Appeal from the United States District Court
                     for the Southern District of California
                  Anthony J. Battaglia, District Judge, Presiding

                            Submitted April 15, 2022**
                              Pasadena, California

Before: CALLAHAN and VANDYKE, Circuit Judges, and Y. GONZALEZ
ROGERS,*** District Judge.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
      ***
             The Honorable Yvonne Gonzalez Rogers, United States District Judge
for the Northern District of California, sitting by designation.
      Appellant Dennis G. Curtis (“Curtis”) appeals the district court’s order

vacating the bankruptcy court’s award of attorney’s fees to Curtis under California

Civil Code section 1717. We have jurisdiction over this appeal pursuant to

28 U.S.C. § 158(d)(1) and 28 U.S.C. § 1291. We find that the nondischargeability

proceeding brought by appellee Bank of the West pursuant to 11 U.S.C. §

523(a)(2)(A)–(B) was not an action “on a contract” under California Civil Code

section 1717. On that basis, we affirm the district court’s order vacating the fee

award.

      The sole issue in this appeal is whether Curtis prevailed in an “action on a

contract” within the meaning of section 1717. In relevant part, section 1717

provides that:

      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.

Cal. Civ. Code § 1717(a). There is no dispute that this provision has the effect of

making reciprocal an otherwise unilateral contractual obligation to pay attorney’s

fees. Santisas v. Goodin, 951 P.2d 399, 406–07 (Cal. 1998).

      As we have previously explained, “[t]hree conditions must be met before

[section 1717] applies.” Penrod v. AmeriCredit Fin. Servs. (In re Penrod), 802

F.3d 1084, 1087 (9th Cir. 2015). “First, the action generating the fees must have

                                          2
been an action ‘on a contract.’” Bos v. Bd. of Trs., 818 F.3d 486, 489 (9th Cir.

2016) (quoting In re Penrod, 802 F.3d at 1087). “Second, the contract must

provide that attorney’s fees incurred to enforce it shall be awarded either to one of

the parties or to the prevailing party.” Id. at 489 (citation omitted). “And third, the

party seeking fees must have prevailed in the underlying action.” Id. (citation

omitted). On appeal, the parties only dispute the application of the first condition.

      We recently reaffirmed the consistency of our precedent applying section

1717 with the California Supreme Court’s interpretation of what it means for an

action to be “on a contract.” Bos, 818 F.3d at 489. In doing so, we noted that

“[t]he California Supreme Court has explained that ‘section 1717 applies only to

actions that contain at least one contract claim,’ and that ‘[i]f an action asserts both

contract and tort or other noncontract claims, section 1717 applies only to attorney

fees incurred to litigate the contract claims.’” Id. (quoting Santisas, 951 P.2d at

409). Again, “[c]onsistent with Santisas, we have previously held that a

nondischargeability action is ‘on a contract’ within section 1717 if ‘the bankruptcy

court needed to determine the enforceability of the . . . agreement to determine

dischargeability.’” Id. (emphasis supplied) (quoting Ford v. Baroff (In re Baroff),

105 F.3d 439, 442 (9th Cir. 1997)); see also Santisas, 951 P.2d at 406 (recognizing

that a party may recover attorney’s fees on a contract where a party “defends the

litigation ‘by successfully arguing the inapplicability, invalidity, unenforceability,

                                           3
or nonexistence of the same contract’” (citation omitted)). Said differently, “if the

bankruptcy court did not need to determine whether the contract was enforceable,

then the dischargeability claim is not an action on the contract within the meaning

of [California Civil Code] § 1717.” Bos, 818 F.3d at 490 (emphasis supplied)

(quoting Redwood Theaters, Inc. v. Davison (In re Davison), 289 B.R. 716, 723

(B.A.P. 9th Cir. 2003)). This “common sense” construction of the phrase “on a

contract,” adopted by Bos, is consistent with long standing precedent applying

section 1717 in bankruptcy proceedings. Bos, 818 F.3d at 489–90.

      Here, the nondischargeability proceeding arose under the Bankruptcy Code

and did not concern a breach of contract claim. The bankruptcy court denied

Curtis’s first motion for summary judgment that asserted that the forbearance

agreement was illusory and unenforceable as a matter of contract interpretation.

The bankruptcy court later granted Curtis’s second motion for summary judgment

and did not rely upon California law. Instead, it relied upon Ninth Circuit case law

concerning the damages element of a fraud claim. Indeed, the bankruptcy court

expressly found that Bank of the West’s failure to proffer evidence of damages

“obviated” the need to rule on the enforceability of the forbearance agreement.

Accordingly, interpretation of the agreement was not necessary for Curtis to

prevail, and he did not prevail “on a contract” within the common-sense

construction of the statute.

                                          4
      Relying on In re Baroff and In re Penrod, Curtis urges us to affirm the

bankruptcy court’s determination that the underlying action was decided “on a

contract” because Curtis’s key contract-based defense played an integral part of the

case where Bank of the West primarily sought monetary damages for amounts on

the initial debts. Such narrow reliance on In re Baroff and In re Penrod is

misplaced.

      Like the case here, In re Baroff concerned a fraud-based nondischargeability

claim. In those proceedings, the debtor raised a defense that the parties’ settlement

agreement had released the debtor from all claims, which included the disputed

debt. In re Baroff, 105 F.3d at 442. Applying California law, the bankruptcy court

concluded that the agreement was an integrated document that precluded proof of

the underlying oral debt at issue. Id. Therefore, summary judgment was granted

on that basis in favor of the debtor. Id. Consistent with our recent precedent, we

held that that the proceeding was on a contract because “the bankruptcy court

needed to determine the enforceability of the settlement agreement to determine

dischargeability.” Id. (emphasis supplied). Here, the bankruptcy court denied

summary judgment as to the unenforceability of the agreement and disposed of the

case on other grounds based in tort, obviating the need to resolve any contract-

based defenses.

                                          5
      Again, in In re Penrod, we confirmed that “an action is ‘on a contract’ when

a party seeks to enforce, or avoid enforcement of, the provisions of the contract.”

802 F.3d at 1088. Since “[n]othing in the text of § 1717 limits its application to

actions in which the court is required to resolve disputed factual issues relating to

the contract,” we held that “[a] party who obtains (or defeats) enforcement of a

contract on purely legal grounds, as by prevailing on a motion to dismiss with

prejudice or by showing that a defendant’s contract-based defenses are barred by

federal statute or federal common law, still prevails in an action ‘on a contract.’”

Id. at 1089 (emphasis supplied) (citations omitted). Ultimately, we had no issue

determining that the action was on a contract because “[t]he sole issue in

the . . . litigation was whether [a particular] provision of the contract should be

enforced according to its terms, or whether its enforceability was limited by

bankruptcy law to exclude the negative-equity portion of the loan.” Id. at 1088

(emphasis supplied). The debtor necessarily “obtained a ruling that precluded [the

lender] from fully enforcing the terms of the contract.” Id. (emphasis supplied).

Here, the enforceability of the contract was not the sole issue in the litigation as

demonstrated by the bankruptcy court’s acknowledgment that its finding on

reliance and damages obviated the need to resolve issues of enforceability. There

was no ruling, concerning either a legal question or factual dispute, that prevented

the enforcement of any term of the agreement. Thus, the proceedings were not an

                                           6
“action on a contract,” and Curtis was not entitled to attorney’s fees pursuant to

section 1717.

      AFFIRMED.

                                          7