Court Opinion

ID: 183950
Source: CourtListenerOpinion
Date Created: 2011-02-01 01:09:21+00
Date Added: 2024-06-11T12:37:55.996776
License: Public Domain

FILED
                            NOT FOR PUBLICATION                               JAN 31 2011

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                         U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

In re JOHN PATRICK KEAHEY,                      No. 09-60000

              Debtor,                           BAP No. WW-08-1151-PaJuKa

JEFF E. JARED,                                  MEMORANDUM*

              Appellant,

  v.

JOHN PATRICK KEAHEY,

              Appellee.

                          Appeal from the Ninth Circuit
                           Bankruptcy Appellate Panel
            Pappas, Jury, and Kaufman, Bankruptcy Judges, Presiding

                        Argued and Submitted August 5, 2010
                                Seattle, Washington

Before: CANBY, THOMPSON and BERZON, Circuit Judges.

        *
         This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      Appellant Jeff E. Jared appeals a decision of the Bankruptcy Appellate Panel

(“BAP”) affirming an order of the United States Bankruptcy Court for the Western

District of Washington in which the court held that Jared had committed the tort of

outrage in attempting to collect a debt owed by Chapter 13 Debtor and Appellee

John P. Keahey. The bankruptcy court subsequently awarded Keahey $98,376.01

in damages, $51,287.50 in attorneys’ fees, and $2,756.84 in costs.

      Jared assigns four errors: first, that the court incorrectly held that his

conduct was “extreme and outrageous,” thereby satisfying the first element of the

tort of outrage; second, that the court lacked a legal basis for awarding attorneys’

fees to Keahey; third, that the court improperly took judicial notice of an attorneys’

fees and costs application in the related bankruptcy case; and, fourth, that the court

exhibited bias against him. We vacate the award of attorneys’ fees and remand that

matter for further proceedings. We affirm in all other respects.1

      The parties are aware of the facts of this case. We therefore recite them only

to the extent necessary to our disposition of the case.

      1
        We have jurisdiction of the appeal pursuant to 28 U.S.C. § 158(d)(1).
Because we are in as good a position as the BAP to consider the decision of the
bankruptcy court, we independently review the decision without deference to the
BAP. See In re Saylor, 108 F.3d 219, 220 (9th Cir. 1997). We review the
bankruptcy court’s conclusions of law de novo and its factual findings for clear
error. See id. We review de novo mixed questions of law and fact. See In re
Bammer, 131 F.3d 788, 792 (9th Cir. 1997) (en banc).
                                           2
                                   DISCUSSION

I.    “Extreme and Outrageous” Conduct

      The tort of outrage requires the proof of three elements: (1) extreme and

outrageous conduct, (2) intentional or reckless infliction of emotional distress, and

(3) actual result to the plaintiff of severe emotional distress. See Kloepfel v. Bokor,

66 P.3d 630, 632 (Wash. 2003) (en banc). Jared contends that the first element

was not established. He does not contest the underlying factual findings of the

bankruptcy court, but argues that those facts do not support the court’s finding that

Jared’s conduct was “extreme and outrageous.” We reject his contention.

      The bankruptcy court based its finding of outrageousness on numerous

misdeeds committed by Jared in the attempted foreclosure proceedings, including

the following:

             Jared “had no idea how to conduct a non-judicial
             foreclosure sale[,] . . . did just about everything wrong,”
             and “signaled to Mr. Keahey with each and every
             communication that Mr. Keahey would never be able to
             keep his house.”

             Jared stipulated to having breached his fiduciary duty to
             Keahey as a trustee under Washington’s Deed of Trust
             Act (the “DOTA”). See Wash. Rev. Code Ann.
             §§ 61.24.010(4).

             Although “there was no . . . interest due under the note,”
             Jared demanded a 10 percent interest charge, amounting

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             at first to $36,000—a “huge amount[] to people like
             Keahey.” He likewise demanded payment for incorrect
             and excessive property tax, insurance, and utility charges.

             Jared arranged for the foreclosure sale to take place in the
             parking lot of his condominium, rather than a public
             place, as required by the DOTA. Jared later testified that
             he opted for the parking lot because he “was going to
             personalize it, make it nice for the bidders, . . . [to]
             boutiquify it.”

             Even “[w]hen the claimed defaults were cured, Mr. Jared
             immediately claimed new defaults entitling him to restart
             the foreclosure process and charge additional fees and
             costs for his own benefit.” By continually and
             unjustifiably varying the amount of debt owed, he
             unjustly prevented Keahey from exercising the right to
             cure for a period of three years.

      On this record, we conclude that “reasonable minds (such as the one

exercised by the trial judge) could conclude that, in light of the severity and

context of the conduct, [the defendant’s conduct] was beyond all possible bounds

of decency, . . . atrocious and utterly intolerable in a civilized community.” Robel

v. Roundup Corp., 59 P.3d 611, 620 (Wash. 2002) (emphasis original) (internal

quotation marks and citations omitted).2 We therefore affirm the finding of

outrageousness.

      2
       Even if we review the bankruptcy court’s finding of outrage de novo as a
mixed question of law and fact, see In re Bammer, 131 F.3d 788, 792 (9th Cir.
1997)(stating standard of review of mixed questions), we reach the same result.

                                           4
II.    The Fees-and-Costs Provision of the Washington Deed of Trust Act

       Jared argues that the bankruptcy court erred in awarding attorneys’ fees on

the basis of the fees-and-costs provision of the Deed of Trust Act.3 See Wash.

Rev. Code Ann. § 61.24.090(2). We review de novo the interpretation and

application of state statutes. See Kona Enters., Inc. v. Estate of Bishop, 229 F.3d

877, 883 (9th Cir. 2000).

       Jared’s primary contention is that the underlying adversary action was not an

action to determine the reasonableness of any fees under the Deed of Trust Act, but

was an entirely different “ personal injury tort trial.” We agree with Jared, but only

in part.

       The Deed of Trust Act is meant to provide an alternative to the judicial

foreclosure process by authorizing the foreclosure of deeds of trust without resort

to litigation. See Joseph L. Hoffmann, Comment, Court Actions Contesting the

Nonjudicial Foreclosure of Deeds of Trust in Washington, 59 Wash. L. Rev. 323,

323 (1984). The fees-and-costs provision provides in pertinent part:

             Any person entitled to cause a discontinuance of the sale
             proceedings shall have the right, before or after
             reinstatement, to request any court . . . to determine the
             reasonableness of any fees demanded or paid as a

       3
       Because Jared has included no argument against the award of costs, we
address only the award of attorneys’ fees.
                                          5
             condition to reinstatement. The court shall make such
             determination as it deems appropriate, which may include
             an award to the prevailing party of its costs and
             reasonable attorneys’ fees . . . .

Wash. Rev. Code Ann. § 61.24.090(2). The “fees demanded or paid” are the fees a

party must pay the trustee “to cause a discontinuance of the sale proceedings by

curing the default set forth in the notice.” Id. § 61.24.090(1)(b). These provisions

do not appear to have been construed by any Washington court.

      Jared contends that § 61.24.090(2) contemplates a limited action by a

plaintiff to forestall foreclosure and to contest the reasonableness of fees demanded

or paid as a condition of curing defaults owing under a deed of trust. He argues

that the action under review was a totally different proceeding – an adversary

action based on the tort of outrage. Under the normal American rule, the

prevailing party in a tort action is not entitled to an award of attorneys’ fees. See

McGreevy v. Oregon Mut. Ins. Co., 128 Wn.2d 26, 35 n.8 (1995).

      We agree with Jared that Keahey’s adversary tort action went well beyond a

mere challenge to the fees charged as a condition of reinstatement and that,

accordingly, Keahey was not entitled to recover all or even most of his fees for the

tort action. We do not, however, construe § 61.24.090(2) to be as limited as Jared

contends. It permits a challenge to excessive fees demanded to cure a default

                                           6
under a deed of trust to be brought in “any court.”4 The statute does not specify the

form in which a request to determine reasonableness of fees must be made.

Keahey’s complaint recites that Jared imposed excessive fees as a condition of

terminating the foreclosure attempts, and excessive fees were an element in the

bankruptcy court’s findings of outrage, which we have already quoted.

      Under these circumstances, we conclude that the bankruptcy court and

appellate panel could reasonably conclude that some portion of the litigation of the

outrage claim, and some limited part of the recovery, fell within the scope of

§ 61.24.090(2). We also conclude, however, that at least a majority of the fees

were incurred in successfully prosecuting the tort action that resulted in a recovery

that went well beyond any restitution of overcharges of fees or costs.

      We therefore vacate the award of attorneys’ fees and remand the matter for a

determination of the portion of the tort recovery that may reasonably be interpreted

as representing a refund of fees excessively charged or demanded. Attorneys’ fees

reasonably attributable to that proportion of the total tort recovery may then be

awarded under § 61.24.090(2).

III. Judicial Notice of Application for Attorneys’ Fees and Costs in the
Bankruptcy Proceeding.

      4
        The only qualification of “any court” in § 61.24.090(2) is an exclusion, not
relevant here, of small claims courts.
                                          7
      In determining the amount of damages due Keahey, the bankruptcy court

took judicial notice of an application for, and award of, attorneys’ fees to Keahey’s

counsel in the related bankruptcy case. Jared contends that it was error to take

judicial notice of the award because, unlike “statistics or geographical, historical or

scientific facts,” requests for attorneys’ fees and costs “are just not something

courts admit into evidence via judicial notice.”5

      The bankruptcy court did not abuse its discretion. A trial court may take

judicial notice of its own records, even in unrelated cases, provided that the court

complies with Federal Rule of Evidence 201 concerning judicial notice of

adjudicative facts. See United States v. Wilson, 631 F.2d 118, 119 (9th Cir. 1980).

Here, the bankruptcy court took notice of an award of attorneys’ fees and costs,

granted after notice (including notice to Jared) and hearing, in a directly related

case. The facts in question were “capable of accurate and ready determination by

resort to a source whose accuracy cannot reasonably be questioned,” and were

properly subject to judicial notice. See Fed. R. Evid. 201(b)(2).

IV.   Judicial Bias

      5
        We review for an abuse of discretion a trial court’s decision to take judicial
notice. See United States v. Daychild, 357 F.3d 1082, 1099 n.26 (9th Cir. 2004).
                                           8
      Jared claims that the bankruptcy court exhibited bias sufficient to require a

retrial when it expressed an opinion and a preliminary ruling at a phone conference

before the trial. Having considered the transcript in its entirety, we find no

indication of bias or hostility in the court’s remarks. See Liteky v. United States,

510 U.S. 540, 555 (1994) (“[J]udicial remarks during the course of a trial that are

critical or disapproving of, or even hostile to, counsel, the parties, or their cases,

ordinarily do not support a bias or partiality challenge.”). Furthermore, the

remarks reflected no extrajudicial source. See id. We therefore find no merit in

Jared’s claim of bias.

                                   CONCLUSION

      The order of the bankruptcy court is VACATED as to the award of

attorneys’ fees, and that matter is remanded for further proceedings. In all other

respects, the judgment of the Bankruptcy Appellate Panel is AFFIRMED. The

parties will bear their own costs on appeal.

      AFFIRMED IN PART, VACATED and REMANDED in part.

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