In re: Shaver Lakewoods Development Inc. ( 2016 )

FILED
1 NOT FOR PUBLICATION
NOV 29 2016
2
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
3 UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT
4 OF THE NINTH CIRCUIT
5
6 In re: ) BAP No. EC-15-1311-JuKuMa
)
7 SHAVER LAKEWOODS DEVELOPMENT ) Bk. No. 11-62509
INC., )
8 ) Adv. No. 14-01005
Debtor. )
9 ______________________________)
HENRY DORAME NUNEZ, )
10 )
Appellant, )
11 )
v. ) M E M O R A N D U M*
12 )
RANDELL PARKER, Chapter 7 )
13 Trustee, )
Appellee. )
14 ______________________________)
15 Argued and Submitted on October 20, 2016
at Sacramento, California
16
Filed - November 29, 2016
17
Appeal from the United States Bankruptcy Court
18 Eastern District of California, Sacramento
19 Honorable Fredrick E. Clement, Bankruptcy Judge, Presiding
__________________________________
20
Appearances: Appellant Henry Nunez argued pro se; Lisa Anne
21 Holder of Klein Denatale Goldner Cooper Rosenlieb
& Kimball, LLP argued for appellee Randell
22 Parker, Chapter 7 Trustee
__________________________________
23
24
25
26 *
This disposition is not appropriate for publication.
27 Although it may be cited for whatever persuasive value it may
have (see Fed. R. App. P. 32.1), it has no precedential value.
28 See 9th Cir. BAP Rule 8013-1.
-1-
1 Before: JURY, KURTZ, and MARTIN,** Bankruptcy Judges.
2 Appellant Henry Nunez (“Nunez”) appeals from the bankruptcy
3 court’s judgment in favor of the chapter 71 trustee Randell
4 Parker (“Trustee”) determining (1) Nunez’s attorney’s lien,
5 which was purportedly secured by real property, was invalid
6 under Rule 3-300 of the California Rules of Professional
7 Conduct, (2) Nunez does not hold an equitable lien on the real
8 property, and (3) Nunez’s allowable attorney fees and costs are
9 limited to pre-petition services that benefitted the debtor’s
10 bankruptcy estate.
11 For the reasons stated below, we AFFIRM.
12 I. FACTS
13 Shaver Lakewoods Development, Inc. (“Shaver” or “Debtor”)
14 was formed to develop a residential subdivision. Gordon Loo and
15 Angela Rodriguez each held a 50 percent ownership interest.
16 Loo, Angela,2 and Robert Rodriguez, the husband of Angela,
17 served as members of the board of directors. Loo was the
18 president, Angela was involved in the daily operations, and
19 Robert brought extensive experience in development.
20 In early 2000, Shaver purchased land in Shaver Lake,
21 California, which was subdivided into twenty lots, fifteen of
22
**
23 Hon. Brenda Martin, United States Bankruptcy Judge for
the District of Arizona, sitting in designation.
24
1
Unless otherwise indicated, all chapter and section
25 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
26 “Rule” references are to the Federal Bankruptcy Procedure.
2
27 For ease of reference, we identify the members of the
Rodriguez family by their first names. No disrespect is
28 intended.
-2-
1 which were fully developed, and five of which remained partially
2 developed (the “Real Property”). Sierra Pines at Shaver Lake
3 Homeowners Association (“Sierra Pines”) was created for
4 marketing, managing, and selling the lots.
5 On June 8, 2009, Sierra Pines and various individual
6 homeowners (the “plaintiffs”) brought a·construction defect
7 lawsuit against Shaver·and Robert for breach of implied
8 warranty, strict liability, and negligence in the Fresno County
9 Superior Court (the “State Court Action”).
10 On October 2, 2009, in satisfaction of preexisting debt,
11 Shaver deeded the Real Property to Angela and Loo (the
12 “Transferred Lots”).3 On August 19, 2010, the plaintiffs in the
13 State Court Action filed an amended complaint which, in relevant
14 part, added Loo and Angela as defendants and added causes of
15 action for actual fraudulent transfer, constructive fraudulent
16 transfer, and constructive trust. On August 27, 2010, the
17 plaintiffs recorded a lis pendens against the Transferred Lots.
18 Nunez Fee Agreement Meetings
19 As a result of the State Court Action, Shaver, Loo, Robert,
20 and Angela retained Nunez, a Fresno based attorney. The parties
21 and Nunez met on two occasions, in June 2010 and January 2011,
22 to discuss their retention of Nunez.
23
24
25 3
The bankruptcy court judge found that on November 7, 2002,
26 Loo loaned Shaver $250,000 and in return received a promissory
note and a security agreement, but not a deed of trust.
27 Likewise, the bankruptcy judge found that on October 18, 2005,
Angela loaned Shaver $282,000 and in return received a promissory
28 note and a security agreement, but not a deed of trust.
-3-
1 The June 2010 Meeting
2 In June 2010, Loo and Robert, without Angela, met with
3 Nunez (the “June 2010 Meeting”). They discussed the dispute,
4 the possibility of defenses, and the type of fee arrangement.
5 Specifically, the record indicates that Nunez presented Loo and
6 Robert with a standard pre-printed retainer agreement. The
7 agreement had blank spaces that could be completed in a
8 handwritten fashion with information pertinent to identifying
9 and describing the clients, the dispute, estimated fees,
10 retainers, and dates and signatures of the parties. Nunez
11 filled in the first few lines on the blank portions of this
12 agreement, which included: the client names of Loo, Robert, and
13 Angela; the client addresses; a description of the Shaver case
14 name and number; authority for Nunez to act; and an indication
15 that the fees were unknown but a retainer of $2,500.00 was
16 required. The judge later found this meeting did not result in
17 an agreement for payment of fees.4 Nunez agreed to work on the
18 case on an interim basis, solely based on his long-standing
19 professional association with Robert Rodriguez, a former client.
20 The January 2011 Meeting
21 Six months later, on January 14, 2011, Angela, Loo, and
22 Robert met with Nunez (the “January 2011 Meeting”). The record
23 indicates that on that date Nunez on his own behalf and Loo,
24 Robert, and Angela, both individually and on behalf of Shaver,
25
4
26 The trial judge based this finding on (1) Angela was not
present, (2) the retainer agreement was not signed, and (3) the
27 parties did not agree on the details of the retention of Nunez,
as Nunez repeatedly resisted the demands by Loo and Robert to
28 proceed on a contingency fee basis.
-4-
1 executed a signed retainer agreement. Although the first few
2 lines from the agreement as marked up at the June 2010 Meeting
3 remained, the parities added several additional terms. Most
4 significantly, the new terms included a purported lien in favor
5 of Nunez which was to be secured by the Transferred Lots. The
6 agreement, in relevant part, provided:
7 The parties agree that the fee shall not exceed 1/3 of
the value of lots owned by clients and attorney shall
8 have the option to accept 1/3 of value of lots
recovered. The lien shall apply to these lots.
9 ...
10 Clients hereby grants [the Nunez Firm] a lien on
any/and all claims or causes of action that are the
11 subject of [] representation under this Agreement.
The lien will attach to any recovery you may obtain
12 whether by Arbitration award, judgment, settlement, or
otherwise and on the real property lots release of lis
13 pendens and recovery of lots for clients.
...
14
The undersigned waive any conflict of interest which
15 may exist as a result of representation of all
parties.
16
17 Of the species of fee agreements recognized in California,
18 the trial judge later found that the agreement was a “hybrid,”
19 where there was an hourly component to the agreement that was
20 capped and the clients held an option to provide Nunez with
21 one-third of the value of the lots. Said another way, Nunez was
22 entitled to an hourly fee without regard to whether he was
23 successful in resolving the dispute with Sierra Pines, and the
24 hourly fees and one-third valuation were mere measuring devices
25 for how much Nunez would be paid.
26 On January 20, 2011, and on March 18, 2011, Nunez made two
27 attempts in the Fresno County Superior Court to expunge the lis
28 pendens. Each attempt was unsuccessful.
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1 The Bankruptcy Proceedings
2 On November 17, 2011, Shaver filed a petition under
3 Chapter 7 of the Bankruptcy Code (the “Petition Date”).5 In
4 addition to representing Shaver, Loo, Angela, and Robert in the
5 State Court Action, Nunez represented them in their respective
6 bankruptcy proceedings as well.
7 In Amended Schedule B, Debtor listed a contingent claim for
8 fraudulent transfer of the Transferred Lots valued at
9 $15,000.00. After negotiations by Trustee, on April 26, 2012,
10 the bankruptcy court approved a settlement agreement under
11 Section 9019(a) of the Bankruptcy Code between Trustee, Angela,
12 Loo, and Nunez (the “Compromise Agreement”). The Compromise
13 Agreement provided, in relevant part, that Loo and Angela would
14 reconvey the Transferred Lots to Debtor’s bankruptcy estate and
15 that Nunez could file a proof of claim for the purported lien
16 secured by the Transferred Lots. On April 20, 2012, Nunez filed
17 a proof of claim asserting a secured claim for unpaid fees and
18 costs in the amount of $88,501.81.
19 On October 26, 2012, Trustee negotiated with Sierra Pines
20 to release the lis pendens against the Transferred Lots which
21 Trustee had obtained. On November 26, 2012, the bankruptcy
22 court entered an order authorizing the sale of the Transferred
23 Lots free and clear of the liens of Nunez, Angela, and Loo.
24 Under the terms of the order, the liens were to attach to the
25 proceeds with the same validity, priority, and amount as they
26
5
27 Loo and Robert also filed for bankruptcy. In total, there
were five bankruptcy filings by parties related to the State
28 Court Action.
-6-
1 attached to the Transferred Lots. The net proceeds from the
2 sale were $210,540.17.
3 On January 6, 2014, Trustee filed an adversary proceeding
4 seeking declaratory relief from the bankruptcy court that
5 Nunez’s lien was not secured against the Transferred Lots and
6 requesting the court to determine the amount of Nunez’s claim.
7 On February 6, 2014, Nunez filed an answer and counterclaim for
8 quiet title based on his lien, specific performance, and
9 declaratory relief.
10 The bankruptcy court held a three day trial. On August 26,
11 2015, the court issued its oral ruling. After stating detailed
12 findings of fact and conclusions of law, the bankruptcy court
13 concluded that Nunez did not have a secured claim against the
14 Transferred Lots because Nunez did not comply with Rule 3-300 of
15 the California Rules of Professional Conduct (“Rule 3-300”).
16 The court found based on the words of the retainer agreement and
17 the testimony at trial that the fee agreement was a “hybrid” and
18 therefore, under relevant case law, Nunez’s lien was invalid and
19 unsecured. Adopting the Trustee’s methodology, the bankruptcy
20 court then determined that Nunez was allowed an unsecured claim
21 for fees and costs based on his pre-petition representation of
22 the Debtor in the amount of $8,535.38, which was to be paid by
23 the estate. Nunez timely appealed to this court.
24 II. JURISDICTION
25 The bankruptcy court had jurisdiction over this proceeding
26 under 28 U.S.C. §§ 1334 and 157(b)(2). We have jurisdiction
27 under 28 U.S.C. § 158.
28
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1 III. ISSUES
2 A. Whether the bankruptcy court erred by concluding that
3 Nunez did not hold an enforceable lien on the Transferred Lots
4 under Rule 3-300 of the California Rules of Professional
5 Conduct.
6 B. Whether the bankruptcy court erred by concluding that
7 Nunez did not hold any equitable liens on the Transferred Lots.
8 C. Whether the bankruptcy court abused its discretion in
9 calculating Nunez’s allowed attorney’s fees and costs in the
10 amount of $8,535.38.
11 IV. STANDARDS OF REVIEW
12 In reviewing decisions of the bankruptcy court, the Panel
13 reviews legal conclusions de novo, factual findings for clear
14 error, and mixed questions of law and fact de novo. Murray v.
15 Bammer (In re Bammer), 131 F.3d 788 (9th Cir. 1997);
16 In re Jorgensen, 66 B.R. 104, 109 (9th Cir. BAP 1986). A
17 finding of fact is clearly erroneous when, after reviewing the
18 evidence, we are left with the definite and firm conviction that
19 a mistake has been committed. In re Contractors Equip. Supply
20 Co., 861 F.2d 241, 243 (9th Cir. 1988).
21 We review a bankruptcy court’s decision to award attorney’s
22 fees and cost for abuse of discretion. See, e.g. Cal. Emp. Dev.
23 Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147 (9th Cir.
24 1996). Under the abuse of discretion standard of review, we
25 first “determine de novo whether the [bankruptcy] court
26 identified the correct legal rule to apply to the relief
27 requested.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th
28 Cir. 2009) (en banc). If the bankruptcy court identified the
-8-
1 correct legal rule, we then determine under the clearly
2 erroneous standard whether its factual findings and its
3 application of the facts to the relevant law were:
4 “(1) illogical, (2) implausible, or (3) without support in
5 inferences that may be drawn from the facts in the record.” Id.
6 (internal quotation marks omitted).
7 V. DISCUSSION
8 A. Motion to Strike
9 During the pendency of this appeal, Trustee filed a motion
10 to strike portions of Nunez’s opening brief and excerpts of
11 record. Nunez included in the excerpts declarations from
12 summary judgment motions, judicially noticed documents, and
13 findings of facts and conclusions of law, all that relate to
14 prior filings with the bankruptcy court, which were not
15 presented at trial or admitted in the trial record. Nunez
16 argues that the evidence only needed to be presented at some
17 point to the trial court to be considered part of the excerpts
18 of record. Thus, because they were on the court’s docket, they
19 were presented to the trial court.
20 In making this argument, Nunez essentially seeks to
21 introduce new evidence on appeal. The summary judgment motion
22 and other documents were not introduced into the evidentiary
23 record at trial. Accordingly, because the material Nunez
24 included in the excepts was not admitted into the trial record,
25 it would be improper for this Panel to consider the material
26 outside the record. See Heath v. Helmick, 173 F.2d 156 (9th
27 Cir. 1949). Therefore, the challenged exhibits are stricken.
28 We likewise accept Trustee’s redacted brief, which eliminated
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1 any reference to the material not in the trial record in Nunez’s
2 opening brief filed with the Panel.
3 B. Secured claims against the estate
4 Nunez argues that his retainer agreement created a secured
5 claim against the Shaver bankruptcy estate. The bankruptcy
6 court denied that security for reasons stated above. We address
7 those reasons in turn.
8 1. Attorney’s Lien
9 Nunez argues that he has a secured attorney’s charging lien
10 based on the January 2011 retainer agreement which need not
11 comply with the ethical obligations in Rule 3-300. The record
12 indicates that in making its determination, the bankruptcy court
13 found that there are four species of retainer agreements:
14 hourly, fixed, contingent, and true retainer. After eliminating
15 each type of agreement, the court characterized the January 2011
16 retainer agreement as a “hybrid.”6 On appeal, Nunez does not
17 dispute this characterization, leaving only the issue of whether
18 Nunez’s fee agreement required compliance with Rule 3-300 before
19 the Panel.
20 State law governs the nature, extent, and validity of a
21 lien in a bankruptcy proceeding. Diamant v. Kasparian (In re S.
22 Cal. Plastics, Inc.), 165 F.3d 1243, 1248 (9th Cir. 1999). The
23 parties do not dispute that California law governs the retainer
24 agreement because undisputably it was entered into in
25 California.
26
6
27 The bankruptcy court based its determination on there
being an hourly component with an option to pay Nunez one-third
28 of the value of the Transferred Lots.
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1 Under California law, there are two types of attorneys’
2 liens: specific charging liens and general possessory liens.
3 Evans v. Stockton & Hing (In re Sw. Restaurant Sys., Inc.),
4 607 F.2d 1243, 1246 (9th Cir. 1979). “A charging lien attaches
5 to the particular fund or other property created or secured
6 through the attorney's efforts,” whereas, a possessory lien
7 “enables the attorney to retain a client’s records or other
8 property until the client pays for all of the legal fees owing
9 to the attorney.”7 Id. A charging lien may be used to secure
10 either hourly fee or a contingency fee. Cetenko v. United Cal.
11 Bank, 30 Cal. 3d 528 (1982).
12 In most jurisdictions, a charging lien may be created
13 either by contract or by operation of law. Fletcher v. Davis,
14 33 Cal. 4th 61, 62 (2010). Unlike most other jurisdictions,
15 under California law an attorney’s charging lien to secure
16 payment for legal services can only be created by contract of
17 the parties. Carroll v. Interstate Brands Corp., 99 Cal. App.
18 4th 1168, 1172 (2002).
19 For most charging liens, California attorneys must satisfy
20 the ethical obligations found in Rule 3-300 or the lien will be
21 invalid. See Fletcher, 33 Cal. 4th 61. Rule 3-300, an ethics
22 rule entitled “Avoiding Interests Adverse to a Client,”
23 provides:
24 A member shall not enter into a business transaction with a
client; or knowingly acquire an ownership, possessory,
25 security, or other pecuniary interest adverse to a client,
unless each of the following requirements has been
26
27
7
Nunez does not argue and the facts do not suggest that the
28 lien he had was a possessory lien.
-11-
1 satisfied:
2 (A) The transaction or acquisition and its terms are fair
and reasonable to the client and are fully disclosed and
3 transmitted in writing to the client in a manner which
should reasonably have been understood by the client; and
4
(B) The client is advised in writing that the client may
5 seek the advice of an independent lawyer of the client's
choice and is given a reasonable opportunity to seek that
6 advice; and
7 (C) The client thereafter consents in writing to the terms
of the transaction or the terms of the acquisition.
8
9 Cal. R. Prof. Conduct 3-300.
10 It is well-established that an attorney who secures payment
11 of fees by taking a lien on the property of a client creates an
12 “adverse interest” and must comply with the ethical obligations
13 in Rule 3-300. See Hawk v. State Bar, 45 Cal. 3d 589 (1988)
14 (holding that an attorney who had secured payment of fees with a
15 note secured by a deed of trust on a client’s property had to
16 comply with then-current Rule 5-101 (now Rule 3-300); see also
17 Brokway v. State Bar, 53 Cal. 3d 51 (1991); Fletcher, 33 Cal. 4th
18 at 64; Comments to Rule 3-300. In this case, Nunez billed at an
19 hourly rate and took a security interest in the Transferred
20 Lots, which prior to the filing of bankruptcy, belonged to one
21 of his clients, either Shaver or Loo and Angela. Nunez’s
22 attorney’s fees were therefore to be secured by property of his
23 clients, an acquisition that creates an adverse interest under
24 California law. Id.
25 Nunez argues that Plummer v. Day/Eisenberg, 184 Cal. App.
26 4th 38, 41 (2010) applies to his hybrid fee agreement and
27 therefore he need not comply with Rule 3-300. We disagree. In
28 Plummer, the retainer agreement was a pure contingency fee
-12-
1 agreement, which provided the attorney with a lien on the
2 client’s prospective recovery in the same proceeding. Id. at
3 38. The court, adopting the reasoning of the California State
4 Bar, concluded that a pure contingency fee agreement does not
5 create an adverse interest to the client within the meaning of
6 Rule 3–300. Id.; Cal. Eth. Op. 2006–170 at *6. Plummer is
7 easily distinguishable because Nunez’s fee agreement was not
8 contingent upon the outcome of resolving the State Court Action,
9 which he plainly concedes.8 Moreover, his fees were not
10 contingent at all, instead billed at an hourly rate whether or
11 not he won for his clients. Therefore, Plummer cannot apply on
12 these facts to exempt Nunez’s compliance with the ethical
13 obligations in Rule 3-300.
14 Although we need not make such determination to reach a
15 decision in this case, we doubt that Nunez held a “charging
16 lien” at all. A charging lien attaches to a particular
17 “recovery” or “fund.” Fletcher, 33 Cal. 4th at 61; In re Sw.
18 Restaurant Sys., Inc., 607 F.2d at 1246; Cetenko v. United Cal.
19 Bank, 30 Cal. 3d at 528. Nunez’s lien secured hourly fees but
20 the fees were not contingent on obtaining a judgment.
21 Therefore, his lien could not attach to any conceivable
22 “recovery” or “fund” and was unperfected, as it was never
23 recorded. In any case, because the lien was not a pure
24 continency charging lien, compliance with Rule 3-300 was
25
8
26 Even if Plummer applied to this retainer agreement, Nunez
still did not “recover” the Transferred Lots. Nunez was
27 unsuccessful in his attempts to expunge the lis pendens. It was
Trustee who avoided the lis pendens and recovered the Transferred
28 Lots in the Compromise Agreement.
-13-
1 required. See Plummer, 184 Cal. App. 4th at 38. The bankruptcy
2 court did not err in determining that Rule 3-300 compliance was
3 mandatory.
4 2. Compliance with Rule 3-300
5 After three days of trial, the bankruptcy court made
6 factual findings that Nunez did not comply with Rule 3-300. We
7 can only disturb these findings if they were clearly erroneous.
8 See Joseph F. Sanson Inv. Co. V. 268 Limited (In re 268
9 Limited), 789 F.2d 674 (9th Cir. 1986).
10 Under the first requirement of Rule 3-300, in which the
11 terms must be “fair and “reasonable” and “fully disclosed” to
12 the client, the bankruptcy court found that the terms were not
13 fair or reasonable. The court noted three problems. First, the
14 costs of litigation and sale of the recovered lots are not
15 described in the fee agreement. Second, Nunez did not discuss
16 how his lien might impact settlement discussions if a
17 disagreement resulted between Nunez on the one hand and Loo,
18 Robert, Angela, or Shaver on the other. Last, and most
19 significant, was the actual conflict of interest in representing
20 both the transferor and transferee in the defense of a
21 fraudulent transfer action. Clients Loo and Angela agreed to
22 place liens on the Transferred Lots that were titled in their
23 names in exchange for Nunez’s representation of themselves and
24 Shaver, the entity which made the transfer. Shaver did not have
25 the same interest in the State Court Action as Loo and Angela.
26 Under the second requirement, which requires there must be
27 both a written notification of the right to seek advice by
28 outside counsel and a reasonable opportunity to obtain such
-14-
1 advice, the bankruptcy court found that neither was present.
2 The court first found that the agreement was not reviewed by an
3 independent lawyer who was not affiliated with Nunez. The court
4 commented that the rule makes no exception for sophisticated
5 clients, as Nunez argued. The bankruptcy court then found that
6 because the agreement that was ultimately signed in January 2011
7 was materially different than the June 2010 agreement, a·new
8 period of review was required, which was not given. Because the
9 clients signed the agreement on that very day, there was no
10 reasonable opportunity for independent review.
11 Under the last requirement, which requires consent by the
12 client, the bankruptcy court found that although consent was
13 given for the January 2011 Agreement, because a reasonable
14 opportunity for advice must precede consent, which was not
15 present, Nunez did not comply with the ethical rule.
16 We have reviewed the retainer agreement and the bankruptcy
17 court’s findings. The bankruptcy court did not commit clear
18 error in making the determination that the Rule 3-300 warnings
19 were not provided by Nunez to all the signers of the January
20 2011 retainer agreement. Among other things, the actual
21 conflict of interest in representing both the transferor and the
22 transferee is blatant. The terms could have never been fair and
23 reasonable to all of Nunez’s clients and on this basis alone
24 Nunez did not comply with the Rule 3-300 warnings. Therefore,
25 the bankruptcy court properly determined that Nunez’s lien was
26
27
28
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1 invalid under Rule 3-300.9 Fletcher, 33 Cal. 4th at 66.
2 3. Equitable Lien
3 Nunez also argues that the bankruptcy court erred in not
4 imposing an equitable lien on the Transferred Lots to protect
5 his claim for attorney’s fees.
6 We disagree. This equitable remedy must be considered
7 under California law. See Wilkins v. Oken, 321 P.2d 876, 879
8 (Cal. Ct. App. 1958). The imposition of an equitable lien is an
9 extraordinary remedy to establish justice in a given situation.
10 See Farmers Ins. Exchange v. Smith, 71 Cal. App. 4th App. 660,
11 667 (1999); see also City. of Los Angeles v. Constr. Laborers
12 Trust Funds for S. Cal., 137 Cal. App. 410, 415 (2006);
13 53 C.J.S. Liens, § 5, pp. 462–463, fns. omitted. An equitable
14 lien is topically based on the doctrines of estoppel, unjust
15 enrichment, or the equitable maxim that equity will deem as done
16 that which ought to be done. See Farmers Ins. Exchange v.
17 Zerin, 53 Cal. App. 4th 445, 453 (1997); Constr. Laborers Trust
18 Funds For S. Cal., 137 Cal. App. at 416.
19 Although we question whether an equitable lien is available
20 as a remedy to an attorney whose retainer agreement did not
21 create a valid charging lien, see Wilkins v. Oken, 157 Cal. App.
22 2d, 603 (1958), we acknowledge that there is no California case
23 that establishes such a bright line rule. However, we need not
24 establish such a rule in this case. Consistent with the policy
25
9
26 Although the lien is invalid for non-compliance with
Rule 3-300, it does not follow that the underlying contractual
27 provisions of the retainer agreement are also invalid. See
Shopoff & Cavallo v. Lyon LLP, 167 Cal. App. 4th 1489, 1523
28 (2000).
-16-
1 of Rule 3-300, we find that under these facts Nunez is not
2 entitled to an equitable lien. The basis of Nunez’s
3 representation and its adverse impact on his clients required
4 him to comply with the ethical provisions of Rule 3-300, which
5 he did not do. Nunez’s non-compliance with Rule 3-300 rendered
6 him unsecured. Nunez cannot now argue under an equitable theory
7 that he is entitled to different treatment. Because the
8 imposition of an equitable lien is based upon providing justice
9 in a given situation, imposing an equitable lien in favor of an
10 attorney who has failed to comply with the Code of Professional
11 Conduct would be improper. See Farmers Ins. Exchange v. Smith,
12 71 Cal. App. 4th App. at 667.
13 We affirm the bankruptcy court’s decision that Nunez has no
14 right to an equitable lien.
15 4. Attorney’s Fee Award
16 After properly determining that Nunez’s claim was
17 unsecured, the bankruptcy court adjudicated the amount of
18 Nunez’s unsecured claim for attorney’s fees. In doing so, the
19 record indicates that the court adopted the Trustee’s
20 methodology in calculating the fees. The bankruptcy court did
21 not abuse its discretion in determining the reasonableness of
22 Nunez’s fees.
23 Section 502(b)(4) provides that a prepetition claim for
24 services performed by an attorney or insider of the debtor shall
25 be disallowed to the extent the claim exceeds the reasonable
26 value of the services provided. Thus, “the excess amount of the
27 claim beyond such reasonable value fixed by the court is simply
28 disallowed and may not, therefore, share in the distribution of
-17-
1 the debtor's assets.” 4 Collier on Bankruptcy ¶ 502.03[5][c]
2 (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2009). The
3 reasonableness of attorney's fees under section 502(b)(4) is a
4 question of federal law. Schoenmann v. Bach Constr., Inc.
5 (In re Segovia), 387 B.R. 773, 779 (Bankr. N.D. Cal. 2008),
6 aff'd, 2008 WL 8462967, at *6 (9th Cir. BAP Oct.22, 2008);
7 In re W. Real Estate Fund, 922 F.2d at 597. As such, Nunez’s
8 claim for attorney's fees and costs may be allowed only to the
9 extent it is reasonable as determined under federal law.
10 Landsing Diversified Props.-II v. First Nat’l Bank & Trust Co.
11 of Tulsa (In re W. Real Estate Fund, Inc.), 922 F.2d 592, 597
12 (10th Cir. 1991). The bankruptcy court correctly applied this
13 law.
14 Nunez’s total claim for attorney fees and costs was in the
15 amount of $88,501.81. The bankruptcy court first properly
16 disallowed all fees after the Petition Date in the amount of
17 $30,824.27. The record indicates that Nunez was not employed by
18 the estate. Because an attorney can only be paid by the estate
19 for post-petition services if employed by the trustee with court
20 approval, §§ 327-330; Lamie v. United States Tr., 540 U.S. 526
21 (2004), the bankruptcy court properly determined that Nunez was
22 not entitled to post-petition fees.
23 The bankruptcy court then deducted $15,000 for the work
24 previously done for Robert because there was no benefit to the
25 Debtor. It was not clear error for the bankruptcy court to
26 deduct fees that were unrelated to the representation of the
27 debtor. Finally, since Debtor was one of five represented
28 clients, with all of the clients’ fees and expenses included in
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1 the claim, the court assigned 20 percent (1/5) of the remaining
2 balance of the claim to the Debtor, leaving $8,535.38 as a
3 general unsecured claim. We conclude this factual finding was
4 not clearly erroneous.
5 VI. CONCLUSION
6 For the reasons stated above, we AFFIRM.
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