Dennis Curtis v. Bank of the West ( 2022 )

NOT FOR PUBLICATION FILED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
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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,
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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.
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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.
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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
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“action on a contract,” and Curtis was not entitled to attorney’s fees pursuant to
section 1717.
AFFIRMED.
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