All posts in Chapter 7

This is pretty interesting and very surprising.  It seems to me to make the whole “is this an action on a contract” issue go away, as long at there is some relevant contract with an attorney’s fees provision.

Asphalt Professionals, Inc. v. Davis (In re Davis), (unpublished) 1:10-bk-17214-VK (9th Cir. BAP  July, 2019)

Issue:    Did the bankruptcy court properly award attorneys fees to the debtor after ruling in debtor’s favor in a 523(a)(2) action?

Holding:   Yes.  Even though the 523 action was not “on the contract,” fees are still appropriate under CCP 1021 which “permits recovery of attorney’s fees by agreement, for tort as well as contract actions.”   Further, CCP 1032(b) gives the prevailing party “costs” which include “Attorney’s fees, when authorized by . . . Contract.” CCP 1033.5(a)(10).

Judge Victoria Kaufman, Central District of California

Faris, Lafferty, Kurtz

The creditor here sued the debtor and certain of his corporations for breach of contract, alter ego and fraud.  The state court gave the creditor judgment against the corporate entities for breach of contract and against the debtor based on alter ego.  It did not rule (apparently) on the fraud.  Judgment was $3 million for breach of contract which included $1.5 million for fees.  During these proceedings, the debtor filed chapter 7.  The creditor filed a non-dischargeability complaint alleging fraud and also sought denial of the discharge.  After trial, the bankruptcy court ruled for the debtor which was affirmed by the BAP.  The bankruptcy court then awarded attorneys fees to the debtor for approximately $100,000.  The court ruled that CA CCP 1717 did not apply because the action in bankruptcy court was not “on the contract.”  She found however that CA CCP 1021 “permits recovery of attorney’s fees by agreement, for tort as well as contract actions.”   Further, CCP 1032(b) provides “a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”  Finally, “Costs” include “Attorney’s fees, when authorized by . . . Contract.” CCP 1033.5(a)(10).

The BAP affirmed.  Citing the California Supreme Court: Read more…

tentative from Judge Maureen Tighe re the issue of whether funds seized by a creditor but still in possession of the Sheriff are property of the estate.

1:18-13040 Eric Rodriguez Chapter 7

Motion By Debtor For Order Authorizing And Instructing the Riverside County Sheriff’s Office to Return Levied Funds to Debtor

On December 13, 2018, Eric Rodriguez (“Debtor”) received a notice from his bank (“Chase”) that it had received a bank levy in the amount of $14,301.57 from the Riverside County Sheriff’s Office (the “Sheriff”) on behalf of judgment creditor Freddy Harrison. Debtor filed this case as a chapter 13 on December 20, 2018.  The Sheriff then sent Debtor a notice acknowledging the bankruptcy filing, but indicating that if Debtor wanted the funds to be returned, he must seek an order from the Bankruptcy Court; otherwise, the funds would be turned over to the Trustee. The total being held by the Sheriff is $11,367.68 (the “Funds”). Read more…

A discharge under 727 discharges a debtor from all prepetition debts (liability on a claim) and any liability on a claim (right to payment).   But what if the debtor is sued for something other than a “right to payment”.   Is that a discharge violation?  Hmmm….let’s take a look at an example.

Read more…