Phillips v. Gilman (In Re Gilman) , 603 B.R. 437 ( 2019 )

FILED
JUL 12 2019
ORDERED PUBLISHED SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. CC-18-1066-TaLS
KEVAN HARRY GILMAN, Bk. No. 1:11-bk-11603-VK
Debtor.
TAMMY R. PHILLIPS; TAMMY R. PHILLIPS, A
PROFESSIONAL LAW CORPORATION,
Appellants,
v. OPINION
KEVAN HARRY GILMAN,
Appellees.
TAMMY R. PHILLIPS; TAMMY R. PHILLIPS, A BAP No. CC-18-1101-STaL
PROFESSIONAL LAW CORPORATION,
Bk. No. 1:11-bk-11603-VK
Appellants,
Adv. No. 1:11-ap-01389-VK
v.
KEVAN HARRY GILMAN,
Appellee.
Argued and Submitted on November 29, 2018
at Pasadena, California
Filed – July 12, 2019
Appeal from the United States Bankruptcy Court
for the Central District of California
Honorable Victoria S. Kaufman, Bankruptcy Judge, Presiding
Appearances: Charles Quentin Jakob argued for Appellants; Mark E.
Ellis of Ellis Law Group, LLP, argued for Appellee.
Before: TAYLOR, LAFFERTY, and SPRAKER, Bankruptcy Judges.
TAYLOR, Bankruptcy Judge:
INTRODUCTION
Appellants, Tammy R. Phillips and Tammy R. Phillips, a Professional
Corporation (jointly, “Creditors”), obtained an $8,250 judgment against
debtor, Kevan Gilman. Under California law, they were entitled to recover
reasonable attorneys’ fees in obtaining and collecting this amount, and the
state court awarded them about $100,000 in prepetition fees. Apparently
other state court fee requests were pending or are anticipated as they
asserted that total state court fees approximate $1,000,000.
In this chapter 7 case, they obtained a determination that Debtor was
not entitled to a discharge. They also actively litigated issues in the main
case itself. The bankruptcy court determined that they were entitled to an
award of reasonable fees in connection with this activity. Creditors
requested approximately $750,000 in fees arising from main case activity
and $1,400,000 in fees in the adversary proceeding. They also requested
costs. The bankruptcy court awarded $137,907.66 and $166,453.58,
respectively, in fees and costs. This appeal arises from the reduced awards.
Given that proportionality is not a hallmark of Creditors’ approach,
the appeals before us raise a multitude of issues. We address the appeals in
three documents that we file concurrently. In this opinion, we address an
issue of first impression that was a partial basis for fee reduction in both
the main case and the adversary proceeding: the applicability of CCP
§ 685.080,1 which creates a two-year deadline for requesting fees incurred
in collection activities, and § 108(c)(2), which tolls the time for certain
actions during the pendency of a bankruptcy case. We conclude the
bankruptcy court correctly found CCP § 685.080 applicable to these
requests for an award of postpetition fees and unaffected by § 108(c).
Accordingly, we discern no error in the reduction of the requested fees on
this basis and AFFIRM the bankruptcy court’s orders in this regard. In
separate, unpublished decisions, we address the bankruptcy court’s further
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532, all “Rule “ references are to the Federal Rules
of Bankruptcy Procedure, all “Civil Rule” references are to the Federal Rules of Civil
Procedure, and all “CCP” references are to the California Code of Civil Procedure.
3
reduction of the requested fees.
FACTS
In 2011, Debtor filed a chapter 7 petition and scheduled his debt to
Creditors. He also scheduled an ownership interest in real property in Van
Nuys, California and, in relation to this real property, claimed an enhanced
homestead exemption.
Creditors actively participated in the bankruptcy case. They filed an
adversary proceeding and obtained a judgment under § 727 that denied
Debtor a discharge. During the course of this litigation and four years after
filing the adversary proceeding, they filed a motion for partial judgment on
the pleadings as to an attorneys’ fees claim for relief, seeking a
determination that they were entitled to recover fees and costs incurred in
the discharge litigation; but they did not seek an immediate award of fees.
The bankruptcy court granted the motion and specified that the adversary
litigation was enforcement of a judgment for purposes of CCP § 685.040. As
Creditors did not request it, the order did not rule on the appropriateness
of any specific fees and costs.
Through litigation in the main case, Creditors also successfully
blocked Debtor’s request for a homestead exemption enhancement.
Litigation continues on their attempt to block the entirety of Debtor’s
asserted homestead exemption.
Having prevailed (in part) on their exemption objection, Creditors
4
filed a motion in the main case under CCP § 685.040 and other theories to
recover their attorneys’ fees and costs. They requested a lodestar award of
$756,425 plus other costs. All of the requested fees and costs were incurred
postpetition and in the bankruptcy proceeding.
In the meantime and after denial of Debtor’s discharge, Creditors
filed a motion in the adversary proceeding and requested an award of
$1,400,000 in attorneys’ fees plus other costs associated with the adversary
proceeding under CCP § 685.040.
After a hearing, the bankruptcy court entered memorandum
decisions and separate orders granting in part and denying in part the two
CCP § 685.040 motions. It awarded Creditors $134,214.50 in fees and
$3,693.16 in costs in the main case and $162,613.60 in fees and $3,839.98 in
costs in the adversary proceeding. In determining these reductions, it
found that $322,000.05 of the fees in the main case and $942,154 of the fees
in the adversary proceeding were time-barred and subject to disallowance
under CCP § 685.080.
Creditors timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(2)(B). We have jurisdiction under 28 U.S.C. § 158.
ISSUES
Do CCP §§ 685.040 and 685.080 apply to Creditors’ fee request?
5
Does § 108(c) toll the time limits of CCP § 685.080 in this case?
STANDARD OF REVIEW
We review “de novo questions of law concerning entitlement to
attorney’s fees.” PSM Holding Corp. v. Nat'l Farm Fin. Corp., 884 F.3d 812,
828 (9th Cir. 2018).
DISCUSSION
The bankruptcy court disallowed 3,200.39 in billed hours, amounting
to $1,264,154.05 in fees, because they were incurred more than two years
before the motions were filed. In doing so, the bankruptcy court enforced
CCP § 685.080. Creditors argue, on appeal, that CCP § 685.080 is not
applicable to their fee request for a variety of reasons and that § 108(c)
tolled the application of the two year period.2 We begin with their first
position; we disagree.
A. California Code of Civil Procedure §§ 685.040 and 685.080
govern Creditors’ fee request.
Under CCP § 685.040, a judgment creditor “is entitled to the
reasonable and necessary costs of enforcing a judgment[,]” including, in
some situations, attorneys’ fees. Cal. Code Civ. Proc. § 685.040. Under CCP
§ 685.040, attorneys’ fees are collectible only when otherwise provided by
law. Id. Here, neither party disputes that the statute supporting the $8,250
judgment, the Rosenthal Fair Debt Collection Act, allows a prevailing party
2
Creditors raise substantially the same arguments in the two appeals.
6
to collect fees.
Neither we nor the parties located a case discussing the intersection
of CCP § 685.040 and § 108(c). The Ninth Circuit, however, has applied
CCP § 685.040 in a federal diversity case. Federal diversity litigants may
invoke CCP § 685.040 through Civil Rule 69, which applies in bankruptcy
proceedings through Rule 7069. See Carnes v. Zamani, 488 F.3d 1057, 1060
(9th Cir. 2007); Fed. R. Bankr. P. 7069. CCP § 685.040 is not, however,
without limitations. As the Ninth Circuit noted in Carnes v. Zamani:
“Because their right to recover post-judgment attorney fees is dependent
on [CCP § 685.040], the Carneses were required to comply with the
timeliness requirements for post-judgment attorney fee motions set forth in
the [California Enforcement of Judgments Law].” 488 F.3d at 1061. The
Ninth Circuit noted that these requirements include CCP § 685.080. Id.
CCP § 685.080 limits the amount that a judgment creditor may
otherwise recover under CCP § 685.040: “The judgment creditor may claim
costs authorized by [CCP §] 685.040 by noticed motion. The motion shall be
made before the judgment is satisfied in full, but not later than two years
after the costs have been incurred.” Cal. Code Civ. Proc. § 685.080(a).
In its ruling, the bankruptcy court concluded that CCP § 685.040
applied and that, under CCP § 685.080, only fees incurred within two years
of the fee motions were eligible for allowance.
Creditors first argue that the statute’s “two-year provision” is purely
7
procedural state law and thus does not apply in a federal bankruptcy court.
They try to distinguish Carnes by saying that it involved application of Civil
Rule 69, while the present case involves Civil Rule 54 motions for prevailing
on the merits. But Civil Rule 54, made applicable in bankruptcy cases by
Rule 7054, does not provide an independent basis for an award of attorneys’
fees following success in a § 727 action or an objection to exemptions.
Similarly, neither § 727 nor any other provision of the Code or Rules include
a relevant, statutory fee-shifting provision, and Civil Rule 54 awards
attorneys’ fees only when a judgment, statute, or rule so provides. Fed. R.
Civ. P. 54(d)(2)(B)(ii).
For that matter, Creditors never told the bankruptcy court they were
relying on Civil Rule 54. In their main case motion, Creditors never
discussed Civil Rule 54; they relied on CCP §§ 685.040 and 685.080, the
common fund doctrine, and the private attorney general doctrine. So too in
the adversary proceeding motion, they sought fees solely under CCP §
685.040. Creditors again made this clear in their main case reply paper filed
with the bankruptcy court: “Plaintiffs claim fees under [CCP] 685.040.” Bk
Dkt No. 510 at 12.3 So we reject Creditors’ suggestion that they moved under
3
Creditors’ characterizing their motions as under Civil Rule 54 for “prevailing on
the merits” is blatantly inconsistent with their previous position. In the main case and
adversary proceeding reply brief they filed with the bankruptcy court, they excoriated
Debtor for suggesting otherwise: “The opposition memorandum is full of whoppers.
Section 685.040 does not require Plaintiffs to prove they are ‘prevailing parties.’ ” Bk
(continued...)
8
Civil Rule 54 and that Carnes is thus distinguishable. They did not; it is not.
Second, Creditors suggest that the two-year look-back provision
would not begin to run until the denial of discharge. They reason: a chapter
7 debtor is presumptively entitled to a discharge; a judgment creditor must
prevail in a non-dischargeability proceeding to avoid that result; if the
judgment creditor fails, then the debt and associated right to enforcement
costs, is discharged; as a result, because the denial of discharge is an
independent precondition to an award of fees, the two-year period begins
to run from the denial of discharge. We disagree.
In their motions, Creditors claimed they were seeking fees under
CCP § 685.040 (i.e., collecting their state court judgment), not for seeking
denial of discharge or for excepting their claim from the discharge
injunction; and the bankruptcy court concluded fees were warranted
because Creditors’ collection activities were compensable under CCP
§ 685.040. On appeal Creditors would now have us treat the denial of
discharge as the CCP § 685.040 judgment. But this is inapt; they are entitled
3
(...continued)
Dkt No. 510 and AP Dkt No. 700 at 5 (same page in each document); see also id. at 9
(“[CCP 685.040] does not require courts to determine ‘prevailing parties’ as the identity
of such parties is already known (they are ‘judgment creditors’).”); id. at 18 (“There is no
‘prevailing party’ analysis under Section 685.040.”). Similarly, in the adversary
proceeding motion, they affirmatively stated: “Plaintiffs do not need to establish
themselves as ‘prevailing partes,’ at least for purposes of securing an award of
attorneys’ fees as enforcement costs under Code of Civil Procedure 685.040.” AP Dkt
No. 674-10 at 26.
9
to fees only because they incurred the fees in the adversary proceeding and
main case in an attempt to collect the statue court judgment.4
Third, Creditors argue that equitable tolling, federal preemption, and
the rule against interpreting statutes to permit mischief or absurdity apply.
None of these arguments are persuasive. They cite no caselaw saying that
equitable tolling applies to CCP § 685.080.5 And they argue no facts that
4
Further, Creditors’ present argument (i.e., that they could wait until after
discharge was denied to file their fee request) is different from the approach they
argued in their main case reply filed with the bankruptcy court:
The argument that a fee motion should be delayed until an appeal is
decided is part of a playbook of dirty tactics used by losing attorneys who
hope delay will give them leverage (or assuage angry clients). It is
routinely ignored. In fact, federal courts have developed a body of law
allowing parties to seek “interim fees” to avoid the liquidity problems
defense counsel seeks to cause.
Bk Dkt No. 510 at 8 (citations omitted). In short, Creditors themselves point out that
they could have sought “interim fees.”
Finally, at the hearing, the bankruptcy court noted that Creditors knew some
time ago that CCP § 685.040 applied: “This was the first time that you requested fees
and costs pursuant to the statute, even though you had filed a request to determine if
the statute was applicable, which is . . . something you did long ago. You could have
requested them then.” Hr’g Tr. (June 7, 2017) 32:10–15. Creditors’ counsel replied:
“Yeah, yes.” Id. at 32:16. The bankruptcy court then faulted Creditors for not seeking
fees earlier. Id. at 32:21–24, 33:1–5.
5
Creditors claim Gray1 CPB, LLC v. SCC Acquisitions, Inc., 233 Cal. App. 4th 882,
897 (2015) stands for the proposition that CCP §§ 685.070 and 685.080’s timing
provisions are subject to equitable tolling. It does not:
(continued...)
10
justify a conclusion that the bankruptcy court erred in refusing to apply the
doctrine. They twice refer to preemption. The first time, they state that
§ 108(c) preempts CCP § 685.080’s two-year limitation. But this is not quite
accurate. As discussed below, § 108(c) does not apply to the present
circumstances, so whether it preempts CCP § 685.080 is immaterial. That
said, when § 108(c) does apply, it does “not operate without regard to
existing nonbankruptcy law to stop the running of any periods of
limitation.” Smith v. Smith (In re Smith), 352 B.R. 702, 706 (9th Cir. BAP
2006); Aslanidis v. U.S. Lines, Inc., 7 F.3d 1067, 1073 (2d Cir. 1993) (“The
(...continued)
Lastly, Gray1 urges us to find sections 685.070, subdivision (b) and
685.080, subdivision (a) were equitably tolled, thus making its motion for
postjudgment costs timely. Equitable tolling is a judicially created doctrine
that permits the tolling of a statute of limitations. (McDonald v. Antelope
Valley Community College Dist. (2008) 45 Cal. 4th 88, 100, 84 Cal. Rptr. 3d
734, 194 P.3d 1026.) Equitable tolling is invoked “ ‘ “[w]hen an injured
person has several legal remedies and, reasonably and in good faith,
pursues one.” ’ [Citations.]” (Ibid.) The Enforcement of Judgments Law
provides two remedies through which a judgment creditor may obtain an
order for postjudgment attorney fees as costs: section 685.070, subdivision
(b) [memorandum of costs] and section 685.080, subdivision (a) [motion
for costs]. Equitable tolling does not apply in this matter because Gray1's
action to set aside fraudulent liens was an effort to satisfy Gray1's
judgment, not an effort to collect postjudgment attorney fees that had not
yet been awarded by the court.
Gray1 CPB, LLC v. SCC Acquisitions, Inc., 233 Cal. App. 4th 882, 897 (2015). In any event,
Creditors did not seek attorneys’ fees by a memorandum of costs as opposed to their
present motion for costs, so they did not pursue one remedy in good faith over the other
and, thus, equitable tolling would not apply.
11
reference in § 108(c)(1) to ‘suspension’ of time limits clearly does not
operate in itself to stop the running of a statute of limitations; rather, this
language merely incorporates suspensions of deadlines that are expressly
provided in other federal or state statutes.”). As the plain language of
§ 108(c) states, the prepetition statute of limitations expires the later of
either the end of the period or 30 days after termination of the stay.
11 U.S.C. § 108(c). The second time they refer to preemption is in a heading,
but they do not elaborate on it any further. Last, the bankruptcy court’s
decision does not lead to mischief.
Fourth, Creditors argue that the bankruptcy court inconsistently
“derided” them for filing numerous discovery and sanctions motions while
simultaneously holding that, under CCP § 685.080, they needed to file their
fee requests earlier. We disagree: each type of motion relies on a different
source of authority; as a result, each motion is constrained by that
particular controlling authority’s limitations.
Fifth, Creditors perfunctorily state that judicial estoppel, equitable
estoppel, and quasi-estoppel apply, but they either provide no analysis for
these points or repeat arguments that we have already addressed. We
consider them no further. Christian Legal Soc. Chapter of Univ. of California v.
Wu, 626 F.3d 483, 487 (9th Cir. 2010) (“[W]e won’t consider matters on
appeal that are not specifically and distinctly argued in appellant’s opening
brief. Applying this standard, we’ve refused to address claims that were
12
only argued in passing or that were bare assertions . . . with no supporting
argument.”) (internal quotation marks and alterations omitted).
Last, in connection with the adversary proceeding, Creditors argue
that Debtor was required to plead the time limitation as an affirmative
defense because it is in the nature of a statute of limitations and a
limitations defense is forfeited if not timely raised. Again, we disagree.
Creditors cite no authority holding that CCP § 685.080’s time limitation is
forfeitable. To the contrary, the time limitations are built into the statute
itself and are more properly read as an element of recovery. See Carnes, 488
F.3d at 1061 (“Because their right to recover post-judgment attorney fees is
dependent on [CCP § 685.040], the Carneses were required to comply with
the timeliness requirements for post-judgment attorney fee motions set
forth in the [California Enforcement of Judgments Law].”).
In sum, Creditors rely on CCP § 685.040 to recover attorneys’ fees.
But CCP § 685.080 limits the reach of CCP § 685.040 to attorneys’ fees
incurred within two years. So says California law; and, according to the
Ninth Circuit, this limitation applies in federal courts when a movant
invokes CCP § 685.040. Accordingly, in the absence of § 108(c) tolling, the
bankruptcy court appropriately disallowed recovery of fees and costs
incurred more than two years before the motions were filed. We now turn
to the tolling question.
13
B. Section 108(c) does not toll application of CCP § 685.080 to
postpetition fees.
To reach our conclusion, we consider the plain language of the
statute and the Code’s purposes.
The statute’s plain language. We begin, as usual, with the statute’s
text. United States v. Ron Pair Enters., 489 U.S. 235, 241 (1989). Section 108(c)
provides:
Except as provided in section 524 of this title, if applicable
nonbankruptcy law, an order entered in a nonbankruptcy
proceeding, or an agreement fixes a period for commencing or
continuing a civil action in a court other than a bankruptcy
court on a claim against the debtor, or against an individual
with respect to which such individual is protected under
section 1201 or 1301 of this title, and such period has not
expired before the date of the filing of the petition, then such
period does not expire until the later of–
(1) the end of such period, including any
suspension of such period occurring on or after the
commencement of the case; or
(2) 30 days after notice of the termination or
expiration of the stay under section 362, 922, 1201,
or 1301 of this title, as the case may be, with respect
to such claim.
11 U.S.C. § 108(c).
Application of § 108(c) turns in the present case on consideration of
the following five elements: (1) applicable nonbankruptcy law; (2) must fix
14
a period; (3) to commence or continue a civil action on a claim against the
debtor; (4) in a court other than a bankruptcy court; and (5) that period
must not have expired when the petition is filed.
The first three elements are present. The applicable nonbankruptcy
law is CCP §§ 685.040 and 685.080. Under CCP § 685.040, a judgment
creditor “is entitled to the reasonable and necessary costs” of collecting a
judgment, including, as here, attorneys’ fees. Cal. Code Civ. Proc. § 685.040.
CCP § 685.080 also limits the amount that a judgment creditor may
otherwise recover under CCP § 685.040 by imposing two time limits: “The
judgment creditor may claim costs authorized by [CCP §] 685.040 by
noticed motion. The motion must be made before the judgment is satisfied
in full, but not later than two years after the costs have been incurred.” Cal.
Code Civ. Proc. § 685.080(a). In § 108(c)’s terms, CCP § 685.080 fixes a
period in which a judgment creditor may commence a claim for collection
costs against the debtor. So the first three elements of § 108(c) are present in
this case.
The fourth and fifth elements, however, have not been met.
Creditors filed their CCP § 685.080 motions with the bankruptcy
court, thereby affirmatively invoking the bankruptcy court’s jurisdiction
and asking it for relief. This was appropriate as all requested fees relate to
postpetition activity before the bankruptcy court and related to the
bankruptcy case. By their conduct, Creditors demonstrate that CCP
15
§ 685.080 did not require Creditors to act “in a court other than a bankruptcy
court”; this fact alone renders § 108(c) inapplicable to their motions. And,
the fact that the automatic stay did not prevent Creditors from filing their
motions with the bankruptcy court underscores this point.
Next, Creditors sought approval under CCP § 685.080 for attorneys’
fees incurred postpetition. By its plain language, § 108(c) extends prepetition
statutes of limitation or duration at risk of expiring postpetition; it applies
if “such period has not expired before the date of the filing of the petition
. . . .” 11 U.S.C. § 108(c).6 Because all of the fees were incurred postpetition,
CCP § 685.080’s two-year period did not commence prepetition and, again,
§ 108(c) does not apply.
A plain language application of § 108(c), then, compels this result:
§ 108(c) did not suspend the application of CCP § 685.080 when Creditors
filed their motions, seeking approval of attorneys’ fees incurred
postpetition, with the bankruptcy court.
The Code’s purposes. As we interpret § 108(c), we recognize that the
Ninth Circuit’s § 108(c) decisions have consistently looked at the purposes
6
Section 108(a), which extends time periods for a trustee, has nearly identical
temporal language. It begins: “If applicable nonbankruptcy law, an order entered in a
nonbankruptcy proceeding, or an agreement fixes a period within which the debtor
may commence an action, and such period has not expired before the date of the filing
of the petition . . . .” 11 U.S.C. § 108(a). And § 108(a) “applies only to causes of action
which the debtor possesses on the date of the order for relief and not to those which
arise or are acquired by the trustee thereafter.” 2 Collier on Bankruptcy 108.02[4] (16th
ed. 2019).
16
of the Code. For instance, in West v. United States (In re West), the Ninth
Circuit rejected what it called a plain language (or literal) interpretation of
§ 108(c). 5 F.3d 423, 426 (9th Cir. 1993). Under the Code, a chapter 13 plan
must provide for full payment of claims entitled to priority under § 507;
§ 507, in turn, gives priority to tax debts assessed within 240 days
prepetition. Id. at 424–25. The debtors filed a joint chapter 13 petition; the
IRS asserted a priority claim for taxes; and the debtors then dismissed the
case but later filed individual chapter 13 petitions. Id. at 424. The Internal
Revenue Service argued that its tax claims were entitled to priority because
§ 108(c) and Internal Revenue Code § 6503 suspended the 240-day priority
period in § 507. Id. at 424. On appeal, the Ninth Circuit agreed with the IRS.
In doing so, the Ninth Circuit noted that a plain language
interpretation of § 108(c) would have “frustrate[d] the Bankruptcy Code’s
intricate scheme for the payment of tax claims . . . .” 5 F.3d 423, 426 (9th Cir.
1993). “Interpreting § 108(c) literally[,]” it said, “would allow a debtor to
create an ‘impenetrable refuge’ by filing a bankruptcy petition, waiting for
§ 507(a)(7)’s priority periods to expire, and then dismissing the case and
refiling shortly thereafter.” Id. Instead, the Ninth Circuit concluded that
§ 108(c) incorporated provisions of the Internal Revenue Code that
suspended the statute of limitations on tax collections while a debtor was
in bankruptcy. Id. at 427 (adopting the reasoning of Brickley v. United States
(In re Brickley), 70 B.R. 113 (9th Cir. BAP 1986)).
17
Our interpretation of § 108(c) here does not frustrate the Code’s
purposes.7 Unlike the situation confronted in West, the Code does not have
an intricate scheme devoted to affording Creditors additional rights or
treatment: they were unsecured creditors, and they remain unsecured
creditors. Rather, matters affecting a claim may be fully litigated before the
bankruptcy court.
Nor, for that matter, does our decision frustrate the purpose of CCP
§ 685.080’s time limit. Quite to the contrary, our decision is entirely
consistent with CCP § 685.080, which imposes two time limitations on a
CCP § 685.040 motion. First, the motion must be filed before the judgment
is satisfied; and, second, it must be filed within two years of the date the
costs were incurred. The California Supreme Court explained the policy
purpose behind the first limitation:
Moreover, section 685.080’s time limit serves a policy purpose
of its own, to prevent unfair surprise to the judgment debtor.
[T]he statutory purpose of requiring that the motion for
7
Our considering the Code’s purposes is further sanctioned by the Ninth
Circuit’s § 108(c) precedent, past and recent. In Miner Corporation v. Hunters Run Limited
Partnership (In re Hunters Run Limited Partnership), a case we discuss below, the Ninth
Circuit referred, approvingly, to a then-recent Second Circuit decision, In re Morton: “As
we do, the In re Morton court based its conclusion on statutory language. In addition,
the Second Circuit demonstrated persuasively that adherence to congressional purpose
also required its result.” 875 F.2d 1425, 1427 (9th Cir. 1989) (citation omitted) (citing
Morton v. Nat’l Bank of N.Y.C. (In re Morton), 866 F.2d 561, 566 (2d Cir. 1989)). More
recently, the Ninth Circuit “expressly adopt[ed]” In re Morton. Daff v. Good (In re
Swintek), 906 F.3d 1100, 1106 (9th Cir. 2018).
18
enforcement costs be brought ‘before the judgment is satisfied
in full’ (§ 685.080, subd. (a)) is to avoid a situation where a
judgment debtor has paid off the entirety of what he
[justifiably] believes to be his obligation in the entire case, only
to be confronted later with a motion for yet more fees.” (Lucky
United Properties Investment, Inc. v. Lee, supra, 185 Cal. App. 4th
at p. 144, 110 Cal. Rptr. 3d 159.)
Conservatorship of McQueen, 59 Cal. 4th 602, 615–16 (2014). In short, the time
limits in CCP § 685.080 serve to prevent the judgment debtor from
unnecessary surprise in relation to the quantum of collection expense.8 Our
present ruling is in full accord with this policy.9
In sum, the bankruptcy court correctly excluded the attorneys’ fees
incurred more than two years before Creditor’s motion seeking collection.
C. The Ninth Circuit’s § 108(c) caselaw does not require a
different result.
Our decision, phrased differently, states: even if the automatic stay
8
A typical chapter 7 debtor would be indifferent to a CCP § 685.080 motion if the
creditor holds a dischargeable, unsecured claim.
9
In its order on Creditors’ motion for a judgment as a matter of law in the
adversary proceeding, the bankruptcy court stated that it would determine the
reasonableness of attorneys’ fees at the conclusion of the adversary proceeding; then, as
already noted, at the conclusion of the adversary proceeding the bankruptcy court
concluded that Creditors needed to file motions on an interim basis. On its face, this
appears discordant. But this is not enough to reverse the bankruptcy court’s decision.
First, the bankruptcy court did not prohibit Creditors from filing CCP § 685.040 motions
or memoranda at two-year intervals. Far from it. Instead, it stated that it would rule on
the motions at the conclusion of the litigation. Second, litigants are obliged to preserve
their rights to the extent they believe courts commit reversible error.
19
blocks acts taken in a nonbankruptcy forum, § 108(c) does not toll a
deadline when the creditor can obtain the specific relief at issue from the
bankruptcy court. This arguably conflicts with language used by the Ninth
Circuit in previous § 108(c) cases—in them, the Ninth Circuit identifies that
one factor dictates whether § 108(c) applies: whether the automatic stay
applies. Daff v. Good (In re Swintek), 906 F.3d 1100, 1105 n.4 (9th Cir. 2018)
(“[T]he determinative factor for tolling is whether the stay prevented [the
judgment creditor] from enforcing her judgment by executing on her
lien.”); Spirtos v. Moreno (In re Spirtos), 221 F.3d 1079, 1081 (9th Cir. 2000)
(“Here, [the judgment creditor] is barred by the automatic stay from
collecting on a judgment by attaching the debtor’s assets which have
become property of the estate. It is the creditor’s inability to enforce the
judgment for a portion of the ten-year period that keeps the period of
duration open under section 108(c).”); Miner Corporation v. Hunters Run
Limited Partnership (In re Hunters Run Limited Partnership), 875 F.2d 1425,
1427 (9th Cir. 1989) (“Applicability of section 108(c) in this case hinges on
the applicability of another section of the Bankruptcy Code, the automatic
stay provisions of 11 U.S.C. § 362.”).
We recognize that the stay prevented Creditors from enforcing their
judgment against Debtor outside the bankruptcy claims process. So a
hyper-literal read of the Ninth Circuit’s language suggests that § 108(c)
should apply. But we reach a different result because, for § 108(c) to apply,
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all of its elements must be met.
In each of those cases, the creditor was required to act in a non-
bankruptcy forum to preserve or enforce its rights (i.e., our fourth
identified element). In Hunters Run, the applicable non-bankruptcy law
required the judgment creditor to file an action “in the proper court” to
enforce a lien—and the stay prohibited the creditor from doing that.
875 F.2d at 1426 n.2 (quoting Wash. Rev. Code Ann § 60.04.100 (West Supp.
1989)). In In re Spirtos, the applicable non-bankruptcy law required the
judgment creditor to “fil[e] an application for renewal of the judgment with
the court in which the judgment was entered.” Cal. Civ. Proc. Code § 683.120(a)
(emphasis added); see In re Spirtos, 221 F.3d at 1080 (referring to Cal. Civ.
Proc. Code § 683.110). And in In re Swintek, the applicable non-bankruptcy
law stated that the lien would expire in one year “unless extended or
sooner terminated by the [state] court.” In re Swintek, 906 F.3d at 1103
(emphasis added) (quoting Cal. Civ. Proc. Code § 708.110(d)). The
application of § 108(c) in those contexts, then, makes sense: § 108(c) applies
when applicable nonbankruptcy law sets a deadline “for commencing or
continuing a civil action in a court other than a bankruptcy court . . . .” 11
U.S.C. § 108(c). As we note above, Creditors filed their motions with the
bankruptcy court.10 And nothing—not even the automatic stay—prevented
10
In Duchek v. Jacobi, the Ninth Circuit held that a district court, sitting in
(continued...)
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Creditors from doing so. Snavely v. Miller (In re Miller), 397 F.3d 726, 730
(9th Cir. 2005) (“The automatic stay does not apply to proceedings initiated
against the debtor if the proceedings are initiated in the same bankruptcy
court where the debtor’s bankruptcy proceedings are pending.”).
In addition, in each of the cases, the creditor was prevented by the
automatic stay from preserving prepetition rights that were at risk of
expiring postpetition (i.e., our fifth identified element). In Hunters Run, the
lien was created in September 1985 and set to expire in May 1986, but the
debtor filed bankruptcy in March 1986. 875 F.2d at 1425–26. In In re Spirtos,
the judgment was acquired in 1983 and set to expire in 1993, but the debtor
filed bankruptcy in 1987. 221 F.3d at 1080. In In re Swintek, the lien was
acquired in June 2010 and set to expire in June 2011, but the debtor filed
bankruptcy in August 2010. 906 F.3d at 1102. In the present case, Creditors’
time to seek recovery of postpetition fees began to run postpetition and
expired two years after postpetition fees were incurred. As to fees
disallowed under CCP § 685.080 in this case, the petition had been filed
before that time period.
In short, § 108(c) does not apply to the present facts for reasons not
10
(...continued)
diversity and through Civil Rule 69, could use state court procedures to enforce the
judgment even though the state court procedures limited jurisdiction to state courts. 646
F.2d 415 (9th Cir. 1981). This does not undercut our point; Duchek does not stand for the
proposition that a judgment creditor could, for instance, renew their state court
judgment or ORAP lien by filing a renewal with the bankruptcy court.
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addressed in the Ninth Circuit’s previous § 108(c) precedent. Put
differently, in each of the prior cases, the Ninth Circuit considered a
different part of the statute than we do now. In Hunters Run, the Ninth
Circuit held: first, that the relevant language of § 108(c) had been updated
to include statutes of duration in addition to statutes of limitation; second,
that Washington law did not require the commencement of foreclosure
proceedings before a lien was “perfected”; and, third, as a result,
commencement of foreclosure proceedings was not exempted from the
automatic stay by § 546(b). 875 F.2d at 1426–28. In In re Spirtos, the Ninth
Circuit was concerned with when the limitations period expired. 221 F.3d at
1081 (“Thus, the period of duration under Cal. Civ. Pro. Code § 683.020 will
not expire until 30 days after all the assets in [the debtor’s] estate have been
finally distributed, an event that has not yet occurred.”). Last, In re Swintek
analyzed the third element. 906 F.3d at 1103–04 (“Specifically, we must
determine whether the period in which a creditor may execute on an ORAP
lien constitutes ‘commencing or continuing a civil action’ under the
bankruptcy code’s tolling provision.”); cf. id. at 1107 (Wardlaw, J.,
dissenting) (“I respectfully dissent. The plain language of 11 U.S.C.
§ 108(c), the Bankruptcy Code's extension provision, applies to fixed
periods of time only ‘for commencing or continuing a civil action . . . .’ ”).
Last, the present situation does not involve a judgment creditor
potentially losing its prepetition claim by not acting within a particular
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time period, as in In re Spirtos and Hunters Run. Nor, for that matter, does it
involve a judgment creditor losing the secured status of its prepetition
claim, as in In re Swintek. Instead, here, Creditors assert an unsecured claim
and they, through their motions, seek to increase the amount of that
unsecured claim by adding postpetition attorneys’ fees for collection efforts
to the judgment’s principal. Lucky United Properties Inv., Inc. v. Lee, 185 Cal.
App. 4th 125, 138 (2010), as modified on denial of reh’g (June 28, 2010) (“When
postjudgment enforcement costs are allowed, they become part of the
principal amount of the judgment.”). Despite our ruling, Creditors remain
unsecured creditors subject to the same treatment as all other unsecured
creditors.
CONCLUSION
In sum, we conclude that, when a creditor voluntarily files a CCP
§ 685.080 motion with the bankruptcy court for an award of postpetition
attorneys’ fees, § 108(c) does not toll the two-year limitation in CCP
§ 685.080. As a result, Creditors have not shown that the bankruptcy court
erred when it disallowed fees on this basis. Accordingly, we AFFIRM.
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