In re: Stephanie White

Opinion

FILED DEC 02 2016

1 NOT FOR PUBLICATION 2 SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

3 UNITED STATES BANKRUPTCY APPELLATE PANEL 4 OF THE NINTH CIRCUIT 5 In re: ) BAP No. CC-16-1067-TaKuKi )

6 STEPHANIE WHITE, ) Bk. No. 2:14-bk-30940-NB )

7 Debtor. )

______________________________)

8 )

STEPHANIE WHITE, )

9 )

Appellant, )

10 )

v. ) MEMORANDUM* 11 )

MAS FINANCIAL, )

12 )

Appellee. )

13 ______________________________) 14 Argued and Submitted on September 22, 2016 at Pasadena, California

15 Filed – December 2, 2016

16 Appeal from the United States Bankruptcy Court 17 for the Central District of California 18 Honorable Neil W. Bason, Bankruptcy Judge, Presiding 19 Appearances: Steven L. Bryson argued for Appellant; Paul V.

20 Reza argued for Appellee. 21 Before: TAYLOR, KURTZ, and KIRSCHER, Bankruptcy Judges.

22 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 8024-1(c)(2).

1 INTRODUCTION 2 Debtor Stephanie White financed acquisition of a vehicle 3 through an installment sales contract; Appellee MAS Financial 4 (“MAS”) asserts a claim based on this contract. The record is 5 unclear as to what happened, but there is no question that MAS 6 was never able to realize upon its collateral and that MAS, as a 7 result, suffered a loss. After the Debtor commenced a 8 chapter 71 case, MAS commenced an adversary proceeding alleging 9 conversion of its collateral and seeking a nondischargeable 10 judgment under § 523(a)(6). It later conceded that it could not 11 prove the willful and malicious injury requirements of 12 § 523(a)(6) given the Debtor’s explanations as set forth in a 13 proposed pretrial order. Thus, the parties stipulated to 14 dismiss the case before trial, and the bankruptcy court entered 15 an order approving the stipulation. 16 Thereafter, the Debtor sought to recover her attorney’s 17 fees. She asserted that her fees were collectible under 18 California’s Rees-Levering Automobile Sales Finance Act, 19 California Civil Code (“CC”) § 2981, et seq. 20 The bankruptcy court assumed, without deciding, that 21 contractual attorney’s fees were available and then determined 22 that the Debtor was not a prevailing party and denied the fee 23 request. If Rees-Levering governs the fee award here, however, 24 unresolved questions exist. Under Rees-Levering, a stipulated 25

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Unless otherwise indicated, all chapter and section 26 references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532. 27 All “Rule” references are to the Federal Rules of Bankruptcy Procedure. All “Civil Rule” references are to the Federal Rules 28 of Civil Procedure.

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1 dismissal can be the basis for a fee award. In such a case, the 2 court must determine which party, as a pragmatic matter, 3 achieved success in the litigation. Here, MAS acquired nothing 4 while the Debtor completely achieved her litigation goal as she 5 avoided a nondischargeable judgment. 6 As a result, on remand the bankruptcy court must determine 7 whether Rees-Levering governs the fee award. We are unable to 8 do so on the record currently before us given discord in 9 California Court of Appeal decisions about when Rees-Levering 10 allows fee recovery and given language in the stipulated 11 dismissal specifically reserving the Debtor’s right to seek 12 reasonable fees and costs after dismissal of the 13 nondischargeability action and further stating: “attorneys fees 14 and costs are governed under CA Civil Code Section 2983.4 of the 15 Motor Vehicle Sales and Finance Act.” The bankruptcy court, in 16 the first instance, should interpret its own order. If the 17 Rees-Levering Act is applicable here, additional findings are 18 then necessary to support the bankruptcy court’s decision that 19 the Debtor was not the prevailing party in the 20 nondischargeability action. 21 Therefore, we VACATE the order denying fees and REMAND to 22 the bankruptcy court for further proceedings consistent with 23 this decision. 24 FACTS 25 In 2011, the Debtor executed an installment sales contract 26 for the purchase of a Lexus. The contract provided for a 27 security interest in the Lexus and was assigned to MAS after 28 execution. The Debtor eventually defaulted under the contract.

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1 As a result, MAS obtained a state court default judgment for 2 money due on the contract and unsuccessfully attempted to 3 repossess its collateral. The record does not make the problem 4 clear, but an accident or nefarious conduct left the Lexus 5 extensively damaged. 6 Eventually, the Debtor filed a bankruptcy. MAS responded 7 with an adversary proceeding, seeking to except $14,242.62 from 8 discharge under § 523(a)(6). MAS did not argue that the entire 9 state court judgment was nondischargeable. Instead, it argued 10 that the Debtor willfully and maliciously converted the Lexus. 11 Thus, it sought a nondischargeable judgment equal to the value 12 of its allegedly converted collateral. The complaint alleged 13 that the vehicle: “ha[d] been stripped and taken apart by the 14 Debtor or persons acting at the direction of the [D]ebtor and 15 that the [Debtor] herein exercised such custody and control as 16 to cause the loss of the collateral.” 17 Two weeks before trial, however, MAS agreed to dismiss the 18 adversary proceeding. Its counsel later attested in a 19 declaration that MAS could not prove the willful and malicious 20 injury requirements as required by § 523(a)(6) based on the 21 Debtor’s explanations in a proposed pretrial order. The 22 parties, thus, submitted a proposed joint stipulation to dismiss 23 the case; the bankruptcy court entered an order approving it. 24 In relevant part, the parties agreed to the following in 25 the stipulation: 26 C The sales contract was subject to the Rees-Levering Act; 27 C Attorney’s fees and costs were governed by CC § 2983.4 of 28 the Rees-Levering Act; and

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1 C The Debtor reserved her right to seek reasonable fees and 2 costs incurred in connection with her defense of MAS’s 3 nondischargeability claim. 4 Given these provisions, it is not surprising that the 5 Debtor promptly sought to recover her attorney’s fees and costs 6 under CC § 2983.4. She asserted that she was the prevailing 7 party in the adversary proceeding and that the parties agreed in 8 the stipulation that the sales contract was subject to the Rees- 9 Levering Act. As a result, the Debtor argued, she was entitled 10 to fees under CC § 2983.4, and she sought fees in the amount of 11 $22,300.92. 12 MAS opposed and argued that the nondischargeability action 13 was based solely on a § 523(a)(6) claim for conversion, not the 14 sales contract. The recovery, it pointed out, “was limited to 15 the value of the vehicle at the time of the alleged conversion 16 of $14,000.00.” MAS never argued that the Debtor was not a 17 prevailing party or that it was confident of victory. Instead, 18 in an acknowledgment that occurred after the discovery cut-off 19 date, it conceded that its “ability to prove the ‘wilfull’ [sic] 20 and ‘intentional’ actions of the Debtor could not be met” based 21 on the Debtor’s representations in a proposed pretrial order. 22 Bk. Dkt. No. 30 at p. 9 ¶ 8. 23 The bankruptcy court denied the fee motion. It stated 24 that, “assuming without deciding that attorney fees could be 25 awarded under the applicable contract (an issue that the Court 26 does not reach),” there was no prevailing party. Bk. Dkt. 27 No. 31 at p. 1. Even if there was a prevailing party, the 28 bankruptcy court found that “no dollar amount of attorney fees

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1 would be reasonable given the tasks performed.” And it found 2 that MAS agreed to dismiss the case 3 [N]ot because of any lack of certainty about misconduct of the debtor, or about its ability to 4 prove such misconduct if it had enough time and resources, but instead out of an unwillingness to 5 throw good money after bad in pursuing a debtor that it had every reason to believe was dishonest, 6 obstreperous, and unrepentant. 7 Id. at p. 2. Finally, to avoid further expense and delay, it 8 concluded that a hearing on the matter was neither necessary nor 9 appropriate given the clarity of issues; it, thus, vacated the 10 hearing set forth on the matter. 11 The Debtor moved for reconsideration. She did not, 12 however, frame her request within the context of Civil Rule 59, 13 and she did not discuss any legal standards. Among other 14 things, the Debtor argued that MAS had misrepresented the facts 15 culminating in the disappearance of the Lexus and that the 16 misrepresentation prejudiced the bankruptcy court in determining 17 that there was no prevailing party in the adversary proceeding. 18 She contended that she was the prevailing party given that MAS 19 had dismissed its complaint and “took nothing.” 20 The next day,2 the bankruptcy court entered an order 21 denying the motion for reconsideration. It clarified that it 22 had not made any findings as to the underlying merits of the 23 adversary proceeding and, instead, that in its initial ruling it 24 solely found that the Debtor was not the prevailing party at the 25 pretrial stage. 26 27 2 Apparently, the Debtor did not set the motion for 28 reconsideration for hearing.

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1 The Debtor timely appealed. 2 JURISDICTION 3 The bankruptcy court had jurisdiction pursuant to 28 U.S.C. 4 §§ 1334 and 157(b)(1). We have jurisdiction under 28 U.S.C. 5 § 158. 6 ISSUE 7 Whether the bankruptcy court abused its discretion when it 8 denied the fee motion. 9 STANDARD OF REVIEW 10 We review a bankruptcy court’s decision regarding an award 11 of attorney’s fees for an abuse of discretion. See Renwick v. 12 Bennett (In re Bennett), 298 F.3d 1059, 1063 (9th Cir. 2002). 13 A bankruptcy court abuses its discretion if it applies the 14 wrong legal standard, misapplies the correct legal standard, or 15 if its factual findings are illogical, implausible, or without 16 support in inferences that may be drawn from the facts in the 17 record. See TrafficSchool.com, Inc. v. Edriver Inc., 653 F.3d 18 820, 832 (9th Cir. 2011) (citing United States v. Hinkson, 19 585 F.3d 1247, 1262 (9th Cir. 2009) (en banc)). 20 DISCUSSION 21 A. Procedural Issues 22 1. Appealability of the Orders and Timeliness 23 MAS, citing many California cases, argues that an order 24 denying a motion to reconsider is not a final and appealable 25 order. It also argues that the appeal was untimely, given that 26 the Debtor filed her notice of appeal outside the 14-day time 27 period established by Rule 8002. MAS is incorrect in both 28 respects.

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1 First, to the extent a denial of a motion to reconsider is 2 considered interlocutory under California law (something that we 3 do not determine), the same is not true under federal law. Such 4 an order is a final and appealable order. 5 Second, the Debtor’s timely-filed motion to reconsider 6 appropriately tolled the time to appeal from the fee motion 7 order. See Fed. R. Bankr. P. 8002(b)(1). Thus, the Debtor’s 8 appeal was timely as to either order. 9 2. Scope of Appeal 10 Timeliness, however, is only one of the relevant questions 11 here. The only order described in and attached to the Debtor’s 12 notice of appeal is the order denying reconsideration; she did 13 not attach the order denying the fee motion. And she did not 14 file an amended notice of appeal. Her statement of issues on 15 appeal, however, refers both to statements made by the 16 bankruptcy court in its order denying reconsideration and the 17 basis for its underlying decision to deny fees. The Debtor 18 further discusses the bankruptcy court’s prevailing party 19 determination in her opening brief. Thus, we infer that the 20 Debtor also intended to appeal from the order denying the fee 21 motion. See United States v. Arkison (In re Cascade Roads, 22 Inc.), 34 F.3d 756, 761-62 & n.5 (9th Cir. 1994). 23 Here, Civil Rule 59, made applicable in bankruptcy 24 proceedings by Rule 9023, applied. See, e.g., Alexander v. 25 Bleau (In re Negrete), 183 B.R. 195, 197 (9th Cir. BAP 1995) (if 26 a motion for reconsideration is brought within 14 days of entry 27 of an order, the motion is governed by Civil Rule 59). 28 Civil Rule 59(e) allows for reconsideration only if the

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1 bankruptcy court: “(1) is presented with newly discovered 2 evidence that was not available at the time of the original 3 hearing, (2) committed clear error or made an initial decision 4 that was manifestly unjust, or (3) there is an intervening 5 change in controlling law.” Fadel v. DCB United LLC 6 (In re Fadel), 492 B.R. 1, 18 (9th Cir. BAP 2013). “There may 7 also be other, highly unusual, circumstances warranting 8 reconsideration.” Sch. Dist. No. 1J v. ACandS, Inc., 5 F.3d 9 1255, 1263 (9th Cir. 1993). 10 A party, however, may not use a motion for reconsideration 11 “to present a new legal theory for the first time or to raise 12 legal arguments which could have been raised in connection with 13 the original motion. Also, a motion to reconsider may not be 14 used to rehash the same arguments presented the first time or 15 simply to express the opinion that the court was wrong.” Wall 16 St. Plaza, LLC v. JSJF Corp. (In re JSJF Corp.), 344 B.R. 94, 17 103 (9th Cir. BAP 2006) (emphasis in original), aff’d and 18 remanded, 277 F. App’x 718 (9th Cir. 2008). 19 Unfortunately for the Debtor, her motion to reconsider was 20 not framed within the legal standards of Civil Rule 59. Nor 21 does the Debtor distinctly and specifically address 22 reconsideration in her opening brief on appeal. As a result, 23 the Debtor effectively waived issues related to reconsideration 24 on appeal. See Padgett v. Wright, 587 F.3d 983, 986 n.2 (9th 25 Cir. 2009) (per curiam) (appellate courts “will not ordinarily 26 consider matters on appeal that are not specifically and 27 distinctly raised and argued in appellant’s opening brief”). 28 Turning to the merits related to the bankruptcy court’s

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1 denial of the fee motion, we conclude that remand to the 2 bankruptcy court is necessary given several ambiguities in the 3 law and record. 4 B. To the extent that the Debtor was entitled to fees under 5 the Rees-Levering Act, additional findings are necessary to 6 support the bankruptcy court’s determination that the 7 Debtor did not prevail in the adversary proceeding. 8 The Debtor contends that she was the prevailing party in 9 the adversary proceeding and, thus, that she was entitled to 10 attorney’s fees under the Rees-Levering Act. We agree with the 11 Debtor that under the Rees-Levering Act it is likely that she 12 prevailed in the adversary proceeding. On this record, however, 13 we cannot tell because the bankruptcy court determined, in a 14 conclusory manner, that there was no prevailing party and, on 15 reconsideration, that the Debtor did not satisfy her burden of 16 showing that she was the prevailing party. It did so based on a 17 superficial evaluation of the motion and papers; there was no 18 hearing or evidence taken on the matter. 19 The Rees-Levering Act governs the sales of motor vehicles 20 based on “conditional sale contracts.” Enacted as a protective 21 measure for consumers, the Act requires certain disclosures on a 22 sales contract relating to costs, limits the amount and types of 23 permitted charges, and establishes processes in the event of 24 contract default. The consumer-focused policy extends to 25 litigation under the Act. Civil Code § 2983.4 provides, in 26 particular, that “[r]easonable attorney’s fees and costs shall 27 be awarded to the prevailing party in any action on a contract 28 . . . subject to the provisions of [the Rees-Levering Act]

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1 regardless of whether the action is instituted by the seller, 2 holder or buyer.” 3 The Rees-Levering Act does not define “prevailing party.” 4 As a result, the courts are directed to “adopt a pragmatic 5 approach” in making this determination, “based on which party 6 succeeded on a practical level.” Graciano v. Robinson Ford 7 Sales, Inc., 144 Cal. App. 4th 140, 150 (2006); see also Heather 8 Farms Homeowners Ass’n v. Robinson, 21 Cal. App. 4th 1568, 1574 9 (1994) (in the context of CC § 1354, the test for a prevailing 10 party is a pragmatic one, namely whether a party prevailed on a 11 practical level by achieving its main litigation objectives). 12 This inquiry is based on “the extent to which each party has 13 realized its litigation objectives, whether by judgment, 14 settlement or otherwise.” Graciano, 144 Cal. App. 4th at 15 150-51. Instructed to reject form over substance, the courts, 16 instead, should be guided by equitable considerations. Id. at 17 151. 18 Further, in a Rees-Levering situation fees may be awarded 19 where the parties enter into a stipulated judgment. See Damian 20 v. Tamondong, 65 Cal. App. 4th 1115, 1119 (1998) (voluntary 21 dismissal does not preclude a CC § 2983.4 fee award); see also 22 Kim v. Euromotors W./The Auto Gallery, 149 Cal. App. 4th 170, 23 178-80 (2007) (California Code of Civil Procedure § 1032 defines 24 prevailing party as including a “defendant in whose favor a 25 dismissal is entered” when evaluating fee recovery under 26 California’s fee shifting consumer statutes). In this respect, 27 a Rees-Levering fee award is different from an award under non- 28 remedial California statutes such as CC § 1717, which

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1 specifically states that there is no prevailing party when an 2 action on a contract is voluntarily dismissed or dismissed 3 pursuant to a settlement. See Cal. Civil Code § 1717(b)(2). 4 Here, the bankruptcy court summarily concluded that there 5 was no prevailing party in the adversary proceeding and, on 6 reconsideration, that the Debtor failed to meet her burden in 7 showing that she prevailed. On this record and without first 8 determining whether the adversary proceeding was an action on 9 the sales contract and, thus, subject to the Rees-Levering Act, 10 this was error. The relevant inquiry under California law is 11 not focused on the victor after a trial; instead, it focuses on 12 whether a litigant achieved their litigation goals. 13 Notwithstanding that the case was dismissed before trial, it 14 appears that the Debtor prevailed in the nondischargeability 15 action under the required pragmatic approach; she got all of the 16 relief she would have obtained if successful at trial. This is 17 particularly true where counsel for MAS conceded in a 18 declaration that MAS could not establish the § 523(a)(6) 19 requirements at trial. See Bk. Dkt. No. 30 at p. 9 ¶ 8. 20 Heather Farms does not change the calculus here. There, a 21 homeowners association filed an action against a homeowner based 22 on allegations of unauthorized modifications to the homeowner’s 23 units. That lawsuit spawned several related actions. 24 Eventually and following a settlement conference with a 25 settlement judge, numerous parties entered into a settlement 26 resolving the litigation and the association dismissed its 27 action against the homeowner pursuant to the settlement. The 28 settlement judge expressly found, however, that there were no

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1 prevailing parties with respect to case dismissal given that the 2 “dismissal [was] part of an overall complex piece of litigation 3 . . . resolved by negotiated settlement. There [were] no 4 winners. There [were] no favorable parties in [the] case.” 5 21 Cal. App. 4th at 1571. 6 The trial court denied the defendant’s subsequent motion 7 for fees under CC § 13543 based on his assertion that he was the 8 prevailing party. On appeal, the California Court of Appeal 9 affirmed. Adopting the pragmatic standard for determining 10 prevailing party, it concluded that there was no reason to doubt 11 the prevailing party determination of either the settlement 12 judge or the trial court. It noted that the association 13 voluntarily dismissed its action against the homeowner “as part 14 of a global settlement agreement, not because [the defendant] 15 succeeded on some procedural issue or otherwise received what he 16 wanted. That dismissal apparently was more the result of the 17 [defendant’s] obdurate behavior rather than any successful legal 18 strategy.” Id. at 1574. 19 Here, once again, it would appear that the Debtor prevailed 20 on a practical level in the adversary proceeding. As stated, 21 she avoided a nondischargeable judgment while MAS took nothing. 22 And it appears that she did so not just because of her 23 settlement with MAS but also because MAS conceded that it could 24

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25 CC § 1354 related to covenants and restrictions governing a residential planned unit development; it also 26 provided for reasonable fees and costs to a prevailing party in 27 an action to enforce the governing documents. The statute was repealed by Stats. 2012, c. 180 (A.B. 805), § 1, operative 28 Jan. 1, 2014.

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1 not establish its only claim against the Debtor. Thus, Heather 2 Farms appears to be distinguishable on the facts. 3 C. The bankruptcy court must determine if the Rees-Levering 4 Act applied here. 5 Three issues arise, however, that lead us to conclude that 6 the bankruptcy court must determine in the first instance 7 whether the nondischargeability action was an action on the 8 underlying sales contract between the parties, such that the 9 Debtor was entitled to fees under the Rees-Levering Act.4 10 First, the California case law points in various 11 directions. On the one hand, it limits fee recovery such that 12 this case would fall well outside Rees-Levering’s fee recovery 13 statute. On the other, it broadly allows fee recovery when a 14 contract governed by Rees-Levering is involved. 15 In Davis v. Ford Motor Credit Co., 179 Cal. App. 4th 581 16 (2009), a panel of the California Court of Appeal held that for 17 a prevailing party to avail themselves of the Act’s reciprocal 18 fee provision, the underlying complaint must allege a violation 19 under the Rees-Levering Act. In Davis, the prevailing defendant 20 moved for attorney’s fees under CC § 2983.4. The complaint had 21 alleged several violations of California law, including 22 23 4 Whether a debtor can recover fees and costs under 24 CC § 2983.4 in a nondischargeability action appears to be a matter of first impression in this circuit. Thus, we are not 25 assisted by Ninth Circuit authority. Indeed, there are only two unreported federal cases citing to CC § 2983.4. See Wright v.

26 Gen. Motors Acceptance Corp., 2012 WL 1416146 (S.D. Cal. Apr. 27 23, 2012); Wright v. Gen. Motors Acceptance Corp., 2012 WL 253157 (S.D. Cal. Jan. 25, 2012), aff’d, 545 F. App’x 686 (9th 28 Cir. 2013).

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1 violations under the Rees-Levering Act, which it asserted 2 constituted unlawful business practices under California unfair 3 competition law. The trial court denied the motion for fees. 4 On appeal, the California Court of Appeal determined that 5 “although the underlying transaction was subject to the 6 provisions of Rees-Levering, the action was not prosecuted under 7 Rees-Levering.” 179 Cal. App. 4th at 601. Instead, “the 8 alleged Rees-Levering violation was merely a predicate to the 9 complaint’s UCL claims.” Id. The court of appeal, thus, 10 concluded that “Rees-Levering’s reciprocal fee provision [was] 11 inapplicable” where the “alleged Rees-Levering violation [was] 12 merely a predicate to the UCL claim . . . .” Id. 13 Here, the adversary complaint made absolutely no reference 14 to the Rees-Levering Act and did not allege a violation 15 thereunder. Instead, it alleged solely that the Debtor 16 willfully and maliciously injured MAS by causing damage to her 17 vehicle (MAS’s collateral). Nor did the Debtor plead an 18 affirmative defense relating to the Rees-Levering Act in her 19 answer to the adversary complaint. 20 Thus, under Davis, the failure to allege a violation under 21 the Rees-Levering Act would be fatal to a claim for attorney’s 22 fees pursuant to CC § 2983.4. 23 At oral argument, the Debtor argued that Cobian v. Ordonez, 24 103 Cal. App. 3d Supp. 22 (1980), supported her position that 25 she was entitled to attorney’s fees under CC § 2983.4. In 26 Cobian, a California Superior Court stated that “[u]nder 27 [CC §] 2983.4 the action need only be on a contract subject to 28 the Re-Levering Act [sic], not an action to enforce such a

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1 contract.” 103 Cal. App. 3d Supp. at 31 (emphasis in original). 2 We give little weight to Cobian, however, as it is a decision 3 from the Appellate Department of a California Superior Court; as 4 a result, it does not supersede or equal the precedential or 5 persuasive value of the California Court of Appeal decision in 6 Davis. 7 Another court of appeal case, however, is consistent with 8 the Debtor’s position. In Leaf v. Phil Rauch, Inc., 47 Cal. 9 App. 3d 371 (1975), a panel of the California Court of Appeal 10 held that the prevailing plaintiffs were entitled to attorney’s 11 fees under CC § 2983.4 in an action for restitution where the 12 plaintiffs previously obtained rescission of the underlying 13 sales contract based on breach of warranty. In doing so, the 14 panel determined that the restitution action involved the 15 underlying sales contract subject to the Rees-Levering Act and, 16 thus, fell within the scope of CC § 2983.4 for the purposes of 17 awarding fees. 18 Here, MAS’s claims of waste and conversion could involve 19 the underlying sales contract as the contract provided for MAS’s 20 rights to the vehicle as collateral and required the Debtor to 21 maintain the vehicle during the finance period. Under Leaf, 22 this could be sufficient to assert a claim for attorney’s fees 23 under CC § 2983.4. We note that where one or more decisions of 24 the California courts of appeal are in conflict, a trial court 25 is instructed to “make a choice between the conflicting 26 decisions.” Auto Equity Sales, Inc. v. Super. Ct. of Santa 27 Clara Cty., 57 Cal. 2d 450, 456 (1962). Were the discord in 28 California case law the only issue, we might undertake this

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1 analysis, but other ambiguities exist. 2 Second, MAS argues that the nondischargeability action was 3 not an action on the sales contract because the § 523(a)(6) 4 action arose under the Bankruptcy Code. At first blush, this 5 argument is compelling. The sales contract was in the 6 background of the facts alleged in MAS’s tort claim against the 7 Debtor. There was no dispute with regard to improper charges or 8 disclosures or MAS’s rights to the collateral. Given that MAS’s 9 rights to the collateral arose under the sales contract, 10 however, it is possible that the sales contract was more than a 11 penumbral aspect of the nondischargeability action. To 12 determine whether conversion existed for the purposes of 13 § 523(a)(6), the bankruptcy court would have to determine MAS’s 14 rights to the collateral; the latter is strictly a contractual 15 issue. Our unwillingness to affirm on this basis is supported 16 by the stipulation between the parties that expressly provides 17 that the sales contract was subject to the Rees-Levering Act and 18 the fees were governed by Rees-Levering. 19 Third, and most importantly, an ambiguity exists in the 20 stipulation itself. Again, in relevant part, it provided that 21 the sales contract was subject to the Rees-Levering Act and that 22 attorney’s fees were governed by Rees-Levering. Although the 23 parties could not stipulate to an improper application of the 24 law, it was possible that they could agree as to how an 25 ambiguous statute would be interpreted. At oral argument, the 26 parties disagreed vociferously on their intent in including this 27 provision in the stipulation. Given that the bankruptcy court 28 approved the stipulation in the face of this ambiguity, it is

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1 appropriate that it determine in the first instance the meaning 2 of this provision. 3 For the reasons stated, remand is required. On remand, the 4 bankruptcy court should determine whether the adversary 5 proceeding was an action on the sales contract within the 6 meaning of CC § 2983.4 and the impact, if any, of the fee 7 provision in the stipulation between the parties on the 8 determination of the appropriateness of a fee award. 9 The bankruptcy court also determined that no amount of fees 10 would be appropriate. It made this determination, however, 11 after making its prevailing party determination and did not 12 support it with any findings. It arguably does not reflect a 13 conclusion regarding the quality of the lawyering in the case. 14 Nor does the determination appear logical; given the case 15 dismissal result, the Debtor, at a minimum, would be entitled to 16 recover reasonable fees related to answering the adversary 17 complaint and preparing the proposed pretrial order. If the 18 bankruptcy court concludes that the Debtor is a prevailing 19 party, it can and should evaluate the reasonableness of the 20 requested fees. 21 CONCLUSION 22 Based on the foregoing, we VACATE the order denying the fee 23 motion and REMAND for further proceedings consistent with this 24 decision. 25 26