Mitelhaus v. Ramey (In re Ramey)

515 B.R. 777
United States Bankruptcy Court, C.D. California·Decided May 5, 2014·No. Bankruptcy No. LA 11-59152 ER; Adversary No. 12-01365 ER·Published

Opinion

MEMORANDUM OF DECISION RE PLAINTIFF’S MOTION TO ALTER OR AMEND MEMORANDUM OF DECISION AFTER TRIAL AND JUDGMENT (D.E. 108)

ERNEST M. ROBLES, Bankruptcy Judge.

On March 8, 2012, Robert Mitelhaus (“Plaintiff’) initiated an adversary proceeding by filing a complaint seeking a [779] determination that certain debts be held non-dischargeable as to Roxanna Ramey (“Ramey”) and Mark Jenkins (“Jenkins”) (collectively, the “Debtors” or “Defendants”). (D.E. 1.) The Court conducted a three day trial on October 2, 15, and 31, 2013. On February 4, 2014, the Court took the matter under submission. On April 2, 2014, the Court entered a Memorandum of Decision and Judgment in favor of the Plaintiff. (D.E. 104 and 105.)

On April 16, 2014, Plaintiff filed the instant “Motion to Alter or Amend ‘Memorandum of Decision After Trial’ and ‘Judgment’” (“Motion”). (D.E. 108.) Plaintiff brings the Motion pursuant to Fed. R.Civ.P. 59 (“Rule 59”), made applicable to this bankruptcy case pursuant to Fed. R. Bankr.P. 9023 (“Rule 9023”). Plaintiff asserts that in considering a Rule 59(e) motion, a court is not limited to the four typical grounds for which reconsideration may be granted1, but may also consider whether amendment is necessary as essentially a clerical task, such as incorporating undisputed facts into a judgment. Allstate Ins. Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir.2011). Plaintiff asserts that the Memorandum and Judgment should be amended to correct five (5) asserted errors.

I

SUMMARY OF MOTION

First, Plaintiff requests that the Judgment be amended to reflect the entire amount of the Arbitration Award of $289,526.62, plus additional interest at 10% per annum ($79.3224 per day) from and after September 23, 2009, for a total Judgment in the amount of $420,487.90 as of April 2, 2014. Plaintiff also requests the Court amend the Judgment to reflect applicable interest that has accrued since April 2, 2014. Plaintiff contends that, because the Arbitration Award was confirmed by the Superior Court, the Arbitration Award is a valid California state court judgment with preclusive effect and must be afforded “full faith and credit.” Plaintiff relies on Ninth Circuit case law for the proposition that even where there is properly an issue about the dischargeability of a judgment that is not determined by application of collateral estoppel, the amount of the judgment is fixed. In re Sasson, 424 F.3d 864, 872 (9th Cir.2005). To this end, Plaintiff asserts that none of the issues of law or fact litigated by the parties or determined by this Court had anything to do with the amount of the Arbitration Award. Thus, Plaintiff contends this Court should have determined the entire Arbitration Award to be nondischargeable.

Second, Plaintiff requests the Court amend the Judgment with respect to the Court’s nondischargeability determination of Plaintiffs’ attorneys’ fees incurred in defending the KS Action in the total amount of $77,284.50 (the “KS Fees”). Plaintiff asserts that because the Arbitration Award included the KS Fees, this Court is required to include the KS Fees in the Judgment as a nondischargeable debt. Additionally, Plaintiff states that the Arbitrator found that Jenkins was liable for KS Fees on the basis that if Jenkins had properly applied the funds paid by Plaintiff to purchase errors and omissions insurance coverage, the KS Fees would have been covered by insurance and Plaintiff would not have incurred the KS [780] Fees as an out-of-pocket cost. Plaintiff asserts that under applicable California law, when a defendant has wrongfully made it necessary for a party to defend a lawsuit brought by a third person, the damages caused by the defendant’s improper actions include the attorney’s fees incurred by that party in the defending the action involving the third party. Prentice v. North American Title Guaranty Corp., 59 Cal.2d 618, 621, 30 Cal.Rptr. 821, 381 P.2d 645 (1963); Gray v. Don Miller & Associates, Inc., 35 Cal.3d 498, 505, 198 Cal.Rptr. 551, 674 P.2d 253 (1984); Brandt v. Superior Court, 37 Cal.3d 813, 817-19, 210 Cal.Rptr. 211, 693 P.2d 796 (1985). Thus, Plaintiff contends that the direct consequence of Jenkins’ wrongful act, in committing larceny as to the $3,197.00 of wrongfully withheld errors and omissions insurance, was that Plaintiff had to expend $77,284.50 in fees to defend the KS Action. Plaintiff highlights that this Court determined the $3,197.00 amount to be nondis-chargeable under § 523(a)(4) and contends that the resulting KS Fees should therefore be rendered nondischargeable.

Third, Plaintiff asserts that if this Court is not inclined to afford the Arbitration Award “full faith and credit,” the Court should consider the additional evidence adduced at trial to conclude that the Defendants wrongfully withheld $62,000.00 worth of Nasr lease commissions and such amount should be included in the nondis-chargeability Judgment.

Fourth, Plaintiff states that although the Memorandum refers to prejudgment interest awarded by the Superior Court in the amount of $49,184.50, the Court should amend the Judgment to include the entire amount of prejudgment interest. In the alternative, Plaintiff indicates that if the Court is not inclined to amend the Judgment to include the KS Fees, the appropriate amount of prejudgment interest to be included is $24,124.48.

Finally, Plaintiff contends that to the extent the Court is not inclined to afford the Arbitration Award “full faith and credit,” the Court should also amend the Judgment to render the Arbitration Award non-dischargeable as to Ramey. In support, Plaintiff cites two non-binding bankruptcy cases in which the courts imputed liability under §§ 523(a)(4) and (6) based on an agent-principal relationship. See In re Day, 2012 WL 4627484, 2012 Bankr.LEXIS 4708 (Bankr.D.Az.2012); In re Palillo, 493 B.R. 248, 256-67 (Bankr.D.Colo.2013).

II

DISCUSSION

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Mitelhaus v. Ramey (In re Ramey), 515 B.R. 777 (Cal. 2014).

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