CASE OF INTEREST: Galindo v. Whited (In re Galindo)

Galindo v. Whited (In re Galindo)

Summarized by: Dean G. Rallis Jr.

BAP No. SC-12-1272-BaPaJu; Bk No 10-12794 MM7; Adv. No 10-90473 (not appropriate for publication)

The Ninth Circuit BAP affirmed the Bankruptcy Court’s judgment awarding attorney fees and costs to the plaintiff creditor as the prevailing party in a non-dischargeability action against the debtor.

Procedural context:
The plaintiff creditor filed a non-dischargeability complaint under §§523(a)(2)(A) and 523(a)(6) against the debtor. After trial, the Bankruptcy Court entered judgment against the debtor for actual damages of $1,648.29, plus recovery of attorney fees and costs of $75,440 and $2,635.07, respectively, as authorized under applicable California law (CCP §1780(e) and §1021.5). The debtor appealed the award of attorney fees and costs. The 9th Circuit BAP affirmed the award ruling that the Bankruptcy Court had the authority and mandate to award attorney fees and costs, and that the amount of such award was not an abuse of discretion.

Plaintiff creditor, a Navy sailor, and his wife purchased a used vehicle from the debtor’s car dealership. Plaintiff financed the purchase under a retail installment sales contract that identified the debtor’s dealership as the secured creditor/seller of the vehicle. The contract allowed the debtor’s dealership an opportunity to sell the contract to a financing company within a designated time frame. The debtor subsequently advised the Plaintiff that the contract had been sold to a finance company. Plaintiff made arrangements for automatic payments to be made to the finance company and made the first payment. In fact, the financing company never purchased the contract. Plaintiff confronted the debtor concerning this and other misrepresentations. Plaintiff offered to continue making payments to the debtor’s dealership commencing with the second payment. Debtor demanded that Plaintiff make the first payment again, otherwise his dealership would repossess the vehicle. Weeks later, the debtor’s dealership repossessed and foreclosed on the vehicle. Plaintiff filed a state court action against the debtor and his dealership, but before he could secure a default judgment, debtor filed his chapter 7 petition. Plaintiff filed a non-dischargeability action under §523(a)(2) and (6). After trial, the Bankruptcy Court made findings that the debtor made false statements concerning the vehicle and financing, and concluded that the debtor was liable for statutory and common law fraud and conversion, including under the California Consumers Legal Remedies Act (CCP §1770, et seq.). The Bankruptcy Court entered judgment awarding actual damages of $1,648.29. And, as mandated by CCP §1780(e), the Bankruptcy Court’s judgment included an award for attorney fees and costs of $75,440 and $2,635.07, respectively, to Plaintiff as the prevailing party. Debtor appealed the judgment for attorney fees/costs principally on the ground that such award was excessive and disproportionate to the actual damages. In affirming the Bankruptcy Court, the 9th Circuit BAP determined that (i) the Bankruptcy Court had the authority and mandate to award attorney fees in a non-dischargeability action as provided under the California Consumers Legal Remedies Action (i.e., CCP §1780(e)), (ii) proportionality of attorney fees to damages in not relevant under the California statute, and (iii) the Bankruptcy Court did not abuse its discretion in awarding the attorney fees and costs considering (y) the Bankruptcy Court, upon close scrutiny of the Plaintiff’s requested amount, awarded less fees/costs than requested, and (z) the important public interests in vindicating consumer rights.

Judge(s): BASON, PAPPAS, and JURY, Bankruptcy Judges


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