(Not For Publication)
Order Regarding Fees and Expenses Sought to be Held Nondischargeable Under 11 U.S.C. §523(a)(5)
DANIEL P. COLLINS, Bankruptcy Judge.
On April 3, 2017, the Court held that amounts awarded to Martin Yee ("Dr. Yee") by the Arizona Superior Court, Maricopa County ("State Court") were nondischargeable under 11 U.S.C. § 523(a)(5).
1. On June 13, 2016, the State Court entered an Order and Judgment Awarding Father Attorney's Fees and Costs against Debtor awarding Dr. Yee a total of $56,768.08 comprised of attorneys' fees ($55,485.00) and costs ($1,283.08) ("State Court Judgment"). See Exhibit B attached to Dr. Yee's Legal Memorandum (DE
2. On August 10, 2016, the State Court awarded Dr. Yee attorney's fees and costs in the amount of $3,990.00 pursuant to A.R.S. § 25-324 related to the Best Interests Attorney ("BIA") Motion filed by Debtor with the Family Court ("BIA Motion Award"). A copy of the BIA Motion Award is attached to DE 52 as Exhibit "C."
3. Ms. Yee filed her Chapter 13 bankruptcy on October 13, 2016 ("Petition Date").
4. On November 10, 2016, Debtor filed her chapter 13 plan ("Plan") (DE 21).
5. On November 28, 2016, Debtor filed a Motion to Avoid Judicial Lien pursuant to 11 U.S.C. § 522(f) ("Lien Avoidance Motion") (DE 28).
6. On April 3, 2017, the Court heard oral arguments on the question of whether the State Court Judgment and BIA Motion Award were domestic support obligations ("DSO") within the meaning of § 101(14A) of the Bankruptcy Code and thus nondischargeable pursuant to § 523(a)(5). The Court held these amounts were DSOs and, therefore, nondischargeable (DE 76). Further, the Court ordered Dr. Yee to provide an accounting of all additional amounts he asserted were nondischargeable.
7. Dr. Yee filed his accounting ("Accounting") on April 17, 2017 (DE 81).
8. Dr. Yee filed his fee application ("Fee Application") on April 17, 2017 (DE 82). The Fee Application appears to cover all matters Dr. Yee's counsel addressed in connection with Ms. Yee's bankruptcy, including the § 341 first meeting of creditors, the Plan, Lien Avoidance Motion, and § 523 issues.
9. Dr. Yee filed his first supplement ("Supplement") to the Fee Application on April 26, 2017 (DE 89). The Supplement brought to this Court's attention a pleading denoted as Mother's Motion to Clarify ("Motion to Clarify") filed in State Court by Ms. Yee's attorney, Trail Potter ("Potter"). Potter's law firm was approved by this Court (DE 73) as special counsel for Ms. Yee to handle her family law matters in the State Court. Potter's filing of the Motion to Clarify caused this Court to issue an Order to Show Cause hearing for June 12, 2017 at 10:00 a.m. against Potter (DE 101).
10. Ms. Yee filed her objection ("Objection") to the Accounting and Fee Application on May 1, 2017 (DE 91).
11. Dr. Yee filed his reply ("Reply") to the Objection on May 5, 2017 (DE 92).
This Court has jurisdiction over the dischargeability issues presented by the parties pursuant to 28 U.S.C. § 157(b)(2)(I).
1. Is there a legal basis for the Court to award the reasonable fees and costs incurred by Dr. Yee in these bankruptcy proceedings?
2. What is the amount of nondischargeable child support owed by Ms. Yee to Dr. Yee?
3. What is the amount of nondischargeable child support cost reimbursement owed by Ms. Yee to Dr. Yee?
4. What are the applicable rates of interest on pre-judgment and post-judgment nondischargeable amounts owed by Ms. Yee to Dr. Yee?
Attorneys' Fees and Costs Sought by Dr. Yee
Dr. Yee seeks an award of fees in the amount of $34,128.50 and costs of $40.98 incurred through April 17, 2017 in connection with his involvement in Ms. Yee's bankruptcy proceedings. He also asks that these fees be recognized as a DSO
The parties agree, as they must, that under the "American Rule" a litigant in federal court is not entitled to an award of attorneys' fees and costs unless an applicable statute or enforceable contract provides for such award. Travelers Casualty & Surety Company of America v. Pacific Gas and Electric Company, 549 U.S. 443, 448, 127 S.Ct. 1199 (2007). Neither party contends there exists a contract which so provides. Moreover, the Bankruptcy Code does not provide a general right to recover fees. Heritage Ford v. Baroff (In Re Baroff), 105 F.3d 439, 441 (9
Dr. Yee argues that Arizona's family law statutes stand as the basis for an award of his fees and costs against Ms. Yee. Dr. Yee points to A.R.S. §§ 25-324(A) and (B) which state:
Section 25-324 is found in chapter 3 ("Dissolution of Marriage") of title 25 ("Marriage and Domestic Relations") of the Arizona Revised Statutes. Article 1 of chapter 4 of title 25 covers "Legal Decision-Making and Parenting Time."
Ms. Yee contends these Arizona family law statutes do not supply a basis to award Dr. Yee fees incurred in her bankruptcy proceeding, even though such fees are related to Dr. Yee's efforts to protect and enforce the State Court's orders which constitute DSOs within the meaning of § 101(14A) of the Bankruptcy Code.
Under the plain language of § 25-324(A), "[t]he court ... may order a party to pay a reasonable amount to the other party for the costs and expenses of
Dr. Yee points to bankruptcy cases from Utah and California where courts looked to those states' family law statutes and held that fees incurred in § 523(a)(5) litigation were nondischargeable DSOs. In the case of In Re Busch, 369 B.R. 614 (10
Dr. Yee also cites In Re Carson, 510 B.R. 627 (Bankr. E.D.Ca. 2014), for the proposition that reasonable fees incurred in a bankruptcy nondischargeability proceeding are themselves nondischargeable. In Carson, Bankruptcy Judge Sargis reviewed California Family Code § 2030 and determined that,
Id. at 633. California's statute specifically provides for a fee award in "any proceeding" subsequent to a family court's judgment which constitutes a DSO. Arizona's family law statutes are not so broad. Again, fee awards under Arizona's statute may only be granted if the proceeding is a proceeding under chapter 3 or chapter 4, article 1 of Arizona's Marriage and Domestic Relations statutes.
Dr. Yee next argues A.R.S. § 25-324(B) provides a statutory basis for an award of fees he incurred in the Bankruptcy Court. Fees are awardable under that statute if a "petition" was (1) filed not in good faith, (2) not grounded in fact or law, or (3) filed for an improper purpose. The term "petition" derives from A.R.S. § 25-311(C) which notes:
Dr. Yee's fees incurred in connection with Ms. Yee's bankruptcy case were not incurred by virtue of a "petition" for dissolution of the Yees' marriage nor a "petition" to address legal decision-making or parenting time. Section 25-324(C) does not aid Dr. Yee's cause.
Although the reasonableness of Dr. Yee's fees and costs incurred in these bankruptcy proceedings are not in question (except as noted on page 4, above), the Court is not free to grant his fee application unless applicable Arizona law permits such an award. Dr. Yee has only directed this Court to A.R.S. §§ 25-324(A) and (B) as providing the statutory bases for such award. While this Court is inclined to believe a fee award in favor of Dr. Yee would be equitable, the U.S. Supreme Court has cautioned bankruptcy courts against exceeding their § 105 equitable powers when the exercise of those powers would run contrary to explicit controlling statutory provisions. See Law v. Siegel, 134 S.Ct. 1188 (2014).
Past Due Child Support
Although Dr. Yee's Accounting (DE 81, pages 7 and 9) initially sought an award of $3,725.52 in past due child support owed to him by Ms. Yee, his Reply (DE 92, pages 17 and 19) agrees with Ms. Yee's Objection. This Court, therefore, awards Dr. Yee the sum of $1,862.76 plus interest (See Section D, Applicable Interest Rates, below) for his unpaid claim for the pre-petition child support owed to him by Ms. Yee. Such amounts are DSOs which are nondischargeable under § 523(a)(5).
Reimbursable Child Support Costs
Dr. Yee directs this Court's attention to the State Court's July 31, 2015, Order: Regarding Financial Issues and Child Support ("Stipulated Order")
The question of the amount of any claims Dr. Yee holds against Ms. Yee for payment of such unreimbursed child support costs are subject to unresolved factual disputes. The State Court is best equipped to resolve these factual questions as well as any questions concerning interpretations of its Stipulated Order. The Court finds the bankruptcy stay (§ 362 of the Bankruptcy Code) does not stay the State Court's determination of the unreimbursed cost amounts, if any, owed by Ms. Yee to Dr. Yee. Even if § 362 does stay the State Court's determination of such claim amounts, the Court hereby terminates all bankruptcy stays so as to afford the State Court and any state appellate court the opportunity to resolve Dr. Yee's claims for unreimbursed child support costs. Once such claims are determined by the Arizona judiciary, they shall become nondischargeable under § 523(a)(5) as DSOs.
Applicable Interest Rates
1. Pre-judgment Interest
Since the State Court Judgment and BIA Motion Award were determined by this Court to be nondischargeable DSOs and each of those orders were issued by the State Court, the Court must apply one of the interest rates enumerated under state law to the pre-judgment nondischargeable amounts owed to Dr. Yee. Dr. Yee argues that A.R.S. § 25-510(E) supplies the applicable interest rate because the State Court Judgment and BIA Motion Award are for domestic support arrearages. He further argues that since this Court previously determined that both the State Court Judgment and BIA Motion Award are DSOs, interest is properly calculated under A.R.S. § 25-510(E).
Debtor argues that this Court's determination that the State Court Judgment and BIA Motion Award were DSOs was strictly for the limited purpose of determining whether the debts are nondischargeable DSOs under federal law. Further, this Court's characterization of the State Court Judgment and BIA Motion Award as DSOs does not make them support arrearages under state law so the applicable judgment interest rate is found at A.R.S. § 44-1201.
This Court has already determined the State Court Judgment and BIA Motion Award were in the nature of domestic support as they relate to litigation involving the best interests of the child. See, In re Rehkow, No. ADV.04-00936, 2006 WL 6811011, at *3-4 (B.A.P. 9th Cir. Aug. 17, 2006), aff'd, 239 F. App'x 341 (9th Cir. 2007). A.R.S. § 25-500 provides applicable definitions for title 25, chapter 5, Family Support Duties:
In this chapter, unless the context otherwise requires:
The Court finds that the State Court Judgment and BIA Motion Award are not "support" within the meaning of A.R.S. § 25-500(9). Those two State Court awards were for fees incurred by Dr. Yee. They were not "support" awards. The fact that those awards are DSOs within the meaning of § 101(14A) does not make the awards "support" within the meaning of § 25-500(9). A.R.S. § 44-1201 dictates the proper interest rate percentage applied to both the State Court Judgment and the BIA Motion Award.
A.R.S. § 44-1201(B) states:
2. Post-judgment Interest
The final question for this Court to resolve is the appropriate post-judgment interest rate to apply to this Court's yet-to-be-entered nondischargeable judgment. 28 U.S.C. §1 961(a) states:
28 U.S.C. § 1961(c)(4) states:
Since this Court's soon-to-be-entered nondischargeable judgment will be a money judgment in a civil case recovered in a federal court, the Court concludes that interest shall accrue on the judgment at the rate specified in 28 U.S.C. § 1961(a) from the date the Court enters its nondischargeable judgment. This conclusion is consistent with nondischargeable judgments granted in other bankruptcy cases. See, for example, In Re Levitsky, 137 B.R. 208 (Bank. E. D. Wisc. 1992) and In re Brace, 131 B.R. 612 (Bankr. W.D. Mi. 1991). It is also consistent with 9
As much as this Court feels it would be equitable to award Dr. Yee his reasonable fees and costs incurred in connection with his efforts in this bankruptcy case, the Court finds no legal basis to do so. However, Dr. Yee is entitled to a judgment entered by this Court declaring nondischargeable the following amounts:
1. $56,768.08 from June 13, 2015, through the date judgment is entered, at the pre-judgment interest rate of 5.0%. This amount pertains to the State Court Judgment.
2. $3,990.00 plus interest from August 10, 2016, through the date judgment is entered, at the pre-judgment interest rate of 5.0%. This amount pertains to the BIA Motion Award.
3. $1,862.76 plus interest from the Petition Date (October 13, 2016) through the date judgment is entered, at the pre-judgment rate of 5.0%. This amount is the agreed upon pre-bankruptcy child support arrears.
4. Any sums declared by the State Court to be owed by Ms. Yee to Dr. Yee as and for accrued unreimbursed child support costs.
All of the above amounts shall accrue interest at the rate described in 28 U.S.C. §1961(a) from the day after judgment is entered, until paid. Counsel for Dr. Yee is hereby directed to lodge a judgment consistent with this Court's order.
Exhibit A Selected Interest Rates
Selected Interest Rates (Daily) — H.15
The release is posted daily Monday through Friday at 4:15pm. The release is not posted on holidays or in the event that the Board is closed.
Selected Interest Rates
Yields in percent per annum