Farmer et al v. Moser

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
JOHN MOSER, 	No. 09-11945
Debtor(s).
______________________________________/
BRAD FARMER, et al.,
Plaintiff(s),
v. 	A.P. No. 09-1126
JOHN MOSER,
Defendant(s).
_______________________________________/
Memorandum on Motion to Alter or Amend Judgment
_________________
In its Memorandum of July 9, 2011, the court made the following finding:
The court agrees with Farmer and Bailey that they are entitled to recover their
attorneys fees incurred in having to litigate in state court over the validity of their
deed of trust. The court agrees with Moser that the amount of those fees
(($313,473.29 in fees and $32,019.61 in costs) is unreasonable. However, they were
incurred as a proximate cause of Moser having converted their collateral, so the court
sees no way to limit them in the absence of any evidence that they were not
legitimately incurred.
Defendant John Moser has asked for the judgment against him to be altered, as the court
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Entered on Docket
September 26, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 09-01126 Doc# 113 Filed: 09/26/11 Entered: 09/26/11 13:05:47 Page 1 of
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cannot award unreasonable attorneys’ fees as damages. Reluctant as it is to revisit this ugly case, the
court sees that it must reconsider the award of attorneys’ fees and clarify its thinking.
First of all, the word “unreasonable” was a poor choice. A better choice is “extraordinary.” If
Farmer and Bailey are to be believed, they spent over half a million dollars pursuing an unpaid note
with a balance owing of $144,000.00. While this is not per se unreasonable, it certainly raises the
eyebrows.
Secondly, the court sees that it did not ask the right questions at trial and improperly shifted the
burden of proof. The court found that Farmer and Bailey were entitled to recover their prepetition
attorneys’ fees as damages, as they were thrust into litigation over the validity of their deed of trust by
Moser’s conversion of their collateral. The plaintiffs had the burden of proving their damages, so the
burden was on them to show that they were legitimately incurred, not on Moser to show that they were
not. Accordingly, the court replaces the above finding with the following:
The court agrees with Farmer and Bailey that they are entitled to recover their attorneys
fees incurred in having to litigate in state court over the validity of their deed of trust.
The court agrees with Moser that the amount of those fees (($313,473.29 in fees and
$32,019.61 in costs) is extraordinary. However, if they were legitimate legal costs
actually incurred as a proximate cause of Moser having converted their collateral, Farmer
and Bailey have a right to recover them as damages.
The key factor for the court, overlooked at the prior hearing, was whether Farmer and Bailey
actually paid the attorneys’ fees they say they incurred. 	If they can actually produce cancelled
checks or other evidence that they paid the legal fees, that will be enough to show the court that they
should recover the fees regardless of the high amount. On the other hand, evidence that they did not
actually pay the billed fees will call their legitimacy into question and require the court to give them
much closer scrutiny to adjudicate their reasonableness.
For the foregoing reasons, in addition to amending its findings the court will <sigh> reopen
the trial on the issue of reasonableness of state court attorneys’ fees assessed as damages. Counsel
for Moser shall submit an appropriate order which counsel for Farmer and Bailey has approved as to
form, and shall also notice a new scheduling conference.
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Case: 09-01126 Doc# 113 Filed: 09/26/11 Entered: 09/26/11 13:05:47 Page 2 of
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Dated: September 26, 2011
SAlan Jaroslovsky
U.S. Bankruptcy Judge
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Case: 09-01126 Doc# 113 Filed: 09/26/11 Entered: 09/26/11 13:05:47 Page 3 of
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