                                                        FILED
                                                          JUL 22 2016
 1                         ORDERED PUBLISHED
                                                     SUSAN M. SPRAUL, CLERK
 2                                                     U.S. BKCY. APP. PANEL
                                                       OF THE NINTH CIRCUIT
 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )      BAP Nos.   AZ-14-1497-JaJuKu
                                   )                 AZ-15-1040-JaJuKu
 6   DONALD GARY SHANNON and       )                 (Consolidated)
     MAI DOAN SHANNON,             )
 7                                 )      Bk. No.    2:10-bk-35640-BKM
                     Debtors.      )
 8   ______________________________)      Adv. No.   2:11-ap-00260-EPB
                                   )
 9   ANDRES CARDENAS; TERESA       )
     CARDENAS,                     )
10                                 )
                     Appellants,   )
11                                 )
     v.                            )      O P I N I O N
12                                 )
     DONALD GARY SHANNON; MAI DOAN )
13   SHANNON,                      )
                                   )
14                                 )
          Appellees.               )
15   ______________________________)
16                    Argued and Submitted on May 20, 2016
                               at Phoenix, Arizona
17
                             Filed – July 22, 2016
18
               Appeal from the United States Bankruptcy Court
19                       for the District of Arizona
20   Honorable Eddward P. Ballinger, Jr., Bankruptcy Judge, Presiding
21
22   Appearances:     H. Troy Romero of Romero Park P.S. argued for
                      appellants Andres Cardenas and Teresa Cardenas;
23                    Neal H. Bookspan of Jaburg & Wilk, P.C. argued for
                      appellees Donald Gary Shannon and Mai Doan
24                    Shannon.
25
     Before:   JAIME,1 JURY, and KURTZ, Bankruptcy Judges.
26
27
          1
           Hon. Christopher D. Jaime, United States Bankruptcy Judge
28   for the Eastern District of California, sitting by designation.
 1   JAIME, Bankruptcy Judge:
 2
 3         Creditors Andres Cardenas and Teresa Cardenas (“Cardenases”)
 4   appeal from an order denying their request for an order declaring
 5   that a debt owed by debtors Donald Gary Shannon and Mai Doan
 6   Shannon (“Shannons”) is non-dischargeable in the Shannons’
 7   bankruptcy case and the judgment entered on that order
 8   discharging the debt.   The bankruptcy court concluded that the
 9   Cardenases failed to prove several elements of their
10   non-dischargeability claim under 11 U.S.C. § 523(a)(2)(A),2 which
11   excepts from discharge debts for, among other things, money and
12   property to the extent obtained by false pretenses, a false
13   representation, or actual fraud.
14         The Cardenases also appeal the bankruptcy court’s order and
15   judgment awarding costs and attorney’s fees with interest to the
16   Shannons, arguing that the action before the bankruptcy court was
17   based in fraud and misrepresentation and not contract.
18         For the reasons explained below, we AFFIRM the bankruptcy
19   court’s ruling that the Cardenases failed to prove
20   non-dischargeability under § 523(a)(2)(A), we AFFIRM the
21   bankruptcy court’s award of costs to the Shannons in the amount
22   of $5,002.10, and we VACATE and REMAND the bankruptcy court’s
23   award of $72,691.00 in attorney’s fees to the Shannons.
24   ///
25
26         2
           Unless specified otherwise, all chapter and section
27   references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
     all “Rule” references are to the Federal Rules of Bankruptcy
28   Procedure, Rules 1001-9037.

                                        2
 1   I.   INTRODUCTION
 2        The dispute below and this appeal arise out of a
 3   longstanding business and personal relationship between the
 4   Cardenases and the Shannons.   It began in 2005 when Mr. Cardenas
 5   purchased vacant land and a dilapidated building located at 30333
 6   Pacific Highway South, Federal Way, Washington (“Washington
 7   Property”) for $1,000,000.00, with Ms. Shannon’s assistance.     It
 8   continued with a fraud and negligent misrepresentation lawsuit
 9   the Cardenases filed against the Shannons in Washington state
10   court in which the Cardenases obtained a default judgment in
11   excess of $1,000,000.00 against the Shannons after the Washington
12   Property was lost to foreclosure.     The adversary proceeding
13   ensued when the Shannons moved to Arizona and filed a voluntary
14   petition for relief under chapter 7 of the Bankruptcy Code.
15        The Cardenases commenced an adversary proceeding in the
16   Shannons’ chapter 7 case in which they sought to have the debt
17   created by the Washington state court default judgment declared
18   non-dischargeable under § 523(a)(2)(A).     After a three-day trial
19   during which the bankruptcy judge heard testimony from numerous
20   witnesses and judged their credibility, the bankruptcy court
21   entered an order denying the Cardenases’ request for an order
22   providing that any debt owed to them based on the Washington
23   state court default judgment be deemed non-dischargeable in the
24   Shannons’ bankruptcy case.   Entry of a judgment, as amended,
25   discharging that debt followed.   The bankruptcy court concluded
26   that the Cardenases failed to carry their burden of proof on two
27   elements of the § 523(a)(2)(A) claim.     It also concluded that the
28   Cardenases failed to prove their damages were proximately caused

                                       3
 1   by their reasonable reliance on any representations made by the
 2   Shannons.
 3         In post-trial proceedings, the bankruptcy court awarded the
 4   Shannons their costs and attorney’s fees as the prevailing
 5   parties on the Cardenases’ § 523(a)(2)(A) claim.
 6         The Cardenases first appealed from the adverse order and
 7   judgment discharging the debt created by the Washington state
 8   court default judgment.     A subsequent appeal from the order and
 9   judgment awarding costs and attorney’s fees followed.     This court
10   consolidated both appeals.
11   II.   FACTS3
12         A.    The Parties
13         Before moving to Arizona, the Shannons resided in Washington
14   where they established a successful bookkeeping and accounting
15   practice.      Ms. Shannon began her career with the Internal Revenue
16   Service as an enrolled agent.     She is also a licensed real estate
17   agent with numerous years of real estate experience.
18         Mr. Cardenas is a Mexican immigrant.    Although he lacks an
19   extensive formal education and his command and understanding of
20   the English language are limited, he is a fairly sophisticated
21   and experienced businessman.     He has established an impressive
22   empire of Mexican-themed restaurants throughout Washington.     He
23   owned as many as twenty restaurants, and he currently owns at
24   least fifteen.     Throughout his career, Mr. Cardenas has
25
           3
26         Because the parties provided limited excerpts from the
     trial transcripts, we exercise our discretion to review the
27   bankruptcy court’s docket for the complete trial transcript
     record. See Woods & Erickson, LLP v. Leonard (In re AVI, Inc.),
28   389 B.R. 721, 725 n.2 (9th Cir. BAP 2008).

                                         4
 1   personally managed and overseen his restaurant holdings and other
 2   business operations in Washington and Oregon.    He also has
 3   experience renovating and selling real properties.    Mr. Cardenas
 4   always communicated with Ms. Shannon in English.
 5        The Cardenases and the Shannons met sometime around 1998 and
 6   formed a personal and business relationship.    Through her tax and
 7   accounting business, for a number of years Ms. Shannon provided
 8   accounting, payroll, and tax services for all of the Cardenases’
 9   restaurants.    As a result of their work for the Cardenases, the
10   Shannons received an annual six-figure income.
11        In addition to accounting, payroll, and tax services,
12   Ms. Shannon also represented Mr. Cardenas in real estate matters.
13   They had partnered successfully and profitably on the
14   rehabilitation of a former bank property where Ms. Shannon
15   oversaw and managed the purchase, renovations, and sale of the
16   building.    Although Mr. Cardenas worked with Ms. Shannon on real
17   estate transactions, on the first day of trial he testified that
18   he did not rely on her for advice in real estate matters.
19        B.     The Washington Property
20        Without performing any due diligence or obtaining an
21   appraisal, Mr. Cardenas purchased the Washington Property in 2005
22   for $1,000,000.00 cash as the property was about to be sold to
23   another buyer.    Ms. Shannon represented Mr. Cardenas in that
24   transaction.    Mr. Cardenas used his personal funds to purchase
25   the Washington Property.    However, the property was subsequently
26   titled in the name of Mazatlan Properties, LLC (“MPL”), a limited
27   liability company of which the Cardenases were the sole members
28   when the Washington Property was purchased.

                                       5
 1        The Washington Property sat vacant for approximately a year.
 2   It was vandalized, gutted of its fixtures and copper wiring, and
 3   a target for graffiti.
 4        By the summer of 2006, Mr. Cardenas decided he no longer
 5   wanted the Washington Property.    He retained Ms. Shannon as the
 6   listing agent in 2006 and she unsuccessfully attempted to sell
 7   the property through 2008.    She then approached Mr. Cardenas with
 8   a proposal to renovate and sell the Washington Property.
 9        C.     The Agreement
10        The Washington state court action and the adversary
11   proceeding arise out of the failed business venture between
12   Mr. Cardenas and Ms. Shannon for the purchase, renovation, and
13   sale of the Washington Property.       It is in that context that the
14   Cardenases accused Ms. Shannon of making false representations
15   and engaging in other deceitful conduct in an effort to obtain
16   the Washington Property from Mr. Cardenas without payment.
17   Ms. Shannon denied those accusations.
18        An initial oral understanding between Mr. Cardenas and
19   Ms. Shannon provided for the renovation and sale of the
20   Washington Property, required Ms. Shannon to furnish funds for
21   renovations to the property, and required Ms. Shannon to pay
22   $1,000,000.00 to Mr. Cardenas upon renovation and sale of the
23   property.    That much is undisputed.
24        The parties’ understanding was subsequently memorialized in
25   two writings, both of which are entitled “Amendment of Operating
26   Agreement of Mazatlan Properties, LLC” (the “First Amendment” and
27   “Second Amendment”).    Following discussions, the First Amendment
28   would have made Ms. Shannon and one of her associates equal

                                        6
 1   members in MPL with the Cardenases, stated that Ms. Shannon and
 2   her associate would provide funds necessary for renovations to
 3   the Washington Property, and would have made Ms. Shannon a co-
 4   manager in MPL with Mr. Cardenas.    The First Amendment, admitted
 5   at trial as Exhibit 17, is neither dated nor signed.    The Second
 6   Amendment, admitted at trial as Exhibit 18, is signed and dated
 7   August 23, 2008.   It transferred the Cardenases’ interest in MPL
 8   and the Washington Property to Ms. Shannon, made Ms. Shannon the
 9   sole member and manager of MPL, and gave her the power and
10   authority to sell or lease the Washington Property.
11        The Cardenases asserted that they never agreed to the terms
12   in the Second Amendment.   They accused Ms. Shannon of using a
13   signature page from the First Amendment for the Second Amendment
14   without their knowledge or authorization.    They also accused
15   Ms. Shannon of not renovating and selling the Washington Property
16   within a promised three- to five-month time period, using funds
17   other than her own funds (which they claimed she fraudulently
18   obtained through loans) to fund renovations, and not providing
19   Mr. Cardenas with a lien on the Washington Property to secure his
20   interest as she purportedly promised to do.    They further accused
21   Ms. Shannon of selling a portion of the Washington Property and
22   not paying Mr. Cardenas the sale proceeds.
23        Ms. Shannon denied the Cardenases’ accusations.    She denied
24   forging or appending an unauthorized signature page to the Second
25   Amendment.   This is consistent with Mr. Cardenas’ trial testimony
26   that he signed the Second Amendment, signed his wife’s signature,
27   and discussed the terms of the Second Amendment with Pat Horan
28   (“Mr. Horan”), vice-president of Timberland Bank (“Timberland”),

                                      7
 1   the bank from which Ms. Shannon obtained a loan which she used
 2   for renovations.   Ms. Shannon attested that she had a prospective
 3   buyer when she entered into the business venture with
 4   Mr. Cardenas.   She also attested that she agreed to furnish funds
 5   to renovate the Washington Property and pay the Cardenases
 6   $1,000,000.00 upon the sale of that property.   However,
 7   Ms. Shannon denied that she represented any time limitation on
 8   completion of the renovations or sale of the property, that she
 9   committed to use only her own funds, or that she promised to give
10   Mr. Cardenas a lien on the property.   Additionally, the purported
11   $72,000.00 “sale” was actually a payment to MPL in 2010 by the
12   City of Federal Way for its taking of a portion of the Washington
13   Property through condemnation in an eminent domain proceeding.
14        D.   Trial
15        In March of 2014, the bankruptcy court conducted a three-day
16   trial on the issue of non-dischargeability under § 523(a)(2)(A).4
17   On September 30, 2014, the bankruptcy court entered findings of
18   fact and conclusions of law in support of its order denying the
19   Cardenases’ request for an order declaring the debt created by
20   the Washington state court default judgment non-dischargeable in
21   the Shannons’ bankruptcy case.   On February 25, 2015, the
22   bankruptcy court entered a judgment discharging all pre-petition
23   indebtedness the Shannons owed to the Cardenases.
24        In support of its judgment for the Shannons and against the
25
          4
26         The Cardenases’ complaint pled two claims for relief:
     (1) enforcement of the Washington state court fraud and negligent
27   misrepresentation default judgment; and (2) “fraud under the
     Bankruptcy Code” based on the Shannons’ alleged negligent and
28   intentional misrepresentations.

                                      8
 1   Cardenases, the bankruptcy court made the following specific
 2   findings:
 3        (1) That the Shannons did not make any representation
          to the Cardenases that they knew to be false and they
 4        did not make any representations with the intent and
          purpose of deceiving the Cardenases; and
 5
          (2) That any damages suffered by the Cardenases are not
 6        a result from reasonably relying on representations by
          the Shannons.
 7
 8   Minute Entry/Order entered October 1, 2014; Judgment entered
 9   February 25, 2015.
10        The bankruptcy court’s ruling was based primarily upon its
11   evaluation of live witness testimony of Mr. Cardenas,
12   Ms. Shannon, and Mr. Horan who dealt with both the Cardenases and
13   Ms. Shannon.   The bankruptcy court found Ms. Shannon’s testimony
14   credible and consistent with the objective documentary evidence.
15   It found that Ms. Shannon had a letter of intent for
16   $1,700,000.00 from a prospective buyer at the inception of the
17   parties’ agreement, she did not represent there was a temporal
18   limit associated with renovations and a sale, she did not commit
19   to use only her funds for renovations, and she did not promise to
20   give Mr. Cardenas a lien on the Washington Property.
21        On the other hand, the bankruptcy court found Mr. Cardenas’
22   testimony inconsistent with his position in the litigation and
23   other admitted evidence.   Some of the more important
24   contradictions noted were: the Cardenases’ claim that Ms. Shannon
25   was a trusted advisor upon whom Mr. Cardenas relied for real
26   estate advice was contradicted by Mr. Cardenas’ testimony on the
27   first day of trial that he did not rely on her; the Cardenases’
28   claim that Ms. Shannon represented she had a committed buyer who

                                      9
 1   would purchase the Washington Property in three to five months
 2   was contradicted by Mr. Cardenas’ testimony that Ms. Shannon
 3   committed to help him find a buyer within three to five months;
 4   Mr. Cardenas’ claim that funds for renovation would come solely
 5   from Ms. Shannon and that he was unaware of and did not authorize
 6   loans was contradicted by Mr. Cardenas’ admission that he was
 7   aware of the loan that Ms. Shannon obtained from Timberland and
 8   that the Washington Property was security for that loan; despite
 9   his claim that signature pages from the First Amendment were
10   appended to the Second Amendment, Mr. Cardenas admitted he signed
11   the Second Amendment and signed it for his wife after having it
12   in his possession; and Mr. Cardenas’ admission at trial that
13   Ms. Shannon did in fact own the Washington Property despite his
14   claim she fraudulently held herself out as an owner to obtain
15   loans.
16         In post-trial proceedings, the bankruptcy court entered an
17   order, followed by a judgment, awarding the Shannons costs in the
18   amount of $5,002.10 and attorney’s fees in the amount of
19   $72,691.00 with interest accruing at the rate set forth in 28
20   U.S.C. § 1961.   It based that award on the parties’ joint pre-
21   trial statement which referenced Washington law.
22   III. JURISDICTION
23         The bankruptcy court had jurisdiction under 28 U.S.C.
24   §§ 1334 and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C.
25   § 158.
26   IV.   ISSUES
27         1.   Was the bankruptcy court clearly erroneous in its
28   findings that Ms. Shannon did not make representations that were

                                     10
 1   false and did not intend to deceive the Cardenases?
 2        2.     Did the bankruptcy court err in awarding the Shannons
 3   costs and attorney’s fees as the prevailing party?
 4   V.   STANDARD OF REVIEW
 5        Whether a claim is excepted from discharge presents mixed
 6   issues of law and fact, which we review de novo.   Diamond v.
 7   Kolcum (In re Diamond), 285 F.3d 822, 826 (9th Cir. 2002).    When
 8   reviewing a bankruptcy court’s determination of an exception to
 9   discharge claim, we review its findings of fact for clear error
10   and its conclusions of law de novo.   Oney v. Weinberg (In re
11   Weinberg), 410 B.R. 19, 28 (9th Cir. BAP 2009).    As relevant in
12   this appeal, whether there has been proof of an essential element
13   of § 523(a)(2)(A) is a factual determination reviewed for clear
14   error.    Am. Express Travel Related Servs. Co. v. Vinhnee (In re
15   Vinhnee), 336 B.R. 437, 443 (9th Cir. BAP 2005).
16        “Clearly erroneous review is significantly deferential,
17   requiring that the appellate court accept the [trial] court’s
18   findings absent a definite and firm conviction that a mistake has
19   been committed.”   United States v. Syrax, 235 F.3d 422, 427 (9th
20   Cir. 2000) (citation and internal quotation marks omitted).     The
21   bankruptcy court’s choice among multiple plausible views of the
22   evidence cannot be clearly erroneous.   Anderson v. City of
23   Bessemer City, 470 U.S. 564, 573-75 (1985); United States v.
24   Elliott, 322 F.3d 710, 715 (9th Cir. 2003); Ng v. Farmer (In re
25   Ng), 477 B.R. 118, 132 (9th Cir. BAP 2012).   The deference owed
26   to the bankruptcy court is heightened where its choice is based
27   on the credibility of live witnesses.   Anderson, 470 U.S. at 575.
28   In fact, we give great deference to the bankruptcy court’s

                                      11
 1   findings when they are based on its determinations as to
 2   credibility of witnesses.     Retz v. Samson (In re Retz), 606 F.3d
 3   1189, 1196 (9th Cir. 2010) (citing Anderson, 470 U.S. at 575).
 4         We may affirm the bankruptcy court on any basis supported by
 5   the record.     See ASARCO, LLC v. Union Pac. R.R. Co., 765 F.3d
 6   999, 1004 (9th Cir. 2014).
 7   VI.   DISCUSSION
 8         A.      The Bankruptcy Court Did Not Err in Finding That the
                   Cardenases Failed to Satisfy Their Burden of Proof on
 9                 an Element of Their § 523(a)(2)(A) Claim.
10         In a non-dischargeability action under § 523(a), the
11   creditor has the burden of proving all the elements of its claim
12   by a preponderance of the evidence.     Grogan v. Garner, 498 U.S.
13   279, 291 (1991).     Exceptions to discharge are strictly construed
14   against an objecting creditor and in favor of the debtor to
15   effectuate the fresh start policies under the Bankruptcy Code.
16   Snoke v. Riso (In re Riso), 978 F.2d 1151, 1154 (9th Cir. 1992).
17         Section 523(a)(2)(A) states as follows:
18         (a) A discharge under section 727 . . . of this title
           does not discharge an individual debtor from any debt -
19
           . . .
20
           (2) for money, property, services, or an extension,
21         renewal, or refinancing of credit, to the extent
           obtained by - (A) false pretenses, a false
22         representation, or actual fraud, other than a statement
           respecting the debtor’s or an insider’s financial
23         condition[.]
24   11 U.S.C. § 523(a)(2)(A).
25         A creditor seeking to except a debt from discharge under
26   § 523(a)(2)(A) based on false representations bears the burden of
27   proving by a preponderance of the evidence five elements:
28   (1) misrepresentation(s), fraudulent omission(s), or deceptive

                                        12
 1   conduct; (2) knowledge of the falsity or deceptiveness of such
 2   representation(s), omission(s), or conduct; (3) an intent to
 3   deceive; (4) justifiable reliance by the creditor; and (5) damage
 4   to the creditor proximately caused by its reliance.   Ghomeshi v.
 5   Sabban (In re Sabban), 600 F.3d 1219, 1222 (9th Cir. 2010);
 6   In re Weinberg, 410 B.R. at 35.    The bankruptcy court found that
 7   the Cardenases failed to carry their burden of proving false
 8   representations and deceitful conduct by Ms. Shannon.   Its
 9   decision is not clearly erroneous.
10        The bankruptcy court identified the representations that the
11   Cardenases accused Ms. Shannon of making to obtain ownership of
12   MPL and the Washington Property without payment as follows:5
13        (1)   that Ms. Shannon had a valid purchase commitment
                that would permit payment to the Cardenases of
14              $1,000,000.00 within a period of three to five
                months (the “Buyer and Temporal Representation”);
15
          (2)   that Ms. Shannon would use only her own funds to
16              renovate the Washington Property (the “Use of
                Funds Representation”);
17
          (3)   that the agreement between the parties created an
18              immediate debt (but not a property sale) owed to
                the Cardenases that was to be secured by a deed of
19              trust (the “Lien Representation”); and
20        (4)   a representation by the Shannons through which
                they improperly obtained loans that were secured
21              by the Washington Property and use of the loan
                proceeds for other than MPL purposes (the “Other
22              Deceitful Conduct”).
23        As to each of these matters, the bankruptcy court found
24   either that the representations were not made, or if made were
25
26
27
          5
           These are consistent with the representations identified in
28   the Cardenases’ amended opening brief.

                                       13
 1   not false, and Ms. Shannon’s conduct was not deceitful.6
 2   Supported by the record and based on its assessment of the
 3   credibility of the witnesses providing testimony, the bankruptcy
 4   court’s findings are not clearly erroneous.   That holds true even
 5   if, as the Cardenases complain on appeal, the bankruptcy judge
 6   selected the Shannons’ version of events over the Cardenases’
 7   version of events.
 8              1.   The Buyer and Temporal Representation
 9        The Cardenases accused Ms. Shannon of stating that she had a
10   committed buyer who would purchase the property within three to
11   five months of the initial oral agreement.    However, Mr. Cardenas
12   contradicted that accusation at trial when he testified as
13   follows:
14        Q And can you please describe for the Court what she
          proposed. In other words, what was she willing to --
15        what was her offer to you?
16        A She told me she wanted to help me out as always and
          that she told me that with three or four months, no
17        more than five months down the road she would find me a
          buyer who would be willing to pay me $1 million for
18        that property.
19   Trial Tr. (March 25, 2014) at 45:23-46:4 (emphasis added).
20        In other words, according to Mr. Cardenas, the
21
          6
           Although not raised by the parties, we note that the
22
     bankruptcy court also recited a “reasonable” reliance standard.
23   Section 523(a)(2)(A) only requires justifiable reliance. Field
     v. Mans, 516 U.S. 59, 74-75 (1995); In re Sabban, 600 F.3d at
24   1222; In re Weinberg, 410 B.R. at 35. Nevertheless, because the
     bankruptcy court’s factual findings that Ms. Shannon made no
25   false representations and her conduct was not deceitful are not
26   clearly erroneous, we need not reach the reliance standard used
     by the bankruptcy court. In the absence of false pretenses,
27   misrepresentations, or deceitful conduct, the Cardenases’
     § 523(a)(2)(A) claim fails regardless of which reliance standard
28   the bankruptcy court used.

                                     14
 1   representation was actually that Ms. Shannon would help find him
 2   a buyer for - not that she would actually sell - the Washington
 3   Property.   And she did just that, it being undisputed that she
 4   had a letter of intent from an interested investor for
 5   $1,700,000.00 at the inception of the agreement.
 6         As to the three- to five-month time frame, Mr. Cardenas
 7   wavered in his testimony.    In fact, Mr. Cardenas himself was
 8   unsure of the time frame within which Ms. Shannon supposedly told
 9   him the Washington Property would be sold.    He testified on
10   direct examination that Ms. Shannon “proposed selling [the
11   property] as soon as possible and within two or three months,
12   three or four months.”   Trial Tr. (March 25, 2014) at 49:22-23.
13   On cross-examination he testified that Ms. Shannon “said from
14   three to five” months.   Trial Tr. (March 25, 2014) at 65:11.    In
15   short, Mr. Cardenas was unclear and uncertain, and could not
16   definitively articulate what Ms. Shannon supposedly said as to
17   any time frame for a sale.
18         Mr. Cardenas’ claim that Ms. Shannon represented she would
19   renovate and sell the Washington Property within three to five
20   months is further undercut, again, by his own testimony regarding
21   another much easier and better resourced renovation project that
22   took over a year to complete.    Trial Tr. (March 25, 2014) at 62-
23   63.   That suggests an understanding by Mr. Cardenas that
24   renovation of the Washington Property within three to five months
25   was not likely, and two months was even less likely.
26         Mr. Cardenas’ understanding is consistent with Ms. Shannon’s
27   testimony that she “never” told him the Washington Property would
28   be renovated and sold within three to five months, (Trial Tr.

                                      15
 1   (March 25, 2014) at 136:8-10; Trial Tr. (March 26, 2014) at
 2   168:17-23), because a three- to five-month time frame was not
 3   possible due to permitting issues for renovations.   Trial Tr.
 4   (March 26, 2014) at 169:6-8.   Ms. Shannon’s testimony is also
 5   consistent with Mr. Horan’s testimony that there was no reference
 6   in Timberland’s loan file of any mention by Ms. Shannon of a
 7   three- to five-month renovation and sale time frame.   Trial Tr.
 8   (March 26, 2014) at 50:9-11, 55:6-8.
 9        In short, when faced with Mr. Cardenas’ contradictory and
10   wavering testimony, both as to renovation and sale of the
11   Washington Property and the timeline for both, we find no error
12   in the version of events that the bankruptcy court accepted.     Its
13   findings, supported by the evidence, will not be disturbed.     The
14   bankruptcy court’s findings related to the Buyer and Temporal
15   Representation are not clearly erroneous.
16             2.   The Use of Funds Representation
17        To support this representation, the Cardenases pointed to
18   language in the First and Second Amendment that states
19   Ms. Shannon was to “furnish funds” for the renovations.   The
20   bankruptcy court also established this as the representation the
21   Cardenases accused Ms. Shannon of making based on the parties’
22   joint pre-trial statement.
23        Ms. Shannon testified that she did not tell Mr. Cardenas she
24   would use only her funds but did tell him that all necessary
25   funds would be used for renovations to the Washington Property.
26   Trial Tr. (March 25, 2014) at 136:24-137:7.   And while
27   Ms. Shannon used a significant amount of her own money for
28   renovations, she also used funds from loans obtained from

                                     16
 1   Timberland and private lenders.
 2        After the Second Amendment made Ms. Shannon the sole member
 3   and 100% owner of MPL, she obtained a $250,000.00 loan from
 4   Timberland and a $300,000.00 loan from private lenders.7
 5   Mr. Horan testified that he and Mr. Cardenas were aware that
 6   Mr. Cardenas no longer owned 100% of MPL and that 100% of the
 7   interest in MPL had been transferred to Ms. Shannon because the
 8   two discussed the matter.   Trial Tr. (March 26, 2014) at 70-71.
 9   Mr. Cardenas also testified that he was aware of the Timberland
10   loan and that the Washington Property was security for that loan
11   because he and Mr. Horan also discussed both matters:
12        BY MR. DRAKE:
13        Q Mr. Cardenas, were you aware that Pat Horan and
          Timberland Bank were loaning money to Mai Shannon to
14        renovate the building?
15        A   Yes.
16        Q And were you aware that Timberland Bank was going to
          get a lien in the property for that loan?
17
          A   The property was security for that.
18
          Q   Was security to Timberland Bank?
19
          A Let me tell you honestly, Pat asked me if she was
20        applying for a loan and I told him it’s your money, do
          you have any security. And he said, yes, the security
21        is your land, your property.
22   Trial Tr. (March 25, 2014) at 96:6-18.   In fact, Mr. Horan
23   testified that Timberland would not have proceeded with the loan
24   to Ms. Shannon if Mr. Cardenas was unaware that the Washington
25
26        7
           Although loan funds were deposited into accounts other than
27   those maintained by MPL, the bankruptcy court concluded loan
     funds were not misused. It found no credible evidence that loan
28   funds were used for anything other than renovations.

                                       17
 1   Property was security for the loan.   Trial Tr. (March 26, 2014)
 2   at 85:4-11.
 3        Based on the testimony described above, the bankruptcy court
 4   could easily conclude that Ms. Shannon did not make the Use of
 5   Funds Representation.   In other words, Mr. Cardenas’ knowledge
 6   and understanding that Ms. Shannon was using loan funds to
 7   renovate the Washington Property is inconsistent with his claim
 8   that Ms. Shannon represented that only her funds would be used
 9   for renovations.   Therefore, the bankruptcy court’s finding that
10   the Use of Funds Representation did not support the Cardenases’
11   § 523(a)(2)(A) claim is not clearly erroneous.
12              3.   The Lien Representation
13        While it is true that Ms. Shannon did not place a lien on
14   the Washington Property in favor of Mr. Cardenas, it is equally
15   true that she never represented to Mr. Cardenas that she would.
16   Trial Tr. (March 25, 2014) at 138:3-6; Trial Tr. (March 26, 2014)
17   at 211:2-6.
18        Mr. Cardenas, on the other hand, could not definitively
19   state if Ms. Shannon ever told him that she would ensure he had a
20   deed of trust on the Washington Property.   At first he testified
21   she did.   Trial Tr. (March 25, 2014) at 47:1-8.   Then he reversed
22   course and testified that she did not:
23        BY MR. ROMERO:
24        Q Mr. Cardenas, when you entered into your agreement
          with Ms. Shannon, did she ever tell you that you would
25        be protected or secured if her buyer didn’t come
          through in buying the property?
26
          A Well, I was told she had a buyer, and that
27        everything was safe, that everything that was going
          along fine, and --
28

                                     18
 1        Q Did she ever tell you that she would give you a deed
          of trust or lien or something to protect your interest
 2        in the property?
 3        A   No, my protection was the promise she told me.
 4   Trial Tr. (March 25, 2014) at 54:7-17.8
 5        Again, we will not disturb the choice by the bankruptcy
 6   court of the version of events it accepted, particularly, when
 7   the version accepted is supported by evidence in the record and
 8   heavily dependent on the credibility of witnesses.       On this
 9   record, there is ample support for the bankruptcy court’s finding
10   that Ms. Shannon did not promise to provide Mr. Cardenas with a
11   lien on the Washington Property.       Therefore, the bankruptcy
12   court’s finding in regard to the Lien Representation is not
13   clearly erroneous.
14              4.     The Additional Deceitful Conduct
15        After this case was briefed and before it was argued, the
16   United States Supreme Court decided Husky Int’l Electronics, Inc.
17   v. Ritz, 136 S. Ct. 1581 (2016).       In Husky, the Supreme Court
18   held that the term “actual fraud” in § 523(a)(2)(A) includes
19   fraudulent schemes even when those schemes do not involve a false
20   representation.
21        The parties did not raise Husky during oral argument.
22   However, the Cardenases’ amended opening brief includes
23   references to conduct raised at trial which the Cardenases claim
24   was fraudulent.    This includes changing the terms of the parties’
25
26        8
           There also is no reference to any such requirement in the
27   First or Second Amendment, and there is no reference to any such
     lien in Timberland’s credit write-ups until early 2010. Earlier
28   write-ups did not include any such reference.

                                       19
 1   agreement, using the signature page from the First Amendment for
 2   the Second Amendment without telling Mr. Cardenas, obtaining
 3   loans secured by the Washington Property, and not paying
 4   Mr. Cardenas the $72,000.00 MPL received when the City of Federal
 5   Way condemned and took a portion of the Washington Property
 6   through eminent domain.   Since the conduct occurred after the
 7   parties agreed to renovate and sell the Washington Property,
 8   arguably, it could not have induced Mr. Cardenas to enter into
 9   the business venture with Ms. Shannon in the first instance.      The
10   Cardenases complain that the bankruptcy court ignored evidence of
11   this conduct.   Perhaps a better characterization, and a more
12   accurate one, is that the bankruptcy judge assessed credibility,
13   found that the Cardenases lacked it, and concluded either these
14   events did not occur or, if they did, they were not fraudulent
15   because Mr. Cardenas knew of and consented to them.     In any
16   event, the above-described conduct does not implicate Husky.
17         The terms of the agreement were not changed without
18   Mr. Cardenases’ knowledge or consent.   The First Amendment was
19   prepared by Ms. Shannon’s lawyer after discussions with
20   Mr. Cardenas.   Trial Tr. (March 25, 2014) at 132, 138.    That
21   document was given to Mr. Cardenas by one of Ms. Shannon’s
22   employees.   Trial Tr. (March 25, 2014) at 51-51, 77.    It was also
23   reviewed by one of Mr. Cardenas’ daughters who assists with
24   business matters.   Trial Tr. (March 25, 2014) at 77.
25         With regard to the Second Amendment, Mr. Cardenas claimed
26   the document was forged or fabricated, and he did not know about
27   it.   Mr. Cardenas accused Ms. Shannon of tricking him into
28   signing the First Amendment and then taking the signature page

                                     20
 1   from the First Amendment and attaching it to the Second Amendment
 2   without his knowledge.    Not only does that make no sense because
 3   the First Amendment admitted at trial was not signed, (Trial Tr.
 4   (March 25, 2014) at 131:19-132:1, 138:7-9, and Appellants’
 5   Excerpts of Record BAP dkt 21 Tab 13 p. 191-192), but
 6   Mr. Cardenas admitted during trial that he signed the Second
 7   Amendment - admitted as Exhibit 18 - and he signed it for his
 8   wife:
 9        BY MR. DRAKE:
10        Q Let me start with this. Mr. Cardenas, please look
          at the screen right now. I’ll try and mark -- is that
11        your signature there beside the marking?
12        A   That is my signature.
13        Q And what about the signature for your wife; do you
          recognize that signature?
14
          A   No, that’s not my wife’s signature.
15
          Q   And how do you know that?
16
          A   Real well.   I’ve lived with her 38 years.
17
          Q   And you did not sign your wife’s signature there?
18
          A   I signed.
19
          Q Oh, so you’re saying it’s not your wife’s signature
20        because you signed it, not her?
21        A Because Mai told me it would be valid, that
          ultimately everything would be taken care of soon
22        enough.
23        Q But is it you that signed for your wife on this
          document then?
24
          A   Yes, I’m telling yes.
25
          Q Okay.    And then your signature, you signed that one
26        as well?
27        A   I signed it.   How could I?   I cannot deny that.
28

                                      21
 1   Trial Tr. (March 25, 2014) at 87:8-88:4.9
 2        As discussed above in the context of the Use of Funds
 3   Representation, Mr. Cardenas also testified that he was aware of
 4   the Timberland loan.    More precisely, he testified that he was
 5   aware that Ms. Shannon obtained a loan from Timberland to fund
 6   renovations because he discussed both the loan and the use of the
 7   Washington Property as security for the loan with Mr. Horan.
 8   Moreover, at the time Ms. Shannon obtained the Timberland loan
 9   she owned 100% of MPL which owned the Washington Property.    In
10   that regard, Ms. Shannon’s conduct was not deceitful.
11        That is also true with respect to the $72,000.00 that MPL
12   received from the City of Federal Way during the time the city
13   condemned and took a portion of the Washington Property through
14   eminent domain.    That occurred in 2010 and, thus, when
15   Ms. Shannon owned 100% of the interest in MPL.    Moreover, those
16   proceeds were received upon condemnation through eminent domain -
17   not a sale - which means the transaction would not have triggered
18   any obligation that Ms. Shannon may have had to pay those funds
19   to Mr. Cardenas upon a sale of the Washington Property.
20             5.      Conclusion
21        We find no error with the bankruptcy court’s conclusion that
22   the above-described representations and conduct are not false or
23   deceitful and, thus, are insufficient to support the first
24   element of the Cardenases’ § 523(a)(2)(A) claim.    Because its
25   factual determinations are supported by the record, we cannot say
26
          9
27         The Cardenases never explained how the signature page of
     Exhibit 17, without signatures, could be swapped for a signature
28   page on Exhibit 18 with signatures.

                                      22
 1   that the bankruptcy court’s decision is clearly erroneous.
 2   Therefore, as to the order and judgment that the debt created by
 3   the Washington state court default judgment is dischargeable, we
 4   AFFIRM.
 5        B.   The Bankruptcy Court Erred When it Awarded Attorney’s
               Fees to the Shannons.
 6
 7         Unless prohibited by a federal statute or the Bankruptcy
 8   Rules, a prevailing party in an adversary proceeding is typically
 9   awarded its costs other than attorney’s fees.    See Fed. R. Bankr.
10   P. 7054(b)(1).   Here, the bankruptcy court awarded the Shannons
11   $5,002.10 in costs apart from its award of $72,691.00 in
12   attorney’s fees.   The Cardenases’ amended opening brief does not
13   articulate a separate argument that the bankruptcy court erred in
14   its award of costs to the Shannons.    An issue not raised by a
15   party in its opening brief is generally deemed waived.    Rivera v.
16   Orange County Probation Dept. (In re Rivera), 511 B.R. 643, 649
17   (9th Cir. BAP 2014).   Therefore, as to the award of costs other
18   than attorney’s fees to the Shannons in the amount of $5,002.10,
19   we AFFIRM.
20        We turn now to attorney’s fees.    Mr. Cardenas asked the
21   bankruptcy court to determine that his Washington state court
22   default judgment against the Shannons be deemed excepted from
23   discharge for fraud and false representations.    Essentially,
24   Mr. Cardenas alleged that Ms. Shannon induced him to sign and
25   execute the First Amendment to the Limited Liability Company
26   Operating Agreement of Mazatlan Property, LLC (January 1, 2016)
27   (“Operating Agreement”) by making false representations about the
28   substance of that agreement and then by committing actual fraud

                                     23
 1   when she allegedly removed the parties’ signature page from the
 2   First Amendment and attached it to the Second Amendment, which
 3   effectively transferred his interest in the Washington Property
 4   to her.   In her answer and at trial, Ms. Shannon both denied
 5   Mr. Cardenas’ allegations and showed that her conduct was
 6   consistent with the Operating Agreement as amended.    In other
 7   words, her defense was not simply a denial of fraud allegations
 8   but an assertion of her right to act as she did based upon the
 9   parties’ written agreement.    After hearing the evidence, the
10   bankruptcy court did not accept Mr. Cardenas’ testimony and
11   instead found Ms. Shannon’s testimony more credible.
12        The executed Second Amendment provides “except as amended by
13   this agreement, the other provisions of the operating agreement
14   shall remain in full force and effect and hereby ratified and
15   confirmed.”   In the Operating Agreement, there is an attorney’s
16   fees provision that provides:
17             Section 12.3 Attorney’s Fees. If any litigation
          or other dispute resolution proceeding is commenced
18        between parties to this Agreement to enforce or
          determine the rights or responsibilities of such
19        parties, the prevailing party or parties in any such
          proceeding will be entitled to receive, in addition
20        [to] such other reliefs as may be granted, its or their
          reasonable attorney’s fees, expenses and costs incurred
21        preparing for [sic] participating in such proceedings.
22   Operating Agreement at Section 12.3.    Significantly, the scope of
23   this bilateral attorney’s fees provision is quite broad and
24   likely its sweep reached issues raised by Ms. Shannon’s defense.
25        Before trial the parties filed a proposed joint pre-trial
26   order but it was not signed by the court.    However, the parties
27   and the court thereafter treated it as a joint pre-trial
28   statement.    Under the heading Agreed Issues of Law, the joint

                                      24
 1   pre-trial statement stated:
 2        The court may award attorney fees to the prevailing
          party on any claim arising out of contract. RCW
 3        4.84.330.
 4   Relying upon the joint pretrial statement, the bankruptcy court
 5   awarded attorney’s fees and costs to Ms. Shannon for the reason
 6   that “the parties stipulated that the court may make an award of
 7   attorney fees and costs to the prevailing party.”   This is the
 8   only explanation that the court provides for its award of
 9   attorney’s fees.   The court’s decision referenced, but does not
10   explain, the applicability of the attorney’s fees provision in
11   the Operating Agreement.
12        RCW 4.84.330 is a fee shifting statute that regulates
13   unilateral attorney’s fees provisions, making them bilateral.
14   Because the agreement at issue here contained a bilateral fee
15   provision, RCW 4.84.330 did not apply.   “By its terms,
16   RCW 4.84.330 applies only to contracts with unilateral attorney
17   fee provisions.”   Kaintz v. PLG, Inc., 147 Wash. App. 782, 786,
18   197 P.3d 710 (2008).   Moreover, a stipulation by the parties to
19   the law does not bind a trial court or an appellate court.
20   Modeer v. United States, 183 F. A’ppx 975, 977 (Fed. Cir. 2006);
21   Avila v. INS, 731 F.2d 616, 620-21 (9th Cir. 1984); Worden v.
22   Smith, 178 Wash. App. 309, 327, 314 P.3d 1125 (2013).     The
23   bankruptcy court’s reliance on the joint pre-trial statement as
24   opposed to the Operating Agreement’s attorney’s fees provision
25   for its award of attorney’s fees was error.
26        “[U]nder Cohen [v. de la Cruz, 523 U.S. 213 (1998)], the
27   determinative question for awarding attorney’s fees is whether
28   the creditor would be able to recover the fee outside of

                                     25
 1   bankruptcy under state or federal law.”    Fry v. Dinan (In re
 2   Dinan), 448 B.R. 775, 785 (9th Cir. BAP 2011) (citations
 3   omitted).   Notably, Cohen is not limited to attorney’s fees
 4   awarded under state or federal statutes; it also applies to cases
 5   in which fees are provided for by contract.    Redwood Theaters,
 6   Inc. v. Davison (In re Davison), 289 B.R. 716, 722 (9th Cir. BAP
 7   2003).    Under the rationale of Renfrow v. Draper, 232 F.3d 688,
 8   694 (9th Cir. 2000), and Heritage Ford v. Baroff (In re Baroff),
 9   105 F.3d 439, 441 (9th Cir. 1997), a prevailing debtor also can
10   recover attorney’s fees, provided the parties have a written
11   agreement which would award fees to the debtor if the same issues
12   were tried in a state court.
13        The rule in Washington is that, absent a contract, statute
14   or recognized ground of equity, attorney’s fees will not be
15   awarded as part of the cost of litigation.10   Pennsylvania Life
16   Ins. Co. v. Emp’t Sec. Dep’t, 97 Wash. 2d 412, 413, 645 P.2d 693
17   (1982).    Under Washington law, attorney’s fees in contract cases
18   may be awarded if the contract contains a provision specifically
19   providing for attorney’s fees upon breach or other stipulated
20   circumstances.    For purposes of a contractual attorney’s fees
21   provision, an action is on a contract if the action arose out of
22   the contract and if the contract is central to the dispute.
23   Hemenway v. Miller, 116 Wash. 2d 725, 742, 807 P.2d 863 (1991).
24
25        10
           The parties stipulated to the applicability of Washington
26   state law, which is appropriate given that the business venture
     between the Cardenases and Shannons arose in Washington, the
27   property in question is located in Washington, and the judgment
     giving rise to the Shannons’ debt to the Cardenases was issued by
28   a Washington state court.

                                      26
 1        The meaning of “on the contract” is explained in Boguch v.
 2   Landover Corp., 153 Wash. App. 595, 615, 224 P.3d 795 (2009), and
 3   Brown v. Johnson, 109 Wash. App. 56, 58-59, 34 P.3d 1233 (2001).
 4   In Boguch, the court held that “[i]f a party alleges breach of a
 5   duty imposed by an external source, such as a statute or the
 6   common law, the party does not bring an action on the contract,
 7   even if the duty would not exist in the absence of a contractual
 8   relationship.”    Boguch, 153 Wash. App. at 615.      Boguch sued his
 9   realtors for breach of contract and negligence, contending that
10   their mistakes caused his property to lose value.       His case was
11   dismissed on summary judgment and his realtors were awarded
12   attorney’s fees based upon a provision in the listing agreement.
13   Id. at 606-07.    On appeal, the court reversed the attorney’s fees
14   award and remanded, stating that Boguch’s negligence claims were
15   not “on the contract” because they concerned breaches of duties
16   imposed by statute and common law.      Id. at 619.   The case was
17   remanded to the trial court with instructions to recalculate the
18   attorney’s fees award, limiting it to fees arising from the
19   contract claim.    Id.    In Brown, the purchaser of the house sued
20   the vendor for misrepresenting the house’s condition.       The court
21   awarded attorney’s fees to the purchaser for her
22   misrepresentation claim against the seller because the purchase
23   and sale agreement provided for attorney’s fees to the prevailing
24   party “concerning this agreement,” and the tort arose from the
25   parties’ agreement.      Brown, 109 Wash. App. at 58-59.
26        These Washington cases are consistent with Ninth Circuit
27   case law.   In Baroff, Baroff’s creditors, like Mr. Cardenas,
28   disputed the dischargeability of their debt to him, alleging that

                                        27
 1   they were induced to enter into a settlement agreement by fraud
 2   and false representations.    Like Ms. Shannon, Baroff based his
 3   defense upon the parties’ written settlement agreement.      He
 4   prevailed because the bankruptcy court ruled that the statute of
 5   frauds barred the oral statements purporting to amend or
 6   supplement the written agreement.     Baroff, 105 F.3d at 442.
 7   Although he prevailed, Baroff’s request for attorney’s fees was
 8   denied.   Id. at 441.   The Ninth Circuit reversed, reasoning that
 9   because the bankruptcy court was required to determine whether
10   the statute of frauds applied to the creditors’ fraudulent
11   inducement claim before ruling on the question of
12   dischargeability, “the document containing the attorney fees
13   clause in this case played an integral role in the proceedings.”
14   Id. at 442.
15        Baroff was clarified by the Ninth Circuit’s subsequent
16   decision in Renfrow.    In that case, the court stated that the
17   rule in Baroff does not permit the bankruptcy court to award a
18   party’s attorney’s fees for litigating federal law issues in
19   bankruptcy court whenever a state law is “integral” to
20   determining dischargeability.    Renfrow, 232 F.3d at 694.
21   Instead, the court held that attorney’s fees should be awarded
22   solely to the extent they were incurred in litigating state law
23   issues.   Id.   Likewise the rule in Washington is that if
24   attorney’s fees are recoverable for only some of the parties’
25   claims, the award “must properly reflect a segregation of the
26   time spent on issues for which fees are authorized from time
27   spent on other issues.”    Hume v. Am. Disposal Co., 124 Wash. 2d
28   656, 673, 880 P.2d 988 (1994).

                                      28
 1        Here, the parties’ agreement contained an attorney’s fees
 2   provision awarding fees to the prevailing party in any litigation
 3   between them to enforce or determine their respective rights and
 4   responsibilities.    In part, Ms. Shannon responded to
 5   Mr. Cardenas’ fraud allegations by maintaining that the Second
 6   Amendment to the Operating Agreement was validly executed and by
 7   showing that her conduct was consistent with the amended
 8   agreement.    To the extent that she litigated those state law
 9   issues before the bankruptcy court and prevailed, she was
10   entitled to an award of reasonable attorney’s fees.
11        In conclusion, the bankruptcy court’s award of attorney’s
12   fees is VACATED because it is based on an erroneous application
13   of the law.    Upon REMAND, the bankruptcy court should base its
14   award of attorney’s fees upon the fees provision of the parties’
15   Operating Agreement, and the court should limit its award to the
16   fees incurred in litigating state law issues under that
17   provision.
18   VII. CONCLUSION
19        Based on the foregoing, we AFFIRM the bankruptcy court’s
20   ruling that the Cardenases failed to meet their burden of proof
21   in establishing non-dischargeability under § 523(a)(2)(A) and its
22   judgment that the debt created by the Washington state court
23   default judgment is discharged in the Shannons’ bankruptcy case,
24   we AFFIRM the bankruptcy court’s order and judgment awarding the
25   Shannons $5,002.10 in costs, and we VACATE and REMAND the
26   bankruptcy court’s order and judgment awarding the Shannons
27   $72,691.00 in attorney’s fees.
28

                                      29
