                                                            FILED
                                                             DEC 11 2017
 1                          NOT FOR PUBLICATION
                                                         SUSAN M. SPRAUL, CLERK
                                                           U.S. BKCY. APP. PANEL
 2                                                         OF THE NINTH CIRCUIT

 3                  UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                            OF THE NINTH CIRCUIT
 5   In re:                        )       BAP No.      CC-17-1154-SAKu
                                   )
 6   LETICIA JOY ARCINIEGA,        )       Bk. No.      6:11-bk-15412-SY
                                   )
 7                  Debtor.        )       Adv. No.     6:11-ap-01735-SY
     ______________________________)
 8                                 )
     LETICIA JOY ARCINIEGA,        )
 9                                 )
                    Appellant,     )
10                                 )
     v.                            )       MEMORANDUM*
11                                 )
     JAMES CLARK,                  )
12                                 )
                    Appellee.      )
13   ______________________________)
14                  Argued and Submitted on November 30, 2017
                             at Pasadena, California
15
                            Filed – December 11, 2017
16
                 Appeal from the United States Bankruptcy Court
17                   for the Central District of California
18             Honorable Scott Ho Yun, Bankruptcy Judge, Presiding
19   Appearances:      Bruce Adelstein argued for appellant; David Edward
                       Hays of Marshack Hays LLP argued for appellee.
20
21   Before: SPRAKER, ALSTON** and KURTZ, Bankruptcy Judges.
22
23
24        *
            This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may
25   have (see Fed. R. App. P. 32.1), it has no precedential value.
26   See 9th Cir. BAP Rule 8024-1.
          **
27          Hon. Christopher M. Alston, United States Bankruptcy
     Judge for the Western District of Washington, sitting by
28   designation.
 1                              INTRODUCTION
 2        This is the second appeal from this adversary proceeding.
 3   In the prior appeal, we vacated the bankruptcy court’s
 4   nondischargeability judgment against chapter 131 debtor Leticia
 5   Joy Arciniega and remanded so that the bankruptcy court could
 6   determine whether the $1,000-per-day liquidated damages clause in
 7   the parties’ settlement agreement was reasonable within the
 8   meaning of Cal Civ. Code § 1671(b).   We also remanded so that the
 9   bankruptcy court could apply the correct standard for awarding
10   Arciniega’s former husband James Clark his attorneys’ fees.
11        On remand, the bankruptcy court determined that there was no
12   evidence in the record supporting Arciniega’s claim that the
13   liquidated damages clause was unreasonable and hence Arciniega
14   had failed to meet her burden of proof on the reasonableness
15   issue.   The bankruptcy court, in addition, identified the
16   prevailing party attorneys’ fees provision in the settlement
17   agreement and Cal. Civ. Code § 1717 as the basis for its fee
18   award.   It then determined that most of the services Clark’s
19   counsel furnished in prosecuting the adversary proceeding were
20   inextricably intertwined rendering it impossible to realistically
21   or meaningfully separate the services related to contract issues
22   from those related to fraud and nondischargeability issues.
23        Based on these determinations, the bankruptcy court entered
24   an amended judgment again awarding Clark $281,000 in liquidated
25
26        1
            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   damages, as well as $244,586.50 in attorneys’ fees.
 2        Arciniega now appeals from the amended judgment after
 3   remand.   She contends that the bankruptcy court’s reasonableness
 4   finding with respect to the liquidated damages clause was clearly
 5   erroneous.   We agree, and we will REVERSE that finding.   In light
 6   of the procedural history of this matter, however, Clark has
 7   never been afforded a reasonable opportunity to prove up his
 8   actual damages proximately caused by Arciniega’s fraud.
 9   Therefore, we will again REMAND the matter to allow the
10   bankruptcy court to reopen the record on the proximate cause and
11   actual damages.
12        As for attorneys’ fees, we perceive no reversible error in
13   the bankruptcy court’s determination of the amount of the fee
14   award.    The bankruptcy court’s finding that the fees were
15   inextricably intertwined was not clearly erroneous, and
16   Arciniega’s fact-based argument on appeal challenging that
17   finding was not raised below.    That being said, the decision to
18   remand for determination of actual damages may call into question
19   the prevailing party determination.    If on remand Clark cannot
20   prove actual damages, it may well be that he is not the
21   prevailing party and is not entitled to attorneys’ fees under the
22   settlement agreement and Cal. Civ. Code § 1717.    Accordingly, the
23   fee award must be VACATED because prevailing party attorneys’
24   fees cannot be awarded under § 1717 until the final resolution of
25   the underlying claims.
26        For the reasons set forth below we will REVERSE IN PART,
27   VACATE IN PART AND REMAND the matter for a determination of
28   proximate cause, actual damages, and prevailing party.

                                       3
 1                                   FACTS
 2
     A.   The Couple’s Two Residences And Their Post-Dissolution
 3        Dispute Over Ownership.
 4        During the course of their marriage, Clark and Arciniega
 5   purchased two residences.   They purchased the first one, on
 6   Arrowhead Avenue in San Bernardino, California, in 1979.    They
 7   purchased the second residence, on Verona Avenue in Hemet,
 8   California, in 1991.    To purchase the Verona property, the couple
 9   utilized home financing available as part of Clark’s veterans’
10   benefits.
11        Very shortly after their purchase of the Verona property,
12   the couple separated.   After they separated, Clark resided at the
13   Arrowhead property, and Arciniega resided at the Verona property.
14   In 2000, their marital dissolution became final.   Nonetheless,
15   both remained on the legal title for each property.   In 2006,
16   Clark deeded to Arciniega his interest in the Verona property.
17   And in 2007, he sued Arciniega in the San Bernardino County
18   Superior Court to obtain sole legal title to the Arrowhead
19   property.   Although Clark has testified that the principal
20   purpose of the lawsuit was to force Arciniega to relinquish her
21   interest in the Arrowhead property, we do not know much else
22   about the state court lawsuit because the only document from it
23   in the record is a copy of the settlement agreement resolving the
24   lawsuit.
25
     B.   Settlement of the Property Dispute, Partial Performance, and
26        Subsequent Bankruptcy Court Litigation.
27        The settlement agreement resolved the principal dispute in
28   the state court lawsuit (regarding title to the Arrowhead

                                       4
 1   property) as follows:
 2        A.   Plaintiff [Clark] will pay Settling Defendant
               [Arciniega] the principal sum of Fifty Thousand
 3             Dollars ($50,000). The settlement draft will be
               made payable to defendant and her counsel of
 4             record. This payment is due on Wednesday May 13,
               2009, so long as all parties have executed the
 5             settlement agreement and defendant has provided
               plaintiff with a properly signed and notarized
 6             quitclaim deed granting her entire interest in the
               [Arrowhead] Property to plaintiff. Plaintiff is
 7             required to pay defendant $1,000 for each day that
               he is late in delivering the settlement funds to
 8             defendant, so long as all the conditions set forth
               above are met.
 9
10   Agreement of Compromise, Settlement, and Mutual and General
11   Release (May 11, 2009) at Section II. A (“Subpart A”).
12        The settlement agreement contains a separate provision
13   dealing with the Verona property.       This provision obliged
14   Arciniega to take the steps necessary to pay off the “VA loan”
15   encumbering the Verona property.       Clark’s subsequent
16   nondischargeability claims arose from this obligation.       The
17   provision states:
18        B.   No later than May 13, 2010, defendant will take
               all necessary measures to payoff the existing VA
19             loan and removing plaintiff’s name from the loan
               on her property located at 890 Verona Avenue,
20             Hemet, California. Defendant will not attempt to
               assume the VA loan. Defendant agrees to pay
21             plaintiff liquidated damages at the rate of $1,000
               per day for everyday that she is late complying
22             with this provision. Plaintiff will execute all
               necessary documents so as to enable defendant [to]
23             effectuate the removal of plaintiff’s name from
               the loan on her property on 890 Verona, Hemet, CA.
24
25   Agreement of Compromise, Settlement, and Mutual and General
26   Release (May 11, 2009) at Section II. B (“Subpart B”).
27        The other critical provision of the settlement agreement is
28   its attorneys’ fees clause, which provides in relevant part as

                                        5
 1   follows:
 2        In the event of future actions including, but not
          limited to filing a motion to enforce settlement,
 3        litigation or arbitration relating to the enforcement
          of this Agreement, the prevailing party shall be
 4        entitled to his or her reasonable attorney’s fees,
          expenses and costs incurred therein pursuant to
 5        California Civil Code section 1717.
 6   Id. at Section II. 1.
 7        Both parties duly performed their respective obligations
 8   under Subpart A, resolving the principal dispute in the state
 9   court lawsuit.   But Arciniega failed to remove Clark from the VA
10   loan secured by the Verona property, as required by Subpart B.
11   In February 2011, she commenced her chapter 7 case.   As of the
12   petition date, the balance on the VA loan was roughly $75,000.
13        In May 2011, Clark filed his adversary complaint seeking
14   relief against Arciniega under § 523(a)(2)(A) and (a)(6), and
15   under § 727(a)(2), (a)(4) and (a)(6).2   In relevant part, Clark
16   alleged that Arciniega’s contractual obligation to remove him
17   from the VA loan amounted to a false promise – that she never
18   intended to actually pay off the VA loan.   Clark asserted that at
19   the time Arciniega entered into the settlement agreement she knew
20   it was impossible for her to payoff the VA loan – given her poor
21   financial condition.    Moreover, Clark maintained that the stated
22   encumbrances against the Verona property significantly exceeded
23   its value – by at least $80,000.
24        Arciniega responded that the settlement agreement did not
25   require her to actually pay off the VA loan.   Rather, she argued
26
27
          2
            The bankruptcy court’s judgment denied Clark any relief on
28   his § 727 claims. Clark did not appeal this denial.

                                        6
 1   that it merely required her to exercise her best efforts to pay
 2   off the VA loan.   Alternately, she contended that she did indeed
 3   intend to pay off the VA loan.   According to Arciniega, the over-
 4   encumbrance of the Verona property, combined with overall
 5   economic conditions at the time, defeated her good faith intent
 6   and best efforts to refinance the Verona property.
 7        The bankruptcy court held a trial on March 17, 2015.     Trial
 8   consisted of the testimony and arguments of Arciniega and Clark
 9   and lasted roughly one day.   Up until the time of trial,
10   Arciniega was represented by counsel.   However, at trial,
11   Arciniega represented herself.
12        After trial, the bankruptcy court decided the § 523 claims
13   in favor of Clark.   The bankruptcy court determined that the
14   settlement agreement required Arciniega to actually pay off the
15   VA loan but that she never intended to honor this obligation.
16   The court relied upon a series of letters between Arciniega, her
17   lender and others.   In particular, in one dated May 2, 2009 –
18   only nine days before she entered into the settlement agreement –
19   Arciniega lamented her poor financial condition.   In it, she
20   effectively admitted her inability to refinance the Verona
21   property or otherwise pay off the VA loan.   The bankruptcy court
22   inferred that Arciniega had knowledge of her inability to
23   refinance from her experience in the real estate and banking
24   industries.
25        As for damages, the bankruptcy court awarded Clark the
26   $50,000 he paid to Arciniega under the settlement agreement for
27   the conveyance of her interests in the Arrowhead property.     The
28   court also awarded Clark $281,000 in liquidated damages.     The

                                      7
 1   $281,000 was based on the settlement agreement’s $1,000 per day
 2   liquidated damages clause, measured from May 13, 2010, the day
 3   Arciniega defaulted on her promise to pay off the VA loan, to
 4   February 18, 2011, the day Arciniega filed her chapter 7
 5   petition.    Additionally, the bankruptcy court awarded Clark
 6   $209,806.42 in attorney's fees and costs.
 7   C.   First Appeal from the Bankruptcy Court’s Judgment.
 8        On appeal from the bankruptcy court’s judgment, we upheld
 9   the bankruptcy court’s determination that Arciniega had committed
10   nondischargeable fraud under § 523(a)(2)(A).    On the other hand,
11   we overturned the bankruptcy court’s award of $50,000 in actual
12   damages.    We held that Clark’s $50,000 settlement payment was not
13   proximately caused by Arciniega’s false promise to pay off the VA
14   loan.    In so holding, we reasoned that “[n]o tie exists between
15   the $50,000 payment Clark made to Arciniega and Arciniega's
16   obligation to pay off the VA loan.”3
17        We also overturned the bankruptcy court’s liquidated damages
18   award because the bankruptcy court did not consider whether the
19   liquidated damages clause was reasonable.4   As we explained, Cal.
20
21        3
            We based this reasoning primarily on the structure of the
22   settlement agreement. More specifically, the $50,000 payment was
     part of the parties’ rights and duties set forth in Subpart A,
23   governing the parties’ obligations with respect to the Arrowhead
     property, whereas the VA loan payoff was part of the parties’
24   rights and duties set forth in Subpart B, governing Arciniega’s
     obligations with respect to the Verona property. The Subpart A
25   obligations were fully performed by both parties, whereas
26   Arciniega did not perform her Subpart B obligations.
          4
27          We acknowledged Clark’s argument that Arciniega did not
     adequately preserve the liquidated damages issue for appeal, but
28                                                      (continued...)

                                       8
 1   Civ. Code § 1671(b) invalidates liquidated damages provisions if
 2   the damages provided for are “unreasonable under the
 3   circumstances existing at the time the contract was made.”     Id.
 4   We vacated and remanded on the liquidated damages issue so that
 5   “the bankruptcy court [could] evaluate whether the liquidated
 6   damages were enforceable under California law.”   We further
 7   stated:
 8        Given the standard set by the California Supreme Court
          [in Ridgley v. Topa Thrift & Loan Ass'n, 17 Cal. 4th
 9        970, 977 (1998)], it seems unlikely that the $1,000/day
          provision was related to any anticipated actual loss
10        Clark would suffer by remaining on the VA loan.
          Accordingly, upon remand, the bankruptcy court will
11        need to review the subject provision under the given
          standard and determine the appropriate amount of
12        liquidated damages, if any.
13   Mem Dec. (Feb. 3, 2016) at 26:25-27:4.
14        As for the fee award, we vacated the bankruptcy court’s
15   award of attorneys’ fees because the apparent grounds for the
16   award, the attorneys’ fees clause in the settlement agreement and
17   Cal. Civ. Code § 1717, only permitted recovery of fees for
18   actions on a contract.   At trial, the bankruptcy court did not
19   attempt to apportion the requested fees into compensable services
20
21        4
           (...continued)
     we rejected this argument for two reasons. First, we posited
22
     that Arciniega had preserved the issue by contending during her
23   pro se closing argument that she should not be subjected to
     liquidated damages. Second, even if the issue was not adequately
24   preserved, we explained that we still could consider it because
     the issue was purely a legal one and Clark would not be
25   prejudiced. According to the prior panel, there was no prejudice
26   to Clark in considering the issue because he addressed it in his
     responsive appeal brief and because the liquidated damages issue
27   was connected to Clark’s burden to establish his damages, as one
     of the elements for obtaining relief under § 523(a)(2)(A) and
28   (a)(6).

                                      9
 1   rendered on contract issues and noncompensable services rendered
 2   on fraud and nondischargeability issues.   We also noted that the
 3   bankruptcy court potentially could determine on remand that it
 4   was impractical or impossible to apportion fees because the
 5   subject claims arose from a common core of facts or implicated
 6   issues that were inextricably intertwined.   If this were the
 7   case, we explained, apportionment was unnecessary and the court
 8   could exercise its discretion to award all fees incurred.
 9   D.   Proceedings On Remand.
10        1.   Resolution of Liquidated Damages Issue.
11        On remand, the bankruptcy court held an initial status
12   conference at which it ordered the parties to further brief the
13   issues remanded and to provide evidence on the reasonableness of
14   the liquidated damages clause.   At that hearing, held in October
15   2016, Arciniega advocated that the Panel’s decision did not
16   contemplate, or even permit, the bankruptcy court to reopen the
17   record concerning the reasonableness of the liquidated damages
18   clause.   The bankruptcy court initially rejected that notion and
19   directed the parties to submit declarations and exhibits on the
20   reasonableness issue.
21        After briefing and the submission of written evidence, the
22   bankruptcy court held a second post-remand status conference.     At
23   the hearing, the bankruptcy court reversed itself on the need to
24   reopen the record to take additional evidence on the
25   reasonableness of the liquidated damages clause and declined to
26   reopen the record.   The bankruptcy court then pointed out that
27   the burden was on Arciniega to establish the unreasonableness of
28   the liquidated damages clause.   According to the bankruptcy

                                      10
 1   court, there was little or no evidence in the record relevant to
 2   the reasonableness of the liquidated damages clause.5   Therefore,
 3   the court concluded, Arciniega failed to meet her burden to
 4   establish the unreasonableness of the liquidated damages clause,
 5   and the clause was valid and enforceable under California law.
 6        Arciniega argued that the liquidated damages clause itself
 7   (and the surrounding circumstances regarding the VA loan)
 8   established that the clause was unreasonable.    She contended that
 9   $1,000 per day – with no termination date – was grossly
10   disproportionate with any potential damages the parties could
11   have conceived of, at the time the settlement agreement was
12   entered into, as potentially arising from breach of the VA loan
13   payoff obligation.   The bankruptcy court gave two reasons for
14   rejecting Arciniega’s argument.    First, according to the
15   bankruptcy court, the accumulation of liquidated damages at a
16   rate of $1,000 per day was not in danger of continuing in
17   perpetuity.   The bankruptcy court explained that Clark had
18   limited his liquidated damages request in the adversary
19   proceeding to the first 281 days of Arciniega’s default, so the
20   liquidated damages were capped at $281,000.    And second, the
21   bankruptcy court noted that Subpart A of the settlement agreement
22   imposed similar $1,000 per day liquidated damages on Clark if he
23   defaulted on his obligation to pay $50,000 to Arciniega.     The
24   bankruptcy court found that these factors negated any argument
25   that the liquidated damages clause invoked against Arciniega was
26
          5
27          The court observed that at trial Arciniega had only
     questioned Clark about the timing as to when the liquidated
28   damages had been inserted into the settlement agreement.

                                       11
 1   unreasonable, and, therefore, the provision was enforceable under
 2   California.
 3        2.   Resolution of Attorneys’ Fees Issue.
 4        At the end of the second post-remand hearing, both parties
 5   agreed to a process for the review and consideration of the fee
 6   issue.    Clark’s counsel agreed to provide its billing entries on
 7   a spread sheet that would enable Arciniega and the court to
 8   comment upon and potentially exclude from compensation individual
 9   billing entries.
10        Clark duly submitted counsel’s billing entries in the form
11   contemplated.   He also voluntarily reduced his fee request by
12   roughly $25,000 as a result of his review of the billing entries
13   and his ability to determine that roughly $25,000 of the services
14   provided did not pertain to contract-related issues.    As for the
15   remaining services, Clark maintained that he could not apportion
16   them between contract related fees and fraud/nondischargeability
17   related fees because they all arose from a common core of facts
18   and also were inextricably intertwined.
19        Arciniega, on the other hand, did not conduct a line-item
20   review or comment regarding specific billing entries.   Instead,
21   in her six-page opposition to the requested fees, she made two
22   summary arguments: (1) Clark had not presented any evidence
23   establishing that he was entitled to recover his attorneys’ fees
24   for any of his counsel’s services in the litigation; and (2) the
25   fees Clark sought to recover were grossly excessive and
26   unreasonable.
27        At the third and final hearing on remand, the bankruptcy
28   court deducted an additional $7,500 from Clark’s fee request

                                      12
 1   based on its own review of the billing entries.    The court
 2   otherwise agreed with Clark’s position that the remaining fees
 3   arose from a common core of facts and that the contract and
 4   fraud/nondischargeability issues were inextricably intertwined.
 5   Based upon this finding, it concluded that it was impractical or
 6   impossible to further apportion the fees.     The bankruptcy court
 7   also rejected Arciniega’s argument that the amount of fees were
 8   unreasonable.   According to the court, the large amount of fees
 9   both parties incurred were the result of the litigiousness of the
10   parties and not the result of unreasonable billings.    Ultimately,
11   the bankruptcy court awarded Clark $244,586.50 in attorneys’ fees
12   and $11,032.02 in costs.
13        The bankruptcy court entered its amended judgment after
14   remand on May 9, 2017, and Arciniega timely appealed.
15                              JURISDICTION
16        The bankruptcy court had jurisdiction pursuant to 28 U.S.C.
17   §§ 1334 and 157(b)(2)(I) and (J), and we have jurisdiction under
18   28 U.S.C. § 158.
19                                 ISSUES
20   1.   Did the bankruptcy court commit reversible error when, on
21        remand, it awarded Clark $281,000 in liquidated damages?
22   2.   Did the bankruptcy court commit reversible error when, on
23        remand, it awarded Clark $244,586.50 in attorneys’ fees?
24                           STANDARDS OF REVIEW
25        We review the bankruptcy court's liquidated damages award
26   for an abuse of discretion.   Traxler v. Multnomah Cty., 596 F.3d
27   1007, 1015 (9th Cir. 2010).   We review the bankruptcy court’s
28   attorneys’ fees award under the same standard.    Dinan v. Fry

                                     13
 1   (In re Dinan), 448 B.R. 775, 783 (9th Cir. BAP 2011).
 2        The bankruptcy court abused its discretion if it applied an
 3   incorrect legal standard or its factual findings were illogical,
 4   implausible or without support in the record.     TrafficSchool.com,
 5   Inc. v. Edriver Inc., 653 F.3d 820, 832 (9th Cir. 2011).
 6                                DISCUSSION
 7   A.   Validity of Liquidated Damages Clause.
 8        In California, the validity of a liquidated damages clause
 9   is governed by Cal Civ. Code § 1671(b), which provides:
10        Except as provided in subdivision (c), a provision in a
          contract liquidating the damages for the breach of the
11        contract is valid unless the party seeking to
          invalidate the provision establishes that the provision
12        was unreasonable under the circumstances existing at
          the time the contract was made.
13
14   Cal. Civ. Code § 1671 (West).      The current version of the statute
15   thus imposes on the adverse party the burden of proving that the
16   clause was unreasonable.    Prior to 1978, Cal Civ. Code § 1671 was
17   silent on the burden of proof, but case law at the time squarely
18   placed the burden of proof on the party seeking to invoke the
19   liquidated damages clause.    See Krechuniak v. Noorzoy, 11 Cal.
20   App. 5th 713, 721 (2017) (citing cases).     In 1978, the California
21   legislature adopted the recommendation of California’s Law
22   Revision Commission and amended Cal Civ. Code § 1671 to
23   “liberalize” the availability of liquidated damages in non-
24   consumer contract cases.    Ridgley v. Topa Thrift & Loan Ass'n,
25   17 Cal. 4th 970, 977 (1998).    The legislature accomplished this
26   liberalization, in part, by shifting the burden of proof
27   regarding reasonableness.    Id.
28        In addition, under the amended statute, the amount of actual

                                        14
 1   damages the plaintiff incurred no longer is relevant to the
 2   reasonableness of the liquidated damages clause.   This point is
 3   made clear in the Law Revision Commission commentary accompanying
 4   the amended statute:
 5        § 1671(b) limits the circumstances that may be taken
          into account in the determination of reasonableness to
 6        those in existence “at the time the contract was made.”
          The validity of the liquidated damages provision
 7        depends upon its reasonableness at the time the
          contract was made and not as it appears in retrospect.
 8        Accordingly, the amount of damages actually suffered
          has no bearing on the validity of the liquidated
 9        damages provision.
10   Law Revision Commission Comments accompanying Cal. Civ. Code
11   § 1671 (West).6
12        The Law Revision Commission further explained what
13   circumstances typically are relevant to the reasonableness
14   consideration:
15        All the circumstances existing at the time of the
          making of the contract are considered, including the
16        relationship that the damages provided in the contract
          bear to the range of harm that reasonably could be
17        anticipated at the time of the making of the contract.
          Other relevant considerations in the determination of
18        whether the amount of liquidated damages is so high or
          so low as to be unreasonable include, but are not
19        limited to, such matters as the relative equality of
          the bargaining power of the parties, whether the
20        parties were represented by lawyers at the time the
          contract was made, the anticipation of the parties that
21        proof of actual damages would be costly or
          inconvenient, the difficulty of proving causation and
22        foreseeability, and whether the liquidated damages
          provision is included in a form contract.
23
24
          6
            “The Law Revision Commission has provided a detailed
25   explanation of the relevant changes in section 1671. Their
26   ‘comments are entitled to great weight in construing statutes
     proposed by the Commission and adopted without substantial
27   change.’” Krechuniak, 11 Cal. App. 5th at 721 (quoting Pac.
     Trust Co. TTEE v. Fidelity Fed. Sav. & Loan Ass’n, 184 Cal. App.
28   3d 817, 823 (1986)).

                                    15
 1   Id.
 2         However, in interpreting Cal Civ. Code § 1671, the
 3   California Supreme court in Ridgley simplified the reasonableness
 4   determination under certain circumstances:
 5         A liquidated damages clause will generally be
           considered unreasonable, and hence unenforceable under
 6         section 1671(b), if it bears no reasonable relationship
           to the range of actual damages that the parties could
 7         have anticipated would flow from a breach. The amount
           set as liquidated damages must represent the result of
 8         a reasonable endeavor by the parties to estimate a fair
           average compensation for any loss that may be
 9         sustained. In the absence of such relationship, a
           contractual clause purporting to predetermine damages
10         must be construed as a penalty. . . . In short, [a]n
           amount disproportionate to the anticipated damages is
11         termed a penalty. A contractual provision imposing a
           penalty is ineffective, and the wronged party can
12         collect only the actual damages sustained.
13   Ridgley, 17 Cal. 4th at 977 (citations and internal quotation
14   marks omitted); see also Grand Prospect Partners, L.P. v. Ross
15   Dress for Less, Inc., 232 Cal. App. 4th 1332, 1358, as modified
16   on denial of reh'g (Feb. 9, 2015) (“[T]he general rule for
17   whether a contractual condition is an unenforceable penalty
18   requires the comparison of (1) the value of the money or property
19   forfeited or transferred to the party protected by the condition
20   to (2) the range of harm or damages anticipated to be caused that
21   party by the failure of the condition.   If the forfeiture or
22   transfer bears no reasonable relationship to the range of
23   anticipated harm, the condition will be deemed an unenforceable
24   penalty.”).
25         Accordingly, when the damages provided for in a liquidated
26   damages clause do not bear a rational and proportional
27   relationship to the range of harm the parties conceivably could
28   have anticipated arising from a breach at the time the parties

                                     16
 1   entered into the contract, the liquidated damages clause is
 2   unenforceable.    See, e.g., Vitatech Int’l, Inc. v. Sporn, 2017 WL
 3   4876175, at *6-8 (Cal. Ct. App. Sept. 29, 2017), as modified
 4   (Oct. 30, 2017); Purcell v. Schweitzer, 224 Cal. App. 4th 969,
 5   975–76 (2014); Greentree Fin. Grp. Inc. v. Execute Sports, Inc.,
 6   163 Cal. App. 4th 495, 498-500 (2008); Harbor Island Holdings v.
 7   Kim, 107 Cal. App. 4th 790, 796, 132 Cal. Rptr. 2d 406, 409
 8   (2003).
 9        Here, Clark admitted that the underlying purpose of the VA
10   loan payoff provision was to restore his entitlement to obtain a
11   new VA loan, which he maintained only could occur if Arciniega
12   paid off the VA loan (or otherwise managed to remove his name
13   from the loan).   Thus, the harm the parties could have
14   anticipated arising from Arciniega’s default necessarily had to
15   be tied to Clark’s inability to obtain a new VA loan.     More to
16   the point, such damages would be the difference in costs and
17   interest between the presumably more favorable VA loan and a non-
18   VA loan.
19        The imposition of $1,000 per day in damages was neither
20   rational nor proportional to this anticipated harm.   Regardless
21   of whether Arciniega’s default would have relegated Clark to
22   obtaining a non-VA loan, or no loan at all, it is inconceivable
23   that the parties could have or would have anticipated Clark
24   suffering $1,000 per day in damages as a result of Arciniega’s
25   default.   Nor can the obligation to pay $1,000 per day in
26   liquidated damages be reconciled to the mortgage payments or
27   balance owed on the Verona property.   The record indicates that
28   the monthly mortgage payment was only $1,025.48, and the balance

                                      17
 1   of the loan as of the settlement was roughly $75,000.
 2        The temporal aspect of this liquidated damages clause also
 3   is problematic.   An indefinite daily imposition of $1,000 in
 4   damages is neither rational nor proportional.    The liquidated
 5   damages clause contains no termination date, and is not limited
 6   to payment of the loan.     Thus, the clause could impose $1,000 per
 7   day in damages against Arciniega in perpetuity, leaving the
 8   damages to grow endlessly – unless and until Arciniega cured the
 9   default.   This type of gross disconnect between the amount of
10   liquidated damages and the anticipated damages is sufficient by
11   itself to invalidate a liquidated damages clause.    See Dollar
12   Tree Stores Inc. v. Toyama Partners LLC, 875 F. Supp. 2d 1058,
13   1071-73 (N.D. Cal. 2012); see also Ridgley, 17 Cal. 4th at 977;
14   Smith v. Royal Mfg. Co., 185 Cal. App. 2d 315, 324 (1960) (“Where
15   a fixed sum is agreed upon as liquidated damages for one of
16   several breaches of varying degree, it is to be inferred that a
17   penalty was intended.”).7
18
19        7
            We are aware that Royal Mfg. predates the major changes to
20   Cal Civ. Code § 1671(b) enacted in 1978. Nonetheless, its
     observation regarding the nature of liquidated damages clauses
21   that impose the same fixed damages for varying degrees of breach
     still makes perfect sense today, under Cal Civ. Code § 1671(b)’s
22
     current standard. In addition, Royal Mfg. is particularly
23   salient to us, because the bankruptcy court reasoned that the
     liquidated damages clause at issue herein was reasonable, in
24   part, because the same $1,000 per day penalty was to be imposed
     against both Arciniega and Clark, depending on who defaulted on
25   their settlement agreement obligations. As suggested by Royal
26   Mfg., the application of the same liquidated damages clause to
     different types of potential breaches, with significantly
27   different types and amounts of potential damages, is evidence of
     the clause’s unreasonableness, rather than its reasonableness, as
28   the bankruptcy court figured.

                                       18
 1        The bankruptcy court rejected the argument that the
 2   liquidated damages were potentially limitless and, hence,
 3   unreasonable.   The bankruptcy court reasoned that, because Clark
 4   only asked for 281 days of liquidated damages, up until
 5   Arciniega’s bankruptcy filing, the liquidated damages clause was
 6   both limited and reasonable.   This determination was neither
 7   logical nor supported by the record.   That Clark voluntarily
 8   limited its liquidated damages request does not alter the
 9   undisputed fact that the liquidated damages clause itself did not
10   provide for any limit or ceiling on damages.8   Furthermore, by
11   focusing on Clark’s unilateral cap on his liquidated damages
12   request, the bankruptcy court misapplied the legal standard under
13   Cal. Civ. Code § 1631 because it relied on a circumstance that
14   did not exist “at the time the contract was made.”    Id.
15        The bankruptcy court additionally opined that Arciniega
16   presented little or no evidence and, therefore, did not satisfy
17   her burden of proof to establish the unreasonableness of the
18   liquidated damages clause.   This determination ignored the
19   factual and legal significance of the settlement agreement itself
20   as evidence and the undisputed fact that the existing VA loan
21   balance was roughly $75,000 at the time of the settlement.    This
22
          8
23          That Clark voluntarily and unilaterally capped the accrual
     of liquidated damages as of the date of Arciniega’s petition
24   filing suggests that he believed that the commencement of a
     bankruptcy case somehow terminates the accrual of
25   nondischargeable debt arising from fraud. We are not aware of
26   any such limit on nondischargeable fraud damages. In fact, such
     a limit would be inconsistent with the Supreme Court’s
27   pronouncement that “§ 523(a)(2)(A) bars the discharge of all
     liability arising from fraud.” Cohen v. de la Cruz, 523 U.S.
28   213, 222, (1998) (emphasis added).

                                     19
 1   evidence reasonably supports only one conclusion: that the
 2   liquidated damages clause bore no rational or proportionate
 3   relationship to Clark’s conceivable damages at the time the
 4   parties entered into the settlement agreement.9
 5        We acknowledge that there is a debate amongst the California
 6   appellate courts as to whether the validity/reasonableness of
 7   liquidated damages clauses is a question of fact or question of
 8   law and as to what standard of review applies.    Compare Vitatech
 9   Int'l, Inc., 2017 WL 4876175, at *6, and Krechuniak, 11 Cal. App.
10   5th at 722–23 (question of fact), with Jade Fashion & Co. v.
11   Harkham Indus., Inc., 229 Cal. App. 4th 635, 646 (2014) (question
12   of law).   Here, however, we do not need to predict how the
13   California Supreme Court will resolve this debate, because the
14   bankruptcy court’s determination cannot be upheld under any
15   potentially applicable standard of review – de novo, clearly
16   erroneous or abuse of discretion – for the reasons set forth
17   above.   Consequently, we REVERSE the bankruptcy court’s
18   determination that the liquidated damages clause was valid, and
19
20
          9
            As set forth in the facts section, supra, the bankruptcy
21   court ultimately ruled on remand not to reopen the record on the
     reasonableness of the liquidated damages clause. Neither party
22
     has challenged this ruling on appeal. Furthermore, we see no
23   basis to conclude that this ruling was an abuse of discretion.
     See generally Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S.
24   523, 551 (1983) (“On remand, the decision on whether to reopen
     the record should be left to the sound discretion of the trial
25   court”); Carter Jones Lumber Co. v. LTV Steel Co., 237 F.3d 745,
26   751 (6th Cir. 2001) (same). Nor did our prior decision require a
     particular ruling either way on the reopening of evidence, as it
27   was silent on the issue. Id.; see also Hall v. City of L.A.,
     697 F.3d 1059, 1067 (9th Cir. 2012) (stating that trial court on
28   remand is free to decide anything not foreclosed by the mandate).

                                     20
 1   we hold that the clause was unenforceable under California law.
 2         Nonetheless, our decision does not preclude Clark from all
 3   relief.   Even though Clark is not entitled to liquidated damages,
 4   he still might be entitled to recover his actual damages.    See
 5   Ridgley, 17 Cal. 4th 970, 977.   Ordinarily, we would have
 6   expected Clark to have made his case for actual damages at the
 7   original trial, as part of his case in chief, because proximate
 8   cause and damages are elements of his nondischargeability claims.
 9   See Cossu v. Jefferson Pilot Sec. Corp. (In re Cossu), 410 F.3d
10   591, 596 (9th Cir. 2005); Romesh Japra M.D., F.A.C.C., Inc. v.
11   Apte (In re Apte), 180 B.R. 223, 231 (9th Cir. BAP 1995), aff'd,
12   96 F.3d 1319 (9th Cir. 1996), partially abrogated on other
13   grounds by, Kawaauhau v. Geiger, 523 U.S. 57, 61-64 (1998); see
14   also Arciniega v. Clark (In re Arciniega), 2016 WL 455428, at *15
15   n.10 (Mem. Dec.) (9th Cir. BAP Feb. 3, 2016) (applying proximate
16   cause element to § 523(a)(6) claim).
17         Here, however, the record demonstrates why Clark did not do
18   so.   Up until her closing argument after trial, Arciniega had
19   done nothing to put the validity of the liquidated damages clause
20   at issue.   As a result, at no time before or during trial did
21   Clark have any reason to suspect that he might have to prove the
22   amount of his actual damages or that those damages were
23   proximately caused by Arciniega’s fraud.   He understood his
24   assertion of liquidated damages was undisputed.
25         To deprive Clark of a reasonable opportunity to prove the
26   amount of his actual damages proximately caused by Arciniega’s
27   fraud would amount to a deprivation of his due process rights.
28   One of the most fundamental requirements of due process is the

                                      21
 1   opportunity to be heard at a meaningful time and in a meaningful
 2   manner.   Armstrong v. Manzo, 380 U.S. 545, 552, 85 S. Ct. 1187,
 3   1191, 14 L. Ed. 2d 62 (1965).   That will not happen here unless
 4   the record is reopened.   Consequently, we must REMAND.   On
 5   remand, the bankruptcy court must reopen the record and give the
 6   parties a reasonable opportunity to present evidence on proximate
 7   cause and damages.
 8   B.   Disposition of Attorneys’ Fees Issue.
 9        Our prior decision set forth the legal standards and rules
10   applicable to Clark’s request for attorneys’ fees.   Those
11   standards and rules are law of the case.   See Am. Express Travel
12   Related Servs. Co. v. Fraschilla (In re Fraschilla), 235 B.R.
13   449, 454 (9th Cir. BAP 1999), aff'd, 242 F.3d 381 (table) (9th
14   Cir. 2000).   We directed the bankruptcy court, to the extent
15   practicable, to apportion the fees between compensable services
16   rendered on contract issues and non-compensable services rendered
17   on fraud and nondischargeability issues.   We also noted that the
18   bankruptcy court was not obliged to apportion fees to the extent
19   it was impractical or impossible to do so because the subject
20   claims arose from a common core of facts or implicated issues
21   that were inextricably intertwined.   Harmon v. City & Cty. of
22   S.F., 158 Cal. App. 4th 407, 417 (2007).
23        More specifically, when the facts, evidence and/or legal
24   work substantially overlap, the trial court typically does not
25   abuse its discretion in declining to apportion fees between
26   compensable and non-compensable units.   See, e.g., Calvo Fisher &
27   Jacob LLP v. Lujan, 234 Cal. App. 4th 608, 626 (2015); Amtower v.
28   Photon Dynamics, Inc., 158 Cal. App. 4th 1582, 1605 (2008), as

                                     22
 1   modified (Feb. 15, 2008); Thompson Pac. Const., Inc. v. City of
 2   Sunnyvale, 155 Cal. App. 4th 525, 556 (2007); Mann v. Quality Old
 3   Time Serv., Inc., 139 Cal. App. 4th 328, 342 (2006); Erickson v.
 4   R.E.M. Concepts, Inc., 126 Cal. App. 4th 1073, 1085–86 (2005), as
 5   modified (Feb. 14, 2005).   At bottom, the determination of
 6   whether issues on compensable and noncompensable claims are
 7   inextricably intertwined is a factual question.    See Harman,
 8   158 Cal. App. 4th at 424.
 9        On remand, the record reflects that Clark duly submitted all
10   of its detailed time entries and that the bankruptcy court duly
11   reviewed these time entries and deducted fees that it determined
12   were either unreasonable or were attributable solely to non-
13   contract issues arising in Clark’s § 727 claims for relief.      In
14   addition, Clark asserted that the contract and non-contract
15   issues arising in his § 523 claims arose from a common core of
16   facts and were inextricably intertwined.    The bankruptcy court
17   agreed with Clark regarding this overlap.
18        Arciniega, who was represented by counsel on remand, was
19   given ample opportunity to review these same time entries and to
20   make objections to specific time entries as being unreasonable or
21   noncompensable or both.   She only submitted a barebones objection
22   containing three pages of argument.   In the objection, she
23   summarily asserted that Clark had not factually established that
24   any of his fees were for services rendered on compensable
25   contract issues.   She also asserted that the amount Clark
26   expended on legal services in this litigation was unreasonable
27   and disproportionate with the amount at stake.
28        Notably, in the bankruptcy court, Arciniega did not oppose

                                     23
 1   Clark’s contention that the fees could not be apportioned between
 2   contract and non-contract issues.    She never challenged the
 3   notion that the contract and non-contract issues arose from a
 4   common core of facts and were inextricably intertwined.    On
 5   appeal, she waits until page 58 of her 60-page brief to assert
 6   for the first time that the bankruptcy court could have
 7   practicably apportioned the fees by focusing on the discovery
 8   questions propounded and on the evidence presented at trial.
 9        One overarching theme of this litigation is Arciniega’s
10   failure to timely assert arguments, claims and defenses – even
11   when she has been represented by counsel.    We have discretion to
12   decline to consider issues and arguments that Arciniega raised
13   for the first time on appeal.   El Paso City of Tex. v. Am. W.
14   Airlines, Inc. (In re Am. W. Airlines), 217 F.3d 1161, 1165 (9th
15   Cir. 2000).   There are certain exceptions that will permit us to
16   review an issue for the first time on appeal.    See Mano-Y & M,
17   Ltd. v. Field (In re Mortg. Store, Inc.), 773 F.3d 990, 995 (9th
18   Cir. 2014) (to prevent a miscarriage of justice, to preserve the
19   integrity of the judicial process, to address a change in the
20   law, or to consider a purely legal issue when it does not depend
21   on the factual record or when the record already has been fully
22   developed).   Arciniega has not asserted that any of these
23   exceptions apply here.   Nor do we perceive adequate grounds to
24   apply any of them.
25        Even if we were to consider Arciniega’s new argument on
26   appeal, she has failed to develop such argument.    Nonetheless, we
27   have reviewed the pleadings, exhibits and other documents
28   included in the record in this litigation.    Arciniega argued

                                     24
 1   vigorously at trial that: (1) the VA loan payoff provision only
 2   required her to use her best efforts to pay off the loan; and
 3   (2) her communications with various financial institutions and
 4   other entities both before and after execution of the settlement
 5   agreement demonstrated her full and complete performance of her
 6   obligations under the loan payoff provision.   These hotly
 7   contested issues in this litigation concerned contract
 8   interpretation and contract performance.   But, these issues also
 9   implicated Clark’s fraud claims, which required evidence that she
10   understood her contractual obligations and was aware that she
11   would not be able to remove Clark from the VA loan.   In short,
12   there could not have been any actionable promissory fraud unless
13   and until Clark established what Arciniega promised and that she
14   did not honor that promise.
15        Moreover, virtually all of the discovery taken and evidence
16   submitted on the § 523 claims was relevant to both contract and
17   tort issues.   Arciniega claims otherwise, but she only is able to
18   make this claim with the benefit of hindsight.   Until the
19   bankruptcy court ruled, after trial, that the VA loan payoff
20   provision was unambiguous, the discovery and presentation of
21   extrinsic evidence regarding Arciniega’s financial condition and
22   regarding her communications with financial institutions and
23   other entities on the subject of her loans and finances were
24   potentially admissible contract interpretation evidence.     See
25   Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co., 69 Cal.2d
26   33, 37-40 (1968) (holding that credible extrinsic evidence is
27   admissible to determine whether a contract term is susceptible to
28   more than one meaning and, hence, ambiguous); London Mkt.

                                     25
 1   Insurers v. Sup. Ct., 146 Cal. App. 4th 648, 656 (2007) (“In
 2   determining if a provision is ambiguous, we consider not only the
 3   face of the contract but also any extrinsic evidence that
 4   supports a reasonable interpretation.”).
 5        As for the discovery and evidence on the § 727 claims, the
 6   bankruptcy court made deductions for non-compensable services
 7   rendered on the § 727 claims.   Arciniega has done virtually
 8   nothing to establish that the bankruptcy court’s deductions were
 9   insufficient.   On this record, and given Arciniega’s limited
10   effort on the issue, we cannot say that the bankruptcy court’s
11   deductions for the § 727 claims were based on clearly erroneous
12   factual findings or an erroneous view of the law.   We are not
13   obliged to search the entire record ourselves, unaided, for
14   error.   Tevis v. Wilke, Fleury, Hoffelt, Gould & Birney, LLP
15   (In re Tevis), 347 B.R. 679, 686 (9th Cir. BAP 2006).
16        Nor can we reverse as clearly erroneous the bankruptcy
17   court’s determination that the amount of fees requested was
18   unreasonable.   The court painstakingly considered the
19   reasonableness of all of Clark’s counsel’s billing entries and
20   made a number of deductions based on reasonableness.     In
21   addition, the bankruptcy court took into account the overall
22   nature of the litigation and concluded that the large amount of
23   fees incurred was not the result of unreasonable billings but
24   rather was the result of the litigious nature of the parties.
25   The bankruptcy court, as the trial court, is in a far better
26   position than us to make this type of assessment, and Arciniega
27   has not offered us any legitimate grounds to disturb that
28   assessment.   Ellis v. Toshiba America Information Systems, Inc.,

                                     26
 1   218 Cal.App.4th 853, 889 (2013), as modified (Aug. 14, 2013), as
 2   modified on denial of reh'g (Sept. 10, 2013).
 3        Even so, a prevailing party attorney fee award should not be
 4   granted under Cal. Civ. Code § 1717 to a plaintiff who obtains no
 5   recovery on any of his claims.    See Hsu v. Abbara, 9 Cal. 4th
 6   863, 876 (1995) (“when a defendant defeats recovery by the
 7   plaintiff on the only contract claim in the action, the defendant
 8   is the party prevailing on the contract under section 1717 as a
 9   matter of law.”).    We have previously reversed the award of the
10   $50,000 settlement payment relating to the Arrowhead property,
11   and now hold that an award of liquidated damages is
12   unenforceable.10    Thus, there is presently no award of damages to
13   Clark.    In the absence of a damages award in his favor, Clark is
14   not the prevailing party for attorneys’ fees purposes.    See id.;
15   see also Cal Civ. Proc. Code § 1032(a)(4) (stating that a
16   “prevailing party” includes “a defendant as against those
17   plaintiffs who do not recover any relief against that
18   defendant.”).   Put another way, the prevailing party
19   determination only can be made on final resolution of the
20   contract claims.    Hsu, 9 Cal. 4th 863, 876; Brosio v. Deutsche
21   Bank Nat. Trust Co. (In re Brosio), 505 B.R. 903, 910 (9th Cir.
22   BAP 2014).
23        In light of our reversal of the bankruptcy court’s
24   liquidated damages award, and our remand to permit trial on
25
          10
26          In light of our prior reversal of the $50,000 damages
     award, our remand for trial on proximate cause and damages is not
27   meant to reopen the record with respect to the $50,000 Clark paid
     in exchange for Arciniega’s transfer of title to the Arrowhead
28   property.

                                       27
 1   proximate cause and damages, we must VACATE the current
 2   attorneys’ fees award.   If, on remand, the bankruptcy court
 3   ultimately awards some actual damages to Clark, then the
 4   bankruptcy court may determine whether Clark or Arciniega is the
 5   prevailing party within the meaning of Cal. Civ. Code § 1717.
 6   See generally In re Tobacco Cases I, 216 Cal. App. 4th 570, 577,
 7   (2013), as modified (May 8, 2013) (explaining how determination
 8   is to be made).   If Clark is the prevailing party, then the
 9   bankruptcy court may reinstate or amend its last fee award.
10                               CONCLUSION
11        For the reasons set forth above, we REVERSE IN PART AND
12   VACATE IN PART.   Also, this matter is REMANDED for further
13   proceedings consistent with this decision.
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

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