Unpublished Disposition, 912 F.2d 470 (9th Cir. 1990)

MEMORANDUM^* 

Sanson sold a Las Vegas apartment complex to 268 Limited, a Nevada limited partnership, and retained a security interest in the property, evidenced by a promissory note and first deed of trust. In Nevada, a deed of trust may provide for attorney's fees. The Sanson deed of trust incorporated by reference section 107.030(7) of the Nevada Revised Statute (NRS) regarding attorney's fees in the event of default, and designated five percent of the secured amount as the attorney's fees.

268 Limited's general partner filed a Chapter 11 petition in bankruptcy, and 268 Limited subsequently defaulted on the obligation to Sanson. The complex was sold, netting a sum substantially in excess of the $3,957,000 that was owed on the note. Sanson was billed $13,732 by its counsel for services related to 268 Limited. Sanson then applied to the bankruptcy court for attorney's fees in the amount of $197,500 pursuant to the clause in the deed of trust.

The bankruptcy court found the requested amount to be unreasonable and awarded Sanson $20,000 pursuant to the Bankruptcy Code, 11 U.S.C. § 506(b). We affirmed, holding that section 506(b) preempts state law governing the availability of attorney's fees as a secured claim. In re 268 Limited, 789 F.2d 674, 675-77 (9th Cir. 1986) (characterizing award as "generous, particularly in light of the quality of legal work performed"). We remanded the case to allow Sanson to attempt to recover the balance of the $197,500 as an unsecured creditor, expressing "no opinion on the enforceability under the governing state law of the deed of trust's attorney's fees provision." Id. at 678.

On remand the bankruptcy court again denied Sanson's claim, holding that NRS 107.030(7) limits attorney's fees in a deed of trust to a reasonable amount and that Sanson had already been awarded a reasonable attorney's fee ($20,000). The Bankruptcy Appellate Panel (BAP) affirmed, holding that NRS 107.030(7) limits recovery to reasonable attorney's fees, that the stipulated percentage should be construed as the maximum possible recovery, and that the excess cannot be recovered as an unsecured claim. Sanson appeals.

Sanson moved this court to certify a question of law to the Nevada Supreme Court regarding the interpretation of NRS 107.030(7). Because we found no Nevada law applying NRS 107.030(7), we certified the following question to the Nevada Supreme Court pursuant to Nevada Rule of Appellate Procedure 5: whether NRS 107.030(7) permits parties to a deed of trust to recover stipulated attorney's fees without regard to the reasonableness of the fee. In a recent opinion, the Nevada Supreme Court answered this question in the negative, holding that the attorney's fees allowed under NRS 107.030(7) are limited to a reasonable amount. Joseph F. Sanson Investment Co. v. 268 Limited, Trustee in Bankruptcy, No. 20118, slip op. at 7 (NV SC July 18, 1990). Based on the Nevada Supreme Court's opinion, we affirm the BAP's decision.

NRS 107.030(7) allows parties to a deed of trust to stipulate in the deed to an amount of attorney's fees in the event of default. Sanson argues that this provision allows parties to stipulate to any amount of attorney's fees in a deed of trust without regard for the reasonableness of the fee. The BAP rejected this argument, and, upon certification, so did the Nevada Supreme Court. Following the reasoning of the BAP, the Nevada Supreme Court held that under NRS 107.030(7) "parties may stipulate in a deed of trust that a certain percentage shall be allowed for attorney's fees as long as that percentage is reasonable." Sanson, slip op. at 7. Therefore, Sanson is entitled to the 5% agreed upon in the contract only if that is considered a reasonable amount.

The Nevada Supreme Court found that the requested fee of $197,500 was unreasonable. Id. at 5. A prior panel of this court has already determined what amount of attorney's fees are reasonable in this case. In re 268 Limited, 789 F.2d 677-78 (9th Cir. 1986). We are bound by that decision. See United Scottish Ins. Co. v. United States, 614 F.2d 188, 191 (9th Cir. 1979). Therefore, the BAP's decision to limit Sanson's award of attorney's fees to $20,000 is affirmed.

AFFIRMED.