Wednesday, September 19, 2018
Court of Appeal:
Judge Erred in Awarding Attorney Fees to Lender Based on Instrument Creating ‘Debt’ for Fees
Justice Rubin Says Provision in Deed of Trust Did Not Meet Criteria of Civil Code §1717
By a MetNews Staff Writer
The Court of Appeal for this district held yesterday that a provision in a deed of trust that attorney fees the lender was required to incur by wrongful action of the mortgagor “shall become additional debt of Borrower” did not authorize the trial court to award attorney fees to the mortgagee in an unsuccessful action against it for wrongful foreclosure.
Justice Laurence D. Rubin wrote the opinion for Div. Eight. It reverses a $59,750 award by Los Angeles Superior Court Judge Stephen P. Pfahler in favor of Nationstar Mortgage LLC.
The proviso in the deed of trust, Rubin said, is not an attorney-fee provision. The jurist pointed to the wording of Civil Code §1717:
“In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.”
Rubin pointed out that the section pertains to a contract which “specifically provides” that attorney fees “shall be awarded.” The deed of trust, he said, “does not,” noting that it simply creates an “additional debt of Borrower secured by this Security Instrument.”
“This is not a provision that attorney’s fees ‘shall be awarded’; it is, instead, a provision that attorney’s fees, like any other expenses the lender may incur to protect its interest, will be added to the secured debt.”
In accord, Rubin said, is a U.S. District Court opinion from the Central District of California, as well as one from the District of Hawaii. The opinion from California, by Senior Judge Christina Ann Snyder, cites an unpublished state Court of Appeal opinion by Justice Richard M. Aronson of the Fourth District’s Div. One.
“There is no authority to the contrary,” he noted.
(Rubin said in a footnote: “Pursuant to California Rules of Court, rule 8.1115(a), we do not formally cite to the unpublished Court of Appeal opinion. However, the federal district court—which is not restricted in its use of unpublished California opinions—relied on it. Under these circumstances, we choose neither to ignore the unpublished opinion nor redact it from our quotation of the federal case which cited it. Nevertheless, we recognize that the California unpublished case is not precedent.”)
No Judicial Estoppel
The opinion rejects Nationstar’s contention that the borrowers are estopped from challenging the trial court’s power to award attorney fees because, in their complaint, they sought such an award.
Rubin said the borrowers “simply included a prayer for attorney’s fees in their complaint, without specifying whether they sought fees according to contract or statute,” and the sole authority Nationstar pointed to was dictum in a Third District opinion which the district has since repudiated.
“[S]imply pleading a right to attorney’s fees is not a sufficient basis to judicially estop a party from challenging the opposing party’s alleged contractual basis for an award of attorney’s fees” he wrote. “The trial court erred in relying on judicial estoppel as an alternative basis for its fee award.”
The case is Hart v. Clear Recon Corp., B283221.
The borrowers, Sara Hart and her son Guy Hart, were in pro per. Nationstar was represented by Howard D. Hall and Amanda V. Anderson of the Santa firm of Hall Huguenin LLP.
Rubin also authored a March 2 unpublished opinion affirming Pfahler’s grant of summary judgment in favor of Nationstar in an action to delay foreclosure until after ownership was determined. Title is in the name of another son of Sara Hart, Don Hart.
The Superior Court case was dismissed on Jan. 17 for lack of prosecution.
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