Second District, Division 8 Affirms Fee Recovery Addition to Note/Trust Deed in Lender’s Favor, But Finds Debtor Shows No Fee Entitlement Authority for Winning Payoff Demand Count.
Here is a case for all of you banking/creditor attorneys arising out of an interesting lawsuit that produced somewhat splintered results. However, it demonstrates that fee recovery may depend on your status as a lender and on whether you can show a contractual/statutory basis for fee award entitlement in the first place.
In Tong v. Rone, Case No. B210280 (2d Dist., Div. 8 June 29, 2010) (unpublished), plaintiff was a nonassuming debtor who won some damages from jurors for not receiving a beneficiary payoff demand as an entitled person from the lender under Civil Code section 2943(c)(1). However, the trial court determined many equitable issues that had the effect of holding that nonassuming debtor had a substantial indebtedness to pay, including the addition of attorney’s fees for the lender’s efforts in defending the trust deed security in bankruptcy and other proceedings. Nonassuming debtor moved for attorney’s fees, but was denied them when the lower court concluded there was no statutory basis for debtor to recoup them in the section 2943 win.
Although the judgment was reversed on technical grounds, the fee determinations were both affirmed on appeal.
The note and trust deed both had attorney’s fees clauses, the contractual predicates for a fee award. Even though nonassuming debtor was just that (such that she was personally responsible for any fee award), the fees were properly added to the indebtedness secured by the deed of trust when the trial court fashioned its ultimate judgment. (Saucedo v. Mercury Sav. & Loan Assn., 111 Cal.App.3d 309, 315 (1980).)
That brought the Court of Appeal to consideration of the denial of fees to nonassuming debtor. The problem here was that debtor’s statutory section 2943 claim was not “on the contract” under Civil Code section 1717. (Pintor v. Ong, 211 Cal.App.3d 837, 842 (1989) [statutory violation sounded in tort rather than in contract].) Aside from that, however, section 2943 has no provision for the recovery of attorney’s fees. “Had the Legislature intended under section 2943 to allow attorney fees to be included as ‘all damages,’ it would have specifically stated such,” citing other statutes where the Legislature had defined damages as including attorney’s fees (e.g., Civil Code section 2941(b)(6)). (Slip Opn., pp. 23-24.)