Broader Fee Clauses Might Have Resulted In A Different Conclusion!
Byun v. Loma Linda University, Case No. E069549 (4th Dist., Div. 2 July 25, 2019) (unpublished), although unpublished, does offer some drafting tips to lenders where wrongful foreclosure cases are brought by borrowers, who prevail and then want to recoup some attorney’s fees.
Borrower lost a wrongful foreclosure, declaratory relief, cancellation of instruments, and quiet title action against lender after losing real property in a foreclosure sale. The defense prevailed at a bench trial, but the trial court denied the lender side’s request for attorney’s fees of $33,917.76 based on fees clauses under the promissory note and deed of trust. The note provided that the lender was entitled to recovery attorney fees and legal expenses incurred in connection with “hiring or paying someone else to help collect this Note if Borrower does not pay.” The deed of trust fees clause said this: “If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal.”
The 4/2 DCA affirmed. Analytically, it found that Civil Code section 1717 did not apply because it only dealt with contract actions, but that still left a consideration of whether the two fees clauses covered the non-contractual claims at issue. The appellate court concluded they did not, based on their narrow breadth. Lender conceded the note clause was not part of collecting on the note, but really only reached tort claims asserted by losing plaintiff. With respect to the deed of trust, the problem was that lender did not institute an action so that the fees clause was not triggered. However, the Court of Appeal, in distinguishing a different result in Jones v. Union Bank of California, 127 Cal.App.4th 542, 544 (2005), did suggest the result might have been very different had the fees clauses extended to “reasonable attorney fees, and all expenses in connection with the protection or realization of the collateral securing the Note” or “proceedings involving Guarantors that in any way affect the exercise by Lender of its rights and remedies hereunder.” Even unpublished decisions provide valuable drafting tips to future parties and litigants with respect to gaining fee recovery—in a word, use broad language!
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