Costs, Deadlines, Fee Clause Interpretation: Lender Defending Against Borrower’s Attempts To Enjoin Eventual Nonjudicial Foreclosure Properly Awarded $9.235 Million In Fees

However, Costs Award Of $332,704.20 Reversed For Failure To Timely File A Costs Memorandum, Although The Appellate Court Did Indicate Lower Court Could Entertain CCP § 473 Default Motion Based On Surprise If Lender Wanted To Renew Costs Issue.

            This next case, Rincon EV Realty LLC v. CP III Rincon Towers, Inc., Case Nos. A155104/A155284 (1^st Dist., Div. 4 June 10, 2021) (unpublished), is an interesting borrower/lender case which has yo-yoed between lower and appellate courts for several years after the lender eventually nonjudicially foreclosed on Rincon Towers (a San Francisco apartment complex).  However, lender did prevail in an action initiated by borrower to forestall foreclosure, with lender then seeking substantial attorney’s fees and costs under a Loan Agreement clause.  After an initial reversal and remand, lender sought $12.2 million in fees and costs, with the lower court awarding $9,235,712.93 in fees, but with it deferring a cost ruling until a new cost memorandum was filed.  Lender did that, claiming $909,548.03 in costs, $357,603.06 in statutory fees and $551,944.97 in costs awardable under the Loan Agreement.  The lower court only awarded statutory costs, reducing the request down to $332,704.30 as far as a court order.  Borrower appealed.

            Borrower argued that lender could not obtain contractual fees because the loan was non-recourse; however, the problem here was that the Loan Agreement contractual fees clause did apply to situations where the lender had to defend against a borrower’s action, rather than commence a lender action or suit against borrower seeking a monetary judgment.  Beyond that, the contractual “proceeding” language did not preclude lender from bringing a fees motion, because a “proceeding” was more akin to an “action” that lender did not commence.  Borrower next argued that the fee award was precluded by anti-deficiency California borrower protections, but that contention was not successful because borrower brought an unmeritorious suit to which lender had to respond—an action which did not implicate a lender attempting to renege on a non-recourse loan.  (See Jones v. Union Bank of California, 127 Cal.App.4^th 542, 547-548 (2005); Passanisi v. Merit-McBride Realtors, Inc., 190 Cal.App.3d 1496, 1509 (1987).)  So, the substantial fee award was affirmed on appeal.

            That brought the appellate court to the costs award, which was a little tricker to resolve.  The 1/4 DCA agreed that the costs memorandum was untimely filed, past the 15-day notice of entry filing deadline even though there were some issues still pending in the appellate court—the best measure was to protectively file it, something lender did not do by quite a bit of time.  However, that did not end the matter.   The appellate court was sympathetic to the fact that the complex procedural context of the case might have been a surprise to the lender such that a CCP § 473 discretionary motion to allow the filing of the belated costs memorandum might be successful.  But it did not want to do that, reversing the smaller component of the costs award (the larger component were damages, and rejected because they were not pled and were not subject to damages proof below) and remanding to the lower court to decide if discretionary default relief should be granted.  So, there might be hope on the cost component for lender.