Fees Were Incurred Defending Lawsuit, Not In Foreclosing, And Plaintiff Failed To Develop Legal Argument Analyzing The Language Of Civil Code §§ 2924c and 2924d On A Claim He Made To The 1/2 DCA That Might Have Had Some Teeth.
In Ratliff v. Trojan Capital Investments, Case No. A155189 (1st Dist., Div. 2 June 8, 2020) (unpublished), plaintiff, who filed suit in an unsuccessful attempt to prevent the nonjudicial foreclosure sale of his real property, appealed a post-judgment order awarding $210,000 in Civil Code section 1717 attorney fees to prevailing defendant.
Plaintiff challenged the fees order by arguing that: (1) the terms of the Note and Deed of Trust did not support a section 1717 fee award; (2) fees could not be awarded under section 1717 because the lawsuit was not an action “on a contract” as his Third Amended Complaint alleged negligence and statutory violations not based on any contract; (3) the award violated the antideficiency bar applying to nonjudicial foreclosures; and (4) there was no evidence that he was in default on the loan. Alternatively, plaintiff argued that if fees were awarded, they should be in the amount of $2,000 pursuant to Civil Code section 2924c(d)(1).
The 1/2 DCA agreed with plaintiff that one of the Deed of Trust sections relied upon by defendant in its request for fees did not specifically provide for the award of attorney fees – instead authorizing only the addition of certain attorney fees to the loan amount. However, the attorney fees provision contained in the Note allowed for section 1717 fees. As to plaintiff’s claim that his lawsuit was not based “on a contract,” the 1/2 DCA reasoned that the proper focus in determining whether an action is “on the contract” is on the basis of the cause of action – not the nature of the remedy. (Kachlon v. Markowitz, 168 Cal.App.4th 316, 347 (2008).) Here, plaintiff’s action sought a determination that defendant had no right to foreclose under the Note or Deed of Trust, and all of plaintiff’s claims directly related to defendant’s enforcement through foreclosure of the Note and Deed of Trust – both of which contained attorney fee provisions.
Plaintiff’s third and fourth arguments were also rejected by the appellate panel. Code Civ. Proc. § 580d precludes a judgment for any unpaid loan balance after lender’s nonjudicial foreclosure. Plaintiff argued that the award of fees violated this statute as the award constituted a deficiency judgment. Following the reasoning in Passanisi v. Merit-McBride Realtors, Inc., 190 Cal.App.3d 1496 (1987) and Jones v. Union Bank of California, 127 Cal.App.4th 542 (2005), the 1/2 DCA found the judgment for fees to be neither measured by, nor interrelated to, a deficiency on the Note, and to be entirely independent of the problems encompassed by antideficiency legislation. As to his claim regarding the default, plaintiff produced no evidence to dispute the default. Rather, in his opposition to defendant’s motion for fees, plaintiff conceded that fees could be awarded under Civil Code section 2924c, calculated upon the amount and instructions in the notice of default – which was attached to his attorney’s declaration.
Finally, the 1/2 DCA found plaintiff’s argument that fees should be limited to $2,000 pursuant to Civ. Code section 2924c did not apply. Following the conclusion in Jones, the appellate panel determined that the fees were incurred by defendant when it was forced to defend against plaintiff’s lawsuit in order to protect its security – not expenses incurred foreclosing on the property which are limited by sections 2924c and 2924d. Interestingly, however, the 1/2 DCA noted that plaintiff’s claim that Jones did not analyze the language of 2924d or 2924c’s similar provision might have had some force if plaintiff had provided legal argument analyzing the language of those code sections.