Decision Should Have Lenders Look At Lending Paperwork To Make Sure There Is A True “Prevailing Party” Clause.
In Luca v. Deutsche Bank National Trust Co., Case No. G053408 (4th Dist., Div. 3 Jan. 5, 2018) (unpublished), borrowers lost a lawsuit attempting to void the promissory note and deed of trust against lenders/affiliates based on a defense summary judgment motion, a determination affirmed in a separate appellate decision. The trial judge denied the defense request for attorney’s fees under four separate note or deed of trust provisions. The 4/3 DCA, in a 3-0 decision authored by Justice Ikola, agreed with the fee denial.
The problem was that defendants relied on four separate provisions scattered through the note and deed of trust, but none of them were true “prevailing party” fee clauses triggering the application of Civil Code section 1717. Rather, they dealt with third-party situations, only allowed the lenders to “add” the fees to the debt, allowed the lenders to apply any fees against trustee sale proceeds, or allowed the lender “to be paid back.” Here is the crux of the appellate court’s reasoning on fee entitlement: “Ultimately, Civil Code section 1717 requires a contract to ‘specifically’ provide for attorney fees. There are many challenges facing attorneys drafting transactional documents. But in general, a specific attorney fee provision is not one of those challenges. In most cases, it can be accomplished in a single sentence, and a specific citation to Civil Code section 1717, though not required, makes the parties’ intent abundantly clear. For that reason, we are not inclined to indulge vague fee provisions like those relied on here.”
Lenders may want to review their paperwork, in light of this decision, and supplement their documents with a more precise “prevailing party” fees clause.