Split Decision For Third Party Purchaser At Trustee’s Sale Involving Second Deed of Trust.
Nonsignatory plaintiff purchased a property at a trustee’s sale of a junior lienholder, eventually bringing an action to sue certain defendants to determine amounts owed under the first (senior) deed of trust and set aside the trustee’s sale of the junior lien as being void. Plaintiff lost it suit, the two set of defendants were denied attorney’s fees requests aggregating over $497,000.
Two sets of defendants appealed the fee denials in U.S. Financial, L.P. v. LnR Group, Inc., Case No. D065276 (4th Dist., Div. 1 Jan. 23, 2015) (unpublished), with one set going home disappointed but with the second set happy given they were entitled to fees as the prevailing party under the fees clause in a senior trust deed pursuant to Civil Code section 1717.
The first set of defendants known as the “Coast defendants”—seeking over $350,000 in fees–argued that plaintiff stepped into shoes of the trustor or was a third-party beneficiary of the junior deed of trust (complete with a fees clause). The appellate court did not buy the analogy, given plaintiff was a third party purchaser obtaining an interest free and clear of the trustor subject to the fees clause. No subrogation or third-party beneficiary theories applied.
However, a second defendant, LnR, did much better. Its theory was that plaintiff stepped into the shoes of trustor with respect to the senior deed of trust so that fee recovery was possible. Yep, that was a winner given that plaintiff did assume the senior lien obligation after the trustee’s sale, so LnR got to get a second bite at fees after being denied them the first time around to the tune of $147,175.