Party Requesting Fees Would Not Have Faced Exposure to Successor Lender Under Document Fee Clauses.
In the Civil Code section 1717 context, especially involving non-signatories, alter egos, successor or joint venturers, a crucial inquiry for recovery is whether this class of litigants would have faced fee exposure under a fees clause to the non-prevailing side. If not, fees will not be awarded.
Residential Credit Solutions, Inc. v. Adigwe, Case No. B240653 (2d Dist., Div. 4 Dec. 4, 2013) (unpublished) involved a situation where original borrowers obtaining a loan secured by a deed of trust eventually lost title to the secured property against the Adigwes, who filed a lis pendens and obtained a quiet title judgment against original borrowers. Later, a successor lender providing a credit facility after the filing of the lis pendens sued borrowers and Adigwes on various theories. Adigwes eventually prevailed based on a demurrer sustained without leave, subsequently seeking attorney’s fees as the prevailing party against successor lender based on fees clauses in the loan documents.
The trial court denied the fees request, a ruling sustained on appeal.
The reviewing court concluded that Adigwes were not parties to the pertinent loan documents with fees clauses, so non-signatory analysis had to be utilized. The problem here was that Adigwes took title through a quiet title judgment, not through the loan documents with fees clauses. Given the absence of allegations that Adigwes were joint venturers or alter egos of the original borrowers, there was no basis for fee entitlement under section 1717.