2017-00224571-CU-OR

Herb Miller vs. Bayview Loan Servicing, LLC

Nature of Proceeding: Motion for Attorney Fees

Filed By: Sarkis, Sunny S.

Defendant Bayview Loan Servicing, LLC’s motion for attorneys’ fees and costs is ruled upon as follows.

In this foreclosure action Defendant seeks fees in the amount of $26,624.50 and costs in the amount of $1,272.88 for a total of $27,897.38 as the prevailing party. Plaintiff voluntarily dismissed the action on April 23, 2018. Defendant argues that it is entitled to fees and costs under CCP § 1032 and Civil Code § 1717 as the prevailing party on the contract (Deed of Trust and Note).

Here, there is no question that for purposes of CCP § 1032, Defendant is the prevailing party. CCP § 1032(a)(4) defines a prevailing party as a defendant in whose favor a dismissal was entered. Plaintiff dismissed this action against Defendant on April 23, 2018. Defendant is therefore entitled to costs as a matter of law. CCP § 1003.5(a)(10)(A) provides that costs include attorney’s fees permitted by contract. “Thus, recoverable litigation costs do include attorney fees, but only when the party entitled to costs has a legal basis, independent of the costs statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees.” ( Santisas v. Goodin (1998) 17 Cal.4th 599, 606.)

The dispute on this motion is whether Defendant is entitled to fees. The Court first examines whether the subject provision in the Deed of Trust permits recovery of fees following voluntary dismissal of this action, absent any consideration of Civil Code § 1717. (Santisas, supra, 17 Cal.4th at 608.) The Deed of Trust provides that the lender may do whatever is reasonable or appropriate where there is a legal proceeding that might significantly affect its interest including paying reasonable attorney’s fees and

that those fees become the additional debt of the borrower. (Def.’s RJN Exh. 1, ¶ 9.) In this action Plaintiff alleged causes of action for wrongful foreclosure and cancellation of instruments challenging Defendant’s ability to make a credit bid at the Trustee’s Sale on the basis that it was not a beneficiary under the Deed of Trust, failed to perfect any security interest in the subject property and did not have physical possession of the Note. Plaintiff sought to obtain a declaration regarding the parties’ rights and sought to invalidate the Trustee’s Deed Upon Sale. On its face, the provision encompasses these claims as they involve a “legal proceeding that might significantly affect” the lender’s interest. Plaintiff was directly challenging Defendant’s status under the subject Deed of Trust. Moreover, there can be no legitimate argument that Defendant was not the prevailing party for purposes of an attorney’s fee award. Plaintiff’s objective in bringing the lawsuit was to obtain the relief requested in the complaint and Defendant’s objective was to prevent Plaintiff from obtaining any relief. The case was terminated by Plaintiff’s voluntary dismissal, Plaintiff did not obtain any relief they requested. Plaintiff failed in his litigation objective and Defendant succeeded in its objective.

The next question, however, is whether Defendant’s right to recover fees is precluded by Civil Code § 1717(b)(2) which states that “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.” The California Supreme Court has interpreted this provision “as overriding or nullifying conflicting contractual provisions, such as provisions expressly allowing recovery of attorney fees in the event of a voluntary dismissal or defining ‘prevailing party’ as including parties in whose favor a dismissal has been entered.” (Santisas, supra, 17 Cal.4th at 617.) “This bar, however, applies only to causes of action that are based on the contract and are therefore within the scope of section 1717. If the voluntarily dismissed action also asserts causes of action that do not sound in contract, those causes of action are not covered by section 1717, and the attorney fee provision, depending on its wording, may afford the defendant a contractual right, not affected by section 1717, to recover attorney fees in litigating those causes of action. Similarly, if a plaintiff voluntarily dismisses an action asserting only tort claims (which are beyond the scope of section 1717), and the defendant, relying on the terms of a contractual attorney fee provision, seeks recovery of all attorney fees incurred in defending the action, the plaintiff could not successfully invoke section 1717 as a bar to such recovery.” (Id. [emphasis in original].)

The Court must note that the parties have set forth an incorrect analysis in the papers. To that end, Defendant argues that it is entitled to fees under Civil Code § 1717 as a prevailing party on the contract under Civil Code § 1717. It then argues that the provision in subdivision (b) does not preclude recovery because that subdivision only precludes recovery where the sole claim is contractual. It then argues nevertheless that Plaintiff’s claims here for wrongful foreclosure and cancellation of instruments were “grounded in contract” but did not directly assert a breach of contract. Defendant reasons that both these causes of action would not exist but for the existence of the lender-borrower contractual relationship and thus “arise out of those contracts.” (Mot. 12:24-28.) However, the scope of Civil Code § 1717 is not limited to breach of contract causes of action but rather applies to actions “on the contract.” Rather, it includes actions “based on” or “sound[ing] in” contract. (Santisas, supra, 17 Cal. 4th at 617.) “ ‘On a contract’ does not mean only traditional breach of contract causes of action. “California courts construe the term ‘on a contract’ liberally. As long as the action involve[s] a contract, it is on the contract within the meaning of section 1717.” (Turner v. Schultz (2009) 175 Cal.App.4th 974, 979-980.) Plaintiff on the other

hand argues that the causes of action were not on the contract.

If Defendant is correct in its analysis, specifically, that the subject causes of action are “on the contract” for purpose of Civil Code § 1717, then it is precluded from recovering attorney’s fees as a result of Civil Code § 1717(b)(2) based on the fact that the action was voluntarily dismissed by Plaintiff. Defendant is correct that Santisas held that subdivision (b) does not bar attorney’s fees awards where the action involves tort based claims and the subject contract otherwise contains a fee provision worded broadly enough to allow for recovery of fees in tort actions. That is, if the causes of action in the instant case were not based on contract, then Civil Code § 1717 drops out of the equation and the Court simply examines the language of the relevant fee provision to see whether it is broad enough to encompass the non-contract causes of action. But if they are based in contract, then Defendant is precluded from recovering fees pursuant to § 1717(b)(2). Xuereb v. Marcus Millichap, Inc. (1992) 3 Cal.App.4th 1338, does not provide a different result. Xuereb did not involve CCP § 1717(b)(2). Xuereb indicated that the fees issue there was not governed by CCP § 1717 because the only effect of that section was to make an otherwise unilateral right to fee binding on all parties in actions on the contract and did not supersede or limit the parties’ right to enter into agreements for fee awards in litigation. Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-130 simply provides that the fact that a non-contract causes of action was joined with a cause of action based on the contract with the fees provision, fees need not be apportioned between the contract based and non-contract based cause of action on issues common to both. (Id.)

Plaintiff on the other hand argues that the causes of action are not “on the contract” because they were based on Defendant’s alleged inability to make a “credit bid” as it was not the present beneficiary of the Deed of Trust because it did not have physical possession of the Note at the time of the Trustee’s Sale. If Plaintiff were correct, then Civil Code § 1717 falls out of the equation and the Court’s analysis is again governed by the language of the fee provision in the Deed of Trust to determine whether it is broad enough to encompass the non-contractual causes of action. As already set forth above, the Court has concluded that it is broad enough to encompass the claims in this action.

This motion presents a unique situation, in that each party appears to be arguing against its interest. Thus, if Defendant is correct that the claims in this action were “on the contract” then the motion of the defendant must be denied. By contrast, if Plaintiff is correct that the action is not “on the contract” then the motion would be granted and Defendant would be permitted to recover fees despite the voluntary dismissal.

Here, the Court concludes that the complaint’s two causes of action for wrongful foreclosure and cancellation of instruments are in fact “on the contract.” Again, as set forth above, an action is “on a contract” for purposes of Civil Code § 1717 not just when a breach of contract cause of action is alleged but where it is based on or sounds in contract. It bears repeating that “[a]s long as the action involve[s] a contract, it is on the contract within the meaning of section 1717.” (Turner, supra, 175 Cal.App.4th at 979-980.) Plaintiff directly challenged Defendant’s status under the Deed of Trust and sought to set aside the Trustee’s Deed Upon Sale on the basis that Defendant was not a beneficiary under the Deed of Trust and therefore could not make a credit bid. The causes of action certainly involved a contract, to wit the Deed of Trust, regardless of how they were framed.

As a result, the Court agrees with Defendant that the action here was “on the contract” pursuant to Civil Code § 1717 and rejects Plaintiff’s arguments to the contrary. However, this means that Defendant is not entitled to attorney’s fees pursuant to Civil Code § 1717(b)(2) as a result of the fact that Plaintiff voluntarily dismissed the action. Again that section makes clear that there is no prevailing party for fees in such a scenario. Defendant’s motion for fees is denied and the Court need not and does not engage in any analysis regarding the reasonableness of the fees.

Defendant is still entitled to costs (other than fees) as a result of the dismissal pursuant to CCP § 1032(a)(4). Defendant sought costs in the amount of $1,272,88 which Plaintiff did not challenge. Defendant is therefore awarded costs in the amount of $1,272.88.