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Date: 09-22-2018

Case Style:

Sara Hart v. Clear Recon Corp.

Case Number: B283221

Judge: Rubin

Court: California Court of Appeals Second Appellate District Division Eight on appeal from the Superior Court, Los Angeles County

Plaintiff's Attorney: Guy Hart, in propria persona

Defendant's Attorney: Howard D. Hall and Amanda V. Anderson

Description: Following summary judgment against plaintiffs Sara and
Guy Hart in this wrongful foreclosure action, defendant
Nationstar Mortgage LLC obtained its attorney’s fees as
prevailing party, based on a clause in the deed of trust. On
appeal from the fee award, the Harts contend the clause in
question is not an attorney’s fees provision. We agree and
reverse.
FACTUAL AND PROCEDURAL BACKGROUND
1. Summary of Litigation1
Sara Hart is the mother of adult son Guy.2 They assert an
interest in a house whose title is in the name of Sara’s other son,
Don Hart. While the intra-family dispute regarding title raged
on, nobody was paying the mortgage on the property, which had
been taken out exclusively by Don. Nationstar, the successor to
the lender, commenced foreclosure proceedings. Sara and Guy
brought suit against Nationstar, alleging causes of action for:
(1) a preliminary injunction halting the foreclosure sale; and
(2) declaratory relief regarding Nationstar’s authority to conduct
a foreclosure while the title dispute was pending. In their prayer
for relief, they sought attorney’s fees.
Nationstar obtained summary judgment on the basis that,
as Sara and Guy are not borrowers, they had no rights under the
deed of trust. Even if they had (or ultimately obtained) a title
interest in the property, they would have no right to reinstate the
loan and therefore could not stop the foreclosure. The court also

1 Our discussion of the underlying action is taken from our
prior opinion in the case, Hart v. Nationstar Mortgage (March 2,
2018, B278677).
2 We refer to the Harts by their first names; no disrespect is
intended.
3
rejected Sara and Guy’s attempt to assert Don’s rights in the
action. Sara and Guy appealed; we affirmed.
2. Motion for Attorney’s Fees
After Nationstar obtained summary judgment, and while
Sara and Guy’s appeal was pending, Nationstar sought its
attorney’s fees as prevailing party on a contract with an
attorney’s fees provision. Specifically, Nationstar relied on
paragraph 9 of the deed of trust, which it asserted was an
attorney’s fees provision.
Paragraph 9 provides, in full, as follows: “9. Protection
of Lender’s Interest in the Property and Rights Under this
Security Instrument. If (a) Borrower fails to perform the
covenants and agreements contained in this Security Instrument,
(b) there is a legal proceeding that might significantly affect
Lender’s interest in the Property and/or rights under this
Security Instrument (such as a proceeding in bankruptcy,
probate, for condemnation or forfeiture, for enforcement of a lien
which may attain priority over this Security instrument or to
enforce laws or regulations), or (c) Borrower has abandoned the
Property, then Lender may do and pay for whatever is reasonable
or appropriate to protect Lender’s interest in the Property and
rights under this Security Instrument, including protecting
and/or assessing the value of the Property, and securing and/or
repairing the Property. Lender’s actions can include, but are not
limited to: (1) paying any sums secured by a lien which has
priority over this Security Instrument; (b) appearing in court; and
(c) paying reasonable attorneys’ fees to protect its interest in the
Property and/or rights under this Security Instrument, including
its secured position in a bankruptcy proceeding. Securing the
Property includes, but is not limited to, entering the Property to
4
make repairs, change locks, replace or board up doors and
windows, drain water from pipes, eliminate building or other
code violations or dangerous conditions, and have utilities turned
on or off. Although Lender may take action under this Section 9,
Lender does not have to do so and is not under any duty or
obligation to do so. It is agreed that Lender incurs no liability for
not taking any or all actions authorized under this Section 9. [¶]
Any amounts disbursed by Lender under this Section 9 shall
become additional debt of Borrower secured by this Security
Instrument. These amounts shall bear interest at the Note rate
from the date of disbursement and shall be payable, with such
interest, upon notice from Lender to Borrower requesting
payment. [¶] If this Security Instrument is on a leasehold,
Borrower shall comply with all the provisions of the lease. If
Borrower acquires fee title to the Property, the leasehold and the
fee title shall not merge unless Lender agrees to the merger in
writing.” (Italics added.)
Alternatively, Nationstar argued that Sara and Guy were
estopped from arguing there was no contractual basis for fees, as
they had sought an award of attorney’s fees in their complaint.
Although Sara and Guy had, in fact, included a prayer for
attorney’s fees in their complaint, they had not identified any
contractual or statutory basis for that prayer.
3. Sara and Guy’s Opposition
Sara and Guy opposed, arguing, among other things, that
the language of Paragraph 9 is not an attorney’s fees provision
because it provides for attorney’s fees to become additional debt
of the borrower, not for an award of fees in litigation. They
argued that judicial estoppel did not apply because they had not
5
specifically sought fees under contract, and, in any event, the
legal authority on which Nationstar relied did not govern.
4. Trial Court’s Ruling and Appeal
The trial court granted Nationstar its attorney’s fees,
concluding both that paragraph 9 of the deed of trust was an
attorney’s fees provision and that Sara and Guy were judicially
estopped from arguing to the contrary. The court awarded fees in
the amount of $59,750.
Sara and Guy filed a timely notice of appeal.3
DISCUSSION
1. Standard of Review
We review a determination of the legal basis for an award
of attorney’s fees de novo as a question of law. (California
Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc.
(2002) 96 Cal.App.4th 598, 604.) “Attorney fees are not
recoverable as costs unless a statute or contract expressly
authorizes them. [Citation.]” (Ibid.)
2. Civil Code section 1717
Generally speaking, each party to a lawsuit must pay his or
her own attorney’s fees unless a statute or contract provides
otherwise. (Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962,
966.) “Where a contract specifically provides for an award of
attorney fees, Civil Code section 1717 allows recovery of attorney

3 On appeal, Sara and Guy initially argued they could not be
liable for attorney’s fees under a contract to which Don, and not
they, were signatories. As there had been recent authority on the
issue of whether paragraph 9 of the deed of trust constituted an
attorney’s fees provision, we sought additional briefing on that
issue. As we conclude that issue is dispositive, we need not
address the non-signatory issue.
6
fees by whichever contracting party prevails, regardless of
whether the contract specifies that party. [Citation.]” (Ibid.)
In pertinent part, subdivision (a) of section 1717 provides,
“In any action on a contract, where the contract specifically
provides that attorney’s fees and costs, which are incurred to
enforce that contract, shall be awarded either to one of the
parties or to the prevailing party, then the party who is
determined to be the party prevailing on the contract, whether he
or she is the party specified in the contract or not, shall be
entitled to reasonable attorney’s fees in addition to other costs.”
3. Paragraph 9 is Not an Attorney’s Fees Provision
Pursuant to the language quoted above, section 1717
applies only where a “contract specifically provides that
attorney’s fees . . . shall be awarded” to one party or the
prevailing party. We must consider whether paragraph 9 of the
deed of trust specifically so provides. By its plain language, it
does not. The paragraph allows the lender to take numerous
actions, including incurring attorney’s fees, to protect its interest.
It then provides, in the language we emphasized above, that “any
amounts disbursed by Lender under this Section 9 shall become
additional debt of Borrower secured by this Security Instrument.”
This is not a provision that attorney’s fees “shall be awarded”; it
is, instead, a provision that attorney’s fees, like any other
expenses the lender may incur to protect its interest, will be
added to the secured debt.
Federal district courts which have considered the issue
have reached the same conclusion. In Valencia v. Carrington
Mortg. Servs., LLC (D. Haw. June 25, 2013, No. 10-00558 LEKRLP)
2013 U.S. Dist. LEXIS 88886, the court considered whether
the same language justified an award of attorney’s fees and
7
concluded that it did not. The court stated, “The Court notes,
however, that the mortgage states that any amounts disbursed in
protecting the Bank Defendants’ rights under the mortgage,
including for attorneys’ fees, ‘shall become additional debt of
Borrower secured by this Security Instrument . . . and shall be
payable, with such interest, upon notice from Lender or Borrower
requesting payment.’ [Citation.] As such, the mortgage does not
entitle the Bank Defendants to recover attorneys’ fees as an
award pursuant to the instant litigation. Rather, as provided in
the mortgage, the Bank Defendants may convert the amounts
spent on attorneys’ fees into additional debt secured by the
mortgage.” (Id. at p. *28.) As Nationstar argued in obtaining
summary judgment, the Harts were not borrowers.4
Recently, a district court in California applied the
reasoning of Valencia, and that of an unpublished California
Court of Appeal opinion, to conclude that paragraph 9 in the
standard form deed of trust is not a litigation attorney’s fees
provision.5 (Dufour v. Allen (C.D. Cal. Apr. 20, 2017, No. 14-cv-

4 For this reason, Nationstar is not aided by paragraph 14 of
the deed of trust, which it raised for the first time at oral
argument on appeal. That paragraph provides that the lender
“may charge Borrower fees for services performed in connection
with Borrower’s default, for the purpose of protecting Lender’s
interest in the Property and rights under this Security
Instrument, including, but not limited to, attorneys’ fees,
property inspection fees and valuation fees.” The Harts are not
borrowers under the deed of trust.
5 Pursuant to California Rules of Court, rule 8.1115(a), we do
not formally cite to the unpublished Court of Appeal opinion.
However, the federal district court – which is not restricted in its
use of unpublished California opinions – relied on it. Under
8
05616-CAS(SSx)) U.S. Dist. LEXIS 61229.) After quoting from
Valencia, the Dufour court stated, “Similarly, the deed of trust at
issue in Tyler v. Wells Fargo Bank, N.A. (Cal. Ct. App. July 8,
2016, No. E063985) 2016 Cal. App. Unpub. LEXIS 5117, No.
2016 WL 3752394 included language identical to Section 9.
[Citation.] Recognizing that Valencia was not binding precedent,
the California Court of Appeal nevertheless found Valencia
persuasive and ‘conclude[d], as in Valencia, that the [deed of
trust] attorney fee provision does not provide an independent
basis for awarding attorney fees.’ [Citation.] In both Valencia
and Tyler, the court denied the lenders’ motions for attorneys’
fees. [Citations.]” (Id. at p. *16.) The Dufour court likewise
concluded paragraph 9 of the deed of trust was not an attorney’s
fees clause. (Id. at p. *17.)
There is no authority to the contrary. Nationstar relies on
cases which have awarded attorney’s fees in litigation under
paragraph 9 of the standard form deed of trust, but none of those
cases actually analyzed of whether paragraph 9 specifically
provided for an award of attorney’s fees. (E.g., Santa Clara
Savings & Loan Assn. v. Pereira (1985) 164 Cal.App.3d 1089 [the
borrowers challenged the fees awarded under language similar to
paragraph 9; argument limited to whether borrowers had
breached, not whether the provision allowed for an award of fees
in litigation]; Boring v. Nationstar Mortg., LLC (E.D. Cal. Jun. 9,
2016, No. 2:13-cv-01404-GEB-CMK) 2016 U.S. Dist. LEXIS 75474
[fees were awarded under both paragraph 9 and the borrower’s

these circumstances, we choose neither to ignore the unpublished
opinion nor redact it from our quotation of the federal case which
cited it. Nevertheless, we recognize that the California
unpublished case is not precedent.
9
note; borrower questioned whether Nationstar was the prevailing
party, not whether paragraph 9 provided an award of fees in
litigation]; Boza v. US Bank Nat’l Ass’n (C.D.Cal. July 25, 2013,
No. LA CV12-06993 JAK (FMOx)) 2013 U.S. Dist. LEXIS 198318,
affd. (2015) 606 Fed.Appx.357 [fees were awarded against
borrower under the note, and two paragraphs of the deed of trust,
including paragraph 9; no issue was raised as to whether
paragraph 9 provided for an award of fees in litigation]; Whittle v.
Wells Fargo Bank, N.A. (E.D. Cal. May 6, 2010, No. CV F 10-0429
LJO GSA) 2010 U.S. Dist. LEXIS 52923 [fees were awarded
under the note and deed of trust; the borrower challenged
whether the provisions encompassed the defense of his claims,
not whether paragraph 9 provided for an award of fees in
litigation].)
None of these cases hold that in an unsuccessful suit by a
nonborrower against a lender, the lender may recover attorney’s
fees against a nonborrower under paragraph 9 or its equivalent.
Indeed none of these cases contain any analysis of paragraph 9 or
similar language in another instrument. In contrast, the only
cases which have considered the issue, Valencia and Dufour, are
in agreement with our independent analysis of the language of
the deed of trust: paragraph 9 simply does not provide for a
separate award of fees per motion.
Nationstar suggests that equitable considerations should
guide us to a different result. Specifically, it argues that
enforcing paragraph 9 as written would mean the attorney’s fees
must be paid by Don, a nonparty to this litigation, rather than
Sara and Guy, the individuals who caused the litigation to occur.
The inference that Don will pay does not follow; the three Harts
are fighting over title to the property, and the property is in
10
foreclosure. It is not clear who, if anyone, will ultimately pay off
the debt and, therefore, be responsible for the added sum of the
attorney’s fees. In any event, even if Don is ultimately
responsible for the fees, we see no inequity. Paragraph 9 is, in
part, an indemnity clause whereby the signatory borrower agrees
to be responsible for numerous expenses which the lender may
incur as the result of third-party interference with the lender’s
rights. Nationstar has cited no authority that such an indemnity
agreement is so inequitable as to be unenforceable. In any event,
we do not address whether paragraph 9 applies to Don in the
context of the present litigation.
4. No Other Provision Justifies an Award of Fees
For the first time, on appeal, Nationstar argues that if
attorney’s fees are not awardable under paragraph 9 of the deed
of trust, they are awardable under paragraph 22.
Paragraph 22 of the deed of trust is an acceleration clause.
It provides, in part, as follows: “22. Acceleration; Remedies.
Lender shall give notice to Borrower prior to acceleration
following Borrower’s breach of any covenant or agreement in this
Security Instrument (but not prior to acceleration under Section
18 [governing acceleration on transfer of interest] unless
Applicable Law provides otherwise). The notice shall specify:
(a) the default; (b) the action required to cure the default; (c) a
date, not less than 30 days from the date the notice is given to
Borrower, by which the default must be cured; and (d) that
failure to cure the default on or before the date specified in the
notice may result in acceleration of the sums secured by this
Security Instrument and sale of the Property. The notice shall
further inform Borrower of the right to reinstate after
acceleration and the right to bring a court action to assert the
11
non-existence of a default or any other defense of Borrower to
acceleration and sale. If the default is not cured on or before the
date specified in this notice, Lender at its option may require
immediate payment in full of all sums secured by this Security
Instrument without further demand and may invoke the power of
sale and any other remedies permitted by Applicable Law.
Lender shall be entitled to collect all expenses incurred in
pursuing the remedies provided in this Section 22, including, but
not limited to, reasonable attorneys’ fees and costs of title
evidence.”
Because this paragraph was only raised on appeal,
Nationstar failed to provide evidence in the trial court that this
paragraph applies. That is, there is no evidence that Nationstar
gave proper notice of default, and that the borrower failed to cure
the default, allowing acceleration. As such, Nationstar cannot
rely on this paragraph as an after-the-fact justification for the
fees awarded by the trial court on a different basis.6
5. Sara and Guy are Not Estopped to Deny Attorney’s Fees
Relying on International Billing Services v. Emigh (2000)
84 Cal.App.4th 1175, Nationstar argues that Sara and Guy are
judicially estopped from denying there is a contractual basis for
an attorney’s fees award, because they had pleaded a right to
attorney’s fees.

6 Nationstar also seeks to justify the fee award under an
attorney’s fees clause in the note signed by Don. Recognizing
that the note was not before the trial court, Nationstar has
moved this court to take additional evidence on appeal. We deny
the motion. In any event, Sara and Guy did not sign the note and
did not sue on the note. There is no basis to hold Sara and Guy
liable for attorney’s fees based on a provision in a contract they
did not sign and did not sue on.
12
In International Billing Services, the Third District Court
of Appeal concluded there was, in fact, a contractual basis for the
award of attorney’s fees at issue in the case. (International
Billing Services, supra, 84 Cal.App.4th at p. 1183.) However, the
court went on to state, in dicta, that a party could be judicially
estopped to deny that a contract provided for an award of fees if
that party had sought an award of fees under that contractual
provision. (Id. at pp. 1186-1191.)
Preliminarily, International Billing Services is
distinguishable. In that case, the party to be estopped had
actually argued that the specific contractual provision at issue
justified an award of fees. (International Billing Services, supra,
84 Cal.App.4th at p. 1186.) Here, in contrast, Sara and Guy had
simply included a prayer for attorney’s fees in their complaint,
without specifying whether they sought fees according to contract
or statute, and certainly without identifying paragraph 9 of the
deed of trust as an applicable attorney’s fees provision.
More importantly, however, is that International Billing
Services is no longer good law. The court that issued the opinion
subsequently backed away from it, holding that its dictum
“sweeps too broadly.” (M. Perez Co., Inc. v. Base Camp
Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 465.)
The Third District concluded that its prior opinion did not make
proper use of the doctrine of judicial estoppel. (Id. at p. 469.) It
stated, “In sum, there is no sound policy or legal basis for the
broad rule adopted by this court in International Billing Services.
That rule would instead violate the very policy considerations it
purports to serve. We agree with the many state court decisions
refusing to apply estoppel against a losing party who sought
13
attorney fees under circumstances where that party would not
have been entitled to such fees had it prevailed.” (Id. at p. 470.)
In short, simply pleading a right to attorney’s fees is not a
sufficient basis to judicially estop a party from challenging the
opposing party’s alleged contractual basis for an award of
attorney’s fees. The trial court erred in relying on judicial
estoppel as an alternative basis for its fee award.

Outcome: The attorney’s fees award is reversed. Nationstar is to pay Sara and Guy’s costs on appeal.

Plaintiff's Experts:

Defendant's Experts:

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