Sara Hart v. Clear Recon Corp.

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.

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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

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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

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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.

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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

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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

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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.

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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

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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

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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.

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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

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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.

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