Opinion
A142956
11-20-2017
KEVIN LAWSON et al., Plaintiffs and Appellants, v. CAL-WESTERN RECONVEYANCE CORPORATION et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Marin County Super. Ct. No. CIV 1101193)
Plaintiffs Kevin and Ingrid Lawson (the Lawsons) appeal from a postjudgment order awarding attorneys' fees in the amount of $137,150.00 to defendants PNC Bank, N.A. (PNC Bank) and Wells Fargo Bank, N.A. (Wells Fargo) (collectively, the banks) in a nonjudicial foreclosure case. We affirm the order.
I. BACKGROUND
We are familiar with the background of this dispute through our review of an earlier appeal in this action, Lawson v. Cal-Western Reconveyance Corporation (Nov. 16, 2017, A142202) [nonpub. opn.] (Lawson I). We take judicial notice of our opinion and of the trial court records included in the appellants' appendix filed in that appeal (Evid. Code, § 452, subd. (d)(1)), and we draw in part from that appendix for our recital of the history relevant to this appeal.
A. Facts
The Lawsons obtained a loan to refinance their residence by signing a promissory note (note) secured by a deed of trust (deed) on the property. In paragraph 6(E) of the note (paragraph 6(E)), the Lawsons agreed, among other things, that: they would be in default if they did not pay the full amount of each monthly loan payment on the due date; if they defaulted, the note holder, after giving notice, might require them to immediately pay the full unpaid balance of their loan; and, in that case, they would be obligated to reimburse the note holder for related expenses, including reasonable attorneys' fees. In the deed, the Lawsons "covenant[ed] and agree[d]," among other things, that the lender—referred to elsewhere in the deed as the "beneficiary"—(1) could charge them fees for certain services if they defaulted on their loan, including attorneys' fees (paragraph 14) and (2) could exercise a power of sale if they breached any covenant or agreement stated in the deed, including the covenant and agreement to make timely loan payments (paragraph 22).
At some point, the Lawsons fell behind on their loan payments. PNC Bank sent them a letter, advising that it was "the servicer and owner, or authorized representative of the owner" of their loan, that they were in breach or default under the loan, and that acceleration of the loan's maturity date would occur if they did not cure the breach or default by a specified date. After the specified date had passed, the Lawsons received a notice of default advising that foreclosure proceedings had commenced. The notice directed the Lawsons to contact PNC Bank care of Cal-Western Reconveyance Corporation (Cal-Western) for further information and provided contact information. Later the Lawsons received a notice of a foreclosure sale, advising that their residence would be sold at a public auction if they did not take corrective action.
The notice advised that Cal-Western was "the original trustee, the duly appointed substituted trustee, or . . . [the] agent for the trustee or beneficiary under a deed of trust."
B. Procedural History
The Lawsons filed suit against PNC Bank and Cal-Western to enjoin the foreclosure sale and obtained a preliminary injunction. After PNC Bank advised them Wells Fargo was the "investor" for their loan, the Lawsons sought, and obtained, leave to amend their complaint to add Wells Fargo as a defendant, advising the court they believed Wells Fargo was "the only party that might claim to be the beneficiary for [their] loan." Later, the Lawsons filed a second amended complaint, the relevant pleading for this appeal (the complaint). It alleged that all defendants had violated nonjudicial foreclosure statutes (Civ. Code, §§ 2923.5, 2924 et seq.) (first and second causes of action) and, in doing so, had also violated California's Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) (third through fifth causes of action). Additionally, the complaint alleged a (sixth) cause of action for declaratory relief.
The trial court sustained the banks' demurrer to two of the Lawsons' causes of action without leave to amend. The banks then successfully moved for summary judgment on the remaining causes of action. Judgment was entered in favor of the banks and the Lawsons filed their first appeal in Lawson I. While that appeal was pending, the banks applied to the trial court for an award of costs and attorneys' fees, citing paragraph 6(E) (of the note) and paragraph 14 (of the deed). The Lawsons opposed the request for fees, and the banks replied. The trial court granted the motion, awarding the banks $137,150.00 in attorneys' fees, and the Lawsons filed the current appeal.
Cal-Western settled with the Lawsons at this point and was dismissed with prejudice. It is not a party to this appeal.
II. DISCUSSION
A. Standard of Review
"The issue of a party's entitlement to attorney fees is a legal issue subject to de novo review. [Citations.] The determination of the amount of fees awarded is reviewed for abuse of discretion. [Citation.] The normal rules of appellate review apply to an order granting or denying attorney fees; i.e., the order is presumed correct, all intendments and presumptions are indulged to support the order, conflicts in the evidence are resolved in favor of the prevailing party, and the trial court's resolution of factual disputes is conclusive. [Citation.]" (Apex LLC v. Korusfood.com (2013) 222 Cal.App.4th 1010, 1016-1017.)
B. Analysis
The Lawsons make five arguments for reversal of the order granting attorneys' fees. We need not consider the first argument as it is predicated on this court's having reversed the judgment in Lawson I, which we did not do. In the alternative, the Lawsons contend the fees award must be reversed because: (1) PNC Bank was not eligible to receive a fees award; (2) the trial court failed to apportion defense fees between Wells Fargo, who was eligible for an award, and PNC Bank, who was not eligible ; (3) the banks were only entitled to fees incurred in defending contract claims, not statutory claims; and (4) the trial court erred in applying an hourly rate in calculating the award that exceeded the rate actually charged by defense counsel. We consider these arguments in turn below.
The Lawsons contended the banks would not qualify as prevailing parties entitled to attorneys' fees if this court reversed the judgment on the merits. But, in Lawson I, we affirmed the judgment. (See Lawson I, supra, at p. 33.)
1. PNC Bank's attorney fees
Although the banks claimed they were entitled to attorneys' fees as prevailing parties under Civil Code section 1717, the Lawsons submit that a court considering such a request must begin with the language of the contractual attorneys' fee provisions. Here the contracts containing the attorneys' fees provisions—the note and deed—were contracts of adhesion, the Lawsons submit, and they therefore may not be interpreted in a manner contradicting the weaker party's reasonable expectations. (See Fischer v. First Internat. Bank (2003) 109 Cal.App.4th 1433, 1446 [a standardized trust deed is considered a contract of adhesion].) They were the weaker party, the Lawsons contend, and neither attorneys' fees provision clearly warned that they could be required to reimburse, not only the attorneys' fees of the note holder or lender/beneficiary (Wells Fargo), but also the attorneys' fees of the loan servicer (PNC Bank). To the extent that the trial court's order required reimbursement of the latter, they maintain, it must be reversed.
All undesignated statutory references below are to the Civil Code.
Before considering this argument, we begin with some basic observations regarding responsibility for attorneys' fees, drawn from our Supreme Court's recent decision in Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744 (Mountain Air). As the court there observed, "[u]nder the American rule, each party to a lawsuit ordinarily pays its own attorney fees. [Citation.] Code of Civil Procedure section 1021, which codifies this rule, provides: 'Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties . . . .' In other words, section 1021 permits parties to ' " contract out" of the American rule' by executing an agreement that allocates attorney fees. [Citations.]" (Id. at p. 751.) For example, " ' "[p]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract." ' [Citations.]" (Ibid.)
If such litigation sounds in contract, "an agreement allocating attorney fees may be 'within the scope of . . . section 1717' and subject to its restrictions." (Mountain Air, supra, 3 Cal.5th at p. 752.) But, the only effect of that section "is to make an otherwise unilateral right to attorney fees reciprocally binding upon all parties to actions to enforce the contract" (Brown Bark III, L.P. v. Haver (2013) 219 Cal.App.4th 809, 820 (Brown Bark)), i.e., section 1717 establishes "mutuality of remedy" in an action on a contract. (Monster, LLC v. Superior Court (2017) 12 Cal.App.5th 1214, 1225.) This restriction might have come into play here if the Lawsons had been the party seeking attorneys' fees, because the note and deed unilaterally authorized an award to the note-holder and the lender, respectively. Because, as discussed below, Wells Fargo and its agent PNC Bank instead were the parties here invoking the attorneys' fees provisions, the parties have not shown how section 1717 applies.
Section 1717, subdivision (a) provides in relevant part as follows: "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."
Even if it did apply, however, in determining a party's entitlement to attorneys' fees, it is necessary, first, to consider whether the parties entered an agreement on this point and, if so, the scope of the agreement. (Mountain Air, supra, 3 Cal.5th at p. 752.) Because there is no dispute that an agreement regarding payment of attorneys' fees here existed, we begin by examining the scope of the agreement, applying "traditional rules of contract interpretation. [Citation.]" (Ibid.) "Our initial inquiry is confined to the writing alone. [Citations.]" (Ibid.) We commence our analysis, therefore, by considering the language of paragraph 6(E) of the note, which provided as follows: "If the Note Holder has required me to pay immediately in full [the unpaid principal and all owed interest, after a default] as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees."
The language of this provision was not complex. In simple terms, it advised that, in the event of a default, the Lawsons could be obligated to reimburse "all of [the note-holder's] costs and expenses" in enforcing the note, including "reasonable attorneys' fees." It is undisputed that Wells Fargo owned the Lawsons' note and that PNC Bank took the relevant actions in this case as Wells Fargo's agent. The Lawsons, represented by counsel, alleged in their complaint that Wells Fargo was the owner or beneficiary of their loan (i.e., the note-holder), PNC Bank was the loan "servicer (or agent)" of the beneficiary, and Wells Fargo and PNC Bank acted together in instructing Cal-Western to commence foreclosure proceedings. As discussed in Lawson I, supra, Wells Fargo and PNC Bank admitted these points in moving for summary judgment. The facts were judicially admitted, therefore, and removed from the issues in this litigation. (Barsegian v. Kessler & Kessler (2013) 215 Cal.App.4th 446, 452 [a "judicial admission is ordinarily a factual allegation by one party that is admitted by the opposing party"].) The Lawsons do not dispute these points in this appeal.
"The essence of an agency relationship is the delegation of authority from the principal to the agent which permits the agent to act 'not only for, but in the place of, his principal' in dealings with third parties. [Citation.] 'The heart of agency is expressed in the ancient maxim: "Qui facit per alium facit per se." [He who acts through another acts by or for himself.]' [Citations.]" (Channel Lumber Co. v. Porter Simon (2000) 78 Cal.App.4th 1222, 1227; see also Coit v. W.U. Tel. Co. (1900) 130 Cal. 657, 663 [the principal could "only stand in [the agent's] shoes"].) Consistent with this principle, the law provides that "all the . . . liabilities which would accrue to the agent from transactions within [the scope of his or her authority], if they had been entered into on his [or her] own account, accrue to the principal." (§ 2330; see also Frank Pisano & Associates v. Taggart (1972) 29 Cal.App.3d 1, 17 ["a disclosed principal may be held liable on a contract made solely in the name of the agent where it is plainly inferable that the agent intended to bind the principal"]; Rest.3d Agency, § 8.14, com. d, p. 405 ["a principal has a duty to indemnify the agent against expenses . . . incurred by the agent in defending against actions brought by third parties if the agent acted with actual authority in taking the action challenged by the third party's suit"].)
Wells Fargo, as beneficiary, and PNC Bank, as its agent, in defending this action, were enforcing the Lawsons' payment obligations under the note. PNC Bank incurred attorneys' fees as a result, and Wells Fargo is legally responsible for those fees, a point Wells Fargo expressly concedes. Effectively, therefore, PNC Bank's attorneys' fees were also Wells Fargo's attorneys' fees. In paragraph 6(E), the Lawsons agreed to reimburse the "Note Holder" for "all of its costs and expenses in enforcing [their] Note . . . . includ[ing], for example, reasonable attorneys' fees." This would reasonably include attorneys' fees that Wells Fargo incurred through, or for, the defense of its agent, PNC Bank.
The Lawsons do not cite any authority specifically confirming that a promissory note is a contract of adhesion. But, assuming this to be true, and assuming the principles of agency we have just discussed, it would not be beyond the reasonable expectations of a typical borrower that a lender's costs and expenses will include sums paid by an agent acting on behalf of the lender. The Lawsons cite no on-point authority confirming that the party offering a contract of adhesion may only obtain reimbursement for expenses it incurred through an agent if the contract included a specific warning on that point.
The Lawsons also contend the note's reference, in paragraph 6(E), to the " 'Note Holder' " was unclear, because the note did not identify a specific entity or confirm that the term referred to the lender. We are unpersuaded, however, that the term " 'Note Holder' " was ambiguous or unclear. In fact, the note defined this term in its first paragraph, stating: "The Lender or anyone who takes this Note by transfer and who is entitled to receive payments under this Note is called the Note Holder.' " The contractual language was sufficiently clear in advising that the entity who owned the Lawsons' loan was entitled to reimbursement for amounts it spent enforcing the parties' agreements in the note. Here, as discussed in Lawson I, there is no dispute Wells Fargo was that entity.
Both the note and the deed advised that the lender could transfer the note.
We reach the same conclusion when we separately consider the attorneys' fees provision, paragraph 14, contained in the companion deed. That provision read in relevant part as follows: "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 [deed], including, but not limited to, attorneys' fees . . . ." The language was broad and included no words of limitation. There is no dispute that the Lawsons sued PNC Bank for actions it took as Wells Fargo's agent, or that Wells Fargo legally was responsible for paying the attorneys' fees PNC Bank incurred in defending the action. Further, the Lawsons do not dispute the attorneys' fees expended to defend PNC Bank in this action protected Wells Fargo's rights under the deed, e.g., the right to invoke the power of sale following a default. Given the broad language of this second attorneys' fees provision—i.e., "services performed in connection with [the Lawsons'] default, for the purpose of protecting Lender's . . . rights under [the deed], including . . . attorneys' fees"— it would not be beyond the reasonable expectations of a typical borrower that the provision would extend to covering the joint defense costs of Wells Fargo and its agent, loan servicer PNC Bank, both seeking to enforce the right to proceed with a foreclosure sale.
In light of our conclusions regarding paragraph 6(E) of the note and paragraph 14 of the deed, the two provisions the banks cited in their motion for attorneys' fees, we need not address paragraphs 9 and 22 of the deed, which Wells Fargo cites on appeal as providing additional support for the award. (PNC Bank did not participate in this appeal.)
The Lawsons make much of the fact that the banks' attorneys submitted their bills to PNC Bank's legal department and not to Wells Fargo directly. They submit there is no evidence, therefore, that Wells Fargo itself actually incurred any attorneys' fees. Contending that PNC Bank was "the only entity to submit bills from its counsel," and that the trial court accordingly "awarded fees only to PNC" Bank, who was not entitled to them, the Lawsons request reversal of that order.
Leaving aside the Lawsons' failure to raise this point before the trial court (see, e.g., Lunada Biomedical v. Nunez (2014) 230 Cal.App.4th 459, 488 [failure to raise specific challenges to attorneys' fees in the trial court " 'forfeits the claim on appeal' "]), we reject the argument. Wells Fargo expressly has admitted its legal obligation to pay attorneys' fees PNC Bank incurred, as its agent, in defending this action. It, therefore, was entitled to a fee award covering those amounts.
Further, the Lawsons stretch the boundaries of veracity in suggesting only PNC Bank submitted bills showing its legal fees, or that the trial court only awarded fees to PNC Bank. In fact, Wells Fargo and PNC Bank submitted a joint motion for attorneys' fees, supported by the declaration of Marcus T. Brown, on behalf of his law firm, the primary attorney of record for both banks from the beginning of the case. Brown's declaration attached copies of bills recording the time he spent on the banks' joint defense, during the course of which the banks consistently submitted joint filings, for example, jointly demurring to and then answering the complaint, and jointly moving for summary judgment and then for attorneys' fees. Based on this evidence, the trial court granted the banks' joint motion for attorneys' fees, awarding fees jointly to both "Defendants." It did not err in doing so.
In light of our conclusion that the trial court did not err by including in its fees award expenses incurred for the joint legal defense of both Wells Fargo and its agent, PNC Bank, we need not address the Lawsons' argument by extension that the trial court committed reversible error by failing to apportion between attorneys' fees that were contractually eligible for reimbursement (Wells Fargo's) and those that were contractually ineligible for reimbursement (PNC Bank's).
2. Attorneys' fees for defending statutory claims
The Lawsons next contend the trial court committed reversible error by awarding the banks all of their attorneys' fees. They cite section 1717, which they submit precludes recovery for fees incurred in defending causes of action alleging statutory violations. Wells Fargo responds by arguing that the Lawsons forfeited this issue by failing to raise it before the trial court. Additionally, it submits the trial court had discretion to grant the full award. In their reply brief, the Lawsons do not address either argument, implicitly conceding both. (See, e.g., Overstock.Com, Inc. v. Goldman Sachs & Co. (2014) 231 Cal.App.4th 513, 530, fn. 11 [party abandoned argument raised in opening appellate brief by failing to respond to arguments raised in an opponent's responding brief].)
Our review of the record confirms the Lawsons forfeited this argument by failing to raise it before the trial court. The Lawsons' opposition to the fees motion included no argument that attorneys' fees incurred to defend against statutory causes of action were ineligible for reimbursement. " 'An appellate court will not consider . . . erroneous rulings where an objection could have been, but was not, raised in the court below.' [Citation.] It is unfair to the trial judge and to the adverse party to take advantage of an alleged error on appeal where it could easily have been corrected at trial. [Citations.]" (Children's Hospital & Medical Center v. Bonta' (2002) 97 Cal.App.4th 740, 776-777 [applying the rule in an appeal from the recovery of attorney fees].)
The Lawsons' argument, however, would fail in any event, because it relies on a misunderstanding of section 1717. As noted above, section 1717 makes a contractual "attorney fee provision reciprocal even if it would otherwise be unilateral either by its terms or in its effect. [Citations.]" (Brown Bark, supra, 219 Cal.App.4th at pp. 818-819.) But, as noted in Brown Bark, supra, a case the Lawsons themselves cite, section 1717 has limited application. (Id. at p. 820.) Among other things, it does not come into play if reciprocity is not an issue. " '[T]he parties to a contract are free to agree that one or more of them shall recover their attorney fees if they prevail on a tort or other noncontract claim,' " and in such a case " 'the right to recover those fees depends solely on the contractual language.' " (Monster, LLC v. Superior Court, supra, 12 Cal.App.5th at p. 1226, quoting Brown Bark, supra, 219 Cal.App.4th at p. 820.) Here, the contractual language was broad and supported the award.
In light of our conclusions in this section, we need not address Wells Fargo's arguments that section 1717 did not prohibit the award in this case because the Lawsons' action was "on a contract" for purposes of that statute.
3. The hourly rate applied in calculating the award
The Lawsons also take issue with the hourly rate that the trial court applied in calculating the attorneys' fees award. The banks requested attorneys' fees totaling $137,150.00, which they advised represented 548.6 attorney hours compensated at an hourly rate of $250.00. The trial court granted the motion, awarding the requested amount. The Lawsons contend the court committed reversible error, because the hourly rate that it applied was greater than the rate the banks' attorneys actually billed. According to the billing records presented to the court in support of the fees motion, the Lawsons point out, the banks' attorneys actually charged between $185.00 and $237.50 per hour for their defense work in this case, with the most common hourly rate being $213.50. By calculating the fees award using the higher $250.00 per hour rate, the Lawsons submit, the trial court effectively gave the banks' attorneys a bonus not authorized by the contractual language, requiring reversal of the award.
Responding to this argument, Wells Fargo correctly notes the Lawsons did not raise the issue in the trial court. Indeed, to the contrary, although they disputed the banks' entitlement to attorneys' fees, the Lawsons expressly advised the trial court they "[did] not contest the reasonability of counsel's hourly fee . . . ." As noted above, "only 'claims properly raised and preserved by the parties are reviewable on appeal.' " (People v. Smith (2001) 24 Cal.4th 849, 852.) Nevertheless, as the Lawsons do not implicitly concede this argument in their reply brief, and as the facts are undisputed, we exercise our discretion to address a question of law, namely, whether the trial court had discretion to calculate the attorneys' fee award here by applying a rate higher than that actually billed. (See, e.g., In re Julien H. (2016) 3 Cal.App.5th 1084, 1089 [where "an appellant poses a question of law, the appellate court can exercise its discretion to address the issue"].)
In deciding this question, the Lawsons contend, the contractual language controls, and they submit neither paragraph 6(E) of the note nor paragraph 14 of the deed includes a provision requiring them to pay the banks' attorneys a bonus above the amount they actually billed. The Lawsons point in particular to language contained in paragraph 6(E), which they observe limited the note-holder's right of reimbursement to "its costs and expenses in enforcing" the note. But that language is followed by a sentence confirming that recoverable "costs and expenses . . . . include[d] . . . reasonable attorneys' fees." (Italics added.) Notably, neither attorneys' fees provision expressly limited reimbursement to the "actual" amounts billed.
" ' "It is well established that the determination of what constitutes reasonable attorney fees is committed to the discretion of the trial court . . . . [Citations.]" ' " (Espejo v. The Copley Press, Inc. (2017) 13 Cal.App.5th 329, 383.) " '[T]he " 'experienced trial judge is the best judge of the value of professional services rendered in his [or her] court, and while [this] judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.' " [Citations.]' " (Syers Properties III, Inc. v. Rankin (2014) 226 Cal.App.4th 691, 698.) As Wells Fargo notes, there is no requirement that the rate used in calculating a reasonable attorneys' fees award must "mirror the actual rate billed." (Id. at p. 701.) To the contrary, trial courts apply " ' "a reasonable hourly rate . . . . regardless of whether the attorneys claiming fees charge nothing for their services, charge at below-market or discounted rates, represent the client on a straight contingent fee basis, or are in-house counsel. [Citations.]" [Citation.]' [Citations.]" (Ibid.)
Here, attorney Brown stated in his declaration that his firm charged the banks a "below-market" amount—primarily, an hourly rate of $213.75—"under a pre-negotiated alternative fee arrangement." But, Brown advised, in his experience, the requested hourly rate of $250.00 would be an "exceedingly reasonabl[e]" rate for the local market (Marin County and the San Francisco Bay Area, generally). The Lawsons did not dispute this point. The trial court, therefore, acted within its discretion in applying the slightly higher hourly rate of $250.00 to calculate the attorneys' fees award. As there was no error, we affirm the order awarding fees.
III. DISPOSITION
The judgment is affirmed.
/s/_________
Rivera, Acting P.J. We concur: /s/_________
Streeter, J. /s/_________
Kennedy, J.
Judge of the Superior Court of California, County of Contra Costa, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.