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Calif. App. Court (5th Dist) Holds Borrower Entitled to Atty Fees for Successful TRO

The Court of Appeal for the Fifth District of California recently held that a court may award attorneys’ fees pursuant to Civil Code § 2924.12(h) when a borrower obtains a temporary restraining order to stop a non-judicial foreclosure sale.

A copy of the opinion in Hardie v. Nationstar Mortgage LLC is available at:  Link to Opinion.

The borrowers filed an ex parte application for a temporary restraining order (“TRO”) to enjoin the trustee’s sale of their home.  The application contained a request for attorneys’ fees and costs.

The trial court granted the TRO and set a hearing to show cause for a preliminary injunction.  The order required the defendants to pay $3,500 in attorneys’ fees pursuant to Civil Code § 2924.12.

The loan servicer brought this appeal of the attorneys’ fees award.

As you may recall, section 2924.12(h) provides that:  “[a] court may award a prevailing borrower reasonable attorney’s fees and costs in an action brought pursuant to this section.  A borrower shall be deemed to have prevailed for purposes of this subdivision if the borrower obtained injunctive relief or was awarded damages pursuant to this section.”

The loan servicer argued that the borrowers did not prevail for purposes of section 2924.12(h) because they merely obtained a TRO.

The Appellate Court considered Monterossa v. Superior Court, (2015) 237 Cal. App. 4th 747, where the Third District held that section 2924.12(h) permitted an award of attorneys’ fees to a borrower who had obtained preliminary injunction, as opposed to permanent, injunctive relief.

The Monterossa court concluded that such fees were permitted by the plain language of the statute because “injunctive relief” incorporates “both preliminary and permanent injunctive relief.”  Monterossa, 237 Cal. App. 4th at 753.

The Monterossa court explained that the purpose of the statutory scheme is to provide borrowers with a meaningful opportunity to obtain available loss mitigation options, and a borrower who successfully forces the lender to comply with the statutory process by obtaining a preliminary injunction has prevailed.  Monterossa, 237 Cal. App. 4th at 755.

The Appellate Court found this reasoning persuasive, holding that “the plain statutory language is dispositive of this appeal.”  The borrowers prevailed in obtaining a TRO, which was a form of injunctive relief, and therefore the Court held that attorneys’ fees were authorized under the statute.

The loan servicer also argued that the fee request was procedurally defective.

As you may recall, a party may seek statutory attorneys’ fees as costs through any of four methods: (1) on noticed motion, (2) at the time a statement of decision is rendered, (3) on application supported by affidavit made concurrently with a claim for other costs, or (4) on entry of a default judgment.  Code Civ. Proc. § 1033.5(a)(10)(B), (c)(5).

Rule 3.1702 of the California Rules of Court proscribes a noticed motion procedure whenever the court is required to determine whether the requested fee is reasonable or whether the requestor is a prevailing party.

Civil Code § 2924.12(h) requires a determination that the plaintiff is a prevailing party and that the requested fees are reasonable, but the borrowers did not file a notice motion for the fee request.  Thus, the Appellate Court held that the grant of fees based on an ex parte application was improper.

Accordingly, the Appellate Court reversed the award of attorneys’ fees and remanded for further proceeding.

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Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.

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