Faubion v. FCI Lender Services, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 FAUBION, et al., No. 2:20-cv-01463-JAM-CKD 12 Plaintiffs, 13 v. ORDER DENYING PS FUNDING INC.’S MOTION FOR ATTORNEY’S FEES 14 FCI LENDER SERVICES, INC., et al., 15 Defendants. 16 17 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND1 18 In March 2019, Veronica Faubion and her husband, Brandon 19 Hintz (“Plaintiffs”), obtained a loan from PS Funding, Inc. 20 (“Defendant”) for real property known as 6350 Carolinda Drive, 21 Granite Bay, California. First Am. Compl. (“FAC”) ¶¶ 5, 41, ECF 22 No. 15. On July 3, 2019, Defendant PS Funding, sent a letter 23 indicating it considered Plaintiffs to be in default. Id. ¶ 46. 24 A day before the property was to be sold at foreclosure, Mr. 25 Hintz filed a voluntary chapter 13 petition in the United States 26 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for May 18, 2021. 1 Bankruptcy Court for the Eastern District of California. Order 2 at 5, ECF No. 30. This Bankruptcy Case was dismissed on June 6, 3 2020. Id. 4 Three days later, On June 9, 2020, Mr. Hintz filed a chapter 5 7 petition in the Bankruptcy Court. Id. On July 13, 2020, the 6 Bankruptcy stay expired, allowing PS Funding to proceed with the 7 foreclosure. Id. On July 21, 2020, Plaintiffs filed suit 8 against FCI and PS Funding asserting: (1) violations of the 9 Homeowners Bill of Rights, California Civil Code § 2924.12; 10 (2) violations of the Real Estate Settlement Procedures Act, 12 11 U.S.C. § 2605(f); (3) Fraud; (4) Breach of Contract; (5) Breach 12 of Good Faith and Fair Dealing; and (6) Unfair Business 13 Practices. See generally Compl., ECF No. 1. That same day, 14 Plaintiffs filed an ex parte application for a temporary 15 restraining order, seeking to enjoin the trustee’s sale set for 16 July 22, 2020. TRO Mot., ECF No. 4. The Court denied this 17 motion, finding Plaintiffs did not demonstrate compliance with 18 Local Rule 231(b) and failed to show a likelihood of success on 19 the merits. Order, ECF No. 13. With no injunction in place, on 20 August 19, 2020, the Property was sold at a trustee’s sale. FAC 21 ¶ 59. 22 On October 13, 2020, Plaintiffs filed their First Amended 23 Complaint, amending the claims to account for the August 24 foreclosure and to seek damages instead of injunctive relief. 25 See generally FAC. Plaintiffs also added a claim for wrongful 26 foreclosure. Id. ¶¶ 106-115. Defendants then filed a motion to 27 dismiss, arguing that Plaintiffs did not have standing to 28 prosecute the claims as they became part of the bankruptcy 1 estate. See Defs.’ Mot. to Dismiss, ECF No. 21. The Court 2 agreed with Defendants, that Plaintiffs did not have standing to 3 bring the claims and dismissed the action without prejudice. See 4 generally Order, ECF No. 30. Defendant PS Funding (“Defendant”), 5 then brought the instant Motion for Attorneys’ Fees. Mot. for 6 Attorneys’ Fees, ECF No. 33. Plaintiffs opposed this motion. 7 Opp’n, ECF No. 36. Defendant replied. Reply, ECF No. 37. For 8 the reasons set forth below, the Court denies Defendant’s Motion. 9 10 II. OPINION 11 A. Judicial Notice 12 Plaintiffs request that the Court take judicial notice of: 13 (1) an Order Granting Dismissal of Chapter 7 Bankruptcy Without 14 Entry of Discharge and (2) a Notice of Entry of Order of 15 Dismissal. See Pls.’ Req. for Judicial Notice, ECF No. 39. As 16 matters of public record, these documents are proper subjects of 17 judicial notice. See Bennett v. Medtronic, Inc., 285 F.3d 801, 18 803 n.2 (9th Cir. 2002). Accordingly, the Court grants 19 Plaintiffs’ request. 20 B. Legal Standard 21 Generally, the prevailing litigant is not entitled to 22 collect attorneys’ fees from the losing party. Travelers Cas. & 23 Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 448 24 (2007). However, a statute or enforceable contract allocating 25 attorneys’ fees can overcome this rule. Id. “State law governs 26 the enforceability of attorneys’ fees in contract provisions.” 27 Gilbert v. World Sav. Bank, FSB, No. C 10-05162 WHA, 2011 WL 28 995966, at *1 (N.D. Cal. Mar. 21, 2011) (citing Sec. Mortgage 1 Co. v. Powers, 278 U.S. 149, 154 (1928)). California allows 2 parties to allocate attorneys’ fees by contract. Id. (citing 3 Cal. Code Civ. Proc. § 1021). 4 When determining whether and how attorneys’ fees should be 5 awarded under a contract California Civil Code Section 1717 6 applies. Winding v. Wells Fargo Bank, No. 1:11-cv-00555-AWI- 7 SKO, 2012 WL 603217, at *10 (E.D. Cal. Feb. 23, 2012) (citing 8 Sears v. Baccaglio, 60 Cal.App.4th 1136, 1157 (1998)). It 9 provides that: 10 In any action on a contract, where the contract provides 11 that attorney’s fees and costs, which are incurred to enforce the contract, shall be awarded either to one of the 12 parties or to the prevailing party, then the party who is 13 determined to be the prevailing party on the contract, whether he or she is the party specified in the contract or 14 not, shall be entitled to reasonable attorney’s fees in addition to other costs. 15 Cal. Civ. Code § 1717(a). “[I]n deciding whether there is a 16 ‘party prevailing on the contract,’ the trial court is to 17 compare the relief awarded on the contract claim or claims with 18 the parties’ demands on those same claims.” DisputeSuite.com, 19 LLC v. Scoreinc.com, 2 Cal.5th 968, 974 (2017) (quoting Hsu v. 20 Abbara, 9 Cal.4th 863, 876 (1995)). “The prevailing party 21 determination is to be made only upon final resolution of the 22 contract claims and only by ‘a comparison of the extent to which 23 each party ha[s] succeeded and failed to succeed in its 24 contentions.’” Id. 25 C. Analysis 26 Here, the parties contracted for the payment of attorneys’ 27 fees incurred to enforce the contract. See Mot. at 8-9; Branch 28 1 Decl. at Ex. 1-3, ECF No. 33-1. Accordingly, California Civil 2 Code § 1717 applies. Defendant argues it is entitled to 3 attorneys’ fees as the Court granted its motion to dismiss 4 Plaintiffs’ contract claims. Mot. at 14-15. Plaintiffs, 5 however, dispute that Defendant was the prevailing party as 6 there was never a final resolution of these claims. Opp’n at 6- 7 9. 8 The Court agrees with Plaintiffs. The Court previously 9 dismissed Plaintiffs’ First Amended Complaint for lack of 10 standing, finding all the claims were property of the bankruptcy 11 estate. See Order at 10-11, ECF No. 30. While the California 12 Supreme Court has recognized that “a defendant might prevail on 13 the contract within the meaning of section 1717 by winning a 14 purely procedural dismissal” if for example “refiling in another 15 forum would be legally barred [. . .] or would be otherwise 16 impossible or impracticable,” DisputeSuite, 2 Cal.5th at 975, 17 this Court specifically dismissed Plaintiffs’ claims without 18 prejudice. Id. at 11. Thus, if Plaintiffs were able to resolve 19 their standing issues, they could refile the lawsuit. Because 20 the Court never reached the merits of Plaintiffs’ contracts 21 claims, neither Plaintiffs nor Defendant were the prevailing 22 party for purposes of attorneys’ fees. See Safley v. Wells 23 Fargo, NA, No. 2:12-CV-00795-JAM-CKD, 2012 WL 4364254 at *1 24 (E.D. Cal. Sept. 21, 2012); see also Vistan Corp. v. Fadei, USA, 25 Inc., No. C-10-04862 JCS, 2013 WL 1345023, at *3 (N.D. Cal. Apr. 26 2, 2013) (“Federal district courts appear uniform in denying 27 fees under Section 1717 where a non-merits decision results in 28 1 dismissal of the contract claim.”)? 2 3 IIl. ORDER 4 For the reasons set forth above, the Court DENIES 5 Defendant’s Motion for Attorneys’ Fees. 6 IT IS SO ORDERED. 7 Dated: June 29, 2021 g Me 9 HN A. MENDEZ, UNITED STATES DISTRICT 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 29 2 As the Court finds Defendant was not the prevailing party under 26 Section 1717, it does not reach the parties’ dispute as to whether Plaintiffs’ consumer rights claims qualify as “on the 27 contract” or interrelated for purposes of Section 1717. See Reynolds Metals Co. v. Alperson, 25 Cal.3d 124, 129-30 (1979); 28 | Mot. at 15-18; Opp’n at 9-10; Reply at 4-5.