8747 Shoreham v. Bank of New York Mellon CA2/1 ( 2021 )

Filed 4/2/21 8747 Shoreham v. Bank of New York Mellon CA2/1
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
8747 SHOREHAM, LLC, B294377, B296777
Plaintiff and Appellant, (Los Angeles County
v. Super. Ct. No. BC667404)
BANK OF NEW YORK MELLON,
as Trustee, etc.,
Defendant and Appellant;
NATIONSTAR MORTGAGE LLC,
Movant and Appellant.
APPEALS from orders of the Superior Court of Los Angeles
County, William Fahey, Judge. Affirmed.
Ferguson Case Orr Paterson and Wendy C. Lascher for
Plaintiff and Appellant 8747 Shoreham, LLC (case No. B296777).
Hall Griffin, Howard D. Hall, Taylor R. Dalton, Jered T.
Ede, and Elena A. Leonard for Movant and Appellant Nationstar
Mortgage LLC (case No. B294377).
Buchalter, Robert M. Dato and Paul A. Alarcón for
Defendant, Appellant and Respondent Bank of New York Mellon,
as Trustee, etc. (case Nos. B294377 & B296777).
Ferguson Case Orr Paterson, Wendy C. Lascher, John A.
Hribar; Law Offices of Rodney T. Lewin and Rodney T. Lewin
for Plaintiff and Respondent 8747Shoreham, LLC (case
No. B294377).
Hall Griffin, Howard D. Hall and Taylor R. Dalton
for Movant and Respondent Nationstar Mortgage LLC (case
No. B296777).
________________________
This matter involves a dispute regarding real property
currently owned by 8747 Shoreham, LLC (Shoreham). The
dispute has a long and tortuous procedural history spanning
three separate lawsuits over the course of almost a decade. The
appeals consolidated and now before this court are from one such
lawsuit, brought by Shoreham against Bank of New York Mellon,
as Trustee of SAMI II Trust 2006-AR7, Mortgage Pass-Through
Certificates, Series 2006-AR7 (BONY), owner of a deed of trust
BONY contends still encumbers the property. The suit ended in
a default judgment against BONY after it and its loan servicer,
Nationstar Mortgage LLC (Nationstar), failed to respond to
multiple notices of the proceeding. BONY, Nationstar, and
Shoreham separately appeal from three different orders the trial
court issued in that suit. We affirm all three.
BONY’s Appeal (Case No. B294377): BONY filed two
motions to set aside the default judgment against it, one based
on Nationstar’s mistake and neglect, and another two months
later based on an argument that the judgment is void. (§ 473,
2
subds. (b) & (d).)1 The trial court denied both motions, and
BONY appeals from the court’s denial of the second motion only.
BONY argues the trial court improperly viewed the second
motion as a renewed motion and/or motion for reconsideration
under section 1008, and thus erred by denying the motion for
failure to comply with section 1008’s procedural requirements.
Even if the trial court did err in concluding BONY’s second
motion was subject to section 1008, we conclude any such error
was harmless, because as a matter of law, the judgment was not
void.
Nationstar’s Appeal (Case No. B294377): The same
day the trial court denied BONY’s second motion to set aside,
Nationstar moved to intervene in the action. Nationstar’s motion
argued that the terms of BONY’s and Nationstar’s loan servicing
agreement give Nationstar a direct interest in the property,
the deed of trust, and the outcome of the litigation, and that, if
permitted to intervene, Nationstar would seek an equitable lien
on the property and move to set aside the default judgment as
void. The court denied Nationstar’s motion to intervene, and
Nationstar appealed. Even if the trial court abused its discretion
in denying the motion, any such error could not prejudice
Nationstar, as Nationstar could not have obtained an equitable
lien or successfully moved to set aside the judgment as void.
Shoreham’s Appeal (Case No. B296777): Finally,
Shoreham sought to recover attorney fees under a provision of
the deed of trust and Civil Code section 1717. The trial court
denied Shoreham’s motion for fees, concluding that Civil Code
1Unless otherwise indicated, all statutory references are to
the Code of Civil Procedure.
3
section 1717 did not apply to the deed of trust. We agree that
the deed does not contain an applicable attorney fees provision to
which Civil Code section 1717 applies. We thus need not address
Shoreham’s arguments as to why Shoreham may rely on an
agreement to which it is not a party as a basis for fees.
Accordingly, we affirm the orders on appeal in case
Nos. B294377 and B296777.
OVERVIEW OF FACTS AND PROCEEDINGS
RELEVANT TO ALL THREE APPEALS2
In May 2004, Aziza Shahi held sole title to residential
property located at 8747 Shoreham Drive in West Hollywood
(the property) and sold a 50 percent interest in the property
to City Breeze LLC and Neutraceutical Services of America
(collectively, City Breeze). At the time Shahi sold City Breeze
this interest, the property was encumbered with a mortgage of
about $1.3 million.
In 2006, Shahi repaid the mortgage by obtaining a $2.36
million loan from America’s Wholesale Lender, secured by a deed
of trust recorded against the property in 2006 (the deed of trust).
The deed of trust identified Shahi as the sole borrower, America’s
Wholesale Lender as the sole lender, Recontrust Company
(Recontrust) as the trustee, and Mortgage Electronic Reservation
Systems, Inc. (MERS) as the beneficiary.
2 Factual and procedural background relevant to all
three appeals consolidated before this court are presented in
this section. As necessary, we provide additional facts relevant
to Nationstar’s appeal regarding its motion to intervene and
Shoreham’s appeal regarding its attorney fees motion in the
respective sections discussing those appeals below.
4
Shahi stopped making payments on the loan secured by
the deed of trust in approximately 2010.
On June 2, 2010, Recontrust recorded two documents
regarding the property: A “notice of trustee’s sale” of the
property based on Shahi being in default, and an “assignment
of deed of trust,” in which MERS assigned “all beneficial interest
under the certain deed of trust” to BONY. (Capitalization
omitted.)
A. The First Lawsuit: The City Breeze Action
A month later, City Breeze filed an action against a
number of financial entities3—not including BONY—all of which
City Breeze alleged “claim[ed] a beneficial interest in the deed of
trust” and “related to each other in some capacity.” City Breeze
later added Shahi as a defendant as well. City Breeze alleged
that Shahi’s signature on the deed of trust was a forgery and that
City Breeze had no knowledge of the deed or loan. City Breeze
sought to block the noticed foreclosure sale of the property and
obtain an equitable lien on the property in the amount City
Breeze had paid to Shahi in purchasing City Breeze’s 50 percent
interest. The court issued a preliminary injunction in August
2010 preventing Recontrust from moving forward with the
foreclosure.
3 The financial entities named as defendants included
Countrywide Home Loans, Inc. (Countrywide), BAC Home
Loans Servicing, LP (BAC), Bank of America, N.A. (BOA),
and America’s Wholesale Lender (collectively, the non-BONY
financial defendants).
5
1. Initial default judgments in the
City Breeze action
Shahi and the non-BONY financial defendants failed to
respond to the City Breeze action, and the trial court entered
defaults against them. In April 2011, the trial court entered
a permanent injunction prohibiting Shahi and the non-BONY
financial defendants from enforcing the deed of trust. That
judgment also awarded City Breeze a $1.84 million special
statutory lien under Civil Code section 3050, concurrent with
an equitable lien on the property in the same amount effective
May 24, 2004, and permitted City Breeze to foreclose on that lien.
Before City Breeze could foreclose on the lien, however,
the non-BONY financial defendants appeared. In October 2011,
the court granted their motion to set aside the default judgment
as against them. The default judgment against Shahi remained,
as did the judgment lien.
2. Non-BONY financial defendants’ efforts
in the City Breeze action
In January 2012, Fidelity National Law Group (the
Fidelity firm), counsel provided through the non-BONY financial
defendants’ title insurer (Fidelity), began representing the
non-BONY financial defendants in the City Breeze action.
Through their new counsel, the non-BONY financial defendants
raised concerns about preserving the deed of trust in the wake
of any sale to foreclose on City Breeze’s equitable lien. But
these concerns were on behalf of BOA and Countrywide, two
of the non-BONY financial defendants whom the Fidelity firm
erroneously believed to be the current beneficial owners of that
deed.
6
The non-BONY financial defendants indicated in a brief
to the court that they “[would] not oppose [a] sale” to foreclose
on City Breeze’s lien “so long as [City Breeze] agree[d] to
and compl[ied] with” two conditions: “[t]hat [City Breeze]
acknowledge that [the non-BONY financial] defendants[’] deed
of trust [was] senior to [City Breeze’s] interest in the subject
property” and “[t]hat the sale of the dwelling [be] subject to the
[deed of trust] held by [the non-BONY financial] defendants.”
(Capitalization omitted.)
In April 2012, the non-BONY financial defendants and
City Breeze filed a stipulation in which the non-BONY financial
defendants agreed, in light of their and City Breeze’s efforts to
reach a settlement, that City Breeze could go forward with a
foreclosure sale to collect on its equitable lien “as against . . .
Shahi and as against the . . . property on condition that if any
third party should purchase the . . . property at the sheriff ’s
sale, [City Breeze] will deposit any and all monies received from
such third party” into an escrow account “to be distributed only
upon direction of the court.” (Capitalization omitted.) Notably,
unlike the non-BONY financial defendants’ brief to the court, the
stipulation did not include any language regarding the seniority
of the deed of trust or any agreement as to the continuing
viability of the deed.
3. Sheriff ’s sale of the property triggers
BONY’s involvement in the City Breeze
action
The court ordered that the property be sold “in the manner
provided in . . . Sections 701.510–701.680,” the sections of the
California’s Enforcement of Judgments law addressing the sale
of property as a means of collection. (See §§ 680.010–724.260.)
7
As to the “order of priority” for proceeds from that sale, the order
required that proceeds go first to pay costs, and that, per the
parties’ stipulation, should a third party purchase the property,
the remainder of the proceeds would be placed in escrow. The
order did not address the deed of trust or relative priority of City
Breeze’s equitable lien in any way.
Because BONY was identified as a lienholder in the county
records regarding the property, BONY received notice of the
sheriff ’s sale to collect on City Breeze’s equitable lien. BONY
thereby became aware of the City Breeze action. Like BOA,
BONY’s title insurer was Fidelity, and BONY appeared in the
City Breeze action through the Fidelity firm, which was already
representing the non-BONY financial defendants in the action.
At this point, the Fidelity firm became aware that BONY was the
current beneficial owner of the deed of trust.
Accordingly, on October 12, 2012, the Fidelity firm
filed a notice of absence of real party in interest and notice of
lis pendens on BONY’s behalf. The Fidelity firm also contacted
City Breeze’s counsel to discuss the lack of BONY’s involvement
in the proceedings and BONY’s view that City Breeze’s default
judgment should therefore be vacated. City Breeze nevertheless
went forward with the sheriff ’s sale of the property a few days
later.
BONY attended the October 17, 2012 sale and passed
out copies of the lis pendens, after which all of the third party
potential buyers present chose not to bid on the property. BONY
likewise chose not to bid on the property. City Breeze purchased
the property for $2,100,000 through a credit bid. City Breeze
recorded a sheriff ’s deed shortly after the sale. The deed
reflected a sale to City Breeze under a writ of execution on a
8
judgment entered on April 26, 2011 in favor of City Breeze and
against Shahi.
4. BONY’s efforts to intervene and undo
the City Breeze action judgment and
resulting sheriff ’s sale
On October 26, 2012, BONY sought to intervene in the
City Breeze action as a real party in interest vis-à-vis the deed
of trust, and in that capacity filed a motion to set aside both the
default judgment against Shahi and the resulting order of sale.
BONY’s motion argued that the default judgment against Shahi
was void, because the court lacked jurisdiction to enter a
judgment absent an indispensable party (BONY), and because
the judgment substantially affected the right of a nonparty
(BONY), such that the court had acted outside the bounds of its
jurisdiction. BONY further argued that judicial action pursuant
to a void judgment is likewise void, such that both the order
permitting the sheriff ’s sale and the judgment must be set aside.
The court denied the motion. In so doing, the court found
“most significant[ ]” that neither BONY nor its title insurer
Fidelity had taken prompt action to protect BONY’s interest in
the deed of trust. “Fidelity is [BONY’s] title insurer. And on
April 6, 2012, Fidelity’s attorney . . . , who . . . is with [the
Fidelity] firm, stipulated to a foreclosure sale on behalf of [the
non-BONY financial defendants]. So it appears to me that any
adverse action suffered by [BONY] was due to either, one, the
actions of its agent and their attorneys; or, two, [BONY’s] failure,
and/or its title company’s failure to timely appeal the [default
judgment against Shahi].” The court expressed concern that
BONY had failed to take action in response to legal notices of
the sheriff ’s sale—noting specifically that it had not, for example,
9
filed an ex parte application for a restraining order to stop the
sale—despite BONY having received proper notice of the sale.
BONY did not appeal the court’s denial of its motion to set
aside as void the default judgment and the resulting sale order.
(See Gassner v. Stasa (2018) 30 Cal.App.5th 346, 356 [denial of
motion to set aside judgment is appealable].)
The court did, however, later permit BONY to file a
complaint in intervention seeking effectively the same relief it
had sought through the motion to set aside the default judgment.
Namely, BONY’s September 2013 complaint in intervention
sought a judicial declaration that the lien on the property under
the deed of trust was senior to City Breeze’s judgment lien.
Anticipating an argument from City Breeze that the judgment
lien extinguished the deed of trust, the complaint also sought,
in the alternative, an equitable lien on the property senior to all
other liens.
5. Shahi appearance and transfer of the
property to City Breeze
Meanwhile, Shahi appeared in the City Breeze action,
and ultimately obtained a September 2014 order setting aside
the default judgment against her based on lack of proper service.
As a result of this order, the judgment on which the sheriff ’s
sale was based was completely set aside. The court did not,
however, set aside the order for sheriff ’s sale or otherwise call
into question City Breeze’s ownership of the property resulting
therefrom.
Instead, City Breeze and Shahi entered into a court-
approved stipulation in October 2014, pursuant to which City
Breeze conveyed the property back to Shahi via quitclaim deed.
10
6. BONY motion for judgment on the
pleadings
BONY moved for judgment on the pleadings as to
City Breeze’s complaint (but not on BONY’s complaint in
intervention). The court granted the motion. In so doing, the
court did not determine that the sheriff ’s sale was invalid or void
for any reason. Rather, the court found that City Breeze was
aware of a pre-existing encumbrance on the property when City
Breeze purchased its 50 percent interest, and the court took
judicial notice of the fact that BONY was the current beneficial
owner of the deed of trust securing the loan used to pay off that
pre-existing encumbrance. The court determined that equity
required that BONY should receive an equitable lien in the
amount of the encumbrance on the property at the time City
Breeze purchased its interest therein, and that this lien be in a
superior position to any other liens.
The court found that the amount of the encumbrance on
the property at the time City Breeze purchased its 50 percent
interest was $1.3 million, but required the parties to submit
additional briefing to determine the exact amount “due and
owing on the BONY senior [equitable] lienholder interest.” This
never occurred, however, due to the successful settlement of all
claims between the parties that followed.
7. Settlement and dismissal of all claims in
City Breeze action
Specifically, before any further briefing or proceedings
took place to effectuate the court’s ruling on BONY’s motion
for judgment on the pleadings, City Breeze settled with BONY
and the non-BONY financial defendants and dismissed City
Breeze’s causes of action against them with prejudice. BONY
11
then dismissed its complaint in intervention against City Breeze
with prejudice, representing to the court that “the issues in that
pleading were adjudicated in the motion for judgment on the
pleadings decision arising out of [City’s Breeze’s] complaint
against BONY.” (Capitalization omitted.) This resulted in a
final dismissal of all claims between all parties (including Shahi)
in the City Breeze action in August 2017.
Thus, there was never a final judgment between City
Breeze and BONY or any of the non-BONY financial defendants
in the City Breeze action. Nor did the “adjudicat[ion]” on which
BONY apparently relied in choosing to dismiss its complaint in
intervention ever become part of a final judgment.
8. Transfers of the property by Shahi
On March 15, 2017, the attorney who represented Shahi
in the City Breeze action recorded two quitclaim deeds, through
which Shahi purported to have transferred the entirety of her
interest in the property on July 22, 2014. These deeds reflect
that, on that date, Shahi “grant[ed]” her former daughter-in-law
a 60 percent interest in the property and “grant[ed]” Shoreham a
40 percent interest in the property. Both deeds were captioned
“quitclaim deed.” (Capitalization omitted.)
It is undisputed that, at the time of these purported
transfers, Shahi held no interest in the property.
B. The Second Lawsuit: The Shoreham Action
Having received no payments on the loan secured by the
deed of trust since approximately 2010, BONY reinstated its
efforts to foreclose on the property and collect on the original
$2.36 million loan to Shahi it secured. In response, in July
2017, Shoreham initiated the action underlying this appeal (the
12
Shoreham action).4 Shoreham’s complaint sought a declaration
that the deed of trust was void because Shahi’s signature thereon
had been forged, and/or a declaration that the deed of trust had
been extinguished by the foreclosure sale. Shoreham further
alleged that it was a bona fide purchaser of the property via
the sheriff ’s sale in 2012, “without notice that [BONY] continued
to allege that the [deed of trust] was a current encumbrance
on the property and not extinguished by the [sheriff ’s sale].”
(Capitalization omitted.)
A month after Shoreham filed the Shoreham action, Shahi
executed a “grant deed” purporting to transfer 100 percent of her
interest in the property to Shoreham.5
C. Nationstar’s Errors and Resulting Default
Judgment in Shoreham Action
From April 2014 to the present, Nationstar has acted as the
servicer of the deed of trust. As such, Nationstar is contractually
obligated to handle loan-related litigation on BONY’s behalf.
Nationstar made a series of decisions in the way it handled
the Shoreham litigation that ultimately led to entry of default
against BONY in that action.
When BONY received a notice of lis pendens regarding
the Shoreham action, it sent the document to Nationstar and
requested that, per the servicing agreement between BONY
4 Shoreham was (and is) represented by the same attorney
who represented Shahi in the City Breeze action, which attorney
is also an organizer of Shoreham and the manager and agent for
service of process for the company.
5A deed correcting the property description in the August
2017 deed was executed and recorded in September 2018.
13
and Nationstar, Nationstar defend and indemnify BONY in
the matter. Nationstar indicated that it would do so. The
service of the summons and complaint were likewise forwarded
to Nationstar for handling. Because Nationstar incorrectly
assumed these documents related to the concluded City Breeze
action, Nationstar failed to take any action in response to them.
As a result, BONY did not respond to the complaint in the
Shoreham action.
Based on BONY’s failure to respond, Shoreham submitted
to the court several requests for entry of default. The court
rejected the first five of these, based on inaccuracies and
inconsistencies in the names of the parties. The trial court,
however, granted Shoreham’s sixth such request (which corrected
all of these inaccuracies), and entered a default judgment against
BONY on November 14, 2017.
All six of Shoreham’s requests for default were properly
served on BONY’s agent for service of process, as was the default
judgment prove up package after the sixth request was granted.
BONY forwarded them all to Nationstar for handling, but
Nationstar took no action in response. At one point, an agent
for Nationstar contacted Shoreham’s counsel with a question
related to Nationstar’s mistaken belief that the Shoreham
requests for default involved a tax lien issue. Although the
details of this conversation are a subject of some dispute, it is
clear that Shoreham’s counsel did not clarify the nature or status
of the Shoreham action, except to the extent he stated there was
no property tax lien issue. Relying on these representations,
Nationstar closed the matter. BONY emailed Nationstar several
times to inquire about the status of the Shoreham action and the
numerous documents in the Shoreham action that BONY had
14
been forwarding to Nationstar, but took no further action when
Nationstar failed to respond.
On January 18, 2018, the trial court entered a default
judgment against BONY, finding that the foreclosure sale was
valid and final, and consequently that the deed of trust had been
extinguished by operation of law. The trial court further enjoined
BONY from conducting any foreclosure sale with respect to the
property based on the deed of trust.
D. The Third Lawsuit: The BONY Action6
In May 2018, while attempting to institute foreclosure
proceedings on the property under the deed of trust, Nationstar
first became aware of the default judgment against BONY in
the Shoreham action. BONY and Nationstar then initiated a new
lawsuit against Shoreham (the BONY action) with the goal “to
ultimately establish that the 2006 deed of trust remains valid.”
The thrust of BONY and Nationstar’s complaint was
that the Shoreham action and default judgment therein were
the result of fraud by Shoreham that deprived BONY of its
rights under the deed of trust. BONY and Nationstar alleged
that Shoreham’s complaint in the Shoreham action contained
fraudulent allegations—specifically, allegations that the sheriff ’s
sale in the City Breeze action had extinguished the deed of
trust—and that the judgment in the second action was therefore
void. The complaint included causes of action for fraud,
cancellation of instrument, slander of title, declaratory relief,
and quiet title. BONY and Nationstar sought, inter alia, a
6Shoreham’s May 19, 2020 request for judicial notice of
documents related to the third lawsuit, which BONY and
Nationstar opposed, is hereby granted.
15
declaration that the judgment in the Shoreham action was
void, that the 2012 sheriff ’s sale did not extinguish the deed
of trust, and that the deed of trust is still a valid first-priority
encumbrance on the property.
E. BONY’s June 2018 Motion to Set Aside the
Default Judgment in Shoreham Action as
the Result of Attorney Mistake
Less than two weeks after BONY and Nationstar filed
the BONY action seeking a declaration that the Shoreham
action judgment was based on fraud, BONY also moved in
the Shoreham action to set aside that same judgment on a
different basis. Specifically, BONY moved to set aside the
default judgment in the Shoreham action under section 473,
subdivision (b), which allows a court to “relieve a party or his
or her legal representative from a judgment . . . taken against
him or her through his or her mistake, inadvertence, surprise,
or excusable neglect.” (§ 473, subd. (b).)
BONY argued that Nationstar was contractually obligated
to defend BONY in the Shoreham action, so Nationstar was
acting as BONY’s attorney when its mistake and neglect led
to the default judgment. The court denied the motion. The
court explained that Nationstar was “a servicer that [BONY]
[was] trying to morph into the role of an attorney,” and that
Nationstar’s obligation to defend BONY created a relationship
most analogous to that of an insured and its insurer, not an
attorney and her client. The court further noted that even if
Nationstar had been acting as BONY’s attorney, Nationstar’s
conduct constituted “malfeasance . . . below the standard of the
profession in such a dramatic way that [section] 473 relief would
16
not be proper.” BONY did not appeal the court’s denial of the
motion.
F. Shoreham’s Motion to Strike the Complaint
in the BONY Action
At the same hearing during which the court denied
BONY’s section 473, subdivision (b) motion to set aside the
default judgment in the Shoreham action, the court ruled on a
special motion to strike under section 425.16 (an anti-SLAPP
motion), through which Shoreham sought dismissal of the
complaint in the BONY action. Shoreham’s anti-SLAPP motion
argued the claims in the BONY complaint arose from Shoreham
filing a complaint and obtaining a judgment in court, which
constitute protected “ ‘petitioning activity,’ ” and that the
litigation privilege absolutely precludes liability based on
damages resulting from such activity.7
The court granted Shoreham’s motion and dismissed the
BONY action with prejudice. The court’s ruling relied entirely
on the litigation privilege to satisfy both the first and second
7 An anti-SLAPP motion requires a court to engage in a
two-pronged analysis. First, the court determines whether the
complaint and/or the claims the movant seeks to strike “aris[e]
from” alleged protected free speech or petitioning activity.
(Baral v. Schnitt (2016) 1 Cal.5th 376, 396.) If so, the burden
shifts to the plaintiff to establish in the second prong of the
analysis that any such claims are legally sufficient in “a
summary-judgment-like procedure.” (Soukup v. Law Offices of
Herbert Hafif (2006) 39 Cal.4th 260, 278, 291.) Any claims and/or
allegations as to which the plaintiff fails to make a prima facie
showing should be stricken. (Baral v. Schnitt, supra, at p. 396.)
17
prongs of the anti-SLAPP statute.8 Judgment was entered in
Shoreham’s favor on August 20, 2018. BONY did not appeal.
G. BONY’s September 2018 Motion to Set Aside
the Default Judgment in the Shoreham Action
as Void
Less than a month later, BONY filed another motion to
set aside the judgment in the Shoreham action, this time seeking
such relief under section 473, subdivision (d) and on the basis
that the judgment was void. The motion argued that the
judgment was void for several reasons, only two of which BONY
raises on appeal. First, BONY argued that the 2012 sheriff ’s sale
was void, so the Shoreham action judgment was likewise void,
because it is premised on allegations that the deed of trust was
extinguished at the (void) sheriff ’s sale. As to why the 2012
sheriff ’s sale was void, BONY’s motion presented the same
bases that BONY had raised in BONY’s motion to set aside
as void both the sheriff ’s sale and the default judgment in the
City Breeze action years earlier: that the default judgment
in the City Breeze action was void for failure to involve an
indispensable party (BONY), and a sale resulting from such a
void (and later set aside) judgment is likewise a judicial nullity.
Second, BONY’s motion argued that Shoreham did not have
standing to bring the Shoreham action, and that this rendered
8 Specifically, the court explained that “[t]he gravamen of
[the] complaint is defendants allege fraud in drafting and filing
[of a lawsuit] . . . . The actions of [Shoreham] in filing the earlier
case are absolutely protected by the litigation privilege. So the
first prong of the analysis is met. And according to [Rusheen v.
Cohen (2006) 37 Cal.4th 1048], that also answers the [second]
prong of the anti-SLAPP analysis.”
18
judgment in the action void. At the hearing on the motion,
BONY explained it had not previously raised these arguments
because BONY’s new counsel had not yet secured many of the
relevant documents from the City Breeze action at the time
BONY made its first motion to set aside.
The court concluded that BONY’s motion was a motion for
reconsideration under section 1008, because it sought the same
relief as the motion BONY had filed just a few months earlier
(namely, an order setting aside the Shoreham action judgment).
The court denied the motion on the basis that it did not meet
the requirements set forth in section 1008. The court found it
“especially problematic because all of the evidence relied on in
support of this new motion [had] been well known to BONY for
many years,” so BONY had not shown “new or different facts,
circumstances, or law” of the type section 1008 requires. (§ 1008,
subds. (a) & (b).)
DISCUSSION
BONY’S APPEAL FROM THE TRIAL COURT’S DENIAL
OF BONY’S MOTION TO SET ASIDE THE SHOREHAM
ACTION JUDGMENT AS VOID (APPEAL NO. B294377)
BONY appeals from the trial court’s denial of BONY’s
September 2018 motion to set aside the judgment in the
Shoreham action as void. BONY argues that the trial court
incorrectly concluded section 1008 applies to BONY’s September
2018 motion. Even if BONY is correct that the trial court erred
in concluding that BONY’s September 2018 motion was subject
to section 1008, any such error would be harmless. As a matter
of law, the court could not have granted BONY’s September
2018 motion on either of the bases BONY raises on appeal.
Accordingly, and for reasons we discuss in greater detail below,
19
we affirm the court’s denial of BONY’s September 2018 motion
to set aside the judgment in the Shoreham action.
When, as is the case here, a motion to vacate a default
judgment as void is filed beyond the six-month deadline
in section 473, the court must look to the rules that govern
collateral attacks on judgments. (Becker v. S.P.V. Construction
Co. (1980) 27 Cal.3d 489, 492−493 (Becker).) Under those
rules, the court could only have concluded the Shoreham action
judgment was void if, at the time the judgment was issued, “the
court lacked personal or subject matter jurisdiction.” (Rochin v.
Pat Johnson Manufacturing Co. (1998) 67 Cal.App.4th 1228,
1239; accord, People v. American Contractors Indemnity Co.
(2004) 33 Cal.4th 653, 660−661; Abelleira v. District Court of
Appeal (1941) 17 Cal.2d 280, 288.) Put differently, the court
must have lacked jurisdiction to issue the judgment in the
“fundamental sense.” (Ibid.; accord, Fireman’s Fund Ins. Co. v.
Workers’ Comp. Appeals Bd. (2010) 181 Cal.App.4th 752, 767.)
A legally erroneous judgment is not void, as long as the court
had fundamental jurisdiction to issue it. (Pajaro Valley Water
Management Agency v. McGrath (2005) 128 Cal.App.4th 1093,
1101 (Pajaro Valley Water).)
On appeal, BONY argues the Shoreham judgment is void
for two distinct reasons: (1) Shoreham lacked standing to bring
the Shoreham action, and (2) the 2012 sheriff ’s sale was void
and thus could not, as the Shoreham action complaint alleges,
extinguish the deed of trust. As a matter of law, neither of these,
even if true, could deprive the court of fundamental jurisdiction
to issue the Shoreham action judgment. Thus, the court did not
commit reversible error in declining to consider the merits of
20
BONY’s motion to set aside the Shoreham action judgment as
void.
A. The Shoreham Judgment Is Not Void Based
on Lack of Standing
BONY argues that the Shoreham action judgment is void
because Shoreham did not have standing to prosecute it,9 and
that “[a] lack of standing is a jurisdictional defect to an action
that mandates dismissal.” (Cummings v. Stanley (2009) 177
Cal.App.4th 493, 501.)
Standing is indeed “a jurisdictional issue that . . .
must be established in some appropriate manner.” (Waste
Management of Alameda County, Inc. v. County of Alameda
(2000) 79 Cal.App.4th 1223, 1232, disapproved on another
ground in Save the Plastic Bag Coalition v. City of Manhattan
Beach (2011) 52 Cal.4th 155, 160.) But something that is
“jurisdictional” does not necessarily go to a court’s fundamental
jurisdiction. “ ‘ The term “jurisdiction,” “used continuously in a
variety of situations, has so many different meanings that no
single statement can be entirely satisfactory as a definition.”
[Citation.] Essentially, jurisdictional errors are of two types.
“Lack of jurisdiction in its most fundamental or strict sense
means an entire absence of power to hear or determine the case,
an absence of authority over the subject matter or the parties.”
[Citation.] When a court lacks jurisdiction in a fundamental
9 Specifically, BONY argues Shoreham lacked standing
because it did not have an ownership interest in the property
at any point during the Shoreham action. We need not reach the
parties’ arguments on this point, however, for reasons we discuss
above.
21
sense, an ensuing judgment is void, and “thus vulnerable to
direct or collateral attack at any time.” (Barquis v. Merchants
Collection Assn. (1972) 7 Cal.3d 94, 119 . . . .)’ ” (County of
Los Angeles v. Harco National Ins. Co. (2006) 144 Cal.App.4th
656, 661.)
Standing does not concern the court’s fundamental
jurisdiction to hear a case; it concerns the party’s authority to
invoke the court's jurisdiction. “ ‘ “ The fundamental aspect of
standing is that it focuses on the party seeking to get his [or her]
complaint before a . . . court, and not [on] the issues he [or she]
wishes to have adjudicated.” [Citations.]’ ‘The issue of standing
is determined by the courts as a matter of policy. In large
measure it depends on the fitness of the person to raise the
issues.’ ” (Chiatello v. City and County of San Francisco (2010)
189 Cal.App.4th 472, 481.) Thus, even if Shoreham lacked
standing to invoke the court’s jurisdiction, such lack of standing
would not rob the court of fundamental jurisdiction in the
Shoreham action, and would not provide a basis for voiding the
judgment resulting therefrom.
On reply, BONY argues that, because “ ‘[f]undamental
jurisdiction cannot be conferred by waiver, estoppel, or consent’ ”
(People v. Lara (2010) 48 Cal.4th 216, 225), and standing likewise
cannot be conferred by these means, standing is an issue that
goes to fundamental jurisdiction. That a party may not obtain
a sufficient interest in litigation to prosecute a claim via waiver
or consent does not render the court without power to adjudicate
that claim. Indeed, although a complaint by a plaintiff who lacks
standing is subject to a demurrer, such lack of standing “is not
necessarily fatal to continuation of the action” (CashCall, Inc. v.
Superior Court (2008) 159 Cal.App.4th 273, 287), because “courts
22
have permitted plaintiffs who have been determined to lack
standing, or who have lost standing after the complaint
was filed, to substitute as plaintiffs the true real parties in
interest.” (Branick v. Downey Savings & Loan Assn. (2006)
39 Cal.4th 235, 243.) If a plaintiff ’s lack of standing divested
the court of fundamental jurisdiction, the court would have no
authority to permit such amendment.
B. The Shoreham Action Judgment Is Not Void
Even if the 2012 Sheriff ’s Sale Was Void
BONY next argues that the 2012 sheriff ’s sale is void
on several bases.10 According to BONY, because Shoreham’s
complaint in the Shoreham action is premised on allegations
involving that purportedly void 2012 sheriff ’s sale, the default
judgment on Shoreham’s complaint is void as well.
We need not determine whether the 2012 sheriff ’s sale
was void, because even assuming it was, this would not render
the judgment in the Shoreham action void. BONY’s argument
to the contrary is, at base, that BONY can disprove key factual
allegations in the Shoreham action complaint regarding the
sheriff ’s sale, and/or that the complaint fails to state a claim
on which relief can be granted, and/or that BONY could assert
winning affirmative defenses based on the sheriff ’s sale being
void. These are all bases on which we might conclude that the
10 On a high level, those bases are as follows: (1) the
default judgment against Shahi in the City Breeze action that
ultimately resulted in the sheriff ’s sale was void for failure to join
BONY as an indispensable party, and was ultimately set aside,
and (2) a foreclosure sale cannot affect interests in the foreclosed
upon property belonging to those not party to the foreclosure
proceedings.
23
Shoreham action judgment is wrong—not that it is void. (See
Pajaro Valley Water, supra, 128 Cal.App.4th at p. 1101 [legally
erroneous action “beyond the sphere of action prescribed by
law” is voidable, not void].) “[A] failure to state a cause of action
[citation], insufficiency of evidence [citation], . . . and mistake of
law” are “nonjurisdictional errors for which collateral attack will
not lie” because they “[do] not reach the power of the court to act.”
(Armstrong v. Armstrong (1976) 15 Cal.3d 942, 950–951.) The
court had the power to issue the judgment it did in the Shoreham
action, because the court had jurisdiction over the parties and
the subject matter of the Shoreham complaint, the complaint
apprised BONY of the nature of Shoreham’s claim, and the
judgment did not award relief beyond that sought in the
complaint. (See Falahati v. Kondo (2005) 127 Cal.App.4th
823, 830 [“[a] default judgment is void if the trial court lacked
jurisdiction over the parties or the subject matter of the
complaint or if the complaint failed to ‘apprise[ ] the defendant
of the nature of the plaintiff ’s demand,’ or if the court granted
relief which it had no power to grant,” fn. omitted]; accord,
Molen v. Friedman (1998) 64 Cal.App.4th 1149, 1157.) BONY
does not and cannot argue to the contrary.11
11 Moreover, the logic of BONY’s argument that a void
2012 sheriff ’s sale means a void Shoreham action judgment is
that the Shoreham complaint relies solely on allegations that
BONY’s deed of trust was extinguished at the foreclosure sale
in order to establish that the deed of trust no longer encumbers
the property. But the complaint also alleges that the deed of
trust contains a forged signature and is not a valid encumbrance
on that basis as well. Shoreham raises this argument in its brief,
and BONY offers no rebuttal. Thus, even if failure to state a
24
BONY’s argument is also fundamentally at odds with
the fact that, by defaulting in the Shoreham action, BONY
admitted all the well-pleaded allegations in the complaint
(Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267,
281), which include the allegations regarding the 2012 sheriff ’s
sale, as BONY now claims these allegations are untrue, not
improperly pleaded. Nor can BONY argue it was unfairly
denied the opportunity to disprove the allegations in the
Shoreham complaint, as it did not appeal the court’s denial of
its section 473, subdivision (b) motion to set aside the default
as the result of attorney or party mistake.
Finally, we reject the implication in BONY’s arguments
that we should reach a different conclusion in order to avoid
forfeiture and facilitate a decision on the merits, something the
law generally favors. Over the long and tortuous course of this
dispute, BONY had at least two opportunities to raise the exact
argument it raises now regarding the 2012 sheriff ’s sale. It
declined to fully utilize either. Namely, in the City Breeze action,
BONY moved under section 473, subdivision (d) to set aside
as void both the City Breeze action judgment and the order
for the sheriff ’s sale resulting therefrom, basing both requests
on the City Breeze judgment being void for failure to join an
indispensable party, BONY. This is, of course, largely the same
basis BONY now cites for why the 2012 sheriff ’s sale is void. The
court denied the motion, and BONY did not appeal. The court
later permitted BONY to file a complaint in intervention in the
claim could provide a basis for voiding the judgment, were one
to strike the allegations regarding the foreclosure sale from the
Shoreham complaint, it could still allege a factual basis for the
relief it seeks.
25
City Breeze action that expressly sought a declaration about
the continuing validity of the deed of trust following the sheriff ’s
sale, based on allegations that that sale was void—again, the
same argument BONY now raises on appeal. BONY chose to
dismiss this complaint with prejudice as part of a settlement with
City Breeze. In doing so, BONY stipulated that the issues raised
in its intervention complaint had been sufficiently adjudicated
via the court’s order granting BONY’s motion for judgment on
the pleadings on City Breeze’s complaint, but that order never
became part of a final judgment. There is nothing inequitable
about BONY being denied yet another such opportunity at the
last minute, particularly when, in order to afford BONY such
an opportunity, we would need to ignore longstanding maxims of
what does and does not have the very drastic effect of rendering
a final judgment a legal nullity.
NATIONSTAR’S APPEAL FROM DENIAL OF
NATIONSTAR’S MOTION TO INTERVENE
(APPEAL NO. B294377)
A. Additional Facts Relevant to Nationstar’s
Appeal
1. Servicing agreement
As noted, from April 2014 to the present, Nationstar
has acted as the servicer of the 2006 deed of trust. Nationstar’s
rights, authority, and obligations as the loan servicer are
set forth in an agreement originally executed by Nationstar’s
and BONY’s respective predecessors in interest (the servicing
agreement), a redacted version of which is included in the record
on appeal. The servicing agreement required Nationstar to,
inter alia, collect monthly mortgage payments for BONY from
the borrower, deposit them in a custodial account, and remit
26
them to BONY, less a servicing fee, on a monthly basis. It
further obligated Nationstar to make monthly advances to BONY
equal to any delinquent mortgage payments, and to make timely
payments of all taxes and insurance on the property, should the
borrower fail to do so. In the event that such advances and/or
payments on BONY’s behalf exceed the amount Nationstar
collected, Nationstar is entitled to reimbursement from available
funds “prior to the rights of [BONY] to receive any funds,” and
may deduct the shortfall from its monthly remittances to BONY.
In the event that the borrower defaults on the loan, the servicing
agreement permits Nationstar to foreclose on the loan on BONY’s
behalf—unless BONY objects—and to collect the proceeds from
such foreclosure on BONY’s behalf and deposit them in the
custodial account.
A document purporting to assign the deed of trust
to Nationstar was publicly recorded on September 30, 2013.
Although Nationstar relies on that document to support certain
of its arguments on appeal, it is undisputed that BONY, not
Nationstar, is the owner of the loan and the beneficiary of the
deed of trust. Nationstar’s sworn declaration in support of its
motion to intervene admitted this, and Nationstar has repeatedly
represented that it is the servicer of the loan secured by the
deed of trust, acting on BONY’s behalf pursuant to the servicing
agreement. Moreover, Nationstar refuted having any interest
in the deed of trust when opposing Shoreham’s motion for
attorney fees discussed below, describing the assignment as
“a wild assignment to Nationstar [that] does not magically
transform it from the servicer of the loan into the loan’s owner.”
(Capitalization omitted.)
27
2. Nationstar’s motion to intervene in the
BONY action
Three months after Nationstar first became aware of the
Shoreham action, it filed a motion to intervene therein. During
the three months Nationstar waited to file that motion, BONY
was litigating the two requests to set aside the default judgment
in the Shoreham action discussed above. Immediately following
the trial court’s denial of BONY’s second motion to set aside—
indeed, later that same day—Nationstar filed its motion to
intervene. Nationstar’s motion argued it should be allowed to
intervene under both the mandatory and discretionary provisions
of governing intervention.12 (See § 387, subds. (b) & (d).)
The court denied Nationstar’s motion as untimely, and
because the court found Nationstar’s interests were adequately
represented by BONY. The court also concluded that Nationstar
12 Mandatory intervention is governed by section 387,
subdivision (d), which provides, inter alia, that “[t]he court
shall, upon timely application, permit a nonparty to intervene
in the action or proceeding if . . . [¶] . . . [¶] . . . [t]he person
seeking intervention claims an interest relating to the property
or transaction that is the subject of the action and that person
is so situated that the disposition of the action may impair or
impede that person’s ability to protect that interest, unless that
person’s interest is adequately represented by one or more of
the existing parties.” (§ 387, subd. (d)(1)(B).) The court also
has discretion to permit a nonparty to intervene in litigation
pending between others, provided that the nonparty has a
direct and immediate interest in the litigation; the intervention
will not enlarge the issues in the case; and the reasons for
intervention outweigh any opposition by the existing parties.
(See § 387, subd. (d)(2); Truck Ins. Exchange v. Superior Court
(1997) 60 Cal.App.4th 342, 346.)
28
did not have a direct interest in the Shoreham action, as required
for discretionary intervention, because Nationstar was “merely
an agent hired to service the loan,” so a refusal to permit
intervention would not impede Nationstar’s ability to enforce
any rights it had under the servicing agreement. Finally, the
court concluded that intervention was not warranted because
it would reopen a case after judgment had been entered and
would necessarily enlarge the issues to be litigated. Nationstar
appealed.
B. Any Error in the Trial Court’s Denial of the
Motion to Intervene Could Not Have Prejudiced
Nationstar
On appeal, Nationstar argues the court erred in denying
its request for intervention. Even assuming, without deciding,
that the trial court abused its discretion in denying this
request (see Sutter Health Uninsured Pricing Cases (2009) 171
Cal.App.4th 495, 512 [denial of motion to intervene reviewed for
abuse of discretion]), any such error was not prejudicial, because
neither of the actions Nationstar indicates it would take, were
it permitted to intervene, could secure Nationstar the relief it
seeks.
According to Nationstar, because Shahi failed to make
her mortgage payments and tax payments on the property,
Nationstar advanced “hundreds of thousands of dollars to BONY,
pursuant to the servicing agreement” between 2014 and 2017.
(Capitalization omitted.) Nationstar identifies two ways in
which, if permitted to intervene, Nationstar could seek to recoup
this advanced amount. First, Nationstar argues it would move to
set aside the Shoreham action judgment and ultimately confirm
the validity of the deed of trust. This would allow Nationstar to
29
collect the advanced amounts from the proceeds of a foreclosure
sale, which the servicing agreement authorizes Nationstar to
conduct on BONY’s behalf. Second, Nationstar argues it would
seek an equitable lien in the amount of the delinquent mortgage
payments and property taxes it claims it has advanced to BONY.
1. Nationstar could not successfully move to
set aside the Shoreham action judgment
The only basis on which Nationstar could move to set
aside the Shoreham action judgment, were Nationstar permitted
to intervene, would be that the judgment is void on its face. At
the time Nationstar filed its motion to intervene, the deadline for
setting aside the motion on any other basis had long since passed.
(See § 473, subd. (b); Becker, supra, 27 Cal.3d at pp. 492–493
[courts apply rules that govern collateral attacks on judgments
to motion to intervene that is untimely under section 473].) In
deciding BONY’s appeal above, however, we conclude that, as
a matter of law, the Shoreham action judgment is not void, and
that it cannot be set aside as such.
Nationstar has identified only one additional argument
beyond those offered by BONY that might support such a motion
to set aside: that Nationstar is an indispensable party to the
Shoreham action and thus the judgment in that action is void
as against Nationstar. Like the arguments to void the judgment
that BONY offers above, this argument fails. The rights and
obligations regarding the deed of trust and property that
Nationstar claims render it an indispensable party are rights
and obligations Nationstar holds as an agent of BONY, and “[a]n
agent is not an indispensable party in litigation between his
principal and a third party over the subject matter of the agency.”
30
(Writers Guild of America, West, Inc. v. Screen Gems, Inc. (1969)
274 Cal.App.2d 367, 374–375.)
We therefore conclude that, even assuming—without
deciding—that the court erred in denying Nationstar’s motion
to intervene so Nationstar could move to set aside the judgment,
any such error could not have prejudiced Nationstar, because it
could not have successfully moved to set aside the Shoreham
action judgment as void in any event.
2. Nationstar could not secure an equitable
lien via intervention in the Shoreham
action
When one party involuntarily pays a debt for which
another is primarily liable, the party who paid the debt may
have the right to pursue an equitable lien. (Fidelity National
Title Ins. Co. v. Miller (1989) 215 Cal.App.3d 1163, 1174.) “An
equitable lien . . . may arise from a contract which reveals an
intent to charge particular property with a debt or ‘out of general
considerations of right and justice as applied to the relations of
the parties and the circumstances of their dealings.’ [Citation.]”
(Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 453
(Zerin).) Although an equitable lien may be appropriate in
many different scenarios, it is in all cases “ ‘a remedy designed
to enforce restitution so as to prevent unjust enrichment.’ ”
(Fidelity National Title Ins. Co. v. Miller, supra, at p. 1174.)
As a preliminary matter, Shoreham was not unjustly
enriched by Nationstar’s payments to BONY on Shahi’s debt,
such that equity might justify imposing a lien on the property
Shoreham currently owns. Shoreham did not have any
agreement with Nationstar that Nationstar would make
payments on the loan or pay taxes on the property. Moreover,
31
Nationstar made no payments at all regarding the property since
Shoreham took title in 2017.
Nationstar nevertheless argues that it is entitled to an
equitable lien on the property, regardless of who currently owns
it, based on Nationstar having made payments on a debt secured
by the property and having paid taxes on the property. But
the mere fact that Shahi used the property to secure the debt
Nationwide helped pay does not give Nationstar any rights
(equitable or otherwise) with regard to the property, or with
regard to the deed of trust on the property, to which Nationstar
was not a party.
Nor does the foreclosure provision in the servicing
agreement give Nationstar any interest in the property that
might entitle it to seek an equitable lien. That provision merely
allowed Nationstar to conduct a foreclosure sale on BONY’s
behalf, and to deduct any advances from the proceeds of a
foreclosure sale, should one take place. (See Zerin, supra,
53 Cal.App.4th at p. 454 [“[a] promise to pay a debt out of a
particular fund, without more, will not create an equitable lien
on that fund”].)
We therefore conclude that, even assuming the trial
court erred in denying Nationstar’s motion to intervene so that
Nationstar could seek an equitable lien, any such error was
harmless, as Nationstar could not have secured an equitable lien
in any event.
SHOREHAM’S APPEAL FROM DENIAL OF
ATTORNEY FEES (APPEAL NO. B296777)
Shoreham moved for attorney fees following entry of the
default judgment in its favor in the Shoreham action. The court
concluded that there was no legal basis for Shoreham’s request,
32
and denied the motion. Shoreham appealed. Because the trial
court’s order did not resolve any disputed factual issues, our
review is de novo. (Mountain Air Enterprises, LLC v. Sundowner
Towers, LLC (2017) 3 Ca1.5th 744, 751.)
Shoreham argues it is entitled to attorney fees under Civil
Code section 1717 and various provisions of the deed of trust that
reference attorney fees the lender may incur. Shoreham relies
primarily on paragraph 9 in the deed of trust, entitled “protection
of lender’s interest in the property and rights under this security
instrument.” (Capitalization and boldface omitted.) Paragraph 9
is a common provision in deeds of trust, and provides, in
pertinent part: “If . . . there is a legal proceeding that might
significantly affect lender’s interest in the property and / or rights
under this security instrument . . . 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 (a) 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 . . . . [¶] Any amounts disbursed
by lender under [this section] 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.” (Capitalization omitted and
italics added.)
33
Civil Code section 1717 imposes a mutuality of remedy for
unilateral attorney fees provisions under certain circumstances.
(Civ. Code, § 1717, subd. (a); see, e.g., Tract 19051 Homeowners
Assn. v. Kemp (2015) 60 Cal.4th 1135, 1146.) In order for Civil
Code section 1717 to apply: (1) the underlying action must
be one “on a contract,” and (2) that contract must “specifically
provide[ ] that attorney’s fees and costs . . . incurred to enforce
th[e] contract[ ] shall be awarded either to one of the parties or
to the prevailing party.” (Civ. Code, § 1717, subd. (a).) Where
these conditions are met, Civil Code section 1717 applies, and
“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.” (Id., § 1717, subd. (a).) Put differently, when
Civil Code section 1717 applies, a unilateral provision that would
have entitled only party A to recover fees if party A prevails,
creates a basis for party B to recover fees, if party B prevails.
To determine whether Shoreham may recover the fees
it seeks under paragraph 9 of the deed of trust and Civil Code
section 1717, we must first determine whether Civil Code
section 1717 applies to the deed of trust at all. If it does apply,
we must then determine whether Shoreham—a “nonassuming
grantee”13 that did not sign the deed of trust and could not be
held personally liable thereunder—can recover under the deed’s
provisions regarding attorney fees for the lender, rendered
reciprocal under Civil Code section 1717. We do not reach the
13
A “nonassuming grantee” is a purchaser of real property
who takes property “ ‘subject to’ ” an existing loan. (Saucedo v.
Mercury Savings & Loan Assn. (1980) 111 Cal.App.3d 309,
314−315 (Saucedo).)
34
second step in this analysis, however, because we agree with the
trial court that Civil Code section 1717 does not apply to the deed
of trust.
Shoreham correctly argues, and BONY concedes, that the
Shoreham action is one “on a contract,” the first requirement for
Civil Code section 1717 applicability. (See, e.g., Eden Township
Healthcare Dist. v. Eden Medical Center (2013) 220 Cal.App.4th
418, 427.) As to the second requirement, in Hart v. Clear Recon
Corp. (2018) 27 Cal.App.5th 322 (Hart), Division Eight of this
court considered whether the exact language in paragraph 9
“ ‘specifically provides that attorney’s fees . . . shall be awarded’
to one party or the prevailing party” and concluded that “[b]y
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 . . . that ‘[a]ny 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.” (Hart, supra, at p. 327, capitalization omitted.) We agree
with Hart’s conclusion that paragraph 9 does not contain an
attorney fees provision that triggers Civil Code section 1717.14
(See also Chacker v. JPMorgan Chase Bank, N.A. (2018)
27 Cal.App.5th 351, 358, fn. 6 (Chacker) [noting court’s
14 Shoreham’s attempt to distinguish this case from Hart
based on its facts is unavailing, as Hart’s analysis was both
based solely on the application of Civil Code section 1717 to the
language of paragraph 9, not any other factual circumstances,
and, in our view, correct.
35
interpretation of paragraph 9 language essentially the same
as in Hart].)
Shoreham argues the trial court erred in relying on Hart,
based on cases in which the court awarded attorney fees under
Civil Code section 1717 involving instruments that contained
paragraph 9. (See Saucedo, supra, 111 Cal.App.3d 309; Wilhite v.
Callihan (1982) 135 Cal.App.3d 295 (Wilhite).)
But the instrument at issue in both of those cases also
included other language that triggered Civil Code section 1717,
so the courts did not have occasion to determine whether
paragraph 9 alone could do so. Namely, the deed at issue in
Saucedo included, in addition to paragraph 9, a provision that
the borrower “ ‘shall pay [the lender’s] attorney fees in connection
with’ ” an action to enforce the loan and would “pay all costs and
expenses, including . . . attorney’s fees in a reasonable sum, in
any such action or proceeding in which beneficiary or trustee
may appear.” (Saucedo, supra, 111 Cal.App.3d at p. 311,
capitalization and italics omitted.) Likewise, in Wilhite, the
instrument provided that the borrower agreed “ ‘to pay all costs
and expenses, including cost of evidence of title and attorney’s
fees in a reasonable sum, in any such action or proceeding in
which the beneficiary or trustee may appear.’ ” (Wilhite, supra,
135 Cal.App.3d at p. 301, capitalization omitted.) Because the
instruments at issue in Saucedo and Wilhite included a provision
triggering Civil Code section 1717, the Courts of Appeal deciding
those cases went on to the second step of the analysis outlined
above: determining whether a nonassuming grantee could collect
under the instrument and Civil Code section 1717. Saucedo and
Wilhite relied on the language of paragraph 9 and the doctrine of
36
“practical liability” in analyzing this separate issue.15 But the
outcome of that analysis does not affect the antecedent, threshold
issue of whether or how Civil Code section 1717 governs any
portion of the deed in the first place. These are two completely
separate issues, as evidenced by the fact that Hart, although
it post-dates both Saucedo and Wilhite, does not disagree with,
distinguish, or even reference those cases. Hart did not need
to do so, because neither Saucedo nor Wilhite required the
15 The doctrine of practical liability recognizes that a
subsequent grantee of a property may be liable in practice for
attorney fees incurred by an adverse party during a dispute
regarding the property if a deed of trust allows for such fees
to be added to the underlying debt secured by the property.
Under such circumstances, the subsequent grantee may
ultimately be required to pay those attorney fees, even though
the subsequent grantee would not have had personal liability
to the lender had the lender sued for damages rather than
foreclosing the deed of trust. (Saucedo, supra, 111 Cal.App.3d
at pp. 314−315.) When Civil Code section 1717 applies to the
deed of trust, “[t]his practical ‘liability’ of the nonassuming
grantee is sufficient to call into play the remedial reciprocity” of
that section. (Saucedo, supra, at p. 315; see Wilhite, supra, 135
Cal.App.3d 295 [because nonassuming grantee prevailing in suit
to prevent foreclosure by lender under due-on-sale clause would
have been practically liable for attorney fees via paragraph 9
language in the deed, nonassuming grantee could recover fees
under section Civil Code section 1717]; see also Milman v.
Shukhat (1994) 22 Cal.App.4th 538, 541–542 [applying Civil
Code section 1717 to a note that allegedly both “ ‘provided
for attorney fees if an action should be brought on the note’ ” and
contained the statement “ ‘[s]hould suit be commenced to collect
this note or any portion thereof, such sum as the [c]ourt may
deem reasonable shall be added hereto as attorney’s fees’ ”].)
37
court to analyze whether paragraph 9 could trigger Civil Code
section 1717—in the latter two cases, other language in the deed
at issue already did so.
Nor does the other language in the deed of trust on which
Shoreham relies (paragraph 14 and paragraph 22) trigger the
application of Civil Code section 1717. These provisions allow
the lender to charge the borrower for attorney fees that the
lender incurs either enforcing the acceleration clause in the
deed or in exercising the lender’s power of sale in the event
of a default. At least one court has held that the language in
paragraph 14 is not an attorney fees provision that can trigger
the applicability of Civil Code section 1717. (See Chacker, supra,
27 Cal.App.5th at p. 357.) We agree with this conclusion as to
both paragraph 14 and paragraph 22, because the plain language
of neither provision requires an award of attorney fees to anyone.
Moreover, even if we were to assume, for the sake of argument,
that Civil Code section 1717 applies to the deed of trust as a
result of either of these provisions, it would only apply to awards
of attorney fees under those provisions: Namely, attorney fees
incurred in connection with an acceleration clause or foreclosure
sale. The attorney fees Shoreham seeks are neither. Finally,
because there is no requirement that the attorney fees discussed
in paragraphs 14 and 22 be added to the debt secured by the
property under the note, there is no basis on which Shoreham
could argue that, had BONY prevailed, Shoreham, as a
nonassuming grantee who is not the borrower under the
loan secured by the deed, BONY could have sought fees from
Shoreham under either paragraph 14 or paragraph 22.
Thus, even assuming Shoreham would be practically liable
for attorney fees BONY incurred in the Shoreham action, had
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BONY prevailed, Civil Code section 1717 is of no assistance to
Shoreham in rendering that unilateral contractual obligation
reciprocal, because it does not apply to the deed of trust.
DISPOSITION
The court’s orders are affirmed.
BONY and Shoreham shall bear their own costs resulting
from BONY’s appeal (case No. B294377). Shoreham shall recover
its costs resulting from Nationstar’s appeal (case No. B294377).
BONY shall recover its costs resulting from Shoreham’s appeal
(case No. B296777).
NOT TO BE PUBLISHED.
ROTHSCHILD, P. J.
We concur:
CHANEY, J.
FEDERMAN, J.*
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
39