Financial Services Law Developments: FYI: Cal App Ct (5th Dist) Holds Borrower Entitled to Atty Fees for Successful TRO

Saturday, May 11, 2019

FYI: Cal App Ct (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 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.

Ralph T. Wutscher
Maurice Wutscher LLP
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The Editor's Bio

Ralph T. Wutscher
Maurice Wutscher LLP
20 N. Clark Street, 33rd Floor
Chicago, Illinois 60602
Direct: (312) 493-0874
RWutscher@MauriceWutscher.com
https://www.MauriceWutscher.com/

Ralph Wutscher's practice focuses primarily on representing depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, distressed asset buyers and sellers, loss mitigation companies, automobile and other personal property secured lenders and finance companies, credit card and other unsecured lenders, and other consumer financial services providers. He represents the consumer lending industry as a litigator, and as regulatory compliance counsel.

Ralph has substantial experience in defending private consumer finance lawsuits, including cases ranging from large interstate putative class actions to localized single-asset cases, as well as in responding to regulatory investigations and other governmental proceedings. His litigation successes include not only victories at the trial court level, but also on appeal, and in various jurisdictions. He has successfully defended numerous putative class actions asserting violations of a wide range of federal and state consumer protection statutes. He is frequently consulted to assist other law firms in developing or improving litigation strategies in cases filed around the country.

Ralph also has substantial experience in counseling clients regarding their compliance with federal laws, and with state and local laws primarily of the Midwestern United States. For example, he regularly provides assistance in connection with portfolio or program audits, consumer lending disclosure issues, the design and implementation of marketing and advertising campaigns, licensing and reporting issues, compliance with usury laws and other limitations on pricing, compliance with state and local “predatory lending” laws, drafting or obtaining opinion letters on a single- or multi-state basis, interstate branching and loan production office licensing, evaluations and modifications of new or existing products and procedures, debt collection and servicing practices, proper methods of responding to consumer inquiries and furnishing consumer information, as well as proposed or existing arrangements with settlement service providers and other vendors, and the implementation of procedural or other operational changes following developments in the law.

Ralph is a member of the Governing Committee of the Conference on Consumer Finance Law. He is also the immediate past Chair of the Preemption and Federalism Subcommittee for the ABA's Consumer Financial Services Committee. He served on the Law Committee for the former National Home Equity Mortgage Association, and completed two terms as Co-Chair of the Consumer Credit Committee of the Chicago Bar Association.

Ralph received his Juris Doctor from the University of Illinois College of Law, and his undergraduate degree from the University of California at Los Angeles (UCLA). He is a member of the national Mortgage Bankers Association, the American Bankers Association, the Conference on Consumer Finance Law, DBA International, the ACA International Members Attorney Program, as well as the American and Chicago Bar Associations.

Ralph is admitted to practice in Illinois, as well as in the United States Court of Appeals for the Seventh Circuit, the United States District Courts for the Northern and Southern Districts of Illinois, and the United States District Court for the Eastern District of Wisconsin, and has been admitted pro hac vice in various jurisdictions around the country.