Opinion
B192925
5-10-2007
ANGELA CAMERON et al., Plaintiffs and Appellants, v. U. S. BANK, formerly known as, FIRSTAR BANK, Defendant and Respondent.
Angela Cameron, in pro. per. for Plaintiff and Appellant. Winnie Doeman, in pro. per. for Plaintiff and Appellant. McCarthy & Holthus, Thomas J. Holthus, Daniel J. Goulding and Matthew E. Podmenik, for Defendant and Respondent.
NOT TO BE PUBLISHED
This is the third appeal by Angela Cameron and Winnie Doeman (appellants). In the first appeal, they successfully stopped the foreclosure of their house. In the current appeal, they seek to vacate an award of attorney fees and costs in favor of U.S. Bank, formerly known as Firstar Bank (the Bank). We hold that the trial court abused its discretion in awarding the Bank attorney fees and costs because this court found the Banks notice of default to be invalid. We reverse.
FACTUAL AND PROCEDURAL BACKGROUND
Cameron I
In May 1999, appellants filed a complaint for temporary restraining order, a preliminary and permanent injunction to set aside a trustees sale. They asserted causes of action for breach of contract, fraud, and breach of statutory duties. In the first appeal, we affirmed the trial courts findings that appellants failed to show breach of contract, fraud, or breach of statutory duties. (Cameron v. Firstar Bank (June 30, 2003, B156022) at p. 12 [nonpub. opn.] (Cameron I).) However, we found the notice of default to be invalid and held that the Bank therefore could not foreclose on the property. The notice of default purported to be based on a tax delinquency but identified the default as "installments of principal, interest, accrued late charges, and/or impounds." (Id. at p. 10.)
Cameron II
The second appeal was from the denial of appellants petition to vacate the attorney fees award. We explained: "Appellants challenge is to Firstars decision to proceed with a second notice of default based on the fees awarded by the trial court when this court expressly found the first notice of default to be invalid and expressly stated that the trial court may consider fees in light of this courts disposition." (Cameron v. Firstar Bank (Feb. 15, 2006, B178813) at p. 6 [nonpub. opn.] (Cameron II).)
We reversed the order denying appellants petition to vacate and directed the trial court "to hold a hearing to determine whether, in light of Cameron I, respondent was entitled to the attorneys fees it included in the March 11, 2004 Notice of Default." (Cameron II, supra, at p. 7.)
Current Appeal
The trial court ordered the parties to file supplemental briefs on whether the Bank was entitled to fees and held a hearing. The court found the Bank was entitled to $67,830 in attorney fees and $4,286 in costs. "[S]uch fees and costs are awardable pursuant to Civil Code section 1717 and the provisions of paragraph 7 of the deed of trust. . . ."
Paragraph 7 of the deed of trust provides: "Protection of Lenders Rights in the Property; Mortgage Insurance. If Borrower fails to perform the covenants and agreements contained in this Security Instrument, or there is a legal proceeding that may significantly affect Lenders rights in the Property (such as a proceeding in bankruptcy, probate, for condemnation or to enforce laws or regulations), then Lender may do and pay for whatever is necessary to protect the value of the Property and Lenders rights in the Property. Lenders actions may include paying any sums secured by a lien which has priority over this Security Instrument, appearing in court, paying reasonable attorneys fees and entering on the Property to make repairs. Although Lender may take action under this paragraph 7, Lender does not have to do so. [¶] Any amounts disbursed by Lender under this paragraph 7 shall become additional debt of Borrower secured by this Security Instrument. Unless Borrower and Lender agree to other terms of payment, these amounts shall bear interest from the date of disbursement at the Note rate and shall be payable, with interest, upon notice from Lender to Borrower requesting payment."
DISCUSSION
I. Appellants Have Not Shown the Trial Court Lacked Subject Matter Jurisdiction
In their reply brief, appellants argue for the first time that the trial court lacked subject matter jurisdiction. According to appellants, with the exception of the determination for permanent injunction and breach of contract, all other orders were entered "in the limited civil section of Los Angeles Superior Court." Appellants argue that the judgment is void because the causes of action adjudicated by the limited civil court were in excess of that courts jurisdiction. We assume for purposes of this appeal that the limited civil court lacked jurisdiction under Code of Civil Procedure section 86 as appellants argue. We must therefore consider whether the judgment is void for lack of subject matter jurisdiction.
An order dated July 7, 2000 indicates that on April 19, 1999, the case was classified as one of limited jurisdiction. Summary judgment was granted in that court on the causes of action other than the breach of contract and the preliminary injunction.
"`A judgment is void if the court rendering it lacked subject matter jurisdiction or jurisdiction over the parties. Subject matter jurisdiction `relates to the inherent authority of the court involved to deal with the case or matter before it. [Citation.] Lack of jurisdiction in this `fundamental or strict sense means an entire absence of power to hear or determine the case, an absence of authority over the subject mater or the parties. [Citation.] " (Pajaro Valley Water Management Agency v. McGrath (2005) 128 Cal.App.4th 1093, 1100 (Pajaro).)
"Prior to 1998, California counties had two major designations of civil courts — the superior courts and the municipal courts, and each court system had separate subject matter jurisdiction." (Ytuarte v. Superior Court (2005) 129 Cal.App.4th 266, 274.) Once the courts were unified "the action was pending not before the municipal court — which no longer existed — but the superior court." (Pajaro, supra, 128 Cal.App.4th at p. 1102.) The Superior Court did "not lack the fundamental power to adjudicate the matter" even if the matter was incorrectly classified. (Ibid.) In other words, the limited civil section of the Superior Court did not "lack[] jurisdiction in the fundamental sense merely because the case could be reclassified as unlimited." (Id. at p. 1104.) Therefore, even assuming that the limited civil court lacked jurisdiction under Code of Civil Procedure section 86, it did not lack fundamental subject matter jurisdiction because the challenged orders were issued after unification.
II. The Trial Court Abused Its Discretion In Awarding The Bank Attorney Fees Based On The Deed of Trust
In the first appeal we held that the notice of default was invalid. In the second appeal, we stated that "Appellants challenge is to Firstars decision to proceed with a second notice of default based on the fees awarded by the trial court when this court expressly found the first notice of default to be invalid and expressly stated that the trial court may consider fees in light of this courts disposition." (Cameron II, supra, at p. 6.) We ordered to trial court to consider whether the Bank "was entitled to the attorneys fees it included in the March 11, 2004 Notice of Default." (Id. at p. 7.)
The Bank argues that it was entitled to fees based on Paragraph 7 of the deed of trust. Other courts have considered similar language. In Valley Bible Center v. Western Title Ins. Co. (1983) 138 Cal.App.3d 931, a trustor prevailed in an action to block a trustees sale and was therefore entitled to attorney fees. (Id. at p. 933; see Civil Code § 1717.) In Santa Clara Savings & Loan Assn. v. Pereira (1985) 164 Cal.App.3d 1089, the lender was entitled to attorney fees incurred in filing a declaratory relief action when the result of that action was that the court held the lender could record a notice of default.
These cases, however, do not assist the Bank. Here, appellants successfully blocked the sale on their house like the trustor in Valley Bible Center. This court found the notice of default to be invalid. Valley Bible Center and Santa Clara Savings & Loan Assn. stand for the proposition that the language of paragraph 7 of the deed of trust allows the prevailing party to recover attorney fees, but neither case assists in ascertaining who is the prevailing party. Whereas in those cases the prevailing party was clear, here the Bank prevailed on the contract, fraud, and statutory cause of action but appellants demonstrated the notice of default to be invalid.
The Bank argues that it is the prevailing party because it "prevailed on each and every claim brought by Appellant." The Bank minimizes this Courts finding that the notice of default was invalid arguing that the only consequence was that it required recommencing the foreclosure. According to appellants, "[a]lthough Respondent successfully defended the collateral issue of whether its initiation of foreclosure based on a claim of delinquent taxes was a breach of contract, the subsequent reversal of the trial courts determination that the notice of default was [in]valid means that respondents right to foreclose were extinguished." We agree with appellants.
Code of Civil Procedure section 1032, subdivision (a)(4) defines prevailing party as follows: " `Prevailing party includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. When any party recovers other than monetary relief and in situations other than as specified, the `prevailing party shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034."
It was an abuse of discretion to award fees to the Bank when appellants halted the foreclosure. In their brief in the trial court, the Bank argued that it was required to litigate because if appellants allegations "had been proved, then obviously U.S. Banks rights would have been significantly [a]ffected and the pending foreclosure halted." That is exactly what happened. Although appellants were not successful in litigating several of their causes of action, they were successful in achieving their overall objective by showing that the notice of default was invalid. There was a substantial defect in the notice of default in that it failed to identify an appropriate default. (Cameron I, supra, at pp. 10-11.) Under such circumstances, the award of attorney fees to the Bank was an abuse of discretion. (See Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170 ["Generally, the trial courts determination of the prevailing party for purposes of awarding attorney fees is an exercise of discretion which should not be disturbed on appeal absent a clear showing of abuse of discretion"].)
III. The Bank Is Not Entitled To Fees On The Cause of Action for Breach of Contract
In Hsu v. Abbara (1995) 9 Cal.4th 863, our Supreme Court considered the following contractual provision: " `In any action between Broker, Buyer or Seller arising out of this agreement, the prevailing party shall be entitled to reasonable attorneys fees and costs. " (Id. at p. 866.) Our high court held that "in deciding whether there is a `party prevailing on the contract, the trial court is to compare the relief awarded on the contract claim or claims with the parties demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by `a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions." (Id. at p. 876.)
In Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, cited by respondent, the lease contained the following provision "authorizing a `reasonable attorneys fee to the prevailing party `In any legal action brought by either party to enforce the terms hereof or relating to the demised premises . . . ." (Id. at pp. 1796-1797.) In Lerner v. Ward (1993) 13 Cal.App.4th 155, cited by respondent, the agreement contained a provision permitting the prevailing party to recover fees "`[i]n any action or proceeding arising out of this agreement . . . ." (Id. at p. 158-159.) These cases are not helpful because no similar provision exists in this case. Respondent also relies on Adam v. DeCharon (1995) 31 Cal.App.4th 708, 713. That case involves attorney fees after a rejection of an offer to compromise, another circumstance not existing in this case.
The court distinguished the case where the party obtains a simple unqualified victory on a single contract claim from the case where the court is determining litigation success. (Hsu v. Abbara, supra, 9 Cal.4th at p. 877.) "For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective." (Id. at p. 877.)
As we stated in the prior appeal, there is no provision that entitles the prevailing party to its attorney fees based on litigation arising out of the agreement. Thus, even though Bank prevailed in the breach of contract cause of action, it is not entitled to attorney fees solely for that cause of action. Here, there is no contractual provision requiring that the court award fees to the "prevailing party." This case is not like Buck v. Barb (1983) 147 Cal.App.3d 920, where the deed of trust allowed the lender to take steps necessary to protect the security and the promissory note contained a provision that " `If action be instituted on this note the undersigned promise to pay such sums as the court may adjudge as attorneys fees. " (Id. at p. 923.)
The Bank does not explain how paragraph 7 in the deed of trust would similarly entitle it to attorney fees for the contract cause of action when appellants were successful in demonstrating that the notice of default was invalid. Attorney fees are not generally recoverable unless authorized by statute or the parties agreement. (Lewis v. Alpha Beta Co. (1983) 141 Cal.App.3d 29, 33.) Here, the parties agreement does not authorize attorney fees for the breach of contract cause of action where the lender sought to preserve its interest in the property, but the sole notice of default underlying the litigation was found to be invalid.
DISPOSITION
The trial court is directed to vacate (1) its order dated April 12, 2002 awarding Bank attorney fees and costs and (2) its order dated July 20, 2006 awarding the Bank attorney fees and costs. The court shall enter a new order denying the Bank attorney fees and costs.
Appellants are entitled to costs on appeal.
We concur:
BOLAND, J.
FLIER, J.