Opinion
NOT TO BE PUBLISHED
Santa Cruz County Super. Ct. No. CV153148.
Duffy, J.
Morgado Four Construction, Inc. petitions in mandate in a challenge to the trial court’s grant of summary adjudication of certain “issues” raised by Morgado’s cross-complaint in favor of Wells Fargo Bank, N.A. and Sara and Garrett Simpson. Wells Fargo and the Simpsons had moved for summary adjudication of targeted issues relating to requests for indemnity and attorney fees included within Morgado’s causes of action and prayer for relief. The motion characterized the issues as “claims for damages,” citing Code of Civil Procedure section 437c, subdivision (f)(1), which provides for summary adjudication of only two specified issues constituting less than an entire cause of action or affirmative defense—an issue of duty or a claim for punitive damages. Concluding that summary adjudication was impermissibly granted as to “issues” that resolved less than an entire cause of action and that did not constitute a claim for punitive damages as set out in the statute, and further that the moving parties did not in any event demonstrate their entitlement to the broad summary adjudication that was granted, we grant the writ.
Further statutory references are to the Code of Civil Procedure unless otherwise specified.
STATEMENT OF THE CASE
I. Factual Background
Morgado Four is a licensed general contractor. In July 2001, Morgado entered into a written contract with Eugene and Lois Oster for construction remodeling work on a time and materials basis at the Oster’s home located at 19177 Old Vineyard Road, Los Gatos, in the Santa Cruz mountains. The property was then encumbered by first and second deeds of trust in favor of Washington Mutual Bank that secured two separate loans totaling approximately $675,000.
At some point, the Osters began to fall behind on their payments to Morgado for construction work but they still wanted the work to continue. Therefore, in June 2002, the Osters and Morgado agreed in writing to a contract addendum, which provided that Morgado would extend credit for work performed up to $350,000 in a revolving line of credit. The Osters would sign a promissory note and the obligation would be secured by a deed of trust affecting the property, to be recorded third in priority behind the two existing Washington Mutual deeds of trust.
The Osters executed the credit line note and deed of trust, which was recorded in Santa Cruz County on June 19, 2002. The note bore a due date of December 1, 2002, but the parties apparently orally agreed that this date could be extended by mutual consent. The note contained an attorney fee clause. And the deed of trust expressly incorporated by reference specific terms of the note and additional terms included in that “fictitious” deed of trust recorded in Santa Cruz County, which contains basic terms of a deed of trust with assignment of rents. These incorporated terms included, as relevant here, that the trustor (Osters) agreed to “appear in and defend any action or proceeding purporting to affect the security... or the rights or powers of Beneficiary [(Morgado)]..., and 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 Beneficiary or Trustee may appear, and in any suit brought by Beneficiary to foreclose this Deed.” Incorporated terms also included that the instrument secured the performance of these additional obligations. The Morgado deed of trust further contained a due-on-sale clause.
The deed of trust identifies the beneficiary as “Morgado Four Corporation, Inc.” instead of Morgado Four Construction, Inc. This appears to be a clerical error that Morgado seeks to correct below but we do not address this issue as it is not relevant to the issues on appeal.
The recording of and reference to such fictitious deeds of trust are authorized by Civil Code section 2952.
In January 2003, the Osters sought to pay off the Washington Mutual loans and to pay Morgado amounts owing under the line of credit via a refinance. Through Golden State Mortgage Company, they applied for an $800,000 first loan and a $400,000 second loan, which was a home equity line of credit, with Wells Fargo Home Mortgage, Inc. and Wells Fargo Bank, N.A., respectively. The amount of the line of credit was what the Osters estimated they would need to pay Morgado to complete construction.
Although these Wells Fargo entities were apparently distinct and separate, this fact is not relevant to our opinion and for ease of reference, we sometimes refer to either of them, or to them collectively, simply as Wells Fargo.
The first Wells Fargo loan application was vague as to the amounts owing under the Morgado loan and its secured status. The second application for the Wells Fargo line of credit did not mention the Morgado obligation at all. The Wells Fargo entities approved both loans. Ultimately, Washington Mutual was paid off through the new Wells Fargo $800,000-loan escrow and its two senior deeds of trust reconveyed. Morgado also received $105,830.76 out of this escrow, which, according to Morgado, was applied to a balance owed by the Osters as of January 30, 2003, of $404,034.24.
Before receiving this payment, Morgado was contacted by the title company handling the Wells Fargo escrow. In response to the company’s request, Morgado filled out and submitted a Request for Verification of Mortgage Lender form dated January 14, 2003. According to Morgado, the form, as filled out by it, stated that the “present loan balance” was $105,548; that the loan was “current;” and that the date of maturity was March 2007, which apparently was the agreed extension of the original due date. Further according to Morgado, when it executed the form, the form did not state what was later typed on it—“total payoff amount received today $105,830.76,” nor did it bear a signature purporting to be that of Manuel Morgado appearing just below this notation. Wells Fargo asserts that it relied on the version of the form bearing the added notation in making its $800,000 loan. The notation suggested, at least to Wells Fargo, that the Morgado line of credit was being paid off and terminated with this transaction and the deed of trust securing it reconveyed. Wells Fargo indeed had understood that the Morgado loan was being paid off as part of the $800,000 loan transaction, and that its two new loans would be in first and second secured position, respectively, as encumbrances affecting the property. The Wells Fargo escrow instructions to the title company handling the $800,000 loan were consistent with this understanding.
As the trial court perceived it, the central issue in the case is whether this form constituted a “payoff demand statement” as defined at Civil Code section 2943, subdivision (a)(5). Under subdivision (d)(1) of this section, a payoff demand statement may be relied upon “for the purpose of establishing the amount necessary to pay the obligation in full.” But this question, acknowledged by the moving parties to be dependent on disputed issues of fact, was not made the subject of the summary adjudication motion.
The record contains both versions of the form, one with the notation and signature and one without. Morgado contends that it did not see or approve of the notation nor did it authorize its signature on the form next to the notation. This contention suggests a forged signature on the document, an issue not determined by the court’s order on summary adjudication and one that both sides agree has yet to be determined by the trier of fact.
But Morgado was never asked to reconvey its deed of trust and it never did. Thus, Morgado’s deed of trust remained of record, first in time, after reconveyance of the Washington Mutual deeds of trust and the recording of the two new Wells Fargo deeds of trust in January and March 2003, respectively.
At the end of February 2003, the Osters paid Morgado $275,263.16 on a February 21, 2003 invoice out of their new Wells Fargo $400,000 home equity line of credit. Again, the Osters had obtained the line of credit in anticipation of using it all to pay Morgado for costs of still ongoing construction. After this payment, the Osters still owed Morgado a principle balance, the exact amount of which is unclear in the record.
It is also unclear if additional amounts of credit for construction work were later extended to the Osters by Morgado or whether whatever outstanding principle balance simply remained after February 2003 while continuing to accrue interest. In any event, Morgado contends that as of June 30, 2006, the amount owing under the note was $72,787.83, comprised of principle plus accrued interest of $36,290.27.
By the middle of 2004, the Osters fell behind on their payments to Wells Fargo, which initiated non-judicial foreclosure proceedings with respect to the deed of trust securing its $800,000 note. This deed of trust was second in time behind Morgado’s. Wells Fargo made a credit bid of $1,155,000.00 at the foreclosure sale on March 30, 2005. On April 15, 2005, Wells Fargo Bank, N.A. took title to the property, which, according to public record, still secured the Morgado note. After repayment of the outstanding loan balance on the $800,000 Wells Fargo note and payment of various foreclosure fees and costs, there were excess funds of $325,336.46 remaining. Wells Fargo used these funds to pay down the Osters’ $400,000 home equity line. Through correspondence after the sale, Wells Fargo may have learned, if it did not already know, that the senior Morgado deed of trust still affected the property. Specifically, in connection with their consent to payment of excess funds to the junior lienholder, on May 10, 2005, the Osters informed counsel for LoanStar Mortgage Services, LLC, which processed the foreclosure of the Wells Fargo deed of trust, that they still owed Morgado $37,000.
Assuming for purposes of this opinion that the Morgado deed of trust was “acknowledged or proved and certified and recorded as prescribed by law from the time it [was] filed with the recorder for record” under Civil Code section 1213, an issue not raised in nor germane to this appeal, Wells Fargo would have taken title to the property with constructive notice of and subject to the deed of trust. (Nguyen v. Calhoun (2003) 105 Cal.App.4th 428, 438-439
On September 9, 2005, Wells Fargo sold the property to its current owners, Garrett and Sarah Simpson, for $1,300,000. The record does not show whether Wells Fargo informed the Simpsons of the Morgado claim affecting the property but the Simpsons deny knowing of the claim before their purchase. The Simpsons took fee title to the property through a title company escrow by payment of $800,000 in cash and financing in the form of a $500,000 purchase-money note in favor of UBS Mortgage, LLC, which was secured by the property. UBS intended that its deed of trust securing the Simpson note would be first in priority, although the Morgado deed of trust remained of record as first in time. As far as the record shows, Morgado was not contacted to submit a pay-off demand out of the escrow by which the Simpsons took record title to the property. In a simultaneous transaction, UBS assigned its beneficial interest in its deed of trust to Wells Fargo.
Again assuming that the Morgado deed of trust had been duly acknowledged and recorded, the Simpsons would have taken title to the property with constructive knowledge of and subject to it. (Nguyen v. Calhoun, supra, 105 Cal.App.4th at pp. 438-439; Civ. Code, § 1213.)
In October 2005, Morgado made a demand for payment claiming the right to be paid under the policy of title insurance issued in connection with the sale of the property to the Simpsons. The Morgado deed of trust had been listed as a specific exception to the policy and no payment was made on the claim.
In December 2005, Morgado initiated non-judicial foreclosure proceedings under the power of sale contained in its deed of trust, which remained of record in first priority over the purchase-money UBS deed of trust assigned to Wells Fargo.
II. Procedural Background
A. The Relevant Pleadings
On December 12, 2005, Wells Fargo sued Morgado, pleading one cause of action for declaratory relief and seeking to enjoin Morgado’s foreclosure of its deed of trust under power of sale. The complaint was subsequently amended and the second amended complaint, filed March 5, 2007, remains Wells Fargo’s operative pleading as far as the record shows. The pleading contains no allegations of wrongdoing against Morgado. But Wells Fargo sought a judicial declaration that the Morgado loan had been paid off as part of the Osters’ refinance with Well Fargo; that any amounts still owing constitute an unsecured, personal debt of the Osters; that Morgado’s deed of trust is invalid; and that Morgado has no beneficial interest in the property.
The amended complaint added a cause of action for fraud against the Osters, Golden State Mortgage Corporation, and its principal, Clifford Stanley. This claim does not involve Morgado and is thus not relevant to this writ proceeding.
Morgado answered and filed a cross-complaint that was also amended after challenges by demurrer and motion to strike. The second amended cross-complaint is its operative pleading. The cross-complaint names the Simpsons and Wells Fargo as cross-defendants. It pleads two causes of action. The first is for declaratory relief. The claim seeks a judicial declaration that Morgado’s deed of trust is superior to any other deeds of trust encumbering the property. It also seeks a declaration that the Simpsons and Wells Fargo are personally obligated to defend and indemnify Morgado for all damages, including for attorney fees, that it may incur in the action. This obligation is alleged to exist by reason of the Morgado deed of trust affecting the property and by “assumption” of the deed-of-trust obligations by the Simpsons and Wells Fargo. The prayer of the cause of action for declaratory relief reasserts these requests for judicial declarations.
The second cause of action is also pleaded against the Simpsons and Wells Fargo and alleges a claim for judicial foreclosure of the Morgado deed of trust. As part of the relief prayed for, the cause of action seeks money damages, indemnity, and attorney fees from the cross-defendants individually or personally. But, construed broadly, it also seeks costs of suit and attorney fees to be adjudged as part of the lien affecting the property. Wells Fargo and the Simpsons answered the Morgado second amended cross-complaint, through joint counsel.
It has long been the rule that the present owner of mortgaged property is an essential party defendant in any judicial foreclosure action, as is a junior lienholder whose interest in the property the beneficiary wishes to extinguish and as to whom the beneficiary wishes to terminate rights to reinstatement of the loan and to redemption of the property from the senior lien. (Burton v. Lies (1862) 21 Cal. 87; City and County of San Francisco v. Lawton (1861) 18 Cal. 465; Boggs v. Hargrave (1860) 16 Cal. 559; Carpentier v. Brenham (1870) 40 Cal. 221; Diamond Benefits Life Ins. Co. v. Troll (1998) 66 Cal.App.4th 1, 7; §§ 701.630, 729.080, subd. (e), & 726, subd. (c).) Accordingly, the Simpsons and Wells Fargo are proper parties defendant in any action by Morgado to judicially foreclose its deed of trust.
The Simpsons also filed their own cross-complaint for indemnity against the Osters, Golden State Mortgage Co., and Clifford Stanley but this pleading is not relevant to this proceeding.
B. The Motion for Summary Adjudication
In June 2007, Wells Fargo and the Simpsons moved for “summary adjudication of issues” raised by the Morgado cross-complaint. The notice of motion stated seven “issues” as to which adjudication was sought. All of the issues targeted specific requests for relief or remedies stated in the prayer of Morgado’s cross-complaint. The grounds for adjudication were that neither Wells Fargo nor the Simpsons had “expressly assumed” the Osters’ obligations under the Morgado note and deed of trust. All of the targeted issues related to Morgado’s claim to be indemnified and to be awarded attorney fees, including its prayer for costs and attorney fees as a component of its judicial foreclosure action. None of the issues, if adjudicated, would dispose of an entire cause of action and none involved a claim for punitive damages as provided at section 437c, subdivision (f)(1).
The motion did not seek to adjudicate the validity or priority of the Morgado deed of trust, issues as to which Wells Fargo and the Simpsons acknowledged the existence of disputed questions of fact requiring a trial.
Morgado opposed the motion in part because the matters sought to be adjudicated were “not the [proper] subject matter for summary adjudication.” The opposition also contended that even if Morgado were not entitled to a personal money judgment for fees against Wells Fargo or the Simpsons, it was still entitled to payment of fees to be adjudged as part of its lien affecting the property through its cause of action for judicial foreclosure.
The trial court’s order granting summary adjudication included the following findings:
“The Court further finds that there is no evidence establishing a basis for a monetary judgment against WELLS and/or SIMPSON pursuant to the... cause of action for Judicial Foreclosure under [section] 726, because the Court finds that such an attorney’s fee award may only be obtained in a judicial foreclosure action where there is a deficiency judgment and may only be recovered against the original signatories of the deed of trust or a guarantor. The evidence presented shows that neither WELLS nor SIMPSON are signatories to the MORGADO Deed of Trust, nor are they guarantors of the debt incurred by the signatories of the MORGADO Deed of Trust, defendants OSTER.
“IT IS HEREBY FURTHER ORDERED that the [motion for summary adjudication] is GRANTED in favor of WELLS and SIMPSON and against MORGADO as to MORGADO’s claims for an attorney’s fees award against WELLS and/or SIMPSON as to the first and second causes of action of MORGADO’s... Cross Complaint, because there was no written assumption of the MORGADO Deed of Trust by WELLS or SIMPSON, nor was new consideration given to WELLS or SIMPSON to support such an assumption.
“IT IS HEREBY FURTHER ORDERED that the [motion for summary adjudication] is GRANTED in favor of WELLS and SIMPSON and against MORGADO as to MORGADO’s claims for indemnity against WELLS and/or SIMPSON as to the first and second causes of action of MORGADO’S... Cross Complaint, because there was no written assumption of the MORGADO Deed of Trust by WELLS or SIMPSON, nor was new consideration given to WELLS or SIMPSON to support such an assumption.
“IT IS HEREBY FURTHER ORDERED that the [motion for summary adjudication] is GRANTED in favor of WELLS and SIMPSON and against MORGADO as to MORGADO’S claims against WELLS and/or SIMPSON for an attorney’s fees award in the form of a monetary judgment pursuant to [Morgado’s] second cause of action for Judicial Foreclosure under [section] 726, because neither WELLS nor SIMPSON are the original signatories of the MORGADO Deed of Trust, nor are they guarantors of OSTER’S debt with respect to the MORGADO Deed of Trust or the underlying loan from MORGADO to OSTER.”
In addition to granting summary adjudication and upon application by Wells Fargo and the Simpsons, the trial court also issued a preliminary injunction enjoining the pending non-judicial foreclosure of the Morgado deed of trust.
In our order to show cause, we requested the parties in further briefing to address: (1) whether the trial court erred by granting summary adjudication of “issues” that were not entire clams for punitive damages as specified at Civil Code section 3294 in violation of section 437c, subdivision (f)(1); and (2) whether the trial court erred by precluding petitioner’s right to claim attorney fees as part of its second cause of action for judicial foreclosure, not as a personal liability to be borne by cross-defendants but instead as obligations of the note and deed of trust that are included within petitioner’s secured claim against the property. We also stayed the action pending resolution of this writ proceeding.
I. Availability of Writ Relief and the Standard of Review
An order granting summary adjudication may be reviewed by way of a petition for writ of mandate. (§ 437c, subd. (m)(1); California Highway Patrol v. Superior Court (2006) 135 Cal.App.4th 488, 496.) Appeal from a judgment after trial ordinarily provides an adequate remedy at law for a party aggrieved by an order granting summary adjudication. But here, interlocutory writ review is appropriate in the exercise of our discretion because the trial court’s order is clearly erroneous as a matter of law in the application of section 437c, subdivision (f)(1) and it substantially prejudices petitioner’s case. (Babb v. Superior Court (1971) 3 Cal.3d 841, 851; Omaha Indemnity Co. Superior Court (1989) 209 Cal.App.3d 1266, 1273-1274 (Omaha).) Writ review is also proper because the order denied petitioner the right to present a substantial portion of its case, resulting in prejudice. (Brandt v. Superior Court (1985) 37 Cal.3d 813, 816; Omaha, supra, 209 Cal.App.3d at p. 1273; Fatica v. Superior Court (2002) 99 Cal.App.4th 350, 351.) Finally, writ review is warranted here because reversal of the order on a post-judgment appeal would require a second trial on Morgado’s two causes of action “with the attendant waste of judicial resources.” (Barrett v. Superior Court (1990) 222 Cal.App.3d 1176, 1183; Fisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003) 114 Cal.App.4th 309, 319.)
Summary judgment or adjudication is proper only in instances in which there are no triable issues of fact and the moving party is entitled to judgment as a matter of law. The standard of review a court of appeal applies to a grant of summary adjudication is the same as that applied to a grant of summary judgment—de novo. (Weiner v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142; Certain Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945, 972.) In deference to the strong public policy favoring trial on the merits, the moving party’s papers filed below are strictly construed and the opposing party’s papers are liberally construed. All doubts about the propriety of granting the motion are resolved in favor of the party opposing the motion. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.)
II. Statutory Scope of Summary Adjudication
Section 437c, subdivision (f)(1) provides that “[a] party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty, if that party contends that the cause of action has no merit or that there is no affirmative defense thereto, or that there is no merit to an affirmative defense as to any cause of action, or both, or that there is no merit to a claim for damages, as specified in Section 3294 of the Civil Code , or that one or more defendants either owed or did not owe a duty to the plaintiff or plaintiffs. A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.” (Emphasis added.)
Civil Code section 3294 governs claims for punitive damages. Thus, by the wording of section 437c, subdivision (f)(1), a “claim for damages” may be the subject of summary adjudication only if the claim lacks merit under Civil Code section 3294, i.e., if there is no merit to a claim for punitive damages. Section 437c, subdivision (f)(1) accordingly does not permit summary adjudication of just any kind of claim for “damages.” And that is what the court was asked to do, and did, here by striking Morgado’s claim to damages in the form of indemnity and attorney fees from its two causes of action without disposing of those entire causes of action.
In the moving papers below, counsel cited section 437c, subdivision (f)(1), but omitted with ellipsis the part of the statute that states “as specified in Civil Code section 3294.” This was a significant omission.
Nor does the statute permit summary adjudication of isolated parts of a prayer for relief, again what the court was asked to do by the notice of motion and what its order effectively did. Thus, by excising or striking Morgado’s alleged claims to indemnity and attorney fees as remedial elements of its two causes of action, whether these damage components are ultimately valid or not, the court erroneously applied the summary judgment statute.
Section 437c is not intended to be available as a means of piecemeal disposition of cases. This is expressed by subdivision (f)(1), which was enacted to preclude, except as expressly provided, motions for summary adjudication of “issues” as occurred in this case. (City of Emeryville v. Superior Court (1991) 2 Cal.App.4th 21, 24-25 [1990 amendment to statute was intended to stop piecemeal summary adjudication of facts or issues and to narrow available adjudication to complete disposal of a cause of action or defense, issue of duty, or claim to punitive damages]; accord, Hindin v. Rust (2004) 118 Cal.App.4th 1247, 1255-1256, fns. 5 & 6.) The trial court’s summary adjudication order thus exceeded statutory authority, resulting in legal error. (Rooz v. Kimmel (1997) 55 Cal.App.4th 573, 593-594.)
Wells Fargo and the Simpsons essentially concede the error but contend that it was harmless because no prejudice resulted from the erroneous adjudication. They argue that the court could properly have made the same order under section 437c, subdivision (f)(1) by summarily adjudicating that Wells Fargo and the Simpsons had no contractual duty to indemnify Morgado or to pay its attorney fees—an argument raised for the first time in this original proceeding. (See Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 516-519 [court may properly summarily adjudicate issue of contractual duty under § 437c, subd. (f)(1)].)
The primary problem with this contention is that the motion below was not based on the no-duty ground and Morgado did not have an opportunity to oppose the motion framed as the moving parties’ entitlement to summary adjudication of issues of contractual duty. It would therefore be improper for us to uphold summary adjudication on this new ground. (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 70 [when trial court grants summary judgment motion on ground of law not explicitly tendered by moving party, due process requires that party opposing motion have opportunity to respond and must be given chance to show triable issue of material fact as to that ground]; County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 326 [accord even where party has been given opportunity to respond to new ground on appeal]; San Jose Construction, Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1545 [moving party not entitled to summary judgment on a ground not raised in its motion, even if that ground would have been sufficient].)
In short, were we to uphold the summary adjudication order on a ground not tendered by the motion, Morgado would suffer a deprivation of due process. A party opposing a motion brought under section 437c is entitled to be informed by the moving papers, which define and frame the motion, as to what issues it must meet in order to prevail. (Hawkins v. Wilton (2006) 144 Cal.App.4th 936, 946 [where such a drastic remedy is involved, due process requires that opposing party be fully advised of the issues to be addressed and be given notice of what facts it must rebut].) We are also loathe to be perceived as sanctioning or encouraging sloppy motion practice by considering a ground for summary adjudication not tendered in the court below. (Id. at p. 948.)
Wells Fargo and the Simpsons also try to avoid the error in the court’s application of section 437c, subdivision (f)(1) by reliance on Lilienthal & Fowler v. Superior Court (1993) 12 Cal.App.4th 1848 (Lilienthal). That case held that where legally separate claims concerning distinct wrongful acts or obligations are commingled into one cause of action by the pleader, a court may still grant summary adjudication of the individual claims even though doing so would not dispose of the entire cause of action as pleaded. (Id. at pp. 1854-1855; see also Dominguez v. Washington Mutual Bank (2008) 168 Cal.App.4th 714, 727 [invalid retaliation claim against individual as opposed to employer was proper subject of summary adjudication as it was one of three legally distinct and separate claims erroneously pleaded as part of single cause of action]; Mathieu v. Norrell Corp. (2004) 115 Cal.App.4th 1174, 1188 [hostile work environment and retaliation claims as distinct bases of liability against employer are treated as separate causes of action for purposes of summary adjudication]; Edward Fineman Co. v. Superior Court (1998) 66 Cal.App.4th 1110, 1116 [single claim against bank for wrongful honoring of checks over two-year period was actually multiple claims divisible by check for purposes of summary adjudication based on statute of limitations]; Exxon Corp. v. Superior Court (1997) 51 Cal.App.4th 1672, 1688, fn. 11 [summary adjudication is proper to dispose of allegations that would have formed a single cause of action if properly pleaded].)
But in order to come within the rule of Lilienthal, even though claims are pleaded in one cause of action, there must be separate and distinct wrongful acts or obligations that are subject to otherwise prohibited piecemeal adjudication because they allege the actual invasion of different primary rights. “ ‘The primary rights theory is a theory of code pleading that has long been followed in California. It provides that a “cause of action” is comprised of a “primary right” of the plaintiff, a corresponding “primary duty’ of the defendant, and a wrongful act of the defendant constituting a breach of that duty. [Citation.] The most salient characteristic of a primary right is that it is indivisible: the violation of a single primary right gives rise to but a single cause of action. [Citation.]’ [Citation.] ‘As far as its content is concerned, the primary right is simply the plaintiff’s right to be free from the particular injury suffered. It must therefore be distinguished from the legal theory on which liability for that injury is premised.’ [Citation.]” (Hindin v. Rust, supra, 118 Cal.App.4th at p. 1257.)
Wells Fargo and the Simpsons do not identify any primary right represented by Morgado’s claims to indemnity and attorney fees that is distinct and separate from its causes of action for declaratory relief and for judicial foreclosure. They simply argue without analysis that under Lilienthal, summary adjudication of their “alleged contractual and legal obligations to indemnify Morgado and to pay its attorney’s fees under the Morgado deed of trust” is proper. But as we see it, these claims and causes of action are all rooted in the existence and terms of Morgado’s deed of trust. Because Morgado’s claimed rights to indemnity and attorney fees flow directly from the allegations of the two causes of action, the claims cannot be segregated from the causes of action as independent claims for relief or as distinct and separate obligations.
Accordingly, we reject the contention that the court’s summary adjudication order that exceeded statutory authority may be upheld as harmless error. We further decline to uphold the order under Lilienthal and those cases applying its holding to circumstances distinguishable from those presented here.
III. Morgado’s Right to Attorney Fees to be Adjudged a Part of the Lien of its Deed of Trust
Although we grant relief in mandate on the basis of the trial court’s procedural misapplication of section 437c, subdivision (f)(1), for the guidance of the court and the parties in future proceedings, we also address a substantive error of law inherent in the court’s summary adjudication order. This was the first part of its finding that in the judicial foreclosure context, attorney fees may only be awarded to the beneficiary of a deed of trust “where there is a deficiency judgment and may only be recovered against the original signatories of the deed of trust or a guarantor.”
Our discussion of this issue demonstrates that contrary to Wells Fargo and the Simpsons’ contention, the court’s erroneous grant of summary adjudication here was not harmless. We decline to discuss other substantive aspects of the court’s summary adjudication order as it is not necessary for us to do so in the context of this proceeding. That we have declined to address other substantive aspects of the order is no reflection on their merits, or lack thereof, and none should be inferred.
As we have discussed, as a consequence of the court’s adjudication, piecemeal aspects of the two causes of action of Morgado’s cross complaint, as well as certain components of its prayer for relief, were in effect stricken. These were (1) Morgado’s claimed right to be indemnified by Wells Fargo and the Simpsons for any damages and attorney fees incurred in the action and (2) its independent right to recover as part of its secured lien claim attorney fees for defending its security and for prosecuting its judicial foreclosure action. These components represent two separate concepts. The first relates to a claimed right to a personal money judgment against Wells Fargo and the Simpsons, which may indeed turn on whether these parties assumed the obligations of Morgado’s note and deed of trust. But the second component relates only to the permissible amount of Morgado’s secured claim to be adjudged a lien affecting the property, given that Morgado’s deed of trust provides for the recovery of attorney fees and further provides that such fees are part of the secured obligation.
In other words, if Morgado’s deed of trust is determined to be valid and in priority and Morgado obtains a decree of foreclosure—issues that have yet to be determined in the trial court—then the court must eventually determine Morgado’s claim of entitlement to attorney fees as a component of its secured obligation. If the deed of trust is valid, then the Simpsons, by constructive notice, took the property subject to it and to the extent of all the obligations secured by it, including for attorney fees that Morgado incurs to protect or defend its beneficial secured interest and to foreclose on it. The consequence of this is that upon foreclosure of Morgado’s deed of trust, whether in the judicial or non-judicial context, the property’s value is available to satisfy all the obligations, including for attorney fees as determined by the court, that the Morgado deed of trust secures. By its breadth, the present order on summary adjudication would arguably preclude the court from determining fees to be adjudged a part of Morgado’s lien in the foreclosure action—an erroneous result.
The record contains little evidence of the property’s value, which would be subject to fluctuations in any event. The Simpsons purchased the property for $1.3 million in September 2005, encumbering it to the extent of $500,000. And counsel for Morgado stated at the November 2007 hearing on summary adjudication that the “property has enough equity in it” to satisfy the full Morgado lien claim, including attorney fees, so as to avoid a deficiency judgment situation. But this latter item in the record does not constitute evidence.
Section 730 provides that “[i]n all cases of foreclosure of mortgage the attorney’s fee shall be fixed by the court in which the proceedings are had, any stipulation in the mortgage to the contrary notwithstanding.” This section has been interpreted to recognize the right of a prevailing beneficiary to be reimbursed for attorney fees in a foreclosure action and the power of the court to set the fees, where, as here, the deed of trust provides for such recovery. (Hotaling v. Monteith (1900) 128 Cal. 556, 557-558; Chase Manhattan Mortgage Corp. v. Lessel (1997) 55 Cal.App.4th 10, 13-14 (Chase) [although § 730 recognizes the right to fees and the power of the court to set them in a foreclosure action, the provision is not independent statutory authority for an award of fees as costs to a prevailing party like Civ. Code, § 1717].) Section 580c and Civil Code section 2924d, subdivision (e) likewise both appear to authorize a discretionary award of fees in a judicial foreclosure action. But because these two sections also do not mandate an attorney fee award, they may be viewed, like section 730, only as a limitation on the amount and type of fees and costs otherwise allowed by a deed of trust and not as an independent basis for statutory fees to a prevailing party.
Section 580c provides that in “all cases where existing deeds of trust or mortgages are judicially foreclosed, unless a different amount is set up in the mortgage or deed of trust,... the mortgagor or trustor may be required to pay only such amount as trustee’s or attorney’s fees for processing the judicial foreclosure as the court may find reasonable and also the actual cost of publishing, recording, mailing and posting notices, litigation guarantee, and litigation cost of suit.” Civil Code section 2924d, subdivision (e) provides that when “court issues a decree of foreclosure, it shall have discretion to award attorney’s fees, costs, and expenses as are reasonable, if provided for in the note, deed of trust, or mortgage, pursuant to Section 580c of the Code of Civil Procedure.”
A leading author’s treatise on mortgage and deed of trust practice observes that “[s]everal statutes address attorney fee awards in judicial foreclosure actions. They were enacted at different times and appear confusing and inconsistent with each other.” (1 Bernhardt, Cal. Mortgages, Deeds of Trust, and Foreclosure Litigation (4th ed. 2009) § 8.85, p. 702.) We further observe that even in the context of nonjudicial foreclosure proceedings in which recoverable attorney fees for processing the foreclosure are limited by statute (Civ. Code, §§ 2924c & 2924d), the statutory maximums do not apply to other legal services rendered to resolve disputes regarding the enforcement of the debt and protection of the security where the note or deed of trust provide for the payment of such fees. These fees can also be required to be reimbursed as a condition to reinstatement. (Jones v. Union Bank of California (2005) 127 Cal.App.4th 542, 548; Santa Clara Savings & Loan Assn. v. Pereira (1985) 164 Cal.App.3d 1089, 1097-1098; de la Cuesta v. Superior Court (1984) 152 Cal.App.3d 945, 950; Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 46; Caruso v. Great Western Savings (1991) 229 Cal.App.3d 667, 676; Buck v. Barb (1983) 147 Cal.App.3d 920, 925.)
Section 730 is not limited by its terms to cases of foreclosure in which the original trustor still owns the property or in which the property has not been transferred to a non-assuming grantee. It would thus be erroneous to apply section 730, as Wells Fargo and the Simpsons urge us to do, in such a manner so as to extinguish its effect where the original trustor has transferred the property to a nonassuming grantee—an occurrence over which the beneficiary has no control. To so apply section 730 would unfairly impair the beneficiary’s rights and its security interest. And, as we discuss, Wells Fargo and the Simpsons cite no authority that compel this result.
It is true that a nonassuming grantee does not bear personal liability for a deficiency judgment and only the original trustor or a guarantor may be so liable. “Upon the transfer of real property covered by a mortgage or deed of trust as security for an indebtedness, the property remains subject to the secured indebtedness but the grantee is not personally liable for the indebtedness or to perform any of the obligations of the mortgage or trust deed unless his agreement to pay the indebtedness, or some note or memorandum thereof, is in writing and subscribed by him or his agent or his assumption of the indebtedness is specifically provided for in the conveyance.” (Cornelison v. Kornbluth (1975) 15 Cal.3d 590, 596-597.) But if the value of the transferred property is sufficient to generate enough funds through a foreclosure sale to pay the total secured obligation, including attorney fees where the deed of trust so provides, then this rule is not triggered and does not eliminate a beneficiary’s right to recovery of fees from the sale. This is because the property, to the extent of its value on sale,continues to serve as security for all the secured obligations of the note and duly recorded deed of trust. (Ibid [upon transfer, property remains subject to the secured indebtedness].) This is true even if the property has been transferred to a nonassuming grantee or encumbered by a junior lien and notwithstanding that grantee’s or beneficiary’s lack of personal liability for the secured obligations.
In Saucedo v. Mercury Sav. & Loan Assn. (1980) 111 Cal.App.3d 309 (Saucedo), a nonassuming grantee brought an action to enjoin a nonjudicial foreclosure initiated by the beneficiary under a deed of trust containing a due-on-sale clause. Upon transfer of the property from the original trustor, the grantee and the beneficiary failed at negotiating terms for the grantee’s assumption of the note and deed of trust. The beneficiary therefore recorded a notice of default and election to sell under the deed of trust. (Id. at p. 311.) To prevent the beneficiary from foreclosing, the grantee filed the action for declaratory relief, injunction, and damages, and requested attorney fees as costs in their prayer for relief. During the course of litigation, the California Supreme Court decided Wellenkamp v. Bank of America (1978) 21 Cal.3d 943, in which it held that commercial lenders may exercise a due-on-sale clause only if they can demonstrate that the sale or transfer of the property results in an impairment of their security. As a result of Wellenkamp, the plaintiffs in Saucedo prevailed on summary judgment. Then they requested an award of contractual attorney fees as costs under Civil Code section 1717 under the fee provisions of the note and deed of trust, to which they were not parties. (Saucedo, supra, at p. 312.)
The court of appeal held that plaintiffs were entitled to an award of fees under Civil Code section 1717 because, as a “practical matter,” the relationship of trust deed holder and nonassuming grantee enables the former “to recover his attorney fees from the nonassuming grantee despite the fact the nonassuming grantee is not personally liable for the performance of the obligations of the note and deed of trust.” (Saucedo, supra, 111 Cal.App.3d at p. 314.) The court observed that on foreclosure, “ ‘the beneficiary is entitled to recover its fees as a condition to redemption and if the non-assuming grantee wishes to protect his equity in the property he will have to pay those fees. [Because] the grantee expended fees to enjoin the foreclosure, there is an indication that there was a sufficient equity in the property to be protected.... [Because] the grantee is required to pay the fees of the beneficiary to protect his equity in the property, this should be a sufficient practical reason to apply [Civil Code section] 1717 in an action by the [grantee] to enjoin the beneficiary’s foreclosure.’ ” (Id. at p. 314.) The reality of the beneficiary’s right to fees and the nonassuming grantee’s obligation to pay them despite lack of exposure to personal liability in order to protect its equity in the property were reason to extend Civil Code section 1717’s reciprocity fee provisions to the circumstances of the case. (Id. at p. 315.) “While the nonassuming grantee would not have been personally liable for payment of attorney fees under the note and deed of trust, the trustee and/or beneficiary would have been entitled to attorney fees under the provisions of the deed of trust had they prevailed, and these fees would have become part of the debt secured by the deed of trust. To prevent foreclosure of his interest, the nonassuming grantee would have had to pay off the secured debt, including the attorney fees, by refinancing or otherwise. (See Civ. Code, §§ 2905, 2924c, subd. (a).) This practical ‘liability’ of the nonassuming grantee is sufficient to call into play the remedial reciprocity established by Civil Code section 1717.” (Id. at p. 315, fn. omitted.)
Wells Fargo and the Simpsons point out that Saucedo’s extension of Civil Code section 1717 has limited application to circumstances in which a nonassuming grantee sues a beneficiary to enjoin foreclosure under the power of sale in a deed of trust based on a due-on-sale clause, a circumstance not present here as the Simpsons, the nonassuming grantees, have not sued to enjoin Morgado’s foreclosure of its deed of trust. We further observe that Morgado’s claim to fees as a component of its secured obligation is more akin to an element of damages than a right to an award of contractual attorney fees to a prevailing party, as the court determined in Saucedo. Nevertheless, Saucedo recognizes the existence of a “practical ‘liability’ ” (Saucedo, supra, 111 Cal.App.3d at p. 315) facing the nonassuming grantee that is also present here. Because of Morgado’s right to reimbursement of fees out of proceeds of sale, the Simpsons have a corresponding obligation to pay the fees if they wish to protect their equity in the property against elimination by Morgado’s foreclosure.
Here, only Wells Fargo as the junior lienor has done so, and not out of acknowledgment of the validity of Morgado’s deed of trust but rather on the basis that it is invalid.
Moreover, Morgado is not attempting to expand Saucedo’s holding beyond the entitlement to an award of fees as costs under Civil Code section 1717 to a prevailing nonassuming grantee who sued to enjoin a foreclosure due to an acceleration clause in a note or deed of trust. Indeed, Morgado’s potential status as a prevailing party defendant in Wells Fargo’s action to enjoin foreclosure is not what is at issue here. Rather, we are concerned in this proceeding with fees to which Morgado has a secured right to reimbursement under the provisions of its deed of trust as part of its own affirmative foreclosure action, a different concept and one not dependent on a judicially determined award of fees as costs to Morgado as the prevailing party in Wells Fargo’s action to enjoin Morgado’s foreclosure. (de la Cuesta v. Superior Court, supra, 152 Cal.App.3d at pp. 948-950.) This right does not derive its vitality from and is not dependent on Saucedo’s actual holding. But the practical reality on which that holding is premised highlights the validity of Morgado’s independent contention that by reason of its deed of trust, the property acts as security for Morgado’s fees notwithstanding that neither the Simpsons nor Wells Fargo bear exposure to personal liability for them in the absence of their having expressly assumed the obligations of the deed of trust.
Wells Fargo and the Simpsons similarly rely on the holding in Chase to limit Morgado’s right to claim fees as a component of the obligation for which the property stands as security. There, Chase, as the successor beneficiary under a deed of trust, sought judicial foreclosure; a deficiency judgment; a receiver to rent out the property; and a constructive trust on proceeds received by the trustor/property owner, Lessel, in a settlement with the developer over damage to the residence. By summary judgment, the trial court concluded that most of Chase’s causes of action were precluded as a matter of law. As a result, Chase voluntarily dismissed the action. Lessel then sought an award of fees as the prevailing party under Civil Code section 1717 and section 730, contending that both sections provided a basis for a statutory award of attorney fees. (Chase, supra, 55 Cal.App.4th at p. 12.) The trial court, which was affirmed by the court of appeal, held that fees could not be awarded under Civil Code section 1717, subdivision (b)(2) because the action had been voluntarily dismissed. (Ibid.) The court further held that section 730 did not operate as an independent statutory basis for an award of fees to a prevailing party in a foreclosure action. (Id. at pp. 13-14.) The appellate court construed section 730 as merely giving the trial court the power to fix a fee in a foreclosure action at any sum not exceeding that amount stipulated by the mortgagor but not requiring the court to render an award. (Ibid.)
As in Saucedo, what was at issue in Chase was the right to a statutory award of fees in an action that neither resulted in a judgment or decree of foreclosure under a deed of trust nor related to the fees claimed by a beneficiary in connection therewith. Here, in contrast, what is at issue and what the court’s order has precluded is Morgado’s right to claim fees as part of the obligation secured by the property and to have that amount included within the decree of foreclosure and paid from proceeds of sale. This is an independent and separate matter from its right to a statutory fee award as a party prevailing in an action under Civil Code section 1717. Accordingly, although Chase held that section 730 did not require the court to make a statutory award of fees upon voluntary dismissal of an action, this holding does not preclude Morgado from claiming entitlement to fees to be adjudged a part of its secured claim and paid from foreclosure sale proceeds.
Leach v. Home Sav. & Loan Assn. (1986) 185 Cal.App.3d 1295 (Leach), on which Wells Fargo and the Simpsons also rely, similarly does not preclude Morgado’s fee claim against the property here. Leach involved an action to enjoin a foreclosure and remove clouds on title to property. It also involved a related probate dispute surrounding one of the testamentary trust beneficiaries, who, as trustee of the trust, encumbered the affected property with the multiple deeds of trust to the detriment of his sister, Leach, the other trust beneficiary. Leach was not a party to any of the notes or deeds of trust. The parties to the dispute included the beneficiaries and trustees of the deeds of trust and the two adverse beneficiaries of the testamentary trust. (Id., at pp. 1298-1300.) The trust-deed beneficiaries prevailed on summary judgment against Leach and then sought attorney fees under the deeds of trust as prevailing parties under Civil Code section 1717. The trial court denied the fees on the basis that Leach was not signatory to the deeds of trust but ruled that the trust deed beneficiaries could seek these fees as part of the secured obligation from the testamentary trustee or the trust itself in a separate proceeding. (Leach, supra, at p. 1301.) The appellate court, limiting Saucedo to its distinct procedural circumstances of an action to prevent foreclosure for nonpayment of a loan, affirmed, observing that there were no practical liabilities or impacts in Leach that were present and compelling in Saucedo. (Leach, supra, at p. 1306.) Although Leach, who did not hold legal title to the property, had sought to enjoin a foreclosure under a deed of trust, she had done so not because she acknowledged the validity of the deed of trust and wished to refinance in order to satisfy it but instead because she perceived the encumbrance as void. (Ibid.)
Seizing on whatever parallel circumstances exist between this case and Leach, i.e., Wells Fargo, like Leach, is not the owner of the property and seeks by its action to void and not pay off Morgado’s lien, Wells Fargo and the Simpsons again ignore what is at issue here. As previously explained, we are not concerned with any claim by Morgado to be declared a prevailing party in the Wells Fargo action and to be entitled to a statutory award of fees as a result. The issue instead is Morgado’s right, in its foreclosure action, to include its fee claim as part of the obligation secured by its deed of trust—a different question and one that the holding in Leach does not reach or preclude.
The same is true of Clar v. Cacciola (1987) 193 Cal.App.3d 1032 (Clar), on which Wells Fargo and the Simpsons also rely. Clar concerned competing claims to priority of two deeds of trust affecting a residential property. The parties to the action, the beneficiaries of the competing deeds of trust, were not in contractual privity with each other. But they each claimed priority over the other and the plaintiffs sought to void the others’ deed of trust. The trial court decided the action in favor of the defendants, who sought statutory attorney fees as prevailing parties in the action, which did not include a claim for foreclosure. The trial court denied the fees and the appellate court affirmed, distinguishing Saucedo and concluding that there was no relationship between the parties—signatories of separate deeds of trust—that created a contractual right to fees. Nor was there the same practical liability for them as was found in Saucedo based on an owner’s incentive to pay fees to protect his or her equity in the property. (Id. at pp. 1037-1039.)
Once again, in their reliance on Clar, Wells Fargo and the Simpsons seize on the procedural similarities between that case and this one in that Wells Fargo has sued to void Morgado’s lien and there is no privity between them. But in doing so, Wells Fargo and the Simpsons ignore that that aspect of the case is not what is before us. We are not dealing with Morgado’s claimed right as a prevailing party in Wells Fargo’s action to a statutory award of fees. Rather, we are concerned with Morgado’s right to claim fees as part of the secured obligation of the deed of trust sought to be foreclosed, in effect as an element of damages. Again, this is a right that has independent vitality as derived from the deed of trust and it is one not impaired by the holding in Clar on distinguishable circumstances.
Wells Fargo and the Simpsons also cite Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36 (Wutzke). That case likewise involved competing claims of creditors, one of whom also sought foreclosure. Wutzke had sold the property, carrying back a deed of trust for part of the purchase price. The buyers later fraudulently caused a reconveyance of the deed of trust to be recorded and further encumbered the property with another deed of trust, the beneficiary of which had relied on clear title caused by the fraudulent reconveyance in making the loan. The trial court determined that even though both creditors were innocent parties, Wutzke’s deed of trust was in priority. The court issued a decree of foreclosure, including Wutzke’s attorney fees in the amount to be satisfied from sale proceeds. (Id. at pp. 38-40, 45.)
The competing lienholder, determined to be subordinate, challenged Wutzke’s right to be reimbursed for fees out of sales proceeds. The appellate court affirmed, holding that “[w]here, as here, attorney fees are contractually provided for in the trust deed and promissory note, the beneficiary is entitled to recover attorney fees and costs incurred in order to enforce and protect his secured obligation.” (Wutzke, supra, 151 Cal.App.3d at p. 46.) But then, the court of appeal denied Wutzke’s request for fees on appeal, determining that there was no contractual basis for a fee award against the subordinate lienholder with whom Wutzke was not in privity. (Id. at p. 47.) This result could arguably be said to be inconsistent with the court’s simultaneous affirmance of trial-court fees adjudged to be a part of Wutzke’s lien and payable from sale proceeds because the fees were incurred to protect the security. Appellate fees to defend the judgment could, in our view, be just as easily characterized as for the protection of Wutzke’s security.
We note that Miller & Starr find this result to be “erroneous. The attorney’s fees were not awarded against the lender under Civ. Code § 1717; rather, they are added to the debt secured by the property. The beneficiary is entitled to any fees incurred for the protection of the security, whether or not the trustor is a party to the action. Therefore, the fees should be a valid advance secured by the deed of trust.” (4 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 10:191, p. 597, fn. omitted.)
But these fees perhaps could not be satisfied out of the foreclosure that may have already occurred by the time of the appeal and this may have been the reason for the court’s disparate treatment of them.
Wells Fargo and the Simpsons embrace Wutzke’s denial of appellate attorney fees, forgetting its primary holding on fees, which was that Wutzke, as a beneficiary of a deed of trust containing an attorney fee provision, could properly claim in her foreclosure action fees incurred to protect her deed of trust. This holding does not aid Wells Fargo and the Simpsons, who seek a contrary result here.
Wells Fargo and the Simpsons also cite four other statutes in the foreclosure context as supportive of their position—section 580c; Civil Code section 2924d, subdivision (e); section 726, subdivision (a); and Civil Code section 2924c. We have already addressed the first two of these, concluding that these statutes are construed similarly to section 730, which authorizes the court in a foreclosure action to determine and include fees as part of the secured obligation if the deed of trust so provides.
Section 726 is known as the one-form-of-action or the security-first rule. Under this statute, “[t]here can be but one form of action for the recovery of any debt or the enforcement of any right secured by mortgage upon real property or an estate for years therein, which action shall be in accordance with the provisions of this chapter.” (§ 726, subd. (a).) The essence of the rule is that “secured creditors must either exhaust their security before seeking a personal judgment against their debtors or be deemed to have waived the security. [Citations.] This statutory rule protects the debtor against multiplicity of suits and compels competitive bidding to test the value of the security for the debt. [Citations.] If asserted by the debtor, it precludes the entry of a personal money judgment against the debtor on the debt until after the foreclosure sale is concluded.” (Passanisi v. Merit-McBride Realtors, Inc. (1987) 190 Cal.App.3d 1496, 1506 (Passanisi).)
Section 726, subdivision (a) further provides that in “the action the court may, by its judgment, direct the sale of the encumbered real property …, and the application of the proceeds of the sale to the payment of the costs of court, the expenses of levy and sale, and the amount due plaintiff, including, where the mortgage provides for the payment of attorney’s fees, the sum for attorney’s fees as the court shall find reasonable, not exceeding the amount named in the mortgage.” (§ 726, subd. (a).) This provision does not appear to aid Wells Fargo and the Simpsons in their cause.
But more importantly, section 726 “applies only where the creditor-beneficiary has brought an action against the debtor-trustor to recover a debt or to enforce some right secured by a deed of trust. [Citation.] It does not apply in other situations.” (Passanisi, supra, at p. 1506.) Morgado not having sued the trustors—the Osters—section 726 has no application here whether to the question of Morgado’s right to attorney fees or otherwise.
As Wells Fargo and the Simpsons point out, Civil Code section 2924c, subdivision (d) limits the amount of attorney fees that may be charged by the beneficiary for the reinstatement of an obligation secured by a deed of trust after there has been a default. By its terms, the provision applies only in the reinstatement context before a decree of foreclosure is rendered. Thus, it has no application in the context of Morgado’s foreclosure action and cannot affect or limit Morgado’s right to include fees within the obligation secured by its deed of trust as part of a decree rendered therein. (Bruntz v. Alfaro (1989) 212 Cal.App.3d 411, 420, 422 [limitations of Civ. Code, § 2924c apply only to reinstatement before decree of foreclosure and not after].)
By its breadth, the trial court’s order summarily adjudicating “claims of damages” effectively eliminated Morgado’s right to be awarded fees for enforcement and defense of its security; to have those fees adjudged a part of the lien of its deed of trust; and to be reimbursed for these fees out of sale proceeds as a result of a decree of judicial foreclosure, if its deed of trust is determined to be valid and in priority. This was error. Wells Fargo and the Simpsons cite no authority establishing that Morgado is precluded from claiming these fees not as an award of costs as a prevailing party on Wells Fargo’s complaint or as an element of a personal money judgment against Wells Fargo or the Simpsons, but as a component of the obligation secured by its deed of trust on which it seeks to judicially foreclose.
DISPOSITION
Let a peremptory writ of mandate issue directing the respondent court to vacate its order granting summary adjudication of issues and enter a new order denying the motion. Petitioner shall have costs in this original proceeding. The stay of proceedings in the trial court will terminate upon finality of this opinion in this court.
Wells Fargo and the Simpsons requested an award of sanctions against Morgado and its counsel for the asserted filing of a frivolous writ petition. In view of our granting of the writ, we deny the request.
WE CONCUR Mihara, Acting P.J., McAdams, J.