DS News - U.S. Bank

68 I N D U S T R Y I N S I G H T / T . R O B E R T F I N L A Y , E S Q . Recovering attorney's fees can be a contentious aspect of any legal proceeding. When it involves navigating the terrain of foreclosures, the process can become even more complicated. A pair of recent decisions from the California Court of Ap- peals has provided clarification when it comes to whether and how servicers can recover their attorney's fees after successfully defend- ing challenges to their deed of trust (DOT)—and unfortunately, the news is potentially troubling. In both Hart v. Clear Recon Corp and Nation- star and Chacker v. JPMorgan Chase Bank, sepa- rate panels of the Second Appellate District held that the provisions in the standard form deed of trust relied on by the prevailing lender only allowed the holder to add fees and costs incurred in defending the litigation to the loan balance. e provisions did not, however, allow for a separately recoverable fee award against the bor- rower. In other words, if the property does not have sufficient equity to cover these amounts, the holder is out of luck. And, even worse, if the defendant assigned away its interest in the DOT before judgment, it is completely out of luck as it would not even have the potential for recover- ing its fees through the foreclosure sale. As the court, quoting the late Justice Scalia in another context, stated in Chacker, the assignor "must take the bitter with the sweet." THE BITTER AND THE SWEET e facts and ruling of both cases are relatively similar. In Chacker, the borrower sued Chase to stop the foreclosure sale. Chase's demurrer was sustained without leave to amend, and the trial court entered a judgment of dismissal. Chase's attorneys then moved for attorney's fees under the standard language of paragraphs 9 and 14 of the DOT, which was granted by the trial court. e Court of Appeal reversed, vacating the judgment for fees and or- dering that Chase's attorney's fees could only be added to the loan balance, not collected directly from the borrower. A Court of Appeal has limited the lender's right to recover attorney's fees after successfully defending against the borrower's lawsuit challenging a foreclosure. That could mean a victory in court could still prove costly.

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