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Nieves v. Wachovia Mortgage

March 30, 2009



This matter comes before the Court on Defendant World Savings Bank, F.S.B.'s, renamed and now known as Wachovia Mortgage, F.S.B ("Wachovia" ), motion for attorneys' fees pursuant to the terms of its contract with Plaintiff Reuben Nieves. For the reasons set forth below, Defendant's motion is GRANTED.


Defendant Wachovia is the holder of Plaintiff's home loan. In accordance with the terms of the promissory note and deed of trust, Defendant moved to foreclose on Plaintiff's property for failure to make adequate payments. Plaintiff sought an order enjoining a trustee sale, arguing that the note he signed was both unconscionable and a violation of his constitutional rights. Complaint, Docket ("Doc.") # 1, Attach. 2, Ex. 1, ¶¶ 7-81. On January 15, 2009, this Court issued an order adopting in full the United States Magistrate Judge's findings and recommendations issued on October 6, 2008. Order, Doc. # 33. The Court granted Defendant's motion to dismiss and dismissed Plaintiff's action without leave to amend. Order, at 2. In the instant motion, Defendant, as the prevailing party in this litigation, filed a motion for award of attorney's fees in the amount of $11,016.00. Def's Mot. for Attorneys' Fees ("Def's Mot.") at 6, Doc. # 38. Plaintiff filed an opposition to Defendant's motion for attorneys' fees as well as a motion for a stay pending appeal from the judgment. Pl's Mot. for Stay, Doc. # 42; Pl's Reply Opposing Def's Mot. ("Pl's Opp."), Doc. # 43. Defendant replied to Plaintiff's motion on March 4, 2009. Def's Reply to Pl's Opp. ("Def's Rep."), Doc. # 45.


Defendant argues that it is entitled to attorneys' fees under the terms of the promissory note and deed of trust. Def's Mot. at 6. Wachovia argues that California state law controls, that the promissory note and deed include fee clauses encompassing Plaintiff's claims, and that the fees it seeks are reasonable. Def's Mot. at 4-6.

In response, Plaintiff claims Defendant did not prevail meritoriously on the underlying claims. As a result, Plaintiff contends, there exists no prevailing party in this action, a requirement for recovering attorneys' fees under California law.

See Cal. Civ. Code § 1717. Plaintiff bases this argument on the fact that this Court dismissed his claim on federal preemption grounds. Pl's Opp. at 2-3. Plaintiff argues dismissal based on federal preemption effectively left his claims "unresolved and unlitigated" and left this action without a prevailing party. Id. at 2. Defendant contends that dismissal on preemption grounds constitutes a determination on the merits. Def's Rep. at 2-3.

Both parties discuss International Indus. Inc. v. Olen, 21 Cal.3d 218 (1978). In that case, the California Supreme Court declined to award defendant attorneys' fees after plaintiff voluntarily dismissed its claim. Plaintiff contends that Olen stands for the notion that a dismissal of any kind precludes the possibility for attorneys' fees recovery. However, Olen applies only to situations in which a plaintiff voluntarily dismisses its claim. As a result, it is distinguishable from this case, in which Plaintiff did not voluntarily relinquish his claim. Rather, this Court dismissed his claim after carefully considering its merits. This dismissal constituted a decision on the merits.

Moreover, Rule 41 of the Federal Rules of Civil Procedure explicitly states that involuntary dismissal acts as a determination on the merits. Fed. R. Civ. P. 41. Dismissals for lack of jurisdiction, improper venue, or failure to properly join a party serve as exceptions to this rule. Id. Plaintiff's claim, however, does not fall under one of these exceptions. This Court's involuntary dismissal constituted a determination on the merits, rendering Defendant the prevailing party for attorneys' fees purposes. As a result, Defendant is entitled to recover attorneys' fees if it is able to meet the necessary requirements.

In deciding whether Defendant is entitled to attorneys' fees, this Court must first determine whether the agreement between the parties included a valid attorneys' fees clause. Second, this Court must determine if Defendant prevailed on the underlying claims. If the answer to the first two inquiries yields an affirmative answer, this Court must determine whether the Defendant seeks reasonable fees. See Cal. Civ. Code § 1717(a).

This action was removed from state court under diversity jurisdiction and state law therefore applies. Contractual attorneys' fees provisions are generally enforceable under California law. Cal. Civ. Proc. § 1021; Port of Stockton v. W. Bulk Carrier KS, 371 F.3d 1119, 1121 (9th Cir. 2004). Defendant claims the promissory note and deed of trust contain fee clauses. Def's Mot. at 4. Paragraph seven of the deed of trust provides:

If:.(B) someone, including me, begins a legal proceeding that may significantly affect the Lenders' interest in the Property,.then Lender may do and pay for whatever it deems reasonable or appropriate to protect the Lender's rights in the Property. Lender's actions may, without limitation, include appearing in court, paying reasonable attorneys' fees.

Def's Req. for Jud. Notice, Doc. # 39, Ex. D, at 36. This provision constitutes an attorneys' fees clause. Furthermore, Plaintiff initiated litigation having the potential to "significantly affect" Defendant-lender's interest in the property. Plaintiff sought an order enjoining a trustee sale. Such an order would have infringed Defendant's right to sell, significantly affecting its interest in the property.

Paragraph seven, subsection E of the adjustable rate note provides: "The Lender will have the right to be paid back by me for all its costs and expenses in enforcing this Note.. Those expenses may include, for example, reasonable attorneys' fees and costs." Def's Req. for Jud. Notice Ex. D, at 52. Plaintiff's claim alleged that the note he signed was unconscionable. In defending against this claim, Defendant effectively sought to enforce the note. Therefore, in addition to the fee clause in the deed, ...

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