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Hopkins v. Wells Fargo Bank, N.A.

United States District Court, E.D. California

July 1, 2014

TERRY L. HOPKINS, Plaintiff,
WELLS FARGO BANK, N.A., and DOES 1-10, Defendant.


WILLIAM B. SHUBB, District Judge.

Plaintiff Terry L. Hopkins brought this action against defendant Wells Fargo Bank arising out of defendant's foreclosure of plaintiff's property and its allegedly improper failure to disburse insurance proceeds to plaintiff. On February 24, 2014, the court granted defendant's motion for judgment on the pleadings on the basis that plaintiff failed to disclose the existence of her claims[1] against defendant in her bankruptcy filings and was therefore estopped from asserting those claims.[2] Defendant now moves to recover attorney's fees[3] pursuant to California Civil Code section 1717.[4]

I. Entitlement to Fees

"In a diversity case, the law of the state in which the district court sits determines whether a party is entitled to attorney fees." Carnes , 488 F.3d at 1059 (citing Larry's Apartment , 249 F.3d at 837-38). Section 1717 of the California Civil Code provides that, in "any action on a contract, " the prevailing party "shall be entitled to reasonable attorney's fees" if the contract so provides. Cal. Civ. Code. § 1717(a). An attorney's fees provision "shall be construed as applying to the entire contract, " even if its language ostensibly permits recovery of attorney's fees only under more limited circumstances. Id .; see Kangarlou v. Progressive Title Co. , 128 Cal.App.4th 1174, 1178 (2d Dist. 2005) (noting that under section 1717(a), "parties may not limit recovery of attorney fees to a particular type of claim"). The California Supreme Court has emphasized that a trial court is "obligated to award attorney fees[] whenever the statutory conditions have been satisfied." Hsu v. Abbara , 9 Cal.4th 863, 872 (1995).

"California courts liberally construe the term on a contract' as used within section 1717. As long as the action involve[s]' a contract it is on [the] contract' within the meaning of [s]ection 1717." Dell Merk, Inc. v. Franzia , 132 Cal.App.4th 443, 455 (3d Dist. 2005) (first two alterations in original) (citations omitted). The Ninth Circuit likewise emphasizes that this language "is interpreted liberally, " and that an action is "on a contract" whenever "the underlying contract between the parties is not collateral to the proceedings but plays an integral part in defining the rights of the parties." Barrientos v. 1801-1825 Morton LLC, 583 F.3d 1197, 1216 (9th Cir. 2009).

Here, plaintiff alleged that defendant breached its obligations under the Note and Deed of Trust by failing to disburse insurance proceeds and foreclosing on her property. (See Compl. ¶¶ 1-19 (Docket No. 1-1).) Because her claims implicate the parties' covenants to one another under those loan instruments, this action is "on a contract" under section 1717. See Dell Merk , 132 Cal.App.4th at 455; Barrientos, 583 F.3d at 1216.

Moreover, both loan instruments contain language that entitles defendant to attorney's fees. The Note states that defendant "will have the right to be paid back by [plaintiff] for all of its costs and expenses in enforcing this Note... includ[ing], for example, reasonable attorneys' fees and court costs." (Dolan Decl. Ex. 6 at 4 (Docket No. 40-1).) Likewise, the Deed of Trust provides that defendant may do "whatever is reasonable or appropriate to protect [its] rights in the Property... includ[ing], without limitation, appearing in court [and] paying reasonable attorney's fees, " and that plaintiff is obligated to repay "any amount which [defendant] advances under this [section]." (Dolan Decl. Ex. 7 at 7 (Docket No. 40-1).)

Even if this language seemingly entitles defendant only to those fees it incurred while attempting to enforce its rights in the underlying property-for instance, fees incurred in the foreclosure proceedings themselves-section 1717(a) requires the court to construe this language to provide for an award of fees whenever a defendant is the prevailing party on an action involving a contract. See Cal. Civ. Code § 1717(a); Kangarlou , 128 Cal.App.4th at 1178; see also Roy Allan Slurry Seal v. Laborers Int'l Union , 241 F.3d 1142, 1145 n.3 (9th Cir. 2001) (noting that section 1717 does not provide "an independent basis for a fee award, " but rather "operates by broadening already-existing contractual fee-shifting provisions").

Several judges in this district have held that identical language in a mortgage loan instrument entitled a prevailing defendant in a foreclosure action to attorney's fees under section 1717. See, e.g., Coppes v. Wachovia Mortg. Corp., Civ. No. 2:10-1689 GEB DAD, 2011 WL 4852259, at *2 (E.D. Cal. Oct. 12, 2011) (holding that defendant was entitled to fees under section 1717 because its "defense of this case was undertaken to protect [its] rights in the property'"); Smith v. World Sav. & Loan Ass'n, Civ. No. 2:10-2855 JAM JFM, 2011 WL 1833088, at *1-2 (E.D. Cal. May 12, 2011). And other district courts "have routinely held that Section 1717 authorizes the recovery of attorneys' fees where, as here, the plaintiff's claims directly relate to a contracting party's attempts to enforce a contract." Thomas v. Wells Fargo Bank, N.A., Civ. No. 13-2065 JSW, 2014 WL 1245034, at *5 (N.D. Cal. Mar. 25, 2014).

Finally, defendant is indisputably the prevailing party. When "the results of the litigation are mixed, " the court may decline to award fees to either party. Hsu , 9 Cal.4th at 876. Here, however, defendant achieved a "simple, unqualified win, " id., rather than a mixed result: the court dismissed three of plaintiff's claims with prejudice, granted judgment in defendant's favor on the other two claims, and denied plaintiff's motion to reconsider the court's Order granting judgment on the pleadings. (See Docket Nos. 16, 29, 36.)

While plaintiff cites section 1717(b) and several decisions by California Courts of Appeal to support the proposition that the court "has jurisdiction not to declare a prevailing party, " (Pl.'s Opp'n at 3), the California Supreme Court has made clear that the court may do so only if the results are mixed. Hsu , 9 Cal.4th at 876. Here, because "the results of the litigation on the contract claims are not mixed[, ]... [the] court has no discretion to deny attorney[s] fees." Id. at 875-76.

In short, defendant is the prevailing party in an action on a contract, and the contracts at issue in this case contain provisions that permit defendant to recover attorney's fees. Accordingly, defendant has met the statutory criteria set forth by section 1717(a), and it is thus entitled to attorney's fees. See Cal. Civ. Code § 1717(a); Hsu , 9 Cal.4th at 872.

II. Reasonable Attorney's Fee

Under section 1717(a), fees are "fixed by the court, " Cal. Civ. Code § 1717(a), which "has broad authority to determine the amount of a reasonable fee, " PLCM Grp. v. Drexler , 22 Cal.4th 1084, 1095 (2000). The court ordinarily begins this process by determining a "lodestar, ' i.e., the number of hours reasonably expended multiplied by a reasonable hourly rate." Id . The court may then adjust that figure based on "a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case." Id. at 1096 (citation and internal quotation marks omitted). While the court retains wide discretion over the amount of a reasonable ...

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