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Jimenez v. Suntrust Mortgage Inc.

United States District Court, N.D. California, San Jose Division

August 11, 2014

SUNTRUST MORTGAGE INC. and DOES 1 through 20 Inclusive, Defendants.


EDWARD J. DAVILA, District Judge.

Presently before the court is Defendant Suntrust Mortgage Inc.'s ("Defendant") Motion for Attorney's Fees. Dkt. No. 20. Defendant seeks $12, 844 in fees from Plaintiffs Margarito Jimenez and Efren Jimenez (collectively, "Plaintiffs") based on the attorney's fees provisions contained in two written agreements between them. The court found this matter suitable for decision without oral argument pursuant to Civil Local Rule 7-1(b) and previously vacated the hearing. Having reviewed the submissions, and for the following reasons, the court GRANTS Defendant's motion.

I. Background

Plaintiffs executed a promissory note (the "subject note") with Defendant on January 27, 2006 and thereby obtained a mortgage loan in the original principal amount of $536, 000. Not. of Removal Ex. A (Complaint) ¶ 17, Docket Item No. 1; Def. Req. for Judicial Not. Ex. 1, Docket Item No. 21.[1] The subject note was secured by a first-lien deed of trust (the "subject deed of trust") on a parcel of real property purchased by Plaintiffs at 1062 Woodminster Drive, San Jose, California 95121 (the "property"). Dkt. No. 21 Ex. 2. After the loan origination, Plaintiffs allegedly received a loan modification from Defendant under the impression that the new terms were more favorable to them than the original ones. Dkt. No. 1 Ex. A ¶¶ 18-19. Plaintiffs allegedly later discovered that these new terms were not in fact beneficial to them. See id. ¶¶ 27-28, 35-37.

Plaintiffs filed this action in the Santa Clara County Superior Court on September 4, 2013, alleging that Defendant's conduct in offering and executing the loan modification constituted fraud, breach of the covenant of good faith and fair dealing, and a violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200 et seq. Dkt. No. 1 Ex. A. Defendant removed the case to this district on October 4, 2013. Id . Defendant filed a Motion to Dismiss on October 15, 2013, which Plaintiffs failed to oppose. Docket Item No. 9. The court scheduled a Case Management Conference for February 7, 2014 and required the parties to file a Joint Case Management Statement by January 31, 2014. See ADR Sched. Order, Docket Item No. 5. Plaintiffs failed to submit this statement. Accordingly, the court issued an Order to Show Cause why the case should not be dismissed for failure to prosecute, requiring Plaintiffs to respond by February 10, 2014. Order to Show Cause, Docket Item No. 16. When Plaintiffs did not respond to the court's Order, the court dismissed this action in its entirety pursuant to Federal Rule of Civil Procedure 41(b). Order Dismissing Case, Docket Item No. 17. In doing so, the court entered judgment in favor of Defendant. Judgment, Docket Item No. 18. Defendant filed the instant Motion for Attorney Fees on February 25, 2014. Dkt. No. 20. Plaintiff did not timely file an Opposition to this motion.[2]

II. Discussion

a. Entitlement to Attorney's Fees

"Under the American Rule, the prevailing litigant is ordinarily not entitled to collect reasonable attorney's fees from the losing party;" however, a statute or enforceable contract can overcome this default. Travelers Cas. and Sur. Co. of Am. v. Pac. Gas and Elec. Co. , 549 U.S. 443, 448 (2007) (internal citations and quotations omitted). "In a diversity case, the law of the state in which the district court sits determines whether a party is entitled to attorney fees, and the procedure for requesting an award of attorney fees is governed by federal law." Carnes v. Zamani , 488 F.3d 1057, 1059 (9th Cir. 2007). Thus, state law governs the enforceability of a contract's attorney's fees provision. In California, Civil Code § 1717(a) governs fee applications stemming from contract actions, providing:

In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs.

The court determines which party, if any, has prevailed on the contract for the purposes of awarding fees. Cal. Civ. Code § 1717(b)(1). Under this section, the prevailing party on a contract is the party that recovered a greater relief in the action on the contract. Id . § 1717(b)(2).

Here, both the subject note and the subject deed of trust contain attorney's fees provisions. The subject note specifies:

If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys' fees.

Dkt. No. 21 Ex. 1 ¶ 7(E). Likewise, the subject deed of trust states:

Lender may charge Borrower fees for services performed in connection with Borrower's default, for the purpose of protecting Lender's interest in the Property and rights under this Security Instrument, including, but not limited ...

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