Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-01280/USCOURTS-caed-2_07-cv-01280-10/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 12:1703 Default of HUD Loan

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argument. E.D. Cal. R. 230(g).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

CLIFF JOHNSTON, )

)

Plaintiff, ) 2:07-cv-01280-GEB-EFB

)

v. ) ORDER DENYING PLAINTIFF’S

) MOTIONS, SUA SPONTE

CHARLENE LINDAUER, a/k/a CHARLENE ) DISMISSING CLAIMS AGAINST 

MACALUSCO; VALUE HOME LOAN, ) DEFENDANT LINDAUER AND

) DENYING VALUE HOME LOANS’

Defendants. ) MOTION FOR ATTORNEYS’ FEES*

)

Defendant Value Home Loan (“Value”) moves under California

Civil Code § 1717 for an award of $33,240 in attorneys’ fees based

upon fee-shifting provisions included in Plaintiff’s loan and deed of

trust agreements. (Docket No. 101.) Pro se Plaintiff Cliff Johnston

does not oppose Value’s attorneys’ fees motion.

Value was granted summary judgment on Plaintiff’s two

federal claims under the Truth in Lending Act (“TILA”) and the Home

Owner Equity Protection Act (“HOEPA”) in an order filed on January 12,

2010. Plaintiff’s TILA and HOEPA claims against Defendant Lindauer

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remain pending since Lindauer filed a notice of bankruptcy on July 27,

2009.

 After the Court granted Value’s summary judgment motion,

Plaintiff filed two unnoticed motions on February 5, 2010, in which he

requests leave to amend his complaint and seeks to “reintroduce” his

Real Estate Settlement Procedures Act (“RESPA”) claim which he

voluntarily dismissed at a hearing held on July 28, 2009. (Docket

Nos. 104, 108.) Plaintiff also filed a motion to proceed in forma

pauperis. (Docket No. 106.)

For the reasons stated below, Plaintiff’s motions are

denied, Plaintiff’s remaining TILA and HOEPA claims against Defendant

Lindauer are sua sponte dismissed for failure to state a claim,

Value’s motion for attorneys’ fees is denied and this case shall be

closed.

I. BACKGROUND

Plaintiff’s claims concern a first deed of trust loan and a

home equity line of credit loan he obtained from Value in January

2007. The terms of the first deed of trust loan were embodied in an

adjustable rate note, and the terms of the home equity line of credit

loan were stated in a home equity credit line revolving loan

agreement. The first deed of trust loan was secured by a first deed

of trust on Plaintiff’s property; the home equity line of credit loan

was secured by a second deed of trust also on Plaintiff’s property. 

Plaintiff defaulted and Value foreclosed under the second deed of

trust in February 2008, and sold Plaintiff’s property to a third

party.

Thereafter, Plaintiff filed a complaint in this federal

court on June 26, 2007, alleging twenty-four claims under federal and

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state law. Plaintiff’s claims largely concern his allegations that

Defendants misrepresented information and failed to make certain

disclosures when he obtained his loans. 

Fourteen days before the trial was scheduled to commence, on

July 14, 2009, the Court sua sponte dismissed Plaintiff’s twenty state

claims under 28 U.S.C. § 1367(c)(2), after finding that Plaintiff’s

state claims substantially predominated over his federal claims. The

Court also sua sponte dismissed Plaintiff’s Equal Credit Opportunity

Act (“ECOA”) claim for failure to state a claim. After the July 14

order issued, only Plaintiff’s TILA, HOEPA and RESPA claims remained.

On July 28, 2009, the day trial was scheduled to begin, a

hearing was held to address the parties’ failure to file appropriate

jury instructions. At the July 28 hearing, the Court dismissed

Plaintiff’s RESPA claim after Plaintiff sought to abandon that claim. 

Also at the July 28 hearing, following the parties disagreement on the

elements of Plaintiff’s TILA and HOEPA claims, the Court vacated the

trial date and informed the parties that they would be required to

submit briefs on Plaintiff’s two remaining federal claims. However,

“since the briefs filed . . . fail[ed] to clearly explain the law and

facts applicable to Plaintiff’s remaining federal claims,” a summary

judgment briefing schedule was established, and trial was again

scheduled. 

Value moved for summary judgment on Plaintiff’s remaining

claims on October 6, 2009, and this motion was granted on January 12,

2010. Value now seeks $33,240 in attorneys fees under California

Civil Code § 1717 (“section 1717") and the fee-shifting provisions

included in Plaintiff’s loan agreements and deed of trusts.

//

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II. PLAINTIFF’S MOTIONS & THE REMAINING CLAIMS AGAINST DEFENDANT

LINDAUER

On February 5, 2010, Plaintiff filed a motion under Federal

Rule of Civil Procedure 15(a) (“Rule 15(a)”), in which he seeks leave

to amend his complaint to allege seven federal claims, including

claims under RESPA and TILA. Also on February 5, 2010, Plaintiff

filed a “motion for reconsideration,” through which he seeks to

“reintroduce” the RESPA claim he voluntarily dismissed at the July 28,

2009 hearing. 

Rule 15(a), however, is not applicable to Plaintiff’s

request to amend his complaint; instead, Federal Rule of Civil

Procedure 16's “good cause” standard governs. See Johnson v. Mammoth

Recreations, Inc., 975 F.2d 604, 607 (9th Cir. 1992) (Federal Rule of

Civil Procedure 16's “good cause” standard governs amendment after the

issuance of a scheduling order). Since Plaintiff has not shown that

good cause justifies allowing amendment of the scheduling order, his

motion to amend his complaint is denied.

Further, review of Plaintiff’s proposed first amended

complaint reveals that it does not state any cognizable federal claims

against Lindauer. Since Plaintiff’s currently pled TILA and HOEPA

claims alleged against Lindauer do not state a claim, they are sua

sponte dismissed. See Pretrial Scheduling Order 4 (which warned that

non-trial worthy issues could be eliminated sua sponte).

Lastly, Plaintiff’s motion to proceed in forma pauperis is

denied as moot since the filing fee has already been paid in this

case.

//

//

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III. VALUE’S MOTION FOR ATTORNEYS’ FEES

A. The Fee Shifting Provisions At Issue

Value argues the adjustable rate note, the home equity

credit line revolving loan agreement, the first deed of trust and the

second deed of trust all include fee-shifting provisions that warrant

an award of attorneys’ fees under section 1717.

The adjustable rate note provides:

If the Note Holder has required [borrower] to pay

immediately in full as described above, the Note

Holder will have the right to be paid back by

[borrower] for all its costs and expenses in

enforcing this Note to the extent not prohibited by

law. Those expenses include, for example,

reasonable attorneys' fees.

(Ex. 1 ¶ 7(e)) (emphasis added). 

The first deed of trust securing the adjustable rate note

also provides:

If . . . there is a legal proceeding that might

significantly affect Lender's interest in the

Property and/or rights under this Security

Instrument . . . then the Lender may do and pay

for whatever is reasonable or appropriate to

protect Lender's interest in the Property and

rights under this Security Instrument . . . .

Lender's actions can include, but are not limited

to, . . . (b) appearing in Courts; and (c) paying

reasonable attorney fees to protect its interests

. . . . Lender shall be entitled to collect all

expenses incurred . . . including, but not limited

to, reasonable attorney fees . . . . 

(Ex. 2 ¶¶ 9) (emphasis added). 

The home equity revolving line of credit loan agreement

similarly states: “[i]f [lender] demand[s] full payment of the

outstanding balance and [borrower] has failed to immediately make

payment, [borrower] agree[s] to pay all collection costs, including

[lender’s] attorneys’ fees.” (Ex. 3 ¶ 12) (emphasis added).

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Lastly, under the second deed of trust, Plaintiff agreed to:

appear in and defend any action or proceeding

purporting to alter the security hereof or the

rights or powers of Beneficiary or Trustee and to

pay all costs and expenses, including costs of

evidence of title and attorney's fees in reasonable

sum in any such action or proceeding in which

Beneficiary or Trustee may appear, and in any suit

brought by Beneficiary to enforce this Deed of

Trust.

(Ex. 4) (emphasis added).

B. Legal Standard

State law governs the interpretation and application of 

contractual attorneys’ fees provisions. See Resolution Trust Corp. v.

Midwest Fed. Sav. Bank, 36 F.3d 785, 800 (9th Cir. 1993) (applying

California law to interpret contract that included fee-shifting

provision); see also Baldain v. Am. Home Mortg. Serv., Inc., No. CIV.

S-09-0931 LKK/GGH, 2010 WL 2606666, at *2 (E.D. Cal. Jun. 28, 2010)

(stating “[f]ederal courts apply state law in interpreting and

enforcing fee shifting agreements”). Under California law, parties

may agree by contract to allocate the payment of attorneys’ fees. See

Cal. Civ. Proc. Code § 1021 (which states that “[e]xcept as attorney’s

fees are specifically provided for by statute, the measure and mode of

compensation of attorneys . . . is left to the agreement, express or

implied, of the parties”). However, California Civil Code § 1717

(“section 1717") governs the recovery of attorneys’ fees pursuant to

an underlying contract. Section 1717 provides: 

(a) 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

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reasonable attorney’s fees in addition to other

costs . . . .

Reasonable attorney’s fees shall be fixed by the

court, and shall be an element of the costs of suit

. . . .

(b)(1) The court, upon notice and motion by a

party, shall determine who is the party prevailing

on the contract for purposes of this section,

whether or not the suit proceeds to final judgment.

Except as provided in paragraph (2), the party

prevailing on the contract shall be the party who

recovered a greater relief in the action on the

contract. The court may also determine that there

is no prevailing party on the contract for purposes

of this section.

(2) Where an action has been voluntarily dismissed

. . ., there shall be no prevailing party for

purposes of this section . . . .

Cal. Civ. Code § 1717. “Therefore, in order for [Value] to recover

the attorney[s’] fees it seeks, (1) [one of the] contract[s] [at

issue] must authorize such fees, (2) Plaintiff must be the prevailing

party, and (3) the fees incurred must be reasonable.” First Nat. Ins.

Co. of Am. v. MBA Const., No. 02:04-CV-836 GEB-JFM, 2005 WL 3406336,

at *2 (E.D. Cal. Dec. 12, 2005); see also Baldain, 2010 WL 2606666, at

*5 (stating that “to recover fees incurred in connection with

litigation of a claim under a fee shifting contract, a party must show

that the claim fell within the scope of the contract and that the

party prevailed on the claim”).

C. Whether Value is Entitled to Attorneys’ Fees on Plaintiff’s Claims

Under Contract

To demonstrate its entitlement to recover attorneys fees,

Value must establish for each claim that it seeks to recover fees for

defending against, that the claim fell within the scope of one of the

fee-shifting provisions in Plaintiff’s loan agreements or deeds of

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trust and that Value is a prevailing party on that claim under section

1717. See Baldain, 2010 WL 2606666, at *5.

//

1. Plaintiff’s State Law Claims

Plaintiff’s twenty state law claims were sua sponte

dismissed without prejudice under 28 U.S.C. § 1367(c)(2) on July 14,

2010. Since the dismissal of these claims was without prejudice, and

did not prevent Plaintiff from re-filing these claims in state court,

Value is not considered a prevailing party on these claims under

section 1717. See Baldain, 2010 WL 2606666, at *4-5, *8 (analyzing

California law and concluding that defendant was not a prevailing

party under section 1717 on state claims that were dismissed without

prejudice under 28 U.S.C § 1367(c)(3)); see also In re Estate of

Drummond, 149 Cal. App. 4th 46, 53 (2007) (holding that party was not

a prevailing party under section 1717 where claims were dismissed

without prejudice). Since Value is not a prevailing party on

Plaintiff’s state claims, Value is not entitled to recover attorneys’

fees for defending against these claims.

2. Plaintiff’s ECOA Claim

Further, Plaintiff’s ECOA claim was sua sponte dismissed for

failure to state a claim in an order filed on July 14, 2009. This

dismissal was without prejudice and, therefore, Value is not

considered a prevailing party on this claim under section 1717. See

Drummond, 149 Cal. App. 4th at 53 (holding that party was not a

prevailing party under section 1717 where claims were dismissed

without prejudice). Accordingly, Value is not entitled to recover

attorneys’ fees for defending against Plaintiff’s ECOA claim.

3. Plaintiff’s RESPA claim

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Plaintiff also voluntarily dismissed his RESPA claim at the

July 28, 2009 hearing. Section 1717(b)(2) provides that “there shall

be no prevailing party” “[w]here an action has been voluntarily

dismissed . . . .” Cal. Civ. Code § 1717(b)(2); see also Baldain,

2010 WL 2606666, at *6 (stating that “§ 1717 provides an immutable

rule that when a claim is voluntarily dismissed, there is no

prevailing party for purposes of fee shifting agreements”). Value,

therefore, is not considered a prevailing party on Plaintiff’s RESPA

claim and may not recover attorneys’ fees for defending against this

claim. See Baldain, 2010 WL 260666, at *6 (finding that defendant was

not prevailing party on plaintiff’s TILA claim because TILA claim was

voluntarily dismissed). 

4. Plaintiff’s TILA and HOEPA claims

Value did prevail on its motion for summary judgment on

Plaintiff’s TILA and HOEPA claims. Value, therefore, is the

prevailing party on these two claims.

Further, both of these claims fall within the scope of the

fee-shifting provisions since Plaintiff sought to rescind the loan

agreements and deeds of trust through these claims. Baldain, 2010 WL

2606666, at *6 (holding that TILA rescission claim was “on contract”

and compiling California case law); Bonner v. Redwood Mortg. Corp.,

No. C 10-00479 WHA, 2010 WL 2528962, at *4 (N.D. Cal. Jun. 18, 2010)

(finding that TILA and HOEPA claims were “on contract” under loan and

deed of trust agreements); Weber v. Langholz, 39 Cal.4th 1578, 1586

(1995) (holding that plaintiff’s TILA rescission claim was within the

scope of section 1717 such that a prevailing defendant is entitled to

recover fees); see also Silgio v. Castellucci, 21 Cal. App. 4th 873,

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878 (1994) (stating “an obligation to pay attorney fees incurred in

the enforcement of a contract includes attorneys’ fees incurred in

defending against a challenge to the underlying validity of the

obligation”) (citations omitted). Value, therefore, has shown that it

is entitled to recover attorneys’ fees under the fee-shifting

provisions in the loan agreements and deeds of trust for defending

against Plaintiff’s TILA and HOEPA claims.

D. The Amount of Attorneys’ Fees Recoverable

Value argues it is entitled to recover $33,240 in attorneys

fees. Value’s lawyer, John Clark Brown, Jr., declares that this sum

represents 138.50 hours of work billed at $240 per hour. (Brown Decl.

¶¶ 10, 11.)

A party seeking attorneys’ fees “bears the burden of

documenting the appropriate hours expended in litigation and must

submit evidence in support of those hours worked.” Welch v.

Metropolitan Life Ins. Co., 480 F.3d 942, 948 (9th Cir. 2007). 

Further, “[t]he applicant should . . . maintain billing time records

in a manner that will enable a reviewing court to identify distinct

claims.” Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); see also

Baldain, 2010 WL 2606666, at *9 (stating that “a party seeking fees

bears the burden of showing the reasonableness of the number of hours

worked in connection with the claims on which the party is entitled to

fees”). “Where the documentation of hours is inadequate, the district

court may reduce the award accordingly.” Hensley, 462 U.S. at 433. 

“[T]he trial court has wide discretion to fix a reasonable amount of

attorney fees, and is not limited to the amount actually paid by the

prevailing party.” Gilbert v. Master Washer & Stamping Co., Inc., 87

Cal. App. 4th 212, 220-21 (2001); see also Cal. Civ. Code § 1717(a)

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(stating that “[r]easonable attorney’s fees shall be fixed by the

court”). 

Further, section 1717(b) provides that “[t]he court may

 . . . determine that there is no prevailing party on the contract

 . . . .” “If neither party achieves a complete victory on all the

contract claims, it is within the discretion of the trial court to

determine which party prevailed on the contract or whether, on

balance, neither party prevailed sufficiently to justify an award of

attorney fees.” Scott Co. of California v. Blount, Inc., 20 Cal.4th

1103, 1109 (1999). “Typically, a determination of no prevailing party

results when . . . the ostensibly prevailing party receives only a

part of the relief sought. In other words, the judgment is considered

good news and bad news as to each of the parties.” Deane Gardenhome

Ass’n v. Denktas, 13 Cal. App. 4th 1394, 1398 (1993) (quotations and

citations omitted).

Value has not met its burden of demonstrating the

reasonableness of the fees it seeks. The billing records Value

submitted do not allow the Court to determine how many hours Value

spent defending against Plaintiff’s TILA and HOEPA claims. See

Baldain, 2010 WL 2606666, at *9 (denying defendant’s request for

attorneys’ fees, in part, because defendant did not provide evidence

that allowed the court to determine how many hours were spent working

on the claims for which the party was entitled to recover fees). 

Further, “it appears that even if [Value] had made [the

required] evidentiary showing, the limited nature of [Value’s] success

would confer upon the court discretion to conclude [Value] was not

entitled to fees at all.” Id. Out of Plaintiff’s twenty-four claims,

Value prevailed on only two; the rest of Plaintiff’s claims were

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dismissed without prejudice. Therefore, though “ostensibly” the

prevailing party, Value has not “prevailed sufficiently to justify an

award of attorney fees.” Scott Co., 20 Cal.4th at 1109; see also

Berkla v. Corel Corp., 302 F.3d 909, 920 (9th Cir. 2002) (affirming

district court’s decision to deny attorneys fees where it concluded

that party had not sufficiently prevailed under section 1717). 

Since Value has not adequately documented its fee request

nor has it sufficiently prevailed to justify an award of fees, no

attorneys’ fees will be awarded to Value in this case. See Baldain,

2010 WL 2606666, at *9 (declining to award any attorneys fees where

moving party did not provide adequate documentation and had achieved

only a narrow victory).

IV. CONCLUSION

For the reasons stated above, Plaintiff’s motions are

denied, Plaintiff’s TILA and HOEPA claims alleged against Defendant

Lindauer are dismissed and Value’s motion for attorneys’ fees is

denied. This case shall be closed.

The Clerk of the Court shall mail a copy of this order to

Plaintiff at 6601 Greenleaf Drive, Citrus Heights, California 95610.

Dated: July 19, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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