Don Hart was on title to a property.  He obtained a loan secured by a standard Fannie/Freddie deed of trust.  Don’s relatives sued him and the lender, claiming they, not Don, owned the property.  After prevailing in that suit, the lender applied for and obtained an attorney fee award against Don’s relatives under Civil Code 1717.  This decision reverses the fee award.  It holds that section 9 of the deed of trust, which allows the lender to take steps to preserve its interest in the property (including defending litigation) and charge the cost of doing so to the borrower, is in the nature of an indemnity provision under which the lender could add its litigation expenses to the principal debt secured by the deed of trust.  However, section 9 is not a clause giving any party the right to an attorney fee award by a court, least of all such an award against a non-signatory to the deed of trust.  Similarly, the lender could not recover fees under section 22 of the deed of trust governing foreclosure because it brought the clause up only belatedly and had not shown that it had complied with that section by serving notice of default, etc.

California Court of Appeal, Second District, Division 8 (Rubin, J.); September 18, 2018; 27 Cal. App. 5th 322