CAM XI TRUST vs. VIRGINIA VON SCHAEFER, TRUSTEE OF VIRGINIA VON SCHAEFER FAMILY TRUST

59 CAM XI TRUST vs. VIRGINIA VON SCHAEFER, TRUSTEE OF VIRGINIA VON SCHAEFER FAMILY TRUST

21-01231930 Motion for Attorney Fees

Plaintiff CAM XI Trust’s Motion for Attorney’s Fee and Costs is DENIED.

Preliminarily, Plaintiff’s request for judicial notice of the following documents is GRANTED as to their existence, filing, and/or recordation, but not as to the truth of any disputed factual matters asserted therein. (Evid. Code, § 452, subds. (c), (d), (h); § 453.)

1. Deed of Trust dated May 17, 2016, and recorded May 19, 2016, as Document No. 2016000223443 (Exhibit 1) 2. Verified Complaint filed November 16, 2021 [ROA #2] (Exhibit 8)

Plaintiff’s remaining requests for judicial notice (Nos. 2-7 and 9-60), as well as Defendant’s request for judicial notice, are DENIED as unnecessary to resolution of this motion.

Motion for Attorney’s Fees

Plaintiff moves for an award of $78,861.70 in attorney fees, contending that it is the prevailing party and that the parties’ contracts authorize recovery of such fees and costs.

“[E]ach party to a lawsuit is responsible for his or her own attorney’s fees in the absence of an agreement between the parties for fees or a statute specifically authorizing fees. [Citations.]” (Pederson v. Kennedy (1982) 128 Cal.App.3d 976, 979.)

Attorney fees are recoverable as costs when authorized by contract, statute, or law. (Code Civ. Proc., § 1033.5, subd. (a)(10).) Civil Code section 1717, subdivision (a) provides, “[i]n 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.” (Civ. Code, § 1717, subd. (a).)

Civil Code section 1717 “applies only to ‘action[s] on a contract.’ ” (Hsu v. Abbara (1995) 9 Cal.4th 804; In re Tobacco Cases I (2011) 193 Cal.App.4th 1591; Khan v. Shim (2016) 7 Cal.App.5th 49, 56.) In determining whether an action is “on a contract,” the focus is on the basis of the cause of action, not the nature of the remedy. (Yoon v. CAM IX Trust (2021) 60 Cal.App.5th 388, 392-393; Kachlon v. Markowitz (2008) 168 Cal.App.4th 316, 347.) Thus, declaratory, injunctive, and quiet title claims may constitute actions “on a contract” when based on rights arising under a note or deed of trust. (Kachlon, supra, at pp. 347-348.)

Here, Plaintiff has not established a contractual basis for an award of attorney’s fees.

Plaintiff’s Verified Complaint asserted causes of action for (1) quiet title, (2) reformation of deed of trust, and (3) declaratory relief. (Plaintiff’s RJN, Ex. 8 [Complaint].) The action arose from a $1,050,000 loan (the “Loan”) evidenced by a May 17, 2016 Note (the “Note”) and secured by a Deed of Trust recorded on May 19, 2016, in the Official Records of Orange County as Document No. 2016000223443 (the “2016 DOT”), which encumbered the subject property. (Complaint, ¶¶ 23, 30.) Plaintiff sought to quiet title as of May 19, 2016 (id., ¶¶ 33-36); reform the 2016 DOT to include the correct legal description of the property (id., ¶¶ 37- 40); and obtain declaratory relief concerning the validity, priority, and reformation of the 2016 DOT (id., ¶¶ 41-44).

Plaintiff submits evidence that Defendant defaulted on the Loan, received Notices of Default and Intent to Accelerate dated January 23, 2017, September 13, 2017, and November 29, 2017, and failed to cure the defaults. (Sokolowsky Decl., ¶ 11, Ex. 3.) The Loan matured on June 1, 2017. (Sokolowsky Decl., ¶ 4, Ex. 1.) Plaintiff brought this action because the 2016 DOT contained an incorrect legal description. (Plaintiff’s RJN, Ex. 8 [Complaint], ¶¶ 37-44.)

Plaintiff relies on Section 6(E) of the Note, read together with Section 6(C), and Section 22 of the 2016 DOT as the contractual basis for recovery of attorney’s fees.

Section 6(C) of the Note provides:

(C) Notice of Default

If I am in default, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, the Note Holder may require me to pay immediately the full amount of Principal which has not been paid and all the interest that I owe on that amount. That date must be at least 30 days after the date on which the notice is mailed to me or delivered by other means. (Sokolowsky Decl., ¶ 4, Ex. 1 [Note], § 6(C).)

Section 6(E) of the Note provides:

(E) Payment of Note Holder’s Costs and Expenses

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. (Sokolowsky Decl., ¶ 4, Ex. 1 [Note], § 6(E).)

Section 6(E) expressly conditions the Note Holder’s right to recover enforcement expenses on the Note Holder having required the borrower to pay immediately in full. This provision contains two critical limitations. First, it is expressly conditioned on the Note Holder having required immediate payment in full — on a completed acceleration. The phrase refers back to Section 6(C), which describes the process by which the Note Holder may send a written notice requiring immediate payment. The fee right does not arise unless and until that demand has been made. Second, the provision gives the Note Holder the right to be “paid back” — language that describes a reimbursement right, not a courtordered award to the prevailing party.

Plaintiff has not established that this condition occurred.

Plaintiff does not contend that the Note was, in fact, accelerated. Rather, Plaintiff states that the servicer sent communications concerning an “intent to accelerate.” The notices themselves are entitled “Notice of Default and Intent to Accelerate.” They advised Defendant of the amount necessary to cure the existing default and stated that, if the default was not cured by a specified future date, BSI Financial Services “will accelerate the maturity date of the Note and declare all outstanding amounts under the Note immediately due.” (Sokolowsky Decl., ¶ 11, Ex. 3.)

The January 23, 2017 notice, for example, required Defendant to pay $10,481.98 by February 27, 2017 to cure the default and stated that, if the default was not cured by that date, BSI “will accelerate” the Note and declare the outstanding amounts immediately due. (Sokolowsky Decl., ¶ 11, Ex. 3.) The notice did not state that the Note had already been accelerated or that Defendant was then required to pay the entire outstanding indebtedness.

The subsequent notices continued to characterize acceleration as a future event. The September 13, 2017 notice required payment of $21,838.96 by October 18, 2017 to cure the default and again stated that BSI “will accelerate” the Note if the default was not cured. (Sokolowsky Decl., ¶ 11, Ex. 3.) The November 29, 2017 notice likewise required payment of $25,368.61 by January 3, 2018 and again stated that BSI “will accelerate” the Note if Defendant failed to cure. (Sokolowsky Decl., ¶ 11, Ex. 3.) Thus, the evidence reflects repeated notices of an intent to accelerate, but does not establish that the Note Holder actually exercised its option to require immediate payment in full.

The fact that the Loan matured on June 1, 2017 does not alter this conclusion. (Sokolowsky Decl., ¶ 4, Ex. 1.) Section 6(E) specifically conditions recovery on the Note Holder having “required” immediate payment in full “as described above,” referring to the default-andacceleration procedure set forth in Section 6(C). Plaintiff does not argue that contractual maturity itself satisfied that condition, and the subsequent September and November 2017 notices continued to describe acceleration as a future event.

Accordingly, Plaintiff has not established that the express condition triggering Section 6(E) was satisfied. It is therefore unnecessary to determine whether, had Section 6(E) been triggered, the reformation and declaratory-relief claims constituted expenses incurred “in enforcing this Note.”

Section 22 of the 2016 DOT provides:

NON-UNIFORM COVENANTS. Borrower and Lender further covenant and agree as follows:

22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower’s breach of any covenant or agreement in this Security Instrument..... The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sum secured by this Security Instrument and sale of the Property.

The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the nonexistence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law.

Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence. (Plaintiff’s RJN, Ex. 1 [2016 DOT].)

Section 22 provides that the lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in Section 22, including, but not limited to, reasonable attorneys’ fees and costs of title evidence.

The remedies provided in Section 22 are the remedies of acceleration and foreclosure — the lender’s option to require immediate payment in full and to invoke the power of sale. The fee entitlement is expressly

limited to expenses incurred in pursuing those specific remedies. No other remedies — including a reformation action or a declaratory relief action — are remedies provided in Section 22.

Here, Plaintiff did not seek to accelerate the debt, obtain a money judgment on the Note, or foreclose under the power of sale. Rather, Plaintiff sought to reform the 2016 DOT to correct its legal description and to obtain declaratory relief concerning its validity and priority. (Plaintiff’s RJN, Ex. 8 [Complaint], ¶¶ 37-44.) Although that relief may facilitate a later exercise of Plaintiff’s remedies against the collateral, Plaintiff has not shown that this reformation and declaratory-relief action itself fall within the scope of the remedies provided by Section 22.

Section 22 also authorizes “any other remedies permitted by Applicable Law,” but that language must be read in context with Section 22 as a whole and its limitation of recovery for expenses incurred in “pursuing the remedies provided in this Section 22.” Thus, Plaintiff has not shown that this case, seeking to reform the 2016 DOT and obtain declaratory relief, was a remedy pursued under Section 22 merely because the resulting relief may facilitate a subsequent foreclosure.

In reaching this decision, the Court considered Yoon v. Cam IX Tr. (2021) 60 Cal. App. 5th 388, upon which Plaintiff relies in response to the opposition brief. Yoon analyzed the same Note Section 6(E) and Deed of Trust Section 22 language and awarded attorney fees to the prevailing lender. However, Yoon is distinguishable on critical facts that make it inapplicable here.

In Yoon, the lender had initiated an actual foreclosure proceeding following the borrower’s default, and the borrower brought negligence and fraud claims seeking to avoid enforcement of the lien through that foreclosure. The trial court found that "the borrower’s causes of action directly relate to enforcement of the note through foreclosure or required defendants to defend against a challenge to the underlying validity of the obligation, so that defendants were entitled to fees under Civil Code section 1717.” (Yoon v. Cam IX Tr., supra, at p. 391.) The Court of Appeal affirmed, holding that "the gravamen of the lawsuit was an effort to avoid the enforcement of the note and deed of trust, and that the borrower’s suit arose from defendants’ alleged conduct in the course of enforcing the terms of those documents." (Id. at 392.)

The situation in the matter before this Court is the inverse of Yoon in every material respect. In Yoon, there was an actual foreclosure proceeding; here, there was none. In Yoon, the borrower was trying to avoid enforcement of the note challenging the foreclosure proceeding; here, plaintiff is the beneficiary of the deed of trust seeking to reform the deed of trust to correct a legal description. In Yoon, the borrower’s claims directly relate to enforcement of the note through foreclosure

proceedings; here, the action was for reformation and declaratory relief, and the judgment obtained is not a money judgment on the Note and there has been no foreclosure. Thus, in Yoon, the attorney fee provisions were triggered because the lender was actively pursuing the Section 22 remedies; here, the Section 22 remedies have not been invoked.

For these reasons, Plaintiff has not established that the contractual fee provisions on which it relies authorize recovery of the attorney fees. Accordingly, the motion is DENIED.

Plaintiff’s Request for Costs

“ ‘The right to recover any of the costs of a civil action “is determined entirely by statute.” ’ [Citation.]” (Charton v. Harkey (2016) 247 Cal.App.4th 730, 737.) California Rules of Court, rule 3.1700(a)(1) requires a prevailing party claiming costs to serve and file a memorandum of costs. An opposing party may challenge the claimed costs by filing a motion to strike or tax costs under rule 3.1700(b).

Plaintiff separately filed a Memorandum of Costs on April 3, 2026. (ROA 272; Plaintiff’s RJN, Ex. 60.) Accordingly, Plaintiff’s recoverable statutory costs should be determined through the procedures applicable to the Memorandum of Costs and not through this motion.

Defendant to give notice.

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