HSBC Bank, USA v. Wells Fargo Bank, N.A. CA2/6

Filed 5/16/16 HSBC Bank, USA v. Wells Fargo Bank, N.A. CA2/6 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SIX

HSBC BANK, USA, 2d Civil No. B266405 (Super. Ct. No. 56-2012-00414216- Plaintiff, Cross-defendant and CU-OR-VTA) Respondent, (Ventura County)

WELLS FARGO BANK, N.A.,

Cross-defendant and Respondent,

v.

ROBERT L. WOOD et al.,

Defendants, Cross-complainants and Appellants.

A lender whose loan is secured by a trust deed brought an action against the borrower. The borrower cross-complained. The lender prevailed on both the complaint and cross-complaint. The trial court awarded the lender attorney fees pursuant to a clause contained in the trust deed. We reverse the order awarding attorney fees and costs to the lender. The one-form-of-action rule (Code Civ. Proc., § 726, subd. (a) (hereafter "section 726")) is a defense to a direct action against the borrower for fees and costs. FACTS In 2006, Robert L. Wood obtained a loan secured by a deed of trust on his residence. The note and deed of trust were assigned to HSBC Bank, USA (Bank).

Wood fell behind on his payments and requested a loan modification pursuant to the Home Affordable Modification Program (HAMP). The Bank agreed to modify Wood’s loan on the condition that he provide the documents necessary to reform the trust deed’s incomplete legal description. Wood refused to provide the documents. Instead, he insisted that the Bank modify the loan before he provided the documents or at least conduct the transaction through an escrow. The Bank refused and terminated Wood from the loan modification program. The Bank brought an action to reform the trust deed’s legal description. Wood filed a cross-complaint for breach of contract based on the Bank’s refusal to modify the loan. The trial court found for the Bank on both the complaint and cross- complaint. The Bank brought a motion for attorney fees under section 9 of the trust deed. Section 9 provides in part: “If . . . there is a legal proceeding that might significantly affect Lender’s [fn. omitted] interest in the property and/or rights under this security [i]nstrument . . . , then Lender may do and pay for whatever is reasonable or appropriate to protect Lender’s interest in the Property and rights under this security [i]nstrument. . . . . Lender’s actions can include, but are not limited to: . . . (b) appearing in court; and (c) paying reasonable attorneys’ fees to protect its interest in the Property and/or rights under this security instrument . . . . [¶] Any amounts disbursed by Lender under this Section 9 shall become additional debt of Borrower secured by this [s]ecurity [i]nstrument.” The Bank also filed a cost memorandum seeking $16,932 in costs. Wood defended the Bank’s motion for attorney fees and costs on the ground, among others, that section 726, subdivision (a) prohibits a direct action against him for fees and costs. Instead, the Bank must add its fees and costs to the secured debt and enforce its right to fees through foreclosure. Wood also filed a motion to tax costs. The trial court rejected Wood’s defense based on section 726 and his motion to tax costs. The court awarded the Bank attorney fees in the amount of $175,000 plus costs.