California Court of Appeals Expands a Borrower's Right to Attorneys' Fees Under the Homeowner Bill of Rights: Hardie v. Nationstar and Bustos v. Wells Fargo

• Publication year: 2019
• Author: T. Robert Finlay

California Court of Appeals Expands a Borrower's Right to Attorneys' Fees Under the Homeowner Bill of Rights: Hardie v. Nationstar and Bustos v. Wells Fargo

T. Robert Finlay

T. Robert Finlay is one of the founding partners of Wright, Finlay & Zak. Since 1994, Mr. Finlay has focused on consumer finance, and mortgage-related litigation, compliance and regulatory matters. Mr. Finlay currently serves as General Counsel for California Mortgage Association, advising the Board and its members on a variety of loan origination, servicing and other legal and compliance issues.

I. INTRODUCTION

Although it has been in effect since January 1, 2013, California's Homeowner Bill of Rights ("HOBR") is still working its way through the trial and appellate courts, with parties searching for clarification on many of its vague and ambiguous provisions. One issue ripe for interpretation is the question: under what circumstance is the borrower entitled to attorneys' fees? Civil Code¹ sections 2924.12(h) and 2924.19(h) give the court the discretion to award reasonable attorneys' fees and costs to the "prevailing borrower," who is defined as a borrower who "obtained injunctive relief or was awarded damages."² There is no question that the court has the discretion to award borrowers who obtained a judgment for damages on their HOBR claims, their reasonable fees. Likewise, under the Court of Appeal's 2015 decision in Monterossa v Superior Court,³ it is equally as clear that a borrower obtaining a preliminary injunction under HOBR is entitled to move for recovery of attorneys' fees for bringing an injunction, even if the borrower does not ultimately prevail on the merits of the lawsuit. However, until recently, servicers have often successfully argued that borrowers who obtain a temporary restraining order ("TRO") are not entitled to attorneys' fees just for obtaining the TRO, as a TRO is not within the scope of the term "injunctive relief."

II. THE NEW DECISIONS

Two recently published decisions by the Court of Appeal, Hardie v. Nationstar and Bustos v. Wells Fargo,⁴ have concluded that borrowers prevailing at a TRO hearing are eligible for attorneys' fees and costs under HOBR because a TRO should be considered a form of injunctive relief.⁵ The decisions in Hardie and Bustos will undoubtedly increase the motivation for borrowers claiming violations of HOBR to seek TROs.

A TRO is an injunction in the sense that it enjoins a particular act pending a hearing on a preliminary injunction.⁶ However, it is distinguishable from an injunction in the following ways:

1. A TRO may be issued ex parte and, sometimes, even without notice (e.g. where a foreclosure sale is just days or even hours away) as its purpose is to preserve the status quo.
2. In contrast to the ex parte TRO proceeding, a hearing on the preliminary injunction is a full evidentiary hearing giving all parties the opportunity to present arguments and evidence.⁷
3. A bond is not essential for a TRO, but is for a preliminary injunction that is not effective...