Filed 7/28/22 Shiheiber v. JPMorgan Chase Bank CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
HANAN SHIHEIBER,
Cross-Complainant and
Appellant, A160189
v. (San Mateo County
JPMORGAN CHASE BANK, N.A., Super. Ct. No. CIV493254 )
Cross-Defendant and
Respondent.
Appellant Hanan Shiheiber appeals from a post-judgment award of
contractual attorney fees imposed against her after she lost at trial on all of
her claims against lender JPMorgan Chase Bank, N.A. (Chase), which were
premised on her theory Chase had wrongfully foreclosed on her properties.
By separate opinion in her related appeal from the judgment, which was
argued together with this one, we have affirmed the judgment entered
against her. (Shiheiber v. JPMorgan Chase Bank, N.A., (July 27, 2022,
A159313) [nonpub. opn.].)
1
Here, Shiheiber challenges the legal basis for the attorney fees award
on two grounds.1 We reject her arguments and affirm the attorney fees
award as well.2
BACKGROUND
Briefly, as described by Shiheiber, all of her claims (and the trial)
focused on Chase’s foreclosure of her property after a loan officer had made
an allegedly false promise to her about how she could reinstate her loan and
avoid foreclosure after the loan had become delinquent. As described in a
nutshell by the trial court, Shiheiber sued Chase for fraudulently foreclosing
on her property. Most of her causes of action against Chase were tried to a
jury, and one was tried to the court. All were rejected.
Chase then moved for an award of contractual attorney fees pursuant
to two attorney fee clauses in the loan instruments, one in the promissory
note and one in the deed of trust.
The trial court granted the motion but reduced the amount of Chase’s
request. It awarded Chase $878,067.11 in attorney fees and costs, and this
timely appeal followed.
1 Our affirmance of the judgment in the related appeal renders moot
her contention in this one that the fee award should be reversed if the
judgment falls, because Chase would no longer be a prevailing party.
2 On our own motion, we notified Shiheiber and her former appellate
counsel we were considering imposing sanctions payable to the court for
asserting frivolous appellate arguments. (See Code Civ. Proc., § 907;
Cal. Rules of Court, rule 8.276.) An opposition was filed, and the matter was
argued. Having taken the matter under submission, we decline to impose
sanctions.
2
DISCUSSION
On appeal, Shiheiber does not challenge the amount of the fee award
but challenges only Chase’s legal entitlement to recover its attorney fees, on
two grounds.
“A determination of the legal basis for an award of attorney fees is a
question of law we review de novo.” (Yoon v. Cam IX Trust (2021)
60 Cal.App.5th 388, 391.) Moreover, “ ‘we review the trial court’s order, not
its reasoning, and affirm an order if it is correct on any theory apparent from
the record.’ ” (Wal-Mart Real Estate Business Trust v. City Council of San
Marcos (2005) 132 Cal.App.4th 614, 625.)
I.
Chase’s Right to Recover Attorney Fees Is Unaffected by the
Foreclosure Sale.
First, citing Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226
(Alliance Mortgage) and Smith v. Allen (1968) 68 Cal.2d 93 (Smith),
Shiheiber argues that the attorney fees provisions contained in the
promissory note and deed of trust are (in effect) unenforceable, because all of
her obligations under those instruments were “extinguished” by the
foreclosure sale, including her potential liability for an award of contractual
attorney fees for pursuing unmeritorious claims against Chase in this case.
She explains: “When the foreclosure sales occurred in 2010, the sales
released Shiheiber from any further obligations under the promissory note or
deed of trust. The debt was extinguished, and the note and deed of trust
were erased. They could not have authorized an award of attorney’s fees
entered years after the foreclosure. Because Chase’s motion for an award of
fees rested on contracts that were no longer in effect, it could not demand
fees.”
3
This argument rests on a vast oversimplification of the law of secured
indebtedness. As we will explain, the two authorities Shiheiber cites are
irrelevant, and her position is squarely contradicted by the holdings of three
published cases, including one directly on point.
We begin with the caselaw Shiheiber cites, which provides no support
for the theory she posits. Neither Alliance Mortgage, supra, 10 Cal.4th 1226
nor Smith, supra, 68 Cal.2d 93 addresses the recovery of contractual attorney
fees, much less the impact of a foreclosure sale on the enforceability of an
attorney fees provision contained in any of the instruments creating or
securing the defaulted indebtedness. Nor does either case even suggest, more
generally, that the governing loan documents cease to exist as binding
contracts once the property securing the indebtedness has been foreclosed
upon. And they most assuredly do not hold, as Shiheiber characterizes them,
that a foreclosure sale “erase[s]” for all purposes the underlying promissory
note and deed of trust.
Smith, supra, 68 Cal.2d 93, holds that after a judicial foreclosure, the
defaulting property owner cannot seek restitution from the lender for costs
previously incurred while in possession of the property (i.e., payments toward
the property’s purchase price and expenses for repairs and improvements).
(Id. at p. 96.) The reason is because the rights of the parties are governed
exclusively by the statutes governing the conduct of judicial foreclosures,
which make “clear that the Legislature intended that a properly conducted
foreclosure sale should constitute a final adjudication of the rights of the
borrower and lender.” (Ibid.) Smith said nothing about a lender’s right to
recover attorney fees in any context.
The issue in Alliance Mortgage, supra, 10 Cal.4th 1226 was “whether a
lender’s acquisition of security property by full credit bid at a nonjudicial
4
foreclosure sale bars the lender from maintaining a fraud action to recover
damages from third parties who fraudulently induced the lender to make the
loan[].” (Id. at p. 1241.) The Court held that such a fraud claim is not
categorically barred. (Id. at p. 1246.) Again, there was no issue concerning
attorney fees. Moreover, Alliance Mortgage makes clear that the only
consequence of a lender’s full credit bid is that it extinguishes the defaulted
indebtedness. Alliance Mortgage did not say it cancels the contract.3
(Further, as Chase points out, Shiheiber has not even demonstrated that
there was a full credit bid in this case.)
3 Here, in context, is what the Supreme Court said:
“A ‘full credit bid’ is a bid ‘in an amount equal to the unpaid principal
and interest of the mortgage debt, together with the costs, fees and other
expenses of the foreclosure.’ [Citation.] If the full credit bid is successful, i.e.,
results in the acquisition of the property, the lender pays the full outstanding
balance of the debt and costs of foreclosure to itself and takes title to the
security property, releasing the borrower from further obligations under the
defaulted note. (See Smith v. Allen (1968) 68 Cal.2d 93, 96 [‘[I]t is clear that
the Legislature intended that a properly conducted [nonjudicial] foreclosure
sale should constitute a final adjudication of the rights of the borrower and
the lender’].) [¶] Under the ‘full credit bid rule,’ when a lender makes such a
bid, it is precluded for purposes of collecting its debt from later claiming that
the property was actually worth less than the bid. (See Cornelison v.
Kornbluth [(1975)] 15 Cal.3d [590,] 606-607; Passanisi v. Merit-McBride
Realtors, Inc. [(1987)] 190 Cal.App.3d [1496,] 1503 [after full credit bid,
lender cannot pursue any other remedy regardless of actual value of the
property on the date of sale].) Thus, the lender is not entitled to insurance
proceeds payable for prepurchase damage to the property, prepurchase net
rent proceeds, or damages for waste, because the lender’s only interest in the
property, the repayment of its debt, has been satisfied, and any further
payment would result in a double recovery.” (Alliance Mortgage, supra,
10 Cal.4th at pp. 1238-1239, italics added.)
5
The caselaw that is relevant—which Shiheiber all but overlooks—
establishes without question that the foreclosure of property securing a deed
of trust does not eliminate a lender’s right to recover contractual attorney
fees for successfully defending claims by a defaulting borrower contesting the
validity of the foreclosure sale.
The leading case is Passanisi v. Merit-McBride Realtors, Inc. (1987)
190 Cal.App.3d 1496 (Passanisi)). There, a defaulting borrower brought an
action to enjoin a nonjudicial foreclosure sale; lost; and then the lender was
awarded attorney fees under an attorney fee clause in the deed of trust. (Id.
at p. 1501.) The trustee’s sale then took place, following which the defaulting
borrower asserted, in effect, that it was not obligated to pay the prior award
of contractual attorney fees because of the foreclosure. (Id. at pp. 1500-1501.)
(Specifically, it filed a motion to compel the lender to acknowledge
satisfaction of the judgment for contractual attorney fees (id. at p. 1501).)
The appellate court held the fee award was not rendered unenforceable by
the trustee sale (nor, alternatively, was the fee award rendered automatically
satisfied). (Ibid.)
In order to clarify the issues, Passanisi first summarized the legal
framework governing the conduct and consequences of foreclosure sales,
background that is unnecessary to repeat here. (See Passanisi, supra,
190 Cal.App.3d at pp. 1502-1505.) After defining the pertinent legal
questions, it specifically held that neither the one form of action rule (Code
Civ. Proc., § 726) nor the prohibition against deficiency judgments (id.,
§ 580d) rendered the attorney fee award unenforceable after the property’s
sale. (See Passanisi, at pp. 1504-1509.) Passanisi observed, among other
things, that the lender “was entitled under the terms of the trust deed to
attorney’s fees incurred in defending the injunction action brought by
6
plaintiffs [and] was not required to forego its right to those fees in order to
rely upon its security to satisfy the secured obligation.” (Id. at p. 1507.) It
also explained that the attorney fee award was “entirely independent of the
problems encompassed by antideficiency legislation,” and merely “the result
of the debtor-trustor’s voluntary act in bringing an unmeritorious suit which
the creditor-beneficiary was required to make expenditures to defend.” (Id.
at p. 1509.)
Passanisi also observed that to preclude the lender from recovering its
attorney fees for defending a meritless lawsuit brought by the borrower
would violate the reciprocity principles of Civil Code section 1717. It
explained: “In Civil Code section 1717 the Legislature has decreed that
contractual attorney’s fee clauses are mutual. Thus, where the contract
provides for attorney’s fees in the event of litigation, the prevailing party may
obtain an award of fees regardless whether that party was contractually
entitled to fees. As the Court of Appeal has said: ‘Under Civil Code
section 1717, what is sauce for the goose is sauce for the gander, . . . .’
[Citation.] To accept plaintiffs’ contention would be to hold that where a
debtor-trustor prevails in an action to enjoin a trustee’s sale he may recover
an enforceable award for attorney’s fees and costs, but where the creditor-
beneficiary prevails he cannot obtain an enforceable judgment for such fees
and may recover fees only in the event the property can be sold for a
sufficient amount to satisfy the indebtedness it secures, together with the
costs of the sale, and attorney’s fees expended in the litigation. Such a result
would destroy the mutuality of attorney’s fee provisions required by Civil Code
section 1717.” (Passanisi, 190 Cal.App.3d at p. 1509, fn. 9, italics added.)
7
In short, the attorney fee claim in Passanisi (which in that case had
been reduced to judgment before the foreclosure sale took place) was not
“extinguished” by the trustee sale.
Passanisi was followed by Flynn v. Page (1990) 218 Cal.App.3d 342
(Flynn), a wrongful foreclosure case that is directly on point. Flynn, a case
neither party cites, upheld an award of contractual attorney fees to lenders
(there, two sellers who issued a purchase money deed of trust in connection
with the sale of their property) who prevailed in an action brought against
them by the defaulting borrowers who asserted various tort and other claims
(such as fraud, negligent misrepresentation and tortious breach of the
implied covenant of good faith and fair dealing) based on allegations their
property had been wrongfully foreclosed upon. (Id. at pp. 344-345, 349.) As
in this case, the borrowers had sought a variety of remedies, including
various forms of both injunctive and monetary relief (such as specific
performance, constructive trust, rescission and restitution). (See id. at
p. 344.) As pertinent here, Flynn held it was immaterial that the lender was
awarded attorney fees after the foreclosure sale took place, because
application of the principles discussed in Passanisi do not depend on the
timing of the foreclosure sale. (Flynn, at p. 349.) It explained: “[T]he fact
that the foreclosure sale [in Passanisi] occurred prior to the award of fees is
not determinative. What is determinative is the fact that, had [borrowers]
prevailed on the complaint, [they] would have been entitled to such an
award.” (Ibid.)
The final case in the trilogy, and the only one the parties cite and
discuss in the appellate briefing, is Jones v. Union Bank of California (2005)
127 Cal.App.4th 542 (Jones) which, like Flynn, extended Passanisi to an
action brought by a defaulting borrower to attack the validity of a foreclosure
8
sale that had already taken place. There, a lender was awarded contractual
attorney fees under the loan instruments after prevailing in an action
brought by the defaulting borrower to set aside the foreclosure sale. (Jones,
at pp. 544-546.) The appellate court affirmed the award. (Id. at p. 551.) It
observed that, if anything, the situation presented an even more compelling
reason to uphold the fee award than in Passanisi, noting that the borrowers
in Passanisi had sought prospective relief to enjoin a foreclosure sale whereas
the present case was backwards-looking, seeking to undo one. (Jones, at
p. 547.) Jones said that the latter kind of action “was not even contemplated
prior to foreclosure” and so “it makes no sense to say that the fees are part of
the indebtedness satisfied at the foreclosure sale.” (Ibid.)
In short, it is settled under Passanisi, Flynn and Jones that a
foreclosure sale does not extinguish or preclude enforcement of a prevailing
party attorney fee clause in the loan instruments. Such a provision
represents a separate contractual covenant, distinct from the covenant to re-
pay the loan on specified terms, that is simply intended to alter the
traditional American rule that each side bear their own attorney fees in the
event of litigation between them.
The only one of these three cases Shiheiber even acknowledges is
Jones, which she says is distinguishable because the borrower in that case
tried to set aside a foreclosure sale, whereas here she did not try to do that
but merely went to trial on a claim for damages against Chase. But that
distinction overlooks Flynn which, as noted, was a tort case seeking a variety
of remedies including monetary relief and is squarely on point.
Shiheiber’s money damages distinction also mischaracterizes the
record. Chase asserts, without contradiction, that Shiheiber did seek
injunctive relief to prevent the foreclosure sale from going forward or
9
continuing, in addition to seeking damages. So that makes Passanisi directly
on point too (but for the timing of the fee award in that case, which under
Flynn is irrelevant).
It also is a distinction without a difference. Regardless of the remedy
sought, when a defaulting borrower pursues claims against a lender
contesting the validity of a foreclosure sale and loses, an award to the lender
of contractual prevailing party attorney fees does not reflect an attempt by
the lender to collect on the underlying secured debt. (See Passanisi, supra,
190 Cal.App.3d at p. 1509.) It “is the result of the debtor-trustor’s voluntary
act in bringing an unmeritorious suit which the creditor-beneficiary was
required to make expenditures to defend.’ ” (Ibid.) And regardless of the
remedy sought, denying the lender its fees would violate the mutuality
principles embodied by Civil Code section 1717. (See Passanisi, at p. 1509,
fn. 9; Flynn, supra, 218 Cal.App.3d at p. 349.)
We could end our analysis there. But the length of this opinion has
been needlessly extended due to, yet again, Shiheiber’s inaccurate, and
indeed misleading, citation of caselaw. Shiheiber’s damages distinction rests
on a quotation taken out of context from an irrelevant case that distinguishes
Jones on other grounds. And so we must address it.
Citing 612 South LLC v. Laconic Limited Partnership (2010)
184 Cal.App.4th 1270 (612 South LLC), Shiheiber asserts: “The borrower’s
efforts to regain title and vacate a foreclosure make a difference when the
lender seeks fees. As one court held, Jones v. Union Bank and related cases
‘are inapposite as they addressed situations where a debtor sought to either
stop . . . or set aside . . . a foreclosure sale under a deed of trust with the
attorney fee award being an obligation imposed on the unsuccessful debtor by
the deed of trust; thus, the anti-deficiency provisions of Code of Civil
10
Procedure section 580d did not render the fee award unenforceable.’
(612 South LLC, [at p.] 1282. [¶] When the borrower does not seek to undo a
foreclosure sale, the lender cannot recover fees under the extinguished
promissory note or deed or trust. (Ibid.)” (Italics added.)
612 South LLC says no such thing. The case did not “hold” that “[t]he
borrower’s efforts to regain title and vacate a foreclosure make a difference
when the lender seeks fees.” Nor does it stand for the proposition that
“[w]hen the borrower does not seek to undo a foreclosure sale, the lender
cannot recover fees under the extinguished promissory note or deed of trust.”
612 South LLC did not involve a foreclosure sale pursuant to a deed of trust
nor any issue concerning contractual attorney fees. The case was a judicial
foreclosure action brought by a public bondholder under section 6615 of the
Streets and Highways Code, and the issue was whether a personal deficiency
judgment against the debtor may be entered in such a case to the extent the
foreclosure sale proceeds prove insufficient to cover amounts owing on the
defaulted bond and the bondholder’s statutorily authorized attorney fees.
(612 South LLC, supra, 184 Cal.App.4th at p. 1281.) 612 South LLC held
that a personal judgment against the debtor is precluded in such a case, and
distinguished Jones and Passanisi as follows:
“[Bondholder] cites [Passanisi] and [Jones] for the proposition that even
where recovery of a deficiency is expressly precluded by statute, a party may
recover its award of attorney fees following foreclosure. These cases are
inapposite as they addressed situations where a debtor sought to either stop
(Passanisi) or set aside (Jones) a foreclosure sale under a deed of trust with
the attorney fees award being an obligation imposed on the unsuccessful
debtor by the deed of trust; thus, the anti-deficiency provisions of Code of Civil
11
Procedure section 580d did not render the fee award unenforceable.”
(612 South LLC, supra, 184 Cal.App.4th at p. 1282, italics added.)
In other words, 612 South LLC distinguished Jones and Passanisi on
two grounds. One was that they were actions brought by the debtor to
challenge a foreclosure, not an action by the creditor to accomplish one (in
that case, under the judicial foreclosure statute governing public bonds). And
the other was that they involved contractual attorney fees, not attorney fees
recoverable by statute for pursuing a judicial foreclosure which were the
attorney fees at issue in that case.4 612 South LLC in no way supports the
remedies distinction urged here by Shiheiber. It is irrelevant to the
contractual attorney fee issue at hand. Shiheiber’s quotation of the italicized
portion of the above-quoted language is irresponsible and highly misleading.
In its respondent’s brief, Chase points out many of the flaws in
Shiheiber’s argument. Shiheiber then drops this issue entirely in her reply
brief, saying nothing.
In sum, the trial court was not precluded from awarding Chase its
attorney fees because the properties securing her debts had been foreclosed
upon. There was no error.
II.
Chase’s Contractual Right to Attorney Fees
As noted, Chase requested its attorney fees under two provisions, one
contained in the deed of trust and one contained in the promissory note.
Shiheiber contends that neither attorney fee provision applies to this case. It
4 See Sts. & Hy. Code, § 6615 (“[t]he court having jurisdiction of the
action shall also fix and allow a reasonable attorney’s fee for the prosecution
of the action”); 612 South LLC, supra, 184 Cal.App.4th at pp. 1280-1281
(quoting and discussing same).
12
is unnecessary to examine the deed of trust because we start and end with
the language of the promissory note.
Section 10 of the promissory note broadly states in pertinent part: “In
the event of any Default or in the event that any dispute arises relating to the
interpretation, enforcement[,] or performance of this Note, Lender shall be
entitled to collect from Borrower on demand all fees and expenses incurred in
connection therewith including but not limited to fees of attorneys . . . .
Without limiting the generality of the foregoing, Borrower shall pay all such
costs and expenses incurred in connection with: (a) . . . . trial court actions,
and appeals; . . . . [and] (e) all claims, counterclaims, cross-claims, and
defenses asserted in any of the foregoing whether or not they arise out of or are
related to this Note or any security for this Note . . . .” (Italics added.)
Shiheiber’s argument about the inapplicability of the foregoing
attorney fee provision rests solely on its plain language. She asserts that it is
limited to cases that “involve[] the ‘interpretation, enforcement or
performance of the note’ ” (which ignores the much broader language of
section 10, subsection (e)), and yet asserts her cross-complaint “did not
involve the promissory note” but, rather, “rested on misrepresentations a
Chase employee made in response to her request to reinstate the loan,” and
asserts that “[t]he jury was not called on to interpret the note.” She
elaborates upon this plain language-based argument in her reply brief.
This argument is supported by no legal authority (and virtually no
analysis). It is forfeited. (See United Grand Corp. v. Malibu Hillbillies,
LLC (2019) 36 Cal.App.5th 142, 153.)
It also is wrong. Yoon v. Cam IX Trust (2021) 60 Cal.App.5th 388
affirmed an award of attorney fees to a lender under a fee clause that is
narrower than this one, after the lender defeated various tort claims asserted
13
by a borrower who, like Shiheiber, contended he had been fraudulently
misled about how to cure a default and avoid the loss of his property. (Id. at
p. 391.) The promissory note in that case stated—more narrowly—that in the
event of default, “ ‘the Note Holder will have the right to be paid back . . . for
all of its costs and expenses in enforcing this Note to the extent not prohibited
by Applicable Law,’ ” including reasonable attorney fees. (Id. at p. 392, italics
added.) Yoon held this provision authorized the fee award, even though the
claims sounded in tort, not contract. “The gravamen of [the borrower’s]
lawsuit,” it reasoned, “was an effort to avoid the enforcement of the note and
deed of trust; his suit arose from defendants’ alleged conduct in the course of
enforcing the terms of those documents.” (Ibid.) It agreed with the trial
court that the borrower’s tort claims “ ‘directly relate to enforcement of the
note through foreclosure.’ ” (Id. at p. 391.) And it rejected precisely the
argument that Shiheiber is making: “Plaintiff insists he did not allege a
breach of contract, but only ‘tortious claims, mainly misrepresentation,’ and
defendants did not defend based on the note or deed of trust, but only sought
to show there was no negligence or misrepresentation in the foreclosure
process. All that is so, but misses the point. At its core, plaintiff's suit sought
to avoid his obligations under the note by making claims defendant acted
negligently and fraudulently during the foreclosure process.” (Id. at p. 393,
italics added.)
Shiheiber tries to distinguish Yoon on baseless grounds. She says Yoon
is not applicable because she herself “did not sue to enforce the note or the
deed of trust” but, rather, “[s]he sued for fraud and damages.” That is a
mixed-up reading of Yoon. The borrower in Yoon didn’t sue for breach of
contract either, he sued for fraud. And he lost. And the appellate court
14
affirmed the award of contractual attorney fees to the lender under a
similarly-worded attorney fee clause.
And so do we. Shiheiber’s claims “related” to “enforcement” of the
promissory note because they challenged Chase’s right to foreclose on the
property under the terms of the promissory note and deed of trust. The trial
court did not err in awarding Chase its fees under section 10 of the
promissory note.
DISPOSITION
The attorney fee order is affirmed. Respondent shall recover its costs.
15
STEWART, J.
We concur.
RICHMAN, Acting P.J.
MAYFIELD, J. *
Shiheiber v. JPMorgan Chase Bank, N.A. (A160189)
* Judge of the Mendocino Superior Court assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
16