Dhillon v. State Bank of India (Cal.)

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RANDEEP S. DHILLON, Plaintiff and Appellant, v. STATE BANK OF INDIA (CALIFORNIA), Defendant and Respondent.

F083964

California Court of Appeals, Fifth District

July 20, 2023

NOT TO BE PUBLISHED

APPEAL from a judgment of the Superior Court of Kern County No BCV-19-101602. Thomas S. Clark, Judge.

Law Office of Forrest R. Miller, Forrest R. Miller; Law Office of Reshma Kamath and Reshma Kamath for Plaintiff and Appellant.

Enenstein Pham &Glass, Teri T. Pham and Alvaro Montenegro for Defendant and Respondent.

OPINION

DE SANTOS, J.

This is the companion case to Dhillon v. State Bank of India (California) (June 28, 2023, F083456) [nonpub opn.], in which we affirmed the trial court's grant of summary judgment in favor of defendant and respondent State Bank of India (California) (SBIC) on plaintiff Randeep Dhillon's claims for fraud and intentional misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, unfair and deceptive business practices, unjust enrichment, and accounting. Here, Dhillon appeals from a postjudgment order awarding costs and attorney fees to SBIC. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Dhillon purchased a pistachio farm in 2006 and financed part of the purchase price by obtaining a $2.160 million loan from SBIC. In November 2007, Dhillon refinanced the SBIC loan by taking out a $4.626 million loan from SBIC (the 2007 Loan); he signed a promissory note in that amount secured by a deed of trust to be recorded on the property. Dhillon also executed a security agreement, which granted SBIC a security interest in Dhillon's personal property.

The promissory note contained the following attorney fees provision: "Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law."

Similarly, the deed of trust provided: "If Lender institutes any suit or action to enforce any of the terms of this Deed of Trust, Lender shall be entitled to recover such sum as the court may adjudge reasonable as attorneys' fees at trial and upon any appeal. Whether or not any court action is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender's opinion are necessary at any time for the protection of its interest or the enforcement of its rights shall become a part of the Indebtedness payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by this paragraph include, without limitation, however subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit .... Trustor also will pay any court costs, in addition to all other sums provided by law."^[1]

Following a default, Dhillon entered into a forbearance and settlement agreement with SBIC in October 2011. Dhillon and SBIC entered into a change in terms agreement in January 2014.

The Underlying Litigations

In December 2016, SBIC filed a verified complaint against Dhillon to judicially foreclose on the property (the foreclosure action). That month, SBIC sold and assigned all its interests in the 2007 Loan to Joseph P. Romance; Romance subsequently substituted into the foreclosure action as plaintiff in SBIC's place. In February 2017, Romance nonjudicially foreclosed on the property and recorded a trustee's deed upon sale. In April 2017, Romance filed a first amended complaint in the foreclosure action, substituting a cause of action for foreclosure of the personal property collateral in place of the claim for judicial foreclosure. The trial court subsequently granted Romance's motion for summary judgment and judgment was entered in Romance's favor and against Dhillon in the amount of $278,417.77.

Dhillon filed this action against SBIC in June 2019, asserting claims for, among other things, breach of contract and fraud. In March 2021, SBIC filed a motion for summary judgment. After multiple continuances and additional briefing, the trial court granted summary judgment in SBIC's favor on all of Dhillon's claims on grounds of res judicata and collateral estoppel. In September 2021, judgment was entered in SBIC's favor and against Dhillon, and notice of entry of judgment was served on all parties on October 27, 2021.

The Attorney Fees Motion

SBIC filed a motion for attorney fees and costs. SBIC contended it was entitled to attorney fees under the attorney fees provisions in the 2007 Loan contracts because: (1) Dhillon's action was "on a contract" within the meaning of Civil Code^[2] section 1717 since the action "entirely 'arises out of, is based upon, and/or relates' to the parties' contractual relationship" under the 2007 Loan contracts, and the parties' performance and conduct under those agreements; (2) the 2007 Loan contracts contained attorney fee provisions relating to enforcement of the 2007 Loan; and (3) it was the prevailing party in Dhillon's action.

SBIC submitted its attorney's declaration in support of the motion. The attorney stated SBIC incurred $125,350 in attorney fees, which reflected 342.5 hours of work by attorneys at the law firm at an hourly rate of $270 for associates, $450 for senior associates, and $500 and $490 for partners. SBIC also sought $4,751.68 in costs. SBIC asserted it was entitled to the full amount of the claimed fees and costs because they were reasonable considering the litigation.

In opposing the motion, Dhillon argued SBIC was not entitled to attorney fees under section 1717 because: (1) SBIC ceased to be a party to the agreements when it assigned its rights to the 2007 Loan contracts to Romance in December 2016; (2) while section 1717's reciprocity principles may apply in actions between parties and nonparties to a contract, SBIC did not stand in the place of a party to the agreements and was not a third-party beneficiary; and (3) nothing in the 2007 Loan contracts contemplated SBIC retaining the right to recover attorney fees postassignment.

Dhillon contended his lawsuit against SBIC was not on a contract because he was not seeking to void, enforce, or stop enforcement of a contract; rather, his case was for damages grounded in SBIC's fraudulent conduct. Dhillon asserted the attorney fees provisions were limited to actions by the lender relating to collection of the amounts due and did not contemplate independent claims for fraud. Finally, Dhillon asserted he was not judicially estopped from challenging SBIC's claim for contractual attorney fees simply because he sought attorney fees in his second amended complaint. Dhillon did not challenge the amount of the requested fees or SBIC's entitlement to the claimed costs.

In reply, SBIC argued its assignment of its interests under the 2007 Loan did not extinguish its commitments under the contracts; therefore, when Dhillon sued SBIC for breach of those contracts, the attorney fees provisions still applied and would have governed Dhillon had he prevailed in the action. SBIC further argued that even if it became a nonsignatory to the 2007 Loan contacts by virtue of its assignment to Romance, it was entitled to attorney fees under section 1717 because it would have been liable for Dhillon's attorney fees had he prevailed.

As for Dhillon's claim that his lawsuit was based on fraud, SBIC asserted the action was on a contract under section 1717 because Dhillon's complaint included claims for breach of contract, and he sought damages based on SBIC's conduct under the loan and the enforcement mechanisms under the written contracts. Finally, SBIC contended the language of the attorney fees provisions in the various contracts showed attorney fees were warranted in connection with any action related to enforcement of the loan, including Dhillon's action to avoid the consequences of enforcement, and the gravamen of his claims sought damages against SBIC for its enforcement of Dhillon's loan obligations, including billing and foreclosure proceedings.

After a hearing on the motion, the trial court entered an order granting the motion in its entirety. The judgment was amended to include an award to SBIC of $125,350 in attorney fees and $4,751.68 in costs.

DISCUSSION

General Legal Principles Governing Attorney Fee Awards

Generally "[e]ach party to a lawsuit must pay his or her own attorney fees except where a statute or contract provides otherwise." (Cargill, Inc. v. Souza (2011) 201 Cal.App.4th 962, 966 (Cargill); Code Civ. Proc § 1021.) Where a contract provides for an award of attorney fees in an action on the contract, the reciprocity provisions of section 1717 allow for recovery of fees by whichever party prevails in an action on the contract, regardless of whether the contract specifies that party. (§ 1717, subd. (a); Cargill, at p. 966; Milman v. Shukhat (1994) 22 Cal.App.4th 538, 543-545; Xuereb v. Marcus &Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342.)

"Tort and other noncontract claims are not subject to section 1717 and its reciprocity principles." (Brown Bark III L.P. v. Haver (2013) 219 Cal.App.4th 809, 820 (Brown Bark).) The contracting parties, however, may agree to a broader attorney fees provision which permits recovery of fees in both contract and noncontract actions. (Xuereb v. Marcus &Millichap, Inc., supra, 3 Cal.App.4th at pp. 1342-1343 [provision for payment of fees in...