Vakili v. Bank of America, N.A. CA3
C091767
| Cal. Ct. App. | Jan 20, 2022Background
- In 2011 Vakili and then-husband Welcher took out a mortgage secured by a promissory note and deed of trust; Vakili later obtained the property in a divorce and defaulted in 2015.
- In Dec. 2015 Vakili applied to Bank of America (BANA) for a federal loan modification; in Nov. 2016 BANA sent a modification naming her by her former surname and listing Welcher as required signatory.
- After Vakili objected, BANA said it would send corrected documents but instead referred the file to its mortgage fraud unit, concluded Welcher’s signature was forged, denied the modification, placed Vakili on a one‑year watch list, and did not notify her of the investigation or findings.
- Vakili sued for breach of contract, breach of the implied covenant, promissory estoppel, negligence, and fraud; the trial court granted directed verdict for BANA on the contract-based claims and punitive damages but allowed negligence and one fraud claim to go to the jury.
- The jury found BANA liable on negligence and fraud; Vakili accepted a reduced judgment of $1,700,869. She then sought contractual attorney fees under Civil Code § 1717 based on fee language in the note and deed; the trial court denied fees and Vakili appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1717 applies so Vakili can recover contractual fees for her claims | Vakili: her negligence/fraud claims are “on a contract” because they relate to enforcing/interpreting the loan documents, so §1717 makes lender’s unilateral fee clause reciprocal | BANA: claims sound in tort and do not seek enforcement/interpretation of the note or deed, so §1717 does not apply | Held: §1717 does not apply; tort claims here are not “on a contract,” so fees denied |
| Whether the note’s fee clause (para. 6(C)) covers Vakili’s claims | Vakili: the clause permits fee recovery and should be applied reciprocally under §1717 | BANA: clause only lets lender recover fees to enforce the note after default (acceleration/foreclosure) and does not cover tort claims | Held: note clause is limited to enforcing the note on default and is inapplicable to negligence/fraud claims |
| Whether the deed clause (para. 7) authorizes separate fee awards for these tort claims | Vakili: deed expenses/attorneys’ fees language supports fee award | BANA: clause authorizes lender to incur expenses to protect property interests (added to debt), not separate fee awards against borrower for tort claims | Held: deed clause does not authorize separate fee awards for Vakili’s negligence/fraud claims |
| Whether BANA may recover appellate fees based on directed‑verdicted contract claims | Vakili: BANA forfeited any fee right by not seeking fees in trial court | BANA: argues it prevailed on contract claims and is entitled to fees on appeal | Held: BANA forfeited right to seek attorney fees because it never sought fees in the trial court |
Key Cases Cited
- Santisas v. Goodin, 17 Cal.4th 599 (1998) (tort claims are not actions on a contract for purposes of §1717)
- Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc., 211 Cal.App.4th 230 (2012) (liberal construction of “on a contract” and two‑part test whether action "involves" an agreement and the contract contains a fee clause)
- Xuereb v. Marcus & Millichap, Inc., 3 Cal.App.4th 1338 (1992) (§1717 limited to contract actions and makes unilateral fee clauses reciprocal)
- Alvarez v. BAC Home Loans Servicing, L.P., 228 Cal.App.4th 941 (2014) (lender’s duty in loan‑mod review can arise in tort separate from deed/note obligations)
- Chacker v. JPMorgan Chase Bank, N.A., 27 Cal.App.5th 351 (2018) (deed language authorizing lender to incur expenses to protect property does not authorize separate fee awards)
- Stout v. Turney, 22 Cal.3d 718 (1978) (fraud claims arising from a contractual transaction are torts, not contract actions for §1717)
- Hsu v. Abbara, 9 Cal.4th 863 (1995) (mutuality requirement: §1717 grants reciprocal fees only if the contract would have allowed recovery by the other party)
- Newton v. Clemons, 110 Cal.App.4th 1 (2003) (issues not raised in the trial court are forfeited on appeal)