Timothy Kowal, Esq.
April 24, 2020

Distressed homeowners subject to lender "dual-tracking" do not need to wait until the end of a lawsuit to recover attorneys' fees if they are successful in obtaining a preliminary injunction, ruled the Third District Court of Appeal today in Monterossa v. Superior Court (Cal. Ct. App. - June 12, 2014).

Under a 2012 law, banks are prohibited from dual-tracking, the tactic of processing a foreclosure while the homeowner is negotiating a loan modification. In one case, for example, a homeowner alleged she lost her home worth more than the remaining loan even while she was still negotiating with her bank. "If I had known they were going to do this," she told the LA Times, "I would have sold the damn house myself."

That is similar to what faced homeowners Michael Monterossa and Cheranne Nobis, according to the decision of the Third District. While negotiating a modification, PNC Bank recorded a notice of trustee's sale. When the owners learned of this, they immediately filed a lawsuit. The trial court granted a preliminary injunction to enjoin the foreclosure, noting the bank did not dispute it engaged in improper dual-tracking. But the court denied the owners' requests for attorneys' fees, ruling fees are only available at the end of the case.

The Court of Appeal reversed. The statute plainly awards fees to the "prevailing borrower" who obtains either "injunctive relief" or damages. Nothing in the statute, the court observed, required the injunctive relief to be "permanent." Moreover, the Legislature clearly intended to put an end to dual-tracking by giving teeth to the enforcement procedure, i.e., by awarding fees to "prevailing borrowers."

Artificially limiting the award to the end of trial, however, would pull the teeth out of the statute. Putting an end to the dual-tracking is a discrete harm in itself that will not exist by the time of trial, the court observed. Once the bank is in compliance, it could dissolve the injunction, and with it the basis for a later fee motion. That would defeat the purpose of the statute, which is to give homeowners a remedy against dual-tracking, which by its nature occurs only in the early phase of a lawsuit.

Ordinarily, of course, attorneys' fees are available only at the end of trial. But the rule is not absolute. Monterossa is a good application of an important exception.

h/t Shaun Martin

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