Closson et al v. Bank of America N.A. et al

Filing 116

ORDER Denying 102 Defendant Bank of America et al.'s Motion for Attorney Fees. Signed by Judge James C. Mahan on 6/27/2013. (Copies have been distributed pursuant to the NEF - SLD)

1
2
3
4
UNITED STATES DISTRICT COURT
5
DISTRICT OF NEVADA
6
7
SUSAN CLOSSON and CHARLES R.
CLOSSON,

8

2:11-CV-275 JCM (GWF)

9
Plaintiffs,

10
11

v.

12

BANK OF AMERICA, N.A., et al.,

13

Defendants.

14
15

ORDER

16

Presently before the court is defendant Bank of America’s motion for attorney’s fees. (Doc.

17

# 102). Plaintiffs Susan and Charles Closson filed a response in opposition (doc. # 106), and

18

defendant filed a reply (doc. # 109).

19

I.

Factual Background

20

On January 30, 2007, Plaintiffs borrowed $4.4 million from defendant Bank of America

21

("BANA") in a construction-to-permanent financing loan. If the plaintiffs did not timely complete

22

construction by the agreed upon date, BANA, at its option, could elect to extend the construction

23

completion date and financing in the contract. The plaintiffs could also elect, at the same time, to

24

pay a fee to lock in the rate and loan terms. If the plaintiffs elected not to lock in the rate and loan

25

terms at that time, then the rates and terms would shift according to market rates as provided in the

26

contract.

27

...

28
James C. Mahan
U.S. District Judge

1

The plaintiffs did not complete construction by the agreed upon deadline date. BANA

2

elected to extend the deadline and offered to roll over the rate and terms of the loan into permanent

3

financing. The plaintiffs elected not to pay the fee to lock in the rates and terms, and to take their

4

chances with market rates. The fluctuating market caused interest rates to increase. Plaintiffs

5

eventually defaulted.

6

The parties did not agree on the facts or the terms of the contract following the plaintiffs'

7

decision to decline to lock in rate and terms protection. The plaintiffs filed this suit and alleged that

8

BANA breached the terms of the contract with its conduct and computations of fees after the

9

plaintiffs declined to exercise rate and terms protection. BANA conducted a trustee sale after the

10

initiation of this lawsuit.

11

This court conducted a jury trial on two of plaintiff's causes of action: breach of contract and

12

breach of the implied covenant of good faith and fair dealing. Following a jury verdict, this court

13

entered judgment in favor of defendant Bank of America and against plaintiffs for both the breach

14

of contract and breach of the implied covenant of good faith and fair dealing claims.

15

Following the jury trial, BANA filed the instant motion for attorney's fees. BANA seeks fees

16

based on language in the contract between the parties.

17

II.

18

Legal Standard
Federal Rule of Civil Procedure 54(d)(2)(B)(ii) provides that a motion for attorneys’ fees

19

must “specify the judgment and the statute, rule, or other grounds entitling the movant to the award.”

20

“A party moving for attorney’s fees must therefore assert an independent source of authority for an

21

award.” Assurance Co. of America v. Nat'l Fire & Marine Ins. Co., 2:11-cv-00275-JCM-GWF, 2012

22

WL 6626809, at *1 (D. Nev. Dec. 19, 2012).

23

In an action where a district court is exercising its subject matter jurisdiction over a state law

24

claim, so long as “state law does not run counter to a valid federal statute or rule of court, and usually

25

it will not, state law denying the right to attorney’s fees or giving a right thereto, which reflects a

26

substantial policy of the state, should be followed.” Alyeska Pipeline Serv. Co. V. Wilderness Soc’y,

27

421 U.S. 240, 259 n.31 (1975) (quoting Moore’s Federal Practice § 54.77[2] (2d ed. 1974)). N.R.S.

28
James C. Mahan
U.S. District Judge

-2-

1

§18.010(1) provides that, “the compensation of an attorney and counselor for his or her services is

2

governed by agreement, express or implied, which is not restrained by law.” “Nevada follows the

3

American rule that attorney fees may not be awarded absent a statute, rule, or contract authorizing

4

such award.” Thomas v. City of N. Las Vegas, 122 Nev. 82, 90 (Nev. 2006).

5

III.

Discussion

6

Defendant contends that its contract with the plaintiffs entitles it to attorney's fees. The note

7

provides for reasonable attorneys' fees when "enforcing this Note," (doc. # 102, Exh. A, clause 7(E),

8

and the deed of trust provides for reasonable attorneys' fees "in connection with Borrower's default,"

9

(doc. # 102, Exh. B, clause ¶ 14). Plaintiffs argue that these contracts are limited to providing for

10

attorneys' fees only in connection with enforcement actions and that defendant's defense to their

11

action for breach of contract and breach of implied covenant of good faith and fair dealing did not

12

constitute enforcement.

13

The court applies general rules of contract interpretation when interpreting a contract

14

provision that provides for attorneys’ fees. As such, the court “will not construe [an attorneys’ fees

15

contract] provision to have broader application.” Campbell v. Nocilla, 101 Nev. 9, 12 (Nev. 1985).

16

In Campbell, the Supreme Court of Nevada reversed a decision to award attorneys’ fees to the

17

respondent because the contract provision did not expressly allow for recovery under the

18

circumstances presented. Id. The contract provision stated, “[i]n case suit is brought to enforce this

19

contract, I [appellants] agree to pay reasonable attorney’s fees as the court may fix in said suit.” Id.

20

(edits in original). The court noted that the appellants’ brought suit not to enforce the the terms of

21

the contract, but, rather, for the purpose of indemnication.

22

Accordingly, the court reversed the award for attorney's fees because the contract did not

23

expressly provide for attorney's fees in the situation presented. Id.; see also In re LCO Enterprises,

24

Inc., 180 B.R. 567 (B.A.P. 9th Cir. 1995) aff'd, 105 F.3d 665 (9th Cir. 1997) (affirming denial of

25

attorneys' fees because defending a bankruptcy preference action was not enforcing the lease

26

contract); Amar v. LSREF 2 APEX 2, LLC, 2:12-CV-969-JCM-RJJ, 2013 WL 1269637 (D. Nev.

27

Mar. 25, 2013) (denying a motion for attorneys' fees when plaintiffs filed suit seeking rescission of

28
James C. Mahan
U.S. District Judge

-3-

1

the contract, not enforcement); Dobron v. Bunch, 125 Nev. 460, 215 P.3d 35 (2009) (overturning

2

an award for attorneys' fees because the court concluded that defense of usury does not constitute

3

collecting or compromising); First Commercial Title v. Holmes, 92 Nev. 363 (Nev. 1976)

4

(overturning an award for attorneys’ fees when the action sought was to enjoin a trustee’s sale, not

5

the grounds mentioned in the provision – commencement of a suit for collection on the promissory

6

note).

7

This case is similar to those cited above. The contract does not explicitly state that attorney's

8

fees may be recovered when defending an action brought under the same contract for breach of

9

contract and breach of the implied covenant of good faith and fair dealing. As the Nevada Supreme

10

Court stated in Campbell, the court “will not construe [an attorneys’ fees contract] provision to have

11

broader application” than the express terms of the contrat. Campbell, 101 Nev. at 12.

12

In this case, construing the contract language to include the defense to this suit would be

13

construing the provision to have broader application and is thus impermissible. Just as in LCO

14

Enterprises, Amar, Dobron, and First Commercial, the contract needs to explicitly include the exact

15

scenario in which a party may recover attorney's fees. The scenario in this case is not provided for

16

in the contract. Defending a breach of contract or breach of implied covenant of good faith claim is

17

no more part of enforcing a contract that the defense of the bankruptcy preference action in LCO

18

Enterprises or the defense of the suit seeking rescission in Amar.

19

Further, this case proceeded to a trial by jury, meaning that the contract contained ambiguous

20

language. In this case, the defendant never filed a motion to dismiss or a motion for summary

21

judgment. This is particularly compelling in a contract case because at the summary judgment stage,

22

if the contract is unambiguous, then the court can adjudicate the matter as a question of law and the

23

case would never proceed to a jury trial. The defendant necessarily concedes that the contract

24

contained ambiguous language by permitting the case to go to a jury trial without ever filing a

25

motion for summary judgment.

26

...

27

...

28
James C. Mahan
U.S. District Judge

-4-

1

Accordingly,

2

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that defendant Bank of

3
4

America et al.’s motion for attorneys' fees (doc. # 102) be, and the same hereby is, DENIED.
June 27, 19, 2012.
DATED December 2013.

5
6
UNITED STATES DISTRICT JUDGE
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
James C. Mahan
U.S. District Judge

-5-