Perez v. Mortgage Electronic Registration Systems, Inc.
- James Donato
- 3:17-cv-04880
- U.S. District Court · Northern District of California
- 2
In Perez v. Mortgage Electronic Registration Systems, Inc., Judge Donato denied MERS’s attorney-fee motion without prejudice because the deed clause did not apply.
Mortgage Electronic Registration Systems, Inc.’s request for attorney’s fees and costs was denied without prejudice; the order also rejected its alternative sanctions arguments.
What happened
In Perez v. Mortgage Electronic Registration Systems, Inc., Mortgage Electronic Registration Systems, Inc. (MERS) asked for attorney’s fees and costs. Perez did not oppose the request.
The court found that the deed’s fee clause applied only to services connected with a borrower’s default, and the parties confirmed there was no default. The court also said MERS was seeking an advance assurance about possible future fees, which was not a dispute the federal court could decide.
The court denied MERS’s motion for fees without prejudice and rejected its alternative sanctions arguments. Judge Donato also said a separate deed provision raised for the first time in supplemental briefing would not be considered.
The detailed version
- Perez v. Mortgage Electronic Registration Systems, Inc. · No. 3:17-cv-04880
- James Donato
- Sept. 18, 2019
Background
Mortgage Electronic Registration Systems, Inc. (MERS) moved for attorney’s fees and costs. The opinion says Perez did not oppose the motion. The court nevertheless independently reviewed the fee request.
Reasons for the Decision
MERS relied on section 14 of the deed of trust. That provision allows the lender to charge fees for services performed in connection with the borrower’s default to protect the lender’s interest in the property and its rights under the security instrument, including attorney’s fees, property-inspection fees, and valuation fees.
The court concluded that section 14 did not authorize a fee award because counsel for both sides confirmed that there was no default and that the plaintiffs were making their mortgage payments regularly and on time.
The court also gave an additional reason why no relief was available. MERS acknowledged that it was not seeking a separate fee award, but instead sought an order stating that the requested fees were reasonable and could be added to the plaintiffs’ underlying debt. The court characterized that request as an advance defense against possible future litigation over the reasonableness of the fees. Because the underlying case had been dismissed for lack of a case or controversy, the court concluded that this request did not present a dispute the federal court could decide under Article III of the Constitution.
MERS’s other arguments also failed. At oral argument, MERS’s counsel confirmed that MERS was relying exclusively on section 14 for its fee request. The court stated that, even if it considered MERS’s sanctions argument under 28 U.S.C. § 1927, MERS had not made an initial showing of the recklessness or bad faith required for sanctions. Allegations that the action was meritless and baseless showed, at most, ignorance or negligence, which was insufficient. The court also declined to consider MERS’s argument that section 9 of the deed authorized fees because MERS raised that argument for the first time in supplemental briefing.
Disposition
The court denied MERS’s motion for attorney’s fees and costs without prejudice. Judge James Donato entered the order on September 18, 2019.
Read the full 2-page opinion on CourtListener, the free public archive maintained by the Free Law Project.