Filed 5/16/16 HSBC Bank, USA v. Wells Fargo Bank, N.A. CA2/6
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.


              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                   DIVISION SIX


HSBC BANK, USA,                                                            2d Civil No. B266405
                                                                     (Super. Ct. No. 56-2012-00414216-
  Plaintiff, Cross-defendant and                                                CU-OR-VTA)
Respondent,                                                                   (Ventura County)

WELLS FARGO BANK, N.A.,

     Cross-defendant and Respondent,

v.

ROBERT L. WOOD et al.,

  Defendants, Cross-complainants and
Appellants.


                   A lender whose loan is secured by a trust deed brought an action against the
borrower. The borrower cross-complained. The lender prevailed on both the complaint
and cross-complaint. The trial court awarded the lender attorney fees pursuant to a clause
contained in the trust deed. We reverse the order awarding attorney fees and costs to the
lender. The one-form-of-action rule (Code Civ. Proc., § 726, subd. (a) (hereafter "section
726")) is a defense to a direct action against the borrower for fees and costs.
                                                         FACTS
                   In 2006, Robert L. Wood obtained a loan secured by a deed of trust on his
residence. The note and deed of trust were assigned to HSBC Bank, USA (Bank).
              Wood fell behind on his payments and requested a loan modification
pursuant to the Home Affordable Modification Program (HAMP). The Bank agreed to
modify Wood’s loan on the condition that he provide the documents necessary to reform
the trust deed’s incomplete legal description. Wood refused to provide the documents.
Instead, he insisted that the Bank modify the loan before he provided the documents or at
least conduct the transaction through an escrow. The Bank refused and terminated Wood
from the loan modification program.
              The Bank brought an action to reform the trust deed’s legal description.
Wood filed a cross-complaint for breach of contract based on the Bank’s refusal to
modify the loan. The trial court found for the Bank on both the complaint and cross-
complaint.
              The Bank brought a motion for attorney fees under section 9 of the trust
deed. Section 9 provides in part: “If . . . there is a legal proceeding that might
significantly affect Lender’s [fn. omitted] interest in the property and/or rights under this
security [i]nstrument . . . , then Lender may do and pay for whatever is reasonable or
appropriate to protect Lender’s interest in the Property and rights under this security
[i]nstrument. . . . . Lender’s actions can include, but are not limited to: . . . (b) appearing
in court; and (c) paying reasonable attorneys’ fees to protect its interest in the Property
and/or rights under this security instrument . . . . [¶] Any amounts disbursed by Lender
under this Section 9 shall become additional debt of Borrower secured by this [s]ecurity
[i]nstrument.” The Bank also filed a cost memorandum seeking $16,932 in costs.
              Wood defended the Bank’s motion for attorney fees and costs on the
ground, among others, that section 726, subdivision (a) prohibits a direct action against
him for fees and costs. Instead, the Bank must add its fees and costs to the secured debt
and enforce its right to fees through foreclosure. Wood also filed a motion to tax costs.
              The trial court rejected Wood’s defense based on section 726 and his
motion to tax costs. The court awarded the Bank attorney fees in the amount of $175,000
plus costs.



                                               2
                                         DISCUSSION
                 Wood contends that section 726, subdivision (a) applies to the award of
attorney fees.
                 Section 726, subdivision (a) provides in part: “There can be but one form
of action for the recovery of any debt or the enforcement of any right secured by
mortgage upon real property . . . which action shall be in accordance with the provisions
of this chapter.” The one form of action is foreclosure. (Brown v. Jensen (1953) 41
Cal.2d 193, 195.)
                 A debtor can use section 726 as an affirmative defense, forcing the creditor
to exhaust the security by foreclosure before he can seek a money judgment by
deficiency. (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 997.) In the
alternative, the debtor may use the section as a bar to foreclosure. Where the creditor
seeks a personal money judgment against the debtor without first foreclosing, the creditor
will be barred from foreclosing on the security. (Ibid.)
                 The Bank argues it has an option: It can pursue a direct action against
Wood based on the trial court’s fee award order without jeopardizing its right to
foreclose. In the alternative, without a court order, it can add the fees to the amount
secured by the trust deed.
                 But that is precisely the option section 726 does not allow. Either the right
to attorney fees is secured by the trust deed, in which case section 726 applies, or the
right to attorney fees is not secured by the trust deed, in which case the fees cannot be
added to the amount of the secured debt.
                 The Bank’s reliance on De la Cuesta v. Superior Court (1984) 152
Cal.App.3d 945 is misplaced. There a debtor brought an action to enjoin enforcement of
a due-on-sale clause in a trust deed. The secured creditor prevailed. The court
determined that the creditor’s failure to request fees in the trial court did not prevent the
fees from becoming part of the secured debt. (Id. at p. 949.) The court did not decide the
creditor had the option either to pursue the fees directly or to add the fees to the secured
debt.


                                                3
              The Bank argues section 726 does not apply because neither its action to
reform the legal description nor its defense to Wood’s action for specific performance of
the loan modification agreement is a right secured by the trust deed.
              The Bank relies on Passanisi v. Merit-McBride Realtors, Inc. (1987) 190
Cal.App.3d 1496 (Passanisi). There the debtor brought an action to enjoin foreclosure of
a deed of trust. The creditor prevailed and obtained an award of attorney fees. The Court
of Appeal held that section 726 did not apply to the award of attorney fees for several
reasons including that the action was not for the recovery of a debt or the enforcement of
any right secured by the trust deed, and that the debtor, not the creditor, brought the
action. (Passanisi, at pp. 1506-1507.)
              Thus in determining whether an award of attorney fees is governed by
section 726, Passanisi looks to the nature of the underlying action. Apparently under
Passanisi, if the underlying action is not to recover a debt or enforce any right secured by
the trust deed, neither is the award of attorney fees.
              We disagree with Passanisi. Whatever the nature of the underlying action,
the Bank’s claim to attorney fees is based exclusively on section 9 of the trust deed. Thus
even if the underlying action itself does not implicate any debt or right secured by the
trust deed, it is inescapable that the motion for attorney fees does. Section 9 of the trust
deed expressly states that the attorney fees “become additional debt of Borrower secured
by this Security Instrument.”
              The Bank argues that requiring it to pursue attorney fees in foreclosure
would undermine the reciprocity principal codified in Civil Code section 1717. A
prevailing debtor can obtain a judgment for fees from the creditor, but the creditor must
look to the secured property. In a falling real estate market, a creditor may be precluded
from collecting the fees to which it is entitled.
              First, the Bank does not suggest that the security here is insufficient to
cover its fees. Second, the secured creditor always assumes the risk of a falling real
estate market. Third, we cannot ignore the plain language of section 726.



                                               4
              Section 726 acts as a bar to the Bank’s direct action against Wood for
attorney fees. Because the Bank’s right to attorney fees is secured by the trust deed,
foreclosure is the only form of action available to enforce that right.
              Neither party argues that under section 726 costs are treated in a manner
any different than an award of attorney fees. Thus the cost award is also subject to
section 726, and must be enforced through foreclosure.
                                       DISPOSITION
              The judgment (order awarding attorney fees and costs) is reversed. Costs
on appeal are awarded to appellants.
              NOT TO BE PUBLISHED.




                                           GILBERT, P. J.

We concur:



              YEGAN, J.



              PERREN, J.




                                              5
                            Vincent J. O’Neill, Jr., Judge

                         Superior Court County of Ventura

                        ______________________________


            Law Offices of Jerome Zamos, Jerome Zamos for Defendants, Cross-
complainants and Appellants Robert L. Wood and Maria Regie Sales Chiong.
            Severson & Werson, Jan T. Chilton, Kerry W. Franich for Plaintiff, Cross-
defendants and Respondents HSBC Bank, USA and Wells Fargo Bank, N.A.




                                          6
