Sundby v. Marquee Funding Group, Inc. et al

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
DALE SUNDBY, Trustee,
Plaintiff,
v.
Marquee Funding Group, Inc.; Salomon
Benzimra, Trustee; Stanley Kesselman,
Trustee; Jeffrey Myers; Kathleen Myers;
Andres Salsido Trustee; Benning
Management Group 401(K) Profit Sharing
Plan; Christopher Myers; Vickie McCarty;
Delores Thompson; Kimberly Gill
Rabinoff; Steven M. Cobin, Trustee;
Susan L. Cobin, Trustee; Equity Trust
Company, Custodian FBO Steven M.
Cobin Traditional IRA: Todd B. Cobin,
Trustee; Barbara A. Corbin, Trustee;
Fasack Investments LLC; and Does 1-X,
Defendants.
Case No.: 19-cv-00390-GPC-AHG
ORDER DENYING DALE AND
EDITH SUNDBY’S MOTION TO
INTERVENE; DENYING DALE AND
EDITH SUNDBY’S MOTION FOR
SUBSTITUTION AND/OR JOINDER;
GRANTING DEFENDANTS’
MOTION FOR RESTITUTION; AND
DENYING DEFENDANTS’ MOTION
FOR ATTORNEY’S FEES
[ECF Nos. 400, 401, 404, 407]
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Currently pending before the Court are Defendants’ motions for attorney’s fees and
restitution against Plaintiff Dale Sundby, Trustee, ECF Nos. 400 & 404, as well as Dale
Sundby and Edith Littlefield Sundby’s motion to intervene and motion for substitution
and/or joinder, ECF Nos. 401 & 407. A hearing was held on February 13, 2026, where
Defendants appeared and the Sundbys elected not to attend. ECF No. 430. Following the
hearing, the Court issued an order permitting supplemental briefing. ECF No. 431. All
motions have been fully briefed.
BACKGROUND
Dale Sundby and his spouse, Edith Littlefield Sundby, twice applied for and received
mortgage refinancing on their primary residence in La Jolla, California; once in 2016 and
once in 2017. ECF No. 209, at 4-6. There was substantial cross-over between the lenders
for the 2016 and 2017 financing. ECF No. 13, at 3-4. In their capacities as Trustees to their
real estate Trust—the Dale H. Sundby and Edith Littlefield Sundby Trust, No. 1989-1 dated
January 26, 1989—Dale and Edith Sundby executed promissory notes promising to pay
the 2016 Lenders $2,600,000 and the 2017 Lenders $3,160,000, as well as corresponding
Deeds of Trust. ECF No. 209, at 4-6.
In 2019, Dale Sundby, appearing pro se as trustee on behalf of the Dale H. Sundby
and Edith Littlefield Sundby Trust No. 1989-1 dated January 26, 1989 (“Trust”), brought
suit against the 2016 and 2017 Lenders, alleging multiple Truth in Lending Act (“TILA”)
violations stemming from both loans. See ECF No. 13. In addition, Dale Sundby, in his
capacity as trustee, sought a declaratory judgment ordering reconveyance of the real
property to the Family Trust. ECF No. 13 at 21. In September 2020, the Court granted in
part and denied in part the parties’ motions for summary judgment, finding largely in favor
of Plaintiff Sundby. ECF No. 209. However, the Court denied the declaratory judgment
request for reconveyance. Id. In April 2021, the Court awarded Sundby $370,166.71 in
statutory damages relating to the 2016 Loan and $320,017.26 relating to the 2017 Loan in
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its final judgment. ECF No. 264, at 7–8. In September 2021, Sundby moved for “post-
judgment TILA damages,” under Rule 60(b)(2) and Rule 60(b)(6). ECF No. 296. The Court
denied Sundby’s motion. ECF No. 304.
Both Sundby and Defendant Lenders appealed the Court’s summary judgment order
to the United States Court of Appeals for the Ninth Circuit. ECF Nos. 267 & 274.
On August 25, 2021, while the appeal was pending, the property at issue was subject
to a foreclosure sale and the Trust purportedly “lost all title and interest in the property.”
ECF No. 314 at 5, 12–13. Sundby subsequently filed a declaration with the Court stating
that “[o]n December 15, 2021, all title, interest, and claims as to [the property] was
transferred by quitclaim deed from [the Trust], to Dale H. Sundby and Edith Littlefield
Sundby, Husband and Wife, as Community Property.” ECF No. 308 at 2, 4.
On October 3, 2022, the Ninth Circuit vacated the Court’s September 15, 2020 order,
ECF No. 209, and April 22, 2021 judgment, ECF No. 264, holding that “Sundby, in his
capacity as trustee” could not represent the Trust, pro se. ECF No. 305. See also Sundby v.
Marquee Funding Grp., Inc., Nos. 21-55504 & 55582, 2022 WL 4826445 (9th Cir. Oct. 3,
2022). The Ninth Circuit remanded the case “to afford the trust an opportunity to obtain
legal representation and to develop facts to determine in the first instance whether Sundby
is the beneficial owner of the trust or whether the trust transferred any interests to Sundby.”
ECF No. 305, at 3.
On remand, the Court repeatedly informed Sundby that legal counsel must be
retained on behalf of the Trust before the matter could proceed. See ECF Nos. 310, 324,
329, 356, 364. At no point did Sundby explain his refusal to secure counsel on behalf of
the Trust except to argue against counsel being required. See ECF No. 356, at 4. The Court
issued a final order instructing that if an attorney did not “enter a notice of appearance on
behalf of the trust on or before July 20, 2023, the case would be dismissed.” ECF No. 364
at 4. Sundby did not obtain counsel. On July 21, 2023, the Court dismissed the case with
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prejudice as to Dale Sundby, Trustee, for failing to retain legal counsel and for failing to
comply with Court orders pursuant to Federal Rule of Civil Procedure 41(b). ECF No. 367.
The Court also dismissed the consolidated case, Case No. 21cv2013, where Dale Sundby
appeared pro se, both as an individual and as trustee. ECF No. 367 at 3-4. The Clerk of
Court entered judgment stating that “the case is hereby dismissed with prejudice as to Dale
Sundby, Trustee. The case is hereby closed.” ECF No. 368.
In the time between the Ninth Circuit’s remand and this Court’s dismissal of the
action, Sundby again filed a declaration stating that “[o]n February 21, 2023 [the Trust]
quitclaimed all individual and collective trust interest in [the property] to Dale H. Sundby
and Edith Littlefield Sundby, husband and wife, as community property.” ECF No. 323, at
2.
On July 25, 2023, Dale Sundby filed a notice of appeal of this Court’s dismissal of
the action. ECF No. 369. On June 30, 2025, the Ninth Circuit Court of Appeals issued a
Memorandum affirming this Court’s dismissal of Sundby’s claims with prejudice. ECF
No. 395-1. On October 14, 2025, the Ninth Circuit issued a Mandate that the June 2025
judgment had taken effect. ECF No. 399.
While the appeal was pending, on December 11, 2023, Dale and Edith Sundby, as
individuals, moved to intervene. ECF No. 388. Because judgment in the case was pending
appeal, the Court denied the motion. ECF No. 389. However, the Court did so “without
prejudice” as to refiling after the Ninth Circuit issued its decision. Id.
Also while the appeal was pending, the Lender Defendants moved for attorney’s
fees. ECF No. 372. The Court denied the motion without prejudice, stating that it would
reconsider the issue after the Ninth Circuit issued its decision. ECF No. 384.
Dale and Edith Sundby, as individuals, now move to intervene. ECF No. 401. In the
alternative, they move to substitute a party pursuant to Federal Rules of Civil Procedure
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(“Rules”) 25(c) and 17(a)(3) or for mandatory joinder pursuant to Rule 19(a), ECF No.
407.1
Lender Defendants now move for attorney’s fees, ECF No. 404, and restitution, ECF
No. 409.
DISCUSSION
I. Motion to Intervene
A. The Sundbys Motion to Intervene is Moot
The Court finds that the Sundbys motion to intervene is moot. While the parties have
not specifically raised the mootness issue, Defendants do repeatedly note the closed nature
of the case, ECF No. 411, at 7-8. However, the Court addresses mootness sua sponte
because it affects this Court’s jurisdiction. See, e.g., United States v. Sprint Commc'ns, Inc.,
855 F.3d 985 (9th Cir. 2017). “A federal court's inability ‘to review moot cases derives
from the requirement of Article III of the Constitution under which the exercise of judicial
power depends upon the existence of a case or controversy.’” Tosco Corp. v. Hodel, 804
F.2d 590, 591 (10th Cir. 1986) (quoting Liner v. Jafco, Inc., 375 U.S. 301, 306 n.3
(1964)). Thus, mootness is a question that “a federal court must resolve before it assumes
jurisdiction.” North Carolina v. Rice, 404 U.S. 244, 246 (1971) (per curiam).
Under Rule 24, on a motion to intervene, the moving party must show: (1) the
application to intervene is timely made; (2) it has an interest in the action relating to the
property which is the subject matter of the litigation; (3) it is so situated that the disposition
of the action may, as a practical matter, impair or impede its ability to protect that interest;
and (4) its interest is not adequately represented by existing parties. Fed. R. Civ. P. 24(a).
This court need not reach the issue of whether the intervenors have satisfied these
1 “Rule” or “Rules” refer to the Federal Rules of Civil Procedure unless otherwise noted.
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requirements because the dismissal of the case upon Sundby’s failure to obtain counsel to
represent the trust renders the motion to intervene moot.
Because all claims in this case were dismissed with prejudice when the Sundbys
filed their motion to intervene, “there [was] no action in which to intervene and the
motion[] to intervene [is] moot.” Mut. Produce, Inc. v. Penn Cent. Transp. Co., 119 F.R.D.
619, 21 (D. Mass. 1988); United States v. Ford, 650 F.2d 1141, 1143 (9th Cir. 1981)
(“Since there is no longer any action in which appellants can intervene, judicial
consideration of the [intervention] question would be fruitless.”); Ctrl Alt Destroy v. Elliott,
No. 24-CV-753 TWR (AHG), 2025 WL 790963 (S.D. Cal. Mar. 12, 2025) (“Because the
Court has dismissed with prejudice the Complaint in its entirety, the Court denies as moot
Proposed Intervenor Defendant IBT's Motion to Intervene.”); W. Coast Seafood Processors
Ass'n v. Nat. Res. Def. Council, Inc., 643 F.3d 701, 704 (9th Cir. 2011) (“Because the
underlying litigation is over, we cannot grant WCSPA any ‘effective relief’ by allowing it
to intervene now.”).
It must also be noted that the Sundbys do not seek post-judgment intervention in this
closed case to modify a protective order, see, e.g., Phillips v. Goodyear Tire & Rubber Co.,
No. CIV. 02-1642B (NLS), 2007 WL 3245015, at *1 (S.D. Cal. Oct. 31, 2007), or access
sealed discovery, see, e.g., Allen-Pieroni v. White, 694 F. App'x 339, 339 (5th Cir. 2017).
Additionally, Mr. Sundby has already appealed this Court’s dismissal of the case, which
the Ninth Circuit affirmed, so the Sundbys do not seek to intervene in this closed case for
the purpose of appeal. See, e.g., U.S. ex rel. McGough v. Covington Techs. Co., 967 F.2d
1391, 1394-95 (9th Cir. 1992). Rather, the Sundbys seek to intervene in this closed case to
simply continue the previous litigation. See generally ECF No. 401.
The Sundbys requested an opportunity to file supplemental briefing on this issue,
and the Court permitted them to do so. In their briefing, the Sundbys first argue that their
motion is not moot so long as the Court retains the power to grant effective relief, which
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the Court can purportedly do by determining who the proper litigants are. ECF No. 432, at
2. However, the Sundbys ignore the fact that this is the very question which the Ninth
Circuit required Mr. Sundby to obtain counsel to answer. ECF No. 305, at 3 (directing
Sundby to “obtain legal representation and to develop facts to determine in the first instance
whether Sundby is the beneficial owner of the trust or whether the trust transferred any
interests to Sundby.”). The Sundbys next argue that intervention is proper because the
Court “preserved the merits posture” of this case by declining to dismiss the action with
prejudice “as to the Trust in its entirety.” ECF No. 401, at 7 (citing ECF No. 367, at 2 n.1);
ECF No. 432, at 2-3. However, such a determination—made on the grounds that the Trust
has never had legal representation to properly prosecute this case—did not provide a means
for this action to proceed indefinitely. Indeed, this action has been dismissed in such a
means as to “operate as an adjudication on the merits.” Fed. R. Civ. P. 41(b). This Court’s
acknowledgment that the Trust may have been entitled to pursue its claims when
represented by counsel, ECF No. 367, at 2 n.1, does not provide the Sundbys with grounds
upon which to now intervene in this closed action.
As a result, the motion to intervene is DENIED as MOOT.
B. The Sundbys Lack Standing to Intervene
Even if the Sundbys’ motion to intervene was not moot, the Sundbys lack the
standing required to successfully intervene. “In general, an applicant for intervention need
not establish Article III standing to intervene.” Perry v. Schwarzenegger, 630 F.3d 898,
906 (9th Cir. 2011). However, this requirement changes when an intervenor attempts to
“continue suit in the absence of the party on whose side” he sought to intervene. In re
Molasky, 843 F.3d 1179, 1185 (9th Cir. 2016). In such an instance, an intervenor, or
putative intervenor, must have standing. Id. (“[A] claim joined by an intervenor may
survive the dismissal of the original party if the court retains jurisdiction over the claim
and the intervenor has standing to continue litigating it.”); see also Diamond v. Charles,
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476 U.S. 54, 68 (1986) (“[A]n intervenor's right to continue a suit in the absence of the
party on whose side intervention was permitted is contingent upon a showing by the
intervenor that he fulfills the requirements of Art. III.”).
The Court acknowledges that the majority of caselaw on this issue contemplates
existing, rather than putative, intervenors. However, if an existing intervenor cannot
continue litigation in the absence of the original parties without standing, it logically
follows that a putative intervenor may not do so. See, e.g., Allen-Pieroni v. White, 694 F.
App'x 339, 340 (5th Cir. 2017) (“[I]n the absence of a live controversy in a pending case,
an intervenor would need standing to intervene.”) (internal citation and quotation marks
omitted). This standing requirement applies equally to permissive intervention and
intervention as of right. See, e.g., Diamond, 476 U.S. at 68 (“Diamond's status as an
intervenor below, whether permissive or as of right, does not confer standing sufficient to
keep the case alive in the absence of the State on this appeal.” (emphasis added)).
Here, the Sundbys, as individuals, lack standing to prosecute the TILA claims they
seek to continue litigating before this Court. This is because the Sundbys are not the
borrowers on the loans they seek to challenge; the Trust is. “Many district courts in the
Ninth Circuit have held that a plaintiff who is not a party to a mortgage loan cannot assert
TILA . . . claims.” Ruegsegger v. Caliber Home Loans, Inc., No. SA-CV-17-0907-DOC-
KES, 2018 WL 5993857, at *15 (C.D. Cal. Apr. 30, 2018); see also Ambers v. Wells Fargo
Bank, N.A., No. 13-CV-03940 NC, 2014 WL 883752, at *5 (N.D. Cal. Mar. 3, 2014)
(collecting cases and finding that plaintiff who did not sign the deed of trust or assert any
other basis for standing lacked standing to bring TILA claim); Singh v. Wells Fargo Bank
N.A., No. CIV 2:11-CV-0401-GEB, 2011 WL 2118889 (E.D. Cal. May 27, 2011), report
and recommendation adopted, No. 2:11-CV-0401-GEB-JFM, 2011 WL 2784592, at *4
(E.D. Cal. July 11, 2011) (“[P]laintiff has no standing to request rescission or damages
under TILA because he was not a party to the loan contract and therefore is not an ‘obligor’
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or ‘consumer’ with the right to rescind under TILA.”); but see Meinhardt v. Sunny Acre
LLC, No. CV 24-6644 PA (AGRX), 2025 WL 2190618, at *6 (C.D. Cal. June 27, 2025),
amended in part sub nom. Iturbe v. Sunny Acre LLC, No. CV 24-6644 PA (AGRX), 2025
WL 2631598 (C.D. Cal. Aug. 22, 2025) (citing Barker v. Rokosz, 740 F. Supp. 3d 187,
200–01 (E.D.N.Y. 2024) (“In turn, the Court rejects Defendants' argument that because
Plaintiffs are not the named borrowers on the Home Loan, they lack standing to assert a
TILA/HOEPA claim.”).
The Sundbys emphasize that “the Trust transferred 100% of its relevant interests to
Dale and Edith individually” via quitclaim deed, ECF No. 401, at 15. However, the Trust
allegedly transferred its interest in the property via quitclaim deed after the foreclosure sale
had already occurred on August 25, 2021. ECF No. 410, at 15. Thus, the Trust lacked any
title or interest in the property to convey. “Generally, once a grantor no longer owns a
property, ‘subsequent attempts to transfer property . . . are ineffective.’” Sundby v. Landau,
No. 2:24-CV-07276-MCS-BFM, 2025 WL 1090165, at *3 (C.D. Cal. Mar. 14, 2025),
reconsideration denied, No. 2:24-CV-07276-MCS-BFM, 2025 WL 2374824 (C.D. Cal.
May 19, 2025), and reconsideration denied, No. 2:24-CV-07276-MCS-BFM, 2025 WL
2374825 (C.D. Cal. July 2, 2025), and reconsideration denied, No. 2:24-CV-07276-MCS-
BFM, 2025 WL 2374825 (C.D. Cal. July 2, 2025) (quoting Shetty v. JPMorgan Chase
Bank, No. CV 16-8986-MWF (JPRx), 2017 WL 4685547, at *4 (C.D. Cal. June 23, 2017)).
Thus, the Trust had “no right to quitclaim the deed to” the Sundbys. Id.
Even so, the Court notes that a quitclaim deed transfers only whatever interest the
Trust had in the property at the time of conveyance, if any. Brown v. Christiana Tr., No.
CV-15-4543-CAS(JEMX), 2016 WL 11758809, at *5–6 (C.D. Cal. Jan. 4, 2016). Such a
transfer of interest does not change the fact that the Sundbys, as individuals, are not named
on the relevant Promissory Notes or Deeds of Trust and retain no obligations under the
loans giving rise to this litigation. See id. Thus, the Sundbys, as individuals, remain non-
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borrowers who lack standing to assert a TILA claim. See Gonzalez on Behalf of Estate of
Perez v. JP Morgan Chase Bank, N.A., No. C-14-2558 EMC, 2014 WL 5462550, at *3
(N.D. Cal. Oct. 28, 2014) (dismissing plaintiff's foreclosure and TILA claims because the
borrower's execution of a quitclaim deed in plaintiff's favor did not convey to the plaintiff
any obligation on the loan); Johnson v. Ocwen Loan Servicing, 374 F. App'x 868, 873 (11th
Cir. 2010) (dismissing plaintiff’s complaint alleging TILA violations because plaintiff—
who received residence via quitclaim deed—“fail[ed] to establish Article III standing,
because [plaintiff] was not a borrower or otherwise obligated on the . . . loan and, therefore,
did not suffer an injury-in-fact.”).
While the Sundbys spend significant time trying to distinguish this case from cases
where courts have found that a non-borrower lacks standing to assert a TILA claim, ECF
No. 414, at 5-7, the Sundbys do not provide any case authority in support of their position
that they—as a result of the quitclaim deed from the Trust to the Sundbys—have standing
to assert the TILA or declaratory judgment claims at issue here.2
Because the Sundbys lack standing to assert the TILA claims for which they seek to
intervene, their motion to intervene—pursuant to both Rule 24(a) and 24(b)—must be
denied for this additional reason, as well.
/ / /
II. Motion for Substitution or Joinder
2 The Sundbys, in their supplemental briefing, rely on Gilliam, Tr. of Lou Easter Ross
Revocable Tr. v. Levine, Tr. of Joel Sherman Revocable Tr. (“Gilliam”), 955 F.3d 1117,
1120 (9th Cir. 2020), to argue that they have standing. ECF No. 432, at 5. However, the
Sundbys overstate Gilliam’s scope. The portion of Gilliam referenced by the Sundbys finds
only that certain transactions of family tax and estate planning trusts constitute consumer
credit transactions. The case did not consider whether trustee obligors possess standing to
bring TILA claims relating to loans made to a trust in their individual capacities. Thus, the
Sundbys’ argument lacks merit.
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In the alternative to their motion to intervene, the Sundbys move for substitution
under Rule 17(a)(3) or 25(c), or joinder under Rule 19(a). Defendants filed a response in
opposition to the Sundbys’ motion on December 10, 2025, to which the Sundbys replied
on December 24, 2025. The Sundbys’ brief in support of their motion for substitution
and/or joinder is devoid of case law in support of their claims. See generally ECF No. 407.
The Sundbys’ motion allegedly relies on an “Assignment of Claims and
Ratification,” which the Sundbys filed on the docket on November 12, 2025. ECF No. 405.
The Notice of Assignment states that, “on November 12, 2025, the Trustees of Declaration
of Trust, Trust No. 1989-1, executed an ‘Assignment of Claims & Ratification; Alternative
Assignment of Trustee-Only Claims.’ . . . The instrument assigns and ratifies all Trust
claims relating to 7740–7746 Eads Avenue, La Jolla, California, as set forth therein.” ECF
No. 405, at 2.
A. Rule 17
1. Legal Standard
Rule 17(a)(1) provides that an action cannot be prosecuted unless it is asserted by
the real party in interest. Thus, generally, a claim not brought by the real party in interest
must be dismissed. Jones v. Las Vegas Metro. Police Dep't, 873 F.3d 1123, 1134 (9th Cir.
2017) (Smith, N.R., concurring). However, under Rule 17(a)(3), a court “may not dismiss
an action for failure to prosecute in the name of the real party in interest until, after an
objection, a reasonable time has been allowed for the real party in interest to ratify, join, or
be substituted into the action.” The purpose of the rule is “to prevent forfeiture of a claim
when an honest mistake was made.” Jones v. Las Vegas Metro. Police Dep't, 873 F.3d
1123, 1128 (9th Cir. 2017) (quoting Goodman v. United States, 298 F.3d 1048, 1054 (9th
Cir. 2002)). The Ninth Circuit has held that “Rule 17 relief is available where counsel
makes an ‘understandable’ error in naming the real party in interest.” Id. (quoting
Goodman, 298 F.3d at 1054). As to timing, Rule 17(a) controls “if an interest was
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transferred prior to the commencement of the suit.” Hilbrands v. Far E. Trading Co., 509
F.2d 1321, 1323 (9th Cir. 1975).
2. Rule 17 Relief Is Not Available to the Sundbys
As an initial matter, as discussed supra Part I(B), the transfer of interest in the
property at issue from the Trust to the Sundbys as individuals, ECF No. 323, does not make
the Sundbys the real party at interest with standing to assert the claims at issue. See, e.g.,
Brown v. Christiana Tr., 2016 WL 11758809, at *5–6; Gonzalez on Behalf of Estate of
Perez, 2014 WL 5462550, at *3 (dismissing plaintiff's foreclosure and TILA claims
because the borrower's execution of a quitclaim deed in plaintiff's favor did not convey to
the plaintiff any obligation on the loan); Johnson, 374 F. App'x at 873 (dismissing
plaintiff’s complaint alleging TILA violations because plaintiff—who received residence
via quitclaim deed—“fail[ed] to establish Article III standing, because [plaintiff] was not
a borrower or otherwise obligated on the . . . loan and, therefore, did not suffer an injury-
in-fact.”).
Additionally, to the extent that, on November 12, 2025, the Trust “assigned” to the
Sundbys all claims relating to the events at issue in this litigation, ECF No. 405, the Trust
assigned the claims to the Sundbys after those claims had already been dismissed with
prejudice. Thus, there were no longer any cognizable claims to assign such that the
Sundbys might become the real party in interest.
Even aside from these significant issues, the facts of this case do not support Rule
17 relief. First, the interests in question were allegedly transferred and/or assigned after,
rather than prior to, commencement of the suit.3 Thus, Rule 17(a) does not control. See
3 The Sundbys’ argument that the November 12, 2025, assignment “states that it is effective
as of March 10, 2016,” ECF No. 407, at 3, does not change the fact that such a transfer of
interest was not actually made until after this lawsuit began.
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Hilbrands, 509 F.2d at 1323. Further, Rule 17(a)(3) exists to “prevent forfeiture of a claim
when an honest mistake was made” regarding the named party. Jones, 873 F.3d at 1128
(quoting Goodman, 298 F.3d at 1054). No such mistake was made here. This case was
brought by Dale Sundby, Trustee. The named Plaintiff was the real party at interest and
there was no “understandable” error. Id. The situation here is not the type contemplated by
Rule 17(a)(3), and relief under Rule 17 is unavailable.
B. Rule 25
1. Legal Standard
Rule 25(c) provides that “[i]n case of any transfer of interest, the action may be
continued by or against the original party, unless the court upon motion directs the person
to whom the interest is transferred to be substituted in the action or joined with the original
party.” Notably, Rule 25(c) “does not require that anything be done after an interest has
been transferred . . . An order of joinder is merely a discretionary determination by the trial
court that the transferee's presence would facilitate the conduct of the litigation.” In re
Bernal, 207 F.3d 595, 598 (9th Cir. 2000) (quoting Wright and Miller’s Federal Practice
and Procedure § 1958 (2d ed.1986)). “Rule 25 is procedural and does not alter the parties’
substantive rights.” Cellwitch Inc. v. Tile, Inc., No. 19-CV-01315-JSW (AGT), 2025 WL
1279122, at *1 (N.D. Cal. Jan. 22, 2025), report and recommendation adopted, No. 19-
CV-01315-JSW, 2025 WL 1583014 (N.D. Cal. Apr. 25, 2025). It is “not designed to create
new relationships among parties to a suit but is designed to allow the action to continue
unabated when an interest in the lawsuit changes hands.” In re Bernal, 207 F.3d at 598
(quoting In re Covington Grain Co., Inc., 638 F.2d 1362, 1364 (5th Cir.1981)). Thus, a
substituted party can assert only the rights of the original party. See Minn. Mining & Mfg.
Co. v. Eco Chem, Inc., 757 F.2d 1256, 1263 (Fed. Cir. 1985) (upon transferee joinder
under Rule 25, “[t]he merits of the case . . . are still determined vis-a-vis the originally
named parties.”).
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2. Rule 25(c) Substitution is Not Appropriate
The Court again notes that the Trust’s transfer of its interests in the subject property
via quitclaim deed did not transfer to the Sundbys the Trust’s right to sue for TILA
violations in the contracts to which the Trust was a party—see, e.g., Brown v. Christiana
Tr., 2016 WL 11758809, at *5-6; Gonzalez on Behalf of Estate of Perez, 2014 WL
5462550, at *3; Johnson, 374 F. App'x at 873—and the Trust’s November 2025 assignment
of claims to the Sundbys, ECF No. 405, did not transfer to the Sundbys any actionable
claim relating to this litigation.
Further, Rule 25(c) exists to allow an action to “continue unabated,” when interest
changes hand. In re Bernal, 207 F.3d at 598. The Court notes that, at this point, there is no
action to “continue.” Plaintiff’s claims have been dismissed because the case could not
continue with Plaintiff representing the Trust pro se and in response to Plaintiff’s failure to
comply with Court orders.
Here, the Ninth Circuit remanded the case to the district court “to afford the trust an
opportunity to obtain legal representation and to develop facts to determine in the first
instance whether Sundby is the beneficial owner of the trust or whether the trust transferred
any interests to Sundby.” ECF No. 305, at 3. Sundby refused to do so and, in the process,
brought about the dismissal which has foreclosed these motions to intervene, join and
substitute parties. Ultimately, Rule 25(c) cannot serve to revive the rights of a party
dismissed with prejudice for failure to comply with Court orders. C.f., Cirba Inc. v.
VMware, Inc., No. CV 19-742-GBW, 2022 WL 16527230, at *5 (D. Del. Oct. 26, 2022)
(“Rule 25(c) cannot serve to revive the rights of a party dismissed for lack of Article III
standing.”).
Whether to grant a motion for substitution is within this Court’s sound discretion.
See In re Bernal, 207 F.3d at 598. However, this discretion only exists where there is an
action to “continue unabated,” which there is not. See id. The Court concludes that
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substituting the Sundbys for now dismissed Dale Sundby, Trustee, would not “facilitate
the conduct of the litigation.” See id. Thus, the Sundbys’ motion pursuant to Rule 25(c) is
denied.
C. Rule 19
1. Legal Standard
Rule 19(a) provides that a person must be joined as a party in an action if (1) the
court cannot accord complete relief in that person’s absence or (2) if the person’s interest
in the action is so situated that disposing of the action in the person’s absence may impair
or impede the person’s ability to protect their interest. In analyzing the issue of whether an
entity is an indispensable party, the Court “evaluate[s] ‘the facts as they existed when the
case [was] filed, and not by what happens later.’” Nemee v. Cnty. of Calaveras, No. CV F
12-02 LJO JLT, 2012 WL 2376955, at *6 (E.D. Cal. June 22, 2012), aff'd (Jan. 16, 2014)
(quoting Salt Lake Tribune Publishing Co., LLC v. AT & T Corp., 320 F.3d 1081, 1097
(10th Cir. 2003)).
2. The Sundbys Are Not Necessary Parties
As an initial matter, the Court notes that there is no longer an action for the Sundbys
to join. This action was dismissed and the appellate court affirmed the dismissal.
At the time this case was filed, the Sundbys, as individuals, were not necessary
parties. The case was filed by Dale Sundby, Trustee, against a third party with reference to
Trust interests. In situations like this one, “beneficiaries need not be joined,” because “the
trustee can so adequately represent the interests of the beneficiaries[.]” Matthies v. Seymour
Mfg. Co., 270 F.2d 365, 374 (2nd Cir. 1959). See also Arizona Laborers, Teamsters &
Cement Masons Loc. 395 Health & Welfare Tr. Fund v. Conquer Cartage Co., 753 F.2d
1512, 1521 (9th Cir. 1985) (“It has long been the rule that beneficiaries of a trust ordinarily
need not be joined as necessary parties under Rule 19.”). The original Plaintiff—Dale
Sundby, Trustee—was certainly capable of obtaining counsel, protecting the Sundbys’
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interests, and obtaining complete relief for the Sundbys. Thus, at no point were the
Sundbys’ interest or potential recovery jeopardized by their status as non-parties.
Accordingly, the Sundbys were not and are not necessary parties pursuant to Rule 19(a).
III. Motion for Restitution
On November 12, 2025, Defendants filed a motion for restitution pursuant to Rule
60(b)(5) and 60(b)(6) seeking an order of restitution against Dale Sundby, Trustee. ECF
No. 404. Dale Sundby, proceeding as proposed intervenor and real party in interest,
responded in opposition to Defendants’ motion on November 22, 2025, ECF No. 409.4
Defendants replied on January 6, 2026, ECF No. 417.
A. Legal Standard
A court may relieve a party from a final judgment when “the judgment has been
satisfied, released, or discharged; it is based on an earlier judgment that has been reversed
or vacated; or applying it prospectively is no longer equitable[.]” Fed. R. Civ. P. 60(b)(5).
//
//
B. Defendants Are Entitled to Restitution
Defendants seek to recoup the $690,183.97 paid by Defendants to Plaintiff Dale
Sundby, Trustee, to satisfy this Court’s April 22, 2021 judgment granting Plaintiff’s motion
for statutory damages. ECF No. 264. Defendants base their argument on the grounds that
the money paid from Defendants to Plaintiff was in satisfaction of a judgment that was
subsequently vacated by the Ninth Circuit. ECF No. 404, at 8-9. Plaintiff counters that the
4 Given that Dale and Edith Sundby’s motions to intervene, to substitute and to join have
been denied, the proposed intervenors have no right to represent the Trust and the Court
would strike the response. However, to the extent that this Court’s rulings will be appealed,
the Court considers the opposition in arriving at its decisions for purposes of having a full
record for the appeal.
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motion should be denied because the Ninth Circuit did not address or reverse this Court’s
substantive findings that Defendants committed TILA violations. ECF No. 409, at 7.
It is correct that the Ninth Circuit did not reverse the Court’s legal reasoning or
findings as to the TILA violations present in the loan documents. Indeed, given the lack of
reversal on the merits, had Mr. Sundby obtained counsel as required by the Court, the Trust,
through counsel, could have repeated the same winning arguments that persuaded the Court
to find in the Trust’s favor on the TILA claims. However, the fact that the judgment was
vacated rather than reversed does not mean that it continues to bind the parties involved.
Indeed, “a decision that has been vacated has no precedential authority whatsoever.”
Durning v. Citibank, N.A., 950 F.2d 1419, 1424 n.2 (9th Cir. 1991). See also O'Connor v.
Donaldson, 422 U.S. 563, 578 n.2, (1975) (“Of necessity our decision vacating the
judgment of the Court of Appeals deprives that court's opinion of precedential effect,
leaving this Court's opinion and judgment as the sole law of the case.”); United States v.
Clark, 617 F.2d 180, 184 n.4 (9th Cir.1980) (maintaining that a vacated decision is not
precedential but noting that reasoning that has not been invalidated might still be
persuasive). It does not matter, as Plaintiff contends, that the “vacatur was pure procedural
defect.” ECF No. 409, at 9. It remains that the Court’s order and judgment were vacated in
their entirety.
Rule 60(b)(5) explicitly empowers a court to relieve a party from final judgment if
it was “based on an earlier judgment that has been reversed or vacated.” Thus, the Rule
“appears to contemplate exactly the type of motion brought here.” California Med. Ass'n
v. Shalala, 207 F.3d 575, 577 (9th Cir. 2000). Here, Plaintiff’s statutory damages award
was based on the Court’s findings on the summary judgment motions. Thus, vacatur of the
summary judgment order “removes the underpinnings” of the damages award. Id. The
Supreme Court has further stated that “[w]hat has been given or paid under the compulsion
of a judgment the court will restore when its judgment has been set aside and justice
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requires restitution.” United States v. Morgan, 307 U.S. 183, 197 (1939). Here, Defendants
paid $690,183.97 “under the compulsion” of a judgment that has been “set aside.” Id. Thus,
justice requires restitution in order to account for the removal of the underpinnings to the
$690,183.97 award.
Plaintiff’s arguments to the contrary are unpersuasive. Plaintiff’s primary argument
is that the interests of justice and equity run counter to an award of restitution, because the
Court found Defendants liable for multiple violations of the Truth in Lending Act. ECF
No. 409, at 7. In making this argument, the Sundbys asks the Court to rely on its own
conclusions in an opinion and order explicitly vacated by the Ninth Circuit. It is true that
“a decision vacated upon a ground independent of that for which it is cited may still have
persuasive effect.” Netzer v. City of Pasadena, 963 F.2d 379, 379 (9th Cir. 1992). Thus,
the Court acknowledges that it previously found—and perhaps would have found again—
that Defendants were liable for TILA violations. Had Sundby obtained counsel as ordered
by the Ninth Circuit, counsel could have presented the Court’s original order to persuade
it to find in the Trust’s favor. However, the issue now before the Court is limited. The
question now posed is simply whether Defendants can remain liable for a judgment that
was vacated. The Court finds that settled law holds they cannot.
The Sundbys next argue that Defendants’ payment of the judgment and Plaintiff’s
acknowledgement of satisfaction, ECF No. 279, created a contract between Plaintiff and
Defendants that bars restitution. ECF No. 409, at 20. While this may be true if the parties
contracted for that payment to be final, see Restatement (First) of Restitution § 74, there is
nothing in the record to support the assertion that Defendants entered into such an
agreement with Plaintiff. See ECF No. 404-1, at 41-42. See also Wesby v. D.C., 393 F.
Supp. 3d 34, 41 (D.D.C. 2019) (“Defendants’ submission of payment to [plaintiff] that
simply satisfied the lower court's judgment is not a ‘settlement’ that would bar Defendants
from pursuing restitution once the judgment is overturned.”). The Sundbys further allege
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that, by choosing to satisfy the judgment while Plaintiff’s appeal was pending, Defendants
assumed the risk that the judgment might be later overturned. ECF No. 409, at 19.
However, the opposite is true: “By executing on their judgment and receiving . . . funds
during the pendency of the appeal, [Plaintiffs] assumed the risk that they might have to
repay the money if [Defendants] prevailed on appeal.” Strong v. Laubach, 443 F.3d 1297,
1299 (10th Cir. 2006).
The Sundbys assert that Defendants must identify what portion of the judgment each
investor Defendant contributed. ECF No. 409, at 28-29. However, the Sundbys provide no
authority in support of such an argument, and the Court is aware of none. The Sundbys’
argument that restitution would undermine TILA’s remedial purpose, ECF No. 409, at 27-
28, is similarly misguided. Defendants’ motion for restitution bears no relation to the
substance of Plaintiff’s TILA claims. It rests only on the fact that Defendants disbursed
funds satisfying a judgment that has since been vacated. Interpretation of TILA is irrelevant
to this motion now before the Court. Lastly, the Sundbys argue that ordering restitution
would run counter to the Ninth Circuit’s mandate, wherein it vacated this Court’s judgment
and remanded the case to allow the Trust to retain counsel. ECF No. 409, at 26-27.
However, an order of restitution is not a deviation from the Ninth Circuit’s mandate; it is a
product of it. It is because of the Ninth Circuit’s vacatur of this Court’s order that the Court
finds restitution is appropriate.
Rule 60(b)(5) allows for the exercise of discretion. California Med. Ass'n v. Shalala,
207 F.3d 575, 578 (9th Cir. 2000). Even so, the Court’s discretion is limited by the facts
before it. Here, the Court awarded Plaintiff Dale Sundby, Trustee, a judgment, which
Defendant paid. Plaintiff and Defendant both appealed the Court’s decision, and the Ninth
Circuit vacated the Court’s judgment given the Trust’s lack of counsel. At that point, the
Sundbys are correct that the “implicit assumption was that if the Trust obtained counsel,
the case would proceed to judgment on the merits.” ECF No. 409, at 27. However, the
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Sundbys’ lack of compliance with Court orders—defying no fewer than five orders to
obtain counsel, see ECF Nos. 310, 324, 329, 356, 364—resulted in dismissal of the action
with prejudice before any such adjudication on the merits could occur. Further, the Sundbys
disregard that an involuntary dismissal pursuant to Rule 41 “operates as an adjudication on
the merits.” Fed. R. Civ. P. 41(b). Thus, the record remains—and will continue to remain—
devoid of any valid judgment against Defendants.
Given these facts, Defendants are entitled to relief from the judgment and restitution
of the judgment paid.
IV. ATTORNEY’S FEES
On November 4, 2025, Defendants filed a motion for attorney’s fees. ECF No. 400.
The Proposed Intervenors responded in opposition to Defendants’ motion on November
29, 2025, ECF No. 410, to which Defendants replied on January 9, 2026, ECF No. 418.5
A. Legal Standard
Federal Rule of Civil Procedure (“Rule”) 54(d)(2) “creates a procedure but not a
right to recover attorneys’ fees.” MRO Commc'ns, Inc. v. Am. Tel. & Tel. Co., 197 F.3d
1276, 1280 (9th Cir. 1999). Accordingly, “there must be another source of authority for
such an award.” Id. at 1281 (quoting Abrams v. Lightolier, Inc., 50 F.3d 1204, 1224 (3d
Cir. 1995)).
Meanwhile, California law provides that “[w]here a contract specifically provides
for an award of attorney fees, Civil Code section 1717 allows recovery of attorney fees by
whichever contracting party prevails, regardless of whether the contract specifies that
party.” Hart v. Clear Recon Corp., 27 Cal. App. 5th 322, 237 (2018) (quoting Cargill, Inc.
5 Again, while the Court has denied the motion to intervene, the Court will address
arguments raised by Proposed Intervenors in order to have a complete record for review on
appeal.
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v. Souza 201 Cal. App. 4th 962, 966, (2011)); see also Cal. Civ. Code. § 1717(a) (“In any
action on a contract, where the contract specifically provides that attorney's fees and costs,
which are incurred to enforce that contract, shall be awarded either to one of the parties or
to the prevailing party.”).
Thus, for a court to award attorney’s fees pursuant to § 1717, the following must be
true: (1) the action must be on a contract, (2) the contract must contain a provision stating
that attorney’s fees shall be awarded to the prevailing party, (3) the party seeking fees must
be the prevailing party. In re Penrod, 802 F.3d 1084, 1087-88 (9th Cir. 2015).
B. Defendants Are Not Entitled to An Award of Reasonable Attorney’s Fees
Defendants argue that, under § 1717 and Rule 54, they are the “prevailing party” and
are “entitled to recover their reasonable fees provision pursuant to the attorney fee
provisions in the loan documents which were the subject of Sundby’s claims.” ECF No.
400, at 6. The Sundbys oppose Defendants’ motion on the grounds that (1) the instant
action is not “on a contract,” (2) Defendants are not the prevailing party, (3) the attorneys’
fees clause relied upon by Defendants are part of a void contract, (4) the Truth in Lending
Act prohibits such an award, (5) the loan instruments upon which Defendants rely were
extinguished by the completed foreclosure sale, and (6) Defendants did not personally incur
any fees. See ECF No. 410.
1. Neither the Deeds of Trust Nor the Promissory Notes Adequately Provide
for an Attorney’s Fees Award
Because § 1717 applies only where a contract specifically provides for an award of
attorney’s fees, see Hart, 27 Cal. App. 5th at 237, the Court must first assess whether the
subject contracts provide such a right. Here, Defendants rely on terms contained in two
deeds of trust and promissory notes as the contractual basis for their request for attorney’s
fees. Both the notes and deeds of trust are contracts. See Kerivan v. Title Ins. & Trust Co.,
147 Cal.App.3d 225, 230 (1983).
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a. Deeds of Trust
Defendants argue that “the recovery of attorney fees is expressly authorized for the
Investor Defendants” under the 2016 and 2017 Deeds of Trust (“Deeds”). Specifically,
Defendants point to Section 7 of the Deeds that provides:
Protection of Lender’s Security. If Borrower fails to perform
the covenants and agreements contained in this Deed of Trust, or
if any action or proceeding is commenced which affects Lender's
interest in the Property, including but not limited to proceedings
by the Lender to obtain relief from stay in any bankruptcy
proceeding which would prohibit Lender enforcing its rights
under the Deed of Trust, then Lender, at Lender's option, may
make such appearances, disburse such sums, including
reasonable attorney's fees, and take such action as is necessary
to protect Lender's interest. If Lender required mortgage
insurance as a condition of making the loan secured by this Deed
of Trust, Borrower shall pay the premiums required to maintain
such insurance in effect until such time as the requirement for
such insurance terminates in accordance with Borrower's and
Lender's written agreement or applicable law.
Any amounts disbursed by Lender pursuant to this paragraph 7,
with interest thereon, including but not limited to payment of
delinquent taxes and assessments, insurance premiums due, and
delinquent amounts owed to prior lien holders, shall become
additional indebtedness of Borrower secured by this Deed of
Trust. Such amounts as are disbursed by Lender shall be payable,
upon notice from Lender to Borrower requesting payment
thereof, and shall bear interest from the date of disbursement at
the rate payable on the Note. Nothing contained in this paragraph
7 shall require Lender to incur any expense or take any action
hereunder.
See ECF No. 400-2, at 8, 24 (emphasis added).
This provision states, in the instance of an action affecting the lender’s rights, the
lender may disburse such sums, including reasonable attorney’s fees, to protect its interest.
Here, Dale Sundby, as trustee, commenced an action, which among other things, sought a
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declaratory judgment which would have fully reconveyed the real property which secured
the loans to the Sundby Family Trust. The action is one which sought to affect the rights
of the Lenders and necessitated the incurring of reasonable attorney’s fees to protect the
Lender’s interests. However, the Deed of Trust doesn’t specifically provide a right to an
attorney’s fees award. Instead, it specifies that any amount disbursed under the section
“shall become additional indebtedness of Borrower secured by this Deed of Trust.” Id.
California state and federal courts alike have determined that such language
authorizes only the addition of attorney fees to the loan amount; it does not entitle a lender
to obtain attorneys’ fees through an independent Reule 54(d)(2) or § 1717 motion.
Hart v. Clear Recon Corp., a California case, considered a similar provision and
held as follows:
[S]ection 1717 applies only where a “contract specifically
provides that attorney's fees . . . shall be awarded” to one party
or the prevailing party. We must consider whether paragraph 9
of the deed of trust specifically so provides. By its plain
language, it does not. The paragraph allows the lender to take
numerous actions, including incurring attorney's fees, to protect
its interest. It then provides . . . that “[a]ny amounts disbursed by
Lender under this Section 9 shall become additional debt of
Borrower secured by this Security Instrument.” This is not a
provision that attorney's fees “shall be awarded”; it is, instead, a
provision that attorney's fees, like any other expenses the lender
may incur to protect its interest, will be added to the secured debt.
27 Cal. App. 5th 322, 327 (2018).
The Court concluded that the language upon which the lenders relied for an award
of attorney’s fees “simply does not provide for a separate award of fees per motion.” Id. at
329. See also Chacker v. JPMorgan Chase Bank, N.A., 27 Cal. App. 5th 351, 356
(2018), as modified on denial of reh'g (Oct. 17, 2018); Tyler v. Wells Fargo Bank, N.A.,
No. E063985, 2016 WL 3752394, at *7-*8 (Cal. Ct. App. July 8, 2016) (unpublished);
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Rezapour v. U.S. Bank Nat'l Ass'n, No. A155505, 2021 WL 6142502, at *10 (Cal. Ct. App.
Dec. 30, 2021) (unpublished).
Federal courts considering similar provisions have found the same. See DuFour v.
Allen, No. 14-CV-05616-CAS(SSX), 2017 WL 1433303, at *6 (C.D. Cal. Apr. 20, 2017);
Valencia v. Carrington Mortg. Servs., LLC, No. 10-cv-00558-LEK, 2013 WL 3223628, at
*10 (D. Haw. June 25, 2013); Residential Funding Corp. v. Buettner, 797 F. Supp. 3d 1167,
1175 (E.D. Cal. 2025).
Accordingly, while attorney’s fees incurred to enforce the lender’s rights are
recoverable as additional indebtedness, no provision in the Deeds of Trust entitles
Defendants to an attorney’s fees award.
b. Promissory Notes
Defendants also rely on language within the Promissory Notes (“Notes”), which
reads:
4. Borrower’s Failure to Pay as Required
(B) Default. If I do not pay the full amount of each monthly
payment due under this` Note by the date stated in paragraph 3
above, I will be in default, and the Note Holder may demand that
I pay immediately all amounts that I owe under this Note. [ . . . ]
(C) Payment of Note Holder’s Costs and Expenses. If the Note
Holder has required me to pay immediately in full as described
above, the Note Holder will have the right to be paid back for all
its costs and expenses to the extent not prohibited by applicable
law. Those expenses include, for example, reasonable attorney’s
fees.
ECF No. 400-2, at 18-19, 33-34 (emphasis added).
Under these provisions, a Note Holder has the “right to be paid back for all its costs
and expenses . . . include[ing] . . . attorney’s fees” where the borrower is in default and has
been required to pay all amounts owed under the note. Defendants rely on this language as
creating a right to an award of attorney’s fees under § 1717. However, Defendants failed
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to support their motion with proof of having made a demand for the Trust to pay all
amounts under the Notes. Following the hearing, Defendants filed a supplemental brief to
show that the Notes’ attorney’s fee provision was triggered by such a demand. ECF No.
436. The citations reference allegations in the First Amended Complaint, ECF No. 14 ¶¶
104-106, and a draft Forbearance Agreement that followed the Sundbys’ default and the
Lenders’ announced intention to foreclose, ECF No. 62-7 at 4-21. While there does appear
to be reference to a default and a requirement to pay, the Forbearance Agreement is
unsigned. See id. Moreover, to the extent that it had been signed, the Lenders conditionally
agreed to forbear from exercising its foreclosure remedies. Given the forbearance, the
Court finds that the Defendants did not show proof that it required the Trust to pay all
amounts owed under the Notes.
Assuming that Defendants made the required demand, the Court next turns to the
attorney’s fee provision to determine whether it specifically provides for an attorney’s fee
award. The Notes provide that if a demand to pay immediately is made “the Note Holder
will have the right to be paid back for …reasonable attorney’s fees.” Unlike in the Deeds,
there is no clarifying language stating that the attorney’s fees are additional indebtedness.
However, the language also does not specifically provide for an attorney’s fee award.
Section 1717 applies “only where a ‘contract specifically provides that attorney’s
fees . . . shall be awarded.” Hart, 27 Cal. App. 5th at 327, 328 (stressing the importance of
“actually analyz[ing] whether [contract language] specifically provide[s] for an award of
attorney’s fees”). Here, the language in the Notes does not specifically provide for an
“award” of attorney’s fees. Rather, it speaks to a right to be “paid back” for such expenses,
which is akin to the Deed language regarding indebtedness.
While there are no published decisions that interpret the promissory note language
here, there are unpublished decisions which do so and vary in the depth of their analysis
and persuasiveness. Because state law governs the interpretation and application of
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contractual attorneys’ fees provisions, see Resolution Trust Corp. v. Midwest Fed. Sav.
Bank, 36 F.3d 785, 800 (9th Cir. 1993), the Court begins by reviewing California court
unpublished decisions.
The California Court of Appeals, in an unpublished decision, has held that language
in a promissory note indicating that “the Note Holder will have the right to be paid back
by [the borrower] for all costs and expenses . . . includ[ing], for example, reasonable
attorneys’ fees” does not authorize a fee award pursuant to § 1717. Rezapour v. U.S. Bank
Nat'l Ass'n, No. A155505, 2021 WL 6142502, at *8 (Cal. Ct. App. Dec. 30, 2021)
(unpublished). Instead, when accompanied by a deed of trust that, as here, contemplated
attorney’s fees as “additional indebtedness,” the court viewed this provision as:
best construed as referring to amounts that a note holder would
charge against borrowers, not that a court would separately order
as an award of attorney fees. Notably, . . . the promissory note
refers to the note holder’s right to be ‘paid back’ its costs and
expenses (including attorney fees), a term that reasonably relates
to the borrower’s loan obligation.
Id. at 9.
In arriving at this legal conclusion, the Rezapour court read both the deed and
promissory note language in conjunction as per California Civil Code § 1642 which reads:
“[s]everal contracts relating to the same matters, between the same parties, and made as
parts of substantially one transaction are to be taken together.” The court found that the
note and the deed provided the same remedy to the lender given that they were both “part
of the same effort to enforce the note.” Id. Accordingly, the note provision was “best
construed as referring to amounts that a noteholder would charge against borrowers, not
that a court would separately order as an award of attorney fees.” Id. Taken together, the
deed and note required that the right to attorney fees under the note “shall become
additional indebtedness.” Id.
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Similarly, here, the two Deeds provide that “[i]f Borrower fails to perform the
covenants and this Deed of Trust, or if any action or proceeding is commenced which
affects Lender’s interest in the property…the lender may take such action as necessary to
protect the Lender’s interest,” including disbursing sums for attorney’s fees which shall
become “additional indebtedness.” ECF No. 400-2 at 8. Meanwhile, the Notes provide as
a remedy for a failure to pay as required a “right to be paid back for all its costs and
expenses…[which] include, for example, reasonable attorney fees.” Id. at 18. The two
Deeds and Notes relate to the same parties, arise from the same transactions and protect
the financial interests of the Lenders. Reasonably construed, the language in the Notes and
Deeds in concert suggests “paid back” in the Notes refers to additional indebtedness.
On the other hand, some unpublished federal decisions have ruled that, because the
note provision “requires the borrower to repay to the lender for attorney’s fees incurred in
collecting the Promissory Note,” it requires an award of attorney’s fees incurred to enforce
the contract within the meaning of § 1717(a). In re Wagabaza, No. 5:18-CV-00406-JLS,
2019 WL 3717794, at *9 (C.D. Cal. Aug. 7, 2019); Gilliam v. Levine, No. CV-18-2580-
PSG-MRWX, 2022 WL 401462, at *3 (C.D. Cal. Jan. 25, 2022), aff'd sub nom. Gilliam,
Tr. of Lou Easter Ross Revocable Tr. v. Levine, Tr. of Joel Sherman Revocable Tr., No.
21-56257, 2023 WL 2770922 (9th Cir. Apr. 4, 2023); Ng v. US Bank, NA, No. 15-CV-
04998-KAW, 2016 WL 6995884, at *4 (N.D. Cal. Nov. 30, 2016), aff'd sub nom. Ng v.
U.S. Bank, NA, 712 F. App'x 665 (9th Cir. 2018).
First, none of these cases considered the effect of Civil Code § 1642 in interpreting
attorney’s fees provisions contained in a deed and a note. As a result, the federal cases are
distinguishable and fail to analyze this salient issue. Only Rezapour has read the deed and
note in conjunction as required under California statutory law in concluding that the right
to attorney’s fees was additional indebtedness that could be recovered as part of the
foreclosure sale. Thus, the Court is prepared to offer deference to the California Court of
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Appeals’ reasoning. See Rezapour, 2021 WL 6142502, at *8; see also DuFour, 2017 WL
1433303 (finding an unpublished decision by the California Court of Appeals to be the
most persuasive authority on how this Court should interpret contractual attorneys’ fees
provisions in a deed of trust.).
Second, in each of the above federal decisions, the lenders had declared a default
and demanded payment under the note so as to trigger the attorney’s fees award. As
discussed above, the Notes provide for costs and expenses, including attorney’s fees, only
when the lender has demanded that a borrower in default pay immediately and the borrower
has failed to do so. ECF No. 400-2, at 18-19, 33-34. Given that any demand for payment
would have been conditionally withdrawn upon the execution of the Forbearance
Agreement, the Court has found that the Defendants failed to provide proof of the required
demand.
//
//
//
C. Equitable Considerations
Finally, even if the Notes’ terms could reasonably be interpreted to support an
attorney’s fee award, the Court finds that it would be inequitable to award Defendants
attorney’s fees given the history of the litigation.
First, Defendants did not realize any success at the trial level and their success on
appeal did not relate to the merits but rather Dale Sundby’s unauthorized practice of law
by representing the Family Trust. Moreover, on appeal, the dissenting judge found that the
Defendants had waived any right to appeal the issue given Defendants’ failure to object to
Sundby representing the Trust at the trial level. See Sundby v. Marquee Funding Grp., Inc.,
No. 21-55504, 2022 WL 4826445, at *2 (9th Cir. Oct. 3, 2022) (Silverman, B., dissenting)
(citing Church of the New Testament v. United States, 783 F.2d 771, 774 (9th Cir. 1986)
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(issue of whether the Church was properly represented was raised for the first time on
appeal and court found it need not address issue that was not raised before the trial court)).
The dissenting judge also observed that Defendants had not shown that they had been
prejudiced in any way by the Sundby’s pro se representation, which was not surprising
given that “[t]he general rule requiring a trust to be represented by counsel is to protect the
trust's beneficiaries, not a defendant accused of cheating them. Nor is there any explanation
for why this issue wasn't raised before, or why this failure should be excused.” Sundby,
2022 WL 4826445, at *2 (Silverman, B., dissenting).
While the majority in the Sundby appeal did not find a waiver, the Defendnats’
failure to object extended this litigation when an earlier objection would have allowed the
Court to efficiently hear the case by addressing this issue nearly seven-years ago.
Ultimately, the failure to object at the trial level led to Defendants incurring substantial
attorney fees that did not need to be incurred given that the Trust was not represented by
counsel. Given the history of this litigation, the Court is not prepared to find that the
attorney’s fees sought are “reasonable.”
Finally, it would be untenable to find that the Defendants are the prevailing parties
where it was Mr. Sundby who prevailed on the TILA claim and the declaratory judgment
claims that the Deeds were improperly modified. But for Mr. Sundby’s dogged refusal to
hire an attorney to address whether the Sundbys had a beneficial interest or to reinitiate the
litigation, it is plausible that the Trust represented by counsel could have again prevailed
on the TILA claims which would have then supported an attorney’s fee award for the Trust
under TILA.
Thus, even assuming that the provision in the Note might provide for attorney’s fees
in some instances—compare Rezapour v. U.S. Bank Nat'l Ass'n, 2021 WL 6142502, at *8
(the “paid back” provision does not entitle lender to a separate order of attorney’s fees)
with Gilliam, 2022 WL 401462, at *4 (such language provides for attorney’s fees in
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enforcing the promissory note)—the provision is not sufficiently broad as to encompass
the litigation here. Santisas v. Goodin, 17 Cal. 4th 599, 608 (1998) (noting that whether a
fee provision is “phased broadly” impacts when, and on what claims, that provision may
support an award of attorney’s fees).
Accordingly, for the foregoing reasons, the Court DENIES Defendants’ motion for
attorney’s fees.
CONCLUSION
For the reasons set forth above, the Court ORDERS as follows:
• The Court DENIES the Sundbys’ motion to intervene, ECF No. 401.
• The Court DENIES the Sundbys’ motion for substitution and/or joinder, ECF
No. 407.
• The Court DENIES Defendants’ motion for attorney’s fees, ECF No. 400.
• The Court GRANTS Defendants’ motion for restitution, ECF No. 404. At the
hearing before the Court, Defendants noted that the judgment was paid to Dale
Sundby in his individual capacity. Accordingly, Dale Sundby is ORDERED
to make a restitution payment to Defendants in the amount of $690,183.87,
plus applicable interest, representing the sums paid pursuant to the now-
vacated April 22, 2021, Order, ECF No. 246.
Dated: February 27, 2026
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