Allex D Baron and Mary Anne C Baron

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 10-33751DM
MARY ANNE C. BARON AND ALLEX D. 	)
BARON, 	) Chapter 13
)
Debtors. 	)
___________________________________)
MEMORANDUM DECISION RE ATTORNEYS FEES CLAIMED IN FOOTNOTE
On November 10, 2010, Wells Fargo Bank, NA (“Wells Fargo”),
though its counsel, filed a proof of claim indicating that Debtors
owed $0.00 in arrearages, and $611,236.58 in secured debt. 	Even
though Debtors were current on their obligations, Wells Fargo
indicated in a footnote on an attachment to the proof of claim
that it had incurred $300 in attorneys fees:
Please be on notice that $300.00 in attorneys' fees and
costs have been incurred for the post-petition
preparation and filing of this Proof of Claim; obtaining
and reviewing the Chapter 13 Plan; and the preparation,
filing and service of a Request for Courtesy Notice to
monitor this bankruptcy, but are not included in the
Proof of Claim. If the Debtor(s) want these fees and
costs included in the Proof of Claim so that the subject
loan is current upon completion of the Plan, please
contact [counsel for Wells Fargo].
Emphasis added.
Although this footnote indicates that the $300 was not
included in the total amount due, Wells Fargo stated in subsequent
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Signed and Filed: April 12, 2011
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
April 13, 2011
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 10-33751 Doc# 55 Filed: 04/12/11 Entered: 04/13/11 13:56:22 Page 1 of 5

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pleadings that it “properly included attorneys’ fees and costs in
its Proof of Claim.” 	As discussed below, based on the relevant
language of the underlying deed of trust, the court believes that
Wells Fargo did not provide sufficient notice of the fees to
Debtors. 	Therefore, whether or not the $300 charge was included
in the total amount due or in the proof of claim, the court will
disallow it.
In their objection to Wells Fargo’s proof of claim, Debtors
argued that Wells Fargo was undersecured and thus could not assert
a claim for postpetition attorneys fees under 11 U.S.C. § 506(b).
Debtors further contended that the $300 fee was not reasonable
given that Debtors did not owe any arrearages, and that the
footnote in the proof of claim provided insufficient notice of
Wells Fargo’s intent to charge such a fee. 	Debtors requested the
court to disallow Wells Fargo’s secured claim in its entirety in
light of the alleged impropriety of asserting that it had incurred
the $300 fee, and prayed that the court award them $750.00 for
legal fees and expenses incurred in objecting to the claim.
In response, Wells Fargo correctly cited governing Ninth
Circuit authority that an unsecured or undersecured creditor may
file a claim for fees incurred postpetition if such fees are
otherwise allowable under law. 	In re SNTL Corp., 571 F.3d 826,
843 (9th Cir. 2009). 	That said, Wells Fargo cannot use the notice
purportedly provided by the footnote in the proof of claim as
grounds for collecting or charging the fee to Debtors.
Under California law, provisions of a contract permitting a
party to recover reasonable attorneys’ fees incurred in enforcing
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Case: 10-33751 Doc# 55 Filed: 04/12/11 Entered: 04/13/11 13:56:22 Page 2 of 5

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that contract are enforceable. 	Cal. Civ. Code § 1717(a). 1 	Wells
Fargo asserted that it was entitled to assert the claim for
attorneys fees pursuant to section 7 of the deed of trust, which
provides:
If (a) I do not keep my promises and agreements made in
this Security Instrument, or (b) someone, including me,
begins a legal proceeding that may significantly affect
Lender’s rights in the Property (including but not
limited to any manner of legal proceeding in bankruptcy,
in probate, for condemnation or to enforce laws or
regulations), then the Lender may do an pay for whatever
it deems reasonable or appropriate to protect the
Lender’s rights in the Property. Lender’s actions may
include, without limitation, appearing in court, paying
reasonable attorneys’ fees, purchasing insurance
required under Paragraph 5, above (such insurance may
cost more an provide less coverage than the insurance I
might purchase), and entering on the Property to make
repairs. 	Lender must give me notice before Lender may
take any of these actions. 	Although Lender may take
action under this Paragraph 7, Lender does not have to
do so. 	Any action taken by Lender under this Paragraph
7, will not release me from my obligations under this
Security Instrument.
I will pay to Lender any amounts which Lender advances
under this Paragraph 7 with interest, at the interest
rate in effect under the Secured Notes. I will pay those
amounts to Lender when Lender sends me a notice
requesting that I do so.
Emphasis added.
At a hearing on the claim objection, Debtor’s counsel argued
that Wells Fargo had not provided the notice of the attorneys fees
required by section 7 of the governing deed of trust. 2 	The court
1However, if such a clause exists, the other party may
recover reasonable attorneys fees if it prevails “on the
contract.” 	Cal. Civ. Code § 1717(a). 	The party prevailing on the
contract “shall be the party who recovered a greater relief on the
contract.” 	Cal. Civ. Code § 1717(b).
2At the hearing, the court instructed Wells Fargo to provide
further authority for its position no later than March 11. 	Wells
Fargo did not file a timely supplemental memorandum. 	Debtors
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Case: 10-33751 Doc# 55 Filed: 04/12/11 Entered: 04/13/11 13:56:22 Page 3 of 5

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agrees. 	As stated previously, Wells Fargo can recover reasonable
attorneys fees under California law to the extent it is entitled
to them contractually. 	Here, under the terms of the contracts
drafted or provided by the lender from whom Wells Fargo acquired
its rights, Wells Fargo is not entitled to recover the fees. 3
Section 7 requires the lender to “send” notice to Debtors before
paying attorneys fees; simply filing a proof of claim does not
constitute “sending” notice, as no proof of service has been filed
indicating that the claim was sent to Debtors, and proofs of claim
are not electronically noticed by the court. 	The promissory note
at paragraph 9 states that notices shall be given to Debtors by
first class mail. 4 	Adding a footnote to an attachment to a proof
of claim does not provide the notice contemplated by the pertinent
agreements, which were not drafted by Debtors.
Consequently, to the extent the Wells Fargo’s claim includes
therefore requested an order by default disallowing the claim and
awarding them attorneys’ fees. 	Wells Fargo responded that its
“failure to file the above statement resulted from both [sic] a
scheduling error by [its] counsel regarding the deadline to
respond to the Court’s order[,]” but did not submit declarations
to support this statement. 	After Debtors filed another response,
the court directed the parties not to file anything further.
3Wells Fargo argues that it was not required to provide
notice because it had not paid the fees, only incurred liability
for them. 	Wells Fargo has not provided a declaration or evidence
in support of that assertion.
4The promissory note also provides in section 8 (“Borrower’s
Failure to Pay as Required”) that “the Lender will have the right
to be paid back by me for all costs and expenses in enforcing this
Note to the extent not prohibited by applicable law. 	Those
expenses may include, for example, reasonable attorneys’ fees and
court costs.” 	As Debtors were not in default under the Note,
Wells Fargo was not taking an action to enforce it. 	Even if it
had, the terms of the Deed of Trust require notice of such fees to
be sent to Debtors.
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Case: 10-33751 Doc# 55 Filed: 04/12/11 Entered: 04/13/11 13:56:22 Page 4 of 5

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the attorneys’ fees, that amount ($300) should be disallowed.
However, Debtors have not provided grounds for disallowance of the
full claim (particularly when the claim indicates that the $300
fee is not included in the total amount due).
Even though the court believes that Debtors’ actual aim in
filing the objection was to have the $300 fee stricken and to
prevent Wells Fargo from asserting a default based on nonpayment
of that amount, the court is not granting all of the relief they
sought (i.e., disallowance of the claim in its entirety). 	If
Debtors want to recover their attorneys’ fees under the
reciprocity provision of section 1717(a) of the California Civil
Code, they will need to file a motion for determination that they
are the prevailing parties. 	See Cal. Civ. Code § 1717(b)(1). 	The
court is denying Debtors’ request for attorneys fees under 28
U.S.C. § 1927, as no basis exists for a finding that Wells Fargo
multiplied the proceedings unreasonably and vexatiously.
The court will enter an order consistent with this Memorandum
Decision.
**END OF MEMORANDUM DECISION**
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Case: 10-33751 Doc# 55 Filed: 04/12/11 Entered: 04/13/11 13:56:22 Page 5 of 5