Walsh

Plaintiffs John Walsh and Sydney Walsh appeal from the judgment in favor of defendant New West Federal Savings & Loan Association (New West). New West cross-appeals from the court’s denial of its motion for reasonable attorney’s fees pursuant to Civil Code section 1717. We affirm the judgment and reverse the order denying New West attorney’s fees.

Factual and Procedural Background

I

The case comes to us after a court trial on New West’s defense which was severed from the main action. For purposes of this appeal we therefore assume the truth of the allegations of the Walshes’ complaint.

In 1982 the Walshes owned approximately 15 real properties, many of which were in,default, nearing foreclosure. In attempting to extricate themselves from their financial difficulties, they met defendant Richard Gallegos who was allegedly going to solve their problems. They would deed their properties to him in exchange for $5,000 cash and Gallegos’s promise to transfer to them property owned by defendant State Savings and Loan Association. The savings and loan property consisted of REO’s, i.e., “real estate owned” by the bank, generally undesirable properties to retain because of the…