Aozora Bank, Ltd. v. 1333 North California Boulevard

The issue addressed in this appeal is whether a real estate lender can recover attorney’s fees for prevailing in a bad faith waste action against the borrower where the loan documents provide that the borrower is liable only “if and to the extent that” it “commits . . . waste.” We hold that the lender is not entitled to attorney’s fees under this contractual language, and therefore reverse the order awarding fees in this case.

I. BACKGROUND

Aozora Bank, Ltd., formerly known as The Nippon Credit Bank, Ltd., Los Angeles Agency (Bank) made a $73 million loan to 1333 North California Boulevard, a limited partnership (the Partnership) to refinance an initial loan and complete construction of the Partnership’s commercial property. The Partnership defaulted on the loan, and a Bank subsidiary purchased the property for a $52 million credit bid in a trustee’s sale under the deed of trust. Bank then filed this suit for damages for waste against the Partnership and its general and managing partners.

A jury found that the defendants committed waste by failing in bad faith to pay an installment of taxes on the property, and awarded Bank $394,713.56 in compensatory damages and…