Fla. Appeals Court: Homeowner Entitled To Nail Bank For Prevailing Party Legal Fees After Lender Voluntarily Dismissed F'closure Case w/out Prejudice

In a relatively short and sweet ruling reversing another lower court screw-up in a foreclosure case, a Florida appeals court held that a defendant is entitled to recover her attorney’s fees as a prevailing party under subsection 57.105(7), Florida Statutes (2009), after the court granted a motion to dismiss a mortgage foreclosure action and dismissed the case without prejudice.

While, on its face, there doesn't seem to be anything particularly ground-breaking about this ruling in that it appears to merely reaffirm and reinforce long-standing law in Florida,(1) it nevertheless serves as a valuable reminder that:

• Homeowners should not hesitate to hammer lenders with a claim for reimbursement of their legal fees after being forced to defend themselves in a foreclosure action where he/she successfully fends off a foreclosure action - particularly if the foreclosing plaintiff lacked standing to file the lawsuit in the first place,
• Foreclosure defense attorneys who are not already seeking reimbursements from banks for their legal fees on behalf of their clients after successfully scoring a dismissal of a foreclosure action (either with or without prejudice) had better start doing so, if for no other reason, to minimize their malpractice exposure for failing to assert all possible claims their clients may have against the rogue lender/loan servicer, and
• Non-profit law firms which take these cases on a pro bono basis should also submit a claim for legal fees (if they are not already doing so), applying a reasonable hourly billing rate to the amount of time spent defending these cases (hopefully, this could provide a modest source of revenue to help keep their operations going, in light of the budget cuts being made by the Federal and state governments and others who provide sources of funding for their operations). Further, they should also seek approval of the use of a contingency fee risk multiplier in calculating their fees (see Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), approving a contingency fee multiplier of 2.5 in determining the tab for homeowner's legal fees that the improperly foreclosing lender was belted with).

Representing the homeowner was Enrique Nieves, of Ice Legal, P.A., Royal Palm Beach, FL.

For the ruling, see Nudel v. Flagstar Bank, FSB, No. 4D10-3001 (Fla. App. 4th DCA, May 18, 2011).(2)
(1) See Landry v. Countrywide Home Loans, Inc., 731 So. 2d 137 (Fla. 1st DCA 1999) (bold text is my emphasis):

• The general rule is that "when a plaintiff voluntarily dismisses an action, the defendant is the prevailing party." See Thornber v. City of Ft. Walton Beach, 568 So. 2d 914, 919 (Fla. 1990). Further, "it is well established that attorney's fees are properly awarded after a voluntary dismissal where such award is provided for by statute or agreement of the parties." See Century Construction Corp. v. Koss, 559 So. 2d 611, 612 (Fla. 1st DCA 1990), review denied, 574 So. 2d 141 (Fla. 1990). See also Boca Airport, Inc. v. Roll-N-Roaster of Boca, Inc., 690 So. 2d 640, 641 (Fla. 4th DCA 1997), review dism'd, 698 So. 2d 543 (Fla. 1997)("for purposes of a prevailing party attorney's fees statute, a voluntary dismissal by the claimant makes the opposing party a 'prevailing party' as to the issue of entitlement to fees").

In addition, in Florida, where an agreement allows for an attorney fee award to one of the contracting parties (a one-sided attorney fee provision), state statute mandates an award of prevailing party attorney's fees to the other party under the reciprocity provisions of section 57.105(7), Florida Statutes; Landry, supra. (Mortgages almost always contain a provision that allow a lender to tack on its legal fees to the amount owed by the borrower when bringing litigation to enforce its rights. Accordingly, by reason of section 57.105(7), the homeowner likewise would be entitled to a recovery of his/her attorney's fees from the losing lender).

Further, foreclosure mill law firms and other attorneys bringing foreclosure actions on behalf of lenders that get summarily kiboshed due to a lack of standing could be ordered to ante up part of the homeowner's legal fees out of their own pockets by reason of section 57.105(1), Florida Statutes:

• Upon the court’s initiative or motion of any party, the court shall award a reasonable attorney’s fee, including prejudgment interest, to be paid to the prevailing party in equal amounts by the losing party and the losing party’s attorney on any claim or defense at any time during a civil proceeding or action in which the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:
  
  (a) Was not supported by the material facts necessary to establish the claim or defense; or
  (b) Would not be supported by the application of then-existing law to those material facts.

This tool could possibly act as a deterrent to foreclosure mills and other attorneys bringing cases when they lack the proper paperwork at the time they file their legal actions.

(2) From the court ruling (bold text is my emphasis):

• Additionally, Nudel was entitled to recover her attorney's fees. The mortgage between Nudel and Flagstar entitled Flagstar to reasonable attorney's fees for enforcement. By operation of subsection 57.105(7), the contractual provision also allows attorney's fees to Nudel if she is the prevailing party. See § 57.105(7) ("If a contract contains a provision allowing attorney's fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney's fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract.").
  
  Nudel is the prevailing party within the meaning of subsection 57.105(7). This court has held that a plaintiff's voluntary dismissal makes a defendant a "prevailing party" in the dismissed action even where the plaintiff refiles the case and prevails. In Alhambra Homeowners Ass'n v. Asad, 943 So.2d 316, 317-18 (Fla. 4th DCA 2006), an association sued some of its homeowners, but voluntarily dismissed its lawsuit without prejudice before a summary judgment hearing. The association subsequently re-filed the suit after unsuccessful mediation talks. Id. at 318. In the other, dismissed action, the homeowners moved for prevailing party attorney's fees. Id. The circuit court found the homeowners to be the prevailing parties and awarded them fees. Id.
  
  Following Thornber v. City of Fort Walton Beach, 568 So.2d 914 (Fla. 1990), this court affirmed. Id. at 318-20. We held that the homeowners were "entitled to recover attorney's fees under a statute awarding fees to the prevailing party in litigation after the plaintiff took a voluntary dismissal without prejudice." Id. at 317. This was so "even though the plaintiff subsequently refiled the identical lawsuit and ultimately prevailed." Id.
  
  For the purpose of determining a "prevailing party" under section 57.105(7), we see no reason to distinguish between a voluntary dismissal without prejudice and a court's involuntary dismissal without prejudice. This same conclusion was reached in Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), where the first district affirmed an award of prevailing party attorney's fees on facts similar to those in this case. There, the bank sued the defendant to foreclose a mortgage. Id. at 347. The defendant moved to dismiss because the bank failed to show that it owned the mortgage and promissory note and, thus, it lacked standing to sue. Id. The court dismissed a complaint and amended complaint without prejudice; "[w]hen the Bank declined to file a second amended complaint, the trial court dismissed the amended complaint with prejudice." Id. The bank did not appeal this order, but instead instituted a new foreclosure action. Id. In the first action, the court awarded the defendant prevailing party attorney's fees and costs. Id.
  
  On appeal, the bank argued that, "because the same factual and legal issues raised in the dismissed action [were] also the subject of the new litigation, [the defendant] [could] [not] be the prevailing party." Id. at 347-48. Relying on a voluntary dismissal without prejudice case, State ex rel. Marsh v. Doran, 958 So.2d 1082 (Fla. 1st DCA 2007), the first district rejected the bank's argument. Id. at 348.
  
  "The refiling of the same suit after the voluntary dismissal does not alter the appellees' right to recover prevailing party attorney's fees incurred in defense of the first suit." Id. (quoting Doran, 958 So. 2d at 1082 (citing, inter alia, Alhambra Homeowners Ass'n, 943 So. 2d at 319)). Accordingly, the court held that the defendant was the prevailing party and affirmed her award. Id. We agree with Williams and conclude that Nudel was a prevailing party entitled to recover attorney's fees.

(It should be noted that, in Bank of New York v. Williams, 979 So.2d 347 (Fla. 1st DCA 2008), noted above, the court also approved the use of a contingency fee multiplier of 2.5 in determining the amount of the homeowner's legal fees that the improperly foreclosing lender was hammered with.)