Fla. Appeals Ct. Nixes Prevailing Party Legal Fee Award In Foreclosure Defense; Failure To Include Request In Pleading Sinks Recovery Attempt

A major screw-up by a foreclosure defense attorney seeking recovery of prevailing party attorneys fees pursuant to section 57.105(7), Florida Statutes(1) on behalf of a client in a defense of a mortgage foreclosure action was at the heart of a recent decision by a Florida appeals court.

An abbreviated, somewhat 'butchered' summary of the facts follows:

1. Lender filed a mortgage foreclosure action against defendants.


2. Defendants filed their answer.


3. The answer did not contain a claim for attorneys' fees.


4. Subsequently, Defendant filed a supplemental answer to correct a scrivener's error but again failed to raise a claim for attorneys' fees.


5. Court grants foreclosure judgment, and lender ultimately takes title to property at a foreclosure sale.


6. Lender then filed a motion for deficiency judgment against defendants.


7. The hearing was scheduled for February 10, 2009, and began as scheduled. However, due to insufficient time to present all evidence, the hearing was continued to February 18, 2009.


8. Five days before the scheduled continuation of the evidentiary hearing, counsel for defendants filed an emergency motion to withdraw and to continue the hearing. The trial court granted the motion, and the hearing was continued to March 19, 2009.


9. New counsel for defendants filed a notice of appearance on March 12, 2009.


10. On March 13, 2009, only seven days before the final hearing on lender's motion for deficiency judgment (and after obviously realizing the screw-up by the original foreclosure defense attorney in failing to raise a claim for attorneys' fees in the defendant's answer to the foreclosure complaint), defendants filed a notice of intent to seek attorneys' fees and costs ("Notice of Intent").


11. Following completion of the evidentiary hearing, the trial court entered final judgment denying lender's motion for deficiency judgment.


12. Defendants subsequently filed a motion for attorneys' fees and costs, claiming entitlement to attorneys' fees and costs for both the foreclosure and deficiency judgment proceedings pursuant to portions of the subject loan documents as well as the reciprocal fees provisions of section 57.105.


13. Lender filed a response to the motion, objecting to defendant's entitlement on multiple bases.


14. Following the hearing on the fee motion, the trial court awarded $44,667.50 in attorneys' fees to defendants on account of the work of the foreclosure defense attorneys. The fee award reflected time spent by all of the attorneys involved in defendant's defense throughout the deficiency judgment proceedings only, and acknowledge no entitlement for time spent on account of the unsuccessful defense of the foreclosure proceedings.

In reversing the trial judge's $44K+ attorney fee award to the foreclosure defense attorneys, the appeals court, citing multiple authorities, simply said that the fee request must be included in a 'pleading' (Complaints, answers, and counterclaims are 'pleadings' pursuant to Rule 1.100(a) of the Florida Rules of Civil Procedure), and said that including the attorney fee claim in the "Notice of Intent" did not satisfy the 'pleading' requirement, because the "Notice of Intent" is not a pleading.(2)

This ruling should serve:

• as a handy reminder for attorneys representing homeowners in foreclosure of what to do (and just as importantly, what not to do) when addressing the issue of recovering attorneys fees paid by their clients from the losing bankster in a successful defense,(3) and
• as valuable information for homeowners successful in fending off foreclosure regarding their rights to recover, from the losing bankster, any fees paid or payable to the attorney representing them in a foreclosure action.

For the ruling, see BMR Funding, LLC. v. DDR Corporation, 2D10-2284 (Fla. App. 2d DCA, June 3, 2011) (Editor's Note: This ruling was subsequently withdrawn, and a new opinion was issued here, with a change contained in the text of one paragraph only).

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

(2) The appeals court ruled as follows in applying Florida law to the facts of this case (bold text is my emphasis):

• Because DDR and Dunn did not claim entitlement to attorneys' fees and costs in any pleading, as defined by Florida Rule of Civil Procedure 1.100(a), the trial court erred in granting DDR and Dunn's motion for attorneys' fees and costs. In Stockman v. Downs, 573 So. 2d 835 (Fla. 1991), the supreme court held that a claim for attorneys' fees must be pleaded, regardless of whether the claim is based on contract or statute. Id. at 837. This pleading requirement was subsequently clarified in Green v. Sun Harbor Homeowners' Ass'n, 730 So. 2d 1261 (Fla. 1998):
  
  This Court's use of the phrase "must be pled" [in Stockman] is to be construed in accord with the Florida Rules of Civil Procedure. Complaints, answers, and counterclaims are pleadings pursuant to Florida Rule of Civil Procedure 1.100(a). A motion to dismiss is not a pleading. Stockman is to be read to hold that the failure to set forth a claim for attorney fees in a complaint, answer, or counterclaim, if filed, constitutes a waiver.
  
  Id. at 1263 (emphasis added).
  
  Subsequently, in Precision Tune Auto Care, Inc. v. Radcliffe, 815 So. 2d 708 (Fla. 4th DCA 2002), the Fourth District reversed an attorneys' fee award where the claimant failed to plead entitlement to fees. Applying the supreme court's ruling in Green, the court stated: "We assume that the supreme court meant what it said and said what it meant in Green. The plaintiffs here were required to set forth their claim for attorney's fees in a pleading." Id. at 712.
  
  In this case, DDR and Dunn urge this court to find that their "Notice of Intent" satisfied the pleading requirement. In its entirety, the notice states:
  
  Defendants, DDR Corporation and Carol J. Dunn, by and through their undersigned attorneys, hereby provide notice that, if they prevail with respect to Plaintiff's efforts to obtain a deficiency judgment, Defendants intend to seek the recovery of their attorneys' fees and costs from Plaintiff pursuant to the express terms of the subject Guaranty and the operation of the reciprocal fee provision of F.S. 57.105.
  
  We agree with BMR that the Notice of Intent is not a pleading. Having filed two answers to the amended complaint, DDR and Dunn had multiple opportunities to plead a claim for attorneys' fees. Thus, DDR and Dunn failed to raise entitlement to attorneys' fees in any pleading, as defined by Stockman and Green, and any claim they may have had was waived. See Sardon Found. v. New Horizons Serv. Dogs, Inc., 852 So. 2d 416, 421 (Fla. 5th DCA 2003).
  
  Further, pursuant to Stockman and Green, the purpose of the pleading requirement is notice. By pleading entitlement to attorneys' fees, the claimant puts the opposing party on notice, thereby preventing unfair surprise. Sardon Found., 852 So. 2d at 421. "The existence or nonexistence of a claim for attorney's fees may often affect the decision whether to pursue, dismiss or settle a claim. For these reasons, a party may not recover attorney's fees unless he has put the issue into play by filing a pleading seeking fees." Id.
  
  Here, not only did DDR and Dunn fail to plead entitlement, their "Notice of Intent" failed to satisfy the purpose behind the pleading requirement. The issue of DDR and Dunn's entitlement to attorneys' fees was not raised until the final hearing on BMR's motion for deficiency judgment was well underway and the foreclosure proceedings were complete. Not only was BMR deprived of any meaningful opportunity to consider whether to proceed with the deficiency judgment in light of possibly being assessed attorneys' fees, it was never put on notice of a potential claim for attorneys' fees during the pendency of the foreclosure action.
  
  Finally, DDR and Dunn urge this court to apply the exception to the pleading requirement recognized by the court in Stockman. "Where a party has notice that an opponent claims entitlement to attorney's fees, and by its conduct recognizes or acquiesces to that claim or otherwise fails to object to the failure to plead entitlement, that party waives any objection to the failure to plead a claim for attorney's fees."
  
  Stockman, 573 So. 2d at 838 (citing Brown v. Gardens by the Sea S. Condo. Ass'n, 424 So. 2d 181 (Fla. 4th DCA 1983); Mainlands of Tamarac by Gulf Unit No. Four Ass'n v. Morris, 388 So. 2d 226 (Fla. 2d DCA 1980)).
  
  DDR and Dunn argue that BMR failed to object to their "Notice of Intent" on the basis that such notice was not a pleading; however, the record conclusively establishes otherwise. BMR's written response to the "Notice of Intent," as well as its argument at the fee entitlement hearing, clearly relied upon the pleading requirement and Stockman in objecting to DDR and Dunn's entitlement to fees. BMR did not "recognize[ ] or acquiesce[ ] to that claim" for attorneys' fees. Stockman, 573 So. 2d at 838.
  
  Accordingly, the final judgment awarding attorneys' fees to DDR and Dunn is reversed.

(3) See Pleading Requirements for a Claim for Attorneys' Fees for an old (July/August, 2000) article in The Florida Bar Journal that may be of some value in providing guidance to lawyers in requesting court-ordered, prevailing party attorneys fees from losing defendants (ie. lenders, servicers, etc.).