Wednesday, July 06, 2016

Florida Appeals Court Stiffs Successful Foreclosure Defendant Out Of Court-Awarded Prevailing Party Legal Fees; Failure To Plead Appropriate Statute Sinks Request

From a post on law firm Shutts & Bowen, LLP's Florida Commercial Real Estate Litigation Blog:
  • Litigation is expensive. If you get sued, winning the case can still be a loss if you can’t recover your attorneys fees from the other side.

    Mortgages usually contain a “one-way” fee provision requiring the borrower to pay the lender’s fees if it wins the case, but not the other way around if the lender loses. But Florida has a law, F.S. 57.105(7), that permits courts to treat one-way fee provisions as reciprocal:

    “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. This subsection applies to any contract entered into on or after October 1, 1988.”

    While the cited language is permissive, not mandatory (the court” may,” not “shall” award fees to the other party), courts generally do award fees if the other party wins the case. So when a borrower wins a foreclosure case, he or she usually gets a judgment for attorneys fees against the losing lender.

    But what happens when a defendant (here, the wife) claims she didn’t sign the note or mortgage? If she wins, can she still get her fees from the lender under the mortgage’s fee provision?

    According to a recent Florida appellate ruling, the answer is “No.” In Florida Community Bank, N.A. v. Red Road Residential, LLC, 41 FLW D1358a (Fla. 3rd DCA 2016), the lender sued a business and its husband-and-wife owners, who had purportedly mortgaged their property to secure the loan. But the wife denied signing the mortgage, arguing that it was fraudulent. After the lender dropped the wife from the suit, the trial court ordered the lender to pay her attorneys fees under the mortgage’s prevailing party fee provision.

    On appeal, the Third District Court of Appeal reversed the wife’s fee award, explaining that because she won the case by claiming she wasn’t a party to the mortgage, she had no right to rely on that mortgage’s fee provision.

    The court noted there may be other possible ways to win a fee award under the right facts. But to get fees based on a one-way fee provision based on the reciprocal fee statute, F.S. 57.105(7), one must to be a party to the contract.(1)
Source: Sometimes even when the borrower wins, she still loses.

See also, Fighting Attorney Fee Demands for Dismissals in Florida for more on the traps facing successful foreclosure defendants in Florida when seeking court-awarded prevailing party legal fee awards.
(1) The Florida appeals court made this observation when reaching its conclusion that the prevailing foreclosure defendant was not entitled to an attorney fee award:
  • Our decision should not be construed to prevent a party sued on a contract from ever recovering prevailing party fees when the party's defense is that the defendant was not a party to the subject contract.

    Both Florida's offer of judgment/proposal for settlement scheme, codified in section 769.68 of the Florida Statutes and rule 1.442 of the Florida Rules of Civil Procedure, and the sanction provisions found in section 57.105, provide potential, substantive fee recovery mechanisms that might be applicable to a defendant asserting a non-party defense. Additionally, in a situation where a defendant unsuccessfully asserts that she is not a party to a contract, yet otherwise prevails in the action, section 57.105(7)'s reciprocity entitlement might be applicable.

    IV. Conclusion

    Only the parties to a contract may avail themselves of section 57.105(7)'s entitlement to attorney's fees. The burden lies with the prevailing party to establish, as a threshold matter, her status as a party to the contract. When, as here, a defendant employs a defense strategy premised on the defendant's status as a non-party to the contract, it is very difficult for the prevailing party to meet this burden and avail herself of section 57.105(7)'s reciprocity entitlement.
See also, HFC Collection Center, Inc. v. Stephanie Alexander, 2016 WL 1600324 (Fla. 5th DCA April 22, 2016). In Alexander, the court held that the borrower could not use Florida Statute §57.105(7) as a basis for an attorney's fees award after her counsel successfully proved that the plaintiff was not the assignee to the credit card agreement between the lender and the borrower. Since there was no contract between them, the borrower was estopped from relying on the contract to obtain an attorney's fee award based on the terms of the contract.

This holding can be used in a similar fashion with a mortgage. As discussed above, a mortgage typically has a clause allowing for the lender to recover attorneys' fees and costs. If the court, however, finds that a plaintiff failed to prove it has standing to foreclose a mortgage, a borrower should be estopped from seeking attorneys' fees and costs against a plaintiff based on that mortgage due to the lack of standing of the plaintiff. Reference: Fighting Attorney Fee Demands for Dismissals in Florida.

Links to this post:

Create a Link

<< Home