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Fla. App. Court (5th DCA) Holds Mortgagee Without Standing Must Pay Prevailing Borrower’s Fees

The District Court of Appeal for the Fifth District of Florida recently denied a motion to reconsider an order awarding appellate attorney’s fees to borrowers who were the prevailing party on appeal, reversing judgment of foreclosure entered in favor of the mortgagee.

Distinguishing contrary rulings from a different Florida appellate court, the Court upheld its prior order awarding the borrowers attorney’s fees pursuant to Fla. Stat. Section 57.105 and the terms of the subject mortgage, despite its conclusion that the mortgagee lacked standing when it filed the foreclosure complaint, as the mortgagee nonetheless was a party to the mortgage contract by virtue of an assignment and indorsement of the mortgage and note.

A copy of the opinion in Madl v. Wells Fargo Bank is available at:  Link to Opinion.

Two borrowers appealed a judgment of foreclosure entered by a trial court in favor of a mortgagee that alleged it was the holder of a promissory note executed by the borrowers (the “note”) and secured by a mortgage to real property (the “subject mortgage”).

On appeal, the Court concluded that the mortgagee lacked standing when it filed suit, and failed to prove that it or anyone acting on its behalf provided the borrowers with notice of default and intent to accelerate.

Accordingly, because of the mortgagee’s lack of standing, along with its failure to prove compliance with a condition precedent, the Appellate Court reversed the judgment in favor of the mortgagee and instructed the trial court to involuntarily dismiss the case. Thus, the borrower appellants were prevailing parties.

Like most mortgages, the subject mortgage at issue provided that only the lender is entitled to recover its litigation and appellate attorney’s fees incurred in successful collection or foreclosure actions. However, by operation of law, Fla. Stat. Section 57.105(7) transforms a unilateral right into a reciprocal right so that all parties to the contract are entitled to recover attorney’s fees upon prevailing. HFC Collection Ctr., Inc. v. Alexander, 190 So. 3d 1114, 1116 (Fla. 5th DCA 2016); see also Fla. Cmty. Bank v. Red Rd. Residential, LLC, 197 So. 3d 1112, 1115 (Fla. 3d DCA 2016) (“[B]y operation of law, section 57.105(7) bestows on the other party to the contract [—the borrower—] the same entitlement to prevailing party fees.”).

In order to obtain prevailing party fees pursuant to section 57.105(7), the moving party must prove three requirements: 1) the contract provides for prevailing party fees, 2) both the movant and opponent are parties to that contract, and 3) the movant prevailed. See Nationstar Mortg. LLC v. Glass, 219 So. 3d 896, 898 (Fla. 4th DCA 2017) (en banc); Fla. Cmty. Bank, 197 So. 3d at 1115.

Here, because the subject mortgage contained the prevailing party fee provisions, the mortgagee was joined as a party to the subject mortgage contract by virtue of an assignment of the subject mortgage and indorsement of the note, and the borrowers prevailed on appeal.  Therefore, the Court awarded the borrowers their attorney’s fees and expenses on appeal.

The mortgagee moved for rehearing, certification of conflict, and reconsideration of the order awarding the borrowers their appellate fees.

On rehearing, the Appellate Court acknowledged that section 57.105(7) cannot support an award of fees in favor of parties who are strangers to the contract or where a contract never existed, nor can it be employed to impose fees on a non-party to the contract.  See Fla. Cmty. Bank, 197 So. 3d at 1115 (defendant whose signature was forged on mortgage cannot recover fees; not party to the contract); Bank of N.Y. Mellon v. Mestre, 159 So. 3d 953, 956–57 (Fla. 5th DCA 2015) (defendants not entitled to fees where their signatures were forged on mortgage being foreclosed because not parties to contract); Bank of N.Y. Mellon Tr. Co. v. Fitzgerald, 215 So. 3d 116, 121 (Fla. 3d DCA 2017) (defendant borrowers not entitled to fees under section 57.105(7) after proving mortgage never assigned and note never delivered to plaintiff); HFC Collection Ctr., Inc., 190 So. 3d at 1117 (defendant not entitled to fees under section 57.105(7) after proving her credit card agreement and debt were never assigned to plaintiff).

On rehearing, the mortgagee cited recent decisions from the District Court of Appeal of the State of Florida, Fourth District to support its proposition that its lack of standing automatically precluded application of Fla. Stat. section 57.105(7).

In Nationstar Mortg. LLC v. Glass, the Fourth DCA broadly stated that “[a] party that prevails on its argument that dismissal is required because the plaintiff lacked standing to sue upon the [mortgage] contract cannot recover fees based upon a [fee] provision in that same contract.” Glass, 219 So. 3d at 899.  A more recent decision from the Fourth DCA, Christiana Trust v. Rushlow, cited Glass in reversing the trial court’s award of attorney’s fees to the borrower defendant pursuant to section 57.105(7) after finding that plaintiff mortgagee lacked standing “both at the initiation of suit and at trial.” Christiana Trust v. Rushlow, 231 So. 3d 558, 559 (Fla. 4th DCA 2017).

However, the Court found Glass and Rushlow to be distinguishable from the facts at bar, as the Glass opinion did not disclose whether there was or was not any contractual relationship between those parties or whether the plaintiff had standing at the time of trial, and Rushlow appeared consistent with the aforementioned cases wherein section 57.105(7) did not apply because no contract existed between the parties.

Having concluded that both the borrower and mortgagee were contractual parties to the subject mortgage, the Court found no conflict between its decision and the Fourth DCA’s in Rushlow, and accordingly, denied the mortgagee’s motion for rehearing, certification and reconsideration.

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Christopher P. Hahn practices in Maurice Wutscher’s Commercial Litigation, Consumer Credit Litigation and Insurance Recovery and Advisory groups. Prior to joining Maurice Wutscher LLP, he served under the General Counsel at the Florida Office of Financial Regulation. He also obtained extensive experience litigating property insurance claims through all phases of discovery, motion practice and other pre-trial activities. Christopher obtained his Bachelor of Science degree in Business Administration from the University of Southern California, followed by his Juris Doctorate degree from the University of Miami School of Law. He is also a graduate of the University of Miami’s Masters of Business Administration program, completing his degree with an emphasis on finance and mergers and acquisitions.

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