201901.07
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THE FLORIDA SUPREME COURT FINDS BASIS FOR ATTORNEY FEE AWARD IN FAVOR OF MORTGAGOR DESPITE BANK’S OSTENSIBLE LACK OF STANDING

The Florida Supreme Court issued a written opinion on January 4, 2019 which addressed a mortgagor’s entitlement to prevailing party attorney’s fees in the context of an unsuccessful foreclosure action. Glass v. Nationstar Mort. LLC. Nationstar held a reverse mortgage and initiated foreclosure proceedings “due to non-payment of taxes and/or insurance on the property.” After two amendments to the complaint, the mortgagor (“Glass”) successfully moved to dismiss Nationstar’s foreclosure complaint with prejudice. Notably, Glass’ motion to dismiss contained four grounds for dismissal but the trial court did not indicate the specific basis for dismissal in its order.

After the dismissal, Glass moved for attorney’s fees as the prevailing party in the mortgage foreclosure suit. Nationstar appealed the order of dismissal to the Fourth DCA, but then voluntarily dismissed the appeal “after briefing” but before the Fourth DCA rendered a decision. Glass then moved for appellate attorney’s fees which the Fourth DCA denied. In its order denying fees the Fourth DCA stated that Glass could not “take advantage of a fee provision” contained in a mortgage contract which the plaintiff lacked the right to enforce. Glass appealed this holding to the Florida Supreme Court.  

The Florida Supreme Court accepted jurisdiction and noted the issue in the case was the mortgagor’s “entitlement to appellate attorney’s fees…after a bank files a notice of voluntary dismissal in the district court of appeal.” The Court concluded Glass was entitled to fees as the prevailing party on appeal since Nationstar voluntarily dismissed the appeal but also “because Nationstar maintained its right to enforce the reverse mortgage contract in its appeal until the dismissal.” The Court quashed the Fourth DCA’s decision explaining it mischaracterized the procedural history of the case and misstated the lower court’s ruling.

The Court explained the Fourth DCA improperly focused on the dismissal of the complaint for lack of standing by the trial court instead of the “entitlement to appellate attorney’s fees based on the voluntary dismissal [of the appeal]” by Nationstar. The Court elaborated:

“This reasoning both misstates the basis of the trial court’s ruling on Glass’s motion for dismissal and fails to address Glass’s motion for appellate attorney’s fees based on the voluntary dismissal.”

The Court then discussed the four grounds Glass raised in her motion to dismiss and pointed out the that trial court did not provide a basis for its decision, so it was “inaccurate to state that Glass was successful only for demonstrating that Nationstar lacked standing.” The Court went further: “Even if the trial court’s dismissal was based on lack of standing, it was not based on a finding that Nationstar did not hold the note …” Instead, it was based on a finding that “Nationstar’s complaint was legally insufficient for failure to properly demonstrate the chain of title” to the note and mortgage. Importantly, the Court distinguished, but did not overrule Bank of New York Mellon Trust Co. v. Fitzgerald on this ground.

In Fitzgerald, the Third DCA refused to grant attorney’s fees to the mortgagor despite the fact she obtained judgment based on the bank’s lack of standing. However, in Fitzgerald the Third DCA specifically found that “no contract existed between the Bank and Fitzgerald that would allow Fitzgerald to invoke the reciprocity provisions of section 57.105(7)” which provision can create entitlement to attorney fees. The Court in Glass pointed out that the Fourth DCA made no such findings.

The Glass Court then went into a detailed discussion regarding attorneys’ fees noting the rule is that “attorney fees may be awarded by a court only when authorized by statute or by agreement of the parties.”  The Court then clarified, however, that:

attorney’s fees may be recovered under a prevailing-party attorney’s fee provision…even though the contract is rescinded or held to be unenforceable.

The Court finally concluded that a reverse mortgage contract “clearly existed between Glass and Countrywide Mortgage Company…” and “…was merely unenforceable by Nationstar because it failed to demonstrate that it was the rightful successor in interest.” Although a troubling decision for the mortgage industry, there are limits to the Glass holding. Firstly, possession of the original negotiated note at the time of filing the complaint eliminates any basis for dismissal or an adverse judgment based on lack of standing. Secondly, if the bank’s foreclosure is unsuccessful based on lack of standing, the bank can still argue (perhaps counter-intuitively) that no contract existed between the plaintiff and the mortgagor. Admittedly, this latter issue will likely be the subject of future litigation.