Lender Not Liable for Attorney Fees if Case Dismissed for Lack of Standing

The Fourth District Court of Appeals (“DCA”) recently held a borrower was not entitled to attorneys’ fees pursuant to the Florida Statute that permits prevailing party attorney fees even though she successfully defended a foreclosure action based on the bank’s lack of standing. Nationstar Mortg. LLC v. Glass, 42 Fla. L. Weekly D815 (Fla. 4th DCA April 12, 2017). The rule in Florida is that a court can only award attorneys’ fees to a prevailing party “when authorized by contract or statute.” In Florida, notes and mortgages typically include standard attorney fee provisions entitling a prevailing party to collect attorneys’ fees if a lawsuit is filed to enforce the terms of the note and/or mortgage.

In Glass, the bank filed a foreclosure action against the borrower. The borrower successfully moved to dismiss the bank’s amended complaint based on alleged lack of standing. The bank initially appealed the order of dismissal, but for unstated reasons, voluntarily dismissed its appeal. The borrower moved for appellate attorneys’ fees and costs as the prevailing party based on the attorney fee provisions in the note and mortgage and Florida Statute 57.105(7) which reads: “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.”

Despite the fact the borrower clearly was the prevailing party in Glass and despite the reciprocal fee provisions contained in the note and mortgage, the Fourth DCA denied the borrower an award of attorneys’ fees. On the issue of entitlement to attorney fees, the Court found (i) the movant must be the prevailing party, and (ii) a party seeking fees must prove both they and the party against whom they are seeking fees are parties to the contract containing the fee provision, here, the note and mortgage. By accepting the borrower’s argument that the bank lacked standing, the Court concluded the borrower could not satisfy the second requirement.

The Court succinctly explained:

Simply put, to be entitled to fees pursuant to the reciprocity provision of section 57.105(7), the movant must establish that the parties to the suit are also parties to the contract containing the fee provision. A party that prevails on its argument that dismissal is required because the plaintiff lacks standing pursuant to the contract sued upon cannot satisfy that requirement.

By establishing the bank lacked standing to bring the lawsuit, the borrower established the bank was not a proper party to the lawsuit. This holding is obviously favorable to the bank; however, it only applies if the bank’s foreclosure was unsuccessful due to lack of standing, which under Florida law can generally be cured in a subsequent action.