The Florida Supreme Court rang in the New Year by casting a blow to lenders and loan servicers in Florida seeking to avoid the entry of attorneys’ fees judgments in borrowers’ favors where the borrowers successfully argued the plaintiff lacked standing to foreclose. On December 31, 2020, the court issued its opinion in Page v. Deutsche Bank Tr. Co. Americas. In its opinion, the court reversed the Fourth District Court of Appeal’s decision reversing an order and judgment entered by the Circuit Court for the 17th Judicial Circuit in and for Broward County, Florida. The Fourth DCA had previously granted the borrower’s motion for attorneys’ fees entered following an involuntary dismissal of the lender’s foreclosure action based on the bank’s inability to prove standing at the time the complaint was filed. The Fourth DCA held in its en banc unanimous decision that “[i]f the borrower prevails on its ‘lack of standing’ defense, it cannot rely on the contract to obtain attorney’s fees,” adhering to the court’s prior precedent in Nationstar Mortg. LLC v. Glass.
The Fourth DCA certified conflict with the Fifth District Court of Appeal’s decision in Madl v. Wells Fargo Bank, N.A. and the Second District Court of Appeal’s decision in Harris v. Bank of New York Mellon. In both decisions, the courts held a borrower who prevails on a lack of standing defense can be awarded attorneys’ fees under Section 57.105(7), Florida Statutes, if they otherwise establish that the plaintiff became subject to the unilateral fee provision in the subject mortgage.
In the end, the Florida Supreme Court quashed the Fourth DCA’s opinion in Page and approved of the decisions in Madl and Harris. In reaching its decision, the court heavily relied on the statutory language of Section 57.105(7), which provides, in pertinent part, “[i]f 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…with respect to the contract.” The court noted the two distinct clauses in the statute and that both must be satisfied before fees may be awarded. The first clause requires the existence of a contract that contains an attorneys’ fees provision when a party is required to take any action to enforce the contract. While the second clause requires that the plaintiff and defendant not be strangers to the contract, the second clause of Section 57.105(7) is what the Madl, Harris, and Page decisions turned on.
The court held the record established that the borrower and the bank were not strangers to the mortgage, citing the fact that the bank claimed the right to enforce the mortgage, sought to be awarded fees based under the mortgage, and, at some point, succeeded to the rights of the originating lender, since the plaintiff in Page successfully proved its standing to foreclose at trial. The court distinguished that dismissal predicated on the bank’s failure to produce proof that it possessed the right to enforce the mortgage at the time the complaint was filed, as in Page, “is not an adjudication ‘that no contractual relationship existed between the parties’…Nor is it an adjudication that the contract was nonexistent.” Indeed, the court explicitly noted to the extent the Fourth DCA read Section 57.105(7) to require contract enforceability by both parties on the day suit is filed, the court erroneously added words to the statute, which were not placed there by the Legislature. This holding ultimately drew the death knell for the Fourth DCA’s decisions in Page and Glass.
Based on the Florida Supreme Court’s decision, it is incumbent on lenders to take into consideration borrowers’ ability to recover prevailing party attorneys’ fees when lack of standing is pled as a defense to a foreclosure claim. Lenders should conduct a more thorough review of foreclosure complaints with a specific focus on standing prior to filing. In addition, lenders should take into consideration a borrower’s claim for fees when determining appropriate settlement terms or choosing to proceed with trial.