Tuesday, March 24, 2015

FYI: Fla App Ct (4th DCA) Holds Voluntary Dismissal of Foreclosure Does Not Necessarily Make Borrower "Prevailing Party" Entitled to Atty Fees

The District Court of Appeal of the State of Florida, Fourth District, recently held that, where neither party substantively prevails in litigation, then neither party can be viewed as a prevailing party for the purpose of recovering attorney’s fees under a contractual attorney’s fees provision made reciprocal under section 57.105(7), Florida Statutes. 


The appellate court reached this conclusion because the short sale agreement between the parties, which led to the mortgagee’s voluntary dismissal, resulted in both the mortgagor losing his home and recovering none of the proceeds of the sale, as well as the mortgagee recovering less than 25% of the full amount claimed in the foreclosure.


A copy of the opinion is available at: http://www.4dca.org/opinions/March%202015/03-18-15/4D14-2359.Rehearing.pdf


Here, a mortgagor appealed a trial court’s order denying his motion for attorney’s fees as the purported prevailing party in a foreclosure action.  His position was that because the mortgagee voluntarily dismissed the foreclosure, he prevailed in the litigation and was entitled to attorney’s fees under the contractual provision in the mortgage made reciprocal under section 57.105(7), Florida Statutes.


By way of background, the mortgagee filed a foreclosure against the mortgagor as he was in default.  The mortgagor answered and further invoked Fla. Stat § 57.105, which he asserted would entitle him to recover his incurred fees in the event he prevailed in the case.


Final summary judgment was ultimately entered in the mortgagee’s favor, nut during the mortgagor’s appeal of the judgment, the property was the subject of a short sale to a third party.  Because of this, the mortgagee “moved to cancel the foreclosure sale, vacate the summary judgment, dismiss the action and return the original note and mortgage, which the trial court granted.”  However, neither party requested the appellate court dismiss the mortgagor’s appeal of the final summary judgment before dismissing the action in the trial court.


Thereafter, over a year following the short sale, the appellate court reversed the final summary judgment and remanded the case.  On remand, the mortgagor moved for attorney’s fees, “arguing that he was the prevailing party in the case and entitled to fees[.]”  However, the trial court denied his motion for attorney’s fees.  The mortgagor then filed the instant appeal.


Initially, the appellate court noted that the mortgagor’s request for fees in his answer was “sufficient to place [the mortgagee] on notice of [the mortgagor’s] intent to seek attorneys’ fees in the action.”  The appellate court also deemed the mortgagee’s attempt to voluntarily dismiss the trial court litigation during the appellate review of the final summary judgment to have been a nullity, and that it did not factor in their analysis.


Under Fla. Stat. § 57.105(7):


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.


In addition, under this stature, “[a] plaintiff’s voluntary dismissal makes a defendant the ‘prevailing party’ within the meaning of [the statute], even if the plaintiff refiles the case and prevails.”  Mihalyi v. LaSalle Bank, N.A., 39 Fla. L. Weekly D2269 (Fla. 4th DCA Oct 29, 2014). 


However, “it is [the] results, not [the] procedure, which govern the determination of which party prevailed for purposes of awarding attorney’s fees[.]”  Tubbs v. Mechanik Nuccio Hearne & Wester, P.A. 125 So. 3d 1034 (Fla. 2d DCA 2013). 


Here, the appellate court noted that “upon voluntary dismissal after execution of the short sale agreement, [the mortgagor] lost his home and received none of the proceeds of the sale of the property, yet the amount [the mortgagee] received from the short sale constituted less than 25% of the amount claimed prior to the voluntary dismissal.” 


Because of this, the appellate court opined that “the conclusion that neither of the parties achieved their litigation objectives in [this foreclosure] case is inescapable.”


Therefore, as “the purpose of section 57.105 is to deter misuse of the judicial system and discourage needless litigation,” the appellate court declined to hold the mortgagee responsible for paying the mortgagor’s attorney’s fees and affirmed the trial court’s order denying the mortgagor’s motion for attorney’s fees.






Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@mwbllp.com


Admitted to practice law in Illinois



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