The District Court of Appeal of the State of Florida, Fifth District, recently reversed a trial court’s award of over $20,000 in attorney’s fees to the borrowers based on the mortgage’s prevailing party attorney’s fee provision, holding there was no legal basis for the award.
A copy of the opinion is available at: http://www.5dca.org/Opinions/Opin2015/030915/5D14-1649.op.pdf
The mortgagee sued to foreclose its mortgage and, in response, the borrowers moved to strike the bank’s pleadings and for sanctions on the basis that their signatures on the mortgage were allegedly forged. The trial court held an evidentiary hearing and granted the borrowers’ motion, struck the bank’s pleadings with prejudice, and found the borrowers were entitled to an award of attorney’s fees at an amount to be determined at a later date.
After some convoluted motion practice, a second senior circuit judge entered an order awarding over $20,000 in attorney’s fees to the borrowers, and eventually referred the case back to the first judge.
As you may recall, many mortgage instruments – including the one at issue in this case – contain a provision requiring payment by the mortgagor of reasonable attorneys’ fees incurred for the purpose of enforcing and protecting the mortgagee’s rights under the mortgage.
In addition, 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.
The mortgagee here appealed the award, arguing that the borrowers were not entitled to recover attorney’s fees. The appellate court agreed, and reversed the lower court’s orders to the extent they determined the issue of attorney’s fees in favor of the borrowers.
In support of its ruling, the appellate court first reasoned that no contractual basis existed for the fee award because, even though the mortgage contained a prevailing party fee provision, the trial court found that the borrowers’ signatures were forgeries and, as a result, the forged document was void and unenforceable and no legal obligations were created between the parties.
Next, the appellate court held there was no statutory basis for the fee award.
Although borrowers cited section 57.105, Florida Statutes in their first motion for attorney’s fees, the court questioned whether it applied to a contract that never came into existence, but then held that the borrowers had abandoned this argument in their second motion for attorney’s fees, which withdrew the first motion and was based on first trial judge’s initial order granting the borrowers’ motion to strike and for sanctions.
Finally, the appellate court analyzed and rejected the last basis under Florida law for an award of fees, the “inequitable conduct doctrine.”
The appellate court reasoned that under Florida Supreme Court precedent, a fee award based on the doctrine must contain express findings of bad faith conduct and detailed factual findings describing the specific acts of bad faith conduct that caused attorney’s fees to be incurred unnecessarily.
Because the trial court had specifically found mortgagee’s counsel did not commit any unethical conduct and refused to impose sanctions against the mortgagee, the award of fees was inappropriate under the inequitable conduct doctrine.
Ralph T. Wutscher
McGinnis Wutscher LLP
The Loop Center Building
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Email: rwutscher@mwbllp.com
Admitted to practice law in Illinois
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