The District Court of Appeal of the State of Florida, Third District, recently reversed an award of attorney's fees to a borrower pursuant to section 57.105, Florida Statutes, holding that because the borrower prevailed on her argument that the foreclosing mortgagee lacked standing to enforce the note and mortgage, there was no contract between the parties, and therefore the borrower could not invoke the attorney's fees reciprocity provision of the statute.
A copy of the opinion is available at: Link to Opinion
The borrower signed a note and mortgage in 2007. The mortgage contained a provision that the lender would be entitled to recover its attorney's fees and costs in enforcing the note and mortgage.
The note contained a special endorsement from the original lender to a national bank, "its successors and/or assigns without recourse." An asset securitization trust mortgagee sued to foreclose in 2009, alleging that it was the holder of the note and mortgage and was thus entitled to enforce the same.
The borrower answered, raising the affirmative defense that the mortgagee lacked standing "because the note was specially indorsed to an entity other than the [mortgagee], and that the [mortgagee] was not the lawful assignee of the note and mortgage." She requested attorney's fees "pursuant to the terms of the agreement between the parties and Florida Statutes, Section 57.105."
As you may recall, under the "reciprocity provision" in subsection 57.105(7), if there is a contract between the parties that entitles one side to recover fees as prevailing party, it is deemed reciprocal in order that if the other side wins, the other side can recover its reasonable attorney's fees.
The case went to trial and the trial court found that the mortgagee lacked standing because there was no evidence of an assignment of the mortgage from the original lender to the mortgagee, and entered judgment in the borrower's favor. The trial court also found that the note was never delivered to the mortgagee and, thus, it never became the holder of the note with the right to enforce it. Finally, the trial court found that the mortgagee was not a non-holder in possession entitled to enforce the note under section 673.3011(1), Florida Statutes, such that the mortgagee could not enforce the note, and reserved jurisdiction to award attorney's fees and costs.
The borrower filed a motion for attorney's fees, arguing that she was entitled to recover them as prevailing party based on the loan documents and subsection 57.105(7), Florida Statutes. In opposition, the mortgagee argued that because it was not a party to the note and mortgage there was no contractual or statutory basis to award fees.
After an evidentiary hearing, the trial court rejected the mortgagee's argument and awarded $41,120.01 in attorney's fees, prejudgment interest and expert witness fees. The mortgagee appealed.
The Third District began it analysis by reiterated the settled principle that Florida follows the "so-called American Rule," under which "attorney's fees may not be awarded unless authorized by contract or statute."
The Court explained that "[b]ecause section 57.105(7) shifts responsibility or attorney's fees, it is in derogation of the common law and must be strictly construed. … The effect of [this section] is to statutorily transform a unilateral attorney's fees contract provision into a reciprocal provision."
However, the Court went on, the statute does not apply where no contract exists between the parties, citing earlier rulings from the Fourth and Fifth District Courts of Appeal.
Because only the parties to a contract can avail themselves of the reciprocity provision in subsection 57.105(7), and because the trial court expressly found that the mortgagee lacked standing because there was no assignment of the mortgage to it and could not enforce the note, the Third District held that the trial court erred in awarding attorney's fees to the borrower "based on a non-existent contract between the parties."
Accordingly, the trial court's order awarding fees was reversed and the case remanded.
Ralph T. Wutscher
Maurice Wutscher LLP
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