Florida Supreme Court Finds Attorneys Fees Available To Mortgagor Even If Bank Lacked Standing To Foreclose

FLORIDA SUPREME COURT FINDS ATTORNEYS’ FEES AVAILABLE TO MORTGAGOR EVEN IF BANK LACKED STANDING TO FORECLOSE

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Last month, in a highly anticipated decision from the Florida Supreme Court, the Court found borrower Terri Page was entitled to attorneys’ fees against her lender (“Deutsche Bank” or “the Bank”) even though Page successfully established at trial that the Bank lacked standing to foreclose. Page v. Deutsche Bank Tr. Co. Americas, SC19-1137i. In Page, the Florida Supreme Court accepted jurisdiction to review the Fourth DCA’s opinion in Deutsche Bank Tr. Co. Americas v. Pageii because that decision created a direct conflict between the Florida District Courts of Appeal.iii

In Deutsche v. Page, the bank filed a foreclosure complaint against Page but failed to attach an endorsed copy of the note to its complaint.iv The Bank later filed a copy of the note which contained three endorsements but failed to prove at trial that those endorsements were placed on the note prior to filing the complaint. The trial court found the endorsed note established the Bank’s standing at the time of trial; however, the evidence presented at trial failed to prove the Bank had standing at the inception of the case.v The court granted Page’s motion for involuntary dismissal and after the Bank unsuccessfully appealed that order the trial court entered a final judgment in favor of Page that included an award of attorneys’ fees.vi The Bank then appealed to the Fourth DCA that portion of the judgment which awarded attorney fees.

The Fourth DCA reversed Page’s fee award reasoning that a borrower who prevailed on a “‘lack of standing’ defense…cannot rely on the [mortgage] contract to obtain attorney’s fees…”vii The DCA bluntly concluded that “NO STANDING = NO ATTORNEY’S FEES…”viii The Fourth explicitly rejected the Second and Fifth’s contrary findings in Harris and Madl refusing to “go down [the] rabbit hole” of relying only on “the existence of a contract between the bank and the borrower…”ix Page then appealed the Fourth DCA’s decision to reverse her fee award.

The Florida Supreme Court accepted jurisdiction to review Deutsche v. Page based on the inter-district conflict between the Second, Fourth and Fifth districts. The Court started and ended its analysis by looking at the plain language of § 57.105(7)x which provides for attorneys’ fees to either party to a contract if (1) the contract contains a fee provision and (2) the party seeking fees prevailed in the “action with respect to the contract.”xi There was no dispute the Page mortgage and note contained the requisite fee provision; however, the Fourth DCA found that since Deutsche Bank did not prove its standing at the inception of the case it was a “stranger to the contract” so a fee award could not be entered against it.

The Florida Supreme Court rejected this conclusion reasoning that dismissal of the foreclosure based on “failure of proof [of standing] is not an adjudication ‘that no contractual relationship existed between the parties…or that the contract was nonexistent.” The Court found the note, mortgage, and Deutsche Bank’s evidence of standing at trial “established the contractual relationship” between Page and the Bank. The Court further surmised that Page was the prevailing party because she successfully defended against the foreclosure action brought by the Bank. The Court concluded that nothing more was required to satisfy the two prongs of §57.105(7) so Page was entitled to fees under the statute.

The Court rejected the Fourth’s ostensible application of the doctrine of judicial estoppel finding the doctrine inapplicablexii. The Court explained that judicial estoppel was an equitable doctrine and the equities weighed in favor of Page and against the Bank “wasting judicial resources” and harming defendants by filing claims before properly investigating and verifying it could prove those claims. More importantly, the Court noted Page’s position that the Bank failed to prove its standing was not inconsistent with her request for fees because “there was no adjudication that the note and mortgage never existed or that the Bank never acquired the right to enforce the note and mortgage.” “The Bank simply failed to carry its burden…” on the issue of its holder status.

The Court concluded that Page met both of the statutory requirements of § 57.105(7) so she was entitled to her attorneys’ fees pursuant to the reciprocity provision of § 57.105. The Court quashed Page and approved Madl and Harris. This ruling, although anticipated, clarifies an important contractual distinction. Thankfully, its application is easily avoided by pre-suit procedures wherein the original note is located, and the bank’s standing established at the inception of the case through any necessary assignments, endorsements or other evidence.

i In this article all citations to “Page” are to this Florida Supreme Court decision.

ii Deutsche Bank Tr. Co. Americas v. Page, 274 So. 3d 1116, 1117 (Fla. 4th DCA 2019), review granted, SC19-1137, 2019 WL 6271587 (Fla. Nov. 25, 2019), and decision quashed, SC19-1137, 2020 WL 7778183 (Fla. Dec. 31, 2020). In this article all citations to “Deutsche v. Page” are to the Fourth DCA’s decision.

iii Page, at *1. Specifically, the Page decision conflicted with the Second and Fifth districts’ decisions in Harris v. Bank of New York Mellon, 44 Fla. L. Weekly D141 (Fla. 2d DCA Dec. 28, 2018) and Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134, 1135 (Fla. 5th DCA 2017) where both courts concluded that the borrower(s) were entitled to attorneys’ fees even though they successfully argued their lender lacked standing to foreclose.

iv Page, at *1.

v Page, at *1, 5. Interestingly, the Supreme Court included a footnote wherein it referenced the rule that “failure to establish standing at the inception of the foreclosure action cannot be cured by establishing standing subsequently in the litigation…” Page, at *6. Ultimately, the Court declined to address the “soundness” of that rule because it was not at issue in the case; however, the footnote could be interpreted to invite litigation on whether a party can cure a defect in standing at the inception of the case by establishing its standing at or before trial. We anticipate more litigation to follow on this issue.

vi Page, at *2.

vii Page, at *2.

viii Page, at *2-3.

ix Page, at *2.

x § 57.105, Fla. Stat. Ann.

xi Page, at *5. All references, citations and quotations to Page hereafter are to this cite until indicated otherwise.

xii The Fourth argued that judicial estoppel prevented Page from relying on her lack of standing argument to defeat the foreclosure while “taking the supposedly inconsistent position of ‘relying on the contract to obtain attorney’s fees.’” The Fourth DCA reasoned it was inequitable for Page “to have it both ways.”