Van Ness Attorneys

Mortgage Reformation Not Tied to Attorney’s Fees

Whether to seek reformation of a mortgage may be a question of strategy. If reformation is not required and may be difficult to prove, servicers may be wary of seeking relief because of the potential for attorney’s fees in the event that the servicer fails to prove the reformation issue. The Fourth District Court of Appeal appears to have made the decision simpler. Servicers may seek reformation without fear that a judgment of foreclosure without reformation will have a negative impact in terms of attorney’s fees.

In Deutsche Bank Nat’l Trust Co. v. Quintela, No. 4D17-873 (Fla. 4th DCA Mar. 27, 2019), the court held that a count to reform a mortgage does not carry the weight of potential attorney’s fees. The court elucidated two primary reasons for this holding.

First, the court held that reformation was outside of the permissible parameters of attorney’s fees under section 57.105(7), Florida Statutes because reformation is not a contractual remedy. The fees’ provision in the mortgage clearly states that plaintiffs are entitled to collect all expenses incurred “in pursuing the remedies provided in this Section 22….” (Emphasis supplied.) Because reformation of the mortgage is not a remedy contemplated within section 22 of the mortgage, defense of reformation is not a ground for recovery of bilateral attorney’s fees.

Secondly, the court determined that reformation of the mortgage is not a significant issue in the litigation. The trial court entered judgment in favor of plaintiff on the foreclosure count despite the fact that the equitable relief of reformation was not provided. Inasmuch as the wont of reformation was not an impediment to foreclosure, it was not a “significant issue” for purposes of determining fees.

The opinion in Quintela may aid servicers in deciding whether to pursue a reformation that may be difficult to prove. Because reformation is not a contemplated remedy in the standard form mortgage and because reformation is not a significant issue in a case in which a foreclosure judgment is ultimately entered, the possibility of an adverse fees award should not deter a servicer from seeking reformation. Also, it is noteworthy that the court examined the scope of section 22 of the mortgage because that may limit other avenues of fees for borrowers and their counsel in the future.