In the event that the borrower prevails in a foreclosure case, servicers need to minimize their exposure to prevailing party attorney’s fees. One strategy is, if applicable, using the “standing” defense premised on the fact if the plaintiff did not have standing to foreclose, they cannot in turn use the mortgage agreement fee provision(s) against them.
The above standing argument is developing and has been tested in a number of appellate actions, one of which had reached the Florida Supreme Court. At the district court of appeal level in Nationstar v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2019), the court had agreed with the servicer and found that the borrower’s having prevailed on standing meant they was no privity of contract and they were estopped from claiming they were entitled to contractual attorney’s fees.
The case went up to the Florida Supreme Court as Glass v. Nationstar Mortg., LLC, Case No. SC17-1387 (Fla. Jan. 4, 2019). The Court reversed the district court of appeal reasoning that the contract may have been unenforceable as opposed to being nonexistent between the parties. This opinion led to a rush to distinguish the facts at issue in multiple trial and appellate cases throughout the state.
However, the Florida Supreme Court had revisited its opinion. Today, April 18, 2019, the Florida Supreme Court announced that its opinion is withdrawn and a substitute opinion would stand in its place. That substitute opinion expresses the Court “initially accepted review of the decision of the Fourth District Court of Appeal in Nationstar Mortgage LLC v. Glass, 219 So. 3d 896 (Fla. 4th DCA 2017), based on express and direct conflict….” The Court then explains that, “Upon further consideration, we conclude that jurisdiction was improvidently granted.”
Inasmuch as there was no conflict jurisdiction for the review, the Court dismissed the proceeding. Because the original opinion was substituted with a dismissal for lack of jurisdiction, there is no longer a Florida Supreme Court decision of the matter. The original district court opinion in Glass may once again be relied on as authority. Servicers should note that the arguments advanced by the Florida Supreme Court in its January opinion have not been found invalid; instead, the Court has provided that it should not have issued its opinion in this case. In the future, the Court may in fact find that it has jurisdiction to issue a substantially similar opinion, once again causing greater uncertainty with regard to fee liability.
Admissibility is a key question in foreclosure cases. Authenticating documents for admission may complicate a plaintiff’s ability to prevail at trial. The Second District Court of Appeal has explained that loan modification agreements and various other documents are self-authenticating, thus easing the process of admission.
In foreclosure trials, the plaintiff is normally correct about most of the facts: “There is a note.” “The borrower signed a mortgage.” “The borrower breached by failing to make required payments.” “A breach letter was sent.” “The payment history and related documents reflect the amounts due and owing under the terms of the note and mortgage.”
Apart from the muddled issue of standing, the key issue in a case is normally focused on whether the servicer’s documentary evidence is admitted by the court. Admissibility involves two questions: Is the document authentic? Is the document admissible? Each question is equally important.
Authentication or identification requires that a party present sufficient evidence to support a finding that the matter in question is what its proponent claims. However, documents which are self- authenticating are not subject to this rule. While it has been understood that certain documents, including the note, are “self-authenticating” within the meaning of section 90.902, Florida Statutes, the scope of documents subject to the self-authentication rule has been less clear.
In Wells Fargo Bank, N.A. v. Quest Systems, LLC, 2D17-1184 (Fla. 2d DCA Apr. 3, 2019), the court clarified this issue. The court highlighted the fact that the statute provides that all documents “relating to” commercial paper are self-authenticating. Based on this proposition, the court found that a loan modification agreement, being related to the note, was self-authenticating. Other documents that relate to the note may be similarly self-authenticating, removing one of the barriers to admission of the evidence and, thus, judgment in favor of plaintiff.
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.