It is becoming increasingly clear that the voluntary dismissal of a case in which a foreclosure plaintiff lacks standing does more harm than good. A defendant in such a case may claim an entitlement to prevailing party attorney’s fees. Though it may sound illogical, under such circumstances it may make more sense for a plaintiff to take the case to trial and force the borrower to prevail on their argument regarding standing, as a means to prevent the borrower from accessing attorney’s fees.
In Florida, the ability of a borrower to recover attorney’s fees following the dismissal of a foreclosure case is an evolving concept. Florida law permits a borrower to take advantage of attorney’s fees provisions in notes and mortgages: section 57.105(7), Florida Statutes. Section 57.105(7) provides the following:
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. This subsection applies to any contract entered into on or after October 1, 1988.
Plaintiffs had argued that borrowers who claimed a foreclosure plaintiff lacked standing were incapable of access to this statute, because a plaintiff who lacks standing with respect to a note and mortgage is not a party to the note or mortgage. This argument gained traction, and courts began to explain that where there is no standing for a foreclosure plaintiff, there is no access to reciprocal fees for a borrower.
However, in Glass v. Nationstar Mortg., LLC, 2019 Fla. App. LEXIS 30; 2019 WL 98152; Case No. SC17-1387 (Fla. 2019), the Florida Supreme Court concluded that a voluntary dismissal renders the borrower a prevailing party and, in the absence of a defined ruling stating that the plaintiff lacks standing, there has been no demonstration that the plaintiff is not a party to the note or mortgage. The Fourth District Court of Appeal has carried this logic into Grosso v. HSBC Bank USA, N.A., No. 4D17-2874 (Fla. 4th DCA Feb. 6, 2019). In Grosso, the court distinguishes between voluntary dismissals without prejudice and involuntary dismissals:
In this case, HSBC voluntarily dismissed its complaint, thus rendering the homeowner the prevailing party for purposes of attorney’s fees. Notably, the trial court never made a judicial determination that HSBC or the homeowner was not a party to the contract. Additionally, HSBC maintained in its complaint a right to enforce the contract.
If it had been demonstrated that plaintiff lacked standing, there would have been room to argue that the borrower was not entitled to the reciprocal fees provision contained in section 57.105. In other words, forcing the borrower to have their day in court and prove their defense could have resulted in a better outcome for the plaintiff.
A new matter has come to our firm which is strikingly similar to another recent case we had. The borrowers are alleging fraud based on “new evidence” discovered after an expert reviewed the loan documents. In this case, an eight year old assignment from MERS was the allegedly fraudulent conveyance despite the fact judgment was entered three years earlier. They are attempting to vacate judgment and sanction all parties supported by an attorney expert affidavit(s). In the other case, a separate suit was filed by the borrowers for fraud based on allegedly forged loan documents (note, mortgage, etc.) after an expert review. This review was performed about four years after entry of judgment and they had lost their appeal. One would think the borrowers would have used that defense the first time around if they did not sign the loan documents. Our firm was successful in procuring dismissal of the latter claim, as well as sanctions against the borrowers by virtue of a 57.105 motion pursuant to the Florida Statutes. Both of these cases seem to be part of an emerging trend as the cases and attorneys are unrelated but the logic is unique. We have learned that other law firms have seen the same types of tactics recently with the use of post judgment expert review on cases already adjudicated.
Any legal practice area with sufficient volume goes through litigation trends. In foreclosure, there have been trends with regard to standing and conditions precedent, amongst other pleading rules and requirements. As the defense bar attempts to take various, new positions in foreclosure cases, precedent gets developed once trial court cases move through the appellate process.
This new trend is the attempted use of experts to overcome the doctrines of res judicata and estoppel by judgment. The process appears to be as follows: (1) the plaintiff files a complaint to enforce a note and foreclose a mortgage; (2) the borrower either does or does not defend the claim, but in any event does not endeavor to use expert testimony to claim that the note is inadmissible due to fraud; (3) the plaintiff proceeds to judgment in its favor; and (4) the borrower either moves to vacate the judgment or files an independent action for damages, premised on expert testimony that the note is in some way fraudulent. These actions by borrowers may be barred by either res judicata or estoppel by judgment. An action is barred by the doctrine of res judicata where there exists: (1) identity in the thing sued for; (2) identity of the cause of action; (3) identity of persons and parties to the action; and (4) identity of the quality or capacity for or against whom claim is made. Rhyne v. Miami-Dade Water & Sewer Auth., 402 So. 2d 54, 5 (Fla. 3d DCA 1981). An action is barred by estoppel by judgment under the following circumstances:
Where the causes of action are different, the doctrine of estoppel by judgment comes into play, in which case the parties are precluded from relitigating matters actually litigated and determined, but only those matters, and not matters which were in fact not litigated in the former action, even though such matters might properly have been determined therein. Thus, before a litigant is barred under the doctrine of estoppel by judgment, it must appear that the points or questions involved in the subsequent action were determined in the prior action.
Green v. State, 412 So. 2d 413, 414 (Fla. 3d DCA 1982). Courts enforce these bars to litigation because there is an interest to there being an end to litigation and an ultimate point of determination. In other words, it is a disservice to the law to allow the finality of judgments to be diminished.
Borrowers attempting to use expert testimony to revive cases that have reached their final conclusion may be blocked by the doctrines of res judicata or estoppel by judgment. What’s more, the conduct of this attempted expert testimony may be sanctionable, pursuant to section 57.105, Florida Statutes. An aggressive approach to terminating this litigation may ebb the trend of borrowers’ counsel employing these particular experts in cases that have been concluded.
Glass v. Nationstar Mortg., LLC, 2019 Fla. App. LEXIS 30; 2019 WL 98152; Case No. SC17-1387 (Fla. 2019) discusses whether a borrower who successfully defends against a foreclosure case may claim entitlement to reciprocal attorney’s fees. The opinion in Glass does not necessarily prevent a plaintiff from arguing that the borrower is not entitled to fees.
In Glass, The borrower sought review of a district court opinion, based on alleged express and direct conflict with another district court opinion, on the point of law that a voluntary dismissal provides a basis for being considered the prevailing party for the purpose of appellate attorney’s fees.
At the trial court level, the borrower had moved to dismiss the complaint on three separate, successful occasions based on the allegation that the complaint failed to demonstrate that the plaintiff was the proper holder of the note. Eventually, the trial court dismissed the complaint with prejudice. The borrower sought attorney’s fees pursuant to rule 1.525, Florida Rules of Civil Procedure, the mortgage, and section 57.150(7), Florida Statutes. Fees were granted.
The plaintiff appealed the final judgment, arguing that none of the arguments in the motions to dismiss had merit. The plaintiff subsequently filed a notice of voluntary dismissal of the appeal and the borrower filed a renewed motion for appellate attorney’s fees based on section 57.105(7) and the voluntary dismissal. The district court of appeal denied the motion for fees. The borrower sought review in the Florida Supreme Court. The Florida Supreme Court reasoned that the voluntary dismissal rendered the borrower the prevailing party on appeal.
However, for a number of reasons, Glass does not necessarily foreclose a plaintiff from arguing that a dismissal premised on a plaintiff’s lack of standing prevents a borrower from seeking attorney’s fees. First, notably, the plaintiff in Glass did not seek review of the attorney’s fees order in the district court. Secondly, the dismissal in Glass was based on any of four alleged bases raised in the motions to dismiss. The trial court dismissed the complaint without prejudice and also without providing its reason for the dismissal. Thirdly, the Court discusses Bank of New York Mellon Trust Co. v. Fitzgerald, 215 So. 3d 116 (Fla. 3d DCA 2017), another case in which a borrower was prevented from obtaining fees where it successfully defended on the basis that there was no contract between the parties. Instead of overturning Fitzgerald, the Court distinguished it, reasoning that it was important that the Fitzgerald case had proceeded to non-jury trial at which specific findings were made as to standing.