On March 1st, Florida’s Third District Court of Appeal affirmatively held that a mortgage holder who fails to prove its standing to foreclose is not liable to a defendant borrower for prevailing party attorney’s fees. The Fitzgerald holding is succinct but immensely significant: “[b]ecause [the Borrower] successfully obtained a judgment below that the [Plaintiff] lacked standing to enforce the subject mortgage and note against her . . . no contract existed between the [Plainiff] and [Borrower] that would allow [the Borrower] to invoke the reciprocity provisions of Section 57.105(7).” Bank of New York Mellon Trust Co. v. Fitzgerald, Case No. 3D16-981, at *2 (3d DCA Mar. 1, 2017). Fitzgerald adopts the rationale set out in HFC Collection Ctr., Inc. v. Alexander, 190 So. 3d 1114 (Fla. 5th DCA 2016) and applies it in the mortgage foreclosure context. In doing so the Third DCA took a step many trial courts have been unwilling to take.
In Fitzgerald, the plaintiff assignee of a promissory note and mortgage commenced its foreclosure action in June of 2009. The plaintiff alleged that it was entitled to enforce the note as holder. When the borrower answered the Complaint in March of 2013, she contested the plaintiff’s status as the holder of the note and mortgage and further alleged the plaintiff lacked standing because the note was specially indorsed to another entity. At trial, the court determined that the plaintiff failed to establish standing as there was no assignment of mortgage or other document evidencing a transfer of the note to the plaintiff prior to the institution of the action. Further, the court—relying on separate grounds—found that the plaintiff never became the holder of the note. See Fitzgerald at *3-*4.
Following her trial victory, the borrower filed a motion for entitlement to tax costs and attorneys’ fees pursuant to the reciprocity provision of Section 57.105, Florida Statutes. As most all courts do, the trial court granted the borrower’s request.
In reviewing the trial court’s decision, the Third DCA found the Fifth DCA’s Alexander decision squarely on point. In that case, the plaintiff collection center sought to collect past due amounts owed to American Express pursuant to a credit card agreement. The plaintiff claimed it had standing to do so as assignee of the agreement. The defendant contested the plaintiff’s standing to bring suit. At trial, the court found the plaintiff failed to establish its status as assignee and determined that no contractual relationship existed between the parties. Nevertheless, the trial court awarded the defendant attorney’s fees pursuant to both the attorney’s fees provision contained in the credit card agreement and Section 57.105(7), Florida Statutes. In reviewing and reversing that fee award, the Fifth DCA reasoned “if there is no contract between the parties which would entitle one to recover attorney’s fees in the first place, there is no basis to invoke the compelled mutuality provision of section 57.105(7).” Alexander, 190 So. 3d at 1117.
The Fitzgerald Court found the Fifth DCA’s reasoning equally applicable and compelling in the case before it. The trial court had specifically found that the plaintiff lacked standing because there was no evidence of a transfer prior to the institution of the action and the plaintiff was neither a holder nor a non-holder in possession with the rights of a holder. Accordingly, the trial court had actually determined that no contract existed between the plaintiff and the borrower. As a result, the borrower could not invoke the compelled mutuality provisions of Section 57.105, Florida Statutes and was not entitled to recover attorney’s fees.
Fitzgerald presents an issue common to the great majority of failed foreclosure prosecutions. The decision should dispense with post-judgment proceedings and streamline the path to re-filing.