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A Critical Examination of Glass v. Nationstar Under Contract Principles

Business Law

Unless one behaves like a quantum particle, one cannot be in two places at once. And unless one disregards contract law, one cannot have a contract enforceable by one party but not the other. Mutuality of obligation is the essence of bilateral contracts; contracts either exist enforceable by both parties or they do not exist at all. It is on this point that Glass v. Nationstar Mortgage, LLC, No. SC17-1387 (Fla. Jan. 4, 2019), either fails traditional contract analysis or heralds a new form of contract. There are arguments on both sides whether Glass represents an unwise approach or merely a balancing of interests, but this article analyzes the more fundamental question of whether Glass survives traditional contract analysis.

Background of Case

Glass is a mortgage foreclosure dispute, unique only in the sense that a reverse mortgage and not a traditional declining balance mortgage was at issue. The loan went into default due to nonpayment of taxes, and Nationstar (the successor in interest to original obligee Countrywide) filed suit.[1] The case was decided on motions to dismiss with “chain of title,” i.e., the argument that plaintiff Nationstar could not enforce the mortgage because it was not the proper party in interest and, thus, did not have a contract with Glass, being one of the principal defenses raised.[2] Glass filed three trial court motions to dismiss, all of which were granted with the last motion being granted with prejudice. The trial court did not set forth the basis or bases upon which it dismissed with prejudice and did not make a finding whether plaintiff Nationstar was the proper party in interest.[3]

Notwithstanding her arguments that Nationstar was not the proper party in interest, Glass filed a motion for attorneys’ fees under the contractual reciprocity provisions of F.S. §57.105(7) (2014), arguing she was entitled to attorneys’ fees under the same mortgage she claimed Nationstar could not enforce. The trial court agreed, and Nationstar filed an appeal[4] but dismissed the appeal after briefing was completed.[5] Glass again filed a motion for attorneys’ fees, this time for appellate fees.[6] The Fourth District Court of Appeal denied Glass’ motion for fees, re-reviewed the case en banc, and again issued an opinion denying Glass’ motion for fees.[7] Glass sought discretionary review in the Florida Supreme Court based on conflict jurisdiction.

Analysis of Majority Opinion

The Florida Supreme Court granted review under Fla. Const. art. V, §3(b)(3), the conflict basis of the court’s jurisdiction.[8] The court ruled 4-3 in favor of Glass, with the majority basing its opinion on the rule that dismissal of an appeal by an appellant renders the appellee the prevailing party. Additionally, the majority held that Nationstar was liable for Glass’ attorneys’ fees due to Nationstar’s argument that it was entitled to enforce the mortgage against Glass notwithstanding her claim there was no contract between the parties.[9] The majority opinion did not state the precise nature of the conflict, but instead chose to immediately dive into its analysis of the Fourth District’s opinion. The dissent, on the other hand, focused on jurisdictional issues.[10]

The majority begins by citing Thornber v. City of Fort Walton Beach, 568 So. 2d 914 (Fla. 1990), for the proposition that “when a plaintiff voluntarily dismisses an action, the defendant is the prevailing party.”[11] This is a well-supported proposition. It is the next step in the process, however, where the majority begins to falter in its analysis.

Specifically, the majority contends the Fourth District erred by “opin[ing] that [F.S. §]57.105(7) precluded an award of attorney’s fees because Glass prevailed in having Nationstar’s complaint dismissed.”[12] In the eyes of the majority, the Fourth District Court of Appeal misunderstood the basis of the trial court’s dismissal and also failed to address Glass’ request for appellate attorneys’ fees. The majority then turns to Bank of New York Mellon Trust Co. v. Fitzgerald, 215 So. 3d 115 (Fla. 3d DCA 2017), a case cited by the Fourth District in support of its opinion, and states the present case is different because the trial court in Fitzgerald specifically ruled the lender lacked standing, while the trial court in this case did not make such a finding. The majority does not, however, mention it was impossible to determine from the trial court order of dismissal whether a contract existed between Nationwide and Glass.

The majority dealt with this issue by stating that “[e]ven if the trial court’s dismissal [in Glass] was based on lack of standing, it was not based on a finding that Nationstar did not hold the note but on a finding that Nationstar’s complaint was legally insufficient for failure to properly demonstrate the chain of title.”[13] In the eyes of the majority, the allegation by a plaintiff that it is contractually bound with a defendant does not bind the defendant to her obligations under the contract but binds the plaintiff to its obligations under the same contract.

This is where the majority first fails in its analysis. Florida law is clear that a holder of a note can enforce the note regardless of recorded assignments.[14] And even failing proper assignments, the “mere delivery of a note and mortgage, with intention to pass the title, upon proper consideration, will vest the equitable interest in the person to whom it is so delivered.”[15] And of course, “person entitled to enforce” a note is a specifically defined term under F.S. §673.3011 (2018) that is broader than “standing” and it is not necessary to prove “chain of title” to have standing. HSBC Bank USA, National Association v. Buset, 241 So. 3d 882, 888 (Fla. 3d DCA 2018). The only time “chain of title” is important is when a promissory note has been lost and a lender is seeking to re-establish the note under F.S. §673.3091 (2018),[16] a situation that does not appear to have occurred here.

The majority’s analysis of “chain of title” is wrong, and there is no direct support for the majority’s proposition that a lender cannot enforce a contract yet be simultaneously bound by its terms. So how does the majority support its proposition? Arguably the majority misinterprets the court’s own precedent to arrive at its conclusion.

Perhaps understanding that declaring a party prevailed is only the first step and that a basis for attorneys’ fees is still required, the majority next references Trytek v. Gale Indus., Inc., 3 So. 3d 1194, 1198 (Fla. 2009), for the proposition that attorneys’ fees can only be awarded when provided by statute or contract between the parties.[17] The majority cites David v. Richman, 568 So. 2d 830, 832 (Fla. 1993), for the rule that a contract must exist in order for a party to be awarded attorneys’ fees under the prevailing party provision of the contract.[18] And then the majority departs from established precedent to create what is apparently a new rule.

Turning to the court’s earlier decision of Katz v. Van Der Noord, 546 So. 2d 1047 (Fla. 1989), the majority reiterates that “when parties enter into a contract and litigation later ensues over that contract, attorneys’ fees may be recovered under a prevailing-party attorneys’ fees provision contained therein, even though the contract is rescinded or held to be unenforceable.”[19] Of particular note is the majority’s quotation of a passage from Katz:

The legal fictions which accompany a judgment of rescission do not change the fact that a contract did exist. It would be unjust to preclude the prevailing party to the dispute over the contract which led to its rescission from recovering the very attorney’s fees which were contemplated by that contract. This analysis does no violence to our recent opinion in Gibson v. Courtois in which we held that the prevailing party is not entitled to collect attorney’s fees under a provision in the document which would have formed the contract where the court finds that the contract never existed.[20]

The quotation hints at, but the majority fails to discuss, the key distinctions between the Glass and Katz cases. First among these is that there was mutuality of obligation in Katz; there was agreement between the parties that an enforceable contract had been formed. Yes, the court ordered an award of fees in Katz after rescinding the contract, but a mutually enforceable contract existed in the first place, and cancelation was the result of a rescission judgment arising from the fraudulent inducement. In other words, there was a contract in fact but the court rescinded the contract as an equitable remedy. And having rescinded the contract as a remedy, the court permitted an award of fees to the prevailing party because there was an enforceable contract in the first place, and not allowing fees in a fraudulent inducement case would reward the fraudster. Another section of Katz court is instructive on this issue:

We agree. . . that “[t]he distinction between no contract at all and one that is unenforceable makes all the difference….” We hold that when parties enter into a contract and litigation later ensues over that contract, attorney’s fees may be recovered under a prevailing-party attorney’s fee provision contained therein even though the contract is rescinded or held to be unenforceable. The legal fictions which accompany a judgment of rescission do not change the fact that a contract did exist. It would be unjust to preclude the prevailing party to the dispute over the contract which led to its rescission from recovering the very attorney’s fees which were contemplated by that contract.[21]

The trial court in Katz, much like the trial court in Fitzgerald, made a specific factual finding. The trial court in Katz made a finding that a contract existed. The trial court in Fitzgerald made a factual finding that a contract did not exist. The trial court in Glass made neither factual finding. It was the Florida Supreme Court, without taking evidence, that made a finding in Glass that a contract existed. In the words of the majority, a “contract clearly existed between Glass and [initial lender] Countrywide Mortgage Company.”[22]

Especially as done in this case, it is troubling to have an appellate court make a factual finding without setting forth the legal basis for its factual findings. The key undisputed fact in Glass was that Glass signed the mortgage with Countrywide; Glass vigorously disputed whether Nationstar had a contract with her such that it could force her to pay her mortgage. And recall the majority found that “failure to properly demonstrate the chain of title”[23] was the reason the lender was not entitled to foreclose.

The majority found the same “chain of title” prevented Nationwide from enforcing its claim for mortgage payments yet simultaneously supported Glass’ claim for attorneys’ fees. If the majority intended to say a contract existed between Countrywide and Glass but no contract existed between Nationstar and Glass, then it should have plainly stated so. But that still does not answer how Glass could have enforced the prevailing party fees provision against Nationstar if her only contract was with Countrywide, the predecessor in interest to Nationstar.

No less troubling is the majority’s use of Katz to support its opinion because doing so creates uncertainty in contract law. Katz is a case of fraudulent inducement into a contract where the contract contained a prevailing party provision. The trial court in Katz found a contract existed but rescinded the contract as a remedy for defendant fraudulently inducing plaintiff into the contract. The trial court in Glass did not find a contract existed, but the Florida Supreme Court did (and a one-sided contract at that). Practitioners are now uncertain whether the court has created a new rule that a court, as a factual matter, can find a contract exists for one purpose and not another. The court’s citation of Katz does not help in this regard because there was an enforceable contract in existence in Katz, but it was the judicial remedy of rescission that terminated the contract. The majority has created a duality in Glass: a contract that factually exists for one purpose yet does not factually exist for another.

Or has the court created a new rule that contracts may be judicially created when none factually exist (such as contracts implied in law) even when such a claim was not pled? Was this a judicially created contract? Or is Glass a “standing” case where the court sub silentio adopts standing analysis? If Glass is a standing case, why is there not more analysis of the standing issue? Is lack of standing a valid basis for defending actions when the same party alleging there is no standing, i.e., that there is no contract, simultaneously alleges he or she is entitled to fees under the same contract? The majority opinion does not answer these questions.

Also unanswered is the role of trial courts in this new process. Are trial courts now obligated to make factual findings that contracts exist at the motion to dismiss stage? Or is the factual finding of whether a contract exists the province of the appellate courts from a review of the appellate record? Requiring trial courts to make these factual findings is, of course, problematic as the Rules of Civil Procedure place strict limitations on trial judges at the motion to dismiss stage, including requiring all well-pled allegations to be deemed admitted and prohibiting the introduction of evidence. The majority does not explain how trial courts are to implement the Glass opinion.

Analysis of Dissent

The dissent’s response is subtle but significant. Instead of refuting the majority opinion point-by-point, the dissent argues the court did not have jurisdiction to entertain the appeal in the first place. This is important because the Florida Supreme Court has only the narrow jurisdiction granted by the Florida Constitution.

This raises the question of whether Glass was decided without jurisdiction, and if so, whether the opinion has any precedential value. Under the Florida Constitution, the court has a limited range of cases over which it has discretionary jurisdiction, the type of jurisdiction exercised in Glass. The type of discretionary jurisdiction exercised in Glass was based on conflict of the Fourth District with an opinion of another district court, specifically, the First District Court of Appeal’s decision in Bank of New York v. Williams, 979 So. 2d 347 (Fla. 1st DCA 2008).

The dissent analyzes the jurisdictional question by first reviewing F.S. §57.105(7) and setting forth that a party must accomplish two things to be entitled to the reciprocity: It must have prevailed, and it must be a party to the same contract sued upon. The dissent then analyzes the Fourth District’s Glass opinion and finds that the Fourth District denied fees based on Glass’ failure to comply with the second prong of the statute, i.e., based on her failure to be a party to the contract that contained the fees provision sued upon. By contrast, the First District held that Williams was not a prevailing party and, thus, based its decision on a different part of the statute.

Fla. Const. art. V, §3(b)(3) (emphasis added), states the court has discretionary jurisdiction as follows:

(3) May review any decision of a district court of appeal that expressly declares valid a state statute, or that expressly construes a provision of the state or federal constitution, or that expressly affects a class of constitutional or state officers, or that expressly and directly conflicts with a decision of another district court of appeal or of the supreme court on the same question of law.

In the eyes of the dissent, the court did not have jurisdiction to entertain the case in the first place, and that raises the question whether Glass is on shaky ground. But more subtly, the dissent re-emphasizes the point that the party seeking fees under §57.105(7) must be a party to the same contract under which it is seeking fees. And again, the mortgage was the contract under which Glass sought fees against Nationstar but also the same contract that she alleged Nationstar could not enforce.

Analysis of Decision

So is Glass a contracts decision? No. Mutuality of obligation, the principle that both parties are bound to the same contract, is the essence of contract formation,[24] and Glass flatly eviscerates this concept. Glass fails under traditional contract principles because it allows one party to enforce a bilateral contract that it does not allow the other party to enforce. The obligations of both parties in this situation are not mutual, and under traditional contract principles, the contract should either succeed or fail for both parties.

The majority attempts to avoid this inconsistency by arguing Glass was no different than Katz, where the court permitted an award of attorneys’ fees while not enforcing the contract. The crucial, unexplained difference between the two cases is that there was an enforceable contract in Katz — the contract was rescinded by well recognized equitable principles — while the court found in Glass there was no contract. Katz does not save Glass.

A more likely explanation for the inconsistency of the Glass opinion is that the majority adopted standing analysis sub silentio. This is also troubling.

First, the court should not adopt such an expansive rule without notice and comment. Adopting such a rule would arguably conflict with Florida’s party-in-interest rule, Fla. R. Civ. P. 1.210(a), which has traditionally been interpreted in a broad fashion. Standing under this rule has always been construed as needing only, or representing one who has, a sufficient stake in an otherwise justiciable controversy to obtain judicial resolution of that controversy.[25] This general rule has been applied in the mortgage foreclosure world as well.[26] If anything, standing appears broader and less limited than contractual privity requirements.

The second question is whether the majority was actually speaking of standing when it stated that lender had failed to establish the “chain of title,” and how does this affect litigation in other contexts? The Florida Supreme Court announced the standing rule in 1911 as follows:

It is said in 1 Cyc. p. 744: “A plaintiff cannot supply the want of a valid claim at the commencement of the action by the acquisition or accrual of one during the pendency of the action. Nor can plaintiff recover in a pending action on a cause of action which accrued after the institution of such action, even though such cause of action relate to the subject-matter of the pending action.” See Metcalf v. Guthrie, 94 N.C. 447. It is stated in this case that, where the right to sue arises out of a transaction subsequent to the institution of the suit, relief cannot be had by a supplemental or amended complaint, for the obvious reason that the cause of action did not then exist. Says Judge Bleckley, in Wadley, Jones & Co. v. Jones, 55 Ga. 329: “It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at all there must be some cause of action at the commencement of suit.”[27]

Contrast the Marianna opinion with Fla. R. Civ. P. 1.210(a), which was adopted by the Florida Supreme Court:

(a) Parties Generally. Every action may be prosecuted in the name of the real party in interest, but a personal representative, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute may sue in that person’s own name without joining the party for whose benefit the action is brought. All persons having an interest in the subject of the action and in obtaining the relief demanded may join as plaintiffs and any person may be made a defendant who has or claims an interest adverse to the plaintiff. Any person may at any time be made a party if that person’s presence is necessary or proper to a complete determination of the cause.

Notably absent from Rule 1.210 is a statement that a party must prove that it is a true party in interest at the motion to dismiss stage. It can be argued that adoption of the Rules of Civil Procedure, especially Rule 1.210 together with the equitable relief principles set forth in cases such as McLean, have modified the apparently harsh rule of Marianna to the point where the rule now stands that any party that has an interest in a contract may sue upon the contract. That is certainly what a clear reading of Rule 1.210 seems to indicate.

But the court’s imprecise use of standing is yet more troubling as explained by Judge Lucas in his concurring opinion in Corrigan v. Bank of America, N.A., 189 So. 2d 187, 191 (Fla. 2d DCA 2016) (en banc). Judge Lucas explains that the standing rule, a standard defense in the mortgage foreclosure arena, has migrated from an affirmative defense to becoming a jurisdictional requirement. And that creates problems for all contractual actions.

Recall the court did not limit its holding in Glass to mortgage foreclosure cases. The worry is that by adopting Glass’ “chain of title” argument, the Florida Supreme Court has now adopted the broad “standing at inception” argument across all litigation cases, and a party in any case must now prove their “standing” at the pleadings stage. Under Glass, a plaintiff can be in privity with a defendant but not have sufficient “standing” to be able to enforce a contract or actions arising out of the contract.

How do we untangle the uncertainty that Glass created? As best as can be understood from the confusing opinions on standing, the problem seems to have begun when standing analysis was disconnected from contractual privity. And a good deal of the problems may be fixed by re-connecting standing with contractual privity.[28]

Under typical privity analysis, only parties in privity with each other (or intended third-party beneficiaries) may enforce the contract against each other.[29] Contracts where parties have a connection with each other, including those situations covered by F.S. §673.3011, do not suffer from mutuality of obligation problems. And if one party is in privity with another party, then that party should have a sufficient interest under either Marianna or Rule 1.210 such that it has sufficient “standing” to enforce the contract. Finally, adopting a privity analysis for standing avoids the problem of asking trial courts to do more at the pleadings stage than permitted to do under the Rules of Civil Procedure.


The Glass opinion has created a great deal of confusion due to its imprecise handling of standing in the contractual arena. The Florida Supreme Court should revisit its opinion in Glass and hold that privity is sufficient for standing purposes under both Marianna and Rule 1.210. The court should further hold that trial courts are not required to examine standing at the pleadings stage beyond the requirements of privity and F.S. §673.3011 and Rules 1.210 and 1.130. Failure to correct the ambiguities created by Glass risks continued confusion in Florida contract law.

[1] Glass, Case No. SC17-1387 at 2. There is no indication from either the Florida Supreme Court or the Fourth District Court of Appeal opinions that a promissory note was being re-established pursuant to Fla. Stat. §673.3091.

[2] Id.

[3] Id.

[4] Id. at 3.

[5] Id. at 4.

[6] Id.

[7] Id.

[8] Id. at 1.

[9] Id. at 4.

[10] Id. at 12.

[11] Id. at 6.

[12] Id.

[13] Id. at 9.

[14] See McLean v. JP Morgan Chase Nat. Ass’n, 79 So. 3d 170, 173 (Fla. 4th DCA 2012).

[15] Id. (citing Johns v. Gillian, 134 Fla. 575, 184 So. 140, 143 (1938)).

[16] See Robelto v. U.S. Bank Trust, N.A., 194 So. 3d 429 (Fla. 4th DCA 2016).

[17] Glass, Case No. SC17-1387 at 10.

[18] Id.

[19] Id.

[20] Id. at 10-11.

[21] Katz, 546 So. 2d at 1049.

[22] Glass, Case No. SC17-1387 at 11.

[23] Id. at 9.

[24] Redington Grand, LLP v. Level 10 Properties, LLC, 22 So. 3d 604 (Fla. 2d DCA 2009).

[25] Kumar Corp. v. Nopal Lines, Ltd., 462 So. 2d 1178 (Fla. 3d DCA 1985).

[26] Elston/Leetsdale, LLC v. CWCapital Asset Management LLC, 87 So. 3d 14 (Fla. 4th DCA 2012).

[27] Marianna & B.R. Co. v. Maund, 62 Fla. 538, 543-44, 56 So. 670 (1911).

[28] It is true that parties who are entitled to enforce an instrument under Fla. Stat. §673.3011 may not be in strict privity with the borrower, but the concept of privity has expanded greatly, and the Florida Legislature has dictated these parties have “standing.”

[29] Gallahager v. Dupont, 918 So. 2d 342, 346 (Fla. 5th DCA 2005).

Manuel FarachManuel Farach practices real estate, business, and appellate law in the Ft. Lauderdale office of McGlinchey Stafford, PLLC. He serves on the executive council of the Business Law Section, for which he has chaired several committees.

This column is submitted on behalf of the Business Law Section, Michael B. Chesal, chair, and Paige Greenlee, editor.

Business Law