Court approves reciprocal attorney fees for defendants in credit card, foreclosure cases
In two separate cases, the Supreme Court has said credit card debtors and homeowners in foreclosure actions are entitled to attorney fees when they prevail as defendants in collection or foreclosure cases and their credit card contracts and mortgages called for attorney fees if the creditors had won.
Both opinions involved interpretations of F.S. §57.105(7).
“Under section 57.105(7)’s rule of reciprocity, if a contract provides for attorney’s fees for a party when that party ‘is required to take any action to enforce the contract,’ then attorney’s fees are authorized for the other party if ‘that party prevails in any action. . . with respect to the contract,’” Chief Justice Charles Canady wrote for the court in the credit card ruling. “Here, the fees were authorized for the debtors because both conditions required by the statute were met.”
There were two consolidated cases in the credit card opinion, Eugene Ham III v. Portfolio Recovery Associates, LLC, Case No. SC18-2142, and Laura Foxhall v. Portfolio Recovery Associates, LLC, Case No. SC18-2143. The mortgage foreclosure ruling came in Terri P. Page v. Deutsche Bank Trust Company Americas, Case No. SC19-1137.
Canady wrote both opinions, which were released on December 31.
The credit card cases were filed by a company that purchased credit card debts from a bank and sued separately to collect from Ham and Foxhall. The company, Portfolio, also said the cases were brought under the “account stated” cause of action rather than the underlying credit card contract with the attorneys’ fees provision.
Both defendants filed affirmative defenses and ultimately prevailed in county court. The county court judge eventually awarded them attorneys’ fees, but that was overturned on appeal to the circuit court, citing an earlier ruling in that circuit. The First District Court of Appeal eventually upheld that decision, but certified a conflict with the Second DCA in Bushnell v. Portfolio Recovery Associates, LLC, 255 So. 3d 473 (Fla. 2d DCA 2018).
The First DCA found that since the original actions did not rely on the credit card contracts but rather were accounts stated claims, attorneys’ fees were not due when the defendants prevailed.
Canady engaged in a detailed analysis that concluded the first requirement of §57.105(7) was met because the credit card contract allowed for attorneys’ fees when the company went to court to collect a debt.
“In accordance with this analysis we thus reject the proposition argued by Portfolio and accepted by the First District that the credit card contract fee provisions did not extend by their plain terms to account stated causes of action. There is no tenable argument that a provision authorizing fees for action to collect a debtor’s account does not encompass account stated claims,” Canady wrote.
The second statutory requirement is whether the defendant prevailed in an action “with respect to the contract.”
Canady said “with respect to” is a phrase the Legislature logically used to broaden, not restrict, application of the statute and, therefore, the law should apply.
“Although the account stated claims brought by Portfolio perhaps could not fairly be said to be claims brought ‘based on,’ ‘under,’ or ‘pursuant to’ the credit contracts, there is nonetheless a clear and direct relationship between the credit contracts and the account stated claims…,” the chief justice wrote. “The business relationship and the previous transactions between the debtors and the creditor were predicated on the credit card contracts. Without those contracts, there would have been no business relationship or previous transactions. The accounts that the creditor sought to collect came into existence as a result of the operation of those credit card contracts. So it is a fair reading to say that the account stated actions on which the debtors prevailed were actions ‘with regard or relation to’ those credit card contracts and that the second element of the statutory provision was therefore satisfied.”
Justices Ricky Polston, Jorge Labarga, Alan Lawson, and John Couriel concurred with Canady. Justice Carlos Muñiz dissented, while Justice Jamie Grosshans did not participate in the opinion.
Muñiz said he agreed with much of the majority analysis except for the holding that the “with respect to” section of the statute should be broadly interpreted.
“It is undisputed that an ‘account stated’ cause of action — the only claim in these cases — is not a contract action and does not depend on proof of an underlying contract. It also is undisputed that Portfolio did not rely on the contract to prove its account stated claim, that the debtors did not rely on the contract as part of any defense, and that no party presented the contract as evidence at trial,” Muñiz wrote. “While Portfolio perhaps could have chosen to use the contract to show its business relationships with the debtors, it did not do so. Under these circumstances, the statute’s ‘action with respect to the contract’ requirement for attorney’s fees is not satisfied.”
In the bankruptcy case, Page, the court was unanimous (with Justice Grosshans again not participating) and the basis for the ruling differed slightly. Deutsche Bank, which had acquired the mortgage from the original lender, filed a foreclosure action in 2009 against the defendant Page.
Page eventually prevailed by arguing Deutsche failed to show it was the mortgage holder at the time the action was filed. The trial court ruled the bank sent a deficient default letter and lacked standing at the time it sued.
Page sought attorneys’ fees and the judge put that on hold while the bank appealed the case. The Fourth DCA eventually upheld the trial court and awarded Page appellate attorneys’ fees. The trial court then awarded fees to Page, and the bank appealed that to the Fourth DCA.
The DCA reversed the trial judge, saying if the basis for Page prevailing was the lack of standing for Deutsche Bank, then she was not entitled to attorneys’ fees under a contract she contended did not apply. Or as the appellate panel summarized: “NO STANDING = NO ATTORNEY’S FEES.”
The judges cited a Fourth DCA en banc panel that reached a unanimous finding on an earlier similar case.
The Fourth DCA certified conflict with “the Fifth District Court of Appeal’s decision in Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017), and the Second District Court of Appeal’s decision in Harris v. Bank of New York Mellon, 44 Fla. L. Weekly D141, 2018 WL 6816177 (Fla. 2d DCA Dec. 28, 2018), both of which held that a borrower who successfully argues ‘lack of standing’ can be awarded fees under section 57.105(7) if it is otherwise established that the plaintiff became subject to the unilateral fee provision in the contract.”
Canady wrote the issue in resolving Page and conflicting cases was determining whether the borrower was due attorneys’ fees when the lender had established standing at trial, but not at the time the action was filed.
“The statute [F.S. §57.105(7)] contains two clauses, the first of which addresses the existence of a fee provision in the underlying contract, and the second of which addresses the requisite prevailing in an ‘action. . . with respect to the contract.’ The conditions in both statutory clauses must be satisfied before fees may be awarded. Here, they are satisfied,” Canady wrote.
Page obviously prevailed in the action, he noted, and as for the existence of the contract, the bank showed at the trial it had the right to enforce the contract even though it failed to show it had that right at the time it filed the case.
“[A] dismissal predicated on that failure of proof is not an adjudication ‘that no contractual relationship existed between the parties.’ Harris, 44 Fla. L. Weekly at D143. Nor is it an adjudication that the contract was nonexistent,” Canady wrote. “Here, the evidence established the contractual relationship between the parties, and the contract contains the requisite provision. The first clause of the statute requires nothing more.”
The court also rejected the bank’s claim that the trial court lacked “subject-matter jurisdiction” to award fees.
“The Bank waived its jurisdictional argument by waiting until the appeal of the fee award to first raise the issue,” Canady said. “Subject-matter jurisdiction is universally acknowledged to never be waivable.”
