A Florida appellate court recently held that a lender can include the attorneys’ fees it incurred in a prior foreclosure action as a condition of reinstating the delinquent loan, even when the prior action was dismissed for lack of prosecution and when the borrower was awarded his own fees as prevailing party in the prior action.  See Colombo v. Robertson, Anschutz & Schneid, 2022 Fla. App. LEXIS 3075 (Dist. Ct. App. May 4, 2022).  In 2008, a lender filed a foreclosure action against the borrower.  The trial court later dismissed the action for failure to prosecute, and awarded the borrower his attorneys’ fees as the prevailing party.  In 2017, the lender brought a new foreclosure action.  The law firm representing the lender sent a reinstatement letter setting forth the amount due to reinstate the loan.  The reinstatement amount included $3,733 for the lender’s attorneys’ fees in the prior action.  The borrower then filed an answer in the foreclosure and brought a claim against the law firm for seeking to collect an “illegitimate debt,” based on the fact that the attorneys’ fees from the prior action were incurred in an action in which the complaint was dismissed and the borrower had been awarded his attorneys’ fees.  The law firm moved for summary judgment, and the trial court granted the motion.

On appeal, the Court affirmed.  The borrower’s mortgage contained language about the requirements for reinstatement, which included that the borrower “pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys’ fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender’s interest in the Property and rights under this Security Instrument.”  The Court found that the plain language of the contract controlled and that there was nothing illegitimate about this debt.  Further, the Court found that “the borrower was under no obligation to pursue reinstatement under paragraph 19 of the contract; rather, whether the borrower elected the option of reinstatement was completely voluntary.”  Accordingly, the Court found that the borrower could not prevail on its claims and that the lender had the right to seek these fees as part of the reinstatement.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.