Real Cases in Real Estate by Andrea Lee Negroni, Esq. – February 14th Update

Real Cases in Real Estate is a weekly update on real estate law, with legal principles illustrated and explained by lawsuits from around the country. The topics are wide-ranging for appeal to a broad spectrum of readers including lawyers, homeowners, investors and the general public. Andrea Lee Negroni, a Washington DC attorney and legal writer with 25 years of experience in financial services and mortgage law, contributes the case summaries.

Followers of Real Cases in Real Estate will learn and be entertained by lawsuits involving nuisance, trespass, zoning violations, deed restrictions, title insurance, public utilities, mechanics liens, construction defects, adverse possession, foreclosure and eviction, divorce and marital property rights, tenants' rights, and more. Real Cases in Real Estate uncovers the unpredictable, amusing, and sometimes outrageous disputes between next-door neighbors, contractors and homeowners, condo boards and residents, real estate brokers and homebuyers, and zoning administrators and developers.

Each fully cited case summary highlights the essential law of the case and explains the principal legal theories and concepts relevant to the outcome. Plain language treatment makes Real Cases in Real Estate accessible to lawyers and laymen alike.

Whether you follow real estate law professionally or as a hobby, you'll find something new and useful every week in Real Cases in Real Estate.

 

Updates for the Week of February 14th, 2011

Florida Court May Review the Reasonableness of Foreclosing Lender's Attorneys' Fees.

A bank that foreclosed a mortgage appealed the trial court's decision which refused to enforce the lender's claim to a 10% attorneys' fee. The promissory note stated that reasonable attorneys' fees would be construed as 10% of the principal amount of the loan. Florida law says that it is not necessary for a court to review the reasonableness of an attorneys' fee contained in a note if it does not exceed 10% of the principal amount. In other words, a 10% attorney's fee is presumed to be reasonable in Florida.

The Florida appeals court decided that simply because a court is not obligated to review the fee doesn't mean it may not do so. The court noted that in Florida, a contract to pay an attorney's fee is a contract of indemnity, so the mortgage holder can recover only what was spent to protect its interest, but not more. Thus, the mortgagee cannot collect more than what was paid out in attorneys' fees.

In this case, the lender did not present any evidence that it had paid attorneys' fees at all. Therefore, it could not prove that the attorneys' fees claimed didn't exceed those actually incurred. The lender could not simply rely on the contractual provision for attorneys' fees and collect 10% of principal.  This decision is 180° removed from recent North Carolina case law on attorneys' fees in foreclosure cases, as discussed below. Reading these cases together reminds us how different the outcomes in similar cases can be!

Lexis.com subscribers can view the enhanced version of Coastal Community Bank v. Jones, 23 So.3d 757 (Fla. App. 2009)

Non-subscribers can use lexisOne's Free Case Law search to view the free, un-enhanced version of Coastal Community Bank v. Jones, 23 So.3d 757 (Fla. App. 2009)   

 

Trustee's Fee and Trustee's Attorney's Fee Are Enforceable As Written in a North Carolina Mortgage, Even if Trustee Serves as His Own Attorney.

In the foreclosure of a $250,000 North Carolina mortgage, the trustee charged a $16,813 trustee fee and a trustee's attorney fee of $33,573. The trustee was also an attorney, so both the trustee fee and the trustee's attorney fee were paid to the same person.

The holder of a second mortgage on the mortgaged property objected to the disbursement of these fees to the trustee, because it would reduce proceeds recovered on the second mortgage. The clerk of the court ordered the trustee's attorney's fees to be reduced to $4,726. The trustee appealed. North Carolina law itemizes and prioritizes amounts that can be distributed from a foreclosure sale, with the "costs and expenses of the sale, including the trustee's commission" as the first priority for distribution. This case considers whether the second mortgagee or the clerk of the court can contest the trustee's claimed disbursements as costs of the foreclosure sale. The court decided they cannot.

The trustee is entitled to the compensation stated in the mortgage documents, and the clerk of the court is entitled only to audit the disbursements contained in the trustee's report of sale, "to determine whether the entries in the report reflect the actual receipts and disbursements made by the trustee." In other words, if the trustee has actually incurred the expenses, the clerk has no authority to determine if the expenses are reasonable.

This case involved a trustee who acted as his own attorney, drawing separate fees in both capacities. This "inherent conflict of interest" led Judge Robert N. Hunter to dissent from the decision. Judge Hunter wrote that the fiduciary duty of the trustee requires him to obtain every possible advantage for the debtor as well as the creditor, suggesting that this duty may be compromised when a trustee sets his own attorney fees.

Lexis.com subscribers can view the enhanced version of In re Vogler Realty Inc., 2010 N.C. App. LEXIS 2416 (N.C. App. 2010)

Non-subscribers can use lexisOne's Free Case Law search to view the free, un-enhanced version of In re Vogler Realty Inc., 2010 N.C. App. LEXIS 2416 (N.C. App. 2010)

 

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