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Great News For Attorneys and Lenders: Second Department Awards Foreclosure Counsel $71,451.11 in Attorney’s Fees — EVERYTHING Counsel Requested

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  • Posted on: Dec 3 2021

By Jonathan H. Freiberger

A major concern raised by potential clients when deciding whether to commence litigation is whether they are entitled to recoup their legal fees if they prevail.  This issue was recently addressed in our BLOG article entitled: “’Can I Sue ‘Em For My Legal Fees?’,” in which we explained, inter alia, that:

Clients are often dismayed to learn that attorney’s fees are not generally recoverable in litigation under the “American Rule,” because “[i]n the United States, the prevailing litigant is ordinarily not entitled to collect a reasonable attorney fee from the loser.”  Alyeska Pipeline Services Co. v. Wilderness Society, 421 U.S. 240, 247 (1975) (providing a historical perspective on the awarding of attorneys’ fees in Federal Court litigation); see also, Mighty Midgets, Inc. v. Centennial Ins. Co., 47 N.Y.2d 12, 21-22 (1979).  The “American Rule” “reflects a fundamental legislative policy decision that, save for particular exceptions or when parties have entered into a special agreement, it is undesirable to discourage submission of grievances to judicial determination and that, in providing freer and more equal access to the courts, the present system promotes democratic and libertarian principles.”  Mighty Midgets, 47 N.Y.2d at 22 (citations omitted).  

Thus, in general, legal fees and disbursements are deemed to be “incidents of litigation” and, therefore, unrecoverable in litigation.  A.G. Ship Maintenance Corp. v. Lezak, 69 N.Y.2d 1, 5 (1986) (citations omitted).  An exception, however, applies when “an award [of legal fees and disbursements] is authorized by agreement between the parties or by statute or court rule.”  Id.  See also  Hooper Assoc., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (1989).  Accordingly, contracts frequently contain provisions permitting the collection of reasonable legal fees if, for example, a party defaults under the contract.  Such provisions are common in promissory notes and mortgages – an area of the law frequently covered by this BLOG.   Indeed, Courts routinely award lenders, “reasonable” legal fees and disbursements in cases where a promissory note or mortgage provides for same in the event of a default by a borrower.  See, e.g., Lupo v. Anna’s Lullaby Café, LLC, 189 A.D.3d 1205, 1208 (2nd Dep’t 2020); Griffon V, LLC v. 11 East 36th, LLC, 90 A.D.3d 705, 707 – 08 (2nd Dep’t 2011); Cutter Bayview Cleaners, Inc. v. Spotless Shirts, Inc., 57 A.D.3d 708, 710 (2nd Dep’t 2008).  Legal fees in mortgage foreclosure actions are frequently requested and frequently awarded; often times, however, the amounts requested do not match the amounts awarded as legal fees as they are frequently reduced by Courts.  

On December 1, 2021, the Appellate Division, Second Department, decided McCormick 110, LLC v. Gordon, a residential mortgage foreclosure action with a seemingly tortured history.  [Eds. Note – In preparing this BLOG article, the author reviewed some of the underlying electronically filed documents available on the Court’s NYSCEF system.]  In 2006, defendants borrowed $400,000 from original lender and secured their repayment obligations with a mortgage on real property in Brooklyn.  Upon defendants’ default, original lender commenced a mortgage foreclosure action in 2013. During the pendency of the first action, the underlying note was assigned to plaintiff.  Plaintiff commenced its action in April of 2016, and the original action commenced by the original lender was discontinued by order of the court issued the following month granting the original lender’s motion for that relief.

Plaintiff’s motion for summary judgment on the complaint and to strike defendants’ answer and for the appointment of a referee to compute was granted.  Plaintiff did not request that the referee calculate legal fees.  Plaintiff then moved for a judgment of foreclosure and sale in which it requested that the court, inter alia, award reasonable attorney’s fees pursuant to the terms of the mortgage.  In support of its attorney’s fees application, plaintiff submitted its invoices totaling $71,451.11.  While defendants opposed the motion for a judgement of foreclosure and sale, they “did not address the plaintiff’s request for an award of attorney’s fees.”  In its reply papers, plaintiff noted that “the Defendants’ opposition papers fail to dispute in any manner the Plaintiff’s request for an award of attorney’s fees.”  In the resulting order and judgment of foreclosure and sale, supreme court “confirmed the referee’s report, directed the sale of the subject premises, and awarded the plaintiff $0 in attorney’s fees.”  

On the parties’ appeals, the Second Department held that plaintiff was entitled to its judgment.  However, the Court held that supreme court “improvidently exercised its discretion in denying the plaintiff’s unopposed request for an award of attorney’s fees and, in so holding, stated:

A plaintiff in a foreclosure action may be entitled to attorneys’ fees pursuant to the terms of the mortgage. However, an award of attorney’s fees pursuant to such a contractual provision may only be enforced to the extent that the amount is reasonable and warranted for the services actually rendered. In determining reasonable compensation for an attorney, the court must consider such factors as the time, effort, and skill required; the difficulty of the questions presented; counsel’s experience, ability, and reputation; the fee customarily charged in the locality; and the contingency or certainty of compensation. While a hearing is not required in all circumstances, the court must possess sufficient information upon which to make an informed assessment of the reasonable value of the legal services rendered. 

Here, section 22 of the mortgage agreement at issue gave the plaintiff the right to collect “reasonable attorneys’ fees” in any foreclosure action.  With its motion for a judgment of foreclosure and sale, the plaintiff submitted an affidavit from its attorney, stating that the plaintiff was entitled to $71,451 .11 in attorney’s fees in this case.  In the affidavit, the attorney described his experience, and stated that his discounted billing rate of $175 per hour “is actually less than that of other attorneys prosecuting foreclosure actions in New York State.”  The plaintiff further submitted its attorney’s billing statements as evidence.  The defendants did not oppose the plaintiff’s request for an award of attorney’s fees.  Accordingly, the plaintiff should have been awarded attorney’s fees in the sum of $71,451.11.

Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes and is not intended to be and should not be taken as legal advice.

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