Pursuant to RPL 282(1), Attorney’s Fees Are Available to Borrowers In Mortgage Foreclosure Actions If They Know How to Ask For Them
Print Article- Posted on: Nov 8 2024
As discussed in a prior BLOG article, one of the first questions asked by a potential client when consulting about a new litigation matter is “can we recoup our legal fees in the litigation.” In response, we must explain that, according to the “American Rule,” “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).
Exceptions to the “American Rule” exist, for example, where the recovery of attorney’s fees “is authorized by agreement between the parties, statute or court rule.” Hooper Assoc., Ltd. v. AGS Computers, Inc., 74 N.Y.2d 487 (1989) (citations omitted); Giannakopoulos v. Figame Realty Mgt., 219 A.D.3d 803, 805-06 (2nd Dep’t 2023) (quoting Hooper). Indeed, contracts typically contain language permitting a party to collect its reasonable legal fees in the event of litigation.
Further, “[i]n general, only a prevailing party is entitled to recover an attorney’s fee and to be considered a prevailing party, a party must be successful with respect to the central relief sought.” Village of Hempstead v. Taliercio, 8 A.D.3d 476 (2nd Dep’t 2004) (citations, internal quotation marks and brackets omitted). “Such a determination requires an initial consideration of the true scope of the dispute litigated, followed by a comparison of what was achieved within that scope.” DKR Mortgage Asset Trust 1 v. Rivera, 130 A.D.3d 774 (2nd Dep’t 2015) (citations and brackets omitted).
In most cases, mortgages provide that if the lender commences litigation to foreclose,[1] it is entitled to recover its reasonable legal fees and expenses. As typically written, such provisions are not reciprocal and, therefore, under the express terms of the mortgage, a borrower that successfully defends a mortgage foreclosure action would not be entitled to recover legal fees and expenses. However, borrowers in foreclosure should not fret because Real Property Law § 282(1) “reads into” mortgages a reciprocal attorney’s fees provision when the existing attorney’s fees provision is one-sided. Thus, RPL § 282(1), provides:
Whenever a covenant contained in a mortgage on residential real property shall provide that in any action or proceeding to foreclose the mortgage that the mortgagee may recover attorneys’ fees and/or expenses incurred as the result of the failure of the mortgagor to perform any covenant or agreement contained in such mortgage, or that amounts paid by the mortgagee therefor shall be paid by the mortgagor as additional payment, there shall be implied in such mortgage a covenant by the mortgagee to pay to the mortgagor the reasonable attorneys’ fees and/or expenses incurred by the mortgagor as the result of the failure of the mortgagee to perform any covenant or agreement on its part to be performed under the mortgage or in the successful defense of any action or proceeding commenced by the mortgagee against the mortgagor arising out of the contract, and an agreement that such fees and expenses may be recovered as provided by law in an action commenced against the mortgagee or by way of counterclaim in any action or proceeding commenced by the mortgagee against the mortgagor. Any waiver of this section shall be void as against public policy. [Emphasis added.]
RPL 282(1), by its express terms, makes plain that for a mortgagor to benefit from this position, an affirmative claim for such fees must be made either by commencing an action or by asserting a claim for such fees by way of counterclaim. This point was highlighted in, U.S. Bank N.A. v. Onuoha, 216 A.D.3d 1069, 1073 (2nd Dep’t 2023), a mortgage foreclosure action. The borrower, in her answer, inter alia, asserted an affirmative defense based on the expiration of the applicable statute of limitations[2] and a counterclaim to discharge the subject mortgage pursuant to RPAPL 1501(4)[3] on the ground that the action was time-barred. The borrower “moved for summary judgment dismissing the complaint insofar as asserted against her and on her counterclaim pursuant to RPAPL 1501(4) to cancel and discharge of record the mortgage, to vacate the notice of pendency filed against the subject property, and for an award of attorneys’ fees pursuant to Real Property Law § 282.” The Second Department reversed the motion court’s denial of the motion to the extent related to the expiration of the applicable statute of limitations. However, the Court held that the motion court properly denied the borrower’s request for attorney’s fees and stated:
Although, in light of our determination, the defendant is the prevailing party for purposes of Real Property Law § 282, her contention that she is entitled to an award of attorneys’ fees pursuant to that statute is without merit. Real Property Law § 282(1) expressly provides that attorneys’ fees are recoverable by a mortgagor only “in an action commenced against the mortgagee or by way of counterclaim in any action or proceeding commenced by the mortgagee against the mortgagor.” Here, the defendant did not assert a counterclaim for an award of attorneys’ fees pursuant to Real Property Law § 282 in her answer or move to amend her answer to assert such a counterclaim. Accordingly, the Supreme Court properly denied that branch of the defendant’s motion which was for an award of attorneys’ fees pursuant to Real Property Law § 282.
Onuoha, 216 A.D.3d at 1073 (some citations omitted). In Nationstar Mortgage, LLC v. Dorsin, 180 A.D.3d 1054, 1055 and 1057 (2nd Dep’t 2020), however, the Court reversed the order of the motion court and granted the borrower’s cross-motion to discharge the mortgage pursuant to RPAPL 1501(4) and for attorney’s fees pursuant to RPL 282 because the borrower’s answer preserved such claims and he affirmatively moved for such relief.
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.
[1] Eds. Note: this BLOG has written numerous articles addressing all aspects of residential mortgage foreclosure. To find BLOG articles related to foreclosure, visit the “BLOG” tile on our website and enter “foreclosure” (or any related topic of interest) in the “search” box.
[2] Eds. Note: this BLOG has written numerous articles addressing statutes of limitation issues in foreclosure actions. To find BLOG articles related to this issue, visit the “BLOG” tile on our website and enter “statute of limitations” in the “search” box.
[3] Eds. Note: this BLOG has written numerous articles addressing actions to quiet title pursuant to RPAPL § 1501(4). To find BLOG articles related to this issue, visit the “BLOG” tile on our website and enter “1501(4)” in the “search” box.
