Issue link: http://dsnews.uberflip.com/i/1045676
70 e published portion of the appeal did not focus on Chase's right to recover fees or the amount of the fees. Instead, the decision focused on whether paragraphs 9 and 14 of the DOT limit Chase to adding the fees to the amount owed under the DOT, or whether these provi- sions supported a separate judgment against the borrower, independent of its repayment obliga- tions under the note and the DOT. Paragraph 9 of the relevant DOT provided that the lender may pay reasonable attorney's fees to protect its interest in the property or DOT. However, the plain language of the DOT specifies that "any amounts disbursed by Lender under this Section 9 shall become additional debt of the Borrower secured by this [DOT]." e court held that the plain language of paragraph 9 did not provide for a separate award of attorney's fees. Likewise, paragraph 14 of the DOT states that the lender may "charge" the borrower fees for services per- formed in connection with borrower's default, for the purpose of protecting lender's interest in the property or DOT, including attorney's fees. However, again, the plain language of this paragraph provides that the attorney's fees are to be added or "charged" to the loan balance. As a result, paragraph 14 did not permit a freestand- ing contractual attorney fee award. Paragraphs 9 and 14 of Chase's DOT reflect the standard language used by most institutional residential lenders. Adding insult to injury, and leading to its quote from Justice Scalia, the court rejected Chase's point that the adding of the fees to the loan balance did nothing to assist Chase in recovering the fees it had incurred because it no longer had any interest in the loan, as the rights had been assigned to another financial institu- tion and therefore would not be paid out of any subsequent foreclosure. e court observed that Chase could have protected itself against that re- sult by including language in the assignment "to account for how attorney fees may be recovered when a borrower defaults." In Hart, two plaintiffs (mother and son) sued Nationstar for wrongful foreclosure. Neither plaintiff was the borrower under the DOT, and the sole borrower was not a party to the action. Nationstar obtained summary judgment on the basis that the plaintiffs were not borrowers, and therefore had no rights under the DOT, and had no right to sue to stop the foreclosure. Nationstar's attorneys sought its attorney's fees as a prevailing party under the DOT. Unlike in Chacker, Nationstar relied exclusively on the attorney fee language in paragraph 9 of the DOT. Like Chase's DOT, paragraph 9 of Nationstar's DOT provided that if there is a legal proceeding that might signifi- cantly affect the lender's interest in the property or security, the lender may do and pay for what- ever is reasonable to protect the lender's interest, including paying attorney's fees to defend itself in a lawsuit. e provision then provides that "[a]ny amounts disbursed by Lender under this Section 9 shall become additional debt of Bor- rower secured by this Security Instrument." e trial court granted Nationstar's attorney's fees motion, holding that paragraph 9 of the DOT was an attorney's fees provision. e Court of Appeals reversed, however, holding that para- graph 9 did not permit an award of attorneys' fees against the plaintiffs. On appeal, Nationstar argued that it was entitled to a fee award under paragraphs 9, 14, and 22 of the DOT, as well as the note. e Court of Appeals refused to consider on appeal whether paragraphs 14 or 22 of the DOT, or the note itself, justified an award because Nationstar had failed to raise these arguments at the trial court level. Instead, the court focused exclu- sively on what was before it—paragraph 9. Like in Chacker, the court concluded that the plain language of paragraph 9 does not provide for an award of attorney's fees. Rather, it is "a provision that attorney's fees, like any other expenses the lender may incur to protect its interest, will be added to the secured debt." e court did, however, note that the result may have been different had Nationstar moved originally under paragraph 22. Likewise, and as discussed more below, we believe the result could be differ- ent if the lender had moved for fees under the language in the note. SPEEDBUMPS ALONG THE WAY What do these decisions mean for a lender or servicer who successfully defends a chal- lenge to the foreclosure or DOT brought by the borrower or a related party? While the Hart and Chacker decisions are disheartening on their face, there are options for getting around their holdings. In addition, the decisions raise several interesting issues for a lender or loan servicer to consider, including: Review your DOT: While most institutional lenders use DOTs with similar language to the ones at issue in these two cases, the language in conventional, private party, and some older DOTs vary. At the onset of your case, we sug- gest looking at your specific DOT to determine As the court, quoting the late Justice Scalia in another context, stated, the assignor "must take the bitter with the sweet."