Attorney Fee Claims In Foreclosure Actions

Lenders pursuing foreclosure actions in states requiring judicial foreclosures should be mindful that claims for attorneys’ fees in foreclosure actions may need to be resolved in order to prevent enforcement issues.  A common procedural scenario under which the attorney fee issue may arise is when a lender seeks summary judgment in the foreclosure. 

Lenders pursuing foreclosure actions in states requiring judicial foreclosures should be mindful that claims for attorneys’ fees in foreclosure actions may need to be resolved in order to prevent enforcement issues.  A common procedural scenario under which the attorney fee issue may arise is when a lender seeks summary judgment in the foreclosure.  Many lenders are entitled to recover their attorneys’ fees in foreclosure actions pursuant to the terms of the financing.  Under Kentucky law there is support for the argument that a summary judgment order reserving the determination of attorneys’ fees is not a final judgment.  Therefore, although the summary judgment order may resolve the foreclosure issues, it is important to ensure that the lender’s request for attorneys’ fees is also resolved in the summary judgment order to prevent enforcement issues. 

The test for determining whether an order reserving the determination of a claim for attorneys’ fees is final under Kentucky law was announced in Francis v. Crounse Corp., 98 S.W.3d 62 (Ky. Ct. App. 2002).  In Francis the court stated:

We conclude that the determination of whether the judgment is final when the amount of the attorney fees has not been resolved should rest on whether attorney fees were part of the claim or whether they were collateral to the merits of the action as was the case in Shelton. If attorney fees were part of Francis’s civil rights violation claim, then the judgment was not final and appealable under CR 54.02(1).

Id. at 67.  In Francis the court held that trial court orders at issue in that case were interlocutory because they reserved the determination of Francis’ claim for attorneys’ fees in the orders.  Id.  Francis’ claim for attorneys’ fees was alleged in his compliant pursuant to statutory mandate.  Id.

However, it is arguable that Francis cannot be interpreted narrowly as holding that attorney fee claims that are not statutorily mandated are collateral to the merits of an action.  Compare Mitchell v. Mitchell, 2010 WL 3928481, 5 (Ky. Ct. App.) (holding that the defendant’s separate motion for attorneys’ fees did not render the court’s order on plaintiff’s motion for spousal maintenance interlocutory because the order did not address defendant’s request for attorneys’ fees), with Hazelwood v. Hazelwood, 2008 WL 2152349, 1 (Ky. Ct. App.) (holding that an order on a motion to increase child support was not final because the issue of attorneys’ fees was reserved). 

In Hazelwood, the court explained that in reaching its conclusion that the attorney fee issue was not collateral, the court viewed “as pivotal the fact that [the plaintiff] requested an award of attorney’s fees in her motion for child support modification.”  Hazelwood, 2008 WL 2152349, 1.  In Mitchell, the court noted that the only “claim” before the court was plaintiff’s motion to modify maintenance and defendant’s motion for fees did not constitute a separate claim or right so as to create a multi-claim case.

Accordingly, the most cautious approach under Kentucky law is to not pursue enforcement of a summary judgment order in a foreclosure action until all claims, including any claims for attorneys’ fees are resolved. 

Posted by: Michele Lorbieski Anderson

Categories: Bankruptcy & Banking Law, Kentucky