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MortgagePoint ยป Your Trusted Source for Mortgage Banking and Servicing News 44 February 2024 F E A T U R E S T O R Y T he following issue is whether the prevailing party on a motion for relief is entitled to fees and costs per the underlying contract. Creditors are already in a vulnera- ble position once their borrower files a bankruptcy petition. From the disrup- tion of cash flow due to nonpayment of monthly debt obligations, to the fees and costs incurred in hiring counsel to assert their rights in the bankruptcy forum, is there an opportunity for the secured creditor to recoup fees and costs when they prevail on a motion for relief per the language of the underlying contract? Current case law is split as to whether this is a certainty for the prevailing party. Arguments for the Awarding of Fees and/or Costs L ook to specific contractual language: If the contract explicitly states that the prevailing party in any dispute, includ- ing motions for relief, is entitled to fees and/or costs, then this language would generally be given effect. Courts are often hesitant to override clear contractual provisions. Generally, some courts argue that the rationale behind prevailing party fee pro- visions, which is to discourage litigation and make the prevailing party whole, applies equally to motions for relief as it does to full-blown lawsuits. They reason that awarding fees and/or costs to the prevailing party on a motion incentivizes both parties to act reasonably and resolve their differences efficiently. Efficient administration of justice: Some courts find that awarding fees and/or costs on motions for relief can promote the efficient administration of justice by deterring frivolous motions and encouraging parties to focus on the merits of their claims. Arguments Against Awarding Fees and/or Costs L imited scope of motions for relief: Mo- tions for relief are generally consid- ered interlocutory proceedings, meaning they deal with procedural matters rather than the ultimate merits of the case. Some courts argue that it is premature to award fees and/or costs at this stage, as the ultimate outcome of the case is still uncertain. Potential for abuse: Awarding fees and/or costs on motions for relief could create an incentive for parties to file frivolous motions simply to recoup their fees. This could increase litigation costs and burden the court system. Contractual silence: If the contract is silent on the issue of fees and/or costs for motions for relief, then some courts argue that the prevailing party is not en- titled to them. In these cases, the general rule that each party bears its own fees and costs applies. Case Law I t is important to note that the relevant case law will vary depending on the specific jurisdiction and the language of the underlying contract. However, here are some examples of cases that have gone both ways: Cases supporting awarding fees and/ or costs: In re Estate of Miller, 872 N.E.2d 355 (Ill. App. Ct. 2007): The court held that the prevailing party on a motion for summa- ry judgment was entitled to fees and/or costs under the underlying contract, even though the contract was silent on the issue of motions for relief. Johnson v. Equitable Life Assurance Soci- ety of the United States, 838 F. Supp. 547 (D. Kan. 1993): The court held that the prevail- ing party on a motion to compel arbitra- WHO PICKS UP THE TAB? . B y J A S O N C . T A T M A N , E S Q . As the President of Tatman Legal, J A S O N C . T A T M A N , E S Q . is responsible for the operation of the firm across its multistate platform. In this role, Tatman oversees all aspects of the firm's diverse practice areas, including, but not limited to, mortgage default services, litigation services, commercial and residential real-estate transaction services, multistate evictions, regulatory compliance, and homeowners' association issues and concerns. For more information, please visit tatmanlegal.com.