On March 23, the Supreme Court issued a unanimous decision in Nationstar Mortgage v. Robert R. Stafsholt, 2018 WI 21. The court held that circuit courts, acting in equity, have the power to award attorney fees to prevailing parties. In this case, the court held that the defendant was entitled to attorney fees but was not exempt from paying interest on a loan during the time of litigation.
In this case, Robert and Colleen Stafsholt obtained a mortgage that required them to maintain insurance on their home. The bank (Bank of America, at the time – the mortgage eventually changed hands to Nationstar) sent a letter to the Stafsholts informing them it would purchase and charge them for lender placed insurance (LPI) if they did not provide proof of homeowner’s insurance. The Stafsholts sent proof of insurance but continued to receive charges for LPI on their mortgage account.
When Stafsholt called the bank to get the charge removed, the bank representative told him he should skip a mortgage payment and become delinquent in order to reach the next level of customer service. Stafsholt followed the representative’s instructions but never reached the next level of customer service. Instead, the bank accelerated his mortgage, continued to charge LPI, ignored Stafsholt’s offers to reinstate the loan, and eventually filed a foreclosure action against Stafsholt.
The issue before the Supreme Court was whether Stafsholt could recover attorney fees and whether the bank could recover interest accrued during the time of litigation.
The Supreme Court held that circuit courts do have the power to award attorney fees in equitable actions in exceptional cases. The court ruled this an “exceptional” case because the bank intentionally caused the dispute and its “conduct was an attempt to use Wisconsin courts to extort the LPI charges from Stafsholt.”
However, the court also held that the bank could still collect interest accrued during litigation because Stafsholt would “receive a windfall” if he was exempt from interest and received attorney fees.
Source: Wisconsin Civil Justice Council