Title: Nationstar Mortgage LLC v. Stafsholt
Citation: N/A
Docket Number: 2015AP001586
State: Wisconsin
Issuer: Wisconsin Supreme Court
Date: March 23, 2018

2018 WI 21 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2015AP1586 
COMPLETE TITLE: 
Nationstar Mortgage LLC n/k/a Bank of America, 
NA, as successor by merger to BAC Home Loans, 
          Plaintiff-Appellant-Cross-Respondent, 
     v. 
Robert R. Stafsholt, 
          Defendant-Respondent-Cross-Appellant-       
Petitioner, 
Colleen Stafsholt f/k/a Coleen McNamara, unknown 
spouse of Robert R. Stafsholt, unknown spouse of 
Colleen Stafsholt, f/k/a Colleen McNamara, 
Richmond Prairie Condominiums Phase I, 
Association and The First Bank of Baldwin, 
          Defendants. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
Reported at 373 Wis. 2d 309, 895 N.W.2d 103 
(2017 – Unpublished) 
 
 
OPINION FILED: 
March 23, 2018 
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
October 23, 2017 
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit 
 
COUNTY: 
St. Croix 
 
JUDGE: 
Scott R. Needham 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
      
 
DISSENTED: 
      
 
NOT PARTICIPATING: ABRAHAMSON, J. did not participate.    
 
 
 
ATTORNEYS: 
 
 
For 
the 
defendant-respondent-cross-appellant-petitioner, 
there were briefs filed by Nathan M. Brandenburg, Steven J. 
Weintraut, and Siegel, Brill, P.A., Minneapolis, Minnesota.  
There was an oral argument by Steven J. Weintraut. 
 
For the plaintiff-appellant-cross respondent, there was a 
brief filed by Amy M. Salberg and Salberg Law Firm, LLC, West 
Bend.  There was an oral argument by Amy M. Salberg. 
 
 
2018 WI 21
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.    2015AP1586 
(L.C. No. 
2011CV224) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Nationstar Mortgage LLC n/k/a Bank of America, 
NA, as successor by merger to BAC Home Loans, 
          Plaintiff-Appellant-Cross-Respondent, 
    
  v. 
 
Robert R. Stafsholt, 
          Defendant-Respondent-Cross-Appellant- 
          Petitioner, 
 
Colleen Stafsholt f/k/a Coleen McNamara, 
unknown spouse of Robert R. Stafsholt, unknown 
spouse of Colleen Stafsholt, f/k/a Colleen 
McNamara, Richmond Prairie Condominiums  
Phase I, Association and The First Bank of 
Baldwin, 
          Defendants. 
FILED 
 
MAR 23, 2018 
 
Sheila T. Reiff 
Clerk of Supreme Court 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Reversed and 
cause remanded.   
 
¶1 
MICHAEL J. GABLEMAN, J.   This is a review of an 
unpublished, per curiam decision of the court of appeals 
reversing the St. Croix County Circuit Court's1 order awarding 
attorney fees and costs to Robert Stafsholt ("Stafsholt") and 
                                                 
1 The Honorable Scott R. Needham presided. 
No. 2015AP1586    
 
2 
 
against Nationstar Mortgage LLC ("Nationstar") on the basis of 
equitable estoppel.  Nationstar Mort. LLC v. Stafsholt, No. 
2015AP1586, unpublished slip op. (Wis. Ct. App. Dec. 28, 2016) 
(per curiam). 
¶2 
Stafsholt raises two issues for our review.2  First, 
whether the circuit court properly awarded attorney fees to 
Stafsholt.  Within this issue are two sub-issues:  (a) whether 
circuit courts acting in equity possess the power to award 
attorney fees to prevailing parties in order to make them whole; 
and (b) if so, whether the circuit court properly exercised its 
discretion in this case.  Second, whether the circuit court 
erroneously exercised its discretion in allowing Nationstar to 
collect interest on the principal amount of the loan during the 
default period. 
¶3 
We reverse the decision of the court of appeals.  As 
to the first issue, circuit courts may include attorney fees as 
part of an equitable remedy "in exceptional cases and for 
                                                 
2 Stafsholt also asks this court to decide whether circuit 
courts possess the inherent authority to award attorney fees.  
Stafsholt argues that circuit courts have the authority to award 
attorney fees as sanctions for egregious conduct committed 
during litigation.  See State ex rel. Godfrey & Kahn, S.C. v. 
Circuit Court for Milwaukee Cty., 2012 WI App 120, ¶43, 344 
Wis. 2d 610, 823 N.W.2d 816.  Because we hold that attorney fees 
may be awarded as an equitable remedy, it is unnecessary to 
address the question of the circuit court's inherent authority.  
See Md. Arms Ltd. P'ship v. Connell, 2010 WI 64, ¶48, 326 
Wis. 2d 300, 786 N.W.2d 15 (citations omitted) ("[A]n appellate 
court should decide cases on the narrowest possible grounds.  
Issues that are not dispositive need not be addressed."). 
No. 2015AP1586    
 
3 
 
dominating reasons of justice."  Sprague v. Ticonic Nat'l Bank, 
307 U.S. 161, 167 (1939).  The circuit court properly exercised 
its discretion because it applied the proper standard of law to 
the facts of record when it concluded that Bank of America acted 
in bad faith and then awarded attorney fees to Stafsholt. 
¶4 
As to the second issue, we hold that Nationstar may 
collect interest accrued during litigation because Stafsholt 
would receive a windfall if he was both excused from paying 
interest and received his attorney fees.  We remand the matter 
to the circuit court for determination of the reasonable 
attorney fees Stafsholt incurred before the court of appeals and 
this court, and to then calculate the balance of the loan. 
I.  FACTUAL AND PROCEDURAL BACKGROUND 
¶5 
Stafsholt 
and 
his 
ex-wife 
Colleen 
Stafsholt 
("Colleen") owned property in New Richmond, Wisconsin.  In 
October 2002, Colleen executed a note in the amount of $208,000, 
which was secured by a mortgage on the property owned by 
Stafsholt and Colleen.  Though the mortgage changed hands many 
times, only four servicers are relevant to this appeal:  Bank of 
America ("BOA") was the servicer while the events underlying 
this case took place; Ocwen Loan Servicing, LLC ("Ocwen") and 
BAC Home Loans ("BAC") were both servicers while this case was 
pending at the circuit court; and  Nationstar Mortgage LLC 
("Nationstar") has serviced the loan from the time of post-trial 
motions through the present appeal. 
¶6 
One of the terms in the mortgage requires the 
Stafsholts to maintain insurance on their home.  In July 2010, 
No. 2015AP1586    
 
4 
 
Colleen received two letters from BOA asking for proof of 
insurance for the time period beginning June 2010, when the 
previous policy expired.  BOA informed Colleen it would purchase 
Lender Placed Insurance ("LPI") if it did not receive the 
requested proof of insurance.  If BOA received proof of 
insurance that demonstrated no lapse in coverage, it would 
cancel any LPI purchased at no charge.  In September, BOA 
purchased LPI and notified the Stafsholts of its purchase.3 
¶7 
After receiving the notice from BOA regarding the 
purchase of the LPI, Stafsholt called BOA because he was 
                                                 
3 The incident at issue in this case followed three similar 
situations involving LPI.  First, in early 2008, Countrywide 
Home Loans, then the loan's servicer, sent Colleen two notices 
informing her that it would purchase LPI and charge it to the 
loan account if Colleen did not submit satisfactory proof of 
insurance.  Countrywide purchased LPI on April 2, 2008, but 
received proof of insurance from Colleen on April 23, 2008; the 
LPI was canceled, at no cost to the Stafsholts, on April 25, 
2008. 
Next, in June of 2009, BOA, then servicing the loan, sent 
Colleen a notice that it would purchase LPI if it did not 
receive proof of insurance by August 12, 2009.  The requisite 
proof was provided, and no LPI charge was incurred. 
Finally, in September 2009, BOA again sent Colleen a notice 
that it would purchase LPI if it did not receive proof of 
insurance within 30 days.  This deadline was then extended to 
October 25, 2009.   BOA purchased LPI and charged it to the loan 
account on October 26, 2009.  The charge was reversed on 
December 24, 2009, after BOA received proof of coverage on 
December 21, 2009. 
For the incident at issue in this case, the record shows 
that Stafsholt's insurance agent faxed proof of coverage to BOA 
no later than April 26, 2011. 
No. 2015AP1586    
 
5 
 
"irritated" that BOA continued to fail to recognize the 
insurance he purchased.  Stafsholt requested the LPI be taken 
off his account.  The BOA representative with whom Stafsholt 
spoke informed him she could not do anything about the LPI 
charge, and he would need to speak with "the next elevated level 
of customer service" to have the charge removed.  The 
representative told Stafsholt that the only way he could reach 
the next level of customer service was to skip a mortgage 
payment and become delinquent.4 
¶8 
Stafsholt followed the phone representative's advice 
and skipped his September and October payments in order to reach 
the next level of customer service, even though he had the 
financial ability to pay his mortgage.  Stafsholt never 
communicated with the next level of BOA customer service.  
Instead, he received a letter dated September 16, 2010, 
detailing BOA's intent to accelerate the mortgage. 
¶9 
BOA charged Stafsholt for LPI from December 2010 
through July 2012, as evidenced by various reinstatement quotes 
that always included LPI.  Stafsholt called BOA five times 
between December 30, 2010, and January 27, 2011, in an effort to 
                                                 
4 BOA contested Stafsholt's version of events at trial, but 
the circuit court found Stafsholt more credible than the 
representative designated by BOA to testify about the company's 
usual policies and procedures.  Nationstar does not dispute this 
factual finding to this court, and nothing in the record 
indicates the circuit court's credibility determination is 
clearly erroneous.  See E-Z Roll Off, LLC v. Cty. of Oneida, 
2011 WI 71, ¶17, 335 Wis. 2d 720, 800 N.W.2d 421 ("a factual 
finding . . . may not be overturned unless clearly erroneous"). 
No. 2015AP1586    
 
6 
 
get the LPI charges removed from his account to no avail.  He 
then sent BOA an offer to reinstate the loan in May 2011.  The 
offer was for $10,573.60, which represented nine monthly loan 
payments, without LPI or other fees, less $500 for expenses.  
Stafsholt continued to make similar offers before trial, but BOA 
never responded. 
¶10 BAC, then servicing the loan, filed a foreclosure 
action against the Stafsholts in February 2011 based on the 
default.  After a series of mergers and assignments, Ocwen 
became the loan's servicer and was substituted as plaintiff in 
December 2013. 
¶11 Stafsholt raised equitable estoppel as an affirmative 
defense.  He asserted that Ocwen was "estopped from foreclosing 
on the property" because its predecessors-in-interest "created 
the dispute" and "induced" the default.  Stafsholt's answer also 
raised a number of counterclaims:  (1) breach of contract; (2) 
breach of the implied covenant of good faith and fair dealing; 
(3) equitable estoppel; (4) a request for declaratory judgment; 
and (5) assignment of the mortgage pursuant to Wis. Stat. 
§ 846.02 (2013-14).5 
¶12 Following a bench trial, the circuit court issued 
findings of fact and conclusions of law in April 2015.  The 
circuit court made four key conclusions of law for purposes of 
this appeal:  (1) BOA improperly charged the Stafsholts for LPI; 
                                                 
5 All subsequent references to the Wisconsin Statutes are to 
the 2013-14 version unless otherwise indicated. 
No. 2015AP1586    
 
7 
 
(2) the Stafsholts established the affirmative defense of 
equitable estoppel because BOA "caused the Stafsholts to default 
on the Mortgage and Note" through the "misrepresentations of the 
BOA agent"; (3) BOA and its successors improperly commenced and 
maintained the foreclosure proceeding from February 2011 to the 
date of the order (April 2015); and (4) BOA breached the implied 
covenant of good faith and fair dealing. 
¶13 The circuit court concluded that due to BOA's improper 
actions, Stafsholt was entitled to a declaratory judgment 
finding 
that 
BOA 
breached 
the 
note 
and 
mortgage 
and, 
furthermore, that Ocwen could not recover the costs and expenses 
incurred by Ocwen and its predecessors-in-interest.  Based on 
these conclusions, the circuit court dismissed the foreclosure 
action and reinstated the Stafsholts' mortgage.  The court 
permitted Ocwen to recover $172,108.17, which represented the 
principal balance of the loan.  The court did not allow Ocwen to 
recover interest that accrued during litigation, nor did it 
allow Stafsholt to recover his attorney fees. 
¶14 Stafsholt moved for reconsideration, claiming that the 
principal balance of the loan due was actually $10,167.38.  
Stafsholt argued that because of the attorney fees and other 
costs he incurred as a result of the litigation, he was "left in 
a worse financial position than he would have been had he just 
done what most homeowners do . . . :  capitulate and pay the 
improper charges."  Stafsholt reached his balance through the 
following calculations:  $172,108.17 of principal as of the 
No. 2015AP1586    
 
8 
 
default minus $71,940.79 for attorney fees and costs,6 and a 
$90,000 payment he made in April 2015.  
¶15 The circuit court granted in part Stafsholt's motion 
for reconsideration.  It concluded that Stafsholt was entitled 
to recover a portion of his attorney fees and costs based on 
equitable estoppel.  The court reasoned that equitable estoppel 
allowed Stafsholt to receive an offset for his attorney fees 
because it "is used to 'prevent the assertion of what would 
otherwise be an unequivocal right.'"  That is, equitable 
estoppel applies to preclude Nationstar from recovering the 
entire balance on the note, which would otherwise be an 
unequivocal right.  The court concluded that the remedy in this 
case "should serve to make [Stafsholt] whole." 
¶16 The circuit court utilized the factors outlined in 
Standard Theatres v. DOT, 118 Wis. 2d 730, 349 N.W.2d 661 
(1984), to determine the reasonableness of the attorney fees 
sought by Stafsholt.  The court reduced Stafsholt's claimed 
attorney fees and costs of $71,940.79 by ten percent ($7,194.08) 
using 
the 
"lodestar 
method," 
as 
articulated 
in 
Standard 
                                                 
6 Stafsholt never separately itemizes his attorney fees and 
costs.  Based on our review of the record, it appears Stafsholt 
reached this amount by adding $68,119.00 for attorney fees 
actually billed at the time of the motion for reconsideration, 
$1,600 expected to be billed for the motion for reconsideration, 
and $2,221.79 billed for costs at the time of the motion for 
reconsideration.  
No. 2015AP1586    
 
9 
 
Theatres,7 resulting in an award of $64,746.71 for attorney fees.  
The circuit court then deducted $40,239.82 from the attorney fee 
award, representing the amount of interest the court had 
previously denied, because the court concluded that allowing 
Stafsholt to recover attorney fees and not pay interest accrued 
during litigation would be a windfall for Stafsholt.  This left 
a net award of $24,506.89 in attorney fees and costs. 
                                                 
7 In Standard Theatres, we utilized the factors listed in 
SCR 20:12 to determine whether an award of attorney fees was 
proper.  Standard Theatres v. DOT, 118 Wis. 2d 730, 749, 349 
N.W.2d 661 (1984).  Those factors are: 
(a) The time and labor required, the novelty and 
difficulty of the questions involved and the skill 
requisite to perform the legal service properly. 
(b) The likelihood, if apparent to the client, that 
the acceptance of the particular employment will 
preclude other employment by the lawyer. 
(c) The fee customarily charged in the locality for 
similar legal services. 
(d) The amount involved and the results obtained. 
(e) The time limitations imposed by the client or by 
the circumstances. 
(f) 
The 
nature 
and 
length 
of 
the 
professional 
relationship with the client. 
(g) The experience, reputation and ability of the 
lawyer or lawyers performing the services. 
(h) Whether the fee is fixed or contingent. 
Id. at 730 n.9.   
No. 2015AP1586    
 
10 
 
¶17 The court then held that the remaining principal 
balance on the loan was $57,601.28.  It reached this number by 
subtracting the allowed attorney fees of $24,506.89 and the 
$90,000 payment made by Stafsholt from the principal balance of 
$172,108.17 ($24,506.89 + $90,000.00 = $114,506.89; $172,108.17 
- $114,506.89 = $57,601.28).  The court ordered Ocwen to assign 
the mortgage to Stafsholt pursuant to Wis. Stat. § 846.02(1) if 
Stafsholt paid the amount due by August 1, 2015. 
¶18 Nationstar, which was substituted as plaintiff after 
acquiring 
the 
note, 
appealed 
the 
order 
dismissing 
the 
foreclosure and the portion of the order granting Stafsholt's 
claims for attorney fees and costs.  Stafsholt cross-appealed, 
arguing that the circuit court erred in reducing his requested 
attorney fees and costs. 
¶19 The court of appeals affirmed the circuit court's 
holding that BOA breached the implied covenant of good faith and 
fair dealing when it charged Stafsholt for LPI.  Nationstar, 
unpublished slip op., ¶37.  The court of appeals concluded that 
the circuit court's finding that BOA committed wrongful actions 
in telling Stafsholt to default on his mortgage was supported by 
the 
record; 
therefore, 
it 
affirmed 
the 
circuit 
court's 
determination that Stafsholt established equitable estoppel as 
an affirmative defense.  Id., ¶¶39, 55.  The court also affirmed 
the circuit court's grant of declaratory judgment to Stafsholt 
on his breach of contract claim because Stafsholt did, in fact, 
have proof of insurance and did supply BOA with that proof.  
No. 2015AP1586    
 
11 
 
Id., ¶58.  Consequently, Nationstar was not entitled to collect 
costs and fees for LPI or the foreclosure.  Id., ¶70-71. 
¶20 However, the court of appeals reversed the circuit 
court's award of attorney fees to Stafsholt.  In doing so, it 
relied on the American Rule ("parties to litigation typically 
are responsible for their own attorney's fees") to conclude that 
the circuit court did not have the power to award attorney fees 
in this case.  Id., ¶¶61-62.  It declined to address Stafsholt's 
argument that the circuit court possessed the inherent authority 
to award his attorney fees because the argument was not raised 
in the circuit court and, furthermore, was first raised in 
Stafsholt's reply brief to the cross-appeal, which deprived 
Nationstar of any opportunity to respond.  Id., ¶67. 
¶21 Finally, the court of appeals reversed the circuit 
court 
as 
to 
Nationstar's 
collection 
of 
interest 
during 
litigation.  Id., ¶75.  The court of appeals held that the 
circuit court's analysis was  
a fair and logical way to resolve the parties' dispute 
over Nationstar's recovery of interest. . . . However, 
in practice, applying this analysis in the instant 
case would result in accomplishing by indirect means 
what we have already determined cannot be done 
directly:  awarding Stafsholt a portion of his 
attorney fees and costs. 
Id.  The court of appeals then remanded to the circuit court to 
determine "whether there are other grounds on which the circuit 
court could have determined it was appropriate to prohibit 
Nationstar from recovering interest."  Id., ¶76. 
No. 2015AP1586    
 
12 
 
¶22 Stafsholt filed a petition for review in this court, 
which we granted on April 10, 2017.  Nationstar did not file a 
cross-petition for review.  Consequently, we consider only the 
issues raised by Stafsholt. 
II.  STANDARD OF REVIEW 
¶23 Whether circuit courts possess the power to award 
attorney fees as part of an equitable remedy is a question of 
law we review de novo.  GMAC Mortg. Corp. v. Gisvold, 215 
Wis. 2d 459, 480, 572 N.W.2d 466 (1998).  The circuit court's 
decision to grant equitable remedies is reviewed for an 
erroneous exercise of discretion.  Prince Corp. v. Vandenberg, 
2016 WI 49, ¶16, 369 Wis. 2d 387, 882 N.W.2d 371. 
III.  ANALYSIS 
¶24 We first consider whether circuit courts possess the 
power to award attorney fees as an equitable remedy to a 
prevailing party in order to make that party whole.  We hold 
that attorney fees may be awarded as an equitable remedy "in 
exceptional cases and for dominating reasons of justice."  
Sprague, 307 U.S. at 167.  We further hold that the circuit 
court properly exercised its discretion when it awarded attorney 
fees to Stafsholt. 
¶25 We next consider whether the circuit court properly 
exercised its discretion when it awarded accrued interest to 
Nationstar.  We hold that Nationstar is entitled to recover 
interest accrued during litigation, and thus remand to the 
circuit court to calculate the balance of the loan. 
 
No. 2015AP1586    
 
13 
 
A.  The Circuit Court Properly Exercised its Equitable 
Discretion when it Awarded Attorney Fees to Stafsholt. 
 
¶26 We first consider whether circuit courts possess the 
power to award attorney fees to prevailing parties in equitable 
actions such as this foreclosure proceeding.8  We hold that 
circuit courts sitting in equity do possess the power to award 
attorney fees "in exceptional cases and for dominating reasons 
of justice."  Sprague, 307 U.S. at 167.  Next, we consider 
whether the circuit court properly exercised its discretion when 
it awarded attorney fees to Stafsholt and hold that it did. 
 
1. Attorney Fees as a remedy in equitable actions 
 
¶27 Under the American Rule, each party is generally 
responsible for its own attorney fees.  Estate of Kriefall v. 
Sizzler USA Franchise, Inc., 2012 WI 70, ¶72, 342 Wis. 2d 29, 
816 N.W.2d 853.  A limited number of exceptions to the American 
Rule allow a prevailing party to recover its attorney fees.  Id.  
See also 3 Robert J. Kasieta et al., Law of Damages in Wisconsin 
§ 37.7-37.18 (7th ed. 2017).9 
                                                 
8 "Foreclosure proceedings are equitable in nature, and the 
circuit court has the equitable authority to exercise discretion 
throughout the proceedings."  GMAC Mortg. Corp. v. Gisvold, 215 
Wis. 2d 459, 480, 572 N.W.2d 466 (1998).  
9 Other exceptions to the American Rule include insurer bad 
faith, third-party litigation, and the common-fund doctrine.  3 
Robert J. Kasieta et al., Law of Damages in Wisconsin § 37.10-
37.18 (7th ed. 2017). 
No. 2015AP1586    
 
14 
 
¶28 Because the primary purpose of equitable actions is to 
do justice between the parties, State v. Excel Mgmt. Servs., 
Inc., 111 Wis. 2d 479, 491, 331 N.W.2d 312 (1983), equitable 
actions are sometimes considered an exception to the American 
Rule where attorney fees are "necessary to effect an adequate 
remedy."  Kasieta, § 37.17.  We have never decided whether 
attorney fees may be awarded as an equitable remedy in 
Wisconsin.  We find two decisions from our court of appeals 
helpful to our consideration of the question.  In White v. 
Ruditys, 117 Wis. 2d 130, 141, 343 N.W.2d 421 (Ct. App. 1983), 
the court stated, in the context of punitive damages in 
equitable proceedings, "[e]quitable remedies are distinguished 
by 
their 
flexibility, 
their 
unlimited 
variety, 
their 
adaptability to circumstances, and the natural rules which 
govern their use.  There is in fact no limit to their variety 
and application . . . ."  The White court applied this broad 
rule regarding equitable remedies to attorney fees, holding that 
"a court of equity has a great deal of flexibility in fashioning 
its remedy . . . [which] includes the awarding of attorney 
fees."  Id. at 142. 
¶29 Five years later, the court of appeals concluded that 
"something more is needed . . . before attorney's fees can be 
ordered . . . " as a remedy in an equitable action.  Gundlach v. 
Estate of Pirsch (In re Estate of Pirsch), 148 Wis. 2d 425, 433, 
435 N.W.2d 317 (Ct. App. 1988).  That "something more" was 
defined as "something shocking, something of bad faith, fraud or 
No. 2015AP1586    
 
15 
 
deliberate dishonesty."  Id. (quoting In re P.A.H., 115 Wis. 2d 
670, 675, 340 N.W.2d 577 (Ct. App. 1983)). 
¶30 It is axiomatic that Wisconsin courts have broad 
flexibility to "adapt[] their decrees to the actual condition of 
the parties . . . so as to meet the very form and pressure of 
each particular case, in all its complex habitudes" in equitable 
actions.  Hall v. Bank of Baldwin, 143 Wis. 303, 312, 127 N.W. 
969 (1910) (quoting Garner, Neville & Co. v. Leverett, 32 Ala. 
410, 413-14 (1858)).  Remedies in equitable actions are without 
limit as to "their substance, their form, or their extent."  
Meyer v. Reif, 217 Wis. 11, 20, 258 N.W. 391 (1935) (quoting 1 
Pomeroy, 
Equity 
Jurisprudence, 
§ 111). 
 
The 
elements 
of 
"flexibility and expansiveness, so that new [remedies] may be 
invented, 
or 
old 
ones 
modified, 
in 
order 
to 
meet 
the 
requirements of every case" are the hallmarks of equity.  Id.  
¶31 This broad power to fashion equitable remedies has 
been utilized to award attorney fees.  See, e.g., Sprague, 307 
U.S. 161 (1939) (common-fund case) (holding that the district 
court has the power "in equity suits to allow counsel fees and 
other expenses entailed by the litigation not included in the 
No. 2015AP1586    
 
16 
 
ordinary taxable costs");10 Weinhagen v. Hayes, 179 Wis. 62, 190 
N.W. 1002 (1922) (third-party litigation case) (quoting McGaw v. 
Acker, Merral & Conduit Co., 111 Md. 153 (1901)) ("[W]here the 
wrongful acts of the defendant [have] involved the plaintiff in 
litigation with others, or placed him in such relation with 
others as to make it necessary to incur expense to protect his 
interest, such costs and expense should be treated as the legal 
consequences of the original wrongful act.").   
                                                 
10 There are factual distinctions between the case at bar 
and Sprague in that the latter concerns an award of attorney 
fees under the common fund doctrine, where ours, of course, does 
not. Sprague v. Ticonic Nat'l Bank, 307 U.S. 161 (1939). We 
apply the reasoning of Sprague here, however, for the same 
reason so many other courts have within so many varied factual 
contexts. That is, the central holding of Sprague is based on 
the nature and extent of the equitable authority of courts to 
fashion remedies it views as fair in equitable actions, such as 
those concerning mortgage foreclosures, and not on the specific 
equitable considerations at issue. See, e.g., In re Air Crash 
Disaster at Fla. Everglades, 549 F.2d 1006, 1018 (5th Cir. 1977) 
("Perhaps more significant than the decision [in Sprague] is the 
language explaining that the award of fees in a fund case is 
rooted in the inherent powers of equity."); Brisacher v. Tracy-
Collins Trust Co., 277 F.2d 519, 524 (10th Cir. 1960) ("The 
allowance of counsel fees for an opposing party has been 
committed to the discretion of the trial court in certain equity 
actions, but that discretion must be exercised in accordance 
with the admonition of Sprague, [meaning] such allowances are 
appropriate only in exceptional cases and for dominating reasons 
of justice."); Cleveland v. Second Nat'l Bank & Trust Co., 149 
F.2d 466, 469 (6th Cir. 1945) (holding that Sprague does not 
limit awarding attorney fees to common fund or class action 
cases; if "fair justice" permits, then awarding attorney fees in 
appropriate situations is "part of equity jurisdiction."); In re 
Appeal of Gadhue, 544 A.2d 1151, 1154 (Vt. 1987) (explaining the 
exceptions to the American Rule "are flexible [and] not 
absolute," concluding that "[t]o this end, we focus on the 
historic powers of equity courts to award attorney's fees as the 
needs of justice dictate."). 
No. 2015AP1586    
 
17 
 
¶32 We are mindful, however, that the power to award 
attorney fees as an equitable remedy is not unlimited——nor 
should it be, given the traditionally narrow character of 
exceptions to the American Rule.  See supra ¶27 n.9.  Rather, 
"such allowances are appropriate only in exceptional cases and 
for dominating reasons of justice."  Sprague, 307 U.S. at 167; 
see Pirsch, 148 Wis. 2d at 433; accord Baldwin v. Burger Chef 
Sys., Inc., 507 F.2d 841, 842 (6th Cir. 1974) (per curiam) ("A 
court exercising its equitable powers may award attorney's fees 
in certain extraordinary circumstances.").  "In the actual 
exercise of the power to award costs 'as between solicitor and 
client' all sorts of practical distinctions have been taken 
in[to account]."  Sprague, 307 U.S. at 167.  Traditionally, the 
power to award attorney fees as an equitable remedy was 
considered "wisely exercised . . . to prevent the use of the 
courts as machinery for extortion or chicanery."  Arthur L. 
Goodhart, Costs, 38 Yale L.J. 849, 862 (1929).  Thus, this power 
is reserved for situations where sanctions pursuant to Wis. 
Stat. § 802.05 will not suffice.  Chambers v. NASCO, Inc., 501 
U.S. 32, 46 (1991) (quoting Universal Oil Products Co. v. Root 
Refining Co., 328 U.S. 575, 580 (1946)).  In Chambers, the 
United States Supreme Court upheld the district court's award of 
attorney fees as an equitable remedy because imposition of 
sanctions pursuant to Federal Rule of Civil Procedure 11, the 
federal analogue to § 802.05, was insufficient to remedy bad-
faith conduct.  Id. at 50-51. 
No. 2015AP1586    
 
18 
 
¶33 In light of the foregoing, we reverse the court of 
appeals' determination that the circuit court did not possess 
the power to award attorney fees in this equitable proceeding.  
We next consider whether the circuit court properly exercised 
its discretion by:  (a) finding that BOA acted in bad faith; 
and, (b) awarding attorney fees to Stafsholt. 
 
2.  The circuit court properly exercised its discretion when it 
awarded attorney fees to Stafsholt. 
 
¶34 Having held that the circuit court possesses the power 
to award attorney fees, we must next consider whether the 
circuit court properly exercised its discretion by awarding 
attorney fees in this case.  We could address this one of two 
ways.  First, we could remand to the court of appeals to review 
the circuit court's exercise of discretion because the court of 
appeals did not do so in the first instance; rather, it held as 
a matter of law that "the circuit court lacked authority to 
award Stafsholt the attorney fees and costs he incurred in these 
foreclosure proceedings."  Nationstar, unpublished slip op., 
¶69.  Second, we could review the circuit court's exercise of 
discretion ourselves.  We conclude that the interests of 
efficiency are best served by reviewing the circuit court's 
discretion ourselves, as we are just as able to review the 
record as is the court of appeals.  See Raz v. Brown, 2003 WI 
29, ¶20, 260 Wis. 2d 614, 660 N.W.2d 647. 
¶35 A circuit court properly exercises discretion when it 
applies a correct legal standard to the facts of record.  Miller 
No. 2015AP1586    
 
19 
 
v. Hanover Ins. Co., 2010 WI 75, ¶29, 326 Wis. 2d 640, 785 
N.W.2d 493.  We hold the circuit court properly exercised its 
discretion in this case.  The circuit court articulated its 
reasoning as to why Stafsholt was entitled to attorney fees: 
 "BOA improperly charged the Stafsholts for the lender-
placed insurance.  This entire dispute was caused by 
BOA's poor record-keeping and business practices.  BOA 
caused this dispute by unnecessarily purchasing insurance 
for Stafsholt when he had always maintained insurance and 
provided proof of a Conforming Policy.  BOA improperly 
demanded that Stafsholt pay for the cost of the 
unnecessary lender-placed insurance and other costs.  BOA 
[b]reached the implied covenant of good faith and fair 
dealing." 
 "BOA caused the Stafsholts to default on the Mortgage and 
Note in September 2011.  Stafsholt acted in good faith 
and reliance on the misrepresentations of the BOA agent." 
 "[T]he Court agrees with Stafsholt . . . that the relief 
here should serve to make him whole." 
 "The egregious nature of Ocwen's conduct in handling this 
particular mortgage and subsequent foreclosure action 
necessitates . . . an equitable remedy . . . ." 
¶36 These conclusions find ample support in the record.  
The following findings of fact support the circuit court's 
conclusions: 
No. 2015AP1586    
 
20 
 
 "From June 27, 2008 to the present, Stafsholt has 
maintained a Conforming Policy that covers the [h]ome in 
satisfaction . . . of the Mortgage." 
 "[Stafsholt] called BOA because he was 'irritated' that 
BOA still failed to recognize that he had and had always 
maintained a 'Conforming Policy.'" 
 "Stafsholt asked the BOA representative what he needed to 
do to get the hazard insurance premium off of his 
mortgage and she responded that he had to pay the 
insurance charge because BOA had already taken out the 
hazard insurance premium and that she couldn't do 
anything about it.  The BOA representative also indicated 
that the next mortgage payment that Stafsholt made would 
be applied to accrued interest and then to the charge for 
the insurance, with none of the payment being applied to 
the principal." 
 "Stafsholt asked the BOA representative who he needed to 
talk to in order to get the escrow removed from his 
account and she said that she didn't have that authority.  
Stafsholt asked the BOA representative who did have the 
authority and she said that the only person would be the 
next elevated level of customer service.  She said that 
the only way that Stafsholt could get to that next level 
of customer service would be if he skipped a mortgage 
payment and became delinquent on the mortgage." 
 "The testimony of BOA representative Heather Pollock 
contradicting Stafsholt on the topic [of what he was told 
No. 2015AP1586    
 
21 
 
over the phone] was not credible.  Stafsholt was credible 
and consistent with the facts of the case, including 
BOA's policies [and] procedures . . . ."  
 "Stafsholt did not make [the September and October 2010 
mortgage] payments because he detrimentally relied on 
what the BOA representative told him regarding how to get 
to the next level of customer service. . . . Stafsholt's 
intent in not paying the mortgage was to follow the 
advice he received from the BOA representative; that if 
he skipped a mortgage payment, a higher ranking customer 
service 
representative 
could 
be 
reached 
and 
the 
insurance/escrow issue finally resolved."  
 When Stafsholt did as he was told and defaulted on his 
loan, "Stafsholt did not receive the next level of 
customer service when he failed to make his next mortgage 
payment.  Instead, he received [a letter] of intent to 
accelerate the Mortgage on September 16, 2010." 
 "On October 16, 2010, BOA sent Stafsholt another notice 
of intent to accelerate the mortgage." 
 "On December 14, 2010, BOA generated a reinstatement 
calculation, which stated that Stafsholt would have had 
to pay $8,528.16 by December 27, 2010 to cure the default 
and reinstate his loan.  Included in that calculation was 
the $2,822 cost of the lender-placed insurance even 
though Stafsholt had a conforming policy.  In addition to 
that cost, BOA also included fees for uncollected late 
charges ($184.56), property inspection fees ($15.00), 
No. 2015AP1586    
 
22 
 
foreclosure 
attorney/trustee 
fees 
($360.00) 
and 
foreclosure expenses ($225.00)."  
 "On May 11, 2011, Stafsholt's attorney, James Krupa, sent 
a letter to BOA offering to reinstate the loan for a 
payment of $10,573.60, which included nine monthly 
payments, less $500 in expenses.  BOA did not respond to 
that letter.  Stafsholt continued to attempt to reinstate 
the loan prior to trial." 
¶37 Our 
review 
of 
the 
record 
satisfies 
us 
that 
a 
reasonable circuit court judge could reach the conclusions made 
in this case.  Miller, 326 Wis. 2d 640, ¶30.  This is an 
"exceptional" case in which an award of attorney fees is proper 
"for dominating reasons of justice," Sprague, 307 U.S. at 167, 
because BOA intentionally caused this dispute when it told 
Stafsholt that defaulting on the loan was the only way the 
erroneous LPI charges could be removed from his account, but 
then proceeded to file a foreclosure action when Stafsholt 
followed its directions.  BOA doubled down on its bad faith by 
refusing Stafsholt's offers to reinstate the loan, without the 
erroneous LPI charges, before trial.  At its core, BOA's conduct 
was an attempt to use Wisconsin courts to extort the LPI charges 
from Stafsholt.  We will not allow Wisconsin courts to be used 
for this purpose.  See Goodhart, supra ¶32, at 862.   
¶38 Though we hold that the circuit court properly 
exercised its discretion in awarding attorney fees after the 
motion for reconsideration, we remand for the circuit court to 
determine Stafsholt's reasonable attorney fees at the court of 
No. 2015AP1586    
 
23 
 
appeals and this court, and then add that amount to the attorney 
fees previously awarded by the circuit court.  
 
B.  We Remand to the Circuit Court to Calculate the Remaining 
Balance on the Loan. 
 
¶39 In its original order, the circuit court did not allow 
Stafsholt to recover his attorney fees, and also prohibited 
Nationstar from collecting interest11 accrued during litigation.  
The circuit court found that the balance of the loan was 
$172,108.17, the principal balance on the date of default, and 
interest would accrue from April 15, 2015 (eight days after the 
order was signed).  The effect of the circuit court's action was 
to "pause" the loan during the foreclosure proceeding. 
¶40 In 
its 
order 
resolving 
Stafsholt's 
motion 
for 
reconsideration, the circuit court allowed Stafsholt to recover 
his attorney fees, but deducted the interest accrued during 
litigation from the amount of attorney fees Stafsholt was 
entitled to recover.   The court held that Stafsholt would 
receive a windfall if he recovered his attorney fees and was 
relieved of his obligation to pay accrued interest. 
¶41 The court of appeals agreed that the circuit court 
could limit Nationstar's collection of interest as part of its 
equitable powers.  Nationstar, unpublished slip op., ¶75.  
                                                 
11 When we discuss "interest," we mean the standard interest 
Stafsholt was obligated to pay on the note, not additional 
interest charges triggered by Stafsholt's default.  See also 
infra note 13. 
No. 2015AP1586    
 
24 
 
However, the court of appeals reversed the circuit court's 
denial of interest because "applying this analysis in the 
instant case would result in accomplishing by indirect means 
what we have already determined cannot be done directly:  
awarding Stafsholt a portion of his attorney fees and costs."  
Id.  The court then remanded to determine if another basis 
existed to prohibit Nationstar's collection of interest.  Id., 
¶76. 
¶42 Circuit courts have the power to limit a lender's 
collection of interest accrued while litigation is pending as 
part of its equitable power to make the aggrieved party whole.  
Excel Mgmt. Servs., 111 Wis. 2d at 490; accord Hall, 143 
Wis. 2d at 412.  In this case, the circuit court properly 
exercised this discretion by allowing Stafsholt to recover 
attorney fees or be excused from interest payments while 
No. 2015AP1586    
 
25 
 
litigation was pending, but not both.12  Allowing Stafsholt to 
avoid paying interest while litigation was pending and recover 
his attorney fees would put him in a better position than if the 
default never occurred because he would have paid interest 
during the time period litigation was pending if the default had 
not occurred. 
¶43 The circuit court is to calculate the balance of the 
loan using the following calculation:  principal balance at the 
time of default ($172,108.17), plus any fees Nationstar is 
                                                 
12 Because of the court of appeals' seemingly contradictory 
holdings on the interest issue, we clarify our mandate.  The 
court of appeals first stated that the circuit court properly 
exercised its discretion on the interest issue, Nationstar Mort. 
LLC v. Stafsholt, No. 2015AP1586, unpublished slip op., ¶75 
(Wis. 
Ct. 
App. 
Dec. 
28, 
2016) 
(per 
curiam) 
("The 
analysis . . . appears to be a fair and logical way to resolve 
the parties' dispute over Nationstar's recovery of interest."), 
but then concluded that the circuit court prohibited Nationstar 
from collecting interest as a proxy for awarding attorney fees.  
Based on its previous holding regarding attorney fees, the court 
of appeals concluded that the circuit court could not prohibit 
collection of interest as a proxy for awarding attorney fees.  
Id. ("However, in practice, applying this analysis . . . would 
result in accomplishing by indirect means what we have already 
determined cannot be done directly . . . .").  The court of 
appeals' ultimate holding is flawed because, as we stated above, 
the circuit court did have the power to award attorney fees in 
this case.  Thus, we reverse the decision of the court of 
appeals, though we agree with its initial statement that the 
circuit court properly exercised its discretion by allowing 
Nationstar to collect interest while awarding Stafsholt his 
attorney fees. 
No. 2015AP1586    
 
26 
 
rightfully entitled to collect13 (to be determined on remand), 
plus contractual interest on the principal balance accrued 
during the default period that Nationstar is rightfully entitled 
to collect14 (to be determined on remand), minus Stafsholt's 
reasonable attorney fees incurred in the original circuit court 
litigation ($64,746.71), minus Stafsholt's reasonable attorney 
fees incurred during the appeal process (to be determined on 
remand),15 minus Stafsholt's payments ($90,000).  The result of 
this calculation is the total amount due on the loan.  The loan 
is then reinstated at this amount, subject to all contractual 
terms and conditions, including interest at the contractual 
                                                 
13 We agree with the court of appeals that "the circuit 
court 
properly 
exercised 
its 
discretion 
by 
prohibiting 
Nationstar from recovering any fees that were charged as a 
result of Stafsholt's default."  Nationstar, unpublished slip 
op., ¶71.  Therefore, Nationstar can recover only such fees as 
are unrelated to the default.  We leave to the capable hands of 
the circuit court to decide which, if any, of those fees 
unrelated to the default that Nationstar is rightfully entitled 
to collect. 
14 Stafsholt 
indicated 
in 
briefing 
that 
he 
tendered 
$57,601.28 to Nationstar on July 28, 2015, which represents the 
outstanding balance on the loan as established by the circuit 
court's June 16, 2015 order.  Nationstar rejected this tender.  
On remand, the circuit court should consider whether Nationstar 
is rightfully entitled to collect interest that accrued after 
July 28, 2015. 
15 In lieu of subtracting Stafsholt's reasonable attorney 
fees from the balance of the loan, the circuit court may 
exercise its equitable discretion to order Nationstar to pay his 
attorney fees directly.   
No. 2015AP1586    
 
27 
 
rate, prospectively from the date of the circuit court's final 
order following remand.16 
IV.  CONCLUSION 
¶44 We reverse the decision of the court of appeals.  
Circuit courts may include attorney fees as part of an equitable 
remedy "in exceptional cases and for dominating reasons of 
justice."  Sprague, 307 U.S. at 167.  The circuit court properly 
exercised its discretion because it applied the proper standard 
of law to the facts of record when it concluded that BOA acted 
in bad faith and thus awarded attorney fees to Stafsholt. 
¶45 We further hold that Nationstar may collect interest 
accrued during litigation because Stafsholt would receive a 
windfall if he was both excused from paying interest and 
received his attorney fees.  We remand to the circuit court to 
determine the reasonable attorney fees Stafsholt incurred before 
the court of appeals and this court, and to then calculate the 
balance of the loan. 
By the Court.—The decision of the court of appeals is 
reversed, and the cause is remanded to the circuit court for 
further proceedings consistent with this opinion. 
¶46 SHIRLEY S. ABRAHAMSON, J., did not participate. 
                                                 
16 The final balance of the loan may be negative.  This 
would occur if Stafsholt's payments and reasonable attorney fees 
during the default period exceed both the amount due during the 
default period and the principal balance of the loan.  In the 
event that the total amount due on the loan is negative, the 
circuit court shall make all orders necessary to terminate the 
mortgage and may order Nationstar to refund Stafsholt.  
No. 2015AP1586    
 
 
 
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