Court Opinion

ID: 4257626
Source: CourtListenerOpinion
Date Created: 2018-03-23 13:31:00.394257+00
Date Added: 2024-06-11T14:45:53.902562
License: Public Domain

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                                         (2017 – Unpublished)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,
                                                                          FILED
          Defendant-Respondent-Cross-Appellant-
          Petitioner,                                                MAR 23, 2018

Colleen Stafsholt f/k/a Coleen McNamara,                                Sheila T. Reiff
                                                                     Clerk of Supreme Court
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.                     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

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.").

                                             2
                                                                             No. 2015AP1586

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,
                                                 3
                                                                            No. 2015AP1586

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.

                                            4
                                                                                   No. 2015AP1586

"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").

                                                     5
                                                                     No. 2015AP1586

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.

                                             6
                                                                             No. 2015AP1586

(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

                                            7
                                                                          No. 2015AP1586

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.

                                              8
                                                                No. 2015AP1586

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.

                                    9
                                                                     No. 2015AP1586

      ¶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.

                                         10
                                                                        No. 2015AP1586

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.

                                              11
                                                                              No. 2015AP1586

      ¶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.

                                              12
                                                               No. 2015AP1586

     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).

                                        13
                                                                          No. 2015AP1586

      ¶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

                                             14
                                                                    No. 2015AP1586

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

                                          15
                                                  No. 2015AP1586

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.").

                               16
                                                                               No. 2015AP1586

      ¶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.

                                              17
                                                                         No. 2015AP1586

       ¶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

                                           18
                                                                          No. 2015AP1586

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:

                                             19
                                                                 No. 2015AP1586

   "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
                                        20
                                                                         No. 2015AP1586

    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),
                                        21
                                                                              No. 2015AP1586

            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
                                                 22
                                                                           No. 2015AP1586

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.

                                              23
                                                                              No. 2015AP1586

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

                                                24
                                                              No. 2015AP1586

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.

                                     25
                                                                    No. 2015AP1586

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.

                                          26
                                                                      No. 2015AP1586

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.

                                        27
    No. 2015AP1586

1