Title: Elson Development Co. v. Arizona Savings & L. Ass'n

State: arizona

Issuer: Arizona Supreme Court

Document:

99 Ariz. 217 (1965) 407 P.2d 930 ELSON DEVELOPMENT CO., an Arizona corporation, Appellant, v. ARIZONA SAVINGS AND LOAN ASSOCIATION, an Arizona corporation in receivership, Appellee. No. 8457. Supreme Court of Arizona. En Banc. November 18, 1965. Rehearing Denied December 21, 1965. *218 Stockton & Hing, Phoenix, for appellant. David J. Perry and Ralph G. Smith, Jr., Phoenix, for appellee. McFARLAND, Justice. Appellee, the Arizona Savings and Loan Association, an Arizona corporation in receivership, hereinafter designated as Arizona Savings, brought suit against the Elson *219 Development Company, an Arizona corporation, as principal defendant, hereinafter designated as Elson, and others to recover the balance due on a note, in the principal sum of $2,086,808.32 together with various items of interest, cost of suit, foreclosure search, taxes, and $88,000 in attorney's fees and to foreclose a realty mortgage given by Elson to secure the payment of the money due on the note. Elson filed an answer and counterclaim. Arizona Savings moved for a summary judgment on Elson's answer and counterclaim. The court granted the motion and entered judgment. It is from the judgment and the decree of foreclosure that Elson appeals. The principal amount of the promissory note, dated April 9, 1959, secured by the mortgage, was in the sum of $2,700,000. The note provided that the entire unpaid balance should be due and payable on or before April 9, 1961. In September 1963, Elson being in default on payment of both principal and interest, entered into a supplemental agreement with Arizona Savings which provided, inter alia: that if Elson did not perform on or before December 15, 1963, certain obligations, to-wit payment of certain interest, taxes and expenses it would abandon the property. The material parts of the agreement are as follows: Elson did not perform in accordance with the supplemental agreement, and Arizona Savings filed its foreclosure action on January 10, 1964, seeking judgment for the sum of $2,086,808.32 plus six per cent interest from April 23, 1963, to August 31, 1963, and eight per cent interest from September 1, 1963, until the principal sum is paid; *220 $88,000 as reasonable attorneys' fees; $21,688.26 as taxes; and various other sums. The complaint alleged that the premises, the subject of the mortgage, had been abandoned. Elson, in its answer, denied that $88,000 was a reasonable attorneys' fee, and that any sum in excess of $1,000 would be reasonable; also specifically denied that the premises described in plaintiff's complaint had been abandoned by Elson. Elson also filed a counterclaim alleging that the agreement entered into in September 1963 was invalid for the reason that the directors did not have authority to enter into the same in that it, in effect, disposes of all the property of the corporation, and specifically alleged that the agreement to abandon the property was against public policy. The bases for the assignments of error of Elson are that there were issues to be determined by a trial, and that for this reason the court erred in granting Arizona Savings's motion for summary judgment. The lower court, in a motion for summary judgment, does not try issues of fact, but only determines whether the same are genuine and in good faith disputed. Perez v. Tomberlin, 86 Ariz. 66, 340 P.2d 982. A motion for summary judgment is granted erroneously if on an examination of the entire record it is found that any disputed fact issue exists which could, if true, affect the final judgment. Arizona Coffee Shops v. Phoenix Downtown Park. Ass'n, 95 Ariz. 98, 387 P.2d 801; Sarti v. Udall, 91 Ariz. 24, 369 P.2d 92. Elson contends "that a genuine issue of fact to be tried existed by reason of the allegation * * * that $88,000 was a reasonable attorneys' fee to be recovered by the plaintiff in the foreclosure action * * *, and the denial * * * that a reasonable fee for plaintiff's attorneys amounts to the sum of $88,000.00 or any sum in excess of $1,000.00." The supplemental agreement of September 1963 provided for "a reasonable sum (not less than three (3%) per cent nor more than four (4%) per cent of the amount found by the court to be due and payable by ELSON to ARIZONA) as and for attorneys' fees." The judgment[1] in the instant case allowed an attorneys' fee of $88,000. $88,000 is *221 more than the three per cent minimum provided in the agreement but is slightly under the maximum of four per cent of the amount found by the court to be due and payable. This court has long recognized the right of parties to a note to agree on the amount of attorney's fees, by providing that the same shall be fixed at a reasonable amount.[2] a definite percentage of the amount recovered, or a specific amount.[3] In the instant case Arizona Savings sought judgment for attorneys' fees in an amount more than the minimum of three per cent and slightly less than the maximum of four per cent. The denial of Elson that the amount alleged as reasonable in Arizona Savings's complaint put this question at issue to be determined by the court. In Crouch v. Pixler, 83 Ariz. 310, 320 P.2d 943, we stated: The agreement in the instant case which provided for a reasonable sum not less than three per cent nor more than four per cent was indefinite as to the exact amount between three and four per cent which would be reasonable. Under the holding of this court in Crouch v. Pixler, supra, evidence was required to determine the amount of a reasonable attorney's fee. There is also the question raised by Elson's answer, which denies any attorneys' fees over a thousand dollars is reasonable, as to whether the court, in fixing the attorney's fees, should fix it within the limits of three to four per cent. In the case of Owens v. Conelly, supra, we said: The case of Citizens National Bank of Orange, Virginia v. Waugh, 4 Cir., 78 F.2d 325, 100 A.L.R. 939, from which we quoted with favor in the Owens case, supra, also passed upon the question in the instant case, as follows: While one line of authorities holds that the amount stipulated in the note is valid and binding in regard to attorney's fees, there is another line of cases holding that while they are valid they are nevertheless enforceable only to the extent that the amount stipulated is reasonable.[4] *223 We are of the opinion that the better rule is set forth in Citizens Nat. Bank of Orange, Va. v. Waugh, supra that a provision in regard to a definite amount of attorney's fees, or a per cent of the amount found due on a note for attorney's fees, is binding only to the extent that it is reasonable; however, where the services have been rendered, and the amount stipulated is not obviously excessive, the stipulation as to the amount should govern. When as in the instant case the reasonableness of the amount is denied, then the court must from evidence and the record determine and fix a reasonable amount for the attorney's fees. We hold that, in the instant case as to the three per cent stipulated in the agreement, it is not absolutely binding on the parties, or on the court, and the stipulation of three to four per cent as reasonable attorney's fees is binding only in the amount that the court finds to be reasonable from evidence. Elson next contends "that a genuine issue of fact to be tried existed by reason of the allegation * * * of the complaint * * *, that the mortgaged premises had been abandoned by Appellant and the denial in * * * the answer * * *, that the mortgaged premises had been abandoned." The Arizona revised statutes, as amended in 1963, provide, in part: The statute provides that the court must determine if in fact there has been an abandonment. In the instant case had the issue of abandonment been tried by the court, and Arizona Savings relied solely on the introduction of the agreement to abandon, and Elson presented evidence showing that as a matter of fact it had not abandoned the premises, the court would have had to determine that the property had not been abandoned, under A.R.S. § 12-1282, subsec. A, supra. Arizona Coffee Shops v. Downtown Park. Ass'n, supra; Sarti v. Udall, supra. Elson, in its counterclaim, alleged that the September 1963 agreement, wherein it provided for an abandonment, was against public policy and contrary to the law of Arizona. This agreement was, in effect, a partial waiver which shortened the redemption period as provided in A.R.S. *224 § 12-1282, subsec. B, supra. Redemption statutes are enacted in the interest of public policy. Dipple v. Neville, 82 Mont. 280, 267 P. 214. Agreements to waive declarations of public policy are necessarily void. Ross v. Ross, 96 Ariz. 249, 393 P.2d 933; Whipple v. Industrial Commission, 59 Ariz. 1, 121 P.2d 876; Olsen v. Union Canal & Irr. Co., 58 Ariz. 306, 119 P.2d 569. The question thus presented is the validity of an agreement to abandon which in effect is a partial waiver of the time period for redemption. A.R.S. § 12-1282, subsec. A, supra, was enacted to prevent deterioration of property where a mortgagor in default has vacated the premises. The shortening of the period for redemption in cases of abandonment is therefore to prevent a loss from deterioration during the redemption period. In Commercial Savings and Loan Ass'n v. Curts, 187 Kan. 18, 354 P.2d 86, the court, in reference to a redemption statute similar to A.R.S. § 12-1282, subsec. A, stated: In the instant case there was an effort to reduce the statutory redemption period by the agreement to abandon. Such agreements would mean that the redemption period would end at a time when the mortgagor might be least able to make redemption. The mortgagee could thereby secure title to the property by bidding less than the amount of the judgment, and less than the real value of the property, thereby defeating the purpose and intent of the provisions of the statutes providing for redemption periods. The intent and purpose of the statute providing for redemption cannot be violated by an agreement. The object of the redemption statute is to give to the mortgagor time to pay his obligation and avoid the loss of his property. In the case of Skach v. Sykora, 6 Ill. 2d 215, 127 N.E.2d 453, 52 A.L.R.2d 1320, the court, in discussing the purpose of the redemption period, stated: In Mace v. Norwood, 155 Kan. 302, 124 P.2d 497, the court in discussing a subsequent agreement whereby the mortgagor, as additional securities for its mortgage, executed an assignment of the rents of the property to the mortgagee, the consideration set forth in the agreement being that the mortgagee withhold foreclosure of said mortgage under the conditions set forth in the agreement stated: The reasoning in the Mace case, supra, is applicable to the instant case. In that case there was an attempt to alter statutory rights during the redemption period by giving the mortgagee the rents during that period. The court ruled that such an agreement was invalid on the grounds that an agreement written into a mortgage which would bar the right of the mortgagor to redeem was contrary to the act, and invalid. Hence, an agreement after default which would alter the rights of the mortgagee during such redemption period was invalid. In the instant case, the attempt was to alter the rights during the redemption period by an agreement to abandon, the effect of which was to give the mortgagee possession and title to the property five months earlier than provided in A.R.S. § 12-1282, subsec. B. In the instant case the facts are different from those where the mortgagee purchases the mortgaged premises by a fair contract entered into after the mortgage is given, or where a purchaser under contract to convey sells his interest by fair contract to the contractor. A conveyance of mortgage realty by mortgagor to mortgagee in satisfaction of mortgage indebtedness, if made fairly and without fraud, oppression, or undue advantage being taken by mortgagee is not against public policy. The same is true of a conveyance by a purchaser under contract to the contractor. In the case of Stallings v. Little, 191 Okl. 399, 130 P.2d 525, the court, in holding a sale by mortgagor to a mortgagee was valid in Oklahoma because of a statute which provided that no realty shall be sold for payment of any money or performance of any contract in security for which it may have been pledged or assigned except in pursuance of a judgment of a court of competent jurisdiction under such sale, stated: There are even greater reasons for holding that agreements to abandon property and thereby shorten the time of redemption to be against public policy than in other types of agreement because abandonment leaves the property unprotected and subject to deterioration and vandalism, and even a possible menace to public safety. To hold otherwise would be to open the door for such agreements, which would result in the beneficial use of such property being lost to the people of our state during the time of such abandonment. We therefore hold the agreement to abandon the property was invalid and against public policy, and that the pleadings presented an issue to be determined by the lower court as to whether the property was in fact abandoned. It is not necessary to pass upon other questions raised by Elson in its brief. For the reasons stated, the judgment is reversed, and the case remanded for proceedings not inconsistent with this opinion. STRUCKMEYER, V.C.J., BERNSTEIN and UDALL, JJ., and IRWIN CANTOR, Judge, concurring. (Chief Justice LORNA E. LOCKWOOD having disqualified herself, Judge IRWIN CANTOR served in her stead.) [1] Principal amount $ 2,086,808.32 Interest on principal amount At 6% from April 23, 1963, through August 31, 1963 44,518.58 At 8% from September 1, 1963, through March 31, 1964 98,775.55 Foreclosure search 142.50 Property taxes paid 21,856.96 Interest on property taxes paid at 8% from January 8, 1964, through March 31, 1964 408.00 Costs of suit 46.75 Attorneys' fees 88,000.00 ______________ TOTAL $ 2,340,556.66 [2] Steele v. Vanderslice, 90 Ariz. 277, 367 P.2d 636; Pioneer Constructors v. Symes, 77 Ariz. 107, 267 P.2d 740, 41 A.L.R.2d 668; Federal Land Bank of Berkeley v. Warner, 42 Ariz. 201, 23 P.2d 563, reversed on other grounds, 292 U.S. 53, 54 S. Ct. 571, 78 L. Ed. 1120. [3] Owens v. Conelly, 77 Ariz. 349, 272 P.2d 345; Gilliland v. Rodriquez, 77 Ariz. 163, 268 P.2d 334; Maxey v. Somerton State Bank, 22 Ariz. 371, 197 P. 894; Estate of Amirault, 22 Ariz. 122, 194 P. 1099; cf. Pioneer Constructors v. Symes, supra. [4] For cases see Citizens Nat. Bank of Orange, Va. v. Waugh, 4 Cir., 78 F.2d 325, 100 A.L.R. 939; also cases collected in 17 A.L.R.2d 288.