No. 81-348 INTHE SUPREME COURT OF THE STATE OF MONTANA 1981

THE FIRST NATIONAL BANK INEUREKA, a National banking corporation, Plaintiff and Respondent,

JOHN C. BECKSTROM and CAROL BECKSTROM, husband and wife, Defendants and Appellants.

Appeal from: DistrictCourt of the Nineteenth Judicial District, In and forthe County of Lincoln, The Honorable Robert Holter, Judge presiding.

Counsel of Record: For Appellants: Oleson Law Firm, Ralispell, Montana For Respondent: David W. Ilarman, Libby, Montana

Submitted on Briefs: November 12, 1981 Decided: September 23, 1982Mr. JusticeFred J. Weber delivered the Opinion of the Court

# . The Beckstroms appeal from the LincolnCounty District Court's award of costs and attorney fees to the FirstNational Bank in the bank's action to recover a deficiency on a promissory note. The bank sued the Beckstroms to recover a deficiency owed on a promissory note. The Beckstromsmade, and the bank accepted,an offer of judgment against the Beckstroms in the amount of $27,569.20. The offer of judgment also admitted the Beckstroms' liability for "costsof collection, including reasonable attorney fees"but reserved any admission

as to the exact amount of costs and attorney fees. Agreement could not be reached between the parties as to the allowable costs and attorney fees,and onMay 26, 1981,the District Court issued findings of fact,conclusions of law and judgment awarding the bank $5,000 in attorney fees,and collection costswhich included a $200attachmentbond premium paid by the bank. From this judgment the Beckstroms appeal. We affirm. The Beckstroms first contend that the trial court erred in awarding $5,000 to the bank as reasonableattorney fees. Second, the Beckstroms contest the trial court's taxing the costof an attachmentbond. The Beckstroms defaulted on a promissory note dated December 3, 1976. The bank and John Beckstrom negotiated a

new note and executed a security agreementonMay 25, 1978. This noteprovided that the debtor would be liable for collection costs, including reasonable attorney fees,upon default. (Mrs.Beckstrom did not sign this note or security agreement.) Mr. Beckstrom defaulted on this second note, and the bank repossessed and sold the security to recoverthe $53,799.20 balance owing on the note. The sale left 

### a deficiency of $28,779.20with interest running as of August 15, 1980. The bank retained the services of David Harman, a Libby attorney, to collect the deficiency. Suitwas filed against the Beckstroms on September 26, 1980. Harman and the bank entered into a contingent fee contract which would allowHarman to keep 33 1/3 percent of the amount collected, if collectionwas made before trial. TheBeckstroms' answer contained three defenses which necessitated somedegree of research and investigationby Harman. Thebank then filed a series of motions of judgment

on the pleadings,partial summary judgment, and motion in limine. Thebank, through attorney Harman,discovered that the Beckstroms owned unmortgaged land which could provide a corpus from which the deficiency could be satisfied. Upon learning of a possible attemptby the Beckstroms to transfer

someproperty to third persons in order to hinder creditors, the attorney for the bank decided to attach the unmortgaged realproperty. Section 27-18-204, MCA, requires an attaching plaintiff to provide at least two court approved sureties before it allows attachment. Thebank agreed to act as its own surety,and alsopurchased another suretybond for $200 to satisfy section 27-18-204,MCA. The attachmentwas contested by the Beckstroms, which required additionalwork on the part of Harman to defend thewrit of attachment. After obtaining a new attorney, the Beckstromsmade their offer of judgment which was accepted by the bank, reserving only the issue of costs and attorney fees. The trial court, after an evidentiary hearing,allowed $5,000 in attorney fees to Harman,and also allowed the $200 attachment bond premium to be assessed as costs against the Beckstroms.COSTS 

### - OF ATTACHMENT BOND The Beckstroms contend that because attachment was merely one possible legal option available to the bank, and not an absolute necessity, the cost of obtaining the attachment bond isnot chargeable to them. We disagree. Under the terms of the promissory note, as well as the offer of judgment,the Beckstroms are liable for the "costs 

### of collection." This phrase includes only those costs which

were reasonably and necessarily incurredby the bank. The bank pursued the attachment only after learning of certain transfers of realproperty by the Beckstroms. The bank's attorney then felt that attachmentwas necessary to safeguard the interestof his client. This was notdone as a mere convenience,rather,itwas necessary to secure collection. There is no evidence of overreaching or harassment by the bank. Inpurchasing an attachmentbond, the bank wasmerely complying with the express terms of section 27-18-204,MCA. We affirm the trial court's determination that the costof the attachmentbond was chargeable to the Beckstroms. AWARD OF ATTORNEY 

### FEES 

### - The Beckstroms contend thatmany of the fifty hours claimed by the bank's attorneywere unnecessary,and were incurred only because of the bank's "sloppy"banking practices. We find no merit in this contention. The Beckstroms chose to raise certain defenseswhen sued by the bank. This required the attorney for the bank to spend many hours investigatingand researching the validity of the defenses. Only when the case was ready for trial did the Beckstroms abandon the defenses by offering judgment against themselves. There is no basis therefore for the Beckstroms' assertion thatmany of thehours claimed by the bank's attorneywere unnecessary.

### TheBeckstroms also contend that the trial court abused its discretion in awarding $5,000as reasonable attorney fees because there was no substantial evidence to indicate that such an amount was reasonable. We disagree. We have repeatedly statedwhat circumstances are to be considered in awarding reasonable attorney fees: "'Thecircumstances to be considered in determining the compensation to be recovered are the amountand character of the services rendered, the labor, time,and trouble involved, the character and importanceof the litigation inwhich the serviceswere rendered, the amount ofmoney or the value ofproperty to be affected, the professional skilland experience called for,the character and standing in theprofession of the attorneys.

## * * 

## * The result secured by the services of the attorneysmay be considered as an important element in determining theirvalue.'" Crncevichv. Georgetown RecreationCorp. (1975),168Mont. 113, 119-120, 541 P.2d 56, 59. The findingsof factand conclusions of the District Court based upon trialwithout a jury contain the following findings of fact with regard to attorney fees: "6. 

### Plaintiff has hired DavidW. Harman,of Libby, Montana, to represent them in this cause. Thenote in question provides that the Defendantswill pay reasonableattorney's fees. In this regard, the Court finds: "a. That the Plaintiff and Mr. Harmanmade a contingentfeeagreementwhich isnotbinding on the Courtbut is indication of the agreementbetween the Parties.

"b. That to the time of hearing hereof, the Plaintiff's counselhad expended at least fifty (50)hours of time and it islikely that continued effortwill be needed herein. 

### "c.That the Defendants action have raised a number of rather unique questions of law into thisproceeding,namely the status of a homestead exemption,themotion to dissolve attachment, the transfer of assets to third persons and the question of whether collectioncosts include the suretybond. An additional questionwas posed by the denial of liability of the Defendant,Carol Beckstrom,because of her failure to sign renewalnotes."d. That the results obtained were thosewhich the Plaintiff expected; that the Defendant only submitted its offer of Judgmentwhen the Plaintiff's attorney had advanced this case to trial. "e. That the Plaintiff'sattorney had been admitted to the bar nine years,has represented this particular Plaintiff in other litigation and is competent to handle litigation generally* "f. 

### -- That the $5,000.00 requested 

### --- fee is commensurate with those usually charged in matters of this nature in this community." (Ederscor-- -- ing added.) From the foregoing findingsof fact, the District Court then concluded:"Thenote sued upon is due and owing. That suit was required to recover the same,and that Plaintiff is entitled to the principal amount sued upon, interest, costs as set forth in thememorandum and attorney's fees in the sum of $5,000.00." With regard to the findingsof fact,the standard of review of this Court of the factual determinationsby the District Courtwithout a jury is set out in Rule 52(a), Montana Rules of Civil Procedure,as follows: "Findingsof fact shallnot be setaside unless clearly erroneous,and due regard shall be given to the opportunityof the trial court to judge of the credibility of thewitnesses." Subparagraph (a)of the findings refers to the contingent fee agreement. Such agreement is an exhibit and shows the agreementby the bank to pay to theplaintiff upon a contingent feebasis as follows: 

### "Iagree topay my attorneys upon a contingent basis on all sums of money which may be recovered by suit or settlementas follows: 25% of all amounts recovered if settlement ismade without instituting suit; 33 1/3% of all amounts recovered if itbecomes necessary to institute suit but the case is settled before pre-trial conference; 40% of all amounts recovered after the case is beyond the pre-trial conference stage, whether by settlementor by the recovery of a verdict or the collection of a judgment entered against the adverseparty; a sum equal to 50% of all amounts recovered if any type of appellantproceedings are takenby either party."In subparagraph (b)the ~istrict Court found that plaintiff's counselhad expended "at least" fifty hours of time. Plaintiff's counsel submitted as an exhibit his affidavit regarding the matter of attorney fees. In that affidavit, counsel described the various factors which he thought to be relevant,and included an estimate of approximately fiftyhours. He also testified orally, stating that he did not keep time records in this matter and that the estimate of fifty hours was an approximationbased upon a review of the file and his notes. The record does sustain the finding that "at least" fifty hourswere expended. However,plaintiff's counsel also pointed out thatwhile he had a billable hour factor,generally he performed work on a differentbasis. He stated: "Thatyour Affiant does have an hourly billable rate of $50.00 per hour but generally performs work on a 'per job' basis, or in accordancewith a written retainer agreement." The District Court concluded that the contingent fee agreement "which is notbinding on the Court"was nonetheless

an indication of the agreement between the parties. Under the contingent fee agreement, the attorneys for the bank appear to be entitled to either 40percent or 50percent of the $27,569.20 which was recovered. Under those circumstances it would be unfair to hold counsel to an approximationof fiftyhours of work at $50.00 an hour. Subparagraph (c) refers to the unique questions of law. There is uncontradicted testimonyby two attorneys to substantiate those fact conclusions. Subparagraphs (d)and (e)are both also uncontradicted. Subparagraph (f)is a key finding. Based upon the uncontradicted testimony of plaintiff's counsel and another attorneywho qualified as an expertwitness familiarwith fees in the area, the DistrictCourt concluded as a fact

### that the $5,000 fee is "commensurate with those usually charged. 

# . .in this community." The record amply substantiates each finding of fact of the DistrictCourt. We are unable to find a basis to conclude that the findings of facts were clearly erroneous and therefore reversible under Rule 52(a). In addition,this Courthas concluded thatwewill only consider whether there is substantial credible evidence to supportboth the findings and the conclusions of a District Court. In Cameronv. Cameron (1978),179Mont. 219, 228, 587 P.2d 939, 945,we stated: "Wewill not substituteour judgment for that of the trier of fact,but rather will only consider whether substantial credible evidence supports the findingsand conclusions. Those findingswill notbe overturned by this Court unless there is a clear preponderance of evidence against them." We hold that the record contains substantial credible evidence to supportboth the findings and the conclusionsof the DistrictCourt and that the approach of the District Court in considering the factors set forth in Crncevich and reaching a conclusion that a $5,000 feeaward is reasonable is the correctapproach. Affirmed.Mr. Justice Daniel J. Shea dissenting:

I join in the opinion on the attachment bond issue but I dissent from the decision approving the attorney fee award. Here we have a situation where plaintiff's counsel was virtually certain to obtain a judgment against the Beckstrams, (or at least against Mr. Beckstrom), in the amount of the promissory note. The real question was whether the bank would have available to it assets to satisfy any judgment obtained. The question is whether the attorney fee, under these circumstances, is excessive. It is. The attorney testified that he spent about fifty hours on the case, and many of the hours were spent on ancilliary matters directed at finding property that could satisfy any potential judgment. The attorney had represented the bank on other occasions, and so they were not strangers to each other. The attorney fee arrangement was that the attorney would receive on a contingency basis, 25percent of any amount recovered before suit, 33 1/3 percent of any amount recovered after suit but before trial, 40 percent of any amount recovered after trial, and 50 percent for an amount recovered after an appeal. This contingency should not have been considered for any purpose in determining the reasonableness of a fee, for the Beckstroms were not a party 

### to the contract and should therefore not be bound directlyor indirectlyby its terms

or by its being considered as a factor in setting the fee. Unfortunately, the trial court and this Court both considered the contingency fee 

### as a factor in setting the fee. The trial court found that the contingency fee contract was not binding on the court, but was simply an indication of the agreement between the parties 

### -- that is, the agreement between the Bank and its attorney. The fact 

### is, however, that absent this agreement, the only evidence present to justify an award would be the $50 per hour normal billable rate testified to by the attorney

### -- atthis rate, the attorney's fee would be $2,500 rather than $5,000 

## -- twice the normal hourly rate. There is no --evidence in the record demonstrating that the normal hourly rates for attorney fees in the community 

### is $100 per hour 

### -- yet that is the only basis on which the award could be upheld under the majority rationale. While the trial court and this Court appear to want to avoid using the contingency fee arrangement as a basis for the amount of the attorney fee award, it is clear that both have at least let the contingency fee contract be used as evidence justifying

an award beyond the normal $50 per hour testified by plaintiff's attorney as his normal hourly rate. Although I do not understand the majority rationale, this part of its opinion is revealing: The District Court concluded that contingent fee agreement which is not binding on the Court was nonetheless an indication of the -- agreement between the parties. Under the contingent fee agreement, the attorneys for the bank appear tobe entitled to 40 percent 

### or 50 percent of the $27,569.20 which 

### was recovered. Under those circumstances it would be unfair to hold counsel to an approximation of fifty hours of work at $50.00 an hour. (Emphasis added) The Beckstroms should eitherbe bound by the contingency fee agreement or they should not 

### -- and I am sure neither the trial court nor this Court would venture to hold that the contingency fee arrangement, to which the Reckstroms were not a party, should be the basis on which they should pay an attorney fee. I also fail to see how the contingency arrangement can be "an - indication" in effect that the Beckstroms should pay more than the normal rate of $50 per hour. To hold otherwise 

### is to hold that the contingency fee agreement 

### is in fact evidence that - Beckstroms should be bound in some degree to some standard of assessment of attorney fees without the Beckstroms being a party tothat agreement. Because the Beckstroms were not a party 

### to this agreement, they cannot be held to the contingency fee arrangement asconstituting in any way what a reasonable attorney fee would be. The question then becomes what standard should be applied in determining the reasonableness of the fee 

### to be assessed against theBeckstroms. The onlyreliable evidence in the record is that of the attorney himself that his normal billable 

### rate is $50 per hour. Any otherevidence 

### is based entirelyon speculation and on the understandable yet regrettable proclivity of attorneys to justify fees on behalf of their brethren of the bar. This Court relies on the so-called uncontradicted testimony of plaintiff's counsel and "another attorney who qualified as an expert witness familiar with fees in the area, 

# . 

# . ." in upholding the 

### trial court's finding that the $5,000 fee 

### was "commensurate with those usually charged 

# . . 

# . in this ------- community." (Emphasis added) I fail to see, however, where

-----

there 

### is evidence in the record justifying this $5,000 fee. The Bank's attorney demanded that he be paid $5,000 as the fee, and he and another lawyer testified that $5,000 

### was a reasonable fee. However, the Bank's lawyer testified that when he charged an hourlyrate it was at the rate of $50perhour. The so-called expert also testified that his 

### rate was $50 per hour. The essence of the testimony of the lawyer receiving the fee is thathe should receive a feehigher than the rate of $50perhour because he had a contingency fee agreement with the Bank which entitled him toa higher fee. The so-called expert on attorney fees, (and all attorneys

seem to be experts 

### - in 

### -- support of attorney fees 

### to be awarded to their brethren of the bar), was that the requested fee, $5,000,

was reasonable. But, he reallygave no basis for this testimony. In fact, he admitted that he had reviewed neither the District Court filenor the fileof the lawyer before determining thatthe requested fee of $5,000 was reasonable. Contrary to the assertions of the Bank's counsel, this case

was not a complex case. Indeed, judgment against the Beckstroms

was virtually assured from the outset

### -- although whether there would be property to satisfy the judgment 

### was another

### matter. It does not engender public confidence on the bench and bar for a court to rubberstamp a demand for attorney fees, especiallywhenthatdemand is double the usual hourly billing rate of the attorney.To summarize, a fee twice as high as a fee calculated at the normal billable 

### rate of $50 per hour, 

### is, under the circumstances of this 

### case, excessive. The fee should be $2,500, not $5,000. 

# fido&A- Justice