Opinion ID: 2617665
Heading Depth: 1
Heading Rank: 8

Heading: Attorney Fee Issue

Text: The insurers claim, sixth, that there was no legal basis for the award of attorney fees and, seventh, that the amount awarded was unreasonable. Although generally an issue for the trial judge, the attorney fee question in this case was submitted to the jury as an element of damages. Canyon Country had requested that attorney fees be determined in a separate hearing after trial, but the insurers objected. The trial judge agreed with the insurers that the attorney fees issue was part of Canyon Country's case-in-chief. Utah adheres to the well-established rule that attorney's fees generally cannot be recovered unless provided for by statute or by contract. Turtle Management, Inc. v. Haggis Management, 645 P.2d 667, 671 (Utah 1982) (citations omitted). Examples of a statutory basis for recovery include the Civil Rights Attorney's Fees Awards Act of 1976 and the attorney fee provision found at Utah Code Ann. § 78-27-56. [3] An example of a contractual basis for an award of fees would be a clause in a uniform real estate contract which provides for the payment of attorney fees by a defaulting party. Attorney fees awarded pursuant to contract or statute are usually those found by the court to be reasonable, unless the statute or contract provides otherwise. In this case, there was no contractual provision requiring attorney fees, nor is Canyon Country entitled to recover fees by statute. [4] Canyon Country's claim for recovery of fees was predicated on the theory that attorney fees were an item of consequential damages flowing from the insurers' breach of contract. This is a legitimate theory of damages, as the trial court recognized. However, attorney fees recovered as damages in a breach of contract suit must be based on the prevailing party's actual losses, i.e., its out-of-pocket expenses for legal counsel. The insurers may only be held liable to the extent Canyon Country was actually damaged, that is, in the same amount it was legally obligated to pay counsel. See Beck v. Farmers Ins. Exch., 701 P.2d 795, 801-02 (Utah 1985); Zions First Nat'l Bank v. National American Title Ins., 749 P.2d 651, 657 (Utah 1988). Thus, Canyon Country is entitled to recover in damages only that which it was obliged to pay: one-third of any recovery. Canyon Country successfully confused this issue at trial by arguing that a contingency agreement was not binding as a measure of damages and that reasonableness was the standard. Reasonableness is generally the standard when the basis for recovery is a statute or a contract. As pointed out earlier, however, Canyon Country's claim was based on neither. We hold, therefore, that Canyon Country was not entitled to reasonable fees, but only to fees in the amount of one-third of the amount ultimately recovered, as provided for in its attorney fees agreement.