Opinion ID: 1210221
Heading Depth: 2
Heading Rank: 1

Heading: Attorney's Fees to American Security Bank.

Text: The promissory notes executed by Akamine & Sons to American Security Bank representing the amounts due and secured by Akamine & Sons' mortgage contains the following covenant: ... . In the event of any default in the payment of this note, and if the same is placed in the hands of an attorney or collection agency for collection or suit is brought hereon, the undersigned jointly and severally, agree to pay in either case, all costs of collection, including attorney's fee equal to twenty per centum (20%) of the balance of principal and interest due and unpaid. The mortgage to American Security Bank on page 7, paragraph 4, provides: ... and out of the proceeds of any foreclosure sale the Mortgagee may deduct all costs and expenses of sale, receivership, foreclosure and suit, or any of them, including reasonable compensation for the services of its employees or officers in connection therewith and an attorney's fee equal to twenty percent (20%) of the principal and interest due .... Under the foregoing provisions, without question attorneys' fees incurred in the collection and foreclosure proceedings are chargeable against Akamine & Sons and are likewise secured. In the proceeding before him Judge Dyer had allowed $17,500.00 attorney's fees based on a recovery of $434,527.07, which amount we reduced to $309,139.08, [5] including interest to November 27, 1964. It is to be noted that HRS § 607-17 provides for the awarding of 25% (of the judgment for principal and interest) to a successful party where a provision of a note or agreement calls for 25% or more or the lesser percentage called for in such instrument as maximum attorney's fee. Thus American Security Bank could have been awarded 20% of $309,139.08 or $61,827.82 as maximum attorney's fees. Also, Hawaii National Bank has acquiesced to the reasonableness of the fee as allowed. Therefore, we are allowing American Security Bank $17,500.00 as its attorney's fees for the proceeding in Judge Dyer's court. It is correct that a substantial portion, if not all, of the services of the attorneys in subsequent proceedings (including appeals to this court) were rendered on questions involving priority of claims, claims of Hawaii National Bank, etc. Hawaii National Bank questions the fees allowed American Security Bank in these proceedings contending that the trial court erred in awarding such fees because American Security Bank was not the prevailing party as against Hawaii National Bank. Probably the trial court allowed attorney's fees to American Security Bank on the basis that it was the prevailing party. Thus, the ground for the allowance may have been error. However, it does not mean that the allowance of the attorney's fees was error. As we indicated in the first paragraph of part III of this decision, in reaching a decision here we are not bound by the arguments presented by the parties nor the theory of law or reasoning adopted by the trial court in reaching the decision. It is to be noted that paragraph 14, page 9 of the mortgage provides: That the mortgagor will not encumber, convey, sell, lease or assign the whole or any part of the mortgaged property without the prior written consent of the Mortgagee. Also, paragraph 6, page 8 of the mortgage reads: That the mortgagor will pay and discharge all costs and attorney's fees and expenses that shall arise from enforcing the covenants and conditions of this mortgage. Further, pertinent portion of paragraph 1, page 8 of the mortgage states: ... that in default ... or upon failure to observe or perform any covenant or condition of this mortgage ...' and that it may recover any such advances made and all expenses, including attorney's fee, paid or incurred by it ..., and the same shall be secured hereby. There is no question that Akamine & Sons, when it executed a second mortgage on the same property to secure its debts to Hawaii National Bank without the consent of American Security Bank, breached the covenant not to encumber the mortgaged property. That breach was responsible for and the cause of the subsequent proceedings between American Security Bank and Hawaii National Bank. Thus, it must be deemed that the breach caused American Security Bank to incur expenses for attorneys in these proceedings; and as to the attorney's fees so incurred, American Security Bank is entitled to be paid by Akamine & Sons and the payment of the same is secured by the mortgage. By the foregoing conclusion, however, we are not affirming the trial court's allowance of attorney's fees, nor are we ruling as to the reasonableness of the sum of $55,201.44 so allowed. As we have said, if the amount of the fee allowed or awarded appears to the appellate court to be disproportionate to the extent of legal services normally required to be expended in a case of the nature of the one before the trial judge in which the fee was allowed or awarded, his allowance or award of a `reasonable' attorney's fee must then stand the scrutiny of the reviewing court on the record. Sharp v. Hui Wahine, Inc., 49 Haw. 241, 251, 413 P.2d 242, 248 (1966). This matter is now before us for the third time, and we believe that further remand on the issue of reasonableness of attorney's fees may be as fruitless. Thus under the circumstances of this case we believe we are compelled to determine this issue. We now allow American Security Bank the sum of $20,000 as reasonable attorney's fees incurred in its subsequent proceedings [6] in addition to $17,500.00 allowed by Judge Dyer. On the basis of the mortgage covenants cited above, the $6,431.08 allowed as costs by the circuit court and $25.00 allowed as additional costs in the initial proceeding but erroneously included in the award of attorney's fees will be allowed to American Security Bank.