Court Opinion

ID: 877762
Source: CourtListenerOpinion
Date Created: 2013-06-04 21:41:12.678721+00
Date Added: 2024-06-11T15:37:26.137960
License: Public Domain

No.    81-348

                I N THE SUPREME COURT O F THE STATE OF M N A A
                                                        OTN

                                                1981

THE FIRST NATIONAL BANK I N EUREKA,
a National banking c o r p o r a t i o n ,

                           P l a i n t i f f and R e s p o n d e n t ,

J O H N C. BECKSTROM a n d CAROL BECKSTROM,
husband a n d w i f e ,

                           D e f e n d a n t s and A p p e l l a n t s .

Appeal from:     D i s t r i c t Court of t h e Nineteenth J u d i c i a l D i s t r i c t ,
                 I n and f o r t h e County o f L i n c o l n , The H o n o r a b l e
                 Robert Holter, Judge p r e s i d i n g .

Counsel o f Record:

       For Appellants:

                 O l e s o n Law F i r m , R a l i s p e l l , Montana

       F o r Respondent:

                 David W.     Ilarman, L i b b y , Montana

                                         S u b m i t t e d on B r i e f s :   November 1 2 , 1 9 8 1

                                                              Decided:        S e p t e m b e r 2 3 , 1982
Mr. Justice Fred J. Weber delivered the Opinion of the
Court .
     The Beckstroms appeal from the Lincoln County District
Court's award of costs and attorney fees to the First National
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 Beckstroms made, 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 "costs of 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 on May 26, 1981, the District

Court issued findings of fact, conclusions of law and judgment
awarding the bank $5,000 in attorney fees, and collection

costs which included a $200 attachment bond 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 reasonable attorney fees.

Second, the Beckstroms contest the trial court's taxing the

cost of an attachment bond.
     The Beckstroms defaulted on a promissory note dated

December 3, 1976.    The bank and John Beckstrom negotiated a
new note and executed a security agreement on May 25, 1978.
This note provided 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 recover
the $53,799.20 balance owing on the note.    The sale left a

deficiency of $28,779.20 with interest running as of August
15, 1980.   The bank retained the services of David Harman, a
Libby attorney, to collect the deficiency.   Suit was filed
against the Beckstroms on September 26, 1980.   Harman and

the bank entered into a contingent fee contract which would
allow Harman to keep 33 1/3 percent of the amount collected,
if collection was made before trial.
     The Beckstroms' answer contained three defenses which
necessitated some degree of research and investigation by
Harman.   The bank then filed a series of motions of judgment
on the pleadings, partial summary judgment, and motion in
limine.

     The bank, 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 attempt by the Beckstroms to transfer

some property to third persons in order to hinder creditors,

the attorney for the bank decided to attach the unmortgaged
real property.   Section 27-18-204, MCA, requires an attaching
plaintiff to provide at least two court approved sureties
before it allows attachment.   The bank agreed to act as its

own surety, and also purchased another surety bond for $200

to satisfy section 27-18-204, MCA.   The attachment was contested
by the Beckstroms, which required additional work on the
part of Harman to defend the writ of attachment.
    After obtaining a new attorney, the Beckstroms made
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 - ATTACHMENT BOND
      OF

        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 attach-

ment bond is not 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 incurred by the bank.      The
bank pursued the attachment only after learning of certain
transfers of real property by the Beckstroms.     The bank's

attorney then felt that attachment was necessary to safeguard
the interest of his client.    This was not done as a mere
convenience, rather, it was necessary to secure collection.
There is no evidence of overreaching or harassment by the

bank.     In purchasing an attachment bond, the bank was merely

complying with the express terms of section 27-18-204, MCA.
We affirm the trial court's determination that the cost of
the attachment bond was chargeable to the Beckstroms.
AWARD - ATTORNEY FEES
      OF
        The Beckstroms contend that many of the fifty hours
claimed by the bank's attorney were 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 defenses when sued by the bank.    This
required the attorney for the bank to spend many hours

investigating and 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
that many of the hours claimed by the bank's attorney were

unnecessary.
     The Beckstroms also contend that the trial court abused
its discretion in awarding $5,000 as reasonable attorney
fees because there was no substantial evidence to indicate
that such an amount was reasonable.   We disagree.
     We have repeatedly stated what circumstances are to be
considered in awarding reasonable attorney fees:
         "'The circumstances to be considered in deter-
         mining the compensation to be recovered are
         the amount and character of the services ren-
         dered, the labor, time, and trouble involved,
         the character and importance of the litigation
         in which the services were rendered, the amount
         of money or the value of property to be affect-
         ed, the professional skill and experience call-
         ed for, the character and standing in the pro-
         fession of the attorneys. * * * The result
         secured by the services of the attorneys may
         be considered as an important element in deter-
         mining their value.'" Crncevich v. Georgetown
         Recreation Corp. (1975), 168 Mont. 113, 119-120,
         541 P.2d 56, 59.
    The findings of fact and conclusions of the District
Court based upon trial without a jury contain the following
findings of fact with regard to attorney fees:
          "6. Plaintiff has hired David W. Harman, of
         Libby, Montana, to represent them in this
         cause. The note in question provides that
         the Defendants will pay reasonable attorney's
         fees. In this regard, the Court finds:
         "a. That the Plaintiff and Mr. Harman made a
         contingent fee agreement which is not binding
         on the Court but is indication of the agree-
         ment between the Parties.
         "b. That to the time of hearing hereof, the
         Plaintiff's counsel had expended at least
         fifty (50) hours of time and it islikely
         that continued effort will be needed herein.
         "c. That the Defendants action have raised a
         number of rather unique questions of law into
         this proceeding, namely the status of a home-
         stead exemption, the motion to dissolve attach-
         ment, the transfer of assets to third persons
         and the question of whether collection costs
         include the surety bond. An additional ques-
         tion was posed by the denial of liability of
         the Defendant, Carol Beckstrom, because of
         her failure to sign renewal notes.
             "d. That the results obtained were those which
             the Plaintiff expected; that the Defendant only
             submitted its offer of Judgment when the Plain-
             tiff's attorney had advanced this case to trial.
          "e. That the Plaintiff's attorney had been ad-
          mitted to the bar nine years, has represented
          this particular Plaintiff in other litigation
          and is competent to handle litigation general-
          ly *
          "f. -- $5,000.00 requested - - -
              That the                     fee is com-
          mensurate with those usually charged in matters
          of this nature - -
          --             in this community." (Ederscor-
          ing added.)
From the foregoing findings of fact, the District Court then
concluded:

          "The note 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 the memorandum and attorney's fees
          in the sum of $5,000.00."
With regard to the findings of fact, the standard of review

of this Court of the factual determinations by the District
Court without a jury is set out in Rule 52(a), Montana Rules

of Civil Procedure, as follows:

          "Findings of fact shall not   be set aside un-
          less clearly erroneous, and   due regard shall
          be given to the opportunity   of the trial court
          to judge of the credibility   of the witnesses."
Subparagraph (a) of the findings refers to the contingent

fee agreement.    Such agreement is an exhibit and shows the

agreement by the bank to pay to the plaintiff upon a contin-

gent fee basis as follows:
          "I agree to pay my attorneys upon a contingent
          basis on all sums of money which may be recover-
          ed by suit or settlement as follows: 25% of all
          amounts recovered if settlement is made with-
          out instituting suit; 33 1/3% of all amounts
          recovered if it becomes 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 settlement or by the recovery
          of a verdict or the collection of a judgment
          entered against the adverse party; a sum equal
          to 50% of all amounts recovered if any type of
          appellant proceedings are taken by either party."
        In subparagraph (b) the ~istrictCourt found that
plaintiff's counsel had 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 approxi-
mately fifty hours.    He also testified orally, stating that

he did not keep time records in this matter and that the

estimate of fifty hours was an approximation based upon a
review of the file and his notes.     The record does sustain
the finding that "at least" fifty hours were expended.
However, plaintiff's counsel also pointed out that while he
had a billable hour factor, generally he performed work on a
different basis.    He stated:

            "That your Affiant does have an hourly bill-
            able rate of $50.00 per hour but generally
            performs work on a 'per job' basis, or in
            accordance with a written retainer agreement."
    The District Court concluded that the 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 to be entitled to either 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.
     Subparagraph (c) refers to the unique questions of law.
There is uncontradicted testimony by two attorneys to substan-
tiate 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
attorney who qualified as an expert witness familiar with
fees in the area, the District Court 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 District Court.     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 Court has concluded that we will only
consider whether there is substantial credible evidence to
support both the findings and the conclusions of a District
Court.   In Cameron v. Cameron (1978), 179 Mont. 219, 228,
587 P.2d 939, 945, we stated:
           "We will not substitute our judgment for that
           of the trier of fact, but rather will only
           consider whether substantial credible evidence
           supports the findings and conclusions. Those
           findings will not be overturned by this Court
           unless there is a clear preponderance of evi-
           dence against them."
    We hold that the record contains substantial credible
evidence to support both the findings and the conclusions of
the District Court and that the approach of the District
Court in considering the factors set forth in Crncevich and
reaching a conclusion that a $5,000 fee award is reasonable
is the correct approach.
    Affirmed.
Mr.    J u s t i c e D a n i e l J . Shea d i s s e n t i n g :

       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 a t least against M r .                           Beckstrom),            i n t h e amount of               t h e pro-

missory note.                  The r e a l q u e s t i o n was w h e t h e r t h e bank would have

available              to      it     assets           to     satisfy           any           judgment        obtained.

       The q u e s t i o n          is w h e t h e r     the attorney               fee,           under    these     cir-

cumstances,             is e x c e s s i v e .        I t is.          The a t t o r n e y t e s t i f i e d t h a t he

s p e n t a b o u t f i f t y h o u r s on t h e c a s e , and many of                               t h e h o u r s were

spent        on    ancilliary matters                       directed          at    finding           property        that

could       s a t i s f y any p o t e n t i a l          judgment.              The a t t o r n e y had            repre-

sented           the     bank        on      other          occasions,             and        so     they     were     not

s t r a n g e r s t o each o t h e r .                The a t t o r n e y f e e a r r a n g e m e n t was t h a t

t h e a t t o r n e y would r e c e i v e on a c o n t i n g e n c y b a s i s ,                      2 5 p e r c e n t of

a n y amount r e c o v e r e d              before       suit,          3 3 1 / 3 p e r c e n t of          any amount

recovered           a f t e r s u i t b u t b e f o r e t r i a l , 40 p e r c e n t of a n y amount

recovered           after          trial,        and    50 p e r c e n t        for       a n amount          recovered

after        an    appeal.             This       contingency              should         not       have     been     con-

sidered           f o r any purpose               i n determining                 the     r e a s o n a b l e n e s s of   a

fee,        for    the       B e c k s t r o m s were        not        a party          to t h e         contract     and

s h o u l d t h e r e f o r e n o t be bound d i r e c t l y or i n d i r e c t l y by i t s terms

or     by     its       being        considered             as     a     factor          in    setting        the     fee.

Unfortunately,                t h e t r i a l c o u r t and t h i s C o u r t b o t h c o n s i d e r e d t h e

contingency                  fee        as        a         factor           in          setting            the       fee.

       The t r i a l c o u r t found                  t h a t the contingency fee contract w a s

not    binding           on     the        court,      b u t was         s i m p l y an i n d i c a t i o n of         the

a g r e e m e n t between            the p a r t i e s       -- t h a t i s , t h e a g r e e m e n t b e t w e e n
the    Bank and              its attorney.                  The    fact        i s , however,              t h a t absent

this       agreement,            the       only evidence present                         to     justify       a n award

would       be     t h e $50 p e r h o u r normal b i l l a b l e                        rate testified             t o by

the attorney                -- a t t h i s r a t e , t h e a t t o r n e y ' s f e e would be $ 2 , 5 0 0
r a t h e r than $5,000               --    twice t h
                                            -- e n o r m a l h o u r l y r a t e .                         T h e r e is no
evidence         in      the   record         demonstrating             that        the   normal     hourly

r a t e s f o r a t t o r n e y f e e s i n t h e community is $100 p e r h o u r                    -- y e t
t h a t is t h e o n l y b a s i s on which t h e award c o u l d be u p h e l d u n d e r

the majority rationale.

       W h i l e t h e t r i a l c o u r t and t h i s C o u r t a p p e a r to w a n t t o a v o i d

u s i n g t h e c o n t i n g e n c y f e e a r r a n g e m e n t as a b a s i s f o r t h e amount

of    t h e a t t o r n e y f e e award,           it i s c l e a r t h a t b o t h h a v e a t l e a s t

l e t t h e c o n t i n g e n c y f e e c o n t r a c t be used as e v i d e n c e j u s t i f y i n g

a n award beyond t h e n o r m a l $ 5 0 p e r h o u r t e s t i f i e d by p l a i n t i f f ' s

a t t o r n e y as h i s n o r m a l h o u r l y r a t e .     Although I d o n o t understand

the majority             rationale,         this part         of    i t s o p i n i o n is r e v e a l i n g :

                The D i s t r i c t C o u r t c o n c l u d e d t h a t c o n t i n g e n t
                f e e agreement which i s n o t b i n d i n g on t h e
                C o u r t was n o n e t h e l e s s - -d i c a t i o n
                                                         an in                   of t h e
                agreement between t h e p a r t i e s .               Under t h e con-
                t i n g e n t f e e agreement, t h e a t t o r n e y s f o r t h e
                b a n k a p p e a r t o be e n t i t l e d t o 4 0 p e r c e n t or 50
                p e r c e n t o f t h e $ 2 7 , 5 6 9 . 2 0 w h i c h was r e c o v e r e d .
                Under t h o s e c i r c u m s t a n c e s i t would be u n f a i r
                t o h o l d c o u n s e l t o a n a p p r o x i m a t i o n of f i f t y
                h o u r s of work a t $50.00 a n h o u r .                  (Emphasis
                added )

       The B e c k s t r o m s s h o u l d e i t h e r be bound b y t h e c o n t i n g e n c y f e e

agreement o r they should not                        -- and     I am sure neither the                    trial

c o u r t n o r t h i s C o u r t would v e n t u r e t o h o l d t h a t t h e c o n t i n g e n c y

f e e a r r a n g e m e n t , t o w h i c h t h e R e c k s t r o m s were n o t a p a r t y ,       should

b e t h e b a s i s on w h i c h        t h e y s h o u l d pay a n a t t o r n e y f e e .          I also

fail       to     see      how        the     contingency           arrangement             can     be     "-
                                                                                                            an

indication"           in effect         that       t h e B e c k s t r o m s s h o u l d pay more         than

t h e n o r m a l r a t e of      $50 p e r h o u r .         To h o l d o t h e r w i s e    is t o h o l d
that      the     contingency           fee    agreement           is    in    fact       -dence
                                                                                          evi             that

Beckstroms          should       be    bound       in   some d e g r e e       to    some    standard       of

a s s e s s m e n t of   a t t o r n e y f e e s without t h e Beckstroms being a p a r t y

t o t h a t agreement.

       Because        t h e B e c k s t r o m s were n o t         a party      to t h i s a g r e e m e n t ,
t h e y c a n n o t be h e l d t o t h e c o n t i n g e n c y f e e a r r a n g e m e n t a s c o n s t i -

t u t i n g i n a n y way w h a t a r e a s o n a b l e a t t o r n e y f e e would b e .                 The

q u e s t i o n t h e n becomes w h a t s t a n d a r d s h o u l d be a p p l i e d              i n deter-

m i n i n g t h e r e a s o n a b l e n e s s of     t h e f e e to be a s s e s s e d a g a i n s t t h e
    Beckstroms.             The o n l y r e l i a b l e e v i d e n c e i n t h e r e c o r d is t h a t of

    the a t t o r n e y himself             t h a t h i s normal b i l l a b l e            rate       is $ 5 0 p e r

   hour.         Any o t h e r e v i d e n c e is b a s e d e n t i r e l y on s p e c u l a t i o n and o n
    the     understandable             yet     regrettable              proclivity          of     attorneys         to

    justify           fees      on     behalf            of     their         brethren           of     the     bar.
           T h i s C o u r t r e l i e s on t h e s o - c a l l e d           uncontradicted             testimony

   o f p l a i n t i f f ' s c o u n s e l and " a n o t h e r a t t o r n e y who q u a l i f i e d a s a n

   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                       . . .
                                                                        -h a-g e d - - - -
                                                                        c r -                             in    this

    community."
-----
                             (Emphasis added)                   I     fail     to    see,        however,      where
    there        is    evidence        in     the        record       justifying           this       $5,000    fee.
           The B a n k ' s      a t t o r n e y demanded            t h a t he be p a i d $ 5 , 0 0 0 a s t h e

    fee,      and      he    and     another         lawyer          testified        that        $5,000       was    a
    reasonable fee.                However,         t h e Bank's         l a w y e r t e s t i f i e d t h a t when
   h e c h a r g e d a n h o u r l y r a t e it was a t t h e r a t e of $50 p e r h o u r . The

    so-called          e x p e r t a l s o t e s t i f i e d t h a t h i s r a t e was $ 5 0 p e r h o u r .
   The e s s e n c e o f        t h e t e s t i m o n y of      t h e l a w y e r r e c e i v i n g t h e f e e is
    t h a t he s h o u l d r e c e i v e a f e e h i g h e r t h a n t h e r a t e of $ 5 0 p e r h o u r

   b e c a u s e he had a c o n t i n g e n c y f e e a g r e e m e n t w i t h t h e Bank w h i c h
   e n t i t l e d him t o a h i g h e r f e e .
           The      so-called        expert         on    attorney           fees,    (and a l l         attorneys

   seem t o be e x p e r t s - -p o r t of
                             i n s u p-                           a t t o r n e y f e e s to be awarded to
    t h e i r b r e t h r e n of     t h e b a r ) , was t h a t t h e r e q u e s t e d f e e , $ 5 , 0 0 0 ,
   was r e a s o n a b l e .     B u t , h e r e a l l y g a v e no b a s i s f o r t h i s t e s t i m o n y .

    In fact,          he a d m i t t e d    t h a t he had r e v i e w e d n e i t h e r t h e D i s t r i c t
   C o u r t f i l e n o r t h e f i l e of t h e lawyer b e f o r e d e t e r m i n i n g t h a t t h e
    r e q u e s t e d f e e of $ 5 , 0 0 0 was r e a s o n a b l e .
           C o n t r a r y t o t h e a s s e r t i o n s of          t h e Bank's c o u n s e l ,       t h i s case
   was n o t a complex c a s e .                 Indeed, judgment a g a i n s t t h e Beckstroms

   was v i r t u a l l y a s s u r e d f r o m t h e o u t s e t -- a l t h o u g h w h e t h e r t h e r e

   would be p r o p e r t y t o s a t i s f y t h e judgment was a n o t h e r matter.                               It

   d o e s n o t e n g e n d e r p u b l i c c o n f i d e n c e on t h e bench and b a r f o r a

   c o u r t t o r u b b e r s t a m p a demand f o r a t t o r n e y f e e s , e s p e c i a l l y when
t h a t demand is d o u b l e t h e u s u a l h o u r l y b i l l i n g r a t e of t h e a t t o r -

ney.

       To s u m m a r i z e , a f e e twice a s h i g h as a f e e c a l c u l a t e d a t t h e

normal b i l l a b l e rate of $50 p e r h o u r , is, u n d e r t h e c i r c u m s t a n c e s

of   t h i s case, e x c e s s i v e .   The f e e s h o u l d be $ 2 , 5 0 0 ,    not $5,000.

                                                fido&A Justice