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
1st Nat L. Bank v. Beckstrom
Combined Opinion