Leibowitz v. Moore

• Decision Date: 29 June 1982
• Docket Number: No. 3-1281A307,3-1281A307
• Parties: Carl LEIBOWITZ, Defendant-Appellant, v. Richard MOORE and Helen Moore, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 899

436 N.E.2d 899

Carl LEIBOWITZ, Defendant-Appellant, v. Richard MOORE and Helen Moore, Plaintiffs-Appellees.

No. 3-1281A307.

Court of Appeals of Indiana, Third District.

June 29, 1982.

J. David Keckley, South Bend, for defendant-appellant.

Max K. Walker, Jr., William J. Cohen, Slabaugh, Cosentino, Walker & Shewmaker, Elkhart, for plaintiffs-appellees.

GARRARD, Judge.

Carl Leibowitz appeals an award of ten thousand dollars ($10,000) as attorneys' fees in a suit on a promissory note. He contends the evidence was insufficient to sustain the award and further that it was excessive.

On March 17, 1981 the Moores filed a complaint against Leibowitz based upon breach of a promissory note payable in installments. The Moores additionally prayed for an award of reasonable attorneys' fees in accordance with the terms of the note. Eventually, the trial court granted a motion for default judgment filed by the Moores. They were awarded $37,274 in principal together with accrued interest in the sum of $3634.16. Based upon representations of counsel but without conducting a hearing or receiving evidence, the court entered its award of attorney fees. We conclude this was error.

Our courts have long held that while a defendant's default admits liability, it does not admit the amount of damages. Siebert Oxidermo, Inc. v. Shields (on rehearing) (1981), Ind.App., 430 N.E.2d 401.

What amount constitutes a reasonable attorney fee is a question of fact to be determined under the circumstances of a given case just as are questions concerning the reasonableness of other professional fees. Lystarczyk v. Smits (1982), Ind.App., 435 N.E.2d 1011.

Admittedly, our courts have sometimes held that the trial judge is a qualified expert and as such may "judicially notice" the amount of a reasonable fee. ¹ We considered these cases in U.S. Aircraft Financing, Inc. v. Jankovich (1980), Ind.App., 407 N.E.2d 287 and concluded that the fact that the attorney's client had agreed to, or paid, a certain fee was not controlling as to reasonableness and that judicial notice of what constitutes a reasonable fee should not be applied except to usual and mundane affairs of the court involving relatively modest sums.

In our view, and as expressed by Judge Chipman in U.S. Aircraft Financing, the extra effort required to place of record evidence of the services performed and their reasonable value under the circumstances is vastly outweighed by the additional apparent integrity thereby imparted to the determination. See also Lystarczyk, supra.

We therefore reverse as to the award of attorneys' fees and remand for further proceedings consistent herewith.

HOFFMAN, P. J., dissents and files separate opinion.

STATON, J., concurs in result and files separate opinion.

STATON, Judge, concurring in result.

I concur in the result reached by Judge Garrard. While I do not believe the trial court erred by awarding attorney fees, I believe the trial court abused its discretion by awarding an unreasonable amount.

In cases tried without a jury, a judge may take judicial notice of what a reasonable attorney's fee would be, even absent any evidence in the record. McDaniel v. McDaniel (1964), 245 Ind. 551, 201 N.E.2d 215, 220; In re Marriage of Gray (1981), Ind.App., 422 N.E.2d 696, 703 (reh. denied ); Fox v. Galvin (1978), Ind.App., 381 N.E.2d 103, 108; Marshall v. Russell R. Ewin, Inc. (1972), 152 Ind.App. 171, 282 N.E.2d 841, 850. Contra, The Henry B. Gilpin Co. and Mooney-Kiefer-Stewart Co., Inc. v. David Moxley (1982), Ind.App., 434 N.E.2d 914 at 920. Judicial notice is proper because of the trial judge's expertise, acquired through professional experience, regarding what is a reasonable charge for the legal work done in the case before him. McDaniel, supra, 201 N.E.2d at 220; Fox, supra, 381 N.E.2d at 108.

Judge Garrard would limit judicial notice of reasonable attorney fees to mundane legal matters involving relatively modest sums. He states in the majority opinion that this limitation prevents "an abberation of the doctrine of judicial notice, at least since the abolition of minimum fee schedules." I disagree with this statement. A trial judge is no less an expert regarding attorney fees since the abolition of minimum fee schedules. It belies the trial judge's experience and knowledge to assert that he does not know what fees are generally being charged by the attorneys practicing before him.

I also disagree with the imposition of this limitation because its practical effect would be to eliminate judicial notice of attorney fees. Before taking judicial notice of attorney fees, a trial judge would first have to determine if the case was appropriately mundane and the sum modest enough. Requiring the trial judge to make such a determination complicates the proceedings at trial and is contrary to the purpose of judicial notice, which is to simplify and expedite trial proceedings where possible. In addition, a careful attorney would have to introduce evidence regarding the value of his services to insure that the award would be upheld on appeal if the trial court has made an incorrect determination. As a result, evidence would almost always be admitted because the vague "modest and mundane" standard espoused by Judge Garrard prevents attorneys and trial judges from reaching a proper decision through legal reasoning.

The vagueness of this standard is illustrated by my disagreement with Judge Garrard's determination that judicial notice of attorney fees was not proper in the present case. This case did not involve novel or difficult questions of law or fact and Moore's attorney needed no special skill to perform his legal services properly. In obtaining a default judgment on an approximately $40,000 promissory note, Moore's attorney filed a one and one-half page complaint, a two page motion/memorandum opposing Leibowitz's motion to dismiss, and a one page motion for default judgment with supporting affidavit. Moore's attorney also attended a combined hearing on Leibowitz's motion to dismiss and Moore's motion for default judgment. Based on the record of proceedings I believe that, even under Judge Garrard's limitation, judicial notice was proper in the present case.

The reasonableness of a judicially noticed attorney fee award is within the trial judge's sound discretion. However, the award will be reversed on appeal when an abuse of that discretion is shown. Streets v. M.G.I.C. Mortgage Corp. (1978), Ind.App., 378 N.E.2d 915, 921 (reh. denied ). Abuse of discretion occurs when the result is clearly against the logic and effect of the facts and circumstances before the judge. Arnold v. Dirrim (1979), Ind.App., 398 N.E.2d 426, 441.

The unreasonable award of attorney fees in this case was an abuse of the trial court's discretion. When requesting the default judgment, Moore's attorney informed the court that he had spent seventeen and one-quarter hours working on this case. For these seventeen and one-quarter hours of routine legal services, Moore was awarded $10,000 as "reasonable" attorney fees under the note's attorney fee provision, approximately $580 for each of his attorney fee hours. ¹

Understandably, Leibowitz contends that the amount of attorney fees was unreasonable. The trial court's written opinion denying Leibowitz's motion to correct errors reveals that the amount of attorney fees was based on the twenty-five percent contingent fee agreement between Moore and his attorney. Apparently determining that this fee agreement was reasonable as between Moore and his attorney, the trial court found that Leibowitz's liability for attorney fees should equal approximately one-fourth of the judgment. ²

Assuming that the agreement was reasonable as between Moore and his attorney, the trial court incorrectly used it as a basis for Moore's attorney fee award. The trial court confused a determination of the reasonable fair market value of the services rendered with a determination of whether the attorney-client fee agreement was reasonable. Common sense and commercial practice dictates that the debtor has contracted to reimburse the holder for the former and not the latter.

In construing this promissory note's attorney fee provision, I must adopt the construction which appears to be in accord with common sense and the obvious intention of the parties. Construed in this manner, the issue is: What has this provision obligated the debtor to do? Obviously, attorney fee provisions in promissory notes are not agreements by debtors to indemnify holders for their total expenses since it is axiomatic that fees awarded pursuant to these provisions must be "reasonable." Similarly, debtors are not agreeing in these provisions to reimburse holders for their total reasonable expenses since all collection costs are unknown at the time of judgment when attorney fees are awarded. ³ It follows that the purpose of these provisions is to reimburse the holder for the amount of reasonable attorney fees incurred in vindicating his collection rights by obtaining a judgment on the note. ⁴

But which of the many different measures of "reasonable" attorney fees has the debtor agreed to reimburse to the holder? For example, a fee awarded by a jury is reasonable if based on sufficient evidence. Thus, in a trial by jury the debtor is bound to abide by the jury's determination if within the evidence presented. Similarly, a fee amount stipulated in a note is reasonable unless unconscionable; the debtor expressly contracting to accept this amount. In such a case the holder has agreed to accept the stipulated amount even if below his actual reasonable fee expenses. Finally, a reasonable attorney-client fee agreement is distinguishable from a determination of the reasonable fair market value of the services rendered. Although both are objectively determined, they are not necessarily equivalent. This is apparent from the present case where an apparently reasonable one-fourth...