Army Aviation Center Federal Credit Union v. Poston

• Decision Date: 07 September 1984
• Citation: 460 So.2d 139
• Parties: ARMY AVIATION CENTER FEDERAL CREDIT UNION v. James E. POSTON. 82-1233.
• Court: Alabama Supreme Court

Page 139

460 So.2d 139

ARMY AVIATION CENTER FEDERAL CREDIT UNION v. James E. POSTON.

82-1233.

Supreme Court of Alabama.

Sept. 7, 1984.

Rehearing Denied Nov. 21, 1984.

Stephen T. Etheredge of Johnson, Huskey, Hornsby & Etheredge, Dothan, for appellant.

Richard W. Whittaker and Stafford Pittman of Pittman, Whittaker & Pittman, Enterprise, for appellee.

MADDOX, Justice.

The issues on appeal are whether the mortgages between the appellee (Poston) and the appellant (Army Aviation Center Federal Credit Union) were contracts susceptible to breach and whether the jury correctly concluded that the contracts were breached, and, next, whether the trial court erred in denying defendant's motion for a directed verdict as to the misrepresentation count of appellee's complaint. We agree with the trial court's determination that the mortgages were contracts which the jury could find were breached, but we find that the trial court erred in denying defendant's motion for a directed verdict as to the misrepresentation count of Poston's complaint. Even though we find that the jury could have found that the contracts were breached, we, nevertheless, reverse and remand, because the jury returned a general verdict and the Credit Union had specifically requested the trial court to direct a verdict in its favor on the misrepresentation count.

Poston, individually, and d/b/a Jim Poston Homebuilders, Inc., borrowed money from the Army Aviation Center Federal Credit Union for the purpose of constructing certain apartment units in the city of Enterprise. At the time Poston acquired the initial construction loans from the Credit Union, he anticipated acquiring permanent financing for the apartment units; however, after he acquired the construction loans, the interest rates charged on real estate transactions escalated and Poston was unable to obtain permanent financing.

In late 1979, or early 1980, the notes representing the construction financing became due. At that time Poston conferred with Tom Carter, the president of the Credit Union, regarding an extension of the due date of the notes. In April 1980, a formal extension agreement was entered into between Poston and the Credit Union.

After the expiration of the extension agreement, Poston contacted Carter, seeking the Credit Union's permission to have the apartment units converted into townhouses. Carter encouraged Poston to convert the apartments into townhouses at a cost of $2,500.00. At this time Poston and Carter discussed the fact that the market was unsettled with respect to interest rates, which meant fewer potential buyers. Poston was under the impression that an understanding and agreement had been reached between him and Carter that he would be given a reasonable period of time to dispose of the townhouse units after converting them.

In the fall of 1980 Carter first mentioned foreclosure to Poston. At that time Poston had a potential buyer for one unit, but Carter refused to allow the townhouses to be sold as individual units. In October or November of 1980, the Credit Union employed J.E. Sawyer, an attorney, to pursue the collection of the notes and to foreclose the mortgages, if necessary. At this time Poston had the townhouse units listed under a contract with Nelson Tucker at a price of $235,000. This price would have enabled Poston to pay the $198,000 indebtedness and to recover money he had invested in the project.

In December 1980, Poston went to see the Credit Union's attorney regarding expenses and the legal fees of foreclosure. The Credit Union's attorney quoted a fee of over $20,000. At that time, Poston expressed outrage over this quoted fee. He also made sure that the Credit Union was aware of the fact that had the substantial attorney's fee not been involved, Tucker was financially able, willing, and ready to acquire the property.

On December 20, 1980, the foreclosure of Poston's property was completed. James E. Poston and Jim Poston Homebuilders, Inc. then filed a complaint alleging misrepresentation and/or deceit, outrageous conduct, bad faith breach of contract, and breach of contract. Poston later amended his complaint by adding a fifth claim, alleging breach of an oral agreement and interference with a contractual relationship between James E. Poston, Jim Poston Homebuilders, Inc., and Nelson Tucker.

At trial the Credit Union moved the court to direct a verdict in its favor at the close of Poston's case. This motion was granted by the trial court with regard to those counts of the complaint denoted as "second claim," "third claim," and "fifth claim," but denied as to the "fourth claim" and "first claim." The jury returned a verdict for Jim Poston Homebuilders, Inc. and James E. Poston for $65,000. The Credit Union then moved the court for a judgment notwithstanding the verdict, or, in the alternative, for a new trial. This motion was denied by the trial court. The Credit Union then filed a notice of appeal.

The first issue raised by the Credit Union is whether the mortgages given by Poston to the Credit Union were contracts between the parties susceptible to breach. The Credit Union argues that the provision of the mortgages relating to attorney's fees in the event of a default is unilateral and is intended as a promise of indemnity from the mortgagor to the mortgagee, and is not a contract, and that in the absence of a contractual obligation there is no foundation for appellee's action for breach of contract. The appellant also contends that the attorney's fee charged in conjunction with the foreclosure of Poston's mortgages were reasonable and that there was no evidence from which the jury could have determined that a breach of the contracts occurred.

We hold that the provisions regarding reasonable attorney's fees are terms of the contracts susceptible to breach. This Court, in Taylor v. Jones, 290 Ala. 268, 276 So.2d 130 (1973), cert. denied, 414 U.S. 879, 94 S.Ct. 126, 38 L.Ed.2d 124 (1973), quoting from White v. Blair, 234 Ala. 119, 173 So. 493 (1937), held that the claim for an attorney's fee is as much a part of the contract as any other feature of it; therefore, the Credit Union's contention that the provision relating to attorney's fees is intended as a promise of indemnity and, therefore, was not a contract provision, is erroneous.

Because the case may be retried after our remand, we set forth some principles of law which govern whether an attorney's fee is reasonable. In King v. Keith, 257 Ala. 463, 60 So.2d 47 (1952), this Court set forth the standard to be used in determining whether an attorney's fee is reasonable:

"[T]hough in reviewing the propriety of the fixation of such fees by the lower court, this court will be guided by its own judgment upon a consideration of the whole record, Frazer v. First National Bank of Mobile, 235 Ala. 252, 178 So. 441, 126 A.L.R. 1; Dent v. Foy, supra [214 Ala. 243, 107 So. 210 (1925) ], we make such review with a presumption in favor of the ruling of the court below and will not set aside its decree unless we are convinced that that court abused the discretion wisely vested in it."

257 Ala. at 470, 60 So.2d at 52.

The reasonableness of an attorney's fee was also addressed by this Court in Peebles v. Miley, 439 So.2d 137 (Ala.1983). In Peebles the trial court awarded attorney's fees of $26,744 as a result of the attorney's collecting $197,367.88 on a promissory note executed by the defendant. The plaintiff's attorney indicated that he had spent from eight to ten hours in the handling of this litigation. His arrangement with his clients was that he would obtain his fee on a percentage basis from the defendants. This Court held that the $26,744 awarded was not a reasonable fee.

This Court stated in Peebles:

"Over 71 years ago, Justice Somerville set forth yardsticks to be used by our courts in determining reasonable attorney's fees. He said:

"The general principle is everywhere established that an attorney is in such a case entitled to reasonable compensation for his services, appropriate to his employment, rendered by him to his client. -- Humes v. Decatur, Etc., Co., 98 Ala. 461, 470, 13 South. 368. In the estimation of their value many elements may be material for consideration, among which are the nature and value of the subject-matter of the employment; the learning, skill, and labor requisite to its proper discharge; the time consumed; the professional experience and reputation of the attorney the weight of his responsibility; and the measure of success achieved.

Faulk & Co. v. Hobbie Grocery Co., 178 Ala. 254, 59 So. 450 (1912).

"Forty years later, Justice Simpson added an additional criterion to the six criteria above mentioned. King v. Keith, 257 Ala. 463, 60 So.2d 47 (1952). The seventh criterion was that in determining a reasonable attorney's fee, the trial judge should take into consideration the reasonable expenses incurred by the attorney. Although Justice Somerville mentioned in the Faulk case that the customary charges of lawyers in a particular community should also be taken into consideration in determining a reasonable attorney's fee, and some cases have stated that the amount of an attorney's fee could turn on whether the fee was certain or contingent, nevertheless, the codification of the criteria, for the most part, has remained as set forth in the Faulk case. Frazer v. First National Bank of Mobile, 235 Ala. 252, 178 So. 441 (1938); Ingalls v. Hare, 266 Ala. 221, 96 So.2d 266 (1957)." (Footnote omitted.)

439 So.2d at 140.

This Court further stated in that same case:

"Having briefly discussed the most current legal principles dealing with reasonable attorney's fees, we would like...