Beal Bank, SSB v. Schilleci

• Decision Date: 23 April 2004
• Citation: 896 So.2d 395
• Parties: BEAL BANK, SSB v. Frank S. SCHILLECI, Jr.
• Court: Alabama Supreme Court

896 So.2d 395

BEAL BANK, SSB v. Frank S. SCHILLECI, Jr.

1021223.

Supreme Court of Alabama.

April 23, 2004.

Opinion on Return to Remand September 17, 2004.¹

Gary W. Farris and Graham H. Stieglitz of Burr & Forman, LLP, Birmingham, for appellant.

Douglas Corretti of Corretti, Newsom & Hawkins, Birmingham; and Donna Richardson Shirley, Birmingham, for appellee.

HARWOOD, Justice.

On November 8, 1999, George Babakitis, as administrator ad colligendum of the estate of Joseph T. Robino, Jr., deceased, filed a complaint seeking declaratory relief, asking the trial court (1) to set aside a foreclosure sale on property known as the Lorna Village Shopping Center ("Lorna Village") that was jointly owned by Joseph T. Robino, Jr. ("Joseph Jr."), and his brother, S.T. Robino ("S.T."); (2) to determine the amount of mortgage indebtedness on Lorna Village; and (3) to determine the amount of attorney fees and expenses Beal Bank, SSB ("Beal"), the mortgagee, was entitled to for conducting the foreclosure sale.

On February 18, 2000, Babakitis assigned to Frank S. Schilleci the estate's statutory right of redemption to Lorna Village, as well as all rights in any pending litigation. Schilleci petitioned the trial court to substitute him as the real party in interest in the declaratory-judgment action, and the trial court granted the petition insofar as it allowed him to enforce his property rights in the pending case. On March 6, 2000, Schilleci amended the complaint to ask that "the attorney fees be declared excessive, that the foreclosure sale be kept in place, and the Court declare and determine the amount that [he] can pay [Beal] in order to redeem ... Lorna Village Shopping Center"; he later filed a verified amended complaint. Thereafter, Schilleci redeemed the property from Beal. After various other motions, the case proceeded to a bench trial on the issue of the reasonableness of the attorney fees. The trial court, in an order dated December 19, 2002, stated, in pertinent part:

"This case was originally filed in January, 1998,[²] and has been a prime example of extended and often unnecessary litigation. Originally the parties were George Babakitis, in his representative capacity for Joseph Thomas Robino, Jr. (`Joe Robino'), both before and after Joe Robino's death. Some property owned by Joe Robino and his brother, S.T. Robino, was the subject of foreclosure by the mortgage holder, Beal Bank (`Beal'). Beal purchased the property at foreclosure for $480,000.00. Attorneys for Beal stated that the principal balance and accrued interest due was $338,811.00. Beal's attorney also claimed attorney fees and expenses of $153,616.59 less a credit of $17,500.00 for a balance of $136,116.59. Babakitis appeared before the Honorable Jack Carl to seek permission to sell the statutory right of redemption to Frank S. Schilleci, Jr. (`Schilleci') for $75,000.00. Judge Carl approved and Schilleci requested this Court to substitute him as the real party in interest pursuant to Rule 17(a)[, Ala.R.Civ.P.] Schilleci's motion was granted only to the extent of enforcing his property right in this case. Schilleci is now before this Court disputing the amount of attorney fees and expenses claimed by Beal's attorney. Schilleci has paid into Court $572,875.79 to redeem subject property and has asked the Court to determine what is a reasonable attorney's fee for the services of Beal's attorney.

"Schilleci has described the attorney fees claimed by Beal to be `unreasonable, inequitable and unconscionable.' Beal has cited the extended time and effort that was needed to protect Beal's interest. They cited time in Circuit Court, in the Court of Civil Appeals and in Bankruptcy Court. There is no doubt that an inordinate amount of time and effort had to be spent by all parties due to the litigious acts and conduct, primarily by S.T. Robino, who at one time was held in contempt by this Court and sentenced for such contempt.

"Both Schilleci and Beal presented evidence of their claims as to the reasonableness of the fees and expenses claimed by Beal. Schilleci presented several attorneys who testified as to reasonable attorney fees for Beal's attorneys. Jerry O. Lorant, Esquire, testified that a reasonable attorney's fee for Beal would be $35,000.00 to $40,000.00 and at the outside, $55,000.00. His opinions were that Beal's claims were far too high and that much of Beal's attorney's time was due to the attorney's physical location in Atlanta, Georgia. Sam Maples, Esquire, testified that he had approximately the same activity in the case and had one hundred ninety (190) hours of billed time at the $150.00 per hour or total fees of $28,500.00. He stated that Beal's legal services should not have exceeded his. Charles Cleveland, Esquire, testified that there was duplication of effort by Beal's attorney and that a reasonable fee for Beal was $5,000.00. Alan Summers, Esquire, testified that far too many lawyers and too many billing hours were claimed by Beal's attorneys; and that Beal's claims were unreasonable. His opinion was that $26,500.00 to $28,000.00 was a reasonable fee for the foreclosure. Frank C. Galloway, III, Esquire, testified that he had handled thirty o[r] forty foreclosures, some of which were commercial. His opinion was that $3,000.00 plus advertising and recording was reasonable; and that Beal's claims were unreasonable. Chalice Tucker, Esquire, testified that she had completed approximately sixteen thousand foreclosures and that about forty percent (40%) of them required filing pleadings related to a Chapter 7, 11 or 3 Bankruptcy. She stated that a reasonable fee in this case would be $1,250.00 or a maximum of ten percent (10%) of the mortgage debt or no more than $33,000.00.

"In response, Beal presented evidence of the reasonableness of their claims. Among the submissions presented by Beal were concerns with what they characterized as S.T. Robino's wrongful acts, his failure to surrender possession of subject property, repeated interferences with the property manager appointed by the Court, his constant filing of unjustified pleadings and appeals, and his various instances of subterfuge. Beal claimed that all of the fees were reasonable and necessary under the circumstances. It is not contested that Beal's attorneys were entitled to reasonable compensation under the provisions of the mortgage. Schilleci contested that the amount of fees is reasonable or necessary. Beal discounted the testimony of Schilleci's witnesses proffered as experts. Among Beal's claims were that Schilleci's witnesses' experiences were limited or limited to typical residential mortgage foreclosures. Some of such witnesses either did not review any or all of Beal's invoices, or their pleadings in this case. Beal presented Dan Sparks, Esquire's testimony as to the fees claimed by Beal. Mr. Sparks had extensive experience in handling commercial foreclosures and bankruptcies. Mr. Sparks studied and considered the invoices presented by Beal's attorneys, Burr & Forman, and concluded that the claims for attorney fees were reasonable and necessary. Mr. Sparks testified that frequently the lender's attorney had to react to claims by the debtor. Beal's attorneys also argued that the legal fees claimed were discounted on several occasions to account for travel time for Beal's attorney from Atlanta.

"The question presented to the Court is `are the legal fees charged by Beal's attorneys of $153,616.50 less $17,500.00 (previously paid by a surety company on a reversal of an injunction) for a total of $136,116.59 to foreclose the mortgage on subject property reasonable and necessary.' The mortgage foreclosure sale was for $480,000.00. Principal, interest and other accrued charges due under the mortgage were $351,479.00. The balance of the credit of $128,521.00 was applied to accrued legal fees and expenses; and reimbursed from the proceeds of the foreclosure sale. Schilleci argues that the claimed fee to debt ratio is evidence of the unreasonableness of the attorneys' fees. He also contends and presents citations that ten percent (10%) of the balance due should be the maximum attorneys fees for any foreclosure. Ten percent (10%) of $480,000.00 is $48,000.00 and of $351,479.00 is $35,147.90. Each reduced by the prior credit of $17,500.00 would be $30,500.00 and $17,647.00 respectively. Beal's attorneys state that such [a] formula is too simplistic and does not reflect the time, effort and resources actually required in this case. There is no doubt that the activities of S.T. Robino substantially and unnecessarily contributed to the costs in this case.

"Upon the submissions of the parties the Court finds that a reasonable fee for services performed by Beal's attorneys in this case to be $80,000.00 less $17,500.00 previously paid, or $62,500.00. This is not to preclude any claim Beal may have against S.T. Robino for his acts. Either party may submit a proposed order consistent with the Court's findings."

The trial court subsequently entered a judgment, on January 24, 2003, against Beal, which stated, in pertinent part:

"A judgment is hereby entered in this cause in favor of Frank S. Schilleci, Jr., and against Beal Bank in the amount of Seventy-three Thousand Six Hundred Sixteen and 59/100 Dollars ($73,616.59), which said sum is arrived at by subtracting Eighty Thousand and No/100 Dollars ($80,000.00), the amount of a reasonable attorney's fee, from the sum claimed by Beal Bank in the amount of One Hundred Fifty-three Thousand Six Hundred Sixteen and 59/100 ($153,616.59)."

On January 30, 2003, Beal filed a motion to alter, amend, or vacate the judgment. On March 7, 2003, the trial court entered an order granting in part and denying in part Beal's motion; that order stated, in pertinent part:

"1. The Court, having issued its Judgment on January 23, 2003 awarding a judgment in the amount of $73,616.59 in favor of Frank S. Schilleci, Jr., and against Beal Bank, SSB, it is the

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