Dixie State Bank v. Bracken

• Decision Date: 25 October 1988
• Docket Number: No. 19375,19375
• Citation: 764 P.2d 985
• Parties: DIXIE STATE BANK, a Utah corporation, Plaintiff and Appellant, v. Kirk BRACKEN and Linford Bracken, Defendants and Appellees.
• Court: Utah Supreme Court

Page 985

764 P.2d 985

DIXIE STATE BANK, a Utah corporation, Plaintiff and Appellant, v. Kirk BRACKEN and Linford Bracken, Defendants and Appellees.

No. 19375.

Supreme Court of Utah.

Oct. 25, 1988.

Michael D. Hughes, Dale R. Chamberlain, St. George, for plaintiff and appellant.

John Miles, St. George, for defendants and appellees.

ORME, Court of Appeals Judge:

Appellant Dixie State Bank seeks review of the trial court's award of judgment in the bank's favor. The bank contends reversible error was committed in awarding to it a considerably lower amount for recoverable attorney fees than was actually incurred. We agree and reverse. ¹

FACTS

The bank loaned Kirk and Linford Bracken $7,695 to purchase a 1979 pickup truck. The loan was memorialized in a promissory note for $10,094.40, which included the full amount which would become due, with interest, over the four-year term of the loan. The note unambiguously called for monthly installment payments to be made by the fifth day of each month for 48 consecutive months. A "summary statement" accompanying the note repeated these key terms. For the twin purposes of reminding the Brackens to make timely payments and assisting the bank in properly crediting the payments made, the Brackens were given the customary payment coupon book. The coupon book unambiguously contemplated a monthly payment schedule. Contemporaneously with the execution of the note, the Brackens executed a security agreement by which the bank obtained a security interest in the pickup. The Brackens made the first four required payments without incident.

Meanwhile, the loan had been incorrectly set up on the bank's internal records. The bank's computer showed the loan as requiring semi-annual, rather than monthly, payments. So far as the computer was concerned, the four payments made by the Brackens did not leave them current as of the fourth month, but rather paid ahead by some two years. The bank's confusion came to the attention of the Brackens, who chose to cease making payments.

Eventually, however, the internal accounting error was discovered by bank personnel. With that discovery came the realization that the Brackens were many months behind in the payments they clearly owed. The bank acquainted the Brackens with its discovery and solicited the missing payments. Rather than immediately settling up after the error had been discovered, the Brackens, no doubt hopeful the computer would again back them up, first claimed they really had made all the required payments and then tried to convince the bank it was to blame and to work out some kind of a deal. Those efforts ultimately failed, and the bank repossessed the truck and accelerated the debt.

Following notice to the Brackens and the Brackens' failure to redeem, the truck was sold at private sale pursuant to published notice. The Brackens were the high bidders at the sale and bought their truck back for $5,000, leaving a substantial deficiency. Demand for payment of the deficiency was made. When it was not received, the bank commenced suit to recover the balance still owing on the loan. Because the note and security agreement both contained attorney fee provisions, ² the bank also sought an award of attorney fees.

The Brackens moved to dismiss on grounds of payment, waiver, and estoppel. Their supporting affidavit explained that they had been informed by bank personnel during the long period of non-payment that the loan was current. A battle of affidavits and motions to strike ensued, but the motion to dismiss was denied in due course. The Brackens answered and included, as part of their answer, a counterclaim. The counterclaim alleged that repossession of the truck was wrongful ³ and damaged the Brackens' "credit reputation." The Brackens claimed the bank had acted maliciously. They demanded $5,000 in general damages, damages unspecified in amount to reimburse for costs of substitute transportation and other costs resulting from the repossession, attorney fees, and "punitive damages of $200,000 or such larger amount as will serve the traditional purpose of punishing the wrongdoer in an amount that will deter future acts of the same nature."

Depositions were noticed and taken and documents requested. The case was eventually set for non-jury trial. The Brackens persuaded the trial court to continue the trial to permit an additional deposition and demanded a jury trial. The deposition was taken and the trial reset. Shortly before trial and at the request of the Brackens, the jury setting was stricken. At trial, the court urged counsel for both sides to confer on settlement after hearing opening statements. After a recess was taken for that purpose, counsel informed the court that a stipulation had been reached. Under its terms, the bank was entitled to judgment in the full amount of principal and unpaid interest due on the post-sale obligation, plus costs, plus attorney fees in an amount found reasonable by the court. In addition, the counterclaim was dismissed in its entirety. In exchange for their capitulation, the Brackens were given 90 days from its entry during which the judgment could not be executed upon.

The court then took testimony concerning the attorney fees issue. Counsel for the bank detailed the efforts he had expended on the bank's behalf, emphasizing that most of what he did was a direct result of the defensive posture undertaken by the Brackens. He had to meet the motion to dismiss. He had to reply to the counterclaim. He had to defend depositions taken by the Brackens, and he had to take their depositions in view of the magnitude of their counterclaim. He had to prepare for trial, including the preparation of jury instructions in view of the Brackens' demand for a jury which was not rescinded until shortly before trial. Because of the nature of the counterclaim, "stock" jury instructions were of only limited utility and numerous "customized" instructions had to be researched and prepared. He testified as to the hours he had expended, for which he charged $75 per hour, and to some legal research which he hired done at $15 per hour. The total fee, he testified, was $4,847.50. He adjudged it reasonable.

Counsel for the Brackens then testified. He opined that a reasonable fee for the bank's attorney would be "no more than $2,000," using as a point of reference the fee his own clients had incurred, which was $1,200. He suggested that the bank's counsel had overreacted by preparing jury instructions pertinent to matters not expressly raised in the counterclaim, but conceded that the possibility of amendment pursuant to Utah Rule of Civil Procedure 15(b) made anticipation of those matters plausible. He reminded the court of the bank's computer error. He minimized the significance of the counterclaim, stating that "the $200,000 claim was something to give the bank a pause for concern, maybe they would suggest a settlement and we would resolve the matter."

The court determined at the hearing to award only $1,500 as attorney fees for the bank, citing public discontent over the levels to which attorney fees have risen and the comparatively modest amount put in issue by the complaint. ⁴ However, at the hearing the court found the total fee claimed by the bank to be reasonable. During an exchange with the bank's counsel, the court reiterated its finding:

I made the ruling with respect to your work and what you were facing and whether or not it was reasonable. I have found your fees to be reasonable.

....

... I want that in the findings.

....

Now, Mr. Hughes, it is clear I have ruled that the time you put in, the fees you charged and the instructions and work that you did was fair and reasonable in light of what you were facing. That's almost an exact quote of the finding that the Court wants in there.

As instructed by the court, counsel for the bank prepared written findings. Finding No. 15, left unchanged by the court, was phrased as follows:

The Court finds that this sum, to-wit $4,747.50 is a reasonable attorney's fee, and adequately represents the necessary time and preparation for this case.

Finding No. 18, as submitted, read as follows:

The Court finds that the amount of attorney's fees claimed of $4,747.50, though reasonable in all regard, constitutes a sum approximating the debt due on the note, absent any assessment for attorney's fees.

To that finding, but without lining through any of the text as submitted, the court added the following phrase, with our emphasis added: "[A]nd from the testimony and the file the court finds $1,500.00 is a reasonable fee to be assessed against [defendants]."

Taken as a whole, we believe the trial court's intent was to find that the fee claimed by the bank was in fact a reasonable fee, but that for policy reasons it was appropriate (i.e., "reasonable") to assess a lesser amount against the Brackens. Justice Howe takes a different interpretation of the trial court's pronouncements and concludes that the court actually intended to find that $1,500 was a reasonable attorney fee under all the circumstances.

We must accordingly address two issues: first, and assuming our construction of the court's various findings is correct, whether the trial court erred in awarding substantially less than what it determined was a reasonable attorney fee; and second, assuming Justice Howe has correctly divined the trial court's position, whether the court abused its discretion in finding a reasonable fee for the bank to be $1,500.

Before addressing those issues directly, we pause to review our prior decisions in this area and to offer some practical guidelines. ⁵

GENERAL PRINCIPLES

In Utah, attorney fees are awardable only if authorized by statute or by contract. Golden Key Realty, Inc. v. Mantas, 699 P.2d 730, 734 (Utah 1985); Turtle Management, Inc. v. Haggis Management, Inc., 645 P.2d 667, 671 (Utah 1982); see Utah Code Ann. § 78-27-56 (1987). If provided for by contract, the award of...