First Nat. Bank in Ord v. Schroeder

• Court: Nebraska Supreme Court
• Writing for the Court: KRIVOSHA; SHANAHAN
• Citation: First Nat. Bank in Ord v. Schroeder, 355 N.W.2d 780, 218 Neb. 397 (Neb. 1984)
• Decision Date: 05 October 1984
• Docket Number: No. 83-490,83-490
• Parties: , 39 UCC Rep.Serv. 1934 FIRST NATIONAL BANK IN ORD, Nebraska, Appellee and Cross-Appellant, v. J.H. SCHROEDER, Appellant and Cross-Appellee.

Page 780

355 N.W.2d 780

218 Neb. 397, 39 UCC Rep.Serv. 1934

FIRST NATIONAL BANK IN ORD, Nebraska, Appellee and Cross-Appellant, v. J.H. SCHROEDER, Appellant and Cross-Appellee.

No. 83-490.

Supreme Court of Nebraska.

Oct. 5, 1984.

Syllabus by the Court

Secured Transactions: Contracts: Attorney Fees. A provision in a security agreement which seeks to impose an attorney fee on a debtor as part of the costs of suit to enforce the security agreement and its underlying contract is contrary to the public policy of Nebraska and, therefore, void and unenforceable.

J.H. Schroeder, pro se, and, on brief, Richard E. Gee, Grand Island for appellant and cross-appellee.

Robert E. Wheeler of Stowell & Wheeler, P.C., Ord, for appellee and cross-appellant.

KRIVOSHA, C.J., and BOSLAUGH, WHITE, HASTINGS, CAPORALE, SHANAHAN, and GRANT, JJ.

SHANAHAN, Justice.

J.H. Schroeder appeals the judgment of the district court for Valley County which dismissed his counterclaims and entered summary judgment in favor of First National Bank in Ord. The district court also awarded First National attorney fees which First National has cross-appealed, arguing the awarded attorney fee was insufficient.

On December 31, 1981, First National sued J.H. Schroeder to recover on a promissory note for $6,223 and to determine the validity of a financing statement-security agreement given in conjunction with Schroeder's promissory note. Schroeder answered and also filed several counterclaims. First National moved to strike Schroeder's counterclaims and moved to amend its petition to request an attorney fee in view of a provision in the security agreement entitling the secured party to recover from the debtor "any and all costs and expenses incurred in recovering possession of the Collateral and incurred in enforcing this security agreement ...." Before the trial court had ruled on these motions, Schroeder filed amended counterclaims. First National moved to dismiss the first amended counterclaims. (For our purpose in disposing of this appeal, we will treat First National's motion to dismiss as a demurrer. Cf. Nelson v. Sioux City Boat Club, 216 Neb. 484, 344 N.W.2d 634 (1984)). The district court sustained the motion to dismiss, but allowed Schroeder 20 days to amend his counterclaims by the following: "Plaintiff's Motion to Dismiss Defendant's Cross Claim is granted, but the Defendant shall have 20 days from the date of this hearing to file a Motion to Reinstate Meritoreous [sic] Claims and to accompany said Motion with a proposed pleading." Schroeder filed his motion to reinstate his claims but never filed the proposed pleading stating his claims as ordered by the trial court. (Consequently, Schroeder's second amended counterclaims are not part of the record.) Nevertheless, First National filed a demurrer concerning the unfiled counterclaims. As reflected by the record, the trial court sustained the demurrer to the amended but unfiled counterclaims and allowed Schroeder 20 days to amend his answer only.

Proceeding pro se, Schroeder filed his amended answer. In substance the amended answer contained a general denial with numerous allegations essentially the same as the contents of the counterclaims. First National filed a motion to strike from the amended answer those parts identical to the counterclaims and also filed a motion for summary judgment on the promissory note. The trial court sustained the motion to strike and allowed Schroeder no further time to amend. Further, the district court sustained First National's motion for summary judgment on the note and proceeded to trial on the remaining issues, namely, validity of the security agreement and recovery of an attorney fee. The district court held the security agreement was valid and awarded First National a $1,000 attorney fee.

Schroeder contends the district court erred in dismissing his amended counterclaims, refusing to allow extra time to amend his amended answer, and awarding an attorney fee. First National cross-appeals and claims the awarded attorney fee is insufficient.

Concerning the cross-appeal, First National argues two theories as bases for an attorney fee. First National points to Neb.U.C.C. § 9-504 (Reissue 1980), in part providing:

Secured party's right to dispose of collateral after default; effect of disposition.

(1) A secured party after default may sell, lease or otherwise dispose of any or all of the collateral in its then condition or following any commercially reasonable preparation or processing. Any sale of goods is subject to the article on Sales (article 2). The proceeds of disposition shall be applied in the order following to

(a) the reasonable expenses of retaking, holding, preparing for sale or lease, selling, leasing, and the like and, to the extent provided for in the agreement, the reasonable attorney's fees and legal expenses incurred by the secured party.

The foregoing section of the U.C.C. is clearly unsupportive of First National's claim. Section 9-504 deals with the disposition of proceeds from a sale of collateral. Nowhere does § 9-504 authorize an attorney fee in a suit on a contract, here, the promissory note, which underlies and supports the security agreement, or in a suit to enforce or establish the validity of a security agreement.

First National, the secured party, argues the security agreement requires the debtor, Schroeder, to pay First National's costs and expenses incurred in enforcing the security agreement and relies upon the contents of the security agreement as follows: ... "DEBTOR WARRANTS AND COVENANTS: ... (10) Debtor will pay Secured Party any and all costs and expenses incurred in recovering possession of the Collateral and incurred in enforcing this security agreement, and the same shall be secured by this security agreement."

This court in Quinn v. Godfather's Investments, 217 Neb. 441, 442, 348 N.W.2d 893,...