Graham v. Turcotte
| Decision Date | 28 January 1982 |
| Docket Number | No. 1897,1897 |
| Citation | 628 S.W.2d 182 |
| Parties | Franklin T. GRAHAM, Jr., Appellant, v. Roy C. TURCOTTE and Louis F. Guzik, Jr., Appellees. |
| Court | Texas Court of Appeals |
Lee Arnett, Brownsville, for appellant.
Charles Vernon Willette, Jr. and Jerry Covington, Brownsville, for appellees.
Before NYE, C. J., and UTTER and KENNEDY, JJ.
Appellees, plaintiffs below, brought suit against National Bank of Commerce (bank), E. B. Roberts, Jr., (trustee), and Franklin T. Graham, Jr. (Appellant), alleging among other grounds, that excessive attorney's fees were charged in connection with the collection of a real estate lien note executed by appellees to the bank. At the conclusion of appellees' testimony the trial court granted an instructed verdict in favor of the bank and trustee. No appeal is taken by appellees to the action of the trial court in this regard. Based upon the jury's answers to certain special issues as to excessive attorney's fees, judgment was entered against appellant from which he now appeals.
The facts are as follows. Appellees entered into a monthly payment real estate lien note with the National Bank of Commerce in Brownsville whereby they obligated themselves to pay the sum of $180,000 plus interest. The note which the appellees signed contained a clause stating that if the note had to be turned over to an attorney for collection, then the appellees would be liable for an additional 10% of the principal and interest, then owing, as attorney's fees. After numerous late payments, appellees were held to be in default by the bank and the note was placed in appellant's hands for collection. Appellant sent a letter to the appellees demanding payment of the note plus attorney's fees and then posted a notice of a foreclosure sale. Thereafter appellees talked extensively with the bank officers and tendered the amount of principal and interest then due and owing, to wit ($179,839.61). However, appellees refused to pay the contractual attorney's fees, claiming such fees to be unreasonable. The bank refused to accept payment without the attorney's fees and told appellees to take that matter up with appellant. Appellant happened to be in the bank at that time and stopped in briefly to discuss the matter but the problem was not resolved. After appellant left, appellees and the bank then entered into a compromise agreement whereby appellees would pay as attorney's fees 25% of the 10% or $4,497.21. Appellees paid to the bank the principal and interest due and owing at the time plus a separate check for the amount of attorney's fees. Releases of the note and deed of trust were subsequently signed by officers of the bank. Appellant did not sign the releases.
Appellees filed suit against the bank and trustee alleging usury, several business and commerce code violations, not germane to this case, and for excessive attorney's fees and against appellant for excessive attorney's fees. After the appellees rested, instructed verdicts were granted to the bank and the trustee but appellant's motion for instructed verdict was denied. Special issues were submitted to the jury who found that $4,497.21 was an unreasonable fee and that $300.00 would have been a reasonable fee under the circumstances. Judgment was accordingly entered for the appellees in the amount of $4,197.21, an amount equal to the $4,497.21 already paid less the reasonable fee of $300.00.
This type of contractual obligation for payment of attorney's fees is considered as a contract to indemnify the holder of the note for attorney's expenses actually incurred in collecting the principal and interest on the note. A party to such type of contractual attorney's fees is entitled to have them reduced upon a showing that the contractual amount is unreasonable. Hernandez Construction & Supply Co., Inc. v. National Bank of Commerce, 578 S.W.2d 675 (Tex.1979), Kuper v. Schmidt, 161 Tex. 189, 338 S.W.2d 948 (1960). However, in order to be able to sue for or assert an affirmative defense of unreasonableness of such type of contractual attorney's fees one must be a party to the contract. A person cannot recover under a contractual theory in absence of showing privity of contract or some special relationship, such as a third party beneficiary contract. In Republic National Bank v. National Bankers Life Ins. Co., 427 S.W.2d 76 (Tex.Civ.App.-Dallas 1977, no writ), the Court stated:
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