Hosts, Inc. v. Wells

• Decision Date: 20 December 1982
• Docket Number: No. 3-981A236,3-981A236
• Citation: 443 N.E.2d 319
• Parties: HOSTS, INC., Defendant-Appellant, v. Milo WELLS & Pauline Wells, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 319

443 N.E.2d 319

HOSTS, INC., Defendant-Appellant, v. Milo WELLS & Pauline Wells, Plaintiffs-Appellees.

No. 3-981A236.

Court of Appeals of Indiana Third District.

Dec. 20, 1982.

George T. McNaughton, Fremont, for defendant-appellant.

Edgar A. Grimm, Grimm & Grimm, P.C., Auburn, for plaintiffs-appellees.

GARRARD, Judge.

Mr. and Mrs. Wells (creditors) brought suit upon a promissory note executed and delivered to them by Hosts, Inc. (Hosts) in exchange for the transfer of some common stock to a wholly owned subsidiary of Hosts. The note was in the principal amount of $5,000 payable with interest at 8% per annum. There was no provision in the note authorizing the recovery of attorneys' fees if the maker defaulted.

Subsequently, the court granted summary judgment to the creditors awarding them judgment for $5,000 principal, $1,800 attorney fees and interest at the statutory rate from and after December 1, 1980.

Hosts' appeal challenges the propriety of summary judgment as to the principal debt and asserts the award of attorney fees is contrary to law.

On February 19, 1981 the creditors served requests for admissions pursuant to Indiana Rules of Procedure, Trial Rule 36 which covered the necessary elements for recovery upon the promissory note. Hosts neither answered nor objected to the requests within thirty (30) days and the matters were thus deemed admitted. TR 36(B); Pathman Const. Co. v. Drum-Co. Engineering Corp. (1980), Ind.App., 402 N.E.2d 1. Furthermore, Hosts did not petition to be relieved of the admissions as provided for in TR 36(B). On the basis of the admissions summary judgment was proper on the note.

However, as previously pointed out the note contained no provision for attorney fees. The trial court nevertheless awarded the creditors eighteen hundred dollars ($1,800) attorneys' fees which it taxed as costs in the action. It did so on the theory that prior to the year 1607 attorneys' fees were recoverable as costs in England pursuant to the Statute of Gloucester enacted by Parliament in 1278. ¹ The court reasoned that the provision thus became a part of Indiana law by virtue of the Common Law Reception Statute (IC 1-1-2-1(4)) enacted by the Indiana General Assembly in 1818. ²

The argument is fetching, but ignores Indiana's adherence to the general rule that in the absence of express agreement or special statute a successful litigant is not entitled to recovery of his attorney fees. ³ Trotcky v. Van Sickle (1949), 227 Ind. 441, 85 N.E.2d 638; Gavin v. Miller (1944), 222 Ind. 459, 54 N.E.2d 277; Cox v. Ubik (1981), Ind.App., 424 N.E.2d 127; Templeton v. Sam Klain & Son, Inc. (1980), Ind.App., 400 N.E.2d 1198; Bd. of Aviation Commr's. v. Schafer (1977), 174 Ind.App. 59, 366 N.E.2d 195; Honey Creek Corp. v. WNC Development Co. (1975), 165 Ind.App. 141, 331 N.E.2d 452; Palace Pharmacy, Inc. v. Gardner & Guidone, Inc. (1975), 164 Ind.App. 513, 329 N.E.2d 642; St. Joseph's College v. Morrison, Inc. (1973), 158 Ind.App. 272, 302 N.E.2d 865; Groves v. Wiles (1891), 1 Ind.App. 174, 27 N.E. 309; cf. Chandler v. Chandler (1859), 13 Ind. 492. Contrary to the position taken by the dissent, these cases must be evaluated from the perspective that the reception statute was in force when they were decided. It is unfortunate that none of them considered the potential impact of the Statute of Gloucester but they do not thereby become less the common law of this state.

The Supreme Court of Indiana is the central source for declaring the law of Indiana. Troue v. Marker (1969), 253 Ind. 284, 252 N.E.2d 800. It is properly empowered to alter, amend or abrogate the common law when the needs of our society dictate. Brooks v. Robinson (1972), 259 Ind. 16, 284 N.E.2d 794. In applying that power the court has had cause to construe the reception statute. It is a declaratory enactment.

"As viewed by this court, it was not the purpose of the legislature by this section to adopt the rules of the common law as announced and applied by the courts of England prior to 1607, but that the purpose was to adopt the general principles of the common law which underlie and control all rules of decision throughout all time, as the same were affected by the acts of the British Parliament passed in aid thereof prior to the time mentioned.

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From this common law system, and from the usages, customs and maxims upon which it is founded, innumerable rules and principles emanated, as the courts from time to time declared what they understood to be the correct law applicable to the matter before them and such law was determined by a system of reasoning and of administering justice consistent with the universal usages, customs and institutions of the English people. The common law grew to be a system of applying to litigated instances, just, reasonable and consistent rules of decision, suitable to the genius of the people and to their social, political and economic conditions and the system once established has never changed."

Ketelsen v. Stilz (1916), 184 Ind. 702, 705-07, 111 N.E. 423, 424-25.

Thus, while our courts could have applied the Statute of Gloucester to award attorneys' fees as costs in certain cases through the reception statute, they were also fully authorized to reject its application through the vitality principle of the common law which was also embodied in the reception statute. It is implicit in the decided cases that this was done in our acceptance of the general policy that a litigant pay his own counsel fees. The court was in error in awarding attorney fees as costs.

Finally the creditors argue that the award of attorney fees may be sustained upon the basis of their requests for admissions. We disagree under the circumstances here presented. The creditors filed their complaint in two pleading paragraphs. In count 1 they pleaded the promissory note for $5,000 which was executed and delivered by Hosts and which contained no provision for attorney fees. It was on this count that the court entered summary judgment in their favor and upon which this appeal was taken.

Count II alleged that the note in question should have been in the principal amount of $5,250 and should have been payable with attorney fees. The court granted summary judgment ⁴ for Hosts on this count and no appeal from that ruling was taken. Accordingly, the creditors have not preserved for appellate review the question of whether the note should have been reformed to include attorney fees.

The court's award of attorney fees is vacated and the summary judgment against Hosts for $5,000 with interest from December 1, 1980 is otherwise affirmed.

Modified and affirmed.

HOFFMAN, P.J., concurs.

STATON, J., dissents and files separate opinion.

STATON, Judge, dissenting.

I dissent because the trial court's award of attorney fees was proper. The attorney fees were awarded pursuant to the Statute of Gloucester, enacted by the English Parliament in 1278, ¹ and adopted in Indiana by the Common Law Reception Statute, first enacted by the General Assembly in 1818. ²

The general rule is that attorney fees are not recoverable as a cost by the prevailing party, whether in law or equity, unless there is a statute authorizing such an award or an enforceable agreement or stipulation providing for such an award. Alyeska Pipe Line Service Co. v. Wilderness Society (1975), 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141; Fleischmann Distilling Corp. v. Maier Brewing Co. (1967), 386 U.S. 714, 717, 87 S.Ct. 1404, 1406, 18 L.Ed.2d 475. Indiana adheres to this general rule. Trotcky v. VanSickle (1949), 227 Ind. 441, 85 N.E.2d 638, 640. Equity allows limited exceptions to the general rule denying the award of attorney fees. Sprague v. Ticonic Nat'l Bank (1939), 307 U.S. 161, 166, 59 S.Ct. 777, 780, 83 L.Ed. 1184. These three equitable exceptions allow the award of attorney fees absent statutory authorization. They are 1) the "obdurate behavior" situation where the courts impose costs on defendants who behaved in bad faith; 2) the "common fund" situation; and 3) the "private attorney general" situation which has been abolished by the Alyeska Pipe Line case. Umbreit v. Chester B. Stem, Inc. (1978), Ind.App., 373 N.E.2d 1116, 1119.

Unlike equity, attorney fees were not awarded as costs at common law. Mattis, "Attorney's Fees as Costs in Illinois: 1607 and All That," (1979), S.Ill.U.L.J. 249, 252. Attorney fees could be recovered, however, in a judgment for damages when the trial court found either that the plaintiff had sued "pro falso clamore" or that the defendant had acted "in misercordia." Essentially, a losing plaintiff was subject to a fine for bringing a false claim and a losing defendant was subject to a fine for his unjust retention of the plaintiff's rights. Mattis, at 252.

In 1278, Parliament expanded the common law rule by passing the Statute of Gloucester which allowed the winning party to recover costs "in all Cases where the Party is to recover Damages." 6 Edward I CI. Sec. 2 (1278); Goodhart, "Costs," (1929), 38 Yale L.J. 849, 852. Sir Edward Coke explained that by 1607 the common law courts interpreted the statute broadly so that it "extendeth to all the legall costs of suit...," including attorney fees. Sir Edward Coke, The Second Part of the Institutes of the Lawes of England, 288 (1642), Goodhart at 852 fn. 14; Fleischmann Distilling Corp. v. Maier Brewing Co., (1967), 386 U.S. 714, 717 fn. 7, 87 S.Ct. 1404, 1406, 18 L.Ed.2d 475. So, by 1607, prevailing litigants in damage actions at law were entitled to recover attorney fees as costs at the common law.

In 1818, the General Assembly passed the Common Law Reception Statute which adopted the English common law as it existed in 1607. ³

The common law adopted in Indiana consists of the judicial common law and the Acts of Parliament prior to the fourth year of James I except where modified or abrogated by Indiana constitutional or statutory provisions. Sopher v. State (1...