Negro Nest, LLC v. Mid-Northern Management
| Citation | 839 N.E.2d 1083 |
| Decision Date | 01 December 2005 |
| Docket Number | No. 4-04-0333.,4-04-0333. |
| Parties | NEGRO NEST, LLC., an Illinois Limited Liability Company, d/b/a Servpro of Springfield, Plaintiff-Appellee, v. MID-NORTHERN MANAGEMENT, INC., an Illinois Corporation, Defendant-Appellant. |
| Court | Supreme Court of Illinois |
John E. Kerley, Kerley & Associates, P.C., Springfield, for Mid-Northern Management, Inc.
Samuel J. Witsman, Jason Anselment, Hart, Southworth & Witsman, Springfield, for Negro Nest, LLC.
In October 2002, plaintiff, Negro Nest, LLC., doing business as Servpro of Springfield (Servpro), filed suit against defendant, Mid-Northern Management, Inc. (Mid-Northern), seeking payment for services rendered pursuant to a contract. In November 2003, the parties settled on the amount owed for the services provided but reserved the issues regarding interest, attorney fees, and costs for the trial court's determination. In March 2004, the trial court entered judgment in Servpro's favor, awarding $15,659.87 in attorney fees, costs, and interest.
On appeal, Mid-Northern argues the trial court erred in its award because (1) the parties' contract did not specifically provide a basis for awarding attorney fees and (2) the fees awarded were unreasonable. Because we agree with the first point, we reverse.
In February 2002, Servpro entered into a contract with Mid-Northern by which Servpro was to perform cleaning and restoration services on a multiunit apartment complex managed by Mid-Northern. The contract was prepared by Servpro and included a provision stating, "If the undersigned fails to pay for services rendered and collection efforts become necessary, the undersigned agrees to be responsible for all collection costs incurred." (Emphasis added.) Servpro performed pursuant to the contract and sent Mid-Northern an invoice for $7,860.66.
Between February and September 2002, Servpro sent six invoices to Mid-Northern. Mid-Northern did not pay the bill. In October 2002, Servpro filed suit seeking $8,744.50 plus interest, reasonable attorney fees, court costs, and all costs of collection. The parties settled in November 2003 for the full amount of the original invoice, $7,860.66, and the remaining issues regarding interest, attorney fees, and costs were left to be determined by the trial court.
In March 2004, the trial court heard oral arguments on the issues. The primary point of contention was whether the contract provision providing for "all collection costs" allowed Servpro to collect for its attorney fees. The trial court held attorney fees are encompassed within "all collection costs." The court entered judgment in Servpro's favor, awarding $12,668.75 in attorney fees, $524.27 costs, and $2,467.85 interest for a total of $15,659.87. This appeal followed.
Mid-Northern first contends the trial court erred in awarding attorney fees to Servpro because the court incorrectly found "all collection costs" included attorney fees.
The construction of a contract is a question of law, and the standard of review is de novo. Pennsylvania Life Insurance Co. v. Pavlick, 265 Ill.App.3d 526, 529, 202 Ill.Dec. 424, 637 N.E.2d 1160, 1162 (1994).
Illinois follows the "American Rule," which provides that absent statutory authority or a contractual agreement, each party must bear its own attorney fees and costs. Morris B. Chapman & Associates, Ltd. v. Kitzman, 193 Ill.2d 560, 572, 251 Ill.Dec. 141, 739 N.E.2d 1263, 1271 (2000). Statutes permitting the recovery of costs are in derogation of the common law and must be strictly construed. Calcagno v. Personalcare Health Management, Inc., 207 Ill.App.3d 493, 502, 152 Ill.Dec. 412, 565 N.E.2d 1330, 1336 (1991). Similarly, contractual provisions providing for attorney fees should also be strictly construed. Helland v. Helland, 214 Ill.App.3d 275, 277-78, 157 Ill.Dec. 939, 573 N.E.2d 357, 359 (1991). Successful litigants cannot recover attorney fees as costs unless expressly authorized by a statute or agreement using specific language. See Estate of Downs v. Webster, 307 Ill.App.3d 65, 70, 240 Ill.Dec. 309, 716 N.E.2d 1256, 1260 (1999).
A statute or contract must allow for attorney fees by specific language, such that one cannot recover if the provision does not specifically state that "attorney fees" are recoverable. See Downs, 307 Ill.App.3d at 70, 240 Ill.Dec. 309, 716 N.E.2d at 1260; Qazi v. Ismail, 50 Ill.App.3d 271, 273, 7 Ill.Dec. 434, 364 N.E.2d 595, 596-97 (1977).
The contract provision at issue calls for recovery of "all collection costs." The contract makes no mention of attorney fees. Plaintiff asks this court to include attorney fees under the umbrella of "collection costs."
Plaintiff relies exclusively on a Seventh Circuit case, Boulevard Bank National Ass'n v. Philips Medical Systems International B.V., 15 F.3d 1419 (7th Cir.1994), which held "collection costs" included attorney fees under Illinois law. The Boulevard court distinguished the general principle that attorney fees are not recoverable unless explicitly authorized by written contract, on the basis that those prior courts had only been construing the term "costs" alone, and not when modified by another term such as "collection." Boulevard, 15 F.3d at 1426. The court reasoned that to give effect to the term "collection costs" it was necessary to include attorney fees, the major cost incurred, and that if the parties wanted to exclude attorney fees they would have used the word "costs" alone. Boulevard, 15 F.3d at 1426. The court found the term "collection" modified the term "costs" in such a way as to allow recovery under the contract. Boulevard, 15 F.3d at 1426. In coming to this conclusion, the court relied on Meeker v. Fowler, 35 Ill.App.3d 313, 341 N.E.2d 412 (1976), which interpreted "collection charge" under section 20 of "An Act in relation to retail installment sales" (Ill.Rev.Stat.1965, ch. 121 1/2, par. 243) (hereinafter 1965 Act) to include attorney fees.
In Meeker, the parties signed numerous instruments, during two transactions in 1965 and in 1968, representing the transfer of three grain bins. The trial court found each transaction constituted an installment sales contract that was governed by the version of the act in effect at the inception of each contract. Ill.Rev.Stat.1965, ch. 121 1/2, pars. 223 through 253; Ill.Rev.Stat.1967, ch. 121 1/2, pars. 501 through 533 (hereinafter 1967 Act). The trial court found the seller noncompliant with the acts and implemented sanctions under two provisions, including denying the seller recovery of his attorney fees because the court believed the fees constituted a "collection charge," forfeited under one of the statutory penalty provisions. The appellate court reversed the trial court in part, finding the 1968 transaction did not fall within the 1967 Act, but also remanded the cause for a determination of whether the 1965 transaction fell within the 1965 Act. Meeker, 35 Ill.App.3d at 320-21, 341 N.E.2d at 417-18. The court, in dicta, went on to address whether, if the 1965 transaction did fall within the 1965 Act, the seller could be denied recovery of his attorney fees as a statutory penalty for his noncompliance.
Section 20 of the 1965 Act stated in part, "[a]ny person violating [certain provisions of the Act] * * * is barred from recovery of any finance charge, delinquency[,] or collection charge * * * on the retail installment contract involved." Ill.Rev.Stat.1965, ch. 121 1/2, par. 243. The seller contended the trial court erred in denying him recovery for his attorney fees as a "collection charge" under the provision. In support, the seller pointed to section 6 of the Act, which allowed the holder of the contract to include contract provisions allowing for recovery of delinquency and collection charges as well as reasonable attorney fees in the instance of default. Ill.Rev.Stat.1965, ch. 121 1/2, par. 228. The seller argued "collection charge" in section 20 should not be interpreted to encompass attorney fees because the legislature clearly treated collection charges separately from attorney fees in section 6. The Meeker court rejected this argument, finding section 6 only applied when holders in compliance with the law were seeking to recover under their contracts. Meeker, 35 Ill.App.3d at 321-22, 341 N.E.2d at 418-19.
The Meeker court emphasized the buyers were trying to recover under an additional statutory penalty provision, section 17, which allowed a monetary penalty plus recovery of the buyer's attorney fees if the seller failed to comply with the provisions of the act. Meeker, 35 Ill.App.3d at 322, 341 N.E.2d at 419. Assuming the contract fell under the 1965 Act, the seller's violations would result in (1) the seller's forfeiture of any finance, delinquency, and collection charges; (2) a monetary penalty against the seller equal to the contract finance charge or 10% of the purchase price; and (3) the seller's payment of the buyer's attorney fees. Meeker, 35 Ill.App.3d at 322, 341 N.E.2d at 419; Ill.Rev.Stat.1965, ch. 121 1/2, pars. 240, 243. Given the penalty provisions and the seller's violation of the law, the court concluded it would be ironic to allow the seller to recover his attorney fees. Meeker, 35 Ill.App.3d at 322, 341 N.E.2d at 419.
In support, the Meeker court stated, "[t]hough the question seems not to have been considered in Illinois, we find authority from other jurisdictions to the effect that `collection charge' includes attorney's fees." Meeker, 35 Ill.App.3d at 322, 341 N.E.2d at 419, citing Ben Construction Corp. v. Snushall, 254 N.Y.S.2d 948, 44 Misc.2d 878 (1964); General Finance Co. v. Powell, 114 Mont. 473, 138 P.2d 255 (1943); McClain v. Continental Supply Co., ...
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