Peebles v. Miley

• Decision Date: 30 September 1983
• Citation: 439 So.2d 137
• Parties: John D. PEEBLES, et al. v. Mary S. MILEY. 82-402.
• Court: Alabama Supreme Court

Page 137

439 So.2d 137

John D. PEEBLES, et al. v. Mary S. MILEY.

82-402.

Supreme Court of Alabama.

Sept. 30, 1983.

Broox G. Holmes and Christopher I. Gruenewald of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, Mobile, for appellants.

Beth McFadden Rouse of McFadden, Riley & Parker, Mobile, for appellee.

ADAMS, Justice.

This case involves the sensitive issue of how reasonable attorney's fees are determined.

On January 4, 1983, the Circuit Court of Mobile County entered a judgment in favor of the plaintiff, Mary S. Miley, against the defendants for the sum of $26,744.00, plus court costs. Except for the costs, this represented an attorney's fee to the plaintiff's lawyer as a result of collecting $197,367.88 on a promissory note executed by the defendants. Plaintiff had claimed $39,562.58 or 20% of the recovery, as attorney's fees. The court allowed 15% of the amount of the recovery. The defendants appealed from the judgment awarding attorney's fees, claiming that the trial court abused its discretion in making this award.

As in most cases, the facts play an important part in establishing the result to be reached. In February 1980, Fairhope East Joint Venture, an entity composed of the defendants in this action, executed a promissory note to the plaintiff, Miley, for the sum of $223,200.00 with interest at 9.5%. The indebtedness was the balance of the purchase price of certain rural property in Baldwin County. The note was secured by a vendor's lien on 79.9 acres, but the agreement provided that certain pieces of property could be released by agreement of the parties. At the time of the litigation, there was 33.3 acres left in the original encumbered acreage, which was landlocked, the released property having been road frontage.

Payments on the note were to be made in six installments, namely, September 25, 1980, 1981, 1982, 1983 and 1984, with a remaining balance due and payable on February 28, 1985. The note contained the usual acceleration clause and, in addition thereto, contained the following provision:

It is further agreed that the undersigned shall pay all costs of collection, including a reasonable attorney's fee, on failure to pay any installment of principal and interest of the note on the date due hereof.

Defendants paid the first two installments promptly. On September 23, 1982, two days prior to the due date of the 1982 installment, plaintiff's original counsel, by letter, informed defendants that an installment of $39,283.20 was due on September 25, 1982. Plaintiff's then-counsel was informed by defendants' then-counsel that the partners of the joint venture "found it impossible" to raise the funds necessary to make the payment, and that the plaintiff should consider alternatives to default.

Plaintiff, from the beginning, was against alternatives, and desired payment in part or in full. Her first counsel suggested foreclosure as a means of collecting the balance due under the note, but plaintiff, not being satisfied with this attorney, contacted Attorney Stova McFadden, who recommended that plaintiff proceed by a direct suit on the note because this action would have to be taken if there were a deficiency on foreclosure, anyway. Plaintiff, at that time, was anxious to receive funds because she had to make a payment on a note on the same property that she had sold to defendants. On October 7, 1982, McFadden sent a demand letter to the defendants, accelerated the note, and informed defendants that if payment in full was not made by October 18, 1982, suit would be filed. Plaintiff was again informed that the defendants were unable to pay the installment and defendants suggested various alternatives in lieu of the payment of the debt. Plaintiff's attorney suggested, as an alternative, that the entire indebtedness of $196,700, plus an attorney's fee of 15% be paid within one week and in the event this was not done, that a default in this amount plus fee be entered. Contemporaneously with this suggestion made by plaintiff, defendants advised that the debt would be paid within a week. On October 22, 1982, the lawyer for the plaintiff contacted defendants' representative to determine whether the defendants had agreed on the alternative he suggested. He was informed that no agreement had been reached because all of the partners could not be located. On that same day suit was filed.

On November 5, 1982, defendants' new counsel sent plaintiff's counsel a check for $197,367.88, being the full amount plus interest due on the note. In addition thereto, $7,500.00 as an attorney's fee was also tendered by separate check.

Plaintiff's attorney indicated that he only spent 8 or 10 hours' time in the handling of this litigation; however, his arrangement with his clients was that he should look to obtain his fee on a percentage basis from the defendant. In other words, if he did not receive his fee from the defendants, he could not receive any fee from plaintiff.

The court heard testimony from four attorneys, including the plaintiff's attorney. Three attorneys testified that it was customary in the Mobile area to take collection of promissory notes on a contingent percentage fee arrangement rather than an hourly basis. They further testified that 20% of $197,367.00 would produce a reasonable attorney's fee for plaintiff's services in this case. One attorney, the defendant's witness, testified that based on hours spent and the result achieved, a reasonable fee would be $2,000.00. However, he also testified that he had handled promissory note collections on a percentage basis and had been awarded fees up to 25% and "maybe one-third."

Over 71 years ago, Justice Somerville set forth yardsticks to be used by our courts in determining reasonable attorney's fees. He said:

The general principle is everywhere established that an attorney is in such a case entitled to reasonable compensation for his services, appropriate to his employment, rendered by him to his client.--Humes v. Decatur, etc., Co., 98 Ala. 461, 470, 13 South. 368. In the estimation of their value many elements may be material for consideration, among which are the nature and value of the subject-matter of the employment; the learning, skill, and labor requisite to its proper discharge; the time consumed; the professional experience and reputation of the attorney; the weight of his responsibility; and the measure of success achieved.

Faulk & Co. v. Hobbie Grocery Co., 178 Ala. 254, 59 So. 450 (1912).

Forty years later, Justice Simpson added an additional criterion to the six criteria above mentioned. King v. Keith, 257 Ala. 463, 60 So.2d 47 (1952). The seventh criterion was that in determining a reasonable attorney's fee, the trial judge should take into consideration the reasonable expenses incurred by the attorney. Although Justice Somerville mentioned in the Faulk case that the customary charges of lawyers in a particular community should also be taken into consideration in determining a reasonable attorney's fee, and some cases have stated that the amount of an attorney's fee could turn on whether the fee was certain or contingent, ¹ nevertheless, the codification of the criteria, for the most part, has remained as set forth in the Faulk case. Frazer v. First National Bank of Mobile, 235 Ala. 252, 178 So. 441 (1938); Ingalls v. Hare, 266 Ala. 221, 96 So.2d 266 (1957).

Our civilization has progressed dramatically in the past 71 years, as well as our jurisprudence. Although we do not decide that the trial court abused its discretion in deciding the attorney's fees in this case, we are also cognizant that the trial court may not have been aware of certain guideposts, not clearly enunciated in our previous decisions, that should have been taken into consideration in determining a reasonable attorney's fee. Therefore, we vacate the judgment herein, and remand this case to the trial court for reconsideration of a reasonable attorney's fee in the light of our discussion in this opinion of current guideposts to be used in determining counsel fees.

On January 1, 1970, Canon 12 of the American Bar Association relating to fees was superseded by Disciplinary Rule 2-106, which states in § (B):

(B) A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee. Factors to be considered as guides in determining the reasonableness of a fee include the following:

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly.

(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer.

(3) The fee customarily charged in the locality for similar legal services.

(4) The amount involved and the results obtained.

(5) The time limitations imposed by the client or by the circumstances.

(6) The nature and length of the professional relationship with the client.

(7) The experience, reputation, and ability of the lawyer or lawyers performing the services.

(8) Whether the fee is fixed or contingent.

Model Code of Professional Responsibility, DR 2-106(B) (1982). ²

Thus, according to the American Bar Association, Justice Somerville's original criteria of six, to which one has been added, should be expanded to include five additional criteria. They are as follows:

1. Whether a fee is fixed or contingent.

2. The nature and length of a professional relationship.

3. The fee customarily charged in the locality for similar legal services. (This was included in the Faulk opinion, but not listed in cases which have followed Faulk ).

4. The likelihood that a particular employment may preclude other employment.

5. The time limitations imposed by the client or by the circumstances.

After due consideration of these additional measurements, we believe them to be...