Petition of State Farm Mut. Auto. Ins. Co., Docket Nos. 12457

• Decision Date: 27 September 1973
• Docket Number: No. 2,12458,Docket Nos. 12457,2
• Citation: 50 Mich.App. 71,212 N.W.2d 821
• Parties: Petition of STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a foreign corporation, for a Declaration of Rights as to Carl Lester Allen, a/k/a Carl Allen, Sr., et al. *
• Court: Court of Appeal of Michigan — District of US

Page 821

212 N.W.2d 821

50 Mich.App. 71

Petition of STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,

a foreign corporation, for a Declaration of Rights

as to Carl Lester Allen, a/k/a Carl

Allen, Sr., et al. ^*

Docket Nos. 12457, 12458.

Court of Appeals of Michigan, Division No. 2.

Sept. 27, 1973.

Released for Publication Dec. 19, 1973.

Leroy M. Ogle, Detroit, for appellant Dodds Co.

Edmond F. DeVine, Ann Arbor, for State Farm.

Arthur E. Carpenter, Ann Arbor, for Ross and Allen.

Ralph H. Adams, Detroit, for Kendall.

L. Ray Bishop, Ann Arbor, for Cygans.

Before LEVIN, P.J., and V. J. BRENNAN and O'HARA,* JJ.

PER CURIAM.

After an automobile collision, Richard Cygan and his wife commenced an action against the driver of the other automobile, Bobby Ross, and the owner, Ross's brother-in-law Carl Allen. State Farm, which had been assigned Allen's policy under the assigned risk plan, was called upon to defend Ross and Allen.

State Farm commenced this action against the Cygans, Ross, and Allen seeking a declaration of rights. Count 1 sought rescission of the insurance contract for Allen's alleged failure to provide accurate information in the insurance application. Count 2 alleged that State Farm was exculpated from liability because Ross intentionally injured Cygan.

In their answers, Ross and Allen asserted that if State Farm was not liable then the dealership which sold Allen the automobile, Wayne Hall Dodds Company, or the insurance agency through whom the insurance was obtained, Bruce G. Kendall, Inc., was responsible for the cost of defense. State Farm, after extensive discovery, was granted leave to file an amended complaint adding a third count stating a cause of action against Dodds and Kendall for fraud and forgery.

A consent judgment for $3,000 was entered in favor of the Cygans in their action against Ross and Allen. All the parties to this action subsequently stipulated that this amount was reasonable.

At the trial, State Farm withdrew counts 1 and 2 of its complaint. Motions by Dodds and Kendall for dismissal of equitable jurisdiction of the third count for fraud and forgery on the ground that the action had become one of law for damages, and subsequent motions for a directed verdict on the same basis, were denied.

Testimony at trial established that, although the automobile had been purchased for Ross's use, the insurance application did not name Ross as the principal driver; Allen was the only operator listed. The question whether the operator's license of any 'usual' driver of the automobile had been suspended was checked 'no' although Ross's license was then under suspension. Handwriting experts testified that Allen's signature on the application was forged. Three experts attributed the forgery to the president of the Dodds dealership. Another testified that it was in the handwriting of an agent for Kendall.

A jury, by special verdict, found that Dodds and Kendall, acting in concert, committed the 'fraud alleged' (as it was termed in the jury verdict), on State Farm, Ross, and Allen. A judgment was entered cancelling the insurance policy, awarding State Farm $12,258.53, and Ross and Allen $5,690 against Dodds and Kendall for the cost of litigation, including attorneys' fees, and requiring Dodds and Kendall to pay the Cygans $4,450 for attorney fees and $3,000 for the consent judgment.

The judge had previously ruled that although 'attorney fees cannot be taxed as costs in the absence of statute or court rule', they 'can be charged as an element of damages where the party claiming them can show that he has been forced to expend money as a direct result of the unlawful acts of the other party'.

In England, attorneys' fees are taxable as 'costs' of litigation in all civil suits. But American courts have stepped to the beat of a different drummer. As a general rule, our courts have refused to allow recovery of attorneys' fees, either as an element of the costs of the suit or as an item of damages, unless allowance of a fee is expressly authorized by statute or court rule. See 20 Am.Jur.2d, Costs, § 72, pp. 58--59, and 22 Am.Jur.2d, Damages, § 165, pp. 234--235. The rule has persisted despite the vigorous attack of commentators advocating adoption of the English rule. ¹ By statute or court rule, Michigan has provided for the recovery of attorneys' fees in special classes of litigation E.g., GCR 1963, 726 (divorce or separate maintenance); GCR 1963, 749.4, 750.4 (partition); M.C.L.A. § 451.810(a)(2); M.S.A. § 19.776(410)(a)(2) (Blue Sky Law suits for rescission); M.C.L.A. § 570.12; M.S.A. § 26.292 (mechanic's liens); M.C.L.A. § 600.2431(2); M.S.A. § 27A. 2431(2) (foreclosure by advertisement); M.C.L.A. § 600.2435; M.S.A. § 27A.2435 (judgment creditor proceedings); M.C.L.A. § 600.2425(1); M.S.A. § 27A.2425(1) (action to abate a nuisance commenced without reasonable ground or cause; 'attorneys' fees are proper costs'); GCR 1963, 526.7, 116.5, 117.3 (filing an affidavit opposing a motion for summary or accelerated judgment without good faith and for purposes of delay); GCR 1963, 306.7 (failure of moving party to subpoena witness to be deposed or to attend and proceed with deposition); and GCR 1963, 313.1(3) (refusal to admit facts and genuineness of documents); GCR 1963, 111.6 (unwarranted allegations and denials); ² GCR 1963, 816.5 (vexatious appeals).

No Michigan statute or court rule provides for an allowance of attorneys' fees in a declaration of rights proceeding. On this vasis, the plaintiffs in a Connecticut case, Peterson v. City of Norwalk, 152 Conn. 77, 80--81, 203 A.2d 294, 296 (1964), were denied attorney fees.

State Farm, et al, contend that the chancellor in equity proceedings has broad discretionary powers regarding remedies and, therefore, may grant relief which includes an award of attorney fees as damages. Michigan case law does not support this contention. In Kittermaster v. Brossard, 105 Mich. 219, 221, 63 N.W. 75, 76 (1895), the Supreme Court rejected the argument that 'a court of equity may impose a reasonable solicitor's fee'. In Nordberg v. Todd, 254 Mich. 440, 446, 236 N.W. 826, 828 (1931), an action for construction of a deed, the Court found that the trial judge had exceeded his authority in awarding plaintiffs an attorney fee in excess of the amount fixed by the court rule. In Roberts v. Michigan Trust Co., 273 Mich. 91, 122, 123, 262 N.W. 744, 755 (1935), a suit against trustees for unlawful diversion of funds, the Court reversed an award of 'reasonable counsel fees and costs of the suit': 'In taxing costs in the lower court, plaintiffs will not be allowed attorney fees in excess of the amount fixed by Court Rule No. 5, § 6 (1933)'. In Peisner v. Lowman, 363 Mich. 320, 323, 109 N.W.2d 923, 925 (1961), a guardian's action to set aside a deed, the trial judge's order granting the prevailing party a $500 legal fee was modified to $30, the amount authorized by court rule.

There is dicta in one case, Merkel v. Long (On Rehearing), 375 Mich. 214, 218, 134 N.W.2d 179, 183 (1965), that 'to avoid 'an inequitable result', equity would have inherent power to require payment of such fees Out of the funds of these trusts'. (Emphasis supplied.) This case is referred to in Gundersen v. Village of Bingham Farms, 1 Mich.App. 647, 137 N.W.2d 763 (1965). However, in both cases an award of attorneys' fees was denied; similarly Fleischer v. Buccilli, 13 Mich.App. 135, 139, 163 N.W.2d 637, 639 (1968) (see fn. 4), also relied on by State Farm, et set aside an award of attorneys' fees. In Merkel the Court expressly went on to state that the cases do not stand 'for the proposition that a chancellor may award such attorney fees whenever failure to do so might 'produce an inequitable result."

There are, indeed, recognized exceptions. Where the prevailing party has created or protected a common fund for the benefit of others as well as himself, a court of equity may allow that party reasonable attorneys' fees to be paid from the fund. See McCormick, Damages, § 62, p. 237; 20 Am.Jur.2d, Costs, §§ 83, 84, pp. 68--69; Sant v. Perronville Shingle Co., 179 Mich. 42, 57--59, 146 N.W. 212, 217--218 (1914): McLaughlin v. McLaughlin, Ward & Co., 277 Mich. 419, 428, 269 N.W. 218, 222 (1936) (stockholders' actions); Mann v. Day, 199 Mich. 88, 97, 165 N.W. 643, 646--647 (1917) (trust estate).

Some jurisdictions allow attorneys' fees to be taken into consideration in determining the amount of exemplary damages. See 22 Am.Jur.2d, Damages, § 167, p. 168; Anno: Attorneys Fees or Other Expenses of Litigation as Element in Measuring Exemplary or Punitive Damages, 30 ALR3d 1443. ³ One Michigan case affirmed an award of exemplary damages in apparent recognition of this principle, Oppenhuizen v. Wennersten, 2 Mich.App. 288, 299, 139 N.W.2d 765, 771 (1966). However, exemplary damages were neither sought nor awarded in the case now before us.

Michigan cases recognize another exception and allow, despite the absence of statutory authority, the award of attorneys' fees in actions for false imprisonment or malicious prosecution. See Bates v. Kitchel, 166 Mich. 695, 701, 132 N.W. 459, 462 (1911); Tutton v. Olsen & Ebann, 251 Mich. 642, 650, 232 N.W. 399, 402 (1930); Anno: Attorneys Fees as Element of Damages in Action for False Imprisonment or Arrest, or for Malicious Prosecution, 21 ALR3d 1068.

Finally, reasonable attorneys' fees incurred in prior litigation with 'a third party--not with the defendant' may be recoverable. See 22 Am.Jur.2d, Damages, § 166, pp. 235--236. Reference was made to this exception in Brillhart v. Danneffel, 36 Mich.App. 359, 366, 194 N.W.2d 63, 66--67 (1971). Cagney v. Wattles, 121 Mich. 469, 80 N.W. 245 (1899), cited in Fleischer v. Buccilli, Supra, appears to rest on this principle. ⁴ As explained by McCormick, Damages, § 66, p. 246:

'For the expense incurred in the Present litigation, we have found that our law generally gives the successful party no recompense beyond the...