Regan v. Malone

C O U R T O F A P P E A L S

A T K N O X V I L L E O F T E N N E S S E E FILED April 30, 1998

Cecil Crowson, Jr. Appellate C ourt Clerk

C . M . R E A G A N ) H A M I L T O N C O U N T Y ) 0 3 A 0 1 - 9 7 0 7 - C H - 0 0 2 8 1 P l a i n t i f f - A p p e l l e e ) ) ) v . ) H O N . R . V A N N O W E N S , ) C H A N C E L L O R ) T R O Y M A L O N E , S A N D R A M A L O N E ) a n d D A N C O N N E L L Y ) ) A F F I R M E D I N P A R T ; V A C A T E D D e f e n d a n t s - A p p e l l a n t s ) I N P A R T a n d R E M A N D E D

M A R V I N B E R K E O F C H A T T A N O O G A F O R A P P E L L A N T D A N C O N N E L L Y S C O T T N . B R O W N , J R . , O F C H A T T A N O O G A F O R A P P E L L E E

O P I N I O N

G o d d a r d , P . J .

D e f e n d a n t D a n C o n n e l l y a p p e a l s a j u d g m e n t o f t h e C h a n c e r y C o u r t o f H a m i l t o n C o u n t y w h i c h f o u n d t h a t h e h a d g u a r a n t e e d a n i n d e b t e d n e s s t h e D e f e n d a n t s T r o y a n d S a n d r a M a l o n e o w e d C . M . R e a g a n , a n d t h e r e u p o n a w a r d e d a r e c o v e r y a s t o t h e p r i n c i p a l a n d i n t e r e s t a c c r u i n g t o A u g u s t 3 1 , 1 9 9 6 , i n t h e a m o u n t o f $ 1 2 8 , 7 6 2 . 9 0 . H e a l s o a w a r d e d , i n a c c o r d a n c e w i t h t h e s p e c i f i c *2 l a n g u a g e o f t h e g u a r a n t y , 2 5 p e r c e n t f o r c o l l e c t i o n c o s t s i n t h e a m o u n t o f $ 3 2 , 1 9 0 . 7 3 .

M r . C o n n e l l y r a i s e s s e v e r a l d e f e n s e s a t t a c k i n g t h e g u a r a n t y w h i c h w e f i n d h a v e b e e n a p p r o p r i a t e l y a n d c o r r e c t l y d e c i d e d b y t h e C h a n c e l l o r i n h i s m e m o r a n d u m o p i n i o n .

W e c o n c l u d e a s t o a l l t h e i s s u e s r a i s e d b y M r . C o n n e l l y , e x c e p t t h e o n e q u e s t i o n i n g t h e a w a r d f o r c o l l e c t i o n f e e s , b e a f f i r m e d u n d e r R u l e 1 0 ( a ) o f t h i s C o u r t .

A s t o t h e c o l l e c t i o n f e e s , t h e C h a n c e l l o r r e l i e d u p o n t h e c a s e o f W a l l e r , L a n s d e n , D o r t c h & D a v i s v . H a n e y , 8 5 1 S . W . 2 d 1 3 1 ( T e n n . 1 9 9 2 ) , w h i c h h e l d t h a t a n o t e c o n t a i n i n g a c l a u s e a u t h o r i z i n g a 1 5 p e r c e n t c o l l e c t i o n f e e t o b e v a l i d . I n s o d o i n g , t h e S u p r e m e C o u r t s a i d ( a t p a g e 1 3 3 ) :

W e f i n d o u r s el v e s i n c o n s o n a n c e w i t h t h e f i n d i n g s o f t h e t r i a l c o ur t s t a t e d i n i t s m e m o r a n d u m o p i n i o n : " T h e N o t e s t a t e s 'a l l c o s t s o f c o l l e c t i o n , i n c l u d i n g a t t o r n e y s f e es o f 1 5 % i f s u i t i s b r o u g h t o n t h i s n o t e , s h a l l b e a d d ed t o t h e p r i n c i p a l h e r e o f . ' T h a t c o n s t i t u t e s an u n c o n d i t i o n a l c o m m i t m e n t o n b e h a l f o f t h e d e f e n d a n t t o p a y a n a d d i t i o n a l 1 5 % i n t h e e v e n t s u i t i s b r o u gh t . . . . T h i s i s n o t a s t a n d a r d c l a u s e w h i c h p e r m i t s a n a w a r d o f r e a s o n a b l e a t t o r n e y s f e e s t o a p r e v a i l i n g p a r t y . I t i s a n e x p l i c i t , u n c o n d i t i o n a l c o m m i t m e n t t o p a y a n a d d i t i o n a l 1 5 % i f s u i t i s b r o u g h t . "

T h e S u p r e m e C o u r t o p i n i o n i n W a l l e r d o e s n o t c i t e a n y a u t h o r i t y f o r i t s s t a t e m e n t a n d a p p a r e n t l y o v e r l o o k e d e a r l i e r *3 T e n n e s s e e c a s e s w h i c h a r e i n c o n f l i c t . F o r e x a m p l e , i n t h e c a s e o f D o l e v . W a d e , 5 1 0 S . W . 2 d 9 0 9 ( T e n n . 1 9 7 4 ) , t h e S u p r e m e C o u r t d i s c u s s e s a n u m b e r o f c a s e s h o l d i n g c o n t r a r y t o e a c h o t h e r a s t o t h e q u e s t i o n p r e s e n t e d i n t h i s a p p e a l . A f t e r d o i n g s o , t h e S u p r e m e C o u r t r e l i e d u p o n H o l s t o n N a t i o n a l B a n k v . W o o d , 1 2 5 T e n n . 6 , 1 4 0 S . W . 3 1 ( 1 9 1 1 ) , w h i c h h o l d s c o n t r a r y t o W a l l e r , t h e c a s e r e l i e d u p o n b y t h e C h a n c e l l o r . I n t h e c o u r s e o f t h e o p i n i o n w h i c h s p e c i f i c a l l y o v e r r u l e s c a s e s t o t h e c o n t r a r y , t h e S u p r e m e C o u r t s t a t e d t h e f o l l o w i n g ( 5 1 0 S . W . 2 d a t p a g e 9 1 0 ) :

T h e c a s e o f H o l s t o n N a t i o n a l B a n k v . W o o d , 1 2 5 T e n n . 6 , 1 4 0 S . W . 3 1 ( 1 9 1 1 ) , i n v o l v e d a n o t e c o n t a i n i n g t h e f o l l o w i n g p r o v i s i o n :

I f t h i s n o t e i s p l a c e d i n t h e h a n d s o f a n a t t o r n e y a t l a w f o r c o l l e c t i o n , w e a g r e e t o p a y 1 0 p e r c e n t . a t t o r n e y ' s f e e s , a n d a l l e x p e n s e s i n c u r r e d i n i t s c o l l e c t i o n , a n d t h a t i f i t i s s u e d o n s a i d a t t o r n e y ' s f e e s a n d e x p e n s e s s h a l l b e t a x e d u p i n j u d g m e n t .

U p o n t h e i s s u e o f a t t o r n e y ' s f e e s u n d e r t h e t e r m s o f t h i s n o t e t h e C o u r t s a i d :

W h i l e a s t i p u l a t i o n i n a n o t e f o r a t t o r n e y ' s f e e s i s v a l i d a n d w i l l b e e n f o r c e d b y t h i s c o u r t , t h e c o u r t i s n o t b o u n d b y a p r o v i s i o n t o t h e e f f e c t t h a t a n y p a r t i c u l a r a m o u n t s h a l l b e a l l o w e d f o r s u c h f e e s , a n d , n o m a t t e r w h a t s t i p u l a t i o n a s t o t h e a m o u n t i s m a d e i n t h e f a c e o f t h e n o t e , i t w i l l n o t b e e n f o r c e d u n l e s s i t a p p e a r s r e a s o n a b l e t o t h e C o u r t . 1 2 5 T e n n . a t 1 6 , 1 4 0 S . W . a t 3 4 .

O u r r e a d i n g o f t h e c a s e s a b o v e m e n t i o n e d p e r s u a d e u s t h a t t h e b e t t e r r u l e i s f o u n d i n D o l e a n d W o o d a n d w e c h o o s e t o f o l l o w t h e i r d i c t a t e s r a t h e r t h a n t h o s e o f W a l l e r .

W e a l s o n o t e , i n s u p p o r t o f o u r d e t e r m i n a t i o n , t h a t c o u n s e l f o r M r . C o n n e l l y i n o r a l a r g u m e n t c o n c e d e d t h a t n o t e v e r y u n c o n d i t i o n a l c o m m i t m e n t t o p a y a s p e c i f i c p e r c e n t - - s u c h a s 5 0 , 7 5 o r 1 0 0 - - c o u l d b e s u s t a i n e d .

A c c o r d i n g l y , w e b e l i e v e i t a p p r o p r i a t e i n t h e i n t e r e s t o f j u s t i c e t o b o t h p a r t i e s t h a t t h i s c a s e b e r e m a n d e d t o t h e C h a n c e r y C o u r t f o r H a m i l t o n C o u n t y f o r a h e a r i n g a n d d e t e r m i n a t i o n o f a r e a s o n a b l e a t t o r n e y f e e f o r M r . R e a g a n ' s c o u n s e l .

T h e j u d g m e n t o f t h e T r i a l C o u r t i s a f f i r m e d i n p a r t , v a c a t e d i n p a r t a n d t h e c a u s e r e m a n d e d f o r f u r t h e r p r o c e e d i n g s n o t i n c o n s i s t e n t w i t h t h i s o p i n i o n . C o s t s o f a p p e a l a r e a d j u d g e d o n e - h a l f a g a i n s t M r . C o n n e l l y a n d h i s s u r e t y a n d o n e - h a l f a g a i n s t M r . R e a g a n .

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ H o u s t o n M . G o d d a r d , P . J .

C O N C U R :

( S e p a r a t e O p i n i o n C o n c u r r i n g i n P a r t a n d D i s s e n t i n g i n P a r t ) C h a r l e s D . S u s a n o , J r . , J .

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ W i l l i a m H . I n m a n , S r . J .

COURT OF APPEALS OF TENNESSEE

FILED C. M. REAGAN, ) HAMILTON COUNTY April 30, 1998 CHANCERY COURT ) C/A NO. 03A01-9707-CH-00281 Plaintiff-Appellee, ) Cecil Crowson, Jr. ) Appellate C ourt Clerk ) ) ) HONORABLE R. VANN OWENS, v. ) CHANCELLOR ) ) ) TROY MALONE, SANDRA MALONE, ) and DAN CONNELLY, ) ) SEPARATE OPINION CONCURRING IN Defendants-Appellants.) PART AND DISSENTING IN PART

Susano, J.

I concur in all of the majority opinion except that portion dealing with the issue of “collection fees.” On that issue, I dissent.

The combined promissory note and guaranty agreement before us includes the following provision:

In the event that default is made in the payment of this note at maturity and it is placed in the hands of an attorney for collection, that suit is brought on the note, or that the note is collected through bankruptcy or probate proceedings, the undersigned agrees that an additional amount of Twenty-five percent (25%) of the principal and interest then due hereon shall accrue as collection fees.

The majority construes this provision as if it provides for a reasonable attorney’s fee not to exceed 25%. The majority relies *7 upon its understanding of Supreme Court decisions that pre-date Waller, Lansden, Dortch & Davis v. Haney, 851 S.W.2d 131 (Tenn. 1992) -- the case upon which the trial court relied in awarding the plaintiff a 25% collection fee in this case.

I feel bound by the Waller case. The decisions upon which the majority relies address the issue of “attorney’s fees”; both the instant case and the Waller case deal with a somewhat broader concept, i.e., collection fees. The provision in the instant case states that if -- as was the case here -- suit is brought by an attorney, the makers and guarantor agree to pay 25% of the unpaid principal and accrued interest. This obligation is stated in clear, absolute, and unconditional terms. As I understand Waller, a collection fees provision such as the one at issue in this case “is an explicit unconditional commitment to pay” a specified percentage “if suit is brought.” Id. at 134. Since “[t]he Court of Appeals has no authority to overrule or modify Supreme Court[] opinions,” see Bloodworth v. Stuart, 428 S.W.2d 786, 789 (Tenn. 1968), and since I find the majority opinion to be at odds with what I perceive to be the controlling holding in Waller, the most recent Supreme Court case on the subject, I am constrained to dissent from my brethren’s ruling with respect to collection fees.

I hasten to express one caveat to my dissent. I can conceive of a note provision with a collection fee stated in a percentage that was so high under the circumstances as to warrant a finding of unconscionability. Such a finding in an appropriate *8 case would not, in my judgment, run afoul of Waller; however, I do not find the 25% fee in the instant case to be unconscionable.

I would affirm the trial court in toto.

__________________________ Charles D. Susano, Jr., J.