Popich v. Fidelity & Deposit Co.

DIXON, Justice. A writ was granted in this matter, limited to the issue of attorney’s fees. Two cases were consolidated for trial, and were heard together on appeal. (231 So.2d 604, La.App. 4th Cir., 1970). Popich, Fox and Fidelity and Deposit Company entered into a contract for the construction of a home for Popich. Fidelity and Deposit Company was the surety on the performance bond for Fox, the builder. Before the completion of the building, it suffered hurricane damage on September 9, 1965. A dispute subsequently arose over the repairs and the completion of the dwelling and Popich filed a notice of default and took possession about July 1, 1966. These suits followed, Fox claiming the balance of the contract price from Popich, and Popich claiming damages and attorney’s fees from the contractor and his surety. The Court of A ppeal affirmed the award to Fox for the balance due him for the construction, but reduced the amount awarded Popich by the trial court and held that Popich was not entitled to recover attorney’s fees. This refusal was based on the conclusions that there was no contractual obligation on Fox to pay attorney’s fees and that the surety was under no liability for attorney’s fees in suits like this because of Costanza v. Cannata, 214 La. 29, 36 So.2d 627 (1948). Fox, Popich and Fidelity and Deposit Company all signed the same contract. In addition to the usual provisions, it contained the following references to attorney’s fees: “ * * * and the expense of the notice, and the completing of the various works, together with all costs, charges or attorney’s fees incident to the completion or enforcement of this contract shall be a charge and lien against the party of the second part (builder) and his surety, hereinafter intervening and may be deducted from the amount due or° to become due him; * * * * * * * * * “And it is agreed and understood that said surety, in addition to the amount of the foregoing bond, shall be liable for all costs, charges, expenses and attorney’s fees, incurred in any concursus or other legal proceeding made necessary by the failure of the contractor to faithfully comply with the foregoing contract, said attorney’s fees to be fixed at five per cent, on the amount of the foregoing bond.” It is readily apparent that Fox was under a liability imposed by the contract for attorney’s fees resulting from 'the default of the builder. Costanza v. Cannata, supra, has no application to the case before us. In Costanza, there was a concursus proceeding provoked by the plaintiffs, who prayed for an [167] increase in attorney’s fees awarded by the trial court. Instead, the Supreme Court reduced the attorney’s fees to $250.00, saying: “The basis for the plaintiffs’ right to attorney fees is to be found in section 10 of Act No. 298 of 1926, and it is limited to compensation for provoking the concursus proceeding. It is not extended to include the services of such attorney in connection with the prosecution of the claims of the owner against the contractor and his surety. We believe the amount awarded by the trial judge in this case is excessive and that the amount suggested by the attorneys for the surety is ample.” There was apparently no contractual obligation to pay attorney’s fees in Constanza. The obligation for attorney’s fees in the case before us arises, not from statute but from the building and surety contract. A similar claim for attorney’s fees, based on the surety contract, was before this court in Maloney v. Oak Builders, Inc., 256 La. 85, 235 So.2d 386 (1970). The attorney’s fees were awarded at 5% of the amount of the contract, pursuant to the contractual provision. The opinion in the Maloney case stated: “Under the facts and circumstances of this case, we find that the award for attorney fees constituted damages, and such were liquidated by contract.” 235 So.2d 386, 391. Fidelity and Deposit interprets Maloney to hold that a stipulation for attorney’s fees in a contract is a penal obligation. C.C. 1934, subsection 5; C.C. 2117-2127; 25 Tul.L.Rev. 407 (1950-1951). Upon this interpretation, the surety company contends that C.C. 2120 excuses it from the penalty, because of the intervention of Hurricane Betsy.1 The Court of Appeal did not find that the failure to perform the building contract was caused by the hurricane. The hurricane, it is true, did intervene. Popich’s complaint, however, was based on the failure of the contractor to complete his performance after the hurricane, and after the builder had presumably been made whole by his builder’s risk insurance. Fox argues before us that the failure to complete was due to the hurricane-induced scarcity of labor. The scarcity of labor during the many months that passed after the hurricane is not the same thing as an irresistible force or an act of God, like the hurricane. [169] Tlie fact that conditions after the hurricane presented difficulties to the contractor in the performance of his obligations is remote, and will not relieve him or the surety from their contractual obligations. Popich prays for an award of 5% of $43,660 (the amount of the bond) or $2,183 as attorney’s fees, pursuant to the provisions of the contract. On the basis of the record before us, the fee sought is reasonable and is not out of proportion to the legal services rendered.2 In the district court this litigation was commenced when Fox, the contractor, sued Popich in No. 9515 for the balance due him under the contract, plus extras. Popich reconvened for damages and attorney’s fees, and filed a separate suit, No. 9779, on the same demand against Fidelity and Deposit Company of Maryland. The judgments of the Court of Appeal are amended, and there is now judgment in suit No. 9515 in favor of H. Bennett Fox and against Joseph A. Popich in the sum of $15,468.67, and in favor of Joseph A. Popich, plaintiff in reconvention, against H. Bennett Fox, defendant in reconvention, in the sum of $7,021.05, which judgment in favor of Popich and against Fox shall be solidary with that rendered against Fidelity and Deposit Company of Maryland in suit No. 9779. In suit No. 9779 there is now judgment in favor of Joseph A. Popich and against Fidelity and Deposit Company of Maryland in the sum of $7,021.05, which judgment is solidary with that rendered against H. Bennett Fox in suit No. 9515. Each judgment is to bear legal interest from the date of demand until paid; all Costs are assessed against H. Bennett Fox and Fidelity and Deposit Company of Maryland. Footnotes [1] “The penalty being stipulated merely to enforce the performance of the principal obligation, it is not incurred, although the principal obligation be not performed, if there be a lawful excuse for its nonperformance, such as inevitable accident, or irresistible force.” [2] See Citizens National Bank v. Waugh, 4 Cir., 78 F.2d 325, 100 A.L.R. 939; Husk v. Blancand, 155 Ba. 816, 99 So. 610, where the court stated at 99 So. 612: “In referring to and approving the doctrine of the cases cited, we are not to be understood as giving unqualified assent to tbe rigor of the rule that the contract in such cases is ‘the law between the parties,’ and that ‘as a party binds himself, so shall lie be bound.’ The legal profession is an arm and support of tbe administration of justice, and the members of tbe bar are in a certain sense officers of the court, and their contracts for professional services on a contingent fee basis in cases such as the instant one may not as a matter of law be regarded as not subject to inquiry and correction by the courts if found unreasonable, greatly in excess of the value of the services rendered, and beyond the ability of the client to pay.”