Regan v. Malone ( 1998 )

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 )
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v . ) H O N . R . V A N N O W E N S ,
) C H A N C E L L O R
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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
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
2
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 .
3
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 .
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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
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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
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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.
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