Indiana Court Discusses Test For Recovery Of Attorney's Fees In Action Against Guarantor

Lesson. An arbitrary “partial” award of attorney fees to a lender may be reversible error. Trial courts must assess what is a reasonable amount of attorney’s fees, taking into account all services rendered up to the entry of such an award.

Case cite. Shoaff v. First Merchs. Bank, 2022 Ind. App. LEXIS 395 (Ind. Ct. App. 2022)

Legal issue. Whether a trial court’s award of attorney’s fees was unreasonable (too low).

Vital facts. This is my third post about Shoaff. Please review my first and second posts for more information about the liability and damages issues in Lender’s suit against Guarantor.

Procedural history. The trial court granted summary judgment for Lender, but Lender cross-appealed the court’s award of attorney fees.

Key rules. Last week’s post dealt with non-discretionary contract damages. “Unlike the calculations of interest and late fees, the trial court's discretion with respect to attorney's fees is, generally speaking, unfettered by everything except for reasonableness.”

“The determination of reasonableness of an attorney's fee necessitates consideration of all relevant circumstances.” Indiana courts may, but are not required to, consider things like hourly rate, result achieved, and difficulty of the issues.

Holding. The Indiana Court of Appeals reversed the trial court and remanded the case for an assessment of a reasonable amount of fees for “all services rendered in pursuit of the debt” owed by Guarantor to and through the date of the order granting such fees.

Policy/rationale. Lender asserted that the trial court abused its discretion when it limited its award of attorney’s fees to the date of the initial summary judgment entry. Lender sought fees for the subsequent litigation that included additional motions and a second award of damages. The Court noted that “reasonable attorney's fees are guaranteed by the [guaranty].”

The Shoaff opinion stated that the trial court’s failing was its “unexplained” decision to limit fees up to a certain date. That decision was “arbitrary,” rendering the award of fees unreasonable. The Court threaded the discretionary/reasonableness needle as follows:

The trial court is free to evaluate [Lender’s] submissions for the fee amount and assess whether that amount itself is reasonable, and the trial court may, in its discretion, conclude that the amount either is or is not reasonable. But to award partial fees, reasonable or not, is to ignore the plain meaning of the [guaranty], and therefore constitutes an abuse of discretion.

As stated last week, the rules and outcome in Shoaff should apply to actions to enforce promissory notes as well as guaranties.  

Related posts.

• Attorney Fee Awards in Indiana
• Unsettled: Recoverability Of Attorney’s Fees For In-House Counsel
• Indiana Attorney Fee Liens In Commercial Cases

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I represent parties involved in disputes arising out of loans that are in default. If you need assistance with a similar matter, please call me at 317-639-6151 or email me at [email protected]. Also, don’t forget that you can follow me on Twitter @JohnDWaller or on LinkedIn, or you can subscribe to posts via RSS or email as noted on my home page.