This case arose out of a line of credit which SunTrust
advanced to Frank J. Goldman and Lisa B. Goldman. The line of credit was secured
by a deed of trust on the Goldmans’ residence. Importantly, in the loan
contract, a section entitled “Lender’s Rights” stated:
We may hire or pay someone else to help collect this
Agreement if you do not pay. You will pay us that amount. This includes,
subject to any limits under applicable law, our costs of collection,
including court costs and fifteen percent (15%) of the principal plus
accrued interest as attorneys’ fees or reasonable attorneys’ fees as allowed
by law.
After making a payment on October 9, 2008, the Goldmans
ceased making payments and they defaulted on the line of credit. SunTrust
filed a Complaint, which claimed $401,373.31 in principal due on the loan,
interest in the amount of $14,259.31, and attorneys’ fees in the amount of
$60,206.00 (15% of principal). The Goldmans failed to answer the Complaint,
and the trial court entered a default judgment.
While the trial court entered a default judgment, it
held a hearing on the amount due on the loan. At the hearing, it was adduced
that, while SunTrust claimed $60,206.00 in attorneys’ fees, SunTrust
actually only incurred $3,094.00 in attorneys’ fees. SunTrust maintained
that the loan agreement provided that SunTrust could recover fifteen percent
(15%) of the principal in attorneys’ fees; and therefore, SunTrust was
entitled to $60,206.000. The trial court disagreed and held that SunTrust
was only entitled to $3,094.00 in attorneys’ fees, which were SunTrust’s
actual losses.
The Court of Special Appeals affirmed the trial court.
The Court of Special Appeals held that an attorneys’ fees provision in a
contract is only an indemnification provision. The lendee indemnifies the
lendor for fees and costs actually incurred. Therefore, a court can only
award attorneys’ fees to the extent that they were actually incurred,
regardless of whether a contract provides for a fixed amount of attorneys’
fees.
SunTrust acknowledged that an attorneys’ fees provision
in a contract is only an indemnification provision, but SunTrust argued that
the fifteen percent (15%) accounted for fees that SunTrust would likely
incur collecting the judgment. SunTrust argued that it should be entitled to
fifteen percent (15%) attorneys’ fees at the outset and then SunTrust would
reimburse the Goldmans with any of the money not actually spent on
attorneys’ fees. The Court of Special Appeals, however, held that SunTrust’s
argument was without merit because the final judgment merges with the
contract. Therefore, the indemnification provision can only account for
money spent on attorneys’ fees up until the contract’s merger with the
judgment. It cannot account for anticipated future expenses.
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