*1 MORTGAGE INVESTORS OF WASHINGTON BANK AND TRUST COMPANY CITIZENS MARYLAND
OF 16, September Term, [No. 1976.] Decided November 1976. Motion 23, 76; reconsideration December denied filed
January 3, 1977. argued The cause was J., before C. Murphy, Singley, JJ. Smith, Levine Eldridge, Betts, David E. with whom Betts, Cbgg were Murdock, & Allan Noble, A. Clancy Pfeifer, & Krulwich, Andrew S.
Robert Winter, H. Patrick F. J. Macrory and Arnold & brief, Porter on appellant.
Ronald Baradel, with whom Hartman, were L C. E.
and Hartman brief, & Crain on appellee. J., opinion delivered the of the Court.
Singley, J., Levine, dissenting opinion dissents and filed page 511infra. question court should presents whether a
This case *2 of an the reasonableness consider application of a from an when is derived it recovery. The of the a note to amount stipulated in County it Montgomery concluded that Court for Circuit Appeals affirmed Special The Court of should not. Washington Trust Citizens Bank & Mortgage Investors of We App. 2d 647 349 A. Maryland, Co. of might we consider the granted certiorari order matter. Investors) is Washington (Mortgage
Mortgage Investors of trust which estate investment dollar real a multimillion industry. nationally At the to the real estate makes loans matter, negotiated lines of credit inception it had this Company banks, including Trust Bank and Citizens with (Citizens). Citizens, which was arrangement with Under banks, Mortgage with the other apparently similar to those prime up $1,000,000.00at rate. could borrow to Investors agreed a minimum Mortgage to maintain Investors $100,000.00plus 10%of the amount compensating balance “rest” borrowing actually in one time and to use at days year: each in other for 30 consecutive the line credit during outstanding words, to have no loans from Citizens period. $750,000.00 1974,Mortgage July Investors borrowed On 17 borrowing by printed was evidenced from Citizens. by Citizens, date, prepared but on form note of that Investors, Mortgage supplied request due at borrowing of August, an additional 1974. On October by made, similarly due 15 evidenced a note was explicit provision as to the Both notes contained October. by upon payment the borrower default: instituted, “If, default, agree all upon suit our outstanding attorney’s fee of 15% of the costs and an court time of the suit.” balance Although Mortgage it notified Investors that Citizens expect payment of the notes when due and that the would renewed, Mortgage Investors not be would loan notes, principal of the on not the paid the interest but possibility the refusal of because of the apparently precipitated have the call renew the notes would Citizens outstanding Mortgage agreements Investors’ under of loans other banks. with certain paid was not principal amount of the notes
When due, 1974 on suit on 13 November Citizens filed when later, Mortgage day Investors with A Citizens credited notes. reducing $200,000.00,thus compensating balance of by the notes principal of the loan evidenced unpaid balance $800,000.00. default, Mortgage 1974,after Investors’ but On 25 October suit, attorneys, letter prior Citizens’ institution of to the be handled for fees in collection cases to had set their *3 contingency read: on a basis. letter Citizens cases, we of our “After a careful review collection contingent following which suggest the fee schedule reasonably will fair to the Bank we believe be light us, particularly in removal of the to provisions judgment from Bank confession forms. gross any case, amount
“For collection less, charge will the same which is or $750.00 — agency 50% as a collection rate involving “For case more than $750.00: —- (a) $1,500.00 one-third for the collected first — (b) $3,500.00 25% collected from the next for 33 1/3% —(cid:127) 15% to $5,000.00 (c) collected for the next 1/3%33 —
(d) all 10% to for sums collected thereafter 25%. filing lump prior
“If a sum is collection made suit, charged will be the fee to be to the Bank (excepting of the minimum cases one-half above less). $750.00 after is
“If collections are made suit trial, instituted, above but before the minimum trial, judgment, before a rea- fees. If after but figure the minimum and maxi- sonable between mum fees. by installment are made either
“If collections suit, or if collection is made whether before or after judgment, above fees.” the maximum after summary judgment, judgment was entered On motion against Mortgage Investors in favor of Citizens unpaid principal $815,714.30, balance of which included judgment was entered Citizens’ plus Another interest. attorneys’ $150,640.26 fees. The Court of favor for recognizing was Appeals, while that 15% Special suit was $1,004,268.40, amount due at the time attorneys suggestion instituted, of Citizens’ concluded obligated pay its which Citizens was the amount $105,750.58, attorneys its with them was under judgment to this amount. and reduced attack on this mounts a multifaceted Mortgage Investors not be is that a court should judgment, of which the crux determining of an the reasonableness from insulated the fact that the amount is percentage by is to be determined which the fee fee or the which in the note or other instrument stipulated argue they can find other They no subject the suit. precluded court is jurisdiction which trial common law considering a collection fee reasonableness of from *4 in on which or amount the instrument as a stated brought. is suit reconciling problem of squarely the faced with
We are first, power of a inherent grounded the four doctrines: well bar, of members of its oversee the activities court to 323-25, 319, A. Mackey, 241 231 Md. Nat’l Bank v. American (1967) (collection applicable both 15, fee is not 2d 18-20 note); Swales, 217 Md. mortgage mortgage Weiner v. and (1958) (attorney’s 749, collection 751 123, 126-27, 141 A. 2d attorney and holder of the note payable is the fee not when
509
performs
himself);
collection work
Rheb v. Bar Ass’n 200,
Baltimore,
205,
289,
(“In
(1946)
186 Md.
46 A. 2d
291
the
analysis
duty
upon
courts,
last
the
the
and
rests
whole,
profession
uphold
highest
as a
standards of
professional
protect
public
conduct and to
from
imposition by
unscrupulous practitioner.”);
the unfit or
second,
rights
parties
to make
they
such contracts as
please,
long
they
law,
so
as
are consistent with
Webster v.
Loan, Savings
People’s
Deposit
57, 61,
Bank,
&
160 Md.
152
815,
(1931);
637,
817
Tolson,
639,
Gaither v.
84 Md.
36 A.
(1897);
Hall,
433, 435,
449
Bowie v.
69 Md.
Testing against mosaic, the facts of this case stipulated conclude that the collection fee in the note is judgment entered, collectible if a Qualified Builders, valid is Equitable Co., 584, Inc. Trust 331 A. 2d (1975); Plitt, 348,366-67, Brenner v. 182Md. 34 A. 2d subject judicial not to reversal on review the factual situation before us unless a term such *5 fixed fee” is substituted for a sum or a
as “reasonable recovered, rights unless amount or parties fee of the debtor not to the other creditors involved, Phillips, arrangement supra, 143 are Johnson v. Further, case since the 26-27. Neither was the here. Md. at indemnity, from agreement is Citizens cannot collect one of greater Mortgage an than the Investors amount under its with its required it was which attorneys. may regarded be as collection fee
While the amount involved, work it grossly disproportionate to the amount of Mortgage Investors was be remembered that must borrower, entirely with sophisticated familiar informed and practices. v. banking Compare Goldman Connecticut 579-80, Co., 248 A. 2d General Ins. Life recovery could be no where held that there $17,000.00charged which loan commitment a fee transaction, length This was an arm’s was never exercised. completely Mortgage free to enter into Investors was arrangement might line which be exacted to obtain the significant In that the interest this connection it credit. notes, 12%, effective rate of 15% paid on the became an rate compensating line of balance once the full because of the was utilized. credit not to intimate that we would be reluctant
We do intend arrangement parties between of dissimilar to disturb knowledge background clear where there was evidence overreaching. Similarly, might a fee be denied a case contemplated were or where services not rendered where counsel, paid to creditor’s stipulated was not the amount Bank, People’s Loan, Savings Deposit & compare Webster Mackey, Bank supra, 63 with American Nat’l Md. at Walker, Bank v. supra, Md. at see Chestertown 1908). (4th F. 510 Cir. however, case, judgment was the facts of Under properly entered.
Judgment affirmed, costs to be by appellant. paid *6 dissenting: J., Levine, attorney’s today even if an that majority concludes
The $105,000 in this note is unreasonable over fee of power lower that fee its to case, will not exercise Court showing overreaching. level absent a clear a reasonable to power possess and should such does I believe Court Since here, I it dissent. exercise provision tacitly a contract concludes
The Court in same attorney’s be treated fee should providing for an contract; example, provision for an in a other as manner clear evidence attorney’s provision is if there is void fee however, provisions believe, overreaching. I category because of our attorneys’ separate in fall a all, are, attorneys, after officers over who supervisory role course, recognizes that because majority, of The the Court. Court, possesses the the Court attorneys of the are officers professional highest standards power uphold the to imposition protect public from and to conduct necessary when power be exercised practitioner. This should society which respect of.. . the and confidence merit “the Association, attorney] Bar Code serves.” American [an (1975). Achievement Responsibility, Preamble Professional such as are objective compels, in circumstances of this attorneys’ here, special for contracts present treatment fees. provides the Responsibility of Professional
The Code an against measure which should touchstone conduct:
“(A) lawyer A shall not enter into for, illegal clearly charge, excessive or collect an fee.
“(B)
when,
clearly
a
after
A
excessive
fee
ordinary prudence
facts,
lawyer
review of the
firm conviction
a definite and
would be left with
.”
fee is in excess
reasonable
that the
fee...
Disciplinary
Responsibility,
of Professional
Code
(A),
App.
(B),
F
Rules
Rule
added).
(emphasis
mandatory in
These rules are
character and state the
lawyer
minimum level of conduct below which no
can fall
being
disciplinary
subject
without
action. American Bar
Association,
Responsibility, Pre-
Code of Professional
majority
liminary
apparently
would
Statement
fees,
permit attorneys
collect excessive
while not
permitting
agreements
them to enter into unconscionable
public
I
will
excessive fees. doubt that
draw such fine
assessing
attorneys.
its
in
distinctions
confidence
past
interposed
disapproval
The Court
has
its
of an
exceeding $100,000. Meyer Gyro Transp.
In
518, 530-33,
Systems,
Meyer
On an earlier occasion this an Court disbarred using slugs parking grounds for in meters on the that such “prejudicial justice.” conduct is to the administration of Vol.) (1957, Repl. 10, Code 1976 Art. 16.Fellner § (1957). Ass’n, 243, 247, v. Bar 213 Md. 131 A. 729 I 2d question exacting which, majority whether a fee as the states, “grossly disproportionate is as to the amount of work likely destroy involved” as public this one is not as duty public confidence. Our to foster in confidence the justice inter- administration therefore warrants our here, vention to the extent that we remand the should case for determination of a reasonable fee. yet
I majority’s see another in approach. defect the The indemnity requires Court concludes that an the contract expenses actually incurs, debtor to all that the creditor
513 majority reasonably he incurs. those that than rather Swales, on 217 in reliance Weiner v. conclusion reaches (1958), 126, Legum Farmers Nat. 123, 749 2d Md. 360-61, 2d and Webster 24 A.
Bank, Md.
57, 62-63,
Bank,
A reasonableness uniformly, adopted in moreover, widely, if has been not provided for fixed where notes cases or contracts remembered, Since, legal fees.1 it must be justice profession “is administration of a branch Association, trade,” money-getting American Bar not mere e.g., Sullivan, See, P. 2d 741 206 1. Waterman v. Colo. *8 720, Company Raby, (1964); Supply v. 348 Mass. American Service 668, Worman, 561, 94, (1965); Campbell 60 W. 669 96 v. 58 Minn. N. N.E.2d 435, 210 Builders, Inc., (1894); Bergen Developers, 44 N. v. Horizon J. Inc. 516, Corp., 65, (1965); Equitable 66 v. IPA Land Devel. 38 N.Y.2d 2d Lbr. Co. 383, 459, (1976); Coley Coley, 391, 94 S. C. N.Y.S.2d 463-64 v. 344 N.E.2d 381 1974); (Tenn. (1913); 909, 49, Wade, E. 50 v. 510 S.W.2d 911-12 77 S. Kuper Dole (1960); Schmidt, 189, 948, 950 Grand Piano Co. 161 Tex. 338 v. S.W.2d (1942); Becker, 281, 86, Lewis, 48 Va. 19 Home Bank v. v. 179 S.E.2d 88-89 855, (1970). Williston, also 5 1, 179 Law See 2d of Contracts Wis. N.W.2d 863 (3d Attorneys’ Jaeger 1961); Speiser, p. 2 Fees 15.44 § 747 ed. § (1968), 288, (1973); (1951), 733, 17 A.L.R.2d 307-11 Annots. 18 A.L.R.3d generally Restatement, 938-42. See 1915B L.R.A. (1937). Restitution, a 80 Comment § § may only concedes, attorney majority readily recover As the despite percentage stipulation the debtor fees where reasonable bankrupt. (4th Walker, F. v. Chestertown Bank 16, 26, 122 1908); Phillips, A. 7 Cir. Johnson Ethics, Professional I Canons of Cannon would stipulates hold a note which fixed may shall recovered from the debtor as be be necessarily to the extent the reasonable fees enforced by the his incurred creditor to collect debt.
HENDERSON MARYLAND NATIONAL BANK 32, September Term, 1976.]
[No. 26,1976. Decided November