Fee Clause Interpretation: Trial Judge’s Award Of Fees Based On Promissory Note Fees Clause Was Erroneous

$53,637 Contractual Fees Award Went POOF! On Appeal.

            In Clark v. Delay, Case No. D072856 (4^th Dist., Div. 1 Jan. 19, 2018) (unpublished), plaintiff filed suit over a partnership dissolution dispute mainly involving the claim that plaintiff did not get insurance proceeds under a buy-sell type of alleged oral arrangement.  Among other documents, there was Note carried back by defendant so that plaintiff could purchase defendant/her husband’s partnership interest.  The Note had the following fee provision:  “Should suit be commenced or an attorney employed to enforce the payment of this note, I agree to pay such additional sum as the court may adjudge reasonable as attorney’s fees in said suit.”  Defendant ultimately defensed plaintiff’s claims hinged on the lower court’s determination that he failed to present sufficient evidence about an oral modification to dissolution documents relating to the insurance issue.  The trial judge then awarded Defendant $53,637 in attorney’s fees under the note fees clause.

            The fee award got reversed as a matter of law and stricken from the judgment on appeal.

            Although assuming that the note was incorporated by reference into the main dissolution agreement, the problem for the defense was that the dispute did not involve enforcement of payment obligations under the note but ancillary claims under which plaintiff would not have been able to recover fees even had he won.  The narrowness of the clause steered the determination in this appellate opinion.