Can the prevailing party recover its attorney's fees under this North Carolina contract?
Only to the extent a statute allows it. In Stillwell the Supreme Court of North Carolina stated the general rule that 'a successful litigant may not recover attorneys' fees, whether as costs or as an item of damages, unless such a recovery is expressly authorized by statute', and recorded that even in the face of a carefully drafted contractual provision indemnifying a party for such fees as may be necessitated by a successful action on the contract itself, North Carolina courts have consistently refused to sustain such an award absent statutory authority. Stillwell itself, though, ENFORCED a fee clause: the sole question was whether a contract for the lease of specific goods may be deemed 'evidence of indebtedness' within the meaning of G.S. 6-21.2, the Court held that it may, and it reversed the Court of Appeals decision that had vacated the trial court's award of attorneys' fees, so the award stood to the extent G.S. 6-21.2 allowed. Two statutes supply that authority. N.C.G.S. § 6-21.2 makes an obligation to pay attorneys' fees 'upon any note, conditional sale contract or other evidence of indebtedness' valid, enforceable and collectible as part of the debt if the instrument is collected by or through an attorney at law after maturity; a promise of 'reasonable' fees with no percentage stated is construed to mean fifteen percent of the outstanding balance, a clause that does name a percentage is enforceable only up to fifteen percent, 'outstanding balance' is a defined term measured as of the time suit is instituted, and Stillwell holds that 'evidence of indebtedness' means any printed or written instrument, signed or otherwise executed by the obligor, which evidences on its face a legally enforceable obligation to pay money. N.C.G.S. § 6-21.6 makes RECIPROCAL attorneys' fees provisions in a business contract valid and enforceable for reasonable fees and expenses, but reciprocal in the section's own defined sense (each party agreeing, on terms and conditions made applicable to all parties, to pay or reimburse the other parties), so a one-way prevailing-party clause is not what the section validates; and only if all of the parties sign the contract by hand or by one of the two signature methods subsection (b) lists.
The trap
Three North Carolina-specific limits, and an exception to the first. First, § 6-21.2(5) requires the holder, after maturity, to notify the obligor that the fee provision will be enforced and that the obligor has five days from the mailing of that notice to pay the outstanding balance without the fees; if the balance is paid in full before that time expires the fee obligation is void and no court shall enforce it. But the section closes with a proviso that dispenses with the notice altogether where the debtor has defaulted and has refused, on demand, to surrender possession of the collateral, so that the secured party must institute an ancillary claim and delivery proceeding, so the notice defence is not available to every obligor. Second, § 6-21.6 reaches only a 'business contract', which the section defines as a contract entered into primarily for business or commercial purposes and which by its own words 'does not include a consumer contract, an employment contract, or a contract to which a government or a governmental agency of this State is a party'; and the section's own definition of an employment contract covers a contract for personal services 'whether the relationship is in the nature of employee-employer or principal-independent contractor', so a prevailing-party clause gets nothing from § 6-21.6 in an independent-contractor engagement any more than in an employment agreement. Third, even inside § 6-21.6 the clause does not fix the number: subsection (c) says the court or arbitrator 'may award' reasonable attorneys' fees in accordance with the terms of the contract and lists thirteen factors it may consider, subsection (d) provides that reasonable fees are not governed by any statutory presumption or by a contractual stated percentage, and subsection (f) caps the award at the amount in controversy in a suit, action, proceeding or arbitration primarily for the recovery of monetary damages. Where the same instrument is both a business contract and an evidence of indebtedness governed by § 6-21.2, subsection (e) gives the party entitled to fees an election between the two statutes but only one recovery for the same fees.
21 authorities
- case300 N.C. 286Stillwell Enterprises, Inc. v. Interstate Equipment Co.N.C.decided 1980read it at the source ↗
The words that state the rule
Thus the general rule has long obtained that a successful litigant may not recover attorneys’ fees, whether as costs or as an item of damages, unless such a recovery is expressly authorized by statute.
- case300 N.C. 286Stillwell Enterprises, Inc. v. Interstate Equipment Co.N.C.decided 1980read it at the source ↗
The words that state the rule
The sole question presented by this appeal is whether a contract for the lease of specific goods may be deemed “evidence of indebtedness” within the meaning of G.S. 6-21.2. We hold that it may and reverse the decision of the Court of Appeals to the contrary.
- case300 N.C. 286Stillwell Enterprises, Inc. v. Interstate Equipment Co.N.C.decided 1980read it at the source ↗
The words that state the rule
we hold that the term “evidence of indebtedness” as used in G.S. 6-21.2 has reference to any printed or written instrument, signed or otherwise executed by the obligor(s), which evidences on its face a legally enforceable obligation to pay money.
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
Obligations to pay attorneys' fees upon any note, conditional sale contract or other evidence of indebtedness, in addition to the legal rate of interest or finance charges specified therein, shall be valid and enforceable, and collectible as part of such debt, if such note, contract or other evidence of indebtedness be collected by or through an attorney at law after maturity, subject to the following provisions:
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
(1) If such note, conditional sale contract or other evidence of indebtedness provides for attorneys' fees in some specific percentage of the "outstanding balance" as herein defined, such provision and obligation shall be valid and enforceable up to but not in excess of fifteen percent (15%) of said "outstanding balance" owing on said note, contract or other evidence of indebtedness.
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
If such note, conditional sale contract or other evidence of indebtedness provides for the payment of reasonable attorneys' fees by the debtor, without specifying any specific percentage, such provision shall be construed to mean fifteen percent (15%) of the "outstanding balance" owing on said note, contract or other evidence of indebtedness.
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
(3) As to notes and other writing(s) evidencing an indebtedness arising out of a loan of money to the debtor, the "outstanding balance" shall mean the principal and interest owing at the time suit is instituted to enforce any security agreement securing payment of the debt and/or to collect said debt. (4) As to conditional sale contracts and other such security agreements which evidence both a monetary obligation and a security interest in or a lease of specific goods, the "outstanding balance" shall mean the "time price balance" owing as of the time suit is instituted by the secured party to enforce the said security agreement and/or to collect said debt.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
Reciprocal attorneys' fees provisions in business contracts are valid and enforceable for the recovery of reasonable attorneys' fees and expenses only if all of the parties to the business contract sign the contract by hand or with one of the following:
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
Business contract. - A contract entered into primarily for business or commercial purposes. The term does not include a consumer contract, an employment contract, or a contract to which a government or a governmental agency of this State is a party.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
(2) Consumer contract. - A contract entered into by one or more individuals primarily for personal, family, or household purposes. (3) Employment contract. - A contract between an individual and another party to provide personal services by that individual to the other party, whether the relationship is in the nature of employee-employer or principal-independent contractor.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
(4) Reciprocal attorneys' fees provisions. - Provisions in any written business contract by which each party to the contract agrees, in the manner set out in subsection (b) of this section, upon the terms and subject to the conditions set forth in the contract that are made applicable to all parties, to pay or reimburse the other parties for attorneys' fees and expenses incurred by reason of any suit, action, proceeding, or arbitration involving the business contract.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
In any suit, action, proceeding, or arbitration primarily for the recovery of monetary damages, the award of reasonable attorneys' fees shall not exceed the amount in controversy.
- case300 N.C. 286Stillwell Enterprises, Inc. v. Interstate Equipment Co.N.C.decided 1980read it at the source ↗
The words that state the rule
Even in the face of a carefully drafted contractual provision indemnifying a party for such attorneys’ fees as may be necessitated by a successful action on the contract itself, our courts have consistently refused to sustain such an award absent statutory authority therefor.
- case300 N.C. 286Stillwell Enterprises, Inc. v. Interstate Equipment Co.N.C.decided 1980read it at the source ↗
The words that state the rule
There is no contention that plaintiff was not afforded *295 the requisite notice under G.S. 6-21.2(5). Under these circumstances, we see no reason why the obligation by plaintiff to pay attorneys’ fees incurred by defendant upon collection of the debts arising from the contract itself should not be enforced to the extent allowed by G.S. 6-21.2. Accordingly, the decision of the Court of Appeals vacating Judge Thornburg’s award to defendant of attorneys’ fees should be and is hereby Reversed.
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
(5) The holder of an unsecured note or other writing(s) evidencing an unsecured debt, and/or the holder of a note and chattel mortgage or other security agreement and/or the holder of a conditional sale contract or any other such security agreement which evidences both a monetary obligation and a security interest in or a lease of specific goods, or his attorney at law, shall, after maturity of the obligation by default or otherwise, notify the maker, debtor, account debtor, endorser or party sought to be held on said obligation that the provisions relative to payment of attorneys' fees in addition to the "outstanding balance" shall be enforced and that such maker, debtor, account debtor, endorser or party sought to be held on said obligation has five days from the mailing of such notice to pay the "outstanding balance" without the attorneys' fees. If such party shall pay the "outstanding balance" in full before the expiration of such time, then the obligation to pay the attorneys' fees shall be void, and no court shall enforce such provisions.
- statuteN.C.G.S. § 6-21.2enactment date not established
The words that state the rule
Notwithstanding the foregoing, however, if debtor has defaulted or violated the terms of the security agreement and has refused, on demand, to surrender possession of the collateral to the secured party as authorized by G.S. 25-9-609, with the result that said secured party is required to institute an ancillary claim and delivery proceeding to secure possession of said collateral; no such written notice shall be required before enforcement of the provisions relative to payment of attorneys' fees in addition to the outstanding balance.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
(1) An electronic signature, as defined in G.S. 66-312, if the party's electronic signature originates from an affirmative action on the part of the party to evidence acceptance and execution such as typing the party's signature or writing the party's signature with a finger or stylus on a touchscreen to indicate acceptance and execution. (2) A manual signature that is delivered by an electronic reproductive image thereof.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
If a business contract governed by the laws of this State contains a reciprocal attorneys' fees provision, the court or arbitrator in any suit, action, proceeding, or arbitration involving the business contract may award reasonable attorneys' fees in accordance with the terms of the business contract. In determining reasonable attorneys' fees and expenses under this section, the court or arbitrator may consider all relevant facts and circumstances, including, but not limited to, the following: (1) The amount in controversy and the results obtained. (2) The reasonableness of the time and labor expended, and the billing rates charged, by the attorneys. (3) The novelty and difficulty of the questions raised in the action. (4) The skill required to perform properly the legal services rendered. (5) The relative economic circumstances of the parties. (6) Settlement offers made prior to the institution of the action. (7) Offers of judgment pursuant to G.S. 1A-1, Rule 68, and whether judgment finally obtained was more favorable than these offers. (8) Whether a party unjustly exercised superior economic bargaining power in the conduct of the action. (9) The timing of settlement offers. (10) The amounts of settlement offers as compared to the verdict. (11) The extent to which the party seeking attorneys' fees prevailed in the action. (12) The amount of attorneys' fees awarded in similar cases. (13) The terms of the business contract.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
Reasonable attorneys' fees and expenses are not governed by (i) any statutory presumption or provision in the business contract providing for a stated percentage of the amount of the attorneys' fees or (ii) the amount recovered in other cases in which the business contract contains reciprocal attorneys' fees provisions.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
(e) Nothing in this section makes valid or invalid attorneys' fees provisions in consumer contracts or in any note, conditional sale contract, or other evidence of indebtedness that is otherwise governed by G.S. 6-21.2. If the business contract is also a note, conditional sale contract, or other evidence of indebtedness that is otherwise governed by G.S. 6-21.2, then the parties that are entitled to recover attorneys' fees and expenses may elect to recover attorneys' fees and expenses either under this section or G.S. 6-21.2 but may recover only once for the same attorneys' fees and expenses.
- statuteN.C.G.S. § 6-21.6enactment date not established
The words that state the rule
(g) Nothing in this section makes valid or invalid attorneys' fees provisions in a contract of insurance governed by Chapter 58 of the General Statutes.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.