Can the prevailing party recover attorney fees in North Dakota even if our contract is silent on fees, or does a fee clause need particular wording?
North Dakota leaves attorney fees to the parties' own agreement, with one statutory backstop that applies whether or not the contract addresses fees at all. N.D.C.C. § 28-26-01(1): "Except as provided in subsection 2, the amount of fees of attorneys in civil actions must be left to the agreement, express or implied, of the parties." Subsection 2 then supplies a mandatory, fault-based exception operating independently of any contract clause: "In civil actions the court shall, upon a finding that a claim for relief was frivolous, award reasonable actual and statutory costs, including reasonable attorney's fees to the prevailing party." One whole category of agreement is taken out of subsection 1's freedom by N.D.C.C. § 28-26-04: "Any provision contained in any note, bond, mortgage, security agreement, or other evidence of debt for the payment of an attorney's fee in case of default in payment or in proceedings had to collect such note, bond, or evidence of debt, or to foreclose such mortgage or security agreement, is against public policy and void."
The trap
Section 28-26-04 is the trap a lender's form walks into: the fee clause in the debt instrument itself is void as against public policy however clearly it is drafted, and no amount of drafting cures it. Big Pines, LLC v. Baker draws the boundary narrowly. "Evidence of debt" means "a written instrument importing on its face the existence of debt, an acknowledgment of that debt, and a promise of payment," and "includes only instruments similar to those specifically listed in N.D.C.C. § 28-26-04: a note, bond, mortgage, or security agreement." So the fee clause in a personal guaranty signed at the same time as a lease was NOT void, because "[t]here was no existing debt when the lease or guaranty was executed, and the guaranty was not a promise to pay an existing debt," and the Court reversed and remanded "for an appropriate award of attorney's fees." Subsection 1's freedom-of-contract default also cuts both ways: no North Dakota statute was found making a one-way contractual fee clause reciprocal (unlike, for example, California's Civil Code § 1717), measured by reading every published North Dakota section, so a fee provision that by its own terms runs only in favor of one party is not read to run both ways absent language saying so. Subsection 2's frivolous-claim award is not limited to contract cases and does not require the losing party to have acted in bad faith: its own text says the award applies "regardless of the good faith of the attorney or party making the claim for relief if there is such a complete absence of actual facts or law that a reasonable person could not have thought a court would render judgment in that person's favor," but only if "the prevailing party has in responsive pleading alleged the frivolous nature of the claim," and the subsection expressly does not reach a claim "unwarranted under existing law" that is "supported by a good-faith argument for an extension, modification, or reversal of the existing law." A contractual fee clause and the frivolous-claim statute are two independent bases and can both be in play in the same case.
7 authorities
- statuteN.D.C.C. § 28-26-01enactment date not established
The words that state the rule
Except as provided in subsection 2, the amount of fees of attorneys in civil actions must be left to the agreement, express or implied, of the parties.
- statuteN.D.C.C. § 28-26-01enactment date not established
The words that state the rule
In civil actions the court shall, upon a finding that a claim for relief was frivolous, award reasonable actual and statutory costs, including reasonable attorney's fees to the prevailing party.
- statuteN.D.C.C. § 28-26-01enactment date not established
The words that state the rule
Such costs must be awarded regardless of the good faith of the attorney or party making the claim for relief if there is such a complete absence of actual facts or law that a reasonable person could not have thought a court would render judgment in that person's favor, providing the prevailing party has in responsive pleading alleged the frivolous nature of the claim. This subsection does not require the award of costs or fees against an attorney or party advancing a claim unwarranted under existing law, if it is supported by a good-faith argument for an extension, modification, or reversal of the existing law.
- statuteN.D.C.C. § 28-26-04enactment date not established
The words that state the rule
Any provision contained in any note, bond, mortgage, security agreement, or other evidence of debt for the payment of an attorney's fee in case of default in payment or in proceedings had to collect such note, bond, or evidence of debt, or to foreclose such mortgage or security agreement, is against public policy and void.
The words that state the rule
Parties are generally free to enter into an agreement for payment of attorney’s fees in a civil action. See N.D.C.C. § 28-26-01(1). However, provisions in debt instruments providing for payment of attorney’s fees are void under § 28-26-04, which states: Any provision contained in any note, bond, mortgage, security agreement, or other evidence of debt for the payment of an attorney’s fee in case of default in payment or in proceedings had to collect such note, bond, or evidence of debt, or to foreclose such mortgage or security agreement, is against public policy and void.
The words that state the rule
We have previously held that “‘evidence of debt,’ as contemplated by N.D.C.C. § 28-26-04, relates to a written instrument importing on its face the existence of debt, an acknowledgment of that debt, and a promise of payment.” Candee v. Candee, 2019 ND 94, ¶ 11, 925 N.W.2d 423 (quoting T.F. James Co. v. Vakoch, 2001 ND 112, ¶ 16, 628 N.W.2d 298). “The general term, ‘evidence of debt,’ ‘despite its seeming breadth,’ includes only instruments similar to those specifically listed in N.D.C.C. § 28-26-04: a note, bond, mortgage, or security agreement.” Id. (Emphasis in original).
The words that state the rule
The guaranty here was executed at the same time as the lease. There was no existing debt when the lease or guaranty was executed, and the guaranty was not a promise to pay an existing debt. The provision for attorney’s fees in the personal guaranty agreement is not void under N.D.C.C. § 28-26-04. 7 Appellees’ remaining arguments are without merit and we decline to address them. We reverse and remand for an appropriate award of attorney’s fees.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.