Wednesday, May 26, 2010

Court reviews award of attorney's fees as well as principal and interest amounts of a promissory note.


James L. Hill ("the defendant"), in order to accommodate his son, Shannon Hill, co-signed a note to First Peoples Bank of Tennessee ("the Bank") in the amount of $50,500 ("the small note"). Shannon later approached the Bank about a larger loan for his pizza business. As a consequence, the small note was combined with two other notes. The Bank made a loan in the amount of $294,764.65 under a new note ("the big note") but required a personal guaranty from the defendant as security. Unbeknownst to the Bank, the guaranty Shannon produced was a forgery. Shannon was later killed and, still later, his pizza business defaulted on the big note.

The Bank initially filed this action against the defendant on the sole basis of the guaranty. The Bank later amended its complaint to allege that the big note was a renewal of the small note and that the defendant remained liable on the small note. The primary issue for trial was whether the small note was renewed or whether it was satisfied with the proceeds from the big note.

On the morning of trial, when the Bank's witnesses appeared, the chancellor announced that he was acquainted with several of the Bank's witnesses. The defendant made an oral motion seeking recusal of the chancellor. The court denied the motion and the case proceeded to a bench trial. After trial, the court entered a judgment in favor of the Bank which included the attorney's fees of the Bank. The defendant appeals. The Bank asks for its attorney's fees incurred on appeal.

We affirm that part of the judgment which awards principal and interest, but vacate the award of attorney's fees claimed in the amount of $25,125 and remand for a determination of a reasonable fee. Additionally, we hold that the Bank is entitled, under the note, to recover reasonable attorney's fees incurred on appeal and remand for a determination of a reasonable appellate fee.

Opinion may be found at: