Bowman v. Kingsland Development, Inc.

District Court of Appeal of Florida
432 So. 2d 660, 1983 Fla. App. LEXIS 19978 (1983)

ELI5:

Rule of Law:

A claim for 'reasonable attorney's fees' provided for in a contract is a claim for unliquidated damages, which requires that a defaulting party be given notice and an opportunity to be heard on the amount of the fees before a final judgment can be entered.

Facts:

Kingsland Development, Inc. executed a negotiable promissory note to Duncan O. Bowman.
The note contained a provision stating that upon default, the maker (Kingsland) agreed to pay all costs of collection, including 'reasonable attorney's fees.'
Kingsland defaulted on its payment obligation under the promissory note.

Procedural Posture:

Bowman filed an action on a promissory note against Kingsland in a Florida trial court.
Attorneys for Kingsland filed notices of appearance but failed to file a motion or answer.
The trial court entered a default against Kingsland.
Without further notice to Kingsland, the trial court entered a final judgment for Bowman, which included an award of $7,500 for attorney's fees based on Bowman's ex parte application.
Nine months later, Kingsland filed a motion under Florida Rule of Civil Procedure 1.540 to set aside the final judgment, alleging the attorney's fee was unreasonable.
The trial court granted Kingsland's motion and, following a hearing, reduced the attorney's fee award to $4,900.
Bowman, as appellant, appealed the trial court's order reducing the fee to the District Court of Appeal of Florida, Fifth District.

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Issue:

Is a claim for 'reasonable attorney's fees,' as provided for in a promissory note, a claim for unliquidated damages that requires notice and a hearing for a defaulting party before the court determines the fee amount and includes it in a final judgment?

Opinions:

Majority - Cowart, J.

Yes. A claim for 'reasonable attorney's fees' constitutes unliquidated damages, and a defaulting party has a due process right to notice and an opportunity to be heard before the amount of such fees is determined. A default admits liability and entitlement to liquidated damages, but not unliquidated damages. Liquidated damages can be determined with exactness from the contract or by a simple arithmetical calculation, such as the principal and interest on a note. In contrast, unliquidated damages require the presentation of evidence and a value judgment by the court. Determining a 'reasonable' fee requires testimony regarding various factors, making it inherently unliquidated. Therefore, entering a judgment for such fees without notice to the defaulting party is a procedural error that can be remedied through a motion under Florida Rule of Civil Procedure 1.540, as it constitutes a 'mistake' that renders that portion of the judgment voidable.

Dissenting - Sharp, J.

No. A provision for a reasonable attorney's fee in a promissory note should not be considered 'unliquidated damages' requiring notice under Florida Rule of Civil Procedure 1.440(c). The majority's holding overturns the established and long-standing practice of the Florida bar not to give notice of final hearing to defaulted parties in suits on notes that include such provisions. This decision will destabilize the finality of numerous existing judgments, potentially creating widespread litigation. The trial court's original award, if erroneous, was a judicial error that should have been challenged through a timely appeal, not a collateral attack via a motion to set aside the judgment nine months later. The issue is of such great public importance that it should be certified to the Florida Supreme Court.

Analysis:

This decision clarifies the crucial distinction between liquidated and unliquidated damages, specifically holding that contractual claims for 'reasonable attorney's fees' fall into the latter category. By doing so, the court reinforces the due process rights of defaulting parties, requiring that they be given notice and an opportunity to contest the amount of such fees. This ruling established a clear procedural safeguard against excessive fee awards in default judgments, potentially slowing down the collection process for creditors but ensuring greater fairness. The dissent highlights the significant practical impact of this decision, as it overturned a common legal practice and raised questions about the finality of past judgments obtained without such notice.

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