Ark. Code Ann. § 4-56-101 (2020)

Research References

Ark. L. Rev.

Taxability of Attorneys' Fees as Costs, 9 Ark. L. Rev. 70.

Note, A Secured Party's Right to Recover Attorney's Fees and Expenses: Svestka v. First National Bank in Stuttgart, 35 Ark. L. Rev. 579.

Case Notes

Constitutionality.

Provision permitting the parties to a note to agree upon a reasonable attorney's fee for the creditor, is not unconstitutional. Hollaway v. Pocahontas Fed. Sav. & Loan Ass'n, 230 Ark. 310, 323 S.W.2d 204 (1959); Hughes v. Lee, 238 Ark. 547, 383 S.W.2d 97 (1964).

In General.

Notwithstanding that the parties have contracted for the recovery of attorney's fees, a party cannot recover attorney's fees unless such fees are expressly provided for by statute. White v. Associates Com. Corp., 20 Ark. App. 140, 725 S.W.2d 7 (1987).

Applicability.

This section provides for attorney's fees only where the underlying instrument is a promissory note. White v. Associates Com. Corp., 20 Ark. App. 140, 725 S.W.2d 7 (1987).

Section 4-9-504 allowing, to the extent provided for in the agreement and not prohibited by law, the reasonable attorney's fees and legal expenses incurred by a secured party in obtaining collateral subsequent to default by a purchaser, is limited by the requirement of this section that the underlying instrument be a promissory note. White v. Associates Com. Corp., 20 Ark. App. 140, 725 S.W.2d 7 (1987).

Agreements Other Than Notes.

A provision in a security instrument for allowance of attorney's fees cannot be enforced under this section since the section limits enforcement of such provisions to those contained in promissory notes. National Bank v. Blankenship, 177 F. Supp. 667 (E.D. Ark. 1959), aff'd, National Bank of Eastern Arkansas v. General Mills, Inc., 283 F.2d 574 (8th Cir. Ark. 1960).

Trial court could not award attorney's fees on the basis of percentage of both unpaid balance of a note and unpaid open account, since this section limits enforcement of provisions for attorney's fees to those contained in promissory note. Bleidt v. 555, Inc., 253 Ark. 766, 489 S.W.2d 235 (1973).

A secured creditor was entitled to allowance of attorney fees as provided in an installment sales contract after the debtor filed a petition for bankruptcy. In re Morris, 602 F.2d 826 (8th Cir. 1979). But see Harper v. Wheatley Implement Co., 278 Ark. 27, 643 S.W.2d 537 (1982).

Attorney's fees are not allowed except when expressly provided for by statute; accordingly, since this section provides for attorney's fees only on promissory notes, the trial court erred in allowing attorney's fees in an action brought on an installment sales contract. Harper v. Wheatley Implement Co., 278 Ark. 27, 643 S.W.2d 537 (1982). But see In re Morris, 602 F.2d 826 (8th Cir. 1979).

In cases not involving promissory notes, a secured party may not collect attorney's fees incurred for services rendered by an attorney in obtaining possession of collateral after default by the purchaser, even though the parties may have contracted for such fees. White v. Associates Com. Corp., 20 Ark. App. 140, 725 S.W.2d 7 (1987).

Allowance.

Fee allowed where attorney's services were necessary in order to recover on note. American-Canadian Oil & Drilling Corp. v. Aldridge & Stroud, Inc., 237 Ark. 407, 373 S.W.2d 148 (1963); Hughes v. Lee, 238 Ark. 547, 383 S.W.2d 97 (1964).

The holder of a note was entitled to attorney's fee even though he failed to recover the full amount claimed. Hughes v. Lee, 238 Ark. 547, 383 S.W.2d 97 (1964).

Amount.

Where collateral note contained a provision for attorney's fees as authorized by law if not paid when due and placed in the hands of an attorney for collection, an attorney's fee of the maximum statutorily allowed percentage could be allowed for services actually rendered in accordance with the terms of the note which is enforceable as a contract of indemnity. May v. National Bank, 231 Ark. 588, 331 S.W.2d 697 (1960).

The court properly allowed a maximum statutory attorney's fee on note, although the same attorneys represented both the maker and the payee, where the maker admitted the validity of the note and that it was due and payable, but its validity was challenged by other parties to the action not represented by these attorneys. American-Canadian Oil & Drilling Corp. v. Aldridge & Stroud, Inc., 237 Ark. 407, 373 S.W.2d 148 (1963).

The time spent and labor required, the novelty and difficulty of the questions involved and the skill required and exercised by the attorneys indicate that the fee allowed by this section is a reasonable fee in this case. First Nat'l Bank v. Magnolia Steel Corp., 261 F. Supp. 283 (W.D. Ark. 1966).

Where promissory notes provided that upon default and collection the promissor must pay ten percent attorney's fees, an award of five percent on the past due principal and interest on the notes as attorney's fees was proper. Although the fee may not exceed the percentage specified in this section, it is within the court's province to determine if the percentage to which the parties agreed is reasonable in view of time and labor involved, the novelty of the question, the necessary skill involved, the customary charges of the bar, the amount in controversy and the benefit resulting to the client for the services. First Nat'l Bank v. Nash, 2 Ark. App. 135, 617 S.W.2d 24 (1981).

This section cannot be interpreted to limit the amount of attorney's fees which can be awarded in an action to recover on a promissory note. Loewer v. National Bank, 311 Ark. 354, 844 S.W.2d 329 (1992).

Priority.

Federal tax liens were entitled to priority over the mortgagee's claim for an attorney's fee because the latter was inchoate when the federal tax liens were filed, inasmuch as at that time the amount of the attorney's fee was uncertain, and there was no showing that the mortgagee had become obligated to pay and had paid any sum for legal services performed prior to the filing of the federal tax lien. United States v. Pioneer Am. Ins. Co., 374 U.S. 84, 83 S. Ct. 1651, 10 L. Ed. 2d 770 (1963), superseded by statute as stated in, Hayden v. Prevatte, 327 F. Supp. 635 (D.S.C. 1971), superseded by statute as stated in, Aetna Ins. Co. v. United States, 456 F.2d 773 (1972), superseded by statute as stated in, United States v. California-Oregon Plywood, Inc., 527 F.2d 687 (9th Cir. Cal. 1975), superseded by statute as stated in, United States v. Crittenden, 563 F.2d 678 (5th Cir. Ga. 1977), superseded by statute as stated in, Shawnee State Bank v. United States, 735 F.2d 308 (8th Cir. Mo. 1984).

Terms of Note.

Failure of a note to provide for attorney's fees was supplied by incorporating in such note by reference a deed of trust which contained a provision for attorney's fees. Geyer v. First Ark. Dev. Fin. Corp., 245 Ark. 694, 434 S.W.2d 301 (1968).

Where promissory note defined “default” in terms of failure to pay a monthly installment when due and attorney's fees were provided for only in case of “default,” the note did not provide for attorneys' fees in an action to collect on the note in event of acceleration based on a due on sale clause. Schulte v. Benton Sav. & Loan Ass'n, 279 Ark. 275, 651 S.W.2d 71 (1983).

Cited: Lewallen v. Bethune, 267 Ark. 976, 593 S.W.2d 64 (1980); Hough v. Continental Leasing Corp., 275 Ark. 340, 630 S.W.2d 19 (1982); Halford v. Southern Capital Corp., 279 Ark. 261, 650 S.W.2d 580 (1983); Damron v. University Estates, Phase II, Inc., 295 Ark. 533, 750 S.W.2d 402 (1988); First Nat'l Bank v. Griffin, 310 Ark. 164, 832 S.W.2d 816 (1992).