Elson Dev. Co. v. Ariz. Sav. & Loan Ass'n
In Elson Dev. Co. v. Ariz. Sav. & Loan Ass'n, 99 Ariz. 217, 407 P.2d 930 (1965), the parties had entered into an addendum to a promissory note in which Elson agreed that if he did not perform in accordance with the supplemental agreement that judgment would be entered against him and that he would pay "a reasonable sum (not less than three (3%) per cent nor more than four (4%) per cent of the amount found by the court to be due and payable) . . . as and for attorneys' fees." Id. at 219, 407 P.2d at 932.
The Savings and Loan Association sued on the promissory note, obtaining summary judgment against Elson, and was awarded attorneys' fees of $ 88,000.00, slightly less than 4% of the judgment. Id. at 219-220, 407 P.2d at 931-32.
On appeal, the supreme court vacated the summary judgment and then addressed Elson's claim that any award of attorneys' fees more than $ 1,000 was not reasonable and that the trial court was therefore not bound by the stipulation. Id. at 221, 407 P.2d at 933.
The supreme court observed that an agreement by the parties as to the amount of attorneys' fees is not contrary to public policy and is analogous to a contract for indemnity, id. at 222, 407 P.2d at 934, and held that a contractual fee provision stipulating to a certain amount or percentage of attorneys' fees "is binding only to the extent that it is reasonable; however, where the services have been rendered, and the amount stipulated is not obviously excessive, the stipulation as to the amount should govern." Id. at 223, 407 P.2d at 934.