Roy v. Mugford

ROY_V_MUGFORD.92-617; 161 Vt. 501; 642 A.2d 688

[Filed 08-Apr-1994]

 NOTICE:  This opinion is subject to motions for reargument under V.R.A.P. 40
 as well as formal revision before publication in the Vermont Reports.
 Readers are requested to notify the Reporter of Decisions, Vermont Supreme
 Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
 order that corrections may be made before this opinion goes to press.


                                 No. 92-617


 Denis A. Roy and Helen Roy                   Supreme Court

                                              On Appeal from
      v.                                      Washington Superior Court

 Wayne and Waldo Mugford,                     December Term, 1993
 M & W Polishing Co., and
 Peerless Granite Company, Inc.


 Stephen B. Martin, J.

 Oreste V. Valsangiacomo, Jr. and Judith A. Miles of Valsangiacomo, Detora &
    McQuesten, P.C., Barre, for plaintiffs-appellants

 Nancy J. Creswell and Bernard D. Lambek of Paterson & Walke, P.C.,
    Montpelier, for defendants-appellees



 PRESENT:  Allen, Gibson, Dooley, Morse and Johnson, JJ.


      DOOLEY, J.   Plaintiffs Denis and Helen Roy appeal from a decision of
 the Washington Superior Court denying them attorney's fees on their success-
 ful action to recover $20,000 due on a 1987 promissory note.  Defendants are
 Wayne and Waldo Mugford; Peerless Granite Company, a business the Mugfords
 purchased from plaintiffs by stock sale; and M & W Polishing Company,
 another business owned by the Mugfords.  Defendants cross-appeal the court's
 decision to allow recovery of the $20,000.  We affirm the court's award of
 the $20,000 plus interest, but reverse and remand for determination and
 award of attorney's fees.

 

      In the fall of 1986, plaintiffs, who were then in the process of
 divorcing, decided to sell Peerless Granite Company in order to take
 advantage of favorable capital gains tax treatment that was to be eliminated
 after 1986.  Denis Roy contacted certain local companies about buying
 Peerless, and defendants Mugford, who had been contemplating expanding their
 granite polishing business, showed immediate interest.  On December 6, the
 Mugfords took a tour of the Peerless operation.  During this visit, Helen
 Roy gave them computer-generated balance sheets covering the period July
 1984 through November 1986.  Plaintiffs explained to the Mugfords that the
 Peerless accounts would change through the end of December, reflecting
 normal operating expenses.
      To expedite the sale, the parties negotiated a straight stock
 purchase.  The purchase and sale agreement was drafted by the Mugfords'
 attorney.  The closing took place on the evening of December 31, 1986, with
 plaintiffs signing over all sixteen outstanding Peerless shares, twelve
 owned by Denis Roy and four by Helen Roy, in exchange for consideration of
 $670,000.  The final price was negotiated down from the plaintiffs' asking
 price of $700,000.  Prior to this closing, the Mugfords neither requested,
 nor were they provided, with any financial information other than that which
 they received in early December.  They relied, however, on advice and
 analysis supplied by their accountant.
      Although the sale was closed on the evening of December 31, defendants
 did not complete their permanent financing until a second closing on January
 30, 1987.  During the second closing, Peerless Granite Company, by Wayne
 Mugford, executed a $59,000 promissory note to plaintiffs, with final pay-
 ment due July 1, 1987.  Like the purchase and sale agreement, this note was

 

 also drafted by defendants' attorney.  The final paragraph of this note
 provided:  "In the event of the default of this note, the maker and any
 endorsers hereof hereby agree to pay all reasonable attorney's fees and the
 costs of collection necessarily incurred."
      During the day of December 31, Helen Roy drew herself a $20,000 bonus
 check.  When she drew the check, Helen Roy was not aware that the Mugfords
 had decided to purchase Peerless and that the closing would occur that
 evening.  The bonus was taken pursuant to a temporary divorce stipulation
 signed by Helen and Denis Roy in September.  Plaintiffs had agreed that
 Helen would take a bonus before year end, which would be treated as salary
 for her, and that the bonus would then be deposited into a college tuition
 account for their children.  Helen Roy did not disclose the bonus at the
 closing.
      The Mugfords discovered the bonus payment three months later when
 Helen Roy stopped working for Peerless and was replaced by a new bookkeeper.
 At that time, defendants asked plaintiffs to explain the payment.  Not
 satisfied with plaintiffs' answer, defendants withheld $20,000 from their
 final payment on the $59,000 promissory note and placed it in an escrow
 account for a time, but later withdrew the funds.  Plaintiffs subsequently
 filed suit to recover the $20,000 withheld from the final note payment.
      On appeal, plaintiffs' sole argument is that the trial court abused its
 discretion in failing to award attorney's fees under the promissory note.
 We agree and reverse and remand for calculation and award of such fees.  On
 cross-appeal, defendants make four arguments that actually reduce to two:
 (1) the taking of the bonus by check, cashed after the stock was
 transferred to the Mugfords, violated the purchase and sale agreement as a

 

 matter of law; and (2) the court failed to make essential findings to
 dispose fully of defendants' affirmative defenses and counterclaims.  We are
 not persuaded by defendants' contentions, and, therefore, we affirm judgment
 for plaintiffs in the amount of $20,000 plus interest.  We address
 defendants' arguments on the underlying judgment before turning to the
 matter of attorney's fees.
      Defendants first argue that plaintiffs breached the stock purchase
 agreement, requiring reversal of the trial court's judgment as a matter of
 law.  Specifically, defendants contend that when plaintiff Helen Roy wrote
 the $20,000 bonus check to herself on December 31, 1986, but did not deposit
 the check until January 6, 1987, she violated Paragraph 6 of the Stock
 Purchase and Sale Agreement, which states:
         All loans and indebtedness owed to DENNIS A. ROY and
         HELEN ROY by the [Peerless] corporation will be
         cancelled on the corporate books as of December 31,
         1986, the date of closing.

 Citing 9A V.S.A. { 3-802(1) and the accompanying commentary, defendants
 contend that a check is nothing more than a loan or indebtedness until
 presented for payment, that is, simply a conditional payment which remains
 suspended until presented.  According to the terms of Paragraph 6,
 defendants' argument runs, Peerless' indebtedness to Helen Roy in the form
 of that $20,000 check was cancelled as of the closing and, therefore,
 plaintiffs breached Paragraph 6 when they took payment on a cancelled
 obligation from Peerless after December 31.
      The short answer to defendants' contention is that payment on a check
 relates back to the time the check is delivered to the payee.  See Ivy v.
 American Road Ins. Co., 398 So. 2d 165, 166 (La. Ct. App. 1981) ("The law is
 well established that a check is a conditional payment and once the check

 

 has made its commercial cycle back to the drawee bank where it is finally
 accepted and paid, such payment relates back to the time the check was
 delivered to the payee . . . ."), rev'd on other grounds, 409 So. 2d 549
 (La. 1982); Regents of Univ. of New Mexico v. Lacey, 764 P.2d 873, 875 (N.M.
 1988) (payment relates back to time of delivery of check; citing 6 R.
 Anderson, Anderson on The Uniform Commercial Code { 3-802:19 (3d ed. 1984)
 and collecting cases); see also General Motors Acceptance Corp. v. Abington
 Casualty Ins. Co., 602 N.E.2d 1085, 1087 (Mass. 1992) (underlying debt
 discharged when check delivered to payee and drawn on account with
 sufficient funds at solvent bank).  In this case, payment on the $20,000
 bonus check related back to the December 31 delivery date, and therefore was
 not a loan or debt outstanding as of the closing.  As a Louisiana court has
 observed, the purpose of allowing payment of a check to relate back to the
 date of delivery
         is both logical and apparent.  It is commonplace in
         today's highly commercialized society to discharge
         obligations by the use of checks.  Many obligations
         require that payments be made timely or at certain
         times.  Examples are installment notes, insurance
         premiums . . . and many others.  The rule . . . protects
         the debtor from such claims as possible additional
         interest, penalties or breach of contract for untimely
         payment.  The rule is designed to allow . . . timely
         payment by check . . . otherwise it would make the
         timeliness of payment depend upon the actions of the
         creditor.  Thus a debtor who paid by check would not be
         assured that his payment was timely even though the
         check was delivered timely.

 Ivy, 398 So. 2d  at 167.
      For the defendants' argument to have any merit, we would have to find
 that there was no agreement that the check constituted payment.  See Drew v.
 Chrysler Credit Corp., 596 F. Supp. 1371, 1376 (D. Mo. 1984) ("Where there
 is no agreement that the check itself shall constitute payment, a

 

 'satisfaction' does not occur until payment of the check has actually been
 received.").  There is no evidence suggesting that Helen Roy did not intend
 that the check constitute payment of her 1986 bonus salary.
      Even outside of the relation-back doctrine, defendants' argument would
 fail because it neglects other, more relevant sections of Article 3 of the
 Uniform Commercial Code.  Under the Code, the check Helen Roy drew was a
 negotiable instrument.  See 9A V.S.A. { 3-104 (defining negotiable
 instrument, including check).  A check is "a draft drawn on a bank and
 payable on demand."  Id. { 3-104(2)(b).  In turn, instruments payable on
 demand "include those payable at sight or on presentation and those in which
 no time for payment is stated."  Id. { 3-108.  Presentment is simply the
 demand for payment.  1 J. White & R. Summers, Uniform Commercial Code { 13-
 11, at 649 (3d ed. 1988).  Under the terms of { 3-503:
         (2)  A reasonable time for presentment is determined by
         the nature of the instrument . . . .  In the case of an
         uncertified check which is drawn and payable within the
         United States and which is not a draft drawn by a bank
         the following are presumed to be reasonable periods
         within which to present for payment or to initiate bank
         collection:
                (a)  with respect to the liability of the drawer,
                     thirty days after date or issue whichever is
                     later . . . .

 Helen Roy was well within the thirty-day period for presentment of the
 Peerless check when she deposited the check six days after its date and
 issue.
       Returning to defendants' argument that the check was a suspended
 indebtedness cancelled by Paragraph 6, we find defendants' reading of { 3-
 802 incorrect.  This section is simply "a tidying-up provision.  It states
 the legal effects on the underlying obligation when one takes a negotiable

 

 instrument for that obligation, and it states the legal effects on the
 underlying obligation when the obligation on the instrument is discharged."
 1 J. White & R. Summers, supra, { 13-23, at 684 (emphasis added) (footnote
 omitted).  The underlying obligation is "the original obligation between the
 parties which led to issuance of the negotiable instrument . . . .  In most
 cases, this obligation will be a contract . . . . "  Id., { 13-23, at 684-
 85.  Here, the underlying obligation was the obligation of Peerless to pay
 Helen Roy a bonus as agreed by the then-owners of Peerless; the $20,000
 check was a negotiable instrument given to discharge that obligation.
      The discussion of suspension in { 3-802 refers not to the suspension of
 the negotiable instrument, but rather suspension of the right to bring an
 action on the underlying obligation.  See id. { 13-23, at 685 (discussing {
 3-802 and noting that "issuance of a check in the usual circumstances does
 not discharge the obligation but merely suspends it").  Thus, the check
 remains a valid instrument, and the right to sue on the obligation -- here
 the $20,000 bonus -- is suspended until and if the check is not honored by
 the bank to which it is presented.  See 9A V.S.A. { 3-802 comment 3.
      We turn now to the second argument raised by defendants: that the
 court failed to make findings essential to the disposition of their
 affirmative defenses and counterclaims.  As defendants correctly point out,
 when requested, the court had a duty to make findings essential to the
 disposition of the issues properly before the court.  See Jacobs v. Jacobs,
 144 Vt. 124, 127, 473 A.2d 1165, 1167 (1984).  In this case, plaintiffs
 requested findings on the record at the close of the evidence, thus
 triggering the court's obligation to make findings.  See V.R.C.P. 52(a).
 The findings must indicate to the parties and this Court what was decided

 

 and how the decision was reached.  See In re J.R., 147 Vt. 7, 11, 508 A.2d 719, 721 (1986).
      Although defendants raised numerous theories to avoid paying the
 remaining amount due on the note, with two exceptions all theories centered
 on the propriety of the $20,000 bonus payment.  Emphasizing "the real
 dispute in this case," the court made detailed findings about the bonus.
 The court found the bonus was appropriate and legitimate because: (1) based
 on the gross sales and earnings of Peerless, plaintiffs were entitled to
 take a salary payment that included the bonus; (2) the total salaries taken
 in 1986 were comparable to those taken in 1984 and 1985; (3) when Helen Roy
 withdrew the bonus, she did not know the Mugfords had decided to purchase
 Peerless; (4) the year-end bonus was taken in the ordinary course of
 business for tax purposes; and (5) payment of the bonus did not dilute the
 value of the Peerless stock purchased by the Mugfords.  Also relevant to the
 court's conclusion were findings that plaintiffs had taken a $50,000 bonus
 in 1985, that the Mugfords were aware of this bonus, and that the agreement
 between the Roys for Helen Roy to take the bonus at issue here had been
 reached months earlier in the divorce stipulation.
      Having determined that the bonus was legitimate and appropriate, the
 court gave short shrift to defendants' theories:
          Taken as a whole, the credible evidence does not support
          a finding that the year-end "bonus" was inappropriate;
          or that the Roys misrepresented the assets of Peerless;
          or committed any fraud or inequitable conduct toward the
          Mugfords; or breached their contract with the Mugfords;
          or converted any money that rightfully belonged to the
          Mugfords; or breached any duty of good faith and fair
          dealing that they owed to the Mugfords.

 Essentially, defendants' argument is that the above conclusions, and the

 

 facts found to support them, are too summary in light of defendants'
 theories.
      Defendants layered theories upon theories, without clearly choosing
 among them and pursuing a particular line of attack.  Thus, as affirmative
 defenses related to the bonus, defendants raised equitable setoff, breach of
 contract, fraud, equitable estoppel, and "[i]ntentional and/or negligent
 misrepresentation."  As counterclaims, they raised breach of contract,
 breach of duty of good faith and fair dealing, misrepresentation or mistake
 to allow for reformation, and fraudulent and inequitable conduct such as to
 allow a setoff of the bonus amount.
      The trial court believed it addressed all these theories by its
 findings and conclusions with respect to the bonus.  In the trial court's
 view, the bonus was a proper expenditure, taken in the ordinary course of
 business, pursuant to a prior agreement, by a business owner who had earned
 the bonus and did not know she was about to sell the business.  Although the
 trial court findings could have been more detailed and its reasoning more
 explicit, we do not find reversible error.  Some of defendants' theories
 were unsupported in law or fact.  One such example is defendants' argument
 that plaintiffs violated Paragraph 6 of the stock purchase and sale
 agreement, which we resolved earlier in this opinion.  Another, related
 example is defendant's theory that plaintiffs violated Paragraph 7 of the
 agreement, in which plaintiffs represented that the transfer of stock
 transferred all property of Peerless including bank deposits as of December
 31, 1986.  Defendants argued that because the check was not cashed until
 January 6, 1987, the bonus payment took money from the business after

 

 December 31st in violation of Paragraph 7.  Our resolution of the Paragraph
 6 claim also resolves this claim.
      Many of defendants' contentions were necessarily concluded by the
 findings and conclusions, however sparse.  Most of the equitable claims and
 defenses were clearly concluded.  For example, the court found that the
 bonus was not inconsistent with a duty of good faith and fair dealing
 inherent in the stock purchase agreement, given the nature of the bonus and
 the circumstances surrounding it.  Assuming the duty could apply to pre-
 consummation conduct, we believe the findings and conclusions show no
 breach of this duty.  See generally Carmichael v. Adirondack Bottled Gas
 Corp., ___ Vt. ___, ___, 635 A.2d 1211, 1216-17 (1993) (covenant of good
 faith and fair dealing implied in every contract protects against bad faith
 that would violate community standards of decency, fairness or
 reasonableness; good faith is ordinarily a question of fact).  This analysis
 also made untenable defendants' equitable estoppel theory.  See Greenmoss
 Builders, Inc. v. King, 155 Vt. 1, 6, 580 A.2d 971, 974 (1990) (equitable
 estoppel is based on "fair dealing, good faith and justice").  Similarly,
 defendants had no right to a setoff or reformation based on equitable
 principles.
      Defendants' main claims of fraud were similarly concluded because the
 court found no misrepresentations were made.  Thus, defendants' claims for
 deceit and negligent misrepresentation are precluded as a matter of law
 given that such actions only lie upon a threshold finding of a
 misrepresentation.  See Lewis v. Cohen, 157 Vt. 564, 568, 603 A.2d 352, 354
 (1991) (deceit); Restatement (Second) of Torts { 552(1) (1977) (negligent
 misrepresentation).  The court's findings also preclude recovery under an

 

 unintentional misrepresentation theory, even assuming that it might be
 grounds for reformation of contract.  See Hardwick-Morrison Co. v.
 Albertsson, 158 Vt. 145, 150, 605 A.2d 529, 533 (1992) (constructive fraud
 requires wrongful act and may allow non-damage remedy).
      Defendants also argued fraudulent concealment, however, and the court's
 findings and conclusions do not clearly address this theory.  Even without a
 finding of misrepresentation, the court could conclude that nondisclosure of
 material fact was actionable if there was a duty to disclose.  See Silva v.
 Stevens, 156 Vt. 94, 103, 589 A.2d 852, 857 (1991).  The duty to disclose
 can arise from a relationship of trust and confidence, superior knowledge or
 means of knowledge.  See id.
      For two reasons, we do not believe this theory is viable here, and,
 therefore, the failure of the court to address it is harmless.  First, the
 nondisclosure must be made with an intention to mislead or defraud.  See
 White v. Pepin, 151 Vt. 413, 416, 561 A.2d 94, 96 (1989).  The court found
 that after Helen Roy made out the bonus check, "it didn't occur to her that
 she should tell the Mugfords."  That finding is inconsistent with an intent
 to defraud.
      Second, this is a case in which defendants had an obligation to make an
 independent inquiry of the facts to protect their own interests.  See Lewis,
 157 Vt. at 568-69, 603 A.2d  at 354 (in context of relationship, party may be
 unable to defend action on contract absent showing of justifiable reliance
 on misrepresentation; such reliance may be precluded by showing that but for
 party's own neglect, party would have discovered wrong); Silva, 156 Vt. at
 105, 589 A.2d  at 858-59 (independent inquiry must be made if clear from
 parties' relationship that such inquiry should precede one party's reliance

 

 on other party's representations).  This was an arm's-length business
 transaction.  Defendants were given all information they requested, and they
 had the assistance of an accountant.  As the court emphasized, the
 information given disclosed the 1985 bonus and the salary history.  See
 Wright v. Doolin, 158 Vt. 317, 319, 607 A.2d 1137, 1138 (1992) (business
 sellers' failure to disclose loss of customer not actionable as purchasers
 were provided with adequate information, including access to company records
 and customer lists, and nature of business made customer profile "a likely
 subject to be explored by a would-be purchaser").  Defendants' lawyer drew
 up the purchase and sale agreement.  The transaction was structured as a
 stock sale, which placed a premium on knowing the state of the business on
 the date of sale and ensuring the assets were intact.  Yet, defendants had
 no information concerning what had occurred in the month prior to the sale
 or about the financial state of the business as of the date of sale.  The
 contract gave them no protection.
      Defendants attempt to liken this sale to the transaction in White v.
 Pepin in order to argue that the time constraints imposed by plaintiffs
 prevented proper factual investigation. See 151 Vt. at 417-18, 561 A.2d  at
 97.  Although there were time constraints involved in the sale of Peerless,
 the record does not support defendants' contention that the timing prevented
 defendants from undertaking an independent examination of the state of the
 business or the inclusion of provisions in the agreement to protect against
 what occurred.  Indeed, the use of legal and financial advisors shows that
 the Mugfords had the capacity to protect their interests.
      In connection with their affirmative defenses and counterclaims,
 defendants also argue that one of the court's critical findings is not

 

 supported by the evidence.  Specifically, they argue that there is no
 evidence to support the fact that the bonus payment did not affect the value
 of the Peerless stock purchased by the Mugfords.  We must uphold the
 court's finding unless it is clearly erroneous.  See V.R.C.P. 52(a)(2).
 Although there was no evidence of the value of the Peerless stock,
 defendant's accountant testified, in response to a question about the
 significance of the bonus as follows:
          Probably in a case like this, I guess in retrospect, the
          bonus situation to me wasn't all that important because
          it was  there was a case of buying what they thought
          they were getting for assets and liabilities of the
          business . . . .

 The "finding" to which defendants object is actually a conclusion that the
 payment of the bonus "did not dilute the value of the Peerless stock."  The
 testimony of the accountant supported this conclusion, and therefore is not
 clearly erroneous.  See Bills v. Wardsboro School Dist., 150 Vt. 541, 544,
 554 A.2d 673, 675 (1988) (findings not clearly erroneous if supported by
 reasonable and credible evidence).  In any event, we believe that, in
 context, the trial court was saying that the taking of the bonus did not
 dilute the value of the stock below that reasonably expected by defendants.
 This conclusion is supported by the court's findings that plaintiffs' total
 compensation, including the bonus, was justified by sales and earnings and
 was in line with past compensation.  We see no error in this conclusion.
      Defendants also have raised two theories that do not involve the
 propriety of the bonus, to which we now turn our attention.  Defendants
 briefed and argued to the trial court both accord and satisfaction, and
 laches.  The court failed to address either defense.  Although this was
 error, we conclude the error was harmless because neither theory was

 

 supported by the evidence before the court.  See V.R.C.P. 61 (error not
 cause for modification of judgment unless it affects "the substantial rights
 of the parties").
      We first address defendants' claim of accord and satisfaction.  On July
 1, 1987, defendants tendered plaintiffs a check for $28,803.04, which
 represented the amount outstanding on the promissory note ($48,803.04) less
 the contested $20,000 bonus amount.  Defendants marked the "remittance
 advice" attached to the check as "pay off." Plaintiffs subsequently cashed
 the check.  One day earlier, however, the attorney for the Mugfords sent a
 letter to plaintiffs' counsel describing the dispute over the bonus and
 stating:
         There is a $50,000 payment due on July 1st to your
         clients.  I have advised my clients to pay $30,000.00
         and escrow the balance of $20,000.00.

         Once we can meet and find out why this occurred, we can
         resolve who is entitled to the remaining $20,000.

 The $20,000 was put in escrow as stated in the letter.  Defendants argued
 below that the acceptance of the "pay off" check constituted an accord and
 satisfaction with respect to the amount due on July 1, 1987 -- that is, the
 remainder of the amount due on the promissory note.
      A party claiming the defense of accord and satisfaction must prove
 that:  (1) the claim is disputed; (2) the party offered to pay less than the
 amount allegedly due; and (3) in full settlement of the claim, the other
 party accepted and retained the lesser amount offered.  Eccomunity, Inc. v.
 Lussier, 147 Vt. 276, 278, 514 A.2d 711, 713 (1986); see also Frangiosa v.
 Kapoukradis, ___ Vt. ___, ___, 627 A.2d 351, 355 (1993) (for negotiable
 instruments governed by the UCC, creditor can avoid the third element by a
 reservation of rights).  As to the second element, the amount tendered "must

 

 clearly be offered in full satisfaction of the claim."  Union Bank v. Jones,
 138 Vt. 115, 124, 411 A.2d 1338, 1344 (1980).  This defense may be a matter
 of fact or law, but when "'the evidence leaves no room for opposing
 inferences it is one of law.'"  Eccomunity, Inc., 147 Vt. at 278, 514 A.2d 
 at 713 (quoting Curran v. Bray Wood Heel Co., 116 Vt. 21, 23, 68 A.2d 712,
 715 (1949)).  We find this to be the case here.
      The evidence would not have allowed the trial court to conclude that
 the second element was present.  The letter and the escrow arrangement
 conclusively established that defendants did not tender the July 1st check
 in full satisfaction of the claim.  In this context, the use of the words
 "pay off" did not clearly convey a message that cashing the check would
 extinguish plaintiffs' claim for the remaining $20,000.
      The remaining defense raised by defendants was labeled "waiver and
 laches" and went solely to the recovery of any prejudgment interest.  The
 trial court awarded interest calculated at nine percent, the rate
 specifically provided in the promissory note.  As the factual base for their
 defense, defendants showed that plaintiffs were aware of the dispute over
 the $20,000 in March of 1987, but failed to bring suit until May of 1991.
 They argued that the delay in bringing the suit was unreasonable and should
 preclude the recovery of interest.
      Although labeled as "waiver" or "laches," defendants' theory is
 actually that the trial court has the discretion to deny prejudgment
 interest in an appropriate case, and this is an appropriate case.  We have
 held, however, that when the damages are liquidated or readily
 ascertainable, interest "is a legal right of the plaintiff."  VanVelsor v.
 Dzewaltowski, 136 Vt. 103, 106, 385 A.2d 1102, 1104 (1978); see also P.F.

 

 Jurgs & Co. v. O'Brien, ___ Vt. ___, ___, 629 A.2d 325, 331-32 (1993)
 (citing Reporter's Notes to 1981 Amendment, V.R.C.P. 54(a)).  This rule is
 particularly appropriate when, as here, defendants have contractually
 obligated themselves to pay interest.  Because the trial court had no
 discretion to refuse plaintiffs the prejudgment interest, defendants' theory
 has no merit.
      Finally, we turn to plaintiffs' argument that the trial court abused
 its discretion by failing to award attorney's fees under the terms of the
 promissory note.  The trial court based its refusal to award fees on two
 factors:  (1) plaintiffs "could have been more explicit about their business
 practices and thereby averted this lawsuit," and (2) "the fact that the so-
 called 'bonus' was the real issue in this case, rather than the balance due
 on a note."
      We have enforced contractual provisions in negotiable instruments
 making the debtor responsible for collection costs, including attorney's
 fees, to "aid in insuring to the holder the full proceeds of the note."
 Young v. Northern Terminals, Inc., 130 Vt. 258, 260, 290 A.2d 186, 188
 (1972); see also Ianelli v. Standish, 156 Vt. 386, 389, 592 A.2d 901, 903
 (1991) (enforcing "unambiguous and clearly applicable" attorney's fee
 provision in real estate purchase contract).  The question of what
 constitutes a reasonable attorney's fee is one of fact.  See Young v.
 Northern Terminals, Inc., 132 Vt. 125, 129, 315 A.2d 469, 471 (1974).  We
 have authorized the trial court to consider a wide range of factors in
 making this determination, id. at 129-30, 315 A.2d  at 472, and accorded it
 "a large measure of discretion" in determining reasonableness.  Id. at 130,
 315 A.2d  at 472.

 

      We do not believe, however, the court's discretion is broad enough to
 allow it to deny any recovery of attorney's fees when plaintiffs prevail.
 See Marlowe v. Der-Hart Assocs., 680 P.2d 716, 717-18 (Or. Ct. App. 1984);
 Singleton v. Frost, 742 P.2d 1224, 1228 (Wash. 1987).  Failure to award at
 least some fees would deny plaintiffs the benefit of the contract freely
 entered into by the Mugfords.
      Although plaintiffs are entitled to an attorney's fee award in some
 amount, we agree that the court could consider plaintiffs' actions in
 resolving, or failing to resolve, the dispute prior to litigation in
 determining what is a reasonable award.  On the other hand, we do not agree
 with the trial court's view that the amount of attorney's fees should be
 affected because the underlying dispute was over the bonus, especially in
 light of defendants' attempt to resolve this dispute by refusing to pay the
 full amount due on the note.  Nor do we believe the fee amount should be
 reduced because part of the attorney's representation went to defend against
 counterclaims raised by defendants.  As discussed above, the counterclaims
 were closely related to the claims and affirmative defenses so they were
 "integral to the action for collection" of the promissory notes, and
 plaintiffs had to defend against them to collect on the promissory note.
 Wright, 158 Vt. at 321-22, 607 A.2d  at 1139-40.
      The court's order denying plaintiffs recovery for reasonable attorney's
 fees is reversed and remanded for proceedings not inconsistent with this
 opinion; in all other respects, the judgment is affirmed.

                                    FOR THE COURT:

                                    ____________________________
                                    Associate Justice