Paul D. Stweart and Beverly A. Stewart v. Darlene A. Bennett, Trustee of the Darlene A. Bennett Revocable Trust

This case presents an action originally brought by Paul D.
Stewart and Beverly A. Stewart to establish a holdover tenancy
under the terms and conditions of an expired lease agreement
with the landowner, Darlene A. Bennett, trustee of the Darlene A .
Bennett Revocable Trust. Bennett denied the existence of a holdover
tenancy and asserted that any rule of law establishing a holdover
tenancy in this case would be an unconstitutional taking of
property without due process. Bennett counterclaimed for liquidated
damages as specified in the lease for failure to relinquish
possession.

The district court found that under the undisputed facts presented,
no holdover tenancy was created. Accordingly, the district
court granted Bennett's motion for summary judgment and
dismissed the Stewarts' petition against Bennett. The Stewarts
do not appeal the determination that there was no creation of a
holdover tenancy, and that issue is not before us in this appeal.

Both parties originally sought attorney fees under paragraph 26
of the lease, which stated that if either party files suit to enforce
the terms of the lease, the prevailing party shall be entitled to
recover court costs and reasonable attorney fees. After the district
court dismissed the Stewarts' petition, but before ruling on
Bennett's counterclaim, the Stewarts challenged the validity of
the attorney fee provision. Bennett responded that the Stewarts were barred from asserting that the attorney fee provision was
against public policy, since they were the first party to ask for
attorney fees under the provision. Bennett also alleged that any
jurisprudence determining such provision to be against public
policy was unconstitutional.

Citing Parkert v. Lindquist, 269 Neb. 394, 693 N.W.2d 529
(2005), and the cases discussed therein, the district court denied
attorney fees. The court overruled Bennett's constitutional challenge
to holdover tenancy law, explaining that because it determined
that there was no holdover tenancy, the issue was moot. The
court did not specifically address Bennett's argument that the rule
recognized in Parkert was unconstitutional. Bennett appeals.

The sole issue in this appeal is whether the district court erred
in failing to grant attorney fees to Bennett. Bennett asks us to
revisit our previously established rule that a contractual provision
for attorney fees, where such fees are not provided by statute
or uniform course of procedure, is against public policy
and will not be judicially enforced. See Parkert v. Lindquist,
supra. Alternatively, Bennett asserts that some form of equitable
defenses, i.e., the doctrines of unclean hands, waiver, and estoppel,
should operate to preclude recognition of the voidness of the
fee provision in this case. She reasons that the Stewarts were the first to request fees in their unsuccessful petition against Bennett
and because the Stewarts had signed the lease with the fee provision.
Finally, Bennett seeks a declaration that our case law on
holdover tenancies is unconstitutional. Although no such tenancy
was found in this case, Bennett asserts that the issue should be
addressed under an exception to the mootness doctrine.

We decline to overrule the line of cases which clearly hold that
the attorney fee provision at issue in this case is invalid. Because
it is uncontested that no holdover tenancy was created, we will
not address Bennett's attacks on the constitutionality of holdover
tenancy jurisprudence.

Doctrines of Unclean Hands, Waiver, and Estoppel

Bennett first asserts various equitable defenses which Bennett
argues preclude the Stewarts from benefiting from any public policy
invalidation of the attorney fee provision. Bennett is unable to
cite any case law directly applicable to this point. Rather, Bennett
relies on generalized references to the doctrines of unclean hands,
waiver, and estoppel to argue that because the Stewarts signed the
lease agreement with the attorney fee provision and also because
they requested such fees in their original petition, they could not
later assert that the attorney fee provision was void as against
public policy.

[2] The doctrines of unclean hands, waiver, and estoppel clearly
do not apply to the Stewarts' claim that the attorney fee provision
is invalid. First, it is axiomatic that a party cannot waive the invalidity
of a contractual provision by entering into a contract containing
such a provision. As to the idea that by asking the court for
fees under the provision, equity precludes the Stewarts from later
denying the validity of the provision, we first note that the underlying
claim is an action at law in which some of these equitable
defenses simply do not apply. See, Mason v. City of Lincoln, 266
Neb. 399, 665 N.W.2d 600 (2003); Buckingham v. Wray, 219 Neb.
807, 366 N.W.2d 753 (1985). In any case, there is no evidence that
the Stewarts acted inequitably, unfairly, or dishonestly in their initial
claim for attorney fees. See, e.g., Manker v. Manker, 263 Neb.
944, 644 N.W.2d 522 (2002). There is not any evidence that the
Stewarts gained any benefit from their unsuccessful claim under
the attorney fee provision or that Bennett detrimentally relied on
the Stewarts' prior claim.

[3] Closer to the point is Bennett's assertion of the doctrine
of judicial estoppel, which holds that one who has successfully
and unequivocally asserted a position in a prior proceeding is
estopped from asserting an inconsistent position in a subsequent
proceeding. Vowers & Sons, Inc. v. Strasheim, 254 Neb. 506, 576
N.W.2d 817 (1998). The doctrine protects the integrity of the judicial
process by preventing a party from taking a position inconsistent
with one successfully and unequivocally asserted by the same
party in a prior proceeding. Id.

[4] However, the doctrine of judicial estoppel does not apply in
this case because the district court never accepted the claim that
the attorney fee provision was applicable. "‘Absent judicial acceptance
of the inconsistent position, application of the rule is unwarranted
because no risk of inconsistent results exists.'" Vowers &
Sons, Inc. v. Strasheim, 254 Neb. at 514, 576 N.W.2d at 824.

[5] This court has said that a party will be bound by allegations
in the pleadings and cannot subsequently take a position inconsistent
thereto, as such allegations are judicial admissions. See,
Jorgensen v. State Nat. Bank & Trust, 255 Neb. 241, 583 N.W.2d
331 (1998); Ryder Truck Rental v. Transportation Equip. Co., 215
Neb. 458, 339 N.W.2d 283 (1983). But we have clarified that a
party cannot judicially admit conclusions of law in the pleadings
because the pleadings admit only facts. See Jorgensen, supra.
The Stewarts' implicit allegation that the attorney fee provision
was valid was a conclusion of law.

"American Rule"

Having concluded that the Stewarts are not estopped from
asserting that the attorney fee provision at issue is invalid as
against public policy, we next address Bennett's argument that we
should overrule our cases on this point. Bennett argues that our
determination that attorney fee provisions violate public policy in
the absence of a uniform course of procedure or statutory authorization
is representative of a minority view of what exceptions
apply to the so‑called American rule, and he urges us to reconsider.
Bennett also asserts that our failure to except privately contracted
fee provisions is a judicial declaration of public policy that encroaches on the exclusive powers of the Legislature to make
public policy determinations and that our American rule jurisprudence
therefore violates separation of powers.

The "American rule" stands generally for the proposition that
"a prevailing party may not also recover an attorney fee from his
opponent." Holt County Co‑op Assn. v. Corkle's, Inc., 214 Neb.
762, 767, 336 N.W.2d 312, 315 (1983). The justification for this
general rule is that "a defendant should not be unduly influenced
from vigorously contesting claims made against him." Id. See,
also, 20 Am. Jur. 2d Costs § 55 (2005) (purpose of American
rule requiring each party to bear own costs in litigation is to avoid
stifling legitimate litigation by threat of specter of burdensome
expenses being imposed on unsuccessful party).

There are exceptions to the American rule, and these exceptions
vary from state to state. All states create an exception to
the general rule in cases where the legislature has expressly allocated
those fees to the winning party. Most jurisdictions, including
Nebraska, also have an exception to the American rule where
attorney fees are granted pursuant to the court's inherent authority
to do all things necessary for the proper administration of justice
and equity within the scope of their jurisdiction. See, Holt County
Co‑op Assn., supra; Mangiante v. Niemiec, 98 Conn. App. 567,
910 A.2d 235 (2006).

[6] Many jurisdictions have also created an exception where
the attorney fees are provided for through contractual agreement.
This court, however, has repeatedly held that in the absence of
a uniform course of procedure or authorization by statute, contractual
agreements for attorney fees are against public policy
and will not be judicially enforced. See, Parkert v. Lindquist,
269 Neb. 394, 693 N.W.2d 529 (2005); Nebraska Nutrients v.
Shepherd, 261 Neb. 723, 626 N.W.2d 472 (2001); GFH Financial
Serv. Corp. v. Kirk, 231 Neb. 557, 437 N.W.2d 453 (1989); First
Nat. Bank v. Schroeder, 218 Neb. 397, 355 N.W.2d 780 (1984);
Quinn v. Godfather's Investments, 217 Neb. 441, 348 N.W.2d 893
(1984); City of Gering v. Smith Co., 215 Neb. 174, 337 N.W.2d
747 (1983).

[7] Public policy is that principle of the law which holds that no
subject can lawfully do that which has a tendency to be injurious
to the public or against the public good. Public policy presents the principles under which the freedom of contract or private dealings
are restricted by law for the good of the community. See
Hood v. AAA Motor Club Ins. Assn., 259 Neb. 63, 607 N.W.2d
814 (2000).

[8,9] It is the Legislature's function through the enactment of
statutes to declare what is the law and public policy. Myers v.
Nebraska Invest. Council, 272 Neb. 669, 724 N.W.2d 776 (2006).
Neb. Rev. Stat. § 25‑824 (Reissue 1995) provides for attorney fees
to the prevailing party when the court determines that the underlying
action was brought in bad faith. The Legislature, in enacting
this statute, was presumably aware of our understanding of the
American rule and the exceptions to that rule in our state. See, In
re Guardianship of Rebecca B. et al., 260 Neb. 922, 621 N.W.2d
289 (2000); State v. Schnabel, 260 Neb. 618, 618 N.W.2d 699
(2000). The Legislature is presumed to know the general condition
surrounding the subject matter of the legislative enactment,
and it is presumed to know and contemplate the legal effect that
accompanies the language it employs to make effective the legislation.
Ludwig v. Board of County Commissioners, 170 Neb.
600, 103 N.W.2d 838 (1960). By implication, in § 25‑824, the
Legislature has made a statement of public policy against granting
attorney fees in actions that are not frivolous.

Having found that the public policy relevant to this case was
embodied by an expression of the Legislature, we can find no merit
to Bennett's argument that our case law recognizing this public
policy violated the alleged exclusive realm of the Legislature to
determine public policy questions. We decline to reconsider our
case law on this issue.

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