Lawrence Tractor Co. v. Carlisle Insurance Co.

Carlisle Insurance Company (Carlisle) appeals from an order awarding attorney fees to respondent Lawrence Tractor Company, Inc. (Lawrence). Thé sole issue presented is whether a surety can be liable in excess of the penal sum of its bond for payment of attorney fees awarded as costs pursuant to Civil Code section 1717.

Facts

Verburg Brothers, Inc. (Verburg) and Ranchers Finance Company (Ranchers) entered into a subordination agreement dated July 2, 1982, with respect to the financing of certain farm equipment purchased by Verburg from Lawrence.

Lawrence had sold certain farm equipment to Verburg which was financed by John Deere Company. As security for the transaction, Lawrence obtained a lien on certain crops owned or leased by Verburg. Thereafter, Verburg defaulted in its payments under the John Deere financing contracts and returned to Lawrence all of the equipment remaining in its possession to be sold by Lawrence and credited to the outstanding balance.

Recognizing the possibility of a deficiency between the total amount due and owing on the John Deere contracts and the amount which would be received by Lawrence from the sale of the equipment, Lawrence, Verburg…