Chelsea Oaks, Inc. v. Catherine A. Sweeney

Opinion

Opinion issued December 20, 2012

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-11-01038-CV ——————————— CHELSEA OAKS, INC., Appellant V. CATHERINE A. SWEENEY, Appellee

On Appeal from County Civil Court at Law No. 1 Harris County, Texas Trial Court Case No. 990728

MEMORANDUM OPINION

Chelsea Oaks, Inc. (“Chelsea”) was granted a default judgment against

Catherine A. Sweeney (“Sweeney”) in a breach-of-contract case for unpaid legal

services and expenses. In two issues on appeal, Chelsea contends that the trial court erred by awarding them pre- and post-judgment interest at the rate of five

percent per annum rather that at the contract rate of eighteen percent per annum.

We reverse and render.

Background1

Sweeney retained The Mendel Law Firm, LP (the “Firm”) which performed

legal services and invoiced Sweeney per their contract. Sweeney never paid the

invoices. The Firm subsequently assigned its rights under the contract to Chelsea,

who sued Sweeney for breach of contract and attorney’s fees.

After perfecting service on Sweeney, Chelsea filed a motion for default

judgment seeking, inter alia, pre- and post-judgment interest at the rate stipulated

in the contract—eighteen percent per annum. The trial court granted Chelsea’s

motion for default judgment, but instead of awarding Chelsea pre- and post-

judgment interest at the contracted rate of eighteen percent per annum, the trial

court set the rate at five percent per annum. Chelsea appealed.

Discussion

In a breach-of-contract case, the pre-judgment interest rate is the same as the

post-judgment interest rate. See Johnson & Higgins of Tex., Inc. v. Kenneco

Energy, Inc., 962 S.W.2d 507, 532 (Tex. 1998). Post-judgment interest—and 1 Because Sweeney has not filed a brief in this appeal, we accept as true the facts stated in Chelsea’s statement of facts. See TEX. R. APP. P. 38.1(g) (“In a civil case, the court will accept as true the facts stated unless another party contradicts them.”)

2 therefore pre-judgment interest—in a contract case where the contract provides for

interest is the lesser of the interest rate specified in the contract or eighteen percent

a year. See TEX. FIN. CODE ANN. § 304.002 (West 2006). If the contract does not

provide for a rate of interest, then the pre- and post-judgment interest rate is

calculated based on the statutory rate provided in the Finance Code. See TEX. FIN.

CODE ANN. § 304.003 (West 2006) (providing judgment interest rate when interest

rate or time price differential is not in contract); see also ExxonMobil Corp. v.

Valence Operating Co., 174 S.W.3d 303, 319 (Tex. App.—Houston [1st Dist.]

2005, pet. denied) (holding pre-judgment interest rate in breach-of-contract case is

determined by section 304.003 if contract does not specify rate of interest).

The contract at issue states, in pertinent part, that invoices “accrue interest at

the rate of 1.5% per month if not paid within thirty (30) days from the date of

invoice.” An interest rate of one and a half percent per month equates to eighteen

percent per annum. As such, the applicable pre- and post-judgment interest rate is

eighteen percent per annum—as specified in the contract. See TEX. FIN. CODE

ANN. § 304.002; Johnson & Higgins, 962 S.W.2d at 532. The trial court had no

discretion to deviate from the interest rate proscribed by the Finance Code, and as

such, the trial court erred by awarding Chelsea pre- and post-judgment interest at

the rate of five percent per annum rather that at the contract rate of eighteen

percent per annum, as required under section 304.002 of the Finance Code.

3 We sustain Chelsea’s first and second issues.

Conclusion

We reverse the portions of the trial court’s judgment awarding Chelsea pre-

and post-judgment interest at the rate of five percent per annum and render

judgment awarding Chelsea pre- and post-judgment interest at the rate of eighteen

percent per annum.

Jim Sharp Justice

Panel consists of Justices Jennings, Higley, and Sharp.