Chelsea Oaks, Inc. v. Catherine A. Sweeney ( 2012 )

Opinion issued December 20, 2012
In The
Court of Appeals
For The
First District of Texas
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NO. 01-11-01038-CV
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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.”)
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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.
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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.
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