Opinion
NO. 01-17-00118-CV
10-17-2017
KENNETH D. EICHNER, P.C., Appellant v. GARETT V. JESTER, Appellee
On Appeal from County Civil Court at Law No. 4 Harris County, Texas
Trial Court Case No. 1020750
MEMORANDUM OPINION
In this breach-of-contract case, Kenneth D. Eichner, P.C. obtained a default judgment against Garrett V. Jester for unpaid accounting services performed by Eichner. Raising one issue, Eichner contends that the trial court erred by awarding pre- and post-judgment interest at the rate of 5% per annum rather that at the contract rate of 18% per annum.
Because we agree that the trial court erred with respect to the interest rate award, we modify the judgment to reflect the correct pre- and post-judgment interest rate of 18% per annum. We affirm as modified.
Background
In 2007, Jester signed a retainer agreement, engaging Eichner to provide accounting services to him individually. Two other retainer agreements were also signed. One engaged Eichner to provide accounting services to GVB Holdings, and the other hired Eichner to provide accounting services to Stafford Automotive. Jester signed personal guaranty agreements, agreeing to pay to Eichner any debts owed by GVB Holdings or Stafford Automotive, arising out of the retainer agreements.
In 2009, Eichner invoiced Jester for accounting services, totaling $23,976.14. Jester did not pay the invoice, and Eichner filed suit against him, asserting breach of contract. Eichner sought to recover $23,976.14, the amount of the invoice that had been sent to Jester. Eichner also sought pre- and post-judgment interest at the rate stipulated in the retainer agreements: 18% per annum.
Eichner did not sue GVB Holdings or Stafford Automotive.
Although he answered the suit, Jester failed to appear at trial. As a result, the trial court signed a default judgment against Jester, awarding Eichner actual damages of $23,976.14. Rather than award Eichner pre- and post-judgment interest at the contracted rate of 18% per annum, the trial court awarded pre- and post-judgment interest at 5% per annum. Eichner moved to modify the judgment, asserting that it was entitled to pre- and post-judgment interest at a rate of 18% per annum. However, the trial court did not modify the judgment.
Eichner now appeals. In one issue, Eichner contends that the trial court erred when it set the pre- and post-judgment interest at 5% per annum rather than at 18% per annum.
Jester has not filed a brief on appeal.
Interest Rate
A trial court does not have discretion to award either pre- or post-judgment interest in excess of the legal rate. See Baker Marine Corp. v. Weatherby Eng'g Co., 710 S.W.2d 690, 695 (Tex. App.—Corpus Christi 1986, no writ) (pre-judgment interest); Fidelity & Cas. Co. of N.Y. v. Central Bank of Hous., 672 S.W.2d 641, 649 (Tex. App.—Houston [14th Dist.] 1984, writ ref'd n.r.e) (post-judgment interest). Nor does a trial court have discretion to award a lower interest rate than required by law. See Chelsea Oaks, Inc. v. Sweeney, No. 01-11-01038-CV, 2012 WL 6644998, at *1-2 (Tex. App.—Houston [1st Dist.] Dec. 20, 2012, no pet.) (mem. op.) (holding trial court had no discretion to award 5% pre- and post-judgment interest when, under the circumstances, Finance Code required 18% interest); see also Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 623-24 (Tex. 2005) (recognizing that trial court has no discretion in determining what law is or in applying law to facts).
In a breach-of-contract case, the prejudgment interest rate is the same as the post-judgment interest rate. Meridien Hotels, Inc. v. LHO Fin. Partnership I, L.P., 255 S.W.3d 807, 823 (Tex. App.—Dallas 2008, no pet.) (citing Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 532 (Tex. 1998)). Post-judgment interest—and thus prejudgment interest—is the lesser of the interest rate specified in the contract or 18% per year. See TEX. FIN. CODE ANN. § 304.002 (West 2016). 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 2016) (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 prejudgment interest rate in breach-of-contract case is determined by Section 304.003 if contract does not specify rate of interest).
The retainer agreement—that is, the contract—between Eichner and Jester provides that "[a]ny balance due and owing for more than thirty (30) days will be subject to interest computed on the unpaid balance from the date of invoice at the maximum legal rate allowed by Texas law or 18% per annum whichever is less." "Texas law authorizes a maximum lawful rate of 18 percent per annum to be applied to a written contract." Saad v. Valdez, No. 14-15-00845-CV, 2017 WL 1181241, at *17 (Tex. App.—Houston [14th Dist.] Mar. 30, 2017, judgm't vacated, op. not withdrawn) (mem. op.) (citing, inter alia, All Seasons Window & Door Mfg., Inc., v. Red Dot Corp., 181 S.W.3d 490, 497-98 (Tex. App.—Texarkana 2005, no pet.) (concluding that language "maximum rate permitted by law" was sufficient to support application of 18% ceiling rate under Finance Code Section 303.009)). Thus, here, the applicable pre- and post-judgment interest rate is 18% per annum. See TEX. FIN. CODE ANN. § 304.002; Johnson & Higgins, 962 S.W.2d at 532; see also Chelsea Oaks, Inc., 2012 WL 6644998, at *1-2 (holding, in breach-of-contract case, that trial court erred by awarding 5% pre- and post-judgment interest when contract required 18% interest).
The trial court had no discretion to deviate from the interest rate proscribed by the Finance Code. See Chelsea Oaks, 2012 WL 6644998, at *1. We hold that the trial court erred by awarding Eichner pre- and post-judgment interest at the rate of 5% per annum rather than at the contract rate of 18% per annum, as required by Finance Code Section 304.002.
We sustain Eichner's sole issue.
Conclusion
We modify the judgment of the trial by replacing the term "5%," each place it appears, with the term "18%." We affirm the judgment as modified. See Davis v. Sysco Food Servs. of Austin, L.P., No. 03-08-00593-CV, 2009 WL 4458600, at *4 (Tex. App.—Austin Dec. 4, 2009, pet. dism'd) (mem. op.) (reforming trial court's judgment to substitute correct pre- and post-judgment interest rate and affirming as reformed).
Laura Carter Higley
Justice Panel consists of Justices Higley, Massengale, and Lloyd.