April 15, 1993. Writ Denied June 25, 1993.
APPEAL FROM 34TH JUDICIAL DISTRICT COURT, ST. BERNARD PARISH, STATE OF LOUISIANA.
Charles K. Watts, Lawrence R. Anderson, Jr., Seale, Smith, Zuber Barnette, Baton Rouge, for Associates Financial Services of America, Inc.
Gerard G. Metzger, Metairie, for T. Cvitanovich Seafoods, Inc.
Before CIACCIO, WARD and LANDRIEU, JJ.
Associates Financial Services of America, Inc. ("Associates") intervened in foreclosure proceedings instituted by T. Cvitanovich Seafoods, Inc. ("TCSI") against Mr. and Mrs. Campo. Mr. and Mrs. Campo executed a first mortgage in favor of TCSI and a second mortgage in favor of Associates. Associates is seeking to protect its claims under its mortgage and disputes the amount claimed by TCSI as interest and attorney's fees on the first mortgage. Additionally, Associates seeks a ranking of its second mortgage before interest and attorneys fees of TCSI's first mortgage.
TCSI proceeded via ordinaria to foreclose on the mortgage which was a collateral mortgage executed by Mr. and Mrs. Campo. Following a trial on the merits of the foreclosure, the trial court dismissed TCSI's suit. On appeal this Court in an unreported opinion reversed the trial court and upheld TCSI's first mortgage. 575 So.2d 954. This court rendered judgment in favor of TCSI in the amount of $25,000 and awarded judicial interest from date of demand, reasonable attorney's fees, and costs.
T. Cvitanovich Seafoods, Inc. v. Margaret (A/K/A Margurita) Marie Mackles, wife of/and Merlin Campo, 575 So.2d 954 (1991).
After Associates filed its intervention, in ruling on the ranking, the trial court held that Associates's mortgage was inferior to TCSI's in all respects — principal, interest and attorney's fees.
Associates contends the trial court erred and argues that TCSI's claims under the collateral mortgage should be limited to the principal, $25,000, and reasonable attorney's fees of $5000, or $30,000 total. After TCSI receives $30,000, Associates claims it is entitled to payment until its mortgage is satisfied. Associates's argument goes to an interpretation of TCSI's collateral mortgage, the collateral mortgage note, and the hand note that it secures. Associates contends, first, that TCSI cannot recover judicial interest after demand because those notes do not provide for payment of interest, and secondly, as a consequence TCSI's attorney's fees are limited to 20% of the principal amount only, $5,000, instead of the $7,500 awarded by the trial court as attorney's fees on both principal and interest.
TCSI, its president and agent, Thomas Cvitanovich, are buyers and wholesalers of seafood. One of TCSI's suppliers was Merlin Campo, who purchased seafood for resale to wholesalers, including TCSI. In the course of their business relationship, TCSI advanced money to Campo to purchase seafood. As security for this arrangement, Mr. and Mrs. Campo executed and transferred to TCSI a collateral mortgage note in the amount of $25,000, payable to bearer on demand and dated April 15, 1980. A promissory note and "a hand note" were executed on October 6, 1983.
The collateral mortgage note and the hand note are demand notes, and each are "fill in the blanks" form notes with a space to be filled in to designate the amount of interest. The collateral mortgage notes states "with no interest from date until paid at the rate of none per centum per annum; interest and principal payable as follows, to-wit: on demand." The hand note says "with interest from 10/6/83 until paid at the rate of 0 per centum per annum; interest and principal payable as follows, to-wit: on demand".
Associates and TCSI agree that any claim for judicial interest must rest on C.C. art. 2000.
Art. 2000 Damages for delay measured by interest; no need of proof; attorneys fees
When the object of the performance is a sum of money, damages for delay in performance are measured by the interest on that sum from the time it is due, at the rate agreed by the parties or, in the absence of agreement, at the rate of legal interest as fixed by Article 2924. The obligee may recover these damages without having to prove any loss, and whatever loss he may have suffered he can recover no more. If the parties, by written contract, have expressly agreed that the obligor shall also be liable for the obligee's attorney fees in a fixed or determinable amount, the obligee is entitled to that amount as well. (Emphasis added).
Associates and TCSI also agree that the resolution of this dispute turns on the interpretation of the phrase "in the absence of agreement" above. But Associates argue that TCSI cannot claim interest under art. 2000 because there exists an agreement as to interest in the mortgage contract. In other words, Associates argues that when the collateral mortgage note says "none" this means that there exists a contractual agreement that the mortgagor is not required to pay mortgagee interest. And because there is an agreement, TCSI cannot recover legal interest because art. 2000 is not applicable as it would be "in the absence of agreement".
On the other hand, TCSI contends that the word "none" and the figure `0' means that there is an absence of an agreement as to payment of interest, hence TCSI may recover legal interest as damages.
Our interpretation of the mortgage contract makes a choice between one or the other interpretations unnecessary. We interpret the mortgage note and the hand note to mean that TCSI and Mr. and Mrs. Campo agreed mortgagors would not pay interest until demand for payment. We do not believe the parties contemplated default, and therefore, there was no agreement as to interest after default. And "in the absence of agreement", Mr. and Mrs. Campo were obligated to pay from date of demand when they defaulted. In this case there is virtually no difference between the formal demand and judicial demand, and hence we will use the date of judicial demand.
The same Civil Code article, C.C. 2000, addresses attorney fees. A mortgagee is entitled to an award of attorney fees, "if the parties, by written contract, have expressly agreed that the obligor shall also be liable for the obligee's attorney's fees in a fixed or determinable amount." La. Civil Code art. 2000. The collateral mortgage says the fee "is hereby fixed at twenty per cent on the amount due or sued for or claimed or sought to be protected, preserved or enforced." TCSI contends that it is entitled to attorneys fees on both principal and interest, but under our holding above it was not entitled to interest until demand, and under the language of the mortgage itself it is entitled to attorneys fees only on the amount demanded when it filed suit. In its suit TCSI could only demand the principal, $25,000, because no interest was due at the time. Therefore attorneys fees are limited to 20% of $25,000 or $5,000. The trial court erred in assessing $7,500 in attorney's fees.
Therefore, we affirm the trial court's ruling that judicial interest is owed from judicial demand, and it is secured by the collateral mortgage; we amend the judgment to reduce attorney's fees to $5,000, and hold that it too is secured by the collateral mortgage. As a consequence, both have preference over Associates's second mortgage.
AMENDED AND AFFIRMED
LANDRIEU, J., dissents with reasons.
Where it is not contrary to law or public policy, consenting adults generally may contract as they choose. It is only in the absence of a contractual understanding between the parties that the law provides a substantive resolution.
Mr. and Mrs. Merlin Campo and T. Cvitanovich Seafoods, Inc. (hereinafter "TCSI") entered into a contract for the loan of money, which provided that the loan was to be repaid on demand, with no interest. Interpreting the contract according to its plain terms, "none" means none and "0" as a numeral means zero.
Just as clearly as TCSI would not have been limited to the legal interest rate had the contract provided for a higher rate, TCSI is not entitled to interest at the legal rate when the contract provides for a lesser rate — in this instance, none or zero. Bank of New Orleans and Trust Co. v. H.P.B., Jr. Devel. Co., Inc., et al., 439 So.2d 1269, 1270 (La.App. 5th Cir. 1983). The contract is neither silent nor ambiguous. Consequently, there is no basis for the substitution of a legislative imposition.
Furthermore, the very principle on which the majority relies to award attorney fees compels the non-award of interest. If the contract had called for attorney's fees in the amount of "none" or "0," but a legislative provision specified an amount in the absence of contractual agreement, would the majority award such fees?
Although this court, in proceeding no. 90-CA-1250, rendered judgment in favor of TCSI and against Campo "in the amount of $25,000.00 with judicial interest from date of demand, plus reasonable attorney's fees and costs and recognize[d] the validity of the collateral mortgage securing the debt," that judgment does not foreclose Associates Financial Services of America, Inc. from asserting its ranking rights in these proceedings. Barnett v. Develle, 289 So.2d 129, 140 (La. 1974).
Since Associates's mortgage was recorded before the judgment in favor of TCSI was rendered, we are called upon to measure Associates's mortgage rights as recorded against TCSI's mortgage rights as recorded. In doing so, I would reverse the judgment of the trial court and find that TCSI's mortgage primes Associates's mortgage only to the extent of $25,000.00 in principal and 20% thereof ($5000.00) as attorney's fees.