Opinion ID: 1699019
Heading Depth: 1
Heading Rank: 6

Heading: Rate of Interest applicable

Text: Chittenden contends that the interest provision is unenforceable because the contract which Carimi prepared failed to specify an exact interest rate. In response, Carimi advocates that Chittenden was explained that the interest rate would be that which the bank charged and that it would be approximately 12%. Interest is a charge, or fee, commonly expressed as an annual percentage rate, paid by a person for the use he makes of, or a detention he exerts on, monies belonging to another, for a specified period of time. 6 SAUL LITVINOFF, LOUISIANA CIVIL LAW TREATISE: THE LAW OF OBLIGATIONS, PUTTING IN DEFAULT AND DAMAGES § 9.4 (1999) (citing Trans-Global Alloy v. First Nat. Bank, 583 So.2d 443, 457-58 (La.1991)). Interest is either legal or conventional. LA. CIV.CODE ANN. art. 2924 A. When charging interest, the Louisiana Civil Code mandates that the conventional rate of interest cannot exceed 12% per annum and that the interest rate be expressed in writing. LA. CIV.CODE ANN. art. 2924C(1). [22] The article provides, in pertinent part: C. (1) The amount of the conventional interest cannot exceed twelve percent per annum. The same must be fixed in writing; testimonial proof of it is not admitted in any case. [23] It is equally clear that when laws are made for the protection of the public interest, persons may not by their juridical acts derogate from them. [24] In the present case, the contract only provided that the full amount of the interest charged on such loans will be reimbursed to Attorneys ... out of the funds received on this claim. It is obvious from a reading of the contract that Chittenden did not agree to pay a sum of conventional interest which was fixed in writing. It is likewise clear that Carimi may not establish the conventional rate of interest through the testimony of Chittenden and Breaux that they may have had discussions about what the interest rate might be. Notwithstanding, Carimi may nonetheless recover interest from the dates that he expended money on Chittenden's behalf because he contracted to pay interest to Carimi on the loans that were made on his behalf. However, because Chittenden did not agree that interest would be compounded, he is only obligated to pay simple interest to Carimi. See LA. CIV.CODE ANN. art.2001, [25] Comment c (stating that although this article applies to interest which equates to moratory damages, it is inapplicable to interest paid for the use of money,  as when the parties agree that the interest on a loan shall be compounded, ....) (emphasis added). The question then arises, if this is so, what simple interest rate is applicable? Although none is specified in the contingent fee contract, we find that the Louisiana Civil Code and our jurisprudence provide the answer. LA. CIV.CODE ANN. art.2000 provides, in pertinent part: 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. Moreover, in conformity with LA. CIV.CODE ANN. arts.2000 and 2924, the jurisprudence recognizes that when the interest rate is not agreed upon in writing, only legal interest can be claimed. See, e.g., Concrete Pipe Products Co. v. Bell, 427 So.2d 551, 554 (La.App. 3 Cir.), writ denied, 433 So.2d 1052 (La.1983); Succession of Drake, 359 So.2d 249, 252 (La.App. 2 Cir.1978); Holzer Sheet Metal Works v. Reynolds & Marshall, 43 So.2d 169 (La. App.Orl.1949); John Crossley & Sons v. Commissioners of Louisiana Sav. Bank & Safe Deposit Co., 38 La.Ann 74 (1886); Buckley v. Seymour, 30 La. Ann. 1341 (1878); Bayly v. Stacey, 30 La. Ann. 1210 (1878); White v. Jones, 14 La. Ann. 681 (1859). Thus, even though no rate of conventional interest was specified in the written agreement, Chittenden nonetheless owes legal interest on the loans Carimi made on his behalf. This is a good example of how the attorney-client relationship is indeed sui generis. As noted above, the RPC permeates the attorney-client relationship. Certainly, if the contingent fee contract had not clearly shown that Chittenden was aware that loans would be made and that he would have to reimburse Carimi for the interest paid on these loans, the outcome of this litigation would have certainly been drastically different. We are not presented with an instance where the client did not agree in a written contract with his attorney to pay interest on loans made on his behalf. To the contrary, it is clear that Chittenden agreed to pay interest and only the rate of conventional interest was not specified in writing. Under these facts, we find that Carimi may only collect the rate of legal interest from Chittenden. To this end, we observe that the rate of legal interest fluctuates and indeed numerous rates of legal interest may be applicable to the loans Carimi made on Chittenden's behalf between 1992 and the date that the district court allowed Carimi to withdraw funds from the court registry. See LA.REV.STAT. ANN. § 13:4202. Accordingly, we find it appropriate to remand this matter to the trial court for the computation of the rate of legal interest owed and to determine Chittenden's interest obligation. [26]