Summary:
The Longphres loaned KT Financial $330,000 by two separate promissory notes with 30% interest and specified “[a]ll accrued interest and unpaid principal” was due one year after the notes were executed. The notes also allowed the Longphres to collect attorney's fees pursuant to N.C.G.S. § 6-21.2 if KT Financial defaulted.
Surprise twist- KT Financial defaulted.
The Longphres demanded repayment of principal and accrued interest on the notes for a total of $546,912.32, eventually bringing suit. KT Financial argued that the notes were interest free during the first year, with the trial court agreeing and reducing the amount owed to $450,156.16, but also awarding attorneys fees of 15% or $67,523.42.
Second surprise twist- Everybody appealed
The N.C Court of Appeals agreed with the trial court that as the contract was silent as to when interest began to accrue, N.C.G.S.. § 24-3(1) controlled and provides that:
All bonds, bills, notes, bills of exchange, liquidated and settled accounts shall bear interest from the time they become due . . . unless it is specially expressed that interest is not to accrue until a time mentioned in the said writings or securities.
As the date the notes came due was after one year, that is when interest commenced.
The NCCOA rejected KT Financial's argument regarding the award of attorneys fees as without merit.
Commentary:
While KT Financial's argument regarding the award of attorneys fees was without merit, since those fees were capped at 15% of the outstanding balance, raising that argument on appeal was without much risk and would seem to have bled the Longphres. Presumably their lawyers were still charging for the appeal win or lose. Meaning that even had the Longphres been successful, the net recovery would have been substantially less than their unrequited desire for $96,756.16 in accrued interest.
To read a copy of the transcript, please see:
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