LJM 12, LLC, ET AL. VS. H. C. TRUITT COMPANY
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RENDERED: NOVEMBER 12, 2010; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-000968-MR
LJM 12, LLC, AND
DOUGLAS RANK
v.
APPELLANTS
APPEAL FROM KENTON CIRCUIT COURT
HONORABLE PATRICIA M. SUMME, JUDGE
ACTION NO. 08-CI-00032
H.C. TRUITT COMPANY,
D/B/A TRUITT ROOFING COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: ACREE, VANMETER AND WINE, JUDGES.
ACREE, JUDGE: The appellants, LJM 12 LLC and Douglas Rank (referred to
collectively as LJM), seek reversal of the Kenton Circuit Court’s decision to award
the appellee, H.C. Truitt Company d/b/a Truitt Roofing Company, contractual
prejudgment interest on a monthly basis and attorney’s fees. However, the circuit
court did not err in determining that the contract’s terms required contractual
prejudgment interest to be applied on a monthly basis and the court properly
awarded attorney’s fees. Therefore, we affirm.
This claim arises from a contract by which Truitt agreed to perform
$23,995.00 worth of improvements to a building owned by LJM. The contract
contemplated that additional work—not specifically set forth in the contract—
would be performed, as needed, at a time and materials rate of $65.00 per man
hour. Additional work was in fact performed and it is undisputed that all of the
work performed by Truitt was authorized by LJM.
Despite full performance by Truitt, LJM failed to render full payment for the
services. As a result, Truitt asserted a mechanic’s and materialman’s lien. The
lien was properly recorded in the records of the Kenton County Clerk in
Covington, Kentucky. The circuit court determined that the lien was valid and
created a security interest in the subject property.
The circuit court further determined that LJM was liable to Truitt for
$52,929.09. Included in that sum is the amount outstanding under the original
contract, $4,315.45, the value of additional work performed, $18,175.51,
prejudgment contractual interest of $9,302.29, and attorney’s fees in the amount of
$21,135.84. The principal damage award of $22,490.96 is not in dispute.
There are only two questions on appeal. First, is the contract term regarding
prejudgment interest ambiguous? Second, is the contract provision for attorney’s
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fees valid? The contract provisions at issue are set forth below as they appear in
the contract.
PAYMENT: 30% upon job set-up with progressive monthly billing
and balance upon completion. 2% interest on all accounts after 30
days.
If it should be necessary to pursue legal action to secure payment, all
such resulting legal expenses shall be paid by the customer herein.
“The interpretation and construction of a contract is a matter of law for the courts
to decide and is subject to de novo review.” New Life Cleaners v. Tuttle, 292
S.W.3d 318, 321 (Ky. App. 2009).
Contractual Prejudgment Interest
LJM contends that the contract term calling for 2% interest is ambiguous
because the contract does not indicate whether the interest is to be applied
monthly, yearly, or by period. An ambiguity exists in the contract “if a reasonable
person would find it susceptible to different or inconsistent, yet reasonable,
interpretations.” Id. at 322 (quoting Cantrell Supply, Inc. v. Liberty Mutual Ins.
Co., 94 S.W.3d 381, 384 (Ky. App. 2002)). If no ambiguity exists, “a written
instrument will be enforced strictly according to its terms.” Frear v. P.T.A. Indus.,
Inc., 103 S.W.3d 99, 106 (2003).
The circuit court determined that the contract provision to require 2%
interest applied on a monthly basis. While the sentence setting forth the 2 % term
does not dictate how the interest is to be applied, the preceding sentence indicates
that billing will occur on a monthly basis. That sentence makes it clear to us that
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in the event a monthly bill becomes 30 days overdue, 2% interest is applied and
added to the bill as a charge for servicing the balance of the customer’s
indebtedness to Truitt.
Considering the entirety of the provision regarding payment, it is logical to
conclude that 2% interest will be applied in accordance with the method of billing,
which in this case is monthly. Thus, this court must ask if a reasonable person
could conclude otherwise. In other words, could a reasonable person conclude
that, despite calling for monthly billing, the contract term regarding interest does
not require 2% interest per month? We do not think so. In light of the monthly
billing scheme, construing the interest rate as applicable to any other period would
introduce an ambiguity, and we are “not permitted to create an ambiguity where
none exists[.]” New Life Cleaners, 292 S.W.3d at 322 (quoting First
Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 836 (Ky. App.
2000)).
Even assuming the term is ambiguous, the circuit court’s determination that
the contract requires prejudgment interest at 2% per month was reasonable. “If an
ambiguity exists, ‘the court will gather, if possible, the intentions of the parties
from the contract as a whole, and in doing so will consider the subject matter of the
contract, the situation of the parties and the conditions under which the contract
was written,’ by evaluating extrinsic evidence as to the parties’ intentions.” Frear,
103 S.W.3d at 106 (quoting Teague v. Reid, 340 S.W.2d 235 (1960)).
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As discussed above, the contract provisions controlling payment clearly call
for monthly billing. Todd Truitt, president of Truitt, testified that the company
calculates interest on a monthly basis. LJM did not offer testimony as to its intent
regarding interest, but it did offer testimony that it was aware of the 2% provision.
It is also important to note that this contract was one of two bids submitted to LJM
for consideration. Thus, LJM was in a position to choose the contract it preferred
and the agreement was entered into at arm’s length.
In light of the contract as a whole, the court reasonably concluded that the
parties intended interest to be applied at 2% per month. There is no indication that
either party intended any other period be the measure of the interest rate. LJM
claims that provisions of the Kentucky Revised Statutes (KRS) imply a different
result, but those provisions1 have no relevance to the facts of this case.
The contract calls for monthly payments with additional interest on balances
carried by Truitt for more than a month of 2%. Damages for LJM’s breach include
that 2% charge for each month Truitt carried LJM’s balance. It was proper for the
circuit court to award such contract damages.
Attorney’s Fees
LJM contends that the attorney’s fee provision of the contract is
unenforceable because it only allows for fees to be collected by Truitt. LJM avers
that this unilateral attorney’s fees provision is contrary to public policy and should
1
LJM cited the 19% annual percentage rate cap for interest on contracts of less than $15,000
contained in KRS 360.010 and the interest rate calculation for manufactured home financing
contained in KRS 360.150.
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not be enforced. However, KRS 411.195 states that “[a]ny provision in a writing
which create[s] a debt, or create[s] a lien on real property, requiring the debtor,
obligor, lienor or mortgagor to pay reasonable attorney’s fees incurred by the
creditor, obligee or lienholder in the event of default, shall be enforceable . . . .”
Truitt fully performed the contract LJM agreed to, thereby creating a debt
owed by LJM to Truitt. Further, a lien was entered upon the land securing Truitt’s
interest. Thus, pursuant to KRS 411.195, the provision allowing Truitt to recover
reasonable attorney’s fees to collect the debt is enforceable.
LJM further argues that, even if the attorney’s fee provision is enforceable, it
only applies to fees incurred in pursuit of the original contract debt. However, it is
clear that the parties contemplated that additional work might be performed and the
cost of the additional work was set forth in the original agreement. Thus, the
additional work was integrated into the additional agreement. It is illogical to
conclude the attorney’s fee provision would not apply to the recovery of a debt
created by Truitt’s performance, under the contract, of additional work.2
For the foregoing reasons, the circuit court’s award of damages,
interest and attorney fees and costs is affirmed.
ALL CONCUR.
2
We also note that LJM failed to pay part of the original contract price. This argument is
inapplicable to that debt and, because the costs of recovering that debt are inextricably related to
the costs of recovering the debt owed for the additional work, this argument has no practical
viability.
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BRIEFS FOR APPELLANTS:
BRIEF FOR APPELLEE:
Joseph E. Conley, Jr.
Florence, Kentucky
John S. Brooking
Ft. Wright, Kentucky
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