David Richard Huddleston v. Patricia Waggoner Huddleston

The plaintiff loaned the defendant $50,000 which was to be repaid in 15 monthly installments of $800 each with a final balloon payment of $46,600. The parties agreed that the total amount to be repaid was $58,600, but did not specify an interest rate or make any provision for interest on the balance in the event the balloon payment was not timely made. The defendant paid the initial 15 monthly installments, but failed to pay the balloon payment, and instead continued to make monthly payments for approximately 44 more months paying a total of $59,416. The issue  presented is what amount of interest, if any, is owed on the balloon payment that the defendant failed to timely pay when the contract failed to make a provision for interest in the event of default. The trial court held that the parties had agreed that the defendant would pay interest at the rate of 14.1 percent per annum, based upon the $8,600 he agreed to pay in excess of principal, and that the plaintiff was entitled to have the balance of the loan outstanding at the time of default paid at such rate. Upon review, we conclude that the parties failed to agree on an interest rate to be paid in the event of default of the balloon payment, and accordingly, the judgment of the trial court is vacated to the extent that it awards the plaintiff interest at the rate of 14.1 percent, and the case is remanded with instructions that the trial court grant the plaintiff an award of prejudgment interest in accord with Tenn. Code Ann. § 47-14-102. The judgment is affirmed in all other respects.