Background
Lisa Espinales borrowed $5,105.56 from First Tower Loan in November 2018. The loan called for 36 monthly payments of $223, totaling $8,028. Tower Loan alleged that Espinales stopped paying in March 2019 and owed a rebated unpaid balance of $7,427.
After Espinales did not respond to the collection suit, Tower Loan sought a default judgment supported by an affidavit of correctness. The proposed judgment awarded $7,427 plus 30.17% contractual interest for one year after November 16, 2021, then 18% interest thereafter. Without a confirmation hearing, the district court reduced the principal to $5,106.56 and substituted legal interest. Tower Loan later moved to annul that judgment after the appellate court decided similar Tower Loan cases, but the district court denied annulment.
The Court’s Holding
The Second Circuit declined to find that the original judgment had been obtained through fraud or ill practices under Louisiana Code of Civil Procedure article 2004. An action for nullity cannot serve as a substitute for an appeal based on legal error, and Tower Loan had not been deprived of an opportunity to assert its position on appeal.
But the court held that the district court erred by disregarding Tower Loan’s affidavit of correctness and by substantively altering the proposed default judgment without following the procedures of article 1702. Under its earlier decision in First Tower Loan, LLC v. Combs, the trial court either had to sign the proposed judgment or order a hearing. Exercising its authority to render a just and proper judgment, the appellate court amended the judgment to award $7,427, with interest at 30.17% per year for one year beginning November 16, 2021, and 18% thereafter until paid. It otherwise affirmed and assessed costs to Espinales.
Key Takeaways
- A nullity action under article 2004 does not replace an appeal to correct legal errors.
- A court may not alter a supported proposed default judgment’s principal or contract interest without following article 1702 procedures.
- The borrower owed the rebated unpaid balance, not merely the original amount financed.
Why It Matters
The decision reinforces that, in Louisiana consumer-loan default cases, a trial court cannot unilaterally reduce a supported debt or replace contractual interest with legal interest. If the court does not accept the default proof, article 1702 requires it to proceed through a hearing rather than rewrite the proposed judgment.