Daily Development for
Friday, April 3, 1998
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
CONTRACTS; INTEREST: Postjudgment interest rate is at judgment rate rather than contract rate unless contract specifically addresses postjudgment interest rate.
Whitehurst v. Camp, 699 So.2d 679 (Fla. 1997).
The case involves a judicial foreclosure of a security instrument set up as an installment land contract (contract for deed). The vendors under the contract obtained a forfeclosure, but were not satisfied with some of the rulings of the court, and appealed. One of the issues they appealed was the courts decision to impose interest following judgment at the statutory rate rather than at the higher contract interest rate. (There was no default rate - the vendors simply were claiming the interest regularly applicable to the sums due under the contract.)
It is not clear from the case exactly what the post judgment interest covered here. One assumes that there was some brief period of time between judgment of foreclosure and actual foreclosure sale. Perhaps the sale itself was stayed pending vendors appeal (but this does not appear likely given the issues of the appeal). Most likely, the vendors were arguing about the interest rate to apply on a deficiency claim resulting from the foreclosure itself.
The court, rejecting earlier authority, holds that the parties agreement to a certain interest rate ended when the court adjudicated the contract in default and at an end, and awarded damages. Thereafter, there was no general agreement as to interest, and the statutory rate prevailed. Significantly, however, the court indicates that parties are not precluded from providing specifically in the contract that a certain rate of interest will apply in the post judgment period.
Comment 1: So - there you are. Its simple. Just add a post judgment interest provision into your standard boiler plate in every security or debt instrument you draft. At least in Florida, obviously, it can only help your client.
Comment 2: Here comes ole Bubba again. The court, in supplementary reasoning, analogized the holding on the impact of the original contract on interest rates to the doctrine of merger. It stated that when a deed is received, the grantee is viewed as having waived all claims under the original contract in favor of the receipt of the deed. As we have indicated a number of times in these pages, a better view of merger that it is nothing more or less than an expression of the probable intent of the parties, and should not operate absolutely to cut off expectations that a grantee really did not and should not be viewed as intending to waive. Similarly, in this case, the question is whether it is appropriate to view the parties interest rate agreement as applicable to post judgment periods. To the editor, the fundamental question ought to be Why not? The creditor hasnt been paid, but has only a judgment. Under these circumstances, the debtor still has the creditors money, and ought to be liable for the originally agreed interest. Here, since the court indicates that the parties can provide for post judgment interest in the agreement, theres no great harm for thoughtful lenders. Further, it ought to be noted that in some cases the contract rate of interest may be less than the post judgment interest rate provided for in the statutes. So creditors may be better off under the courts ruling in some cases.
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