To:      Senator Andrew McDonald

Representative Michael P. Lawlor

CoChairs, Judiciary Committee

From:  David L. Hemond

Date:   January 6, 2003

Re:      Law Revision Commission report concerning postjudgment interest

 

 

 

On May 21, 2002, pursuant to a letter and request of Attorney Philip M. Block dated February 25, 2002, the Law Revision Commission voted to review the manner in which postjudgment interest is calculated and collected in Connecticut.  Attorney Block’s letter expressed considerable frustration with “repeated problems I have experienced in attempting to confirm what is due to my clients.”  He asked for a definitive analysis as to how interest should be computed, who is responsible to compute, how to apply it to further collection efforts, and who is responsible to see that it is collected.  He noted that Marshals have not indicated a willingness to perform interest calculations and that the Superior Court form fails to provide for the accumulation of interest accrued between the time the judgment issues and the time of the request for the execution.  Attorney Block attributed this problem to confusion over the applicable statutes and procedures. 

 

The Law Revision Commission study committee reviewed existing Connecticut law concerning postjudgment interest and finds, as noted by Attorney Block, that both the statutes and interpretative cases reflect a law that is unnecessarily convoluted, uncertain, and confusing.  (See the Law Revision Commission staff memorandum of David L. Hemond, dated June 18, 2002, entitled “Preliminary review”.)  The Commission recommends enactment of a statutory clarification of the right to automatic accrual of postjudgment interest on an unsatisfied money judgment.   A proposed bill to clarify postjudgment interest is attached.

 

Under current law, the award of postjudgment interest on money judgments is governed by two primary statutes, section 37-3a, “Rate recoverable as damages”, which covers both prejudgment and certain postjudgment interest, and section 37-3b, “Rate of interest recoverable in negligence actions”, which covers postjudgment interest for negligence cases.  See generally Gionfrido v. Avis Rent a Car System, Inc., 192 Conn 301 (1984) and Camp, Dresser & McKee, Inc v. Technical Design Associates, Inc., 937 F.2d 840 (1991).  Postjudgment interest automatically accrues – without any further action by the court –when it is governed by section 37-3b.  However, a problem of statutory interpretation arises in determining whether interest automatically accrues on a money judgment when postjudgment interest is governed by section 37-3a.  When section 37-3a is applied in its prejudgment context -  before judgment, the court must first make a determination that money has been wrongfully detained.  Some court decisions construing application of section 37-3a in a postjudgment context suggest that a similar express court determination that interest applies must be made before postjudgment interest may be collected under section 37-3a.  (See comments of Raphael Podolsky dated July 29, 2002, and cited cases, such as Bower v. D’Onfro, 445 Conn. App. 543 (1997).  See also TDS Painting & Restoration, Inc. v. Copper Beech Farm, Inc., 73 Conn. App. 492 (2002 ).)  As noted in the Commission’s preliminary staff review, the rationale for applying prejudgment standards to a case that has gone to judgment, and requiring a further determination of wrongful detention of money, may not be sound.  The ramification of this uncertainty, however, is that in cases governed by section 37-3a persons holding judgments have been uncertain of collecting interest unless they obtain an express court award of that interest. 

 

The Commission recommends that this statutory scheme be revised to govern prejudgment and postjudgment interest in separate statutes.  Under the Commission’s proposed draft, prejudgment interest would continue to be governed by section 37-3a and postjudgment interest rules would be consolidated in section 37-3b.  The Commission further recommends that interest automatically accrue on money judgments under section 37-3b whether a judgment arises from negligence or another cause of action. 

 

Such a revision would be consistent with the policy now set under section 37-3b.  In the Commission’s judgment, no sound basis exists for differentiating as to the underlying cause of action in determining the accrual of interest on a final money judgment.  Moreover, a money judgment itself reflects a judicial determination that a specified amount of money is owed and, prior to satisfaction, improperly detained.  When that judgment is not satisfied in a timely fashion, the payment of interest on that judgment is intended to make the creditor whole. 

 

The proposed draft also clarifies by statute that the rule setting the statutory interest rate defers to a contrary interest rate set by contract between the parties, provided that contractual interest rate is less than the maximum set by statute.  See Little v. United National Investors Corporation,  160 Conn. 534 (1971) and Big Sport USA, Inc. v. Kerbel, 995 F. Supp. 244. (1997).

 

Finally, the proposed draft further directs that the rules and forms for postjudgment procedures adopted by the judges of the Superior Court provide for the inclusion and enforcement of postjudgment interest on money judgments.