Simon PLC Attorneys & Counselors – May 2021 Memorandum
JUDGMENT INTEREST IN MICHIGAN – HOW MUCH AND WHEN?
Bloomfield Hills, Michigan – It is often taken as a given that a party that prevails in a civil action is entitled to receive interest on its judgment. Everyone has heard the old adage “time is money” and doubtless this is true, and lenders are very careful (or should be as we will see) to specify the interest that is to be repaid over the term of a loan. What provision, though, does the law make regarding the entitlement of a prevailing party to be compensated for the time value of its money as represented in the form of a judgment award that may take months and even years to collect?
MCL 600.6013 establishes the entitlement to interest on money judgments. MCL 600.6013(1) provides, in pertinent part, that “[i]nterest is allowed on a money judgment recovered in a civil action, as provided in this section.” That a judgment entered by a Michigan court will accrue interest is, therefore, clearly enshrined in Michigan statute. Furthermore, interest is calculated from the date of filing the complaint to the date of satisfaction of the judgment.” MCL 600.6013(10). Thus a prevailing party is allowed to accrue interest on its damages award from the date the complaint is first filed all the way up until the time the judgment is satisfied.
Having established that a judgment will indeed earn interest, at what rate does it accrue? In instances where the claim is founded on tort or otherwise not on a written instrument which specifies a rate of interest, “interest on a money judgment recovered in a civil action is calculated at 6-month intervals from the date of filing the complaint . . . .” MCL 600.6013(8). The statutory rate is equal to the 5 year U.S. Treasury Note rate plus 1%. Judgments rendered in actions based upon a written instrument that specifies a rate of interest will accrue interest at the rate so specified (assuming it was legal at the time of execution) up to a maximum of 13% compounded annually MCL 600.6013(7).
As to what type of interest (simple or compound) is to be applicable, in the case of RJMC v Tomei, (Unpublished November 19, 2020 (Docket No. 348015)) the Michigan Court of Appeals considered whether simple or compound interest should apply to the parties’ mortgage document. The Court of Appeals, following the precedent established in Norman v Norman, 201 Mich App 182, 184; 506 NW2d 254 (1993) held that absent specific contractual language or statutory provision, simple interest, rather than compound, will be applied. The case was remanded for further proceedings as an issue of fact existed as to whether the parties intended for simple or compound interest to apply as the document did not specify a rate of interest (instead relying upon an amortization table and payment schedule) and no statute directing mortgages to apply compound interest was cited.
What about garnishment proceedings? What, if any, interest is allowed to be charged to a garnishee that, for whatever reason, refuses to timely comply with the directive of a writ of garnishment? Is the plaintiff entitled to compensation for time value lost in waiting for or compelling the garnishee to comply? Does a judgment entered against a garnishee for its failure to timely pay over to the plaintiff monies owed to the defendant constitute a “judgment” for purposes of accrual of pre- and/or post-judgment interest?
In Hunt v Drielick, ___ Mich ___; ___ NW2d ___, (2021) (Docket No. 157476) the Michigan Supreme Court held that a judgment against a garnishee for failing to honor the command of a writ duly issued and served was entitled to accrue judgment interest from the date of issuance. Writs of garnishment were issued on December 4, 2000. After prolonged delays on the part of the garnishee and subsequent litigation, judgment on the writs was not entered until June 2, 2016.
The Supreme Court noted that although the garnishment writs were predicated upon the judgment awarded in the underlying lawsuit, the writs themselves constitute separate actions pursuant to MCR 3.101. A lengthy dissent by Justices Viviano and Clement, notwithstanding, the Court of Appeals’ previous holding that no interest apart from that which had accrued to the original judgment as of the time the garnishment writs were issued should be awarded was overturned. The judgments on the writs of garnishment were held to mark a separate date from which to calculate prejudgment and post-judgment interest. Similar to the analysis of prejudgment interest on the underlying action, prejudgment interest should be awarded from the dates the writs of garnishment were issued (December 4, 2000) until the date the judgment on those writs entered (June 2, 2016). Post-judgment interest should also be awarded from the dates the judgment on those writs entered.
Having discussed the statutory and contractual bases for awarding pre- and post-judgment interest, does a Michigan Court also have the inherent power to award judgment interest where neither of these factors are present? For the answer, we turn to a case with an extremely complicated history, Jode Investments, LLC v Burning Tree Props, LLC, (Unpublished on remand, March 18, 2021 (Docket No. 346403).
The case arose out of the Defendants’ initiation of garnishment proceedings in June 2018 after the September 2016 judgment remained unpaid. In their requests for writs of garnishment, defendants had included an amount of post-judgment interest accruing from September 30, 2016. Plaintiffs objected, arguing that the writs were invalid because they should not have included any post-judgment interest. The trial court, however, partially granted defendants’ request for post-judgment interest pursuant to its equitable authority, fixing the date for accrual as of the November 2018 hearing on Plaintiff’s objections to garnishment citing the holding in Ashbrenner v Ashbrenner, 156 Mich App 373; 401 NW2d 373 (1986) that the failure to award post-judgment interest effectively rewarded the judgment debtor for failing to pay the amount due, and further, discouraged the prompt compliance with the court’s orders.
With no less than two prior trips to the Court of Appeals, and upon remand from the Supreme Court on this and other issues, the Court of Appeals ultimately upheld the trial court’s employment of its equitable powers to award post-judgment interest where neither basis was available. The trial court reasoned, and the Appeals and Supreme Courts agreed, that while plaintiffs should not be incentivized to not satisfy the court’s judgment, defendants should also not be rewarded for their delay in seeking post-judgment interest.
Awards of pre- and post-judgment interest are, in very large part, governed by MCL 600.6013 and the applicable provisions of the written instrument or contract, if any, upon which the action is founded. Moreover, Michigan courts also have the inherent power to award interest in cases where the balance of equities supports it. We at Simon PLC Attorneys & Counselors are always ready to answer your questions and can ensure your contracts and agreements are drafted and judgments are entered so as to enable the recovery of all legally accrued and agreed to interest.
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