Collecting Pre- and Post-judgment Interest in Colorado: a Primer
| Jurisdiction | Colorado,United States |
| Citation | Vol. 15 No. 5 Pg. 753 |
| Pages | 753 |
| Publication year | 1986 |
1986, May, Pg. 753. Collecting Pre- and Post-Judgment Interest in Colorado: A Primer
In October 1983, these authors wrote an article discussing the recovery of moratory interest in Colorado, both by statute and as an element of common law damages.(fn1) The article analyzed the 1979 amendment to CRS § 5-12-102 and explored its effects on the recovery of prejudgment interest from a practitioner's standpoint. It also reported on a recent decision by the Colorado Supreme Court which suggested that a plaintiff could recover its borrowing costs, or other losses resulting from nonpayment of funds, as an element of common law rather than statutory moratory interest.(fn2)
This article expands the focus and updates the material on moratory interest.(fn3) In addition, it discusses and analyzes other Colorado prejudgment interest statutes, including CRS § 13-21-101, which governs recovery for personal injury claims. Finally, it considers Colorado's post-judgment interest statutes and the law on federal pre- and post-judgment interest. This article and the chart (Appendix A) and tables (Appendices B and C) are intended to serve as a comprehensive reference guide for the recovery of pre- and post-judgment interest.
Until recently, the recovery of prejudgment interest under Colorado law turned largely on whether a claim could be deemed "liquid."(fn4) Generally, claims were considered liquid if they were based upon written instruments or were for agreed-upon amounts.(fn5) Personal injury claims were deemed to be unliquidated, but the legislature allowed statutory interest from the date suit was filed.(fn6) Other unliquidated claims drew no prejudgment interest and the defendant reaped the benefit of the interest earned on the damages until trial.
Today the distinction between liquid and unliquidated claims has been all but eliminated.(fn7) In almost every case, a plaintiff can now recover prejudgment interest, with the rate of recovery dependent on the nature of the claim involved. Indeed, in some cases a plaintiff has a choice between recovering prejudgment interest under the common law or by statute, and the rate can vary from 8 percent to any amount which can be justified.
This section first discusses the recovery of moratory interest under the common law and under Colorado's general prejudgment interest statute. It then considers the personal injury prejudgment interest statute and makes reference to a number of special or "hybrid" interest statutes which govern particular claims and apply to both pre- and post-judgment recovery.
Moratory interest is a seldom used, common law doctrine which relies upon the concept of interest as damages and unjust enrichment as a basis for awarding common law interest rather than statutory interest.(fn8) In the 1975 landmark decision of Davis Cattle Co. v. Great Western Sugar Co.,(fn9) Judge Winner of the U.S. District Court for the District of Colorado revived what had been a moribund concept. In this case, the court held that a plaintiff could recover moratory interest under Colorado common law, even though its damages were unliquidated and recovery was barred under the then-applicable Colorado prejudgment interest statute.(fn10) The court's rationale was that the defendant should not be allowed to benefit by withholding amounts due the plaintiff until trial.
Under the formula used in Davis Cattle, a defendant may be liable for common law moratory interest if he wrongfully withholds money or property from the plaintiff.(fn11) The rate of interest he must pay is not fixed; it varies according to the gain or benefit the defendant has achieved from the wrongful withholding. In other words, if the defendant has earned interest on the money wrongfully withheld, he must pay it to the plaintiff as moratory interest. If, instead, he has
Four years after Davis Cattle, in 1979, the Colorado legislature codified Judge Winner's concept of moratory interest by amending Colorado's general prejudgment interest statute.(fn12) Originally, there was some concern that this codification would preempt common law moratory interest.(fn13) For a number of years, the only decision touching upon this point was Acme Delivery Services, Inc. v. Samsonite Corp., decided in 1983.(fn14) In this case, the Colorado Supreme Court suggested that common law moratory interest remained a viable concept. The court expressly rejected the argument that prejudgment interest could only be awarded when authorized by statute. Instead, it held that Colorado common law authorized the recovery of moratory interest as damages and suggested that the measure might be the plaintiff's costs rather than the defendant's gains.(fn15) The court did not explain why statutory interest was not recoverable even though the judgment post-dated the amendment.(fn16)
Since Acme, courts have continued to hold that common law moratory interest is viable. A number of decisions involved judgments entered prior to the effective date of the 1979 amendment, July 1, 1979.(fn17) In each case, the court's language suggested that there was a separate right to common law moratory interest, but did not address the question of whether this right survived the amendment of the statute.(fn18)
In 1985, the Colorado Court of Appeals awarded common law moratory interest on a claim which post-dated the 1979 amendment. In Berkeley Metropolitan District v. Poland,(fn19) the court reversed a judgment by the trial court which had denied an award of moratory interest on certain illegal amounts received by the defendant. In so doing, it cited Acme for the proposition that common law moratory interest was recoverable as an additional component of damages. As in Acme, this court did not explain why statutory interest was not claimed even though the underlying action was commenced on January 21, 1983, well after the 1979 amendment took effect.(fn20)
Another recent decision has resolved any remaining doubt that common law moratory interest remains viable. In Hein Enterprises, Ltd. v. San Francisco Real Estate Investors,(fn21) the Court of Appeals affirmed in part a trial court's award of common law moratory interest in a case that was filed and decided after the effective date of the 1979 amendment. In this case, a defendant/counterclaimant won a judgment for slander of title and tortious interference and was awarded more than $2 million. The damages included attorneys' fees, court costs and expert witness fees. Damages also included the loss of "appreciation" on the purchase price during the period when the defendant could not sell a building which had been subject to a notice of lis pendens.(fn22) Moreover, the trial court awarded common law moratory interest in the amount of $289,600 on the total damage award.(fn23)
The Court of Appeals reversed the award of moratory interest for the portion of the damages which related to the lost earnings from the unpaid purchase price. The court reasoned that the award for these speculative earnings fully compensated the counter-claimant for the lost use of the purchase price and therefore made it whole.(fn24) However, the court did affirm the award of common law moratory interest for the other consequential damages; i.e., the award for attorneys' fees, court costs and expert witness fees. The court gave no guidance on how to calculate interest for these items nor did it discuss whether moratory interest would always be available for cases where such items of damages are recovered.
Hein Enterprises is significant because the court's language suggests that the plaintiff's borrowing costs or lost earnings may still provide a measure for determining the rate of moratory interest:
The "gain or benefit to the defendant" measure used in Davis Cattle and the 1979 amendment was not mentioned by the court.In a proper case, part of the loss suffered by an injured party may be the loss of the use of its money from the date of loss until the date of judgment. In such case, moratory interest may be awarded in order to make the injured party whole.(fn25)
A different division of the Court of Appeals again affirmed a common law award of moratory interest in a case post-dating the statute. In E. B. Jones Construction Co. v. City and County of Denver,(fn26) the trial court had awarded damages and common law moratory interest on plaintiffs claims for breach of a construction contract, unjust enrichment, estoppel and negligence. The city of Denver appealed the award of interest in part because it claimed it did not benefit from the withheld funds. The court disagreed, stating first that common law moratory interest was recoverable:
Conventional interest as a matter of contract and statutory prejudgment interest on particular kinds of damage awards are to be distinguished from moratory interest. Moratory interest is an element of damage in itself which is allowed as compensation for the detention and use of money.(fn27)
The court went on to conclude that Denver's actions in withholding the funds were unjust and inequitable...
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