Recovery of Interest: Part Ii-other Than Personal Injury
| Publication year | 1989 |
| Pages | 1307 |
| Citation | Vol. 07 No. 1989 Pg. 1307 |
1989, July, Pg. 1307. Recovery of Interest: Part II-Other Than Personal Injury
© J. Kent Miller
Part I of this article, published in the June issue of The Colorado Lawyer,(fn1) reviewed certain principles common to all interest claims and then focused on the recovery of interest in personal injury cases. It also analyzed the impact of this recovery of interest statute (CRS § 13-21-101) on various tort reform statutes and discussed the question of revealing the effect of the personal injury statute to the jury.
The second and concluding part of this article is divided into four sections:
1) Recovery of interest under the statute which applies to all but personal injury claims;
2) Impact of both interest statutes on insurance coverage and statutes which require minimum insurance limits;
3) Recovery of interest in federal cases; and
4) An appendix table of the state and federal statutes which affect recovery of interest.
Plaintiffs have been recovering interest as damages, both by Colorado statute and under the common law concept of moratory interest, for more than 100 years.(fn2) The history of interest under Colorado law was summarized in a 1975 U.S. District Court decision and has been reviewed in previous articles.(fn3)
Colorado's "statutory interest" law, now CRS § 5-12-102, was substantially changed when repealed and reenacted in 1979.(fn4) The many Colorado decisions construing the statute before this time have limited precedential value. Previous decisions often turned on the question of whether claims were liquidated. The 1979 statute expressly provides for its application to unliquidated claims. Recovery of interest is now available under CRS § 5-12-102 on almost all obligations not covered by specific Colorado or federal statutes (see Appendix).
In Colorado, a plaintiff may be awarded interest under either the reenacted 1979 statute or under common law doctrines of moratory interest. Common law interest may supplement or change the rules of calculation, allowing interest which otherwise might not be available under the statute. As explained below, while the statute allows calculation of interest based on the defendant's gains, moratory interest might allow the additional consideration of a plaintiff's cost of working capital.(fn5)
Moratory interest has been allowed for slander of title, which would not be a "wrongful withholding" under the statute.(fn6) It also may be recoverable on attorney's fees and other costs where these are special damages in a tort claim and not wrongfully withheld.(fn7)
CRS § 5-12-102, reenacted in 1979, with its amendments now provides as follows:
1. The statute applies to all "creditors claims," except personal injury claims, which are governed by CRS § 13-21-101 (see Part I of this article).
2. Post-judgment interest (unless the judgment debtor appeals, in which case CRS § 5-12-106 controls) is calculated from the date of judgment until satisfied as follows:
a) At the rate specified in any agreement between the parties; or
b) if the agreement between the parties provided for a variable
J. Kent Miller, Denver, is a shareholder in Miller & McCarren, P.C. and author of the two-volume Colorado Personal Injury Practice, to be published in August by West Publishing Co.
rate, at the rate in effect on the date of judgment; or
c) in all other cases where no rate is specified, at 8 percent per annum compounded annually.
3. Pre-judgment interest is to be awarded when money or property has been wrongfully withheld.
4. Pre-judgment interest is to be calculated in one of two ways, at the election of the claimant:
a) an amount which fully recognizes gain or benefit realized by the person withholding, from the date of wrongful withholding, or
b) at 8 percent per annum compounded annually, measured from either
1) date wrongfully withheld
2) after amount becomes due
5. Interest on "wrongfully withheld" claims is allowed even if the amount is unliquidated at the time of wrongful withholding or at the time when due.
6. With respect to specified classes of liquidated claims---money coming due on bills, bonds, promissory notes, other instruments or mutual settlement of accounts---the rate is 8 percent per annum compounded annually from the date of such instruments. Several of these provisions have been interpreted by Colorado courts, as discussed below.
Only "creditors" receive interest under the statute. More than thirty years ago, the Colorado Supreme Court expressed a preference for liberal construction of this term, stating that it applies to "any judgment creditor who could fall within the other provisions of the statute"(fn8) (and who is not covered by a specific statute).(fn9)
Creditors can elect 8 percent or the gain-or-benefit rate when there has been a "wrongful withholding." There does not have to be tortious conduct or bad faith.(fn10) Money which is withheld by a public entity, pursuant to a statute which is constitutional at the time of the withholding but is subsequently held unconstitutional, still amounts to a wrongful withholding.(fn11) CRS § 5-12-102 interest has been awarded in a variety of tort cases, including (1) a claim involving defective design of a house, (2) slander of title, (3) water damage to documents and (4) fraud.(fn12) It has also been approved in quantum meruit awards for legal services.(fn13) Pre-judgment interest is calculated only on the money wrongfully withheld. This does not include punitive damages awards.(fn14)
Gain or benefit to the judgment debtor is one alternative for calculation, not an element of proof for CRS § 5-12-102 recovery of interest. Recently, however, the determination of wrongful withholding turned on the consideration of whether or not a wrongdoer benefits or realizes a gain from his actions. In a 1988 Court of Appeals case,(fn15) the court analyzed an arrangement between plaintiff and defendant who had contracted for a cooperative dual excavation and landfill operation. CRS § 5-12-102 interest was not allowed because the judgment debtor did not gain or benefit by failing to excavate the materials in accordance with the agreement. If the judgment debtor had no gain or benefit, the creditor can elect the 8 percent rate(fn16) and should not be denied interest recovery.
CRS § 5-12-102 interest has been allowed in breach of contract cases involving construction contracts and home remodeling,(fn17) and rejected in a carefully reasoned opinion on a breach of mining contract claim.(fn18) Colorado federal court decisions have both expanded moratory interest and restricted § 5-12-102 recovery by strictly construing the requirement of wrongful withholding.(fn19)
In another recent Court of Appeals case,(fn20) developers prevailed on their counterclaim in response to a quiet title suit brought by owners of property being developed. The developers were awarded quantum meruit damages for work they had done in marketing, annexing and rezoning the property, and they claimed interest from the date that the landowners received the benefits of such services rather than from the date of the counterclaim. The Court of Appeals construed CRS § 5-12-102 to preclude interest from accruing before filing of counterclaims because the developers had never expected or demanded payment for their services before that date. Absent either a wrongful withholding or "date that such damages became due," the trial court properly allowed interest only from the date of filing of the counterclaims. Similarly, the date of wrongful withholding, for guarantors of debt, is the date of demand.(fn21)
Property which has been damaged is "property wrongfully withheld" under CRS § 5-12-102. In tort cases for non-personal injury damages, the court has liberally interpreted the withholding date as the date that the tort cause of action accrued.(fn22) However, sending a bill for the property damage to the tort-feasor may only work to the tortfeasor's advantage. In a recent Court of Appeals case, the refusal of a trial court to award damages was reversed with language in the decision suggesting that interest should run only from the date that the defendant refused to pay a bill for the property damage.(fn23)
In a 1986 conversion case involving forged checks presented through a bank, the trial court ordered interest from the date of the first forged deposit. The Court of Appeals reversed, holding that the owner's demand for its return and the converter's refusal are elements of the cause of action.(fn24) The bank's wrongful withholding could only begin at the time it refused to return the money. Thus, interest must be recalculated from the date the cause of action accrued, the later date of the bank's refusal. Other cases suggest that wrongful withholding can only start at the time of demand.(fn25) A comparison of these decisions does not reveal any consistent rule for determining the time of wrongful withholding.
Decisions construing the pre-1979 statute consistently limited statutory interest to liquidated claims.(fn26) The statute as reenacted in 1979 specifically provides that interest is to be allowed under subsection (1) (when property has been wrongfully withheld), even when the amount is unliquidated at the time of wrongful withholding.(fn27) However, this subsection (1) (providing for the alternative computations, at the election of the claimant, of "gain or benefit" or 8 percent per annum) could be construed not to apply to liquidated claims which are covered by...
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