Post Judgment Interest in Civil Actions in Connecticut
| Publication year | 2021 |
| Pages | 299 |
By James R. Fogarty. [*]
There are two[1] key statutes in Connecticut providing for court awards of interest: General Statutes Sections 37-3a and 37-3b. Since 1997, both have been interpreted to allow trial courts to determine the appropriate rate of interest to be awarded up to a maximum rate of ten percent per year. The effect of this statutory scheme, as interpreted and implemented by appellate decisions granting broad discretion to trial courts, is that the determination of the appropriate rate within this wide range has been labor intensive for both bench and bar and has produced disparate results. There should be a simpler, more consistent procedure enacted by the legislature. This article will attempt to explain the evolution of the relevant statutes in Connecticut and the appellate case law interpreting them; to itemize and identify the range of rates from zero to ten percent per year awarded by our trial courts, consistent with appellate authority; to compare the statutes of 48 other states that require awards of postjudgment interest at either fixed or variable rates set forth therein; and to offer specific suggestions for legislative action. The proposals expressed herein are heavily influenced by four essential, guiding principles. First, an award of interest on the entry of final judgment at a reasonable rate is a good thing. What Judge Learned Hand observed almost a century ago is still true today.
[I]n modern financial communities a dollar to-day is worth more than a dollar next year and to ignore the interval as immaterial is to contradict well-settled beliefs about value. The present use of my money is itself a thing of value, and, if I get no compensation for its loss, my remedy does not altogether right my wrong.[2]
Second, there is a material difference between an award of prejudgment interest versus postjudgment interest. Once a money judgment has entered, the "balance of equities" changes.[3] The court has then determined both liability and damages. A judgment of the court should have uniform consequences for parties who fail or refuse to comply with the judgment.
Third, it has long been the public policy of this state to award postjudgment interest.[4]
Fourth, it is for the legislature, not the courts, to determine whether the public is better served by higher or lower postjudgment interest rates.[5]
The last two principles are established in the Supreme Court's most recent decisions in DiLieto v. County Obstetrics & Gynecology Group, P.C., known as DiLieto III and DiLieto IV, both of which deal extensively with awards of prejudgment and postjudgment interest pursuant to General Statutes Sections 37-3a and 37-3b.
This article will suggest a legislative fix to postjudgment interest awards in civil cases, leaving intact the broad discretion and range of rates permitted for prejudgment interest awards.
I. The Connecticut Statutes and Appellate Case Law Interpreting Them
General Statutes Section 37-3a provides:
(a) Except as provided in sections 37-3b, 37-3c and 52-192a, interest at the rate of ten per cent a year, and no more, may be recovered and allowed in civil actions or arbitration proceedings under chapter 909, including actions to recover money loaned at a greater rate, as damages for the detention of money after it becomes payable. Judgment may be given for the recovery of taxes assessed and paid upon the loan, and the insurance upon the estate mortgaged to secure the loan, whenever the borrower has agreed in writing to pay such taxes or insurance or both. Whenever the maker of any contract is a resident of another state or the mortgage security is located in another state, any obligee or holder of such contract, residing in this state, may lawfully recover any agreed rate of interest or damages on such contract until it is fully performed, not exceeding the legal rate of interest in the state where such contract purports to have been made or such mortgage security is located.
(b) In the case of a debt arising out of services provided at a hospital, prejudgment and postjudgment interest shall be no more than five percent per year. The awarding of interest in such cases is discretionary.
(Emphasis added.)
Except for the portions italicized and bold-faced above, subsection (a) of this statute has remained virtually the same since 1875.[6] The specified rate often percent was originally seven percent, reduced to six percent in 1887,[7]increased to eight percent in 1979[8] and further increased to ten percent in 1983.[9] As a result, for the 144-year period from the beginning to the present, the specified rate for interest awards in civil actions has been six percent for 91 years (1887-1979 except for 1972), and ten percent for 36 years (1983-present).
The italicized portions of subsection (a) of General Statutes Section 37-3a were the result of amendments in 1976 enacting General Statutes Section 52-192a, providing for offers of judgment,[10] in 1979 allowing interest awards in arbitration proceedings as well as civil actions,[11] in 1981 enacting General Statutes Section 37-3b, providing for awards of interest in actions to recover damages for injury to the person, or to real or personal property, caused by negligence[12] and in 1987 enacting General Statutes Section 37-3c, providing for awards of interest in eminent domain cases.[13] The remaining text of subsection (a) (i.e., the second and third sentences) seems misplaced and unnecessary, having no apparent relevance to awards of interest in civil actions and ambiguously purporting to bar recovery on out-of-state loans in excess of the "legal rate of interest" in the state where a loan was transacted, when such a rate may not exist and, even if it did exist, may not serve as a usury limit, as is the situation in Connecticut.
Subsection (b) to General Statutes Section 37-3a was added in 2003,[14] creating a lower limit of five percent for discretionary awards of interest in cases based upon debt arising out of hospital services.
General Statutes Section 37-3b, enacted in 1981 and amended once thereafter,[15] provides:
(a) For a cause of action arising on or after May 27, 1997, interest at the rate of ten per cent a year, and no more, shall be recovered and allowed in any action to recover damages for injury to the person, or to real or personal property, caused by negligence, computed from the date that is twenty days after the date of judgment or the date that is ninety days after the date of verdict, whichever is earlier, upon the amount of the judgment.
(b) If any plaintiff in such action files a postverdict or post-judgment motion or an appeal, the recovery of interest by such plaintiff shall be tolled and interest shall not be added to the judgment for the period that such postverdict or post-judgment motion or appeal is pending before the court. The provisions of this subsection shall not apply if the reason for the filing of a postverdict or postjudgment motion or appeal by the plaintiff is to reply to or answer a motion or appeal filed by a defendant.
This statute was substantially revised by amendment in 1997.[16] One such revision was the change in subsection (a) providing that interest shall be recovered and allowed in such cases in lieu of the former provision, still contained in General Statutes Section 37-3a(a), that interest may be recovered and allowed. However, the change from may to shall did not have its normal legal consequence in this instance because of the breadth of discretion given to the trial court. Even if, as a result of this amendment, it is required to award postjudgment interest in actions to recover damages for injury to the person, or to real or personal property, caused by negligence, the trial court is able, in the exercise of its discretion, to award such interest at a rate of one percent or, perhaps, even less. Hence, if the intent of the amendment[17] was to require postjudgment interest awards, that goal was not achieved. Furthermore, a recent decision of the Appellate Court interprets General Statutes Section 37-3b as permitting only postjudgment interest awards in these negligence cases, not prejudgment interest.[18]
The 1997 Connecticut Supreme Court decision in Sears, Roebuck & Co. v. Board of Tax Review,[19] deserves some, but not all, of the blame for the unduly wide range of postjudgment interest rates that have been awarded thereafter. For more than one hundred years prior to this decision, General Statutes Section 37-3a and its predecessors, each providing for a specified rate "and no more," had been interpreted as requiring that the specified rate be awarded - so long as the trial court, in the exercise of its discretion, deemed such an award appropriate under the circumstances. Hence, an interest award was an all-or-nothing proposition, i.e., either the specified rate or zero.
Sears, Roebuck was a garden variety real property tax appeal that has wreaked havoc with interest awards in all civil actions thereafter. The plaintiffs retail store had been revalued by the Town of West Hartford at $13 million. The plaintiffs appraiser testified it was worth only $11.7 million; the Town's appraiser testified it was worth $12.1-12.3 million, which was closer to the plaintiffs value than the assessor's. It was not surprising then that the trial court determined that the true value was $12.1 million. The plaintiff then sought prejudgment interest. For reasons not apparent, counsel for both parties argued for application of an interest rate below the ten percent rate then specified in General Statutes Section 37-3a. The trial court (Blue, J.) rejected the arguments of both counsel, holding:
Although this united front of the parties, their experienced counsel, and their expert witnesses inspires some trepidation...
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