Opinion ID: 3176495
Heading Depth: 2
Heading Rank: 2

Heading: End of Article 1061 Interest Accrual

Text: We must, however, vacate and remand the bankruptcy court's calculation of prejudgment interest to the extent it includes accrual past the entry of judgment. Although prejudgment interest is usually governed by state law when the underlying claims are based on state law, postjudgment interest is governed exclusively by federal law under 28 U.S.C. § 1961. VázquezFilippetti v. Cooperativa de Seguros Múltiples de P.R., 723 F.3d 24, 28 (1st Cir. 2013) ([T]he plaintiffs tell us that the laws of Puerto Rico require [the defendant] to pay postjudgment interest. 8 The parties stipulated that the dates of substantial completion were: November 1, 1993 for the Mayagüez project; March 18, 1994 for the Patillas project; and September 5, 1995 for the DoradoToa Alta project. These dates were adopted by the bankruptcy court. Redondo IV, 505 B.R. at 399. -15- Yet it is well established that federal law governs the entitlement to postjudgment interest in any federal civil suit, including a diversity suit such as the instant action.). And under federal law, [p]ostjudgment interest is mandatory and the prevailing party is entitled to it even if the district court made no provision for its payment. In re Redondo Const. Corp., 700 F.3d 39, 42 (1st Cir. 2012).9 The bankruptcy court's order in Redondo IV clearly accrues Article 1061 interest past the entry of judgment, thus overlapping with § 1961's postjudgment interest period. 505 B.R. at 401. Because § 1961 interest is exclusive and mandatory, we must remand Redondo's case to the bankruptcy court for a calculation of postjudgment interest in accordance with § 1961's terms. Redondo argues that it is entitled to interest under both statutes, but a plaintiff is entitled to only one full recovery, no matter how many different legal grounds may support the verdict. Freeman v. Package Mach. Co., 865 F.2d 1331, 1345 (1st Cir. 1988). Redondo's full recovery entitles it to prejudgment interest under Article 1061 and postjudgment interest under § 1961 only. Allowing the Article 1061 interest accrual 9 This case is not part of the present litigation -- although it involves the same parties, we reviewed different contracts, claims, and proceedings. -16- period to extend into the period already covered by § 1961 would result in Redondo receiving more than its full recovery. We also reject the bankruptcy and district courts' reasoning in allowing recovery under both statutes. When challenged by the Authority in a motion to amend, the bankruptcy court explained in Redondo V that it believed that Redondo could recover under both Article 1061 and § 1961 because Article 1061 interest is an independent indemnity for damages, by way of penalty, for default in payment. Redondo V, 515 B.R. at 414 (quoting Rivera v. Crescioni, 77 D.P.R. 47, 55-56 (1954)). The district court echoed this reasoning in its affirmance. Redondo VI, 523 B.R. at 345. We, however, find little support for the bankruptcy and district courts' view that Article 1061 acts as a separate penalty rather than compensation for delay based on the time value of money,10 and Redondo never develops its claim beyond a bare assertion. Finding no authority to the contrary, we must direct that the Article 1061 interest award be recalculated to take into account an award of postjudgment interest consistent with § 1961's terms. 10 The bankruptcy court's reasoning also appears to be based in part on its view that Article 1061 interest is an inseparable part of the judgment. See Redondo V, 515 B.R. at 414 (Moreover, prejudgment interest under Article 1061 may be awarded even when they have not been claimed in the complaint. Hence, Article 1061 applies until the obligation is no longer in default. (citation omitted)). We rejected this argument above in footnote 5 of this opinion. -17-