Opinion ID: 764118
Heading Depth: 1
Heading Rank: 1

Heading: Nature of the Judgment

Text: 7 The majority takes a straightforward state court judgment for damages and transforms it into a judicially prescribed sale of stock that is impervious to the operation of federal bankruptcy law. As the majority acknowledges, this is an effort to analytically place the judgment into a category, even one that does not comfortably fit. The judgment calls for no such creativity on our part. 8 This is not a case, as the majority suggests, where one party has sought in bad faith to use bankruptcy proceedings in order to escape its rightful creditors and obtain a free lunch. The bankruptcy court expressly ruled to the contrary, finding no evidence that the bankruptcies were filed with malice or ill-will but rather that the debtors sought to gain the beneficial ends intended by Congress. In re Shoen, 193 B.R. 302, 312-13 (Bankr.D.Ariz.1996). The Bankruptcy Appellate Panel (BAP) aptly described this appeal as a $55 million mopping-up operation in a $1.5 billion family feud that has been waged for longer than World Wars I and II combined. Given the long and tortured history of this litigation, it seems particularly inappropriate at this stage for us to make judgments about the legal maneuverings of one side or the other. Instead, our role is to analyze the judgment vis-a-vis the bankruptcy rules. The rule is clear: the Bankruptcy Code prohibits postpetition interest on unsecured claims. 11 U.S.C. § 502(b)(2). The Arizona judgment is an unsecured claim. 1 The interest accrued on the judgment after the filing of the bankruptcy is postpetition interest. What then is the majority's basis for deviating from the rule? None, other than creating an unprecedented exception to the rule. 2 9 The Arizona judgment is not the anomaly that the majority describes. To put the judgment in context, it is necessary to go back to the beginning of the litigation. The suit stems from an intrafamily feud over AMERCO, the holding company for U-Haul International, Inc. and several related corporations. The Samuel Shoen Interests (the Creditors) claimed that the Edward Shoen Interests (the Debtors) breached their fiduciary duties and engaged in other tortious conduct. The genesis of this appeal lies in the Arizona court's initial determination that, in order to avoid a double recovery, the Samuel Shoen Interests would have to choose either to accept a money judgment for their claims or to dismiss the suit and retain their stock. In other words, they had to elect a remedy at the outset and then live by that decision. They chose to seek the judgment. 3 10 The jury awarded the Samuel Shoen Interests $1.48 billion in compensatory damages (based on a finding of a per share decrease in value from $81.12 to $0.48) and $70 million in punitive damages against Joe Shoen. The court found that the verdict was based on an inflated valuation of the company and issued a remittitur, requiring the Samuel Shoen Interests to accept $461,838,000 in compensatory damages and $7 million in punitive damages or to have a new trial on damages. The Samuel Shoen Interests accepted the remittitur on February 14, 1995 and judgment was entered on February 21, 1995. The terms of the judgment were as follows: 11 Upon payment or tender of the total dollar amount set forth above [$461,838,000], together with accrued interest and taxable costs, all Plaintiffs' shares of AMERCO Common Stock identified above shall be transferred to Defendants or their designees. 12 Plaintiffs are hereby awarded interest on the amount of this Judgment ($461,838,000) at the rate of ten percent (10%) per annum until paid, said interest to accrue from February 14, 1995. 13 In addition to the $461,838,000 Judgment, the Arizona court awarded the Samuel Shoen Interests interest from the date of their acceptance of the remittitur (February 14, 1995) at the Arizona statutory rate. See A.R.S. § 44-1201(A) (1998) (fixing interest on judgments at 10 percent per annum). As is typical, postjudgment interest was to accrue until the judgment was paid. Most importantly, in keeping with the election of remedies, the judgment required the Samuel Shoen Interests to transfer their shares of AMERCO stock to the Edward Shoen Interests upon payment of the $461,838,000 together with accrued interest and taxable costs. 14 Although the stock transfer provision complicates the judgment somewhat, it does not, as the majority holds, create a new brand of judicial sale. The majority apparently believes that unless postjudgment interest is collected, the Samuel Shoen Interests will not have received full compensation. However, this ignores the intervention of the bankruptcy filing. In a typical judgment, the creditor receives the judgment amount plus postjudgment interest. The postjudgment interest is generally a creation of state statute designed to make the debtor whole if payment is delayed. A satisfaction of judgment is not entered until the judgment and interest are paid in full, just as here the stock would not be transferred until the judgment amount plus interest were paid. However, if bankruptcy is filed after entry of the judgment, postjudgment interest stops accruing and the allowed claim becomes the judgment amount plus any interest accrued prior to the bankruptcy filing. The same analysis should apply to the Arizona judgment here. 15 This case is not dissimilar from one in which the plaintiff obtains a prejudgment writ of attachment against the property of the debtor. In that case, where the plaintiff obtains a money judgment for more than the amount of the collateral, and the judgment debtor thereafter files for bankruptcy, the lienholder holds an undersecured claim and is not entitled to postpetition interest on the judgment. See 11 U.S.C. §§ 502(b)(2), 506(b); United Sav. Ass'n of Texas v. Timbers of Inwood Forest Assocs., Ltd., 484 U.S. 365, 372-73, 108 S.Ct. 626, 98 L.Ed.2d 740 (1988) (finding that under § 506(b), the undersecured creditor ... falls within [§ 502(b)(2)'s] general rule disallowing postpetition interest.). That result is not changed by the fact that, absent the bankruptcy filing, payment of any postjudgment interest awarded would be required before the judgment could be satisfied and the writ extinguished. 16 Guidance may also be found in our analysis in In re Del Mission Ltd., 998 F.2d 756, 757 (9th Cir.1993). There the bankruptcy court approved the sale of Del Mission's liquor license after payment of  'necessary' amounts to the California Employment Development Department (EDD) and the State Board of Equalization (Board). EDD and the Board claimed a statutory right not only to all unpaid taxes and penalties, but also to accrued interest before they would transfer the license. We rejected their claim for interest, holding that [a]uthority to pay 'necessary' amounts does not ... permit payment of prohibited postpetition interest on prepetition taxes. Id. at 757.