Opinion ID: 1369316
Heading Depth: 1
Heading Rank: 3

Heading: both prejudgment and post-judgment interest in actions for personal injuries are statutory obligations

Text: Other than the procedural/substantive distinction, whether to apply interest rate changes to pre-existing judgments was often analyzed in many older cases by determining whether interest on judgments was a matter of contract or an obligation imposed by statute. If, as in Benson, a court takes the latter view, then the rate is subject to later modification by statute. [9] On the other hand, if the interest on a judgment is considered a contractual obligation, the rate is a vested obligation which cannot be subjected to later modification. The contractual view has fallen into disuse, and has been criticized because of the major differences between contracts and judgments. [10] If we decide, as do the majority of jurisdictions, that interest on a judgment for damages to person or property is not a substantial right but exclusively an incident attached thereto by legislative fiat after the right has been adjudicated, [11] neither enlarging nor impairing substantial rights, but rather prescribing the methods and procedures of enforcement, [12] interest on the judgment can be changed at any time. [13] Because at common law interest was not an element of damages recoverable on actions of tort for personal injuries, [14] but is purely a creature of statute, a historical review is essential. Arguments are often offered that the new interest rate should not apply to unsatisfied judgments entered before the effective date of the statutory change because a judgment is a contract or is in the nature of a contract with the rights and liabilities of the parties fixed at the time judgment is entered. The United States Supreme Court disposed of this argument almost a century ago in Morley v. Lake Shore & Michigan Southern Ry. Co., 146 U.S. 162, 169-70, 13 S.Ct. 54, 56-57, 36 L.Ed. 925, 929 (1892). The Court, in its discussion of a New York statute similar to the one here, held that the right to interest on a judgment for personal injuries is a matter of legislative discretion not of contract pointing out the absence of essential characteristics of a contract  a meeting of the minds, consideration, mutuality, and assent of the parties. The Court discussed this issue at length: After the cause of action, whether a tort or a broken contract, not itself prescribing interest till payment, shall have been merged into a judgment, whether interest shall accrue upon the judgment is a matter not of contract between the parties, but of legislative discretion, which is free, so far as the constitution of the United States is concerned, to provide for interest as a penalty or liquidated damages for the nonpayment of the judgment, or not to do so. When such provision is made by statute, the owner of the judgment is, of course, entitled to the interest so prescribed until payment is received, or until the state shall, in the exercise of its discretion, declare that such interest shall be changed or cease to accrue. Should the statutory damages for nonpayment of a judgment be determined by a state, either in whole or in part, the owner of a judgment will be entitled to receive and have a vested right in the damages which shall have accrued up to the date of the legislative change; but after that time his rights as to interest as damages are, as when he first obtained his judgment, just what the legislature chooses to declare. He has no contract whatever on the subject with the defendant in the judgment, and his right is to receive, and the defendant's obligation is to pay, as damages, just what the state chooses to prescribe. (Emphasis supplied) The right of a judgment creditor to interest on a judgment is a matter of legislative grace granted to compensate the judgment creditor for the damages sustained by nonpayment of the judgment. Here, just as the judgment creditor has no right to interest except that which is legislatively decreed, the judgment debtor has no right to a limitation of the interest rate to be applied in the future except for that ordered by the legislature. Should the legislature determine that it is prudent to raise or lower [15] the interest rate from time to time either to compensate fairly judgment creditors, to conform with current economic standards, or to expedite litigation, the new rate should apply from the effective date of the change to all outstanding judgments. This construction is a hybrid application because it is actually neither retrospective nor prospective. A retroactive application would apply the new rate to all outstanding judgments running from the date of the judgment even if it were entered before the effective date of the new rate. This construction is a prospective application of the new rate, e.g., the new rate applies after the effective date to all outstanding judgments  before that date interest accrues at the old rates. [16] Where the language of a statute is plain and the meaning clear, the statute must be enforced as written. [17] Here, the language of the statute contains no exception for actions accruing prior to the effective date of the statute. Although there is arguably a valid rationale for differentiating between interest on contracts and interest on actions for damages, none of the Oklahoma interest statutes make such a distinction except when the rate of interest is specified in the contract. The Oklahoma statute, 12 O.S.Supp. 1986 § 727(A)(1), and its predecessors have always provided that if the rate of interest is specified in the contract, the rate is applicable to the judgment debt and that it will be so specified in the journal entry of judgment. Perhaps this is so because of the language of Morley construing a similar New York statute. [18] Nor do I find support in the Oklahoma Constitution [19] for the proposition that prejudgment and postjudgment interest on an action for damages to person or property are vested rights because this Court held in Benson that interest calculation was procedural. Procedural changes affect the remedy rather than the right, [20] and there is no vested right in any particular mode of procedure. In the absence of an expression of contrary intent, a procedural statute applies equally to all actions within its purview, those accruing both before and after the statutory enactment. [21] Generally, because a constitution is not the beginning of law in the state, it assumes the existence of a well understood system of law which is to remain in force. Accordingly, a constitution is to be construed in the light of common law. The framers are presumed to have intended no change from nor innovation on the common law than appears from reasonable implication, or from an express declaration by the Constitutional framers themselves. In many jurisdictions the rule is that statutes in derogation thereof are to be strictly construed. Since 1910, the common law, as modified by constitutional and statutory law, judicial decisions, and the condition and wants of the people, has remained in force in aid of the general statutes of Oklahoma. However, the rule that statutes in derogation are to be strictly construed is inapplicable to the laws of this state  they are to be construed liberally in order to achieve their objectives and to promote justice. [22] Here, because the framers had the benefit of the New York statute and of the United States Supreme Court's decision in Morley, I must conclude that the right of the judgment creditor to receive, and the obligation of the judgment debtor to pay, interest upon a judgment does not rest in contract. Instead it is an obligation imposed by law with the right to receive interest entirely contingent upon legislative prescription. Because prejudgment and postjudgment interest are in the nature of statutory damages where the interest is not specifically provided by contractual agreement, a state without impairing the obligation of contracts or interfering with vested or accrued rights, may legislate to increase or reduce the rate of interest on judgments previously obtained in its courts. [23] Regardless of the analysis used  substantive/procedural or contractual/statutory  the majority of jurisdictions allow the rates on pre-existing judgments to be changed as the new statutory rates become effective. [24] The underlying policy for this position was discussed in Shook & Fletcher Insulation v. Central Rigging & Contracting Corp., 684 F.2d 1383, 1388 (11th Cir.1982). In Shook, as here, the applicable statute did not address specifically what interest rate should apply to judgments existing prior to an amendment of the statutory rate. The language of the Georgia Code § 57-108 (1980) was the same as the Oklahoma statute. It provided: All judgments ... shall bear interest ... at the rate of twelve per cent per year. The court interpreted this language literally, stating: The purpose for increasing the rate of interest accruing to judgments was to acknowledge an increase in interest rates in general and to bring the rate of interest on judgments into parity with other comparable market rates of interest. If the legal rate of interest for judgments remains significantly lower than the prevailing market rates of interest, then judgment-debtors would have a strong incentive to delay paying their judgments as long as possible in order to capitalize on this difference. Judgment-creditors, in turn, would increasingly be compelled to resort to levying, attachment, and other judicial remedies to enforce their judgments. This windfall to judgment-debtors and burden on judgment-creditors and the state courts are a state of affairs that Georgia could reasonably seek to avoid. These policy concerns apply with equal force for all judgments outstanding as of July 1, 1980, [the effective date of the amendment] as well as for new judgments entered after July 1, 1980. [25] The same result was reached in Noe v. Chicago, 56 Ill.2d 346, 307 N.E.2d 376, 379 (1974). The Noe Court determined: that the new rate should apply prospectively to pre-existing judgments; that this application was not, in any sense, a retroactive application of the statute; and, that changing the interest rate on a judgment does not interfere with rights already accrued or vested. [26] Another case in which this reasoning was adopted is McBride v. Superior Court of Maricopa County, 130 Ariz. 193, 635 P.2d 178-79 (1981). In rebutting the argument that changing the rate after the date of judgment was a retroactive application of the statute, the McBride court said, The statute at the time of the judgment provided for 6% interest; the 10% rate did not take effect until 14 December 1979 and was effective only after that date. It was not retroactive but prospective after the effective date of the statute. [27] In the final analysis, we need not find that the interest on the judgments for breach of an oral contract is merely procedural or that it is not contractual. The most appropriate construction is that the new rate is not a retrospective application of the statute interfering with vested or accrued rights but that it is, in fact, prospective from the effective date of the new rate. Shook, Noe, and McBride provide the proper prototype for finding that the interest rate of the amended statute varies the prejudgment and postjudgment rate prospectively from the effective date of each amendment. The underlying rationale for awarding interest at all is to compensate the prevailing party for the expenses incurred in bringing an action, for the delay in receiving money damages, and for the loss of the use of the principal. [28] In 1986, the Oklahoma Legislature included amendments to § 727 as a part of its popularly-denominated Tort Reform legislation. [29] At the time of the amendment, judgments bore interest at the rate of 15% per annum even though the average treasury bill rate was 6.03% per year. [30] The obvious legislative purpose expressed in § 727 was to link interest rates with changing economic conditions. The overriding legislative intent is the desirability of tying interest rates on judgments to rapidly fluctuating financial realities, and to avoid penalizing either the judgment debtor or the judgment creditor. Because the judgment debtor may invest the amount of the judgment at the contemporary cost of money pending appeal, neither of the parties suffer undue hardship rather, this procedure more fairly maintains the status quo. If the Court continues to cling to the Timmons doctrine, it will ignore the unmistakable legislative directive, and risk unraveling the legislature's attempt to deal comprehensively with tort-related issues. Generally, a case does not become final until the appeal or the right to appeal is exhausted. [31] According to Walker v. St. Louis-San Francisco Ry. Co., 671 P.2d 672, 674 (Okl. 1983), prejudgment interest should be calculated from September 21, 1973, (the date the suit was filed) [32] until October 1, 1979, at 6%. After October 1, 1979, until the date of judgment, interest should run at the rate of 10% per annum. Thereafter, the accrued amount merged in the judgment and the interest continued to run on the entire amount at 12% per year until April 1, 1982. After that date, interest on the judgment should be figured at an annual rate of 15% until January 1, 1987. [33] After January 1, 1987, the interest should run at 10.03%. [34] If the judgment is not paid during 1987, then the interest on the judgment from January, 1988, should be calculated at an annual rate equal to the average United States Treasury Bill rate of the preceding calendar year plus four percentage points. [35]