Court Opinion

ID: 9638401
Source: CourtListenerOpinion
Date Created: 2023-08-22 15:43:02.135381+00
Date Added: 2024-06-11T18:10:06.275383
License: Public Domain

AKIN, Justice,
dissenting.
I cannot agree with the majority’s holding that the judgment continues to bear interest at the rate prescribed by the statute in effect on the date of judgment. The majority rests its holding on the case of Missouri Pac. Ry. v. Patton, 35 S.W. 477 (Tex. Civ. App., 1896, writ ref’d). As noted in the majority opinion, the refusal of the writ indicates approval of the result, but not necessarily the rationale. In Watkins v. Junker, 90 Tex. 584, 40 S.W. 11, 12 (1897), the supreme court addressed a similar question concerning prejudgment interest. In Junker, the court stated that interest is essentially compensation for the withholding of money which is due and since the rate of interest is a creature of statute, held that the plaintiff was entitled to the statutory interest from the time the money was due until paid. In so holding, the court applied the existing rate of eight percent up to the date when the statute changing it to six percent became effective and thereafter applied the new rate. The change in the statutory interest rate by the legislature is apparently an attempt to insure that the compensation for detention of money due approximates the cost of money in the market place. A corollary to the rationale stated in Junker is that the legislature intended to prevent those who owe debts from profiting by the use of dilatory tactics to avoid payment. When the applicable interest rate does not reflect the actual damages suffered due to delay in payment, the dilatory debtor can, in effect, unjustly appropriate part of the principal’s earning power. Since the purpose of the statute is to compensate for the withholding of money, damages accrue with each day that it is withheld. Because damages continually accrue, it is only logical that the amount of damages be calculated based on the interest rate which the legislature deems to be just *209compensation at that time; the interest rate which provided just compensation at some arbitrarily fixed date in the past is not relevant. This was the position taken by the supreme court in Junker. Given this rationale for the allowance of interest and the legislative decision to adjust the interest rate, the decision in Patton does not further the aims of the legislature. The holding in Patton conflicts with the rationale of Junker, even though it may be factually distinguishable on the basis that it pertained to postjudgment interest rather than prejudgment interest. Since the rationale stated by the supreme court in Junker dictates a contrary result, I cannot accept Patton as controlling.
Regardless of the rationale used to support the Patton decision, whether that stated by the court of civil appeals or another theory upon which the supreme court could reach the same result, one of two positions regarding the interest rate and date of judgment must be taken: (1) the interest rate is irrevocably fixed on the date that the judgment is signed, whether recited in the judgment or not, or (2) the interest rate is irrevocably fixed by the recital in the judgment. The first position would seem to conflict directly with the holding in Junker that prejudgment interest is not fixed on the day that the right of recovery comes into existence; it is the interest rate in effect at the time that the interest accrues, not that in effect at the time the right was created, that controls. Therefore, the Patton decision is viable, if at all, due to the recital in the judgment. If this is true, the effect would be that a recital in a judgment of an erroneous, or even illegal, interest rate would be binding unless set aside. However, the rate of interest is based upon the statute, not the recital in the judgment. In Junker, the supreme court held that the question of whether prejudgment interest was recoverable was a question of law to be decided by the court; if the case was one in which interest was recoverable, then the award of interest was mandatory. The trial court was not called upon to pass on the rate of prejudgment interest, but merely whether it was recoverable as a matter of law. The computation of the proper interest is then a mathematical exercise involving application of the statutory rate to the amount of the judgment on a per diem basis.
Similarly, the courts of civil appeals have consistently held that a judgment bears interest at the statutory rate even though the judgment is silent as to interest. Hoffman v. Love, 523 S.W.2d 503, 504-05 (Tex. Civ. App., Texarkana 1975, no writ); Broadway Drug Store, Inc. v. Trowbridge, 435 S.W.2d 268, 270 (Tex.Civ.App., Houston [14th Dist.] 1968, no writ); Lewis v. Hill, 429 S.W.2d 572, 575 (Tex. Civ. App., Tyler 1968, no writ); Carter v. McHaney, 373 S.W.2d 82, 86 (Tex. Civ. App., Corpus Christi 1963, no writ); Ross v. McGuffin, 2 Willson 403, 404 (Tex. Ct. App. 1884). In International-Great Northern R.R. v. Lucas, 123 S.W.2d 760, 765 (Tex. Civ. App., Eastland 1938, writ ref’d), cert. den., 308 U.S. 573, 60 S.Ct. 89, 84 L.Ed. 481 (1939), the court stated:
The provision for interest on the judgment added nothing, we think, to the provisions of law. R.S. 1925, Art. 5072; Texas & St. L. Ry. Co. v. Melear, 2 Willson Civ.Cas.Ct.App. § 457.1 If, therefore, the interest be not collectible as against the provisions of the law, neither would it be so far as we can see, as against the provision of the judgment, and therefore such provision in any event would be harmless.
As I understand this holding, the recital of an erroneous post-judgment interest rate in a judgment would not be controlling; the judgment would bear interest at the statu*210tory rate regardless of the rate specified in the judgment. As noted above, the decision in Patton requires, as its basis, a holding that the interest rate is irrevocably fixed as of the date judgment is rendered or that it is irrevocably fixed by the recital in the judgment. Since neither of these positions is consistent with subsequent decisions, I do not view Patton as controlling.
The view that a change in the statutory interest rate becomes effective prospectively from and after the date of the amendment, regardless of the amount of statutory interest stated in the judgment, appears to be the more enlightened view. It is grounded on the principle that judgments bear no interest unless interest is provided for by the legislature. A question similar to ours was decided by the United States Supreme Court in 1892. In applying New York law in Morley v. Lake Shore & Mich. S. Ry., 146 U.S. 162, 13 S.Ct. 54, 36 L.Ed. 925 (1892), the Supreme Court held that post-judgment interest was statutory and therefore subject to prospective changes in rates by the legislature, stating:
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 non-payment 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 non-payment 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.
In Missouri & Ark. Lumber & Mining Co. v. Greenward District, 249 U.S. 170, 39 S.Ct. 202, 63 L.Ed. 538 (1918), a judgment debtor attempted to distinguish Morley on the ground that the judgment in Morley did not specify a definite rate, whereas the judgment in Arkansas Lumber did so specify. In disposing of this contention the Supreme Court stated that the “mere recital of a particular rate does not change the nature of the charge as a penalty or liquidated damages.” Id. The Fort Worth Court of Civil Appeals adopted, without discussion, this result in two recent cases: Southwestern Bell Tel. Co. v. Hertz Equipment Rental Co., 533 S.W.2d 853 (Tex. Civ. App., Fort Worth 1976, writ ref’d n.r.e.), and Donahue v. Rattikin Title Co., 534 S.W.2d 156 (Tex. Civ. App., Fort Worth 1976, no writ).
In a well-reasoned opinion, the Illinois Supreme Court concluded that the rate of interest which a judgment bears should be governed by the statutory rate at the time the interest accrues, not the rate in effect when the judgment is rendered. Noe v. City of Chicago, 56 Ill.2d 346, 307 N.E.2d 376 (1974). See generally Annot., 4 A.L.R.2d 932, § 10 (1949 and Supp. 1971). The Illinois court rejected the argument that this amounts to a retroactive application of the statutory amendment, saying that it would only be beyond the legislature’s power to interfere with interest which had already accrued and vested. Noe at 379, 307 N.E.2d 376. In its decision the court cited a prior Illinois case holding that prejudgment interest would not be controlled by the rate in existence at the time the right to recovery matured, but would be governed by the statutory rate at the time the interest accrued; this is the position taken by our supreme court in Junker. The Illinois court concluded that the rationale of its earlier *211prejudgment interest case applied “with equal force and validity to the question of interest on a judgment.” Id. I agree and, consequently, dissent on the basis that we should follow the rationale of Junker.

. We note that the Lucas court erroneously cites Texas & St. L. Ry. v. Melear, 2 Willson 402 (Tex. Ct. App. 1884) for this proposition. The sole holding in Melear was that a cause of action not asserted in the justice court cannot be asserted in the county court on appeal. However, the following case, Ross v. McGuffin, 2 Willson 403, 404 (Tex. Ct. App. 1884), stands for the proposition that a judgment bears interest at the legal rate even though there is no recital of interest in the judgment. This error can be traced, we believe, to 22A TEXAS DIGEST Interest § 22(1) (1963), which cites Melear for the proposition stated in Ross.