Court Opinion

ID: 4702202
Source: CourtListenerOpinion
Date Created: 2021-07-08 19:03:12.018743+00
Date Added: 2024-06-11T08:06:22.716942
License: Public Domain

UNPUBLISHED

                       UNITED STATES COURT OF APPEALS
                           FOR THE FOURTH CIRCUIT

                                      No. 19-1790

CATJEN, LLC,

                    Plaintiff - Appellee,

             v.

HUNTER MILL WEST, L.C.,

                    Defendant - Appellant.

Appeal from the United States District Court for the Eastern District of Virginia, at
Alexandria. Leonie M. Brinkema, District Judge. (1:18-cv-01546-LMB-JFA)

Submitted: April 29, 2021                                         Decided: July 8, 2021

Before KING, DIAZ, and QUATTLEBAUM, Circuit Judges.

Affirmed by unpublished per curiam opinion.

J. Chapman Petersen, David L. Amos, CHAP PETERSEN & ASSOCIATES, PLC,
Fairfax, Virginia, for Appellant. Nicholas M. DePalma, Christian R. Schreiber,
VENABLE LLP, Tysons, Virginia, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

       Following protracted litigation in bankruptcy court and Virginia state courts, Catjen,

LLC (“Catjen”), commenced the instant action in federal district court seeking to recover

the outstanding balance on a $1 million note executed by Hunter Mill West, L.C.

(“HMW”), in favor of Catjen’s predecessor-in-interest, BDC Capital, LLC (“BDC”). Two

questions lie at the heart of this dispute: (1) whether, after the note matured, simple or

compound interest applied; and (2) whether, after the bankruptcy court issued its claims

order, the interest rate was determined by the federal rate or the rate provided in the note.

In granting summary judgment to Catjen, the district court concluded that interest

compounded at the note’s postjudgment rate. HMW appeals, and we affirm.

       “We review de novo a district court’s grant or denial of a motion for summary

judgment, construing all facts and reasonable inferences therefrom in favor of the

nonmoving party.” CTB, Inc. v. Hog Slat, Inc., 954 F.3d 647, 658 (4th Cir. 2020).

Summary judgment is appropriate “if the movant shows that there is no genuine dispute as

to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.

Civ. P. 56(a).

       In 2008, HMW executed a one-year note in favor of BDC, set to mature on

November 19, 2009. The note provided that, before maturity, interest accrued at a rate of

14%, compounded monthly; that, upon default, BDC could unilaterally increase the interest

rate by 10 points, to 24% (the “default interest rate”); and that, in the event that a court

entered judgment on the note against HMW, the judgment would bear interest at the default

interest rate of 24%. After HMW failed to satisfy its obligations under the note, BDC

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placed HMW in default on September 24, 2010. Two years later, on November 9, 2012,

HMW filed for bankruptcy.

      In a proof of claim filed in the bankruptcy court, BDC asserted that HMW owed

roughly $1.8 million on the note. HMW objected, maintaining that the debt was closer to

$1.5 million. In support of its argument, HMW submitted a spreadsheet, prepared by its

expert, that calculated the balance due from the note’s inception until the date of the

bankruptcy petition. Critically, HMW’s expert compounded interest throughout this entire

period. Following a hearing, the bankruptcy court sustained HMW’s objection and, aside

from one minor adjustment not pertinent here, adopted HMW’s calculations in full.

Accordingly, the bankruptcy court entered a claims order fixing BDC’s claim at

$1,504,998.55.

      In the instant action, Catjen and HMW argue over what, if any, preclusive effect the

claims order has on the issue of compounding interest. Under the applicable state law,

      [T]he proponent of issue preclusion must demonstrate that: (1) the parties to
      the two proceedings, or their privies, be the same; (2) the factual issue sought
      to be litigated must have been actually litigated in the prior action and must
      have been essential to the prior judgment; and (3) the prior action must have
      resulted in a valid, final judgment against the party sought to be precluded in
      the present action.

Hately v. Watts, 917 F.3d 770, 778 (4th Cir. 2019) (footnote and internal quotation marks

omitted) (discussing Virginia law).     Here, the parties disagree only on the second

element—specifically, whether the claims order conclusively established that interest

compounded after the note matured.

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       As noted above, the bankruptcy court used HMW’s own spreadsheet to determine

the amount due under the note, and those calculations included compounding interest from

the maturity date through the date of the bankruptcy petition.        And given that the

application of compounding interest necessarily impacted the value of BDC’s claim as

recorded in the claims order, it stands to reason that this issue was necessary to the

bankruptcy court’s decision.    For these reasons, we agree with the district court’s

determination that HMW is precluded from relitigating the issue of postmaturity

compounding interest. 1

       HMW’s arguments to the contrary are not persuasive. First, HMW notes that the

spreadsheet’s calculations ended on the petition date, November 9, 2012; thus, according

to HMW, even assuming that the bankruptcy court adopted the spreadsheet’s calculations,

the claims order could be preclusive only through that date. But a bankruptcy court

necessarily decides the value of a claim “as of the date of the filing of the petition,” 11

U.S.C. § 502(b), so the fact that the spreadsheet ended on the petition date is

unilluminating. In any event, HMW’s argument presupposes that the petition date is

somehow relevant to the compounding interest issue, yet HMW identifies no legal or

       1
        HMW also seeks to invoke res judicata, relying on the bankruptcy court’s refusal
to allow BDC to charge late fees after the note matured. As relevant here, the bankruptcy
court determined that late fees were permissible only when monthly payments were due,
but that monthly payments ceased at maturity. From this, BDC extrapolates that
compounding interest—which the note allowed when a monthly payment was missed—
likewise could apply only until the note matured. But the bankruptcy court never
announced such a finding, and, moreover, the claims order’s incorporation of postmaturity
compounding interest belies this argument.

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factual basis—nor do we discern any—for concluding that the filing of its bankruptcy

petition altered its obligations under the note.

       Next, HMW contends that the claims order is not preclusive because BDC’s own

submissions during the bankruptcy proceedings assumed that a simple interest rate of 14%

applied after the petition date.     But the bankruptcy court declined to adopt BDC’s

calculations; thus, they were not essential to the court’s judgment. HMW also asserts that

the bankruptcy court did not explicitly indicate whether it had relied on the spreadsheet.

However, given that the court sustained HMW’s objection and, but for one deviation, fully

adopted HMW’s calculations, we are satisfied that the court made clear its reliance on the

spreadsheet.

       Finally, HMW maintains that the spreadsheet’s use of compounding interest was

based on a mistaken formula. And because, in some instances, a party is not estopped from

correcting its previously erroneous position on a question of law—such as the

interpretation of a contract—HMW insists that it should be able to correct this error going

forward. In support of this argument, HMW attempts to equate res judicata with the

doctrine of judicial estoppel, which “prohibits a party from taking inconsistent positions

within a single action.” CVAS 2, LLC v. City of Fredericksburg, 766 S.E.2d 912, 919 n.5

(Va. 2015) (internal quotation marks omitted). As HMW points out, judicial estoppel does

not prevent a party “who has taken an erroneous position on a question of law . . . from

later taking the correct position, provided [the party’s] adversary has suffered no harm or

prejudice by reason of the change.” Lofton Ridge, LLC v. Norfolk S. Ry. Co., 601 S.E.2d

                                               5
648, 651 (Va. 2004) (internal quotation marks omitted). Thus, HMW reasons that, because

judicial estoppel does not apply, neither should res judicata.

        This argument, however, fundamentally misunderstands the doctrine of judicial

estoppel. First, judicial estoppel is inapplicable not because of the exception on which

HMW relies, but because the doctrine is limited to instances in which the inconsistent

positions are taken within the same action. Obviously, the instant proceedings are not the

same as those that occurred in the bankruptcy court. Second, and more to the point, res

judicata and judicial estoppel simply are not equivalent doctrines: whereas res judicata

seeks to “promot[e] finality and judicial economy,” Providence Hall Assocs. Ltd. P’ship v.

Wells Fargo Bank, N.A., 816 F.3d 273, 279 (4th Cir. 2016), judicial estoppel is a doctrine

“of fair play” designed to prevent a party from “talk[ing] through both sides of his mouth,”

Wooten v. Bank of Am., N.A., 777 S.E.2d 848, 850 (Va. 2015). Thus, HMW cannot use the

inapplicability of judicial estoppel to evade the application of res judicata.

        In sum, we conclude that the claims order is preclusive as to the appropriate method

for calculating interest after the note matured. Consequently, we affirm the district court’s

decision to bar HMW from relitigating this issue. 2

        Turning to the rate of interest, HMW argues that the federal rate, 28 U.S.C.

§ 1961(a), should apply to the amount owed under the claims order. Under § 1961(a), the

federal interest rate “shall be allowed on any money judgment in a civil case recovered in

        2
            As a result, we do not reach HMW’s argument based on the plain language of the
note.

                                              6
a district court.” 28 U.S.C. § 1961(a). However, although “§ 1961 provides a standard

rate of post-judgment interest, the parties are free to stipulate a different rate, consistent

with state usury and other applicable laws.” Hymel v. UNC, Inc., 994 F.2d 260, 266 (5th

Cir. 1993) (internal quotation marks omitted); see FCS Advisors, Inc. v. Fair Fin. Co., 605

F.3d 144, 147 (2d Cir. 2010) (“[P]arties are free to agree to a different post-judgment

interest rate by contract, provided that they do so through clear, unambiguous and

unequivocal language.” (internal quotation marks omitted)); Soc’y of Lloyd’s v. Reinhart,

402 F.3d 982, 1004 (10th Cir. 2005) (“[P]arties may contract to, and agree upon, a post-

judgment interest at a rate other than that specified in § 1961.”).

        Here, the note clearly stipulated that, following entry of judgment, interest would

accrue at a rate of 24%. Thus, assuming without deciding that the claims order is a money

judgment governed by § 1961, we conclude that the terms of the note supplanted the federal

interest rate. 3

        Accordingly, we grant the parties’ joint motion to submit this case on the briefs and

affirm the district court’s judgment. We dispense with oral argument because the facts and

legal contentions are adequately presented in the materials before this court and argument

would not aid the decisional process.

                                                                                 AFFIRMED

        We find that HMW has waived its remaining claims—including those based on
        3

Fed. R. Bankr. P. 9024 and Catjen’s alleged failure to mitigate—by not advancing them in
its summary judgment briefing. See Cox v. SNAP, Inc., 859 F.3d 304, 308 n.2 (4th Cir.
2017).

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