Time is money. Thus, recent seemingly conflicting appellate court decisions as to when interest starts to accrue may impact counsel’s approach.
Thursday the Fourth District Court of Appeal addressed whether a trial court has discretion to award pre-judgment interest in Sterling Village of Palm Beach Lakes Cd’m. Ass’n., Inc. v. Lacroze, Case No.: 4D-17-1385 (Fla. 4th DCA, July 5, 2018).
Astute followers will recall that just weeks ago the Third District Court of Appeal addressed a similar issue in First Equitable Realty III Ltd. V. The Grandview Palace Cd’m. Ass’n., Inc. Case No.: 3D-17-669 (Fla. 3d DCA, April 11, 2018), rehearing denied June 25, 2018.
Analysis of the two decisions indicates a conflict among the Districts.
In Sterling Village, Lacroze, successfully bid for a Sterling Village Condominium unit at a foreclosure sale and obtained title to that unit. A dispute over the Association’s demand for assessments resulted in Lacroze filing an action for an accounting, injunctive relief and damages. The Association counter-claimed seeking damages for unpaid assessments, later adding a count to foreclose a claim of lien.
Following a non-jury trial, the trial court held that owner Lacroze “shall take nothing from the action.” The trial court found owner Lacroze owed the Association money damages, plus pre-judgment interest from the date of the claim of lien’s recording, not from the date money was delinquent and due. While the opinion mentions that jurisdiction was reserved for the injunction claim, the opinion is silent as to the disposition of the foreclosure claim.
Affirming that interest did not have to be awarded from the date of the delinquency, the appellate court held that the trial court in this case had discretion to find that pre-judgment interest should commence from the date the owner received the Association’s default notice. Reciting that interest is to make a claimant whole, and the “general rule that prejudgment interest should run from the date of the loss…”, the appellate court cited to Broward County v. Finlayson, 555 So. 2d 1211 (Fla. 1990), for the proposition that interest could be withheld based on considerations of “fairness.”
When a trial court determines it would be inequitable under the circumstances to award prejudgment interest prior to a party’s notice of the default, the trial court has the discretion to find that prejudgment interest should run from the date the party received notice of the default and not the date of the default. Cuillo v. McCoy, 810 So. 2d 1061, 1064-65 (Fla. 4th DCA 2002).
Thus, “equity” may be perceived to be a basis for shortening the time from which interest accrues.
Interestingly, the decision does not cite to a specific date for when interest accrues, and its holding seems to refer to two different dates. The court’s analysis refers to the date that a notice of default is provided. That date is normally different from the date of recording of the claim of lien which is the date from which interest was allowed to accrue. The factual deference to the trial court may be explained by the lack of a record on appeal; but, is nevertheless not explained.
Especially as the Sterling Village decision appears to contradict the Third District’s First Equity decision, it may be helpful to understand the precedent upon with the appellate court relied. Both decisions appear to provide narrow distinguishing facts that would not appear to invite broad extension. The Broward County limitation on interest was predicated on the parties first negotiating in good faith on a distinct issue, workweek pay, and apparently only after extensive negotiations was a separate overtime claim raised; the Supreme Court invoked the fairness analysis for interest on the not negotiated overtime claim. In Cuillo, the claim was against an indemnitor which had no notice of the primary debtor’s underlying default. Thus, the two citations’ situations would have appeared to have been clearly distinguishable from the Sterling Village situation.
For practitioners this decision may raise uncertainties. Initially, what is the test for limiting interest, particularly what factors or threshold trigger the equitable or fairness withholding of interest? Then, if interest is to be partially withheld, then what date should interest begin to accrue, recognizing that there is usually a difference between the date of default notice and the date of recording a claim of lien.
Concerning the first, threshold issue, whether equity may reduce or bar interest, there is the recent holding by the Third District Court of Appeal in First Equitable Realty that a trial court did not have discretion to reduce interest recoverable pursuant to statute. While First Equitable could be stated to be distinguishable because it addressed the rate of interest, not when it accrues, that appears to be a distinction without a purpose.
In fairness to the Sterling Village court, the First Equitable conflict may not have been raised by the parties. In Sterling Village the Fourth District affirmed over the Association’s objection, most of the trial court’s holdings because a transcript was not provided! Further, it appears from the appellate court’s docket that briefing was completed only two days before the First Equitable decision was published which normally would have been too short of time for even counsel to have been appraised of First Equitable, and there was no notice of supplemental authority to bring the First Equitable decision to the appellate court’s attention.
Interestingly, First Equitable relies upon a Fourth District decision holding that the trial court lacked discretion to reduce an interest award based upon equitable considerations because equity cannot override a statutory mandate for an interest award. Oreal v. Steven Kwartin, P.A., 189 So. 3d 964, 966-67, (Fla. 4th DCA 2016).
Concerning the second issue, the date from which interest was allowed to accrue, there might be confusion. The court’s use of the date of recording of the lien does not normally relate to the date of a default notice, and the decision does not explain the differentiation. As the claimant was a condominium association normally the association would have provided a statutory notice of intent to lien which in turn would have been at least forty-five days before the recording of the lien. Again, this issue may be a mystery because there was not trial transcript as part of the record on appeal.
Michael J. Gelfand
Real Property, Probate and Trust Law Section
of The Florida Bar
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Note: This article is not legal advice. Statements and comments made are not those of The Florida Bar or the RPPTL Section
© 2018 Michael J. Gelfand
Michael J. Gelfand
Florida Bar Board Certified Attorney:
Real Estate Law
Condominium & Planned Development Law
Florida Supreme Court Certified Mediator:
Civil Circuit Court & Civil County Court
Fellow, American College of Real Estate Attorneys
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