Little v. United Nat. Investors Corp.

• Decision Date: 24 March 1971
• Citation: 160 Conn. 534,280 A.2d 890
• Court: Connecticut Supreme Court
• Parties: Royal LITTLE et al. v. UNITED NATIONAL INVESTORS CORPORATION.

Page 890

280 A.2d 890

160 Conn. 534

Royal LITTLE et al. v. UNITED NATIONAL INVESTORS CORPORATION.

Supreme Court of Connecticut.

March 24, 1971.

Richard A. Silver, Stamford, with whom, on the brief, was Robert Fain, Bridgeport, for appellants (plaintiffs).

Julius B. Kuriansky, Stamford, with whom was Stephen M. Seelig, Stamford, for appellee (defendant).

Before ALCORN, C.J., and HOUSE, THIM, RYAN and SHAPIOR, JJ.

HOUSE, Associate Justice.

This case is a sequel to the case reported in 157 Conn. 44, 245 A.2d 567, under the name of Little v. United Investors Corporation, the defendant being the same corporation but having changed its name. In that appeal we affirmed the judgment of the trial court rendered in favor of the plaintiffs in their action to collect two notes of the defendant on which payment was in default. The present dispute is over the amount of interest due on that judgment. The defendant paid the principal amount of the judgment debt in the sum of $3,000,000, together with the sum of $395,352.11 representing attorneys' fees, costs and interest calculated at the rate of 6 percent from the date of the judgment. The plaintiffs claim that interest should have been paid at the rate of 9 percent from the date of the judgment. The difference amounts to $127,500. The parties presented the question to the trial court on a stipulation of facts and that court decided that the plaintiffs were entitled to interest at 6 percent on the judgment and not 9 percent and rendered judgment accordingly. It is from that judgment and on that narrow issue that this appeal has been taken.

The defendant's notes contained the following provision: 'interest shall accrue at the rate of nine (9) per cent per annum on unpaid balances, before and after maturity, by acceleration or otherwise'.

Section 52-349 of the General Statutes provides that '(l)egal interest on the amount of the judgment shall be collected on the execution issued thereon'. The first question is, what is 'legal interest'? The answer is found in chapter 663 of the General Statutes, entitled 'Interest.' The first section of that chapter, § 37-1, provides as follows: 'Legal rate. The compensation for forbearance of property loaned at a fixed valuation, or for money, shall, in the absence of any agreement to the contrary, be at the rate of six per cent a year; and, in computing interest, three hundred and sixty days may be considered to be a year.' The basic controversy, then, revolves about the meaning of the phrase, 'in the absence of any agreement to the contrary,' as used in that statute.

Parenthetically, we note that our statute on the subject differs somewhat from those in most other states. At common law, judgments do not bear interest but interest on judgments is now generally allowed by virtue of statute. Pierce v. United States, 255 U.S. 398, 41 S.Ct. 365, 65 L.Ed. 697; 45 Am.Jur.2d, Interest and Usury, §§ 59, 60; 47 C.J.S. Interest § 40. In many states, including Florida, Illinois, Montana and Indiana, the governing statute provides that the interest rate on judgments shall be at a fixed rate. The Illinois statute is typical of this type of statute: 'Every execution issued upon a judgment shall direct the collection of interest thereon, from the date of the recovery of the judgment until the same is paid, at the rate of 6% per annum.' Ill.Rev.Stat. c. 77, § 7. On the other hand, many other states, including Arkansas, Arizona, Georgia, Iowa, Nebraska, Nevada, Michigan, Oregon and Washington, expressly provide for interest at the contractual rate after judgment. The Arizona statute is typical of this type: 'A judgment given on such agreement shall bear the rate of interest provided in the agreement, and it shall be specified in the judgment.' Ariz.Rev.Stat. § 44-1201, subsec. B. Since the problem presented in this case would only arise from judgments in contract cases. and then only where the statute was not clear on its face and where the difference in the amount of interest, if contested, was sufficient to warrant appeal, there is a dearth of relevant case law on the question and we find that because of the differing statutory provisions most of the few existing cases from other jurisdictions are of little help in th decision of this appeal.

Connecticut has by statute long provided for interest on judgments. The first enactment appears to be chapter 34 of the Public Acts of 1860. Thus is the predecessor of the present § 52-349 and provided that 'lawful interest upon the amount of the judgment upon which such execution is issued shall form a part of the amount to be collected by the officer to whom such execution or executions may be directed and delivered'. In the light of ther continuance of this statutory direction down to the present General Statutes § 52-349, the common-law impediment to interest on judgments does not exist in Connecticut. The common-law principle was predicated upon the theory that the note or contract which was the subject of suit merged in the judgment and technically there could be no agreement concerning the judgment. See Bowers v. Hammond, 139 Mass. 360, 31 N.E. 729. Section 52-349 expressly provides for legal interest on judgments and § 37-1 expressly provides that the legal rate of interest shall be 6 percent, 'in the absence of any agreement to the contrary.' We see no conceivable reason why such a proviso should be included in the statutory definition of 'legal interest' unless the General Assembly recognized the right of the parties to agree upon interest rates, subject to the limitations imposed by the usury statutes. Implicit in § 37-1 is the provision that if the parties have agreed upon a rate of interest not prohibited by the usury law then that rate is the legal rate and only in the absence of such an agreement is it 6 percent. This meaning is clear from reading the two statutes together.

The language of predecessory statutes and the construction placed on them by this court confirms the clearly expressed intention of jthe legislature in the enactment of these statutes. As distinguished from prohibitions against usury, the legal rate of interest appears to have been first set in chapter 16 of the Public Acts of 1872. This act provided: 'When there is no agreement for a different rate of interest of money, the same shall be at the rate of six dollars upon one hundred dollars'. In 1874 this statute was amended solely to change the rate from 6 percent to 7 percent. Public Acts 1874, c. 108. In 1877, the rate was changed back to 6 percent and the language was altered to read: 'The compensation for forbearance of property loaned at a fixed valuation, or for money, shall in the absence of any agreement to the contrary be at the rate of six per cent a year'. Public Acts 1877, c. 151. This provision has continued without change and is the present § 37-1 of the General Statutes defining 'legal interest.'

In Beckwith v. Trustees of Hartford, P. & F.R.Co., 29 Conn. 268, decided in 1860, this court was faced with the question of the rate of interest to be assessed in favor of bondholders against the defendants for the period after the railroad had defaulted on the payment of its bonds. The bonds carried interest at 7 percent pursuant to the authorization of Statutes, 1854, p. 750, § 23, but the usury statute prohibited interest at a greater rate then 6 percent. It was the contention of the defendants that although they were required to pay interest at 7 percent on the principal until it became due that after maturity the interest rate should be at 6 percent. The court rejected this contention, saying (p. 271): 'And the different rates thus agreed upon become the legal rates of interest in respect to particular contracts during their existence. And the rates of interest thus established by agreement must be presumed to be just and equitable under the circumstances, that is, a fair compensation in such case for the use of money between the parties during the time the contract had to run. Then why should we not presume, as between the same parties, that such continues a fair compensation for its use until the contract is performed, as well after as before the day when the principal was to be paid, and thus permit the rate of interest agreed upon to control the damages to be paid for the detention of the money as well as the interest for its use. There is no equity in favor of one rate of interest rather than another, where they are both legal, and within reasonable limits, and the defendants ought not to complain so long as it is in their power, by paying the principal, to protect themselves from...