U.S. v. Griffin

• Decision Date: 31 January 1986
• Docket Number: Nos. 85-2208,85-2244,s. 85-2208
• Citation: 782 F.2d 1393
• Parties: UNITED STATES of America, Plaintiff-Appellee--Cross-Appellant, v. Jack GRIFFIN, et al., Defendants. Appeal of Merrill MOORES, Cross-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1393

782 F.2d 1393

4 Fed.R.Serv.3d 414

UNITED STATES of America, Plaintiff-Appellee--Cross-Appellant, v. Jack GRIFFIN, et al., Defendants Appeal of Merrill MOORES, Cross-Appellee.

Nos. 85-2208, 85-2244.

United States Court of Appeals Seventh Circuit.

Argued Jan. 6, 1986.

Decided Jan. 31, 1986.

Merrill Moores, Moores, Boring & Landwerlen, Indianapolis, Ind., for appellant.

Gerald A. Coraz, Asst. U.S. Atty., Indianapolis, Ind., for plaintiff-appellee cross-appellant.

Before CUDAHY, FLAUM, and EASTERBROOK, Circuit Judges.

EASTERBROOK, Circuit Judge.

The foreclosure of a mortgage has produced a difficult problem in the interpretation of Fed.R.Civ.P. 60(a): whether an error in entering the rate of post-judgment interest into a consent decree is a "clerical mistake" that may be corrected at any time. The blunder in this decree went unnoticed for 20 months, until after the judgment had been assigned to a third party and the property had been sold at auction. Unless this is the sort of mistake that may be corrected "at any time" under Rule 60(a), it cannot be corrected at all.

I

Carmel Bank had a note for $28,000 plus $9,292 in interest arrears secured by a first mortgage on some property, and the United States had a note for $115,000 plus $15,359 interest arrears secured by a second mortgage. The annual rates of interest were 18% on Carmel Bank's note and 10% on the government's. The United States sought to foreclose its mortgage, and the affected parties worked out a consent decree. The owner admitted the debts and nonpayment; the United States admitted Carmel Bank's prior interest; everyone agreed to the sale of the property to satisfy the debts, the sale to take place free of any equity of redemption. The buyer would get good title, and the United States would have a judgment against the owner for any deficiency.

It was necessary to identify the rate of interest that would apply to the debt between the date the judgment was entered and the date of the foreclosure sale (and the date the United States collected any deficiency). Under 28 U.S.C. Sec. 1961(a) interest "shall be allowed" on every judgment in a civil case, and this interest "shall be calculated ... at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States treasury bills settled immediately prior to the date of the judgment." The statute eliminates all discretion. On the date of judgment, someone must find the "coupon issue yield equivalent" interest rate of 52-week treasury bills at the most recent auction. These rates are compiled by the Secretary of the Treasury and published; they are also widely available in the financial press.

The statute creates a potential problem for people negotiating a consent decree. Unless the negotiations conclude with startling dispatch, at least one auction of treasury bills will intervene between the beginning of the negotiations and the entry of the judgment. One expedient is to leave blanks in the decree to be filled in on the day of judgment. That happened here. The decree called for the fund generated by the sale to be disbursed as follows (after provisions for taxes and costs):

b. To the payment of $37,291.89 to Carmel Bank and Trust Company, with future interest accruing at the rate of $13.81 per day from May 1, 1983, up to the date on which the decree is entered, plus interest thereafter of ---%, according to law, plus attorneys' fees in the amount of $3,000.00;

c. To the payment of $130,358.50 to plaintiff, with future interest accruing at the rate of 10% per annum from May 1, 1983, up to the date on which the decree is entered, plus interest thereafter of ---% per annum, according to law, plus costs, disbursements, and expenses.

Each paragraph set out the contractual rate of interest ($13.81 per day on the bank's debt is 18% per year) running from May 1 until entry of judgment, followed by a blank to be filled in "according to law." One might suppose that the "law" in question was 28 U.S.C. Sec. 1961(a).

The decree was entered on May 25, 1983. On that date the rate of interest required by Sec. 1961(a) was 8.72% per year. Both blanks were filled in, although we do not know when or by whom. The blank in paragraph (c) contains a handwritten "8.72", the legal rate. The blank in paragraph (b) contains a typewritten "18", the contractual rate. No one brought the discrepancy to the district court's attention until after the sale took place.

Immediately before the sale in January 1985, Merrill Moores, an attorney, bought Carmel Bank's interest in the judgment. Moores then purchased the property at the sale for $115,001, exactly $1 more than the United States bid. Moores paid the sum to the Marshal, but as the owner of the bank's interest in the judgment Moores is entitled to cash back. The question is how much. The difference is substantial. The debt to the bank was $37,637 on May 25, 1983, when the judgment was entered. With interest compounded yearly at 18%, the entitlement will be worth about $58,600 by February 1, 1986, while if the rate is 8.72% the entitlement will be worth about $47,100.

The United States wants to receive as much of the $115,001 as possible, and it asked the district court to change the 18% rate in paragraph (b) to the legal rate of 8.72%. The court complied. Moores then asked the court to restore the original rate. The court reaffirmed its decision in a thoughtful opinion. The district judge agreed with Moores that the party seeking an alteration of a judgment under Rule 60(a) must show "a clear entitlement to an interest award [and] ... automatic application and mechanical calculation of the award, with no exercise of discretion...." The court thought that Moores loses under this standard because 28 U.S.C. Sec. 1961(a) leaves courts with no discretion and because the consent decree created two blanks, each to be filled in "according to law." As a result, "[t]he entry of the 18% interest rate clearly was not intended by the parties and was an error caused by clerical mistake and oversight."

II

The consent decree called for a single number, the rate "according to law", to be inserted in each of two blanks. Different numbers ended up in these blanks--the contractual rate in one and the rate "according to law" in the other. It is therefore apparent on the face of the document that something went wrong. ¹ We do not know who wrote the numbers in the blanks or when; we know only that a mistake was made. Our question is whether this blunder is best characterized as a "clerical mistake" that may be corrected under Rule 60(a) at any time, as a "mistake [or] inadvertence" that may be corrected under Rule 60(b)(1) on motion filed within a year, or as a legal error that may be corrected under Rule 59(e) on motion filed within 10 days.

The polar cases are clear. If the parties had actually bargained for a rate of 18%, believing it to be authorized by law, they could not use Rule 60(a) to substitute a fresh bargain. The Rule does not permit alterations of factual and legal decisions deliberately made. Hoffman v. Celebrezze, 405 F.2d 833 (8th Cir.1969). On the other hand, suppose the blanks had been left empty through the date of the sale. They could be filled in later, on the authority of Rule 60(a), to complete the bargain. Or suppose a decimal point had been misplaced, so that the bank's interest was "87.2%" instead of "8.72%". Again the mistake would be a scrivener's error. See Allied Materials Corp. v. Superior Products Co., 620 F.2d 224 (10th Cir.1980). Suppose finally that the consent decree had stated that interest was to be "according to law" but had left no blanks, and the rate had never been identified. Then a court may specify the appropriate rate at any time. United States v. Kenner, 455 F.2d 1, 5-6 (7th Cir.1972).

Kenner, which allowed a district court to establish a rate of interest several years after the entry of judgment, is close but not dispositive. In Kenner, as here, the judgment called for the legal rate of interest; in Kenner the judgment was silent on what that rate might be, while this judgment said "18%". But the only reasons why the use of an incorrect number might matter are reliance and an actual agreement to employ the wrong number. The bank did not rely to its detriment on the error, and the consent judgment does not embody an actual agreement on anything other than the rate of interest determined "according to law." (We address in Part III whether Moores has an independent claim of reliance.) The amendment of the judgment to replace "18%" with "8.72%" therefore carries out the principal function of Rule 60(a)--protecting the court's (or the parties') actual meaning from mistakes in implementation. See 11 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2854 pp. 149, 154 (1973); 6A J. Moore, Moore's Federal Practice p 60.06 pp. 60-41 to -42, 60-52 (1983). District courts enter thousands of judgments every year, so there are bound to be some mistakes between the design of a judgment and its implementation. There are two ways to deal with these--to scrutinize every judgment with great care, and to use less care but correct scriveners' errors that show up later. If errors are few, then subsequent correction is on balance the better device. Rule 60(a) embodies a conclusion that subsequent correction is preferable to greater vigilance (plus a rule of preclusion).

If the flaw lies in the translation of the original meaning to the judgment, then Rule 60(a) allows a correction; if the judgment captures the original meaning but is infected by error, then the parties must seek another source of authority to correct the mistake. So read, Rule 60(a) preserves the stability of judgments, an important interest of everyone in the legal system. See Metlyn Realty Corp. v. Esmark, Inc., 763 F.2d 826, 830-32 (7th Cir.1...