August 28, 2023Share
Lender Alert: Identifying Post-Judgment Interest in Foreclosure Judgments
By: Marc Marra
In re 6200 NE 2nd Ave., LLC
648 B.R. 114 (Bankr. S.D. Fla. 2022)
When foreclosure judgments, and the loan instruments underlying those judgments, did not specifically identify a post-judgment interest rate, the U.S. Bankruptcy Court for the Southern District of Florida ruled that 4.25% statutory foreclosure rate must be imposed; not the 25% default rate sought by mortgage servicer.
Subsequent to the entry of two foreclosure judgments in state court in favor of a mortgage servicer, debtors’ filed for chapter 11 bankruptcy. Servicer filed two proofs of claim in the bankruptcy cases based upon their interest in the mortgage foreclosure judgments. Debtors objected to servicers’ proofs of claim and the 25% post-judgment interest rate sought therein.
The U.S. Bankruptcy Court for the Southern District of Florida sustained debtors’ objection to the proofs of claim and ruled that the state’s statutory judgment rate of 4.25% applied when, as here, the loan instruments and foreclosure judgments were silent as to a specific post-judgment interest rate.
In ruling, the bankruptcy court relied upon Whitehurst v. Camp, wherein the Florida Supreme Court held that “because a judgment is an obligation separate from the underlying contractual debt, to contractually set the rate of post-judgment interest the parties must expressly provide that the agreed interest rate also applies to any judgment or decree entered on the underlying debt.” Id., 699 So. 2d 679, 682 (Fla. 1997).
As the interest rate language in the judgments was ambiguous, the bankruptcy court interpreted the state court judgment awards of post-judgment interest “at the highest legal rate of interest” to mean “at the highest legal rate of interest applicable to judgments” as opposed to “the highest legal rate of interest applicable to loans.” In re 6200 NE 2nd Ave., LLC, 648 B.R. 114, 117 (Bankr. S.D. Fla. 2022).