The Delaware Court of Chancery recently held that, in a case alleging breach of a loan agreement for more than $100,000, post-judgment interest accrues at the rate set forth in the agreement and not at the lower statutory rate.
FE Partners, LLC made a loan to Sequoia Presidential Yacht Group LLC with an 8.75 percent interest rate per annum. Sequoia later commenced an action to prevent FE Partners from utilizing an option to purchase the collateral for the loan, and FE Partners counterclaimed for breach of the loan agreement. Although the dispute ultimately settled, with Sequoia consenting to entry of a default judgment on FE Partners’ counterclaim, the parties disagreed over the rate for the post-judgment interest.
In considering which rate should apply, the court looked to the state’s usury law, Section 2301 of Title 6 of the Delaware Code. Section 2301(a) caps the interest rate on loans at five percent over the Federal Reserve discount rate including any surcharge thereon (the legal rate), and provides that “except as otherwise provided,” post-judgment interest shall be the legal rate or the contract rate, whichever is less.
Sequoia argued that Section 2301(a) governed its loan and therefore interest was limited to the lower legal rate. The court, however, held that Section 2301(c), not Section 2301(a), governed the agreement. Section 2301(c) imposes no limit on the interest charged for loans in excess of $100,000 and not secured by a mortgage against the borrower’s principal residence.
Despite Section 2301(c)’s silence on the issue of post-judgment interest, the court looked to the statutory scheme laid out in Section 2301(a), which permits lawful contract rates to govern post-judgment. As such, the court determined that post-judgment interest would accrue at the parties’ agreed-upon contract rate of 8.75 percent.
Sequoia Presidential Yacht Group LLC v. FE Partners, LLC, Civil Action No. 8270-VCG.