The Supreme Court of Missouri recently affirmed, in part, a trial court order dismissing two debtors’ petitions attempting to assert violations of the federal Fair Debt Collection Practices Act and the Missouri Merchandising Practices Act against a hospital for failure to state a claim, holding that judgments in non-tort actions include post-judgment interest as a matter of law pursuant to § 408.040.1 even if the judgment does not expressly include postjudgment interest.
A copy of the opinion is available at: Link to Opinion.
A hospital provided medical services to the debtors. After the debtors failed to pay their debt, the hospital sued the debtors in separate breach of contract actions.
The court in each action entered judgments against the debtors. Neither judgment expressly provided for the recovery of post-judgment interest pursuant to § 408.040. Nevertheless, the hospital attempted to collect on the judgments, including seeking post-judgment interest.
The debtors, in separate petitions, sued the hospital and its debt collection counsel alleging they violated the federal Fair Debt Collection Practices Act and the Missouri Merchandising Practices Act because the judgments did not award post-judgment interest.
The hospital and its counsel moved to dismiss arguing that the petitions failed to state a claim on which relief can be granted. The trial court consolidated the cases and granted the motions to dismiss finding that the petitions failed to state a claim on which the court could grant relief.
The debtors appealed and, after the Court of Appeals opinion, the Supreme Court of Missouri accepted the case pursuant to article V, § 10 of the Missouri Constitution.
On appeal, the debtors argued that they properly stated a claim because § 408.040 does not provide for automatic accrual of post-judgment interest, and the judgments at issue did not expressly include post-judgment interest.
As you may recall, Section 408.040 provides, in relevant part, that:
1. In all nontort actions, interest shall be allowed on all money due upon any judgment or order of any court from the date judgment is entered by the trial court until satisfaction be made by payment, accord or sale of property; all such judgments and orders for money upon contracts bearing more than nine percent interest shall bear the same interest borne by such contracts, and all other judgments and orders for money shall bear nine percent per annum until satisfaction made as aforesaid.
2. Notwithstanding the provisions of subsection 1 of this section, in tort actions, interest shall be allowed on all money due upon any judgment or order of any court from the date of judgment is entered by the trial court until full satisfaction. All such judgments and orders for money shall bear a per annum interest rate equal to the intended Federal Funds Rate, as established by the Federal Reserve Board, plus five percent, until full satisfaction is made. The judgment shall state the applicable interest rate, which shall not vary once entered.
The debtors cited McGuire v. Kenoma, LLC, 447 S.W.3d 659 (Mo. 2014), to support their argument that a nontort judgment does not accrue post-judgment interest if the judgment does not expressly state that it includes post-judgment interest.
The Missouri Supreme Court distinguished McGuire, because, unlike these breach of contract actions, it was a tort case that concerned subsection 2 of section 408.040. Subsection 2 of § 408.040 provides that post-judgment interest “shall be stated” in the judgment or it is not collectible. The Court observed that subsection 1 (nontort actions) and subsection 2 (tort actions) are distinct because only subsection 2 requires that the “judgment shall state the applicable interest rate.” § 408.040.
In contrast, section 408.040.1 states that “judgments and orders for money upon contracts bearing more than nine percent interest shall bear the same interest borne by such contracts, and all other judgments and orders for money shall bear nine percent per annum until satisfaction made as aforesaid.” § 408.040.
Thus, the Missouri Supreme Court held, post-judgment interest under subsection 1 of § 408.040 accrues automatically because the plain language does not require any findings by a trial court “for a nontort judgment to bear 9-percent interest.” If the judgment does not specify the amount of interest the contract allows, then the judgment “shall bear nine percent interest,” and the judgment holder may collect post-judgment interest “even if the judgment does not specifically award the statutorily approved post-judgment interest.”
The Court observed that post-judgment interest is designed to ensure that “a money judgment will be worth the same when it is actually received as it was when it was awarded.” Also, post-judgment interest compensates “the successful plaintiff for being deprived of compensation for the loss from” when damages are ascertained and the defendant pays. Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 835–36 (1990). Moreover, courts have often recognized that “a judgment need not explicitly state it bears interest. Laughlin v. Boatmen’s Nat. Bank of St. Louis, 189 S.W.2d 974, 980 (Mo. 1945)
Thus, the Missouri Supreme Court explained, the prevailing party does not lose the “right to collect the statutorily authorized interest by the lack of a specific award as to post-judgment interest in nontort actions.” Instead, a “judgment must only recite the ‘money due’ or principal, and then the statute makes that amount bear interest, at the statutorily defined rate, to the time of payment.” Judgments in nontort actions include post-judgment interest as a matter of law pursuant to section 408.040.1 “regardless of whether the judgment expressly includes it.”
Finally, the Court found that the debtors’ petitions contained additional allegations — such as the law firm’s failure to credit all payments — that may state a claim upon which relief can be granted. The Missouri Supreme Court noted that the trial court should consider these issues in the first instance.
Accordingly, the Court reversed the trial court’s dismissal of the petitions, and remanded the case to consider the remaining issues.