law-prejudgmenti-interest | post-judgment interest

Prejudgment Interest

Prejudgment interest is recoverable as a matter of right when an ascertainable sum of money is found due
and payable at a definite date before judgment.  Jarrin v. Sam White Oldsmobile Co., 929 S.W.2d 21, 24
(Tex. App.—Houston [1st Dist.] 1996, writ denied); see, e.g., Henry Bldg., Inc. v. Milam, No. 05-99-01400-
CV, 2001 WL 246882, at *3–4 (Tex. App.—Dallas Mar. 14, 2001, pet. denied) (holding that trial court erred
by awarding contractor six-percent-per-year prejudgment interest instead of one and one-half percent per
month prejudgment interest under section 28.004(b)).  A general prayer for prejudgment interest
sufficiently invokes a statutory right to such interest.  Benavidez v. Isles Constr. Co., 726 S.W.2d 23, 25
(Tex.1987); Olympia Marble & Granite v. Mayes, 17 S.W.3d 437, 441 (Tex. App.—Houston [1st Dist.] 2000,
no pet.).  Because the plaintiff is entitled to prejudgment interest based on a prayer for general relief
alone, a plaintiff need not specifically plead prejudgment interest if the claim falls within the scope of a
statute authorizing pre-judgment interest.  Olympia Marble & Granite, 17 S.W.3d at 441; see e.g. Talley
Constr. Co. v. Rodriguez, 01-03-01147-CV, 2006 WL 908180 (Tex. App.—Houston [1st Dist.] Apr. 6, 2006,
no pet.) (holding that trial court did not err in awarding claimant eighteen percent per year in pre-judgment
interest under section 28.004(b) because claimant’s pleading included prayer for general relief).   

PREJUDGMENT INTEREST

Under Texas law, "[t]he prejudgment interest rate is equal to the postjudgment interest rate applicable at
the time of the judgment." Tex. Fin. Code § 304.103; Int'l Turbine Servs., Inc. v. VASP Brazilian Airlines,
278 F.3d 494, 500 (5th Cir. 2002) (holding that under Texas law, the rate of pre-judgment interest "accrue
[s] at the same rate as post-judgment interest."); see also Bob Anderson v. Mega Lift Sys., L.L. C. (In re
Mega Sys., L.L. C), No. 04-6085,2007 WL 1643182, at * 10-11 (Bankr. E.D. Tex. 2007). The post-
judgment rate is statutorily set at the "prime rate as published by the Board of Governors of the Federal
Reserve System on the date of computation" unless this rate is less than five percent or more than fifteen
percent. Tex. Fin. Code Ann. § 304.003(c). Therefore, this Court will follow the Texas method of
calculating interest and use the prime rate, as opposed to the Treasury yield.

Interest Under Texas Law

Under Texas law, prejudgment interest may be awarded if either the "general principles of equity" or an
"enabling statute" allow such an award. Johnson & Biggins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.
2d 507, 528 (Tex. 1998) (citing Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 552 (Tex. 1985);
and Phillips Petroleum Co. v. Stahl Petroleum Co., 569 S.W.2d 480, 483-85 (Tex. 1978)). Texas courts
have held that "the decision to award prejudgment interest is left to the sound discretion of the trial court,
which should rely upon equitable principles and public policy in making this decision." Citizens Nat. Bank v.
Allen Rae Invs., Inc., 142 S.W.3d 459, 487 (Tex. App.—Fort Worth 2004, no pet.). With respect to
awarding prejudgement interest in fraudulent transfer cases, Texas courts have concluded that equity
allows for such an award, and thus have frequently awarded pre-judgment interest in those cases. See, e.
g., Lentino v. Cullen Center Bank & Trust, No. 14-00-00692-CV, 2002 WL 220421, at *1 (Tex. App.—
Houston [14th Dist] Feb. 14, 2003, pet. denied) (mem. op.); McDill Columbus Corp. v. Univ. Woods
Apartments, Inc., No. 06-99-00138-CV, 2001 WL 392061, at *3 (Tex. App—Texarkana Apr. 19, 2001, pet.
denied) (unpublished); Arlittv. Weston, No. 04-98-00035-CV, 1999 WL 1097101, at *2 (Tex. App.—San
Antonio Dec. 1,1999, pet. denied). Additionally, post-judgment interest may also be awarded on a
fraudulent transfer claim under Texas law. Fidelity & Deposit Co. of Maryland v. Tri-Lam Co., Inc., No. SA-
06-CA-207-XR, 2007 WL 1452632, at *5 (W.D. Tex. May 15, 2007) (citing Tex. Fin. Code Ann. § 304.001).

As already noted, the rate for both prejudgment and post-judgment interest under Texas law is the prime
rate as published by the Board of Governors of the Federal Reserve System. Tex. Fin. Code Ann. §
304.003(c). However, § 304.003(c)(2) of the Texas Finance Code Annotated states that the judgment rate
shall be set at 5% if the current prime rate is less than 5%. The current prime rate is 3.25%. Federal
Reserve Statistical Release, H.15 Selected Interest Rates, http://www.federalreserve.gov/releases/hl
5/current/hl 5.htm (last visited August 31,2009). Therefore, pursuant to § 304.003(c)(2) of the Texas
Finance Code, the Court will apply a 5% interest rate to both prejudgment and post-judgment awards. See
Int'l Turbine Servs., Inc., 278 F.3d at 500 (holding that the rate of pre-judgment interest accrues at the
same rate as post-judgment interest); see also In re Mega Sys., L.I.C, No. 04-6085, 2007 WL 1643182, at
*10-11 (holding same).

Interest

In his fourth issue, Cobb argues that trial court erred in not awarding pre-judgment interest Footnote
because the issue was not addressed in Morace’s summary judgment motion. He requests that this Court
“permit Cobb recovery of interest for his breach of contract and on his other claims.”

We review a trial court’s decision regarding pre-judgment interest using an abuse-of-discretion standard.
Clements v. Minn. Life Ins. Co., 176 S.W.3d 258, 264 (Tex. App.—Houston [1st Dist.] 2004, no pet.),
overruled on other grounds by, State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799, 804 n.19 (Tex.
2007). Although a trial court may award pre-judgment interest under the authority of a statute or under an
equitable theory, a trial court has discretion to choose not to award pre-judgment interest. Id. at 264–65;
see Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 528 (Tex. 1998).
Accordingly, we hold that the trial court did not err in denying pre-judgment interest to Cobb.

POST-JUDGMENT INTEREST

The Finance Code provides that the consumer credit commissioner shall determine the postjudgment
interest rate to apply to money judgments.  TEX. FIN. CODE ANN. § 304.003(c)(2).  The interest rate
published by the consumer credit commissioner for judgments issued in May 2010 was five percent per
year.


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