Summary
In Young v. Robin, 146 Mich. App. 552, 382 N.W.2d 182 (1985), the parties entered into a settlement agreement that did not mention interest, and the court subsequently entered a consent judgment consistent with the settlement agreement.
Summary of this case from Employers Mut. Cas. Co. v. McKeonOpinion
Docket Nos. 80065, 80066.
Decided October 21, 1985. Leave to appeal denied, 424 Mich ___.
McGinty, Brown, Jacubiak, Frankland Hitch, P.C. (by Charles E. Henderson), for plaintiffs.
Lilly, Domeny, Durant, Byrne Schanz, P.C. (By Paul Z. Domeny), for defendants.
Before: R.M. MAHER, P.J., and BEASLEY and SHEPHERD, JJ.
In these consolidated appeals as of right, plaintiffs claim that the trial court erred in refusing to award statutory interest on the consent judgments entered after the parties reached settlement agreements which were silent as to interest. We affirm.
Plaintiff Elmer Cary, Eldrid Cary and plaintiff Young were passengers in an automobile driven by Kenneth Young. The vehicle ran headlong into a truck driven by defendant Robin. Eldrid Cary and Kenneth Young died because of the collision.
The facts are succinctly stated in this Court's opinion in a prior appeal. Young v. Robin, 122 Mich. App. 84, 85-86; 329 N.W.2d 430 (1982).
During trial, the parties reached a settlement. They placed the terms of the agreement on the record. There was no mention of interest. By the terms of the two judgments (entered June 21, 1984) appealed from here, relating to the individual claims of the two plaintiffs, the trial court awarded interest only from June 29, 1984. Defendants satisfied the judgments before that date. The trial court denied plaintiffs' motion for interest from commencement of these actions.
Plaintiffs argue that the trial court's refusal to award interest on the consent judgments from the date plaintiffs filed their complaints is in fatal conflict with the following statute:
"(1) Interest shall be allowed on a money judgment recovered in a civil action, as provided in this section.
"(2) For complaints filed before June 1, 1980, in an action involving other than a written instrument having a rate of interest exceeding 6% per year, the interest on the judgment shall be calculated from the date of filing the complaint to June 1, 1980 at the rate of 6% per year and on and after June 1, 1980 to the date of satisfaction of the judgment at the rate of 12% per year compounded annually." MCL 600.6013; MSA 27A.6013 (emphasis added).
Plaintiffs urge that each consent judgment is a "judgment" within the meaning of the statute, so that the allowance of prejudgment interest is mandatory in these cases. Militzer v Kal-Die Casting Corp, 41 Mich. App. 492, 496; 200 N.W.2d 323 (1972), lv den 388 Mich. 789 (1972). We do not believe this issue can be so easily decided.
The trial court entered the judgments only as a result of the settlements. While "on its plain unambiguous terms, § 6013 applies to all damages sought and sustained in a civil action", Goins v. Ford Motor Co, 131 Mich. App. 185, 202; 347 N.W.2d 184 (1983), lv granted 422 Mich. 857 (1985) (emphasis added), we remain unpersuaded that its application is mandatory even though the judgment is entered as a reflection of the parties' agreement. Surely the Legislature did not intend to abrogate the common law principles governing consent judgments:
"A consent judgment differs substantially from the usual litigated judgment. It is primarily the act of the parties rather than the considered judgment of the court. Union v. Ewing [ 372 Mich. 181; 125 N.W.2d 311 (1963)]. Cf. Tudryck v. Mutch [ 320 Mich. 99; 30 N.W.2d 518 (1948)]. It ordinarily cannot be set aside by the court without the consent of the parties. In re Estate of Meredith [ 275 Mich. 278; 266 N.W. 351; 104 ALR 348 (1936)]." Ortiz v. Travelers Ins Co, 2 Mich. App. 548, 555; 140 N.W.2d 791 (1966).
"A consent judgment reflects primarily the agreement of the parties. Dora v. Lesinski, 351 Mich. 579, 582; 88 N.W.2d 592 (1958). The action of the trial judge in signing a judgment based thereon is ministerial only. The parties have not litigated the matters put in issue, they have settled. The trial judge has not determined the matters put in issue, he has merely put his stamp of approval on the parties' agreement disposing of those matters." American Mutual Liability Ins Co v. Michigan Mutual Liability Co, 64 Mich. App. 315, 327; 235 N.W.2d 769 (1975), lv den 395 Mich. 830 (1976).
Moreover, the statute dictates allowance of interest on a judgment "recovered", MCL 600.6013(1). Black's Law Dictionary (4th ed) defines "recover", in pertinent part, as follows:
"In a narrower sense, to be successful in a suit, to collect or obtain amount, to have judgment, to obtain a favorable or final judgment, to obtain in any legal manner in contrast to voluntary payment." (Citations omitted.) See, Garza v. Chicago Health Clubs, Inc, 347 F. Supp. 955, 962 (ND Ill, 1972).
Since a consent judgment is by definition a product of voluntary agreement, American Mutual, supra, it is not "recovered" through litigation of the matter to a judicial decision. The parties to a settlement may agree that the settlement figure include interest, that interest is to be added to that figure, or that no interest (or interest at a rate different than those set forth in the statute) be included in the agreement. The statute does not require defendants to pay more than the parties agreed. The issue arises only when there is no agreement on the question of interest.
In McGrath v. Clark, 89 Mich. App. 194; 280 N.W.2d 480 (1979), this Court held that, when the court entered a consent judgment following plaintiff's acceptance of defendant's offer of judgment, GCR 1963, 519.1, and the offer contained no provision for interest, plaintiff was entitled to statutory interest. The Court stated: "This leaves the parties free to negotiate on the subject but does not deprive one party of a statutory right by mere silence." 89 Mich. App. 197. Another panel followed McGrath in Singleton v. Davis, 95 Mich. App. 182, 184; 290 N.W.2d 117 (1980), lv den 409 Mich. 872 (1980).
Under MCR 2.405(A)(1), an offer of judgment "is deemed to include all costs and interest then accrued". Thus, McGrath is no longer good law.
On the other hand, this Court has twice held that where the case was terminated by dismissal following a settlement, plaintiffs waived the right to statutory interest because no final judgment was rendered. Silisky v. Midland-Ross Corp, 97 Mich. App. 470, 476; 296 N.W.2d 576 (1980), lv den 414 Mich. 868 (1982); Awedian v. Theodore Efron Mfg Co, 66 Mich. App. 353, 357-358; 239 N.W.2d 611 (1976), lv den 396 Mich. 856 (1976). In Commercial Union Ins Co v. The Shelby Mutual Ins Co, 563 F. Supp. 803, 805 (ED Mich, 1983), Judge Joiner drew this conclusion:
"Reviewing all of the decisions, it becomes clear that Michigan courts apply the statute only to situations within its express terms, `interest * * * on a money judgment,' and draw a distinction under the statute between judgments and consent judgments on the one hand, and settlements which result in dismissal on the other. There is a right to prejudgment interest in the former but not the latter case."
See, also, Darnell v. Auto Owners Ins Co, 142 Mich. App. 1, 16; 369 N.W.2d 243 (1985); Celina Mututal Ins Co v. Citizens Ins Co of America, 133 Mich. App. 655, 658; 349 N.W.2d 547 (1984).
We are dissatisfied with the state of the law on this issue. In our view, Silisky and Awedian, supra, were correctly decided, because in those cases the trial court entered no judgment which might have served as a basis for an award of statutory interest. However, we do not agree with the notion and with cases that hold that incorporation of a settlement agreement into a consent judgment dictates an award of prejudgment interest even though the parties have reached no agreement on that issue. A consent judgment is merely reflective of the parties' agreement. American Mutual, supra. "An agreement to settle a pending lawsuit is a contract which is to be governed by the legal principles which are generally applicable to the interpretation and construction of contracts." Gojcaj v. Moser, 140 Mich. App. 828, 834; 366 N.W.2d 54 (1985). When the parties have reached no agreement on the question of interest, the trial court lacks authority to impose it as a term of the consent judgment. The court cannot extend the settlement to matters not included in the agreement. 15A Am Jur 2d, Compromise Settlement, § 23, pp 795-796.
Furthermore, we see no reason to place such heavy emphasis on the fact that the case was settled by a consent judgment rather than by a dismissal. Generally, a consent judgment is entered for one or more of the following reasons:
A. The case involves the interests of minors.
B. The parties for their own private reasons want the matter memorialized by a judgment.
C. Full payment is not made immediately and plaintiff needs the protection of a judgment.
None of these reasons justifies imposing interest back to the date of filing the complaint when the parties and their consent judgment are silent on that issue.
We conclude that the trial court rightly refused to obligate defendants to pay statutory prejudgment interest, since the agreement placed on the record was silent on that point and there is no indication that there was a binding agreement relative to the payment of interest which was not placed on the record.
Interest on a judgment (or an amount equivalent to the same) is an important term of a consent judgment, especially in these days of 12% interest rates. MCL 600.6013. We believe that litigants and their counsel generally resolve the question of interest and incorporate their resolution of the issue into their settlement agreements as a matter of course. In this case, the agreement was silent on this term. "A meeting of the minds of the parties upon all essential points is necessary to constitute a valid contract." International Transportation Ass'n v. Bylenga, 254 Mich. 236, 239; 236 N.W. 771 (1931). There is no indication in the record that the parties had reached an agreement as to interest but then simply neglected to place it on the record. On the contrary, they simply neglected to negotiate and agree on that matter. The parties did agree to the amount of principal to be paid and that the principal was to be treated separately from interest. This is confirmed by the facts that the amount of principal was reduced to judgment, tendered and accepted. We agree with the circuit judge that, in these circumstances, the statute does not force defendants to pay interest which they never agreed to pay.
Affirmed.
BEASLEY, J., concurred.
I concur in the decision of the majority but write separately to state that implicit to this Court's application of GCR 1963, 519.1 is the conclusion that an offer of judgment is not subject to the interest statute. Singleton v. Davis, 95 Mich. App. 182, 185; 290 N.W.2d 117 (1980) (MAHER, J., dissenting), lv den 409 Mich. 872 (1980), citing Bertilucci v. Avery, 42 Mich. App. 483; 202 N.W.2d 331 (1971), and Beltz v. Kimberley, 63 Mich. App. 700, 702-703, fn 1; 235 N.W.2d 25 (1975).
Under the new court rules, an offer of judgment is deemed to include costs and interest then accrued. MCR 2.405(A)(1). The new court rule does not reflect a change in law, but merely clarifies the old rule formalizing the settlement process. An application of the interest statute, MCL 600.6013; MSA 27A.6013, to consent judgments would alter and frustrate the terms of a voluntary settlement.