Brady v. Park
2013 UT App 97
| Utah Ct. App. | 2013Background
- Bradys purchased commercial property from Park in 1996 and gave two promissory notes, including a $675,000 Note with 10% interest and a balloon in 2006.
- Note required monthly payments of $5,923.61 and imposed a 10% late fee after five days and a 20% default interest on the entire balance until current.
- Bradys paid monthly, with some late payments, and sought refinance starting around 2000, learning in 2002 that Park believed the Note was not current since March 1997.
- In 2006 Park provided payoff amounts; Bradys sued for a judicial amount determination, and Park counterclaimed for breach and unjust enrichment.
- Trial court held the Note called for compound interest and that all accrued default interest was due before current status, and barred the 10% late fee as a penalty.
- Appellate court reverses in part, remands for recalculation, and clarifies that the Note bears simple interest and that default interest is ambiguous, affecting the amount owed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Note call for compound interest? | Bradys: no express compound interest terms; only simple interest. | Park: note implies compound interest via 20% default and balance provisions. | Note does not expressly provide compound interest; it bears simple interest. |
| Is the 10% late fee enforceable or a penalty? | Bradys: late fee is unenforceable penalty; burden on Park to prove liquidated damages. | Park: late fee may be enforceable liquidated damages under updated law. | Remanded to evaluate enforceability under Commercial Real Estate standard; not decided. |
| Does the 20% default interest enforceable, and when is it due to bring current? | Bradys: default interest should not compound to force balloon; may be payable with balloon. | Park: default interest accrues and is due monthly until brought current. | Default interest is ambiguous; construed against drafter; accrues until balloon and is due with balloon, not prior to it. |
| Was the 20% default interest rate preservation required for appeal? | Bradys contends the rate is unenforceable as unconscionable or penalty. | Park: preservation not met; not properly raised at trial. | Bradys' challenge to 20% default rate not preserved; not considered on appeal. |
| Was the Bank One Fax correctly excluded as tender evidence? | Bradys argue it showed tender in 2000 halting interest accrual. | Park argues it was not a bona fide tender, merely an inquiry. | Exclusion not erroneous; fax not a bona fide unconditional tender. |
Key Cases Cited
- WebBank v. American Gen. Annuity Serv. Corp., 2002 UT 88 (Utah Supreme Court (2002)) (contract interpretation; ambiguity review)
- Mountain States Broadcasting Co. v. Neale, 783 P.2d 551 (Utah Ct. App. 1989) (compound interest issue; longstanding disfavor)
- Christensen v. Munns, 812 P.2d 69 (Utah Ct. App. 1991) (disfavor of compound interest)
- Commercial Real Estate Inv., LC v. Comcast of Utah II, Inc., 2012 UT 49 (Utah Supreme Court (2012)) (liquidated damages guidance; unconscionability framework redefined)
- Fire Ins. Exch. v. Oltmanns, 2012 UT App 230 (Utah Ct. App. 2012) (construction against the drafter; ambiguity resolution)
- Cantamar, LLC v. Champagne, 2006 UT App 321 (Utah Ct. App. 2006) (default interest reasonableness; appellate precedent)
- Markham v. Bradley, 2007 UT App 379 (Utah Ct. App. 2007) (implied covenant; objective reasonableness standard)
- Ward v. Intermountain Farmers Ass’n, 907 P.2d 264 (Utah (1995)) (contract interpretation; ambiguity principles)
- Zions Props., Inc. v. Holt, 538 P.2d 1319 (Utah (1975)) (construction against the framer; note interpretation)