2015 Ohio 53
Ohio Ct. App.2015Background
- Midwestern Auto Sales sued multiple buyers on separate retail installment contracts after defaults; trial court entered default judgments or granted judgments on the pleadings in favor of Midwestern in each case.
- Each contract included a federal Truth-in-Lending disclosure showing an APR in excess of 24%, a finance charge, amount financed, and payment schedule, but did not separately state a specific contract interest rate for sums "due and payable."
- Trial court awarded damages in Midwestern's favor but applied Ohio's statutory interest rate (3.0% per annum under R.C. 1343.03) rather than the APR listed in the Truth-in-Lending disclosure.
- Midwestern appealed, arguing it was entitled to contractual interest (and prejudgment interest) at the APRs shown in the contracts.
- The appellate court reviewed de novo whether the contracts provided a written, agreed interest rate and reviewed for abuse of discretion the trial court's accrual dates for prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the APR in the Truth-in-Lending disclosure constitutes a written contract interest rate for purposes of displacing the statutory rate | Midwestern: the APR in the contract (≈24%+) is the agreed rate and should replace the 3% statutory rate | Appellees/State: APR is a Truth-in-Lending disclosure reflecting total cost (interest + fees), not an express contract interest rate for amounts due and payable; absent an express rate, statutory rate applies | Held: APR is not an express contractual interest rate; R.C. 1343.03 statutory rate (3.0%) applies |
| Whether prejudgment interest must be awarded and when it begins to accrue | Midwestern: entitled to prejudgment interest at contractual (APR) rate from default | Appellees: prejudgment interest, if any, is controlled by statute; accrual date depends on when sum became due and payable | Held: Prejudgment interest is mandatory under R.C. 1343.03(A) but at statutory rate here; trial court did not abuse discretion in most cases by starting accrual at date of default, but in two cases the court erred by awarding interest only from judgment date rather than from default |
Key Cases Cited
- Howard v. Catholic Social Servs. of Cuyahoga Cty., 70 Ohio St.3d 141 (1994) (trial court loses jurisdiction to rule on Civ.R. 60(B) after appeal is filed)
- Hobart Bros. Co. v. Welding Supply Serv., Inc., 21 Ohio App.3d 142 (10th Dist. 1985) (two prerequisites for contractual interest to displace statutory rate: written contract and contract must provide an interest rate for sums due)
- Royal Elec. Constr. Corp. v. Ohio State Univ., 73 Ohio St.3d 110 (1995) (prejudgment interest compensates for lapse between accrual and judgment)
- Ohio Neighborhood Fin., Inc. v. Scott, 139 Ohio St.3d 536 (2014) (APR under Truth-in-Lending differs from contract interest rate because APR includes other finance charges)
- Smith v. Anderson, 801 F.2d 661 (4th Cir. 1986) (APR includes broader finance charges and is distinct from simple interest rate)