Sovereign Bank v. Remi Capital Inc
49f4th360
3rd Cir.2022Background
- Sovereign Bank made a $15M loan to REMI Capital in 2007; Erik Kaiser guaranteed REMI’s obligations under a Suretyship Agreement that provided that any judgment against Kaiser would bear interest at Prime + 6% per annum (and not the statutory post-judgment rate).
- REMI defaulted; Sovereign sued REMI and Kaiser. The parties placed a settlement on the record and the District Court entered a one‑sentence Consent Judgment on Sept. 1, 2010 for $1,560,430.24; the Consent Judgment said nothing about the interest rate.
- Sovereign assigned the Consent Judgment to Jenzack Partners, LLC, which later sought to collect post‑judgment interest at Prime + 6% from Kaiser based on the Suretyship Agreement.
- The District Court held that the Consent Judgment was unambiguous and silent on interest, applied the federal statutory post‑judgment rate (28 U.S.C. § 1961), allowed limited discovery, and ultimately found the judgment satisfied and discharged it.
- Jenzack appealed, arguing the contractual Prime + 6% rate survived and should govern post‑judgment interest; the Third Circuit affirmed the District Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a contractual post‑judgment interest rate (Prime + 6%) governs a federal money judgment when the later consent judgment is silent on interest | Jenzack: the Suretyship clearly prescribes post‑judgment interest and that contractual rate survives and governs the judgment | Kaiser/Respondent: the Consent Judgment is a judicial decree interpreted on its face; silence means the statutory §1961 rate controls | Held: Consent Judgment is unambiguous and contains no interest term; §1961 default rate applies; contractual rate not enforceable against the judgment. |
| Whether parties can contract around §1961 | Jenzack: parties may contract out of §1961 if they show clear, unambiguous intent that the contractual rate apply to judgments | Kaiser: any such intent must appear in the judgment or an incorporated document; absent that, §1961 governs | Held: Parties can contract around §1961, but here the Consent Judgment contains no clear, unambiguous language adopting the contractual rate, so §1961 governs. |
| Does entry of the Consent Judgment effect a novation or merger that extinguishes prior contractual terms (or preserve specific contractual terms)? | Jenzack: the master note/suretyship preserved post‑judgment interest (expressly before and after judgment), so merger does not defeat that term | Kaiser: the settlement and consent judgment supplanted prior contract terms as reflected on the face of the judgment; parties intended to end the case | Held: Because the Consent Judgment is a judicial decree interpreted within its four corners and contains no interest term, the court will not look through to prior agreements; the prior contractual term does not control the judgment. |
Key Cases Cited
- In re Stendardo, 991 F.2d 1089 (3d Cir. 1993) (doctrine that contract claims merge into judgment unless contract clearly preserves post‑judgment obligations)
- Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96 (2d Cir. 2004) (parties may override §1961 only by clear, unambiguous, unequivocal language applying the contractual rate to judgments)
- SEC v. Levine, 881 F.2d 1165 (2d Cir. 1989) (consent judgments are interpreted by their face or by documents incorporated by reference)
- United States v. Armour & Co., 402 U.S. 673 (1971) (consent decrees must be interpreted within their four corners and not by extrinsic aims)