Opinion
No. 5-877 / 05-0601
Filed February 1, 2006
Appeal from the Iowa District Court for Polk County, Michael Huppert, Judge.
Plaintiff lessor appeals following entry of default judgments against defendant lessees, asserting the district court erred in its damage and interest awards. AFFIRMED.
Edward McConnell, West Des Moines, for appellant.
Acevado Grocery, Inc., Highland Falls, New York, pro se.
Domingo Acevado, Highland Falls, New York, pro se.
Bishop's Table, Inc., Miller Place, New York, pro se.
John Scalatos, Miller Place, New York, pro se.
Vista Bagels, Inc., Oceanside, California, pro se.
Alan Amster, Oceanside, California, pro se.
JMM Food Corporation, Bronx, New York, pro se.
Cristino Marte, Bronx, New York, pro se.
Considered by Zimmer, P.J., and Miller and Vaitheswaran, JJ.
Lessor plaintiff Frontier Leasing Corporation (Frontier) appeals following entry of default judgments against lessee defendants Acevedo Grocery, Inc. and Domingo Acevedo (Acevedo), Bishop's Table, Inc. and John Scarlatos (Bishop's), Vista Bagels, Inc. and Alan Amster (Vista), and JMM Food Corporation and Cristino Marte (JMM). It contends the district court erred when it failed to award Frontier all the damages to which it was entitled in each action, and by ordering that interest on the damage awards against Bishop's and JMM would accrue from the date of judgment. Upon our review for the correction of errors at law, Iowa R. App. P. 6.4, we affirm the district court.
The individual defendants were all guarantors for the lessee corporations.
I. Background Facts and Proceedings.
In 1999 and 2000 Liberty Leasing Company (Liberty) entered into equipment lease agreements with Acevedo, Bishop's, Vista, and JMM. Under each agreement the lessee agreed to lease an ATM machine from Liberty for a period of sixty months. At the end of the lease term the lessee was required to return the ATM to Liberty, unless the lessee exercised an option to purchase the equipment. The lease defined the purchase option as simply "10%." The lease provided that, in the event of the lessee's default, Liberty could require the lessee to pay the "remaining balance" of the lease — defined as the discounted present value of future rents — and return the ATM. The lease also granted Liberty the right to use any remedy available under the Uniform Commercial Code (U.C.C.) "or any other law."
All defendants defaulted under their respective lease agreements by failing to make required monthly payments. In 2004 Frontier, Liberty's successor in interest, filed suits against Acevedo, Bishop's, Vista, and JMM. In each case it sought damages for breach of the lease agreement. The defendants failed to file answers or otherwise appear, and in March 2005 Frontier requested that default judgments be entered against all defendants.
Frontier supported each request with an affidavit and itemized list of damages. As all four lease agreements had now expired, Frontier sought the full amount of all due and owing lease payments, interest and late fees. It also sought various costs and expenses, including any costs associated with repossessing, storing, and refurbishing the ATM machines, which had occurred at some unspecified time prior to the applications for default. Frontier further sought an award for the residual value of the equipment, which it calculated as ten percent of the equipment's original purchase price. From the total claimed amounts due Frontier offset proceeds it received after disposing of the repossessed equipment at commercially reasonable sales.
While Frontier filed suit against Acevedo and Bishop's after expiration of their respective lease terms, at the time the actions against Vista and JMM were filed several months remained under their respective lease agreements.
In the case of Bishop's the amount allegedly due was further offset by a settlement received from a dismissed party.
The district court entered default judgments against Acevedo, Bishop's, Vista, and JMM. In each case the court made a damage award in an amount lower than the total amount of damages to which Frontier alleged it was entitled. In each judgment the difference between the court's damage award and the damage award sought by Frontier was the alleged residual equipment value of the ATM machine. The court awarded Frontier interest at the statutory rate on each damage award. In the actions against Acevedo and Vista the court ordered that interest would accrue from the date of filing. In the actions against Bishop's and JMM the court ordered that interest would accrue from the date of judgment.
Frontier was awarded legal fees and expenses in separate provisions of the default judgments.
Frontier appeals. It asserts the district court erred by not including the residual values of the equipment in the damage awards. It asserts the court further erred in the cases involving Bishop's and JMM by ordering that interest would accrue from the date of judgment rather than the date of filing.
II. Residual Equipment Value.
Although the leases themselves do not define or even mention residual equipment value, Frontier correctly notes that under the leases it could avail itself of remedies under the U.C.C., which would include Iowa Code section 554.13532 (2003). Section 554.13532 permits a lessor to recover from a lessee, in addition to any other permitted recovery, "an amount that will fully compensate the lessor for any loss of or damage to the lessor's residual interest in the goods caused by the default of the lessee." Frontier bears the burden of proving it actually sustained loss or injury to its residual interest in the equipment as a result of the lessees' defaults. See Poulsen v. Russell, 300 N.W.2d 289, 295 (Iowa 1981).
Frontier acknowledges it recovered the goods, received damage awards that included costs of repossession and refurbishment, and sold all four machines at commercially reasonable sales. Frontier contends its residual interests in the machines were nevertheless damaged by the lessees' defaults, because those defaults resulted in the lessees' failure to exercise the purchase options under the lease. Frontier seems to suggest that the mere failure to exercise the purchase option, regardless of any default, entitles it to a "residual" award equal to the amount it would have received had the purchase option been exercised. In effect, Frontier treats the purchase option as an obligation under the lease which Frontier was entitled to accelerate in the event of a lessee's default.
The primary problem with Frontier's position is that the leases did not require the lessees to exercise the purchase options, much less convert the options into obligations in the event of default. Even if the lessees had not breached the lease agreements, they were free to simply return the equipment to Frontier at the end of the lease term — the same action provided for in the event of default. Any assumption that but for the defaults the lessees would have exercised the options rather than returning the equipment is speculative at best. When the record is uncertain and speculative as to whether the plaintiff has sustained damages, the fact finder must deny recovery. See Sun Valley Iowa Lake Ass'n v. Anderson, 551 N.W.2d 621, 641 (Iowa 1996).
There is simply no evidence in the record that failure by the various lessees to make their monthly lease payments resulted in a loss or damage to Frontier's residual interest in the goods. The district court accordingly did not err in denying that item of damages as to each defendant. We therefore turn to the only other error alleged by Frontier — the order of the district court, in the cases against Bishop's and JMM, that interest at the statutory rate would accrue from the date of judgment.
While not necessary to the resolution of this appeal, we also address Frontier's contention that the face of each lease demonstrates an agreement that residual equipment value would be calculated by taking ten percent of the original purchase price of the equipment. We find it to be without merit. As previously noted, the leases stated only that the lessee had the option to purchase the equipment at the end of the lease term for "10%." They did not state what amount was be used in calculating the ten percent purchase option, much less reference the original value of the equipment. Moreover, there is no evidence any lessee was aware of the purchase price of the ATM machine it leased. In fact, in the suits against Bishop's and JMM, Frontier did not even present evidence of the purchase price of the respective ATM machines.
III. Interest Awards.
Interest on judgments and decrees in cases such as this is governed by Iowa Code section 535.3. For many years section 535.3 expressly provided that interest on judgments "shall accrue from the date of the commencement of the action." See Iowa Code § 535.3(1) (1997). The appellate courts rigidly applied this rule with few exceptions. See In re Marriage of Baculis, 430 N.W.2d 399, 402-04 (Iowa 1988). In 1997, however, the legislature amended section 535.3 and eliminated the requirement that judgment interest accrue from commencement of the action. 1997 Iowa Acts ch. 197, § 2. Section 535.3 now provides, in relevant part: "Interest shall be allowed on all money due on judgments and decrees of courts at a rate calculated according to section 668.13. . . ." Iowa Code § 535.3(1) (2003).
Frontier contends section 535.3 continues to require that interest accrue from the date of commencement, as such a provision is included in section 668.13. See Iowa Code § 668.13(1) ("Interest, except interest awarded for future damages, shall accrue from the date of the commencement of the action."). However, as our supreme court has noted, section 535.3's reference to section 668.13 relates only to the rate of interest, and does not incorporate section 668.13(1)'s provision regarding the time for interest accrual. See Schimmelpfennig v. Eagle Nat. Assur. Corp., 641 N.W.2d 814, 815 (Iowa 2002).
We presume Frontier's argument is based on section 535.3's reference to section 668.13, as section 668.13 governs action brought pursuant to the comparative fault act and does not in and of itself govern actions sounding in contract. See Iowa Code § 668.13; Frunzar v. Allied Property and Cas. Ins. Co., 548 N.W.2d 880, 890-91 (Iowa 1996).
Accordingly, by its own terms section 535.3 now provides only for interest on "money due on judgments and decrees." (Emphasis added). As money is not due on a judgment until that judgment is entered, it follows that interest allowable under this section begins to accrue only from the date of judgment. To interpret this section as continuing to provide that interest on a judgment accrues from the date of commencement would not only run contrary to the plain meaning of the words used in the statute, but also the legislature's decision to remove such a provision from section 535.3. See Iowa Comprehensive Petroleum Underground Storage Tank Fund Bd. v. Mobil Oil Corp., 606 N.W.2d 359, 363 (Iowa 2000) (noting "our ultimate goal is to ascertain and give effect to the intent of the legislature," and "when the language is plain and unambiguous, we do not look beyond the statute for its meaning"); see also City of Cedar Rapids v. James Props., Inc., 701 N.W.2d 673, 677 (Iowa 2005) ("[A]n amendment to a statute raises a presumption that the legislature intended a change in the law."). Accordingly, we perceive no error in the district court's decisions to order that interest under section 535.3 would begin to accrue on the date of judgment.
This is not to say that Frontier had no entitlement to any prejudgment interest. Subject to exceptions not applicable in this case, section 535.2(1)(a) provides that a plaintiff may recover five percent interest on "[m]oney due by express contract." Generally speaking, "interest runs from the time money becomes due and payable, and in the case of unliquidated claims this is the date they become liquidated. . . ." Schimmelpfennig, 641 N.W.2d at 816 (citations omitted); see also Rowen v. LeMars Mut. Ins. Co., 347 N.W.2d 630, 641 (Iowa 1984).
We note that in each case Frontier requested and was awarded prejudgment interest as part of the damage award. While it is not clear this interest was calculated in accord with section 535.2 and the above-noted case law, that question is not before us on appeal. We also recognize that implicit in our decision today is the conclusion the district court erred in ordering interest to accrue from the date of filing in the default judgments entered against Acevedo and Vista. However, the propriety of the interest award in those two actions is also not before us on appeal.
IV. Conclusion.
We have reviewed the claims raised by Frontier, and find them all to be without merit. Accordingly, the district court's judgments are affirmed.