Judge: Mark H. Epstein, Case: 20SMCP00231, Date: 2023-12-06 Tentative Ruling

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Case Number: 20SMCP00231    Hearing Date: March 20, 2024    Dept: I

This is a motion to vacate or modify the court’s judgment to change the prejudgment interest rate.  The motion is DENIED.

Defendant does not claim in this motion that prejudgment interest is not awardable, but rather asserts that the contract in question states that the rate of interest is 75% of the Bank of America Prime Rate, which means 4.125% given the rate at the relevant time rather than the default 10% rate that the court awarded.  Accordingly, defendant argues, the prejudgment interest should be reduced to $69,000.

The court disagrees.  The actual contract language states that defendant may (but is not required to) buy plaintiff’s stock when he leaves his employment.  If defendant so elects, it may (but is not required to) pay in installments with an initial immediate payments and the remainder on a schedule.  It then states that “The balance of the purchase price remaining unpaid after the payment of the first installment of the purchase price shall bear simple interest per annum at the rate of 75% of the primate rate in effect at the Bank of America on the due date of the installment of interest.  Interest payments shall be calculated from the date of the payment of the first installment of the purchase price.”  Further, the company is required to provide a note relating to the remaining balance.

The key in the court’s view is that the lower contractual rate of interest only begins after the “the payment of the first installment.”  The court reads this as meaning the payment of the first installment in full, not the payment (or tender) of part of the first installment.  It also requires that there be a note that accurately reflects the amount owing.  Neither of those things happened.  Defendant did not tender the full first installment—rather it tendered an amount that was only half of that installment.  The note it tendered was not for the full amount of the remainder, but rather the remainder based on a lower principal purchase price than the court has determined.  Because the trigger for the contractual interest rate never occurred, defendant does not enjoy the lower interest rate as part of the judgment.  Accordingly, the prejudgment interest rate remains at 10%.  In short, this is not a case in which the allegation is a breach of the promissory note, which is the type of case for which the lower interest rate would applied.  Accordingly, the motion is DENIED and the judgment stands.