Case 08-02077 Doc 47 Filed 03/27/09 Entered 03/27/09 16:25:29 Desc Main

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Gary E. Jubber A1758

Douglas J. Payne A4113
Clint R. Hansen A12108
FABIAN & CLENDENIN,
a Professional Corporation
215 South State Street, Suite 1200
Salt Lake City, Utah 84111-2323
Telephone: (801) 531-8900
Fax: (801) 596-2814
gjubber@fabianlaw.com
dpayne@fabianlaw.com
chansen@fabianlaw.com

Attorneys for Gary E. Jubber, Chapter 7 Trustee

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
)
In re: ) Bankruptcy No. 08-20308
)
BEDROCK MARKETING, LLC, ) (Chapter 7)
)
Debtor. )
) Honorable William T. Thurman
)
GARY E. JUBBER, Chapter 7 )
Bankruptcy Trustee of Bedrock Marketing, )
LLC and Enlightened Management, LLC, ) PLAINTIFF’S RESPONSE TO
) DEFENDANT’S OBJECTION TO
Plaintiff, ) PROPOSED JUDGMENT
v. )
)
WESTON WADE SLEATER, an ) Adversary No. 08-02077
individual, )
)
Defendant. )

Plaintiff Gary E. Jubber, Chapter 7 trustee of the bankruptcy estate of Bedrock

Marketing, LLC and Chapter 7 trustee of the bankruptcy estate of Enlightened Management,
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LLC, (the “Trustee”) hereby submits the following Response to Defendant’s Objection to

Proposed Judgment:

INTRODUCTION

On March 4, 2009, the Court read into the record its decision in the above-entitled matter.

The Court granted summary judgment to Trustee on his first and second causes of action, and

held defendant Weston Wade Sleater (“Sleater”) personally liable to pay the amounts due under

the two promissory notes which have been the subject of this Adversary Proceeding (the

“Notes”). Copies of the Notes are attached hereto as Exhibits “A” and “B” for the Court’s

reference. On March 16, 2009, the Trustee served Sleater’s counsel with a proposed judgment

based upon the Court’s decision. Sleater filed an objection (“Objection”) to the Trustee’s

proposed judgment on March 18, 2009 (Docket No. 41), arguing that post-judgment interest on

the amounts owed by Sleater should be calculated at the federal post-judgment interest rate rather

than the default rate set forth in the Notes. The Trustee has withdrawn his initially filed proposed

judgment (Docket No. 45) and has filed a corrected proposed judgment which also provides for

post-judgment interest at the contract rate of the Notes. The corrected proposed judgment

provides for post-judgment interest on the entire balance of principal and interest due under the

Notes at 72% per annum, the default rate set forth in the Notes. The Trustee has spoken with

Sleater’s counsel and is advised that Sleater’s Objection applies equally to the Trustee’s

amended proposed judgment. Therefore, the Trustee responds to Sleater’s Objection as follows:

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ARGUMENT

The Trustee is entitled to have post-judgment interest calculated at the contract rate

because: (1) the parties to the Notes specifically and clearly agreed to post-judgment interest at

the contract rate, and (2) Trustee specifically prayed in his Complaint for post-judgment interest

at the contract rate.

I. The 10th Circuit Has Held That Parties to a Contract May Agree Upon a Post-
Judgment Interest Rate Other Than as Specified in 28 U.S.C. § 1961 and the
Parties’ Intent to Override 28 U.S.C. § 1961 is Clearly Stated in the Notes.

Sleater’s blanket assertion that post-judgment interest is controlled by 28 U.S.C. § 1961

is plainly incorrect. Section 1961 sets forth the default rule, but the Tenth Circuit has held that

“parties may contract to, and agree upon, a post-judgment interest at a rate other than that

specified in § 1961.” Society of Lloyd’s v. Reinhart, 402 F.3d 982, 1004 (10th Cir. 2005) (citing

Westinghouse Credit Corp. v. D'Urso, 371 F.3d 96, 101 (2d Cir.2004) (“We agree that parties

may by contract set a post-judgment rate at which interest shall be payable.”); see also, Central

States, Southeast & Southwest Areas Pension Fund v. Bomar Nat., Inc., 253 F.3d 1011, 1020 (6th

Cir. 2001) (“It is well established that parties can agree to a[] [post-judgment] interest rate other

than the standard one contained in 28 U.S.C. § 1961”).1

The law simply requires that parties wishing to override § 1961 must express their intent

to do so “through clear, unambiguous and unequivocal language” contained in the written

contract. Society of Lloyd’s 402 F.3d at 1004 (internal cites omitted); see also, Westinghouse,

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The Central States court awarded post-judgment interest at the contractual rate of prime plus two percent and
compounded annually. 253 F.3d at 1019.

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371 F.3d at 101 (“Most fundamentally, such contracts must actually indicate the parties' intent to

deviate from § 1961.”)

In paragraph 5 of both Notes, the parties clearly, unambiguously and unequivocally stated

their intent to deviate from § 1961’s general rule; the Notes read, “After acceleration the unpaid

principal balance and accrued interest shall, until paid and both before and after judgment,2

earn interest at the Default Rate specified in Section 2 of this Note.” See Exhibits “A” and “B”

at Section 2 (emphasis added). Thus the parties specifically agreed that the “Default Rate” stated

in the Notes was to apply to awards of both pre- and post-judgment interest.

Clearly, under the parties’ agreed-upon terms, Trustee is entitled to post-judgment

interest on the entire “principal balance and accrued interest” owed under the Notes at the

“Default Rate” specified in the Notes.

II. Plaintiff Specifically Prayed in His Complaint For Post-Judgment Interest at the
Contract Rate, so Sleater Had Ample Opportunity to Raise an Objection But
Failed to Do So.

The Trustee notes that the Tenth Circuit and other federal courts have refused to award

post-judgment interest at a contractual rate where the plaintiff had not raised the issue prior to

entry of judgment and had therefore deprived the defendant of the opportunity to assert available

defenses. See e.g., O’Tool v. Genmar Holdings, Inc., 387 F.3d 1188, 1207 (10th Cir. 2004)

(plaintiff’s failure to make post-judgment interest an issue in the pleadings barred him from

seeking contract interest rate in judgment); BP Products North America, Inc. v. Youssef, 296

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The Fifth Circuit stated, in dicta, that a note which provided that “all past due interest and/or principal shall bear
interest from maturity until paid, both before and after judgment, at the rate of 9% per annum,” entitled plaintiff
to an award of post-judgment interest at the contract rate and was sufficient to override the general rule contained in
28 U.S.C. §1961. Hymel v. UNC, Inc., 994 F.2d 260, 265-66 (5th Cir. 1993) (emphasis added).

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F.Supp.2d 1351, 1355-56 (M.D.Fla.2004) (plaintiff required to notify defendant in complaint or

pretrial order of intent to seek interest at the contractual rate).

The Trustee in this case did raise the issue and request post-judgment interest at the

contract rate at the first possible opportunity, clearly requesting in the Complaint that both pre-

and post-judgment interest be calculated at the contract rate. See Complaint at 5. Plaintiffs’

prayer for relief in the Complaint reads as follows:

[on the Bedrock Note] for Judgment against the Defendant in the sum of
$3,422,570.17, as of October 31,2007, together with interest as set forth in the
Note, both before and after entry of judgment until paid in full, costs of court
and reasonable attorney’s fees.

and

[on the Enlightened Note] for Judgment against the Defendant in the sum of
$847,850.00, as of October 31,2007, together with interest as set forth in the
Note, both before and after entry of judgment until paid in full, costs of court
and reasonable attorney’s fees.

The Trustee has given Sleater adequate notice of the claim for post-judgment interest at the

contract rate but Sleater has simply failed to respond or raise the issue until now. The Trustee is

entitled to judgment at the post-judgment interest rate to which Sleater contractually agreed.

CONCLUSION

For the foregoing reasons, the Trustee respectfully request that the Court overrule

Defendant’s Objection to Proposed Judgment and enter judgment awarding the Trustee post-

judgment interest on the entire accrued balance of principal and interest owing under the Notes at

the “Default Rate” of interest, being 72%, as provided in the Notes.

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DATED this 27th day of March, 2009.

/s/ Douglas J. Payne

Gary E. Jubber
Douglas J. Payne
Clint R. Hansen
FABIAN & CLENDENIN,
a Professional Corporation
Attorneys for Plaintiff Gary E. Jubber, Ch. 7
Trustee

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CERTIFICATE OF SERVICE

I hereby certify that on the 27th day of March, 2009, I caused a true and correct

copy of the foregoing PLAINTIFF’S RESPONSE TO DEFENDANTS OBJECTION TO

PROPOSED JUDGMENT to be served via first class mail and by e-mail to the following:

Ronald S. George, P.A.

389 N. Mink Creek Road
Pocatello, ID 83204
Email: 19ron48@gmail.com

United States Trustee

405 South Main #300
Salt Lake City, Utah 84111

/s/ Douglas J. Payne

ND: 4818-1173-0691, v. 1