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#2118 signed 4-18-95

Amended 5-10-95 (order appended)





IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS

In Re:

MACK EXCAVATING, INC.,

DEBTOR

NO. 91-42654-7

CHAPTER 7

DARCY D. WILLIAMSON, Trustee,

PLAINTIFF

v.

CITY OF TOPEKA, KANSAS, and STEPHEN W. DULTMEIER,

DEFENDANT

ADV. NO. 93-7200

ORDER GRANTING SUMMARY JUDGMENT FOR PLAINTIFF

ON PREJUDGMENT INTEREST QUESTION

This proceeding is before the Court on the plaintiff-trustee's motion for partial summary judgment against the City of Topeka. The plaintiff appears by counsel James S. Kreamer. The City appears by consel Ann L. Hoover. The Court has reviewed the relevant pleadings, heard oral arguments, and is now ready to rule.

The debtor performed certain construction work under a contract involving the City. A dispute arose about problems with some of the debtor's work, but the City conceded it owed the debtor $24,112.85 as of January 1, 1991. The dispute concerned additional amounts the debtor claimed the City owed. Nevertheless, until March 9, 1994, the City refused to pay the debtor the undisputed amount unless the debtor agreed the City owed no more money. The plaintiff-trustee, as successor to the debtor's rights, claims the City owes prejudgment interest on the undisputed amount from January 1, 1991, until March 9, 1994.

Under the circumstances presented to the Court, Kansas law provides that the City owes prejudgment interest on the amount it admittedly owed as of January 1, 1991. See Blinne Contracting Co. v. Bobby Goins Enterprises, 715 F.Supp. 1044, 1047-48 (D. Kan. 1989); J. Walters Construction Co. v. Greystone South Partnership, 15 Kan.App.2d 689, 697-700, 817 P.2d 201 (1991). Therefore, the plaintiff-trustee's motion for partial summary judgment is hereby granted. The City does not appear to contest the plaintiff's calculation of the amount of prejudgment interest, so the Court accepts her figure of $8,579.28 as correct. She shall recover that amount from the City.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of April, 1995.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

#2118 signed 5-10-95

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF KANSAS











In Re: )

)

MACK EXCAVATING, INC., ) NO. 91-42654-7

) CHAPTER 7

DEBTOR(S). )

)

DARCY D. WILLIAMSON, Trustee, )

)

PLAINTIFF(S), )

v. ) ADV. NO. 93-7200

)

CITY OF TOPEKA, KANSAS, and )

STEPHEN W. DULTMEIER, )

)

DEFENDANT(S). )

ORDER AMENDING APRIL 18, 1995, ORDER

GRANTING PARTIAL SUMMARY JUDGMENT

This proceeding is before the Court on a motion for reconsideration filed by the City of Topeka. The City appears by consel Ann L. Hoover. The plaintiff has not yet appeared. The Court has reviewed the relevant pleadings, and is now ready to rule.

In November 1994, the trustee filed a motion for partial summary judgment on the question of her entitlement to prejudgment interest, setting forth on page 9 of her brief in support of the motion her calculation of the amount of interest she sought. The calculation clearly includes interest for the month of January 1991, and, since the amount of interest increases each year for three years while the rate remained 10%, also indicates the interest is being compounded, apparently on an annual basis. The City opposed the motion, claiming no interest was owed, but did not question the starting date or methodology of the trustee's calculation. At a hearing in March 1995, the City still did not question the trustee's calculation. On April 18, 1995, the Court entered an order granting the requested interest. Eight days later, the City filed the present motion, complaining for the first time that the trustee's calculation began charging interest one month early and improperly compounded the interest.

Thus, rather than following the appropriate practice of asserting alternative claims or defenses, the City raised only a full defense to the trustee's claim, and waited until it lost on that defense to raise other issues. Ordinarily, defenses not timely raised in response to a summary judgment motion are waived. The date when the prejudgment interest should have started to run was a factual question that cannot be raised now. Therefore, the interest ran from January 1, 1991, until March 9, 1994, when the City paid the principal amount to the trustee. However, whether prejudgment interest may be compounded is a question of law that the Court will now address despite the City's unexcused tardiness.

K.S.A. 16-201 provides in pertinent part that, "Creditors shall be allowed to receive interest at the rate of ten percent per annum, when no other rate is agreed upon, for any money after it becomes due." The Court has not been able to locate any Kansas case that explained whether prejudgment interest under this statute should be compounded. However, in Wornkey v. Wornkey, 12 Kan.App.2d 506, 514 (1988), the court said of postjudgment interest under K.S.A. 16-204, "[I]t is settled that interest on judgments may not be compounded." Furthermore, in Shutts v. Phillips Petroleum Co., 222 Kan. 527 (1977), which appears to have involved an agreement for the payment of interest rather than the application of K.S.A. 16-201, the court indicated that the appellant had complained about the trial court's award of compound prejudgment interest, id. at 563, and then, after discussing other issues but without explaining its reasoning on the compound interest issue, decleared that the appellees were entitled to simple prejudgment interest and simple postjudgment interest, id. at 568-69. This Court sees no reason why the Kansas rule on compounding prejudgment interest should differ from the one for postjudgment interest, and concludes the trustee is entitled to recover from the City only simple prejudgment interest.

The principal amount on which the City must pay prejudgment interest was $24,112.85. K.S.A. 16-201 provides for interest at 10% per annum. Consequently, the City owes $2,411.29 each for 1991, 1992, and 1993, plus another $6.60 per day ($2,411.29 divided by 365) for the 68 days of 1994 that passed before it paid the trustee. The total interest it must pay is $7,682.67. The Court's April 18, 1995, order granting the trustee partial summary judgment is hereby amended to reflect the correct interest owed.

IT IS SO ORDERED.

Dated at Topeka, Kansas, this _____ day of May, 1995.













__________________________________

JAMES A. PUSATERI

CHIEF BANKRUPTCY JUDGE

 

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