No Prejudgment Interest on Equitable Distribution
In the recent case of Iarussi v. Iarussi, the First District Court of Appeal addressed the issue of prejudgment interest on equitable distribution. In this case, the trial court ordered the husband to make a cash payment to the wife of $1,709,141 as the equalizing payment in equitable distribution. The trial court also ordered prejudgment interest on this amount retroactive to the date of the filing of the petition for dissolution of marriage. The First District Court of Appeal held that the trial court erred in applying prejudgment interest.
Florida is an equitable distribution state. Section 61.075, Fla. Stat. governs the equitable distribution of marital assets in Florida. Distribution of marital assets can take different forms, including a cash payment “to be paid in full or in installments.” Fla. Stat. §61.075(2). We often call this payment an “equalizing payment.”
The Florida statute does not specifically authorize prejudgment or retroactive interest on an equalizing payment. Few cases have addressed this. Previously, the Fourth District Court of Appeal, in the case of Catalfumo v. Catalfumo, declined to award prejudgment interest on an equalizing payment, stating:
No case cited by the wife allows for the assessment of interest prior to the entry of final judgment, the event which triggers her entitlement to a certain amount of assets. The cases requiring the assessment of prejudgment interest generally involve the occurrence of a wrong—such as a breach of contract or a tort— which causes a loss at a time certain in the past.
Now, the First District Court of Appeal has also declined to award prejudgment interest on an equalizing payment, emphasizing that “the purpose of equitable distribution is to distribute marital assets equitably, and does not deal in prior loss, entitlement, or unjust enrichment.” The court went on to state:
The separation of married persons inevitably causes temporary distance between people and their property. But marital property, which is all that we deal with when discussing an equitable distribution, is owned by both parties…Because they both jointly owned all of the marital assets subject to distribution, it necessarily follows that neither could have suffered a deprivation of property warranting prejudgment interest prior to entry of final judgment…Dissolution of marriage cases, by their nature, have no winners or losers, no losses or gains, because the distribution of marital assets is simply the separation of existing interests…
The First District Court of Appeal further emphasized that it cannot add words to a statute. The court noted that Section 61.075(10)(b), Fla. Stat. does allow the trial court to order “security and a reasonable rate of interest or may otherwise recognize the time value of the money to be paid in the judgment or order” when an equitable distribution is ordered in installments. This secures payments and compensates for the time value of money lost when a party is unable to make the entire cash payment at the time of judgment. However, the statute does not extend this principle to payments made in full upfront at the time of judgment and in neither scenario is prejudgment interest authorized. The language of the statute simply does not allow for prejudgment interest.
So, under current Florida law, if an equalizing payment is made in full at the time of the judgment, no prejudgment interest is authorized under Florida law. If the equalizing payment is ordered in installments, no prejudgment interest is authorized, but post-judgment interest at a reasonable interest rate may be authorized to secure the payment and compensate for the time value of the money lost where the full payment cannot be made at the time of the final judgment but must instead be made over time.
