In short: No compounding clause, no compound interest. The Third DCA affirmed a judgment on a promissory note that awarded the holder only simple interest because the note did not expressly provide for compounding. It also rejected the borrowers’ cross-appeal over excluded evidence, directed verdicts on their defenses and counterclaims, and denial of relief from judgment.
The Facts
The opinion is short and gives few background facts. It confirms that Abraham Cohen held a promissory note signed by Avra Jain and Michael Murphy, that the trial court entered final judgment for Cohen, and that the judgment awarded simple rather than compound interest. A later Third DCA decision describes the judgment as roughly $11 million.
According to the argument as described in the video, the note dated from 2008 and was given for a membership interest in a Miami condominium developer. It reportedly carried 5% non-compounding interest before default and 12% after default, and was silent on whether default interest compounded. The borrowers, along with H-H Investments, LLC, complained that the trial court struck their defenses and counterclaims mid-trial, excluded a term sheet and emails, and entered judgment even though the original note was never surrendered. Those details come from the parties’ presentation, not from findings in the opinion.
The Decision
The Third District affirmed in a per curiam opinion. On Cohen’s appeal, it held that when a promissory note has no express compounding provision, the holder is entitled only to simple interest. On the cross-appeal, the court found no error in the evidentiary rulings and added that any error would have been harmless under the Special v. West Boca Medical Center standard. It upheld the directed verdict for Cohen on the borrowers’ affirmative defenses and counterclaims and the denial of the borrowers’ motion for directed verdict.
The court also affirmed the denial of the borrowers’ later motion for relief from judgment under Florida Rule of Civil Procedure 1.540, applying the very deferential gross-abuse-of-discretion standard. The remaining cross-appeal issues, which would include the note-surrender argument described in the video, were affirmed without discussion.
The Law
Florida courts enforce the interest terms the parties wrote. If a note does not expressly provide for compounding, interest is simple: it runs on principal only, not on accrued interest. The Third DCA relied on a line of Florida cases to that effect. Contract interest rates are also capped by Florida’s usury statutes in chapter 687, which matters most for high default rates.
Relief from a final judgment under Rule 1.540 is limited to specific grounds such as mistake, newly discovered evidence, fraud, or a void judgment, and the trial court’s decision gets broad deference on appeal. The video’s surrender-of-note issue relates to the general rule that a party enforcing a negotiable note should produce or surrender the original, or account for it under section 673.3091; the opinion did not discuss it.
Lessons
- Lenders who want compound interest, especially on default interest, must say so expressly in the note.
- Borrowers facing a judgment on a note should check whether the interest calculation compounds without contractual authority.
- An evidentiary error on appeal is not enough; the appellate court will ask whether it could have affected the verdict.
- Motions for relief from judgment under Rule 1.540 face a steep standard of review if denied.
Watch the Oral Argument
This is the recording of the actual oral argument, posted on the channel. What lawyers and judges say at argument is not the ruling; the decision is summarized above.
Default Interest Silent on Compounding, Original Note Never Surrendered | Cohen v. Jain, 3D16-0281
Go Deeper
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- Boat-Lift Business Sale Fight: Jury Verdict Stands, Fee Appeal Too Early (Low Key v. Annesser)
Frequently Asked Questions
Does a Florida promissory note earn compound interest?
Only if the note expressly provides for compounding. In Cohen v. Jain, the Third DCA held that a note without a compounding provision entitled the holder to simple interest only, and affirmed a judgment calculated that way. Lenders who want compounding need to put it in writing.
What is the difference between simple and compound interest on a judgment?
Simple interest accrues only on the principal balance. Compound interest adds accrued interest to the principal so future interest is charged on interest too. On a large note over many years, the difference can be substantial. That is why the absence of a compounding clause mattered so much in Cohen v. Jain.
Can I get a judgment vacated in Florida after trial?
Rule 1.540 allows relief from judgment for limited reasons, such as mistake, excusable neglect, newly discovered evidence, fraud, or a void judgment. If the trial court denies relief, appellate courts review only for abuse of discretion, which is hard to overcome, as the borrowers found in Cohen v. Jain.
Is default interest on a promissory note enforceable in Florida?
Generally yes, if the note provides for it and the rate does not violate Florida’s usury limits in chapter 687. Whether default interest compounds depends on the note’s language; without an express compounding clause, Cohen v. Jain indicates it is simple.
Talk to a Florida business litigation lawyer
Weidner Law, P.A. handles business, LLC, shareholder and contract disputes from St. Petersburg. If you need a civil litigation lawyer, call (727) 954-8752 or email weidner@mattweidnerlaw.com.
Read the law yourself, free: every Florida statute and court rule is on floridarules.net.
This article is general information about Florida law, not legal advice about your situation. Reading it, watching the videos, or contacting the firm does not create an attorney-client relationship. Every case turns on its own facts, and past results do not guarantee a similar outcome. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
