Opinion ID: 1405642
Heading Depth: 1
Heading Rank: 27

Heading: The circuit court committed an abuse of discretion by failing to award GBC prejudgment interest with respect to GBC's damages resulting from the conversion.

Text: Without articulating any reasons for doing so, the circuit court allowed GBC prejudgment interest commencing from the date the plaintiffs-appellees' lawsuit was filed, rather than from January 1, 1975 (the approximate date on which Ferdinand allegedly began converting most of the treasure from the tunnels at Baguio City, see supra section I.B.7), as requested. The plaintiffs-appellees argue that this unfairly accorded the Marcoses the opportunity to realize the investment profit from Roxas's gold during the period of its conversion and continuing to the date of the complaint. Because the special verdict form specifically limited the jury's award to the value of the gold actually converted, it cannot be said that the plaintiffs-appellees' damages were of such an extraordinary nature as to fall within the Leibert exception. See supra section III. M.1. Moreover, the rationale underlying the awarding of prejudgment interest in conversion actions is clear and intuitive: We begin with the proposition that interest is compensatory in nature, not punitive, and it is for this reason that interest is properly given to a plaintiff from the date of conversion of his property by a defendant until the date judgment is satisfied. There is no sound reason why a plaintiff should not be able to recover a loss in earnings of an asset which defendant converted. Lucas, 51 Haw. at 348, 461 P.2d at 142 (citations omitted). Finally, as noted above, the responsibility for the delay in commencing the present action lies overwhelmingly with Ferdinand. Therefore, it would appear that there is little justification for the circuit court's ruling. Imelda argues that (1) the purpose of prejudgment interest is not to force the defendant to disgorge profit, but, rather, to discourage delay in adjudication, and (2) pursuant to McKeague v. Talbert, 3 Haw. App. 646, 658 P.2d 898 (1983), the circuit court lacked the discretion, in any case, to award prejudgment interest for any period prior to May 8, 1979, the effective date of HRS § 636-16. Imelda's first argument amounts to little more than a semantic dispute with the plaintiffs-appellees. Clearly, the implication in this court's oft-repeated characterization of prejudgment interest as compensatory is that the award is meant to make the plaintiff whole with respect to delay in receiving damages to which he or she is entitled. The foregoing proposition is the functional equivalent of the notion that prejudgment interest is designed to afford the plaintiff the approximate investment value of the damage award, which the law presumes the defendant has acquired as a windfall. Imelda's second argument is more substantial than her first, but, in the end, also fails. In McKeague, supra, the ICA construed HRS § 636-16, noting that, prior to the enactment of that statute, this court had expressly approved of the award of prejudgment interest, where properly proved, in City and County of Honolulu v. Caetano, 30 Haw. 1 (1927), and Lucas, supra . McKeague, 3 Haw.App. at 660-61, 658 P.2d at 909. The ICA also quoted from the language of the conference committee report on 1979 Haw. Sess. L. Act 78, which promulgated HRS § 636-16, as follows: The purpose of this bill is to more clearly define the trial judge's descretion [sic] in awarding interest in civil cases. Your Committee understands that at the present time interest is generally awarded commencing on the day the judgment is rendered. Where the issuance of a judgment is greatly delayed for any reason, such fixed commencement date can result in substantial injustice. Allowing the trial judge to designate the commencement date will permit more equitable results. Also, it is expected that party litigants will give serious regard to this discretion on the part of the trial judge so that those who may have had an unfair leverage by the arbitrariness of the prior rule will arrive at the realization that recalcitrance or unwarranted delays in cases which should be more speedily resolved will not enhance their position or assure them of a favorable award. Id. at 662, 658 P.2d at 909 (quoting Conf. Comm. Rep. No. 67, in 1979 Senate Journal, at 984) (brackets in original) (footnote omitted). The ICA surmised that the situation that gave rise to the statute was that, notwithstanding Caetano and Lucas, plaintiffs in this jurisdiction have not pleaded and proved interest as an element of damages except in contract actions or actions for liquidated damages. Also, notwithstanding that in Lucas the court said § 478-2 does not preclude prejudgment interest, the courts in this jurisdiction have not been asked to award it. Id. at 662, 658 P.2d at 910 (footnote omitted). The McKeague court then held: (1) that HRS § 636-16 had replaced the Lucas rule; (2) that the legislature had expressed no intent that HRS § 636-16 should have retroactive effect; and, therefore, (3) that, by dint of the new statute, circuit courts had no discretion to award prejudgment interest for any period prior to its enactment on May 18, 1979. Id. at 663, 658 P.2d at 910. Notwithstanding the McKeague court's analysis, the history underlying HRS § 636-16 establishes that the legislature intended retroactive effect to be given to the statute's provisions. See HRS § 1-3 (1993) (providing that [n]o law has any retrospective operation unless otherwise expressed or obviously intended). The clear spirit of HRS § 636-16, as unambiguously expressed in the conference committee report quoted by the McKeague court itself was to codify the courts' preexisting discretion to award prejudgment interest. The ICA thus misapprehended the spirit underlying HRS § 636-16 by construing the statute to restrain the courts from awarding prejudgment interest for periods prior to its enactmentin effect, according the courts less discretion on the issue than before. The unfairness thus engendered is especially apparent in cases like the one at bar, in which the plaintiffs-appellees expressly prayed for prejudgment interest in their complaint and actually adduced the requisite proof at trial; yet because the ICA held that HRS § 636-16 replaced the common law rule on prejudgment interest, they ostensibly do not enjoy the same access to prejudgment interest as plaintiffs whose judgments were entered before 1979. Moreover, the ICA's interpretation in McKeague effectively delayed the implementation of the new statute (itself designed to end delays) by years, inasmuch as the statute could not affect any action involving a compensable injury occurring before May 18, 1979. Finally, the McKeague interpretation allowed tortfeasors to benefit from the investment potential of damage awards that, but for the tortfeasors' own attempts to delay judgment, would have been in the possession of plaintiffs. Cf. Hawaiian Beaches, Inc. v. Kondo, 52 Haw. 279, 281, 474 P.2d 538, 540 (1970) (holding that the ordinary meaning of the term interest is payment made for the privilege of using another's money (citations omitted)). Contrary to the ICA's analysis in McKeague, we believe that HRS § 636-16 should be afforded retroactive effect because it is a remedial statute designed to clarify and encourage the exercise of judicial discretion in the award of prejudgment interest. Cf. State v. Von Geldern, 64 Haw. 210, 638 P.2d 319 (1981) (holding that the legislative history of the penal code evinced a desire by the legislature to provide flexibility in sentencing and that sentencing provisions could therefore be applied retroactively); Palea v. Rice, 34 Haw. 150, 158 (1937) ([W]here a remedial statute is clearly intended to cure a defect in an earlier statute so as to make it operative in the bestowal of accruing benefits to persons from the date of the earlier statute, and is without ambiguity in meaning and intent in that respect, the legislative intent as to retroaction must be given effect, for the spirit or reason of the law is the life of the law.). We therefore overrule McKeague insofar as it holds that HRS § 636-16 restricts the circuit court's discretion in awarding prejudgment interest to periods subsequent to May 18, 1979. We have already held that the issue of damages must be remanded to the circuit court in order to afford the jury the opportunity to determine the highest value of the golden buddha statue and the seventeen gold bars converted from Roxas between the date of conversion and a reasonable time after Roxas had notice of the conversion, excluding any time between the conversion and Roxas's discovery of it. See supra section III.L. Pursuant to the New York rule, the jury, on remand, might find that the value of the gold corresponds to its market value on a date subsequent to the date of conversion. In such an event, the jury will already have compensated GBC for Roxas's loss of market appreciation between the date of conversion and the date of the value chosen. Just as it would be unfair to compensate the Roxas Estate doubly for the time value of the damages arising out of its claims of battery and false imprisonment damages by awarding prejudgment interest when the jury has already factored the passage of time into its award, see supra section III.M.1, it would be unfair to award GBH prejudgment interest for the period between the date of conversion and the date corresponding to the value of the gold chosen by the jury. Cf. American General Corp., 622 A.2d at 13-14 (holding, in a breach of contract case, that prejudgment interest started to accrue from the date the plaintiff's damages actually began to accrue rather than from the date of the breach). Accordingly, we hold that, upon retrial of the issue, the circuit court should award prejudgment interest on the damages arising out of the conversion of the golden buddha and the seventeen gold bars from the date corresponding to the value of the gold chosen by the jury.