Opinion ID: 1248620
Heading Depth: 1
Heading Rank: 3

Heading: Computation of Interest.

Text: Iowa Code section 535.3(1) provides for interest on all judgments and decrees at a rate to be calculated according to Iowa Code section 668.13(1). As already noted, that section provides that interest shall accrue from the date of the commencement of the original action. The concept of prejudgment interest is based on the realization that the loss caused by tortious conduct results in the loss of use of compensatory damages, and to make the plaintiff whole, prejudgment interest should be allowed. See Wilson, 589 N.W.2d at 732. Iowa Code section 668.13(4) provides that interest on future damages shall not begin to accrue until the date of the judgment. Several payments were received by the plaintiffs before they obtained a judgment against Allied. These payments included payments by Allied for medical expenses and one payment by Pruisner's liability insurance company in settlement of the claim against Pruisner. The amounts and dates of payment are as follows: February 23, 1999 $25,000.00 in settlement from Pruisner's insurer April 9, 1996 $ 28.00 in medical payment July 24, 1996 $ 168.07 in medical payment October 7, 1996 $ 264.12 in medical payment June 29, 1998 $ 1238.31 in medical payment July 20, 1999 $ 3000.00 in medical payment In computing the interest to be paid by Allied, the plaintiffs should receive interest on all of the past damages from December 9, 1997, the date the original petition was filed against the tortfeasors, to March 16, 2000, when judgment was entered against Allied. As each payment set out above was received by the plaintiffs, the amount of principal on which interest was computed should be reduced by those amounts as of the time the payments were received. All payments credited to Allied shall first be credited to the interest then due and the balance, if any, to principal. See 47 C.J.S. Interest & Usury § 74, at 164 (discussing the general rule, which is known as the United States rule, to apply payments first to interest, and the balance, if any, to principal); see also Christensen v. Snap-On Tools Corp., 554 N.W.2d 254, 262 (Iowa 1996). The plaintiffs argue that these credits should be made at the time judgment was entered, not as of the time the payments were actually made, and the district court agreed. That is so even though the plaintiffs had received those payments at earlier times. On the other hand, Allied argues that credits should be figured as of the time interest began to accrue, i.e., the date of filing the original suit, even though the plaintiffs did not receive the payments until later. Thus, Allied would get credit for payments before they made them. We disagree with both parties and the district court and conclude that interest should be computed only on the remaining unpaid balance of the past-due damages after each payment was received. The amount of prejudgment interest thus computed is part of plaintiffs' damages in the contract action. This amount should be added to the other damages found by the jury and made a part of the total damages awarded in the judgment. This aggregate award shall, in turn, draw interest from the date of judgment at the rate specified in Iowa Code section 535.3(1). [1] As modified, we affirm the judgment of the district court. AFFIRMED AS MODIFIED.