Opinion ID: 1275069
Heading Depth: 1
Heading Rank: 3

Heading: Should the award of presuit interest to F.S. Credit be limited to the legal rate then prevailing?

Text: Trial court awarded five percent interest pursuant to Iowa Code subsection 535.2(1) (1983) on the $25,000 judgment from January 1, 1978 (one day after the due dates of the notes), until the petition was filed on December 13, 1979. The court fixed the interest from that time at ten percent as provided in Iowa Code section 535.3 (1983). The court of appeals affirmed on this issue and F.S. Credit sought our further review. F.S. Credit initially cross-appealed from trial court's limitation of the judgment to the principal amount of its secured debt, and from the court's award of interest. Kettwigs' seven notes, held by F.S. Credit, were dated from February 23, 1977, to September 20, 1977, and totaled $25,000. [10] As shown by our statement of facts, Shear purchased the crops that constituted F.S. Credit's collateral on eight different dates extending from October 11, 1977, to January 9, 1978, with eight checks payable to Kettwig totaling $26,957.14. On appeal F.S. Credit suggests alternate ways in which the alleged error of trial court might be corrected. The first is to compute interest at five percent on $26,957.14 from January 9, 1978 (date of last conversion), until the commencement of the action and thereafter at ten percent, with credits of $902.16 and $750 deducted as of the date of the judgment. The second method would compute interest at the promissory note rate, nine and one-fourth percent, on each note from its date to the date of commencement of the action, thus obtaining an interest sum of $5,942.38, which, added to the $25,000 principal, would total $30,942.38 for which judgment should be entered less the two credits above mentioned, this sum to draw interest at ten percent from the commencement of the action. The general principles applicable here are easily stated but difficult to apply. The fundamental principle of damages is to restore the injured party, as nearly as possible, to the position he would have been in had it not been for the wrong of the other party. Ontario Livestock Commission Co. v. Flynn, 256 Iowa 116, 128, 126 N.W.2d 362, 369 (1964) (quoting United States v. Hatahley, 257 F.2d 920, 923 (10th Cir.1958)). The measure of damages in an action for conversion ordinarily is the fair and reasonable market value at the time and place of taking. Id. at 126, 126 N.W.2d at 368; 18 Am.Jur.2d Conversion §§ 82, 83, 86 (1965); 89 C.J.S. Trover and Conversion § 164 (1955). Generally, interest is allowed from the date of conversion. See Hubbard v. State Life Insurance Co., 129 Iowa 13, 16, 105 N.W. 332, 333 (1905); Cutter v. Fanning, 2 Iowa 580, 590 (1856) (The value at the time of conversion with interest is the measure of damages....); Production Credit Association v. Nowatzski, 90 Wis.2d 344, 354, 280 N.W.2d 118, 123 (1979). It is obvious that F.S. Credit's recovery in this case cannot rise higher than the value of its security interest in the collateral, nor can it rise higher than the value of the collateral at the time of its conversion. See 89 C.J.S. Trover & Conversion § 164 (1955). The security agreement in this case provided the crops would stand as security for the promissory notes with interest as therein set forth. The seven separate notes each called for interest at an annual percentage rate of nine and one-fourth percent. Obviously F.S. Credit's security interest in these harvested crops would be measured by the principal of the notes and some measure of interest. At the same time, F.S. Credit elected a tort remedy, which would call for only the legal rate of interest, not a contractual rate, from the date of the conversion. Had the conversion of crops in the sum of $26,957.14 occurred on one date, F.S. Credit's damage would be limited to the lesser of (1) $25,000 plus accumulated interest at nine and one-fourth percent to the date of conversion of the crops with interest thereafter at five percent, or (2) the value of the converted crops on the date of conversion with interest thereafter at five percent. We are not convinced that justice in this case would require the computation of interest on the declining balance owed on seven notes of different dates, on each of the eight dates of conversion of collateral, extending over a period of almost three months. Such a computation would challenge a sophisticated computer. An examination of the eight conversions discloses that approximately one-half of the total value had been converted with a grain purchase on October 17, 1977. We select this date as a reference point and will assume one conversion at that time. We compute the principal and interest on the notes to be $25,983.28 as of October 17, 1977. Because this is a lesser amount than the total grain sales of $26,957.14, the prior sum represents the value of F.S. Credit's security interest in the crops that were converted and represents its damages at that time. F.S. Credit is entitled to $25,983.28 with interest at five percent from October 17, 1977, to December 13, 1979, the date of filing the petition, and ten percent thereafter. Shear should be credited by the amount of the $902.16 settlement as of March 2, 1982, and by the amount of $750, credited as of October 31, 1983, the date of judgment in this action. [11] We therefore vacate the court of appeals opinion in the particulars above set forth, and modify the district court judgment as above indicated. This case is remanded to district court for further proceedings in conformance with this opinion. Costs are taxed to Shear. DECISION OF COURT OF APPEALS VACATED IN PART; DISTRICT COURT JUDGMENT MODIFIED; CASE REMANDED.