Opinion ID: 2224660
Heading Depth: 1
Heading Rank: 6

Heading: Compound prejudgment interest.

Text: The trial court awarded $544,682.14 in prejudgment interest to Tri-State on fraud damages of $210,000. Opdahl contends that this award was improper because damages must be certain or capable of being made certain under SDCL 21-1-11 to award prejudgment interest. Opdahl's reliance on SDCL 21-1-11 is misplaced. The prejudgment interest award was based on a tort claim of fraud. SDCL 21-1-13 provides, In an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud, or malice, interest may be given, in the discretion of the jury. The trial judge was the fact finder in this case and could properly award prejudgment interest for fraud damages in his discretion. Winterton v. Elverson, 389 N.W.2d 633 (S.D.1986). Finally, Opdahl claims that the trial court erred in compounding prejudgment interest. [3] Tri-State provides no authority for its argument that compounding prejudgment interest was proper. Opdahl submits SDCL 21-1-11 and SDCL 21-1-13 should be read in conjunction with SDCL 54-3-3, which provides: When a rate of interest is prescribed by a law or contract, without specifying the period of time by which such rate is to be calculated, it is to be deemed an annual rate. Opdahl also claims Northern Improvement Co. v. South Dakota State Highway Commission, 314 N.W.2d 857 (S.D.1982), is controlling because of the interest rates approved therein. We do not find it to be controlling. Whether interest may be compounded under SDCL 21-1-13 has not previously been addressed by this court. The language of the statute provides little guidance on the question. It should be noted, however, that SDCL 21-1-11 provides that every person entitled to recover damages is entitled also to recover interest thereon from that day. The statute allows interest to be recovered thereon which refers back to damages. This language appears to allow the recovery of interest on damages but not interest on interest. There is no reason to calculate interest differently under SDCL 21-1-13 than under SDCL 21-1-11. Thus, it was improper for the trial court to compound the interest. On remand, the trial court should recalculate the amount of prejudgment interest under SDCL 21-1-13 using simple interest. The judgment of the trial court is affirmed in part, reversed in part, and remanded for a redetermination of damages for breach of the lease and recalculation of prejudgment interest.