Opinion ID: 1179849
Heading Depth: 1
Heading Rank: 12

Heading: postjudgment interest on prejudgment interest

Text: The trial court granted plaintiffs prejudgment interest from August 11, 1987, one month prior to the date on which plaintiffs filed their complaint in this case. After the jury returned its verdict, the court calculated prejudgment interest that had accrued to the date of that verdict, September 13, 1990. The court then imposed postjudgment interest at 10% per annum on total prejudgment interest as well as on the jury's award of damages. Pacesetter asserts that the award of postjudgment interest on prejudgment interest violates HRS § 478-3 (Supp.1991). The general rule is that interest on damages is not recoverable in a tort action unless specifically authorized by statute. Chapman v. Hawaiian Gov't, 8 Haw. 653, 656 (1887); McCormick, The Law of Damages § 51 (1985); see Coleman v. Reamer's Ex'r, 237 Ky. 603, 36 S.W.2d 22 (1931) (interest was usury, a punishable offense). The controlling statute is HRS § 478-3, which provides that: [i]nterest at the rate of ten per cent a year, and no more, shall be allowed on any judgment recovered before any court in the State, in any civil suit. We agree with Pacesetter that when the trial court calculated prejudgment interest and imposed additional postjudgment interest of 10% on that interest, it in effect, contravened the express terms of § 478-3. However, plaintiffs argue that the court had authority to make this award under HRS § 636-16 (1985), as well as our decision in Lucas v. Liggett & Myers Tobacco Co., 51 Haw. 346, 461 P.2d 140 (1969), because the award compensated plaintiffs for the interest they would have been able to collect if they had invested their interest on the judgment. In Lucas, this court interpreted § 478-3 (then HRS § 478-2) as authorizing a court to award interest commencing prior to the time of judgment. We reasoned that an award of interest from the date of conversion of [the plaintiff's] property by a defendant until the date judgment is satisfied[] was proper under the statute because it would recompense plaintiff for losses caused by defendant's conversion, thus effectuating the compensatory purpose of an award of interest. Id. at 348, 461 P.2d at 143 (1969). In 1979, the legislature expressly affirmed our interpretation of § 478-2 by enacting HRS § 636-16 which provides: In awarding interest in civil cases, the judge is authorized to designate the commencement date to conform with the circumstances of each case, provided that the earliest commencement date in cases arising in tort, may be the date when the injury first occurred and in cases arising by breach of contact, it may be the date when the breach first occurred. The legislative history of § 636-16 restated our reasoning in Lucas: 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. Sen.Conf.Comm.Rep. No. 67, in 1979 Senate Journal, at 984. We find no direct support in Lucas and § 636-16 for treating prejudgment interest as a separate award at the time of judgment, on the basis of which postjudgment interest may be imposed. Although both Lucas and § 636-16 provide authority for a court to set the starting date for an award of interest at a time prior to the judgment, Lucas plainly states that interest beginning at a date prior to judgment will continue past judgment until plaintiff's claim is satisfied. We read § 636-16 as consistent with Lucas in this regard. We reject plaintiffs' attempt to harmonize interest on interest with our reasoning in Lucas and § 636-16, by characterizing it as compensatory. Lucas is limited by § 478-3. The express terms of the statute authorize interest on the judgment. They contain nothing that would authorize a court to impose § 478-3 interest on § 636-16 interest. Therefore, although it is true that plaintiffs could have invested the interest on the judgment and thereby profited, § 478-3 does not protect any right that plaintiffs may have to those profits. Postjudgment interest on prejudgment interest is a windfall to plaintiff under § 478-3, and, as such, is more punitive than compensatory under Lucas. Cf., State v. Pioneer Mill Co., 64 Haw. 168, 184-85, 637 P.2d 1131, 1142 (1981) (postjudgment interest on blight of summons damages is interest on interest and § 101-33 contains no authority for the award). The trial court's award of postjudgment interest on prejudgment interest is reversed.