Opinion ID: 2297393
Heading Depth: 1
Heading Rank: 2

Heading: Bowaters' Appeal

Text: Bowaters' appeal raises two questions respecting the allowance of interest by the trial court. 1. After the filing of the suit Bowaters paid to Southern, on account of Southern's total claim, the sum of $157,417.05. The court below held that the delay in making this payment was unwarranted and allowed interest on that sum. The parties agree that the allowance of interest is governed by Tennessee law. Stentor Electric Mfg. Co. v. Klaxon Co., 3 Cir., 125 F.2d 820, involving a case tried in the District Court of Delaware, 30 F.Supp. 425. Bowaters concedes that under Tennessee law the payment represented a liquidated amount, but urges that because of certain of the contract provisions interest is not recoverable. Article IV of the contract contains the following provisions: The final payment shall be made within forty days after the completion of the Work covered by this Contract and acceptance thereof by Fabroan and and the Engineer, provided all plans and specifications have been returned to Fabroan by the Subcontractor and also provided the Subcontractor has given to Fabroan satisfactory evidence that the premises are free from all liens or other claims chargeable to the premises or the said Subcontractor.       Prior to final payment, the Subcontractor shall execute and deliver to Fabroan, a General Release in a form satisfactory to Fabroan, holding Fabroan and the Owner free and harmless from all claims arising out of, or in connection with, this contract. Southern refused to give the release or return the plans and specifications, because it elected to sue. On their face these provisions fix the time when final payment becomes due, and consequently, if read literally, would appear to prevent any suit by the sub-contractor to recover an amount in dispute, since if he gives the release he abandons his claim, and if he refuses the release he cannot sue on the claim because it is not due. Of course, Bowaters makes no such unreasonable contention; it concedes that suit may be brought, but argues that interest is not recoverable on the disputed amount, although it was admittedly liquidated and due. This argument we cannot follow. The quoted provisions have nothing to do with interest. Reasonably construed they simply mean that after the amount due has been agreed upon, the plans shall be returned and a release given as a condition of payment, in order that the final payment may clearly constitute an accord and satisfaction. Bowaters' construction of the contract is that, in effect  Article IV merely provides that if there is any dispute as to the amount due final payment will not be made until the amount has been settled by the parties or determined by a court of competent jurisdiction. This is to say that the clauses relied on are merely declaratory of the legal rights of the parties to have the courts settle their dispute. But how does it follow that interest may not be recovered on an amount now admitted to have been due and therefore unjustifiably withheld? What bearing has such a provision on the right to recover interest in a case such as this? Bowaters says that since Southern did not furnish the release it should not be heard to complain that Bowaters did not pay them the sum admittedly due within the forty-day period. This is to say that an owner who unjustifiably refuses payment of the balance due may have the use of the money until compelled to pay and escape interest as damages for the delay. We can see no justice in such a result. The cases cited by Bowaters do not, in our opinion, touch the point. Capitol City Lumber Co. v. Sudarsky, 95 Conn. 336, 111 A. 349, concerns partial payments retained by the owner under a building contract expressly permitting such retention if there were evidence of any liens for which the owner might be liable. Since such retention was specifically authorized, interest on such withheld payments was held not recoverable. The provision here, in our opinion, is not intended to authorize the owner to withhold a final payment justly due under the contract. The other cases cited by Bowaters concern the binding effect of a release actually executed by the contractor. They hold that the contractor's surety may not, in the face of such a release, sue the owner to recover money paid on claims of subcontractors. They are not in point here, except, indeed, as illustrating the real purpose which the release provision of the contract is intended to accomplish. We are of opinion that the trial judge properly allowed interest on the delayed payment of $157,417.05. 2. Bowaters objects to the award of interest on four small claims of Southern allowed by the trial court. These items concerned the cost of access openings, of tending salamanders, for buff brick, and for caulking. Under Tennessee law interest is recoverable of right only on bonds, notes, bills of exchange, and liquidated and settled accounts, signed by the debtor. Sec. 47-1607, Tennessee Code Annotated. Damages for breach of contract do not fall within the statute. Tennessee Fertilizer Co. v. International Agricultural Corporation, 1922, 146 Tenn. 451, 243 S.W. 81, 88; Illinois Central R. Co. v. Southern Seating & Cabinet Co., 104 Tenn. 568, 58 S.W. 303, 306, 50 L.R.A. 729. In the Fertilizer case the applicable rule is thus stated by the Supreme Court of Tennessee [146 Tenn. 451, 243 S.W. 88]: Interest as a matter of right is purely statutory, unknown to the common law (Cherry's Ex'rs v. Mann, [3] Cooke [268] 269-272, [3 Tenn. 268] 5 Am.Dec. 696), and its positive allowance must be confined to those obligations and demands specified and enumerated in statutory provisions. In cases not so included, it remains, as at common law, a matter of discretion in the jury or chancellor, to be allowed or not, according to the facts presented. Bowaters argues that discretionary interest is allowable only by a chancellor  not by the law courts. Since what we would call a suit at law is triable in Tennessee before a chancellor the distinction seems one without a difference. Bowaters cites Cole v. Sands, 1805, 1 Tenn. 106. That decision indicates that in a suit at law interest should not be ordinarily allowed when the debt or duty is uncertain. But the later Tennessee cases appear to recognize clearly that interest is recoverable on unliquidated claims in the discretion of the trier of facts whether chancellor or jury. See the Fertilizer case, supra. We have examined many of the Tennessee cases dealing with the award of interest. No case is cited to us in which the discretionary award of interest on an unliquidated claim has been reversed by the Supreme Court as an abuse of discretion. In the Illinois Central case, cited above, the trial court had peremptorily directed the allowance of interest. In State v. Stockton, 1954, 38 Tenn.App. 90, 270 S.W.2d 586, an award of interest on an unliquidated claim was sustained. In the instant case the trial judge was in a much better position than is this Court to determine whether the circumstances surrounding the disputed claims of Bowaters and Southern justified the award of interest. He found that interest should be allowed, and we decline to disturb his finding. We find no error in the record, and the judgment of the Superior Court is affirmed.