Court Opinion

ID: 9648276
Source: CourtListenerOpinion
Date Created: 2023-08-23 14:12:30.927153+00
Date Added: 2024-06-11T18:11:58.267118
License: Public Domain

WALLACE, Justice,
dissenting.
I respectfully dissent.
The trial court applied the correct rate of prejudgment interest. Article 5069-1.03, TEX.REV.CIV.STAT.ANN. applies to all contract cases in which the contract is silent on prejudgment interest.
The public policy reasons we enunciated in Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex.1985), are inapplicable in contract actions. Cavnar revised the prejudgment interest rule in personal injury, survival, and wrongful death cases to compensate the injured victim for money withheld and to expedite settlements and trials.
Olcott was not a “victim” of a contract breach. A “victim” is “[t]he person who is the object of a crime or tort, as the victim of a robbery is the person robbed.” BLACK’S LAW DICTIONARY, p. 1405 (5th ed. 1979). Victims have no prior dealings, no prior agreements, no meeting of the minds. They do not select their defendants. Conversely, parties to contracts engage in a bargained-for exchange; an arm’s length transaction in which they may contractually provide for prejudgment interest on liquidated damages.
Unlike personal injury, survival, and wrongful death cases, suits on contracts often involve counterclaims. Contract actions are generally bona fide disputes between parties who choose to do business. The parties have the ability to negotiate the terms of their agreements in advance; indeed, they have the freedom to choose whether to contract. Further, it is important to contracting parties that they be able, in advance, to determine the full extent of their contractual rights and obligations. If the contract does not provide for prejudgment interest, then it is presumed the parties intended the statutory interest rates to apply. These elements are not present in the personal injury context. Tort victims have no prior opportunity to negotiate the terms by which they will be compensated.
In Phillips Petroleum Co. v. Stahl Petroleum Co., 569 S.W.2d 480 (Tex.1978), we stated that the rate allowed as equitable prejudgment interest was to be the legal rate of interest, i.e., the rate established by art. 5069-1.03, or its predecessors. Further, we approved the language of Watkins v. Junker, 90 Tex. 584, 40 S.W. 11 (1897), in which this court, in applying the legal rate of interest to an equitable interest situation said: “... the courts have, by analogy, adopted the legal rate of interest fixed by statute as the standard by which to be governed in assessing damages for the detention of money.”
In Cavnar, we stated that it was “both necessary and appropriate for us to modify this [personal injury, survival, and wrongful death] area of the law in order to elimi*932nate the existing inequities.” 696 S.W.2d at 556. The court’s opinion points out one of the inequities of its holding. Had Olcott refused to pay the contract price, damages would be ascertainable and, therefore, subject to the prejudgment interest provided under art. 5069-1.03. It is unfair to hold one party in a bona fide dispute to a higher rate of prejudgment interest than the other. If the damages arising from a party’s breach of contract are reasonably ascertainable, that party has an opportunity to compensate the other party when notified of breach, before interest on the sum due begins to accrue. If, however, the amount is not ascertainable, the party charged with a breach has no opportunity to discharge its obligation. It is difficult to conclude that the latter party, with no ascertainable damage claim against which a deposit may be made, should suffer a higher rate of prejudgment interest than a party to a contract in which damages are readily ascertainable. There is no reason why a prevailing party in such a contract action should receive a prejudgment interest award at a rate in excess of that determined by the Legislature in art. 5069-1.03.
In effect, the court’s opinion states that it was our intention in Cavnar to overrule prior cases which held that the six percent rate available under art. 5069-1.03 is the maximum legal rate of prejudgment interest in all cases where the damages are unascertainable or unliquidated. The opinion misinterprets Cavnar. The Cavnar opinion dealt with personal injury, survival and wrongful death cases for which no prejudgment interest had theretofore been permitted. The conflicting cases referred to and overruled in Cavnar were cases denying prejudgment interest in personal injury, survival and wrongful death cases only. The court takes unwarranted liberty in extending the holding in Cavnar to cases such as this one.
The Legislature has given contracting parties notice that if they enter into and subsequently breach agreements in which damages are liquidated or otherwise ascertainable, they may be held liable for prejudgment interest. Parties to contracts have always had this corresponding obligation and right, and the law provides that, if the parties do not contract otherwise, the rate shall be six percent. If no alternate rate is agreed upon, it will be presumed the parties contemplated and intended that the statutory rate apply, since the law in existence at the time the parties entered into the agreement becomes a part of the contract itself. Hardware Dealers Mutual Insurance Co. v. Berglund, 393 S.W.2d 309, 315 (Tex.1965).
Furthermore, the court’s opinion is prospective, applying to all future cases and those presently in the judicial process. This court is creating just as much a wrong by imposing a nonconsensual interest rate which applies to all current contracts which, necessarily, did not contemplate today’s holding at the time the contract was made. Public policy would best be served by continuing to allow parties to future contracts to stipulate an interest rate to be paid upon breach by either party and, if no agreement is made, to allow the legal statutory rate to apply.
PHILLIPS, C.J., and GONZALEZ, J., join in this dissent.