Court Opinion

ID: 9745896
Source: CourtListenerOpinion
Date Created: 2023-08-27 13:41:30.742597+00
Date Added: 2024-06-11T07:25:06.080075
License: Public Domain

MCDONALD, J.,
J.,Concurring and Dissenting.—I concur with the majority opinion, except for part XIII in which Wisper is denied Civil Code section 3287 prejudgment interest. On that issue alone, I respectfully dissent.
I do not believe the California Supreme Court in 1975 intended by its adoption of the pure comparative negligence system in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804 [119 Cal.Rptr. 858, 532 P.2d 1226, 78 A.L.R.3d 393] to deny plaintiffs Civil Code section 3287 prejudgment interest to which they would have been entitled prior to its Li decision. “Pure” comparative negligence did not exist in California in 1872 when the Legislature enacted Civil Code section 3287. For over 100 years, a plaintiff who proved a defendant’s negligence and suffered damages that were certain was entitled to prejudgment interest. I question whether, as the majority opinion apparently concludes, the Li decision could somehow completely eliminate a plaintiff’s entitlement to statutory prejudgment interest in any case in which any significant comparative negligence of a plaintiff is found. Assume a plaintiff is found 1 percent negligent and the defendant is found 99 percent negligent. Should that plaintiff be denied prejudgment interest even though the damages it suffered are certain? I think not. Although the majority opinion apparently leaves open the possibility that a plaintiff in that case might be entitled to prejudgment interest (i.e., where a plaintiff “recovers virtually all of the claimed damages”), it fails to indicate where the “line” is drawn between allowing and disallowing interest. I do not believe there is a rational place to draw the line. For example, if the majority would allow *964prejudgment interest if a plaintiff is only 20 percent negligent, why would it deny interest if the plaintiff is only slightly more negligent (e.g., 21 percent)?1 The majority opinion leaves open this “slippery slope” question, which tends to undermine the logic of its position.
The objective of our tort system is to make whole a plaintiff for damages suffered to the extent a defendant is responsible for those damages. To make a plaintiff whole in a comparative negligence case involving a certain amount of damages suffered by a plaintiff, a plaintiff should receive prejudgment interest on that portion of the damages for which the defendant is liable.
Here there was no dispute as to which checks were diverted by Benitez or the amounts of those checks. Wisper’s damages consisted solely of those checks diverted by Benitez through the “partial” or comparative negligence of CCB. As the majority opinion notes, the jury expressly found that Wisper and International suffered damages totaling $1,445,953.60, and these damages were not substantially different from the amount sought by their complaint (i.e., $1,399,132.83). Wisper’s “damages” were “certain” or at least capable of being calculated and made certain. I believe the ultimate dispute in this case involved CCB’s “liability” for Wisper’s damages, whether that liability was found to be entire or partial, and not the amount or certainty of the damages. This case is like the many non-negligence cases in which the dispute effectively is over liability rather than damages and in which prejudgment interest is awarded. (See, e.g., Esgro Central, Inc. v. General Ins. Co. (1971) 20 Cal.App.3d 1054, 1060 [98 Cal.Rptr. 153].)
I believe the most closely analogous case law on the entitlement to prejudgment interest is that involving unliquidated setoffs and counterclaims asserted by a defendant in defense of an otherwise liquidated claim asserted by a plaintiff. The California Supreme Court first embraced the principle that a defendant’s unliquidated setoff or counterclaim cannot defeat a plaintiff’s claim for Civil Code section 3287 prejudgment interest in Hansen v. Covell (1933) 218 Cal. 622, 629-632 [24 P.2d 772, 89 A.L.R. 670]. In that case the plaintiff filed an action for the value of construction work performed for the defendant, and the defendant claimed an offset for defective workmanship and other amounts. (Id. at pp. 624-626.) The California Supreme Court upheld the trial court’s award of Civil Code section 3287 prejudgment *965interest to the plaintiff, stating in part: “[P]laintiffs here are entitled to interest on the balance of the two liquidated principal sums after deduction of the amounts found to be due to the defendant for defective workmanship and [other amounts].” (218 Cal. at p. 631.) That court again noted this principle in Lineman v. Schmid (1948) 32 Cal.2d 204, 212 [195 P.2d 408, 4 A.L.R.2d 1380], and in Cal. Lettuce Growers v. Union Sugar Co. (1955) 45 Cal.2d 474, 487 [289 P.2d 785, 49 A.L.R.2d 496]. In the latter case the court stated: “California Lettuce correctly contends that the mere pleading of unliquidated counterclaims does not render unliquidated an otherwise certain or determinable debt owing to the plaintiff. The unliquidated counterclaims are given treatment as discounts, not as payments made at the time the debt is due. [Citations.] They do not therefore affect the liquidated or unliquidated character of the debt.” (Ibid.)
Other California courts consistently have adopted and applied this principle. One court reversed a denial of prejudgment interest, stating:
“Plaintiffs were awarded damages of $5,012.88, computed as follows: as against the sum of $7,312.88 ($7,085.38 paid pursuant to the contract, plus $227.50 as consequential damages) found to be due plaintiffs based upon their rescission of the contract, defendants were allowed an offset of $2,300, representing the reasonable value to plaintiffs of their use of the [automobile]. [Citations.]
“The sum paid by plaintiffs pursuant to the contract was fixed by its terms. Therefore, this element of damage was certain. . . .
“The amount of the offset allowed to defendant was determined on the basis of conflicting evidence. However, that fact did not preclude allowance of prejudgment interest, for where the amount of a claim is certain, but is reduced by reason of an unliquidated setoff, interest properly is allowed on the balance found to be due from the time it became due. [Citations.]
“Since the requirement of Civil Code section 3287 regarding certainty of damages was met, plaintiffs were entitled, as a matter of right, to recover prejudgment interest on the sum awarded from the time such sum became due. [Citations.]” (Leafy. Phil Rauch, Inc. (1975) 47 Cal.App.3d 371, 376 [120 Cal.Rptr. 749].)
Another court observed: “When a plaintiff sues for a liquidated sum and the defendant establishes an offsetting claim based upon defective performance of the same contract by the plaintiff, the amount of the plaintiff’s liquidated sum must be offset against the defendant’s unliquidated sum as of *966the due date of the original debt and only the balance bears interest. [Citations.] Iii this case, Phillips’ claim for the balance due under the contract was reduced by the existence of an unliquidated set-off or counterclaim attributable to Phillips’ breach of contract; therefore interest was to be allowed only on the balance found to be due after deduction of the offset.” (Burnett & Doty Development Co. v. Phillips (1978) 84 Cal.App.3d 384, 391 [148 Cal.Rptr. 569], original italics; see also Chesapeake Industries, Inc. v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d 901, 907 [197 Cal.Rptr. 348].) Following this approach, another court reversed a denial of prejudgment interest, stating: “[W]e are persuaded that this case is analogous to situations where the party claiming to be entitled to prejudgment interest holds a liquidated contractual claim subject to an unliquidated setoff for defective performance. In such cases, it is settled that prejudgment interest should be awarded on the balance of the claim after deduction of the unliquidated setoff. [Citations.]” (Bentz Plumbing & Heating v. Favaloro (1982) 128 Cal.App.3d 145, 152 [180 Cal.Rptr. 223], fn. omitted.)
Therefore, case law clearly supports an award of Civil Code section 3287 prejudgment interest where a plaintiff’s contractual claim is liquidated but the defendant asserts an unliquidated offset based on the plaintiff’s defective performance of that contract. I believe this factual scenario is closely analogous to the case at hand. Wisper’s claim against CCB for negligence clearly was liquidated. Wisper suffered specific monetary losses which were confirmed by the jury’s special verdict. Absent CCB’s defense of Wisper’s own negligence, even the majority presumably would not dispute Wisper’s entitlement to prejudgment interest. What then is the effect of CCB’s “partial” defense that Wisper was comparatively negligent and partially responsible for its damages? I believe that CCB’s defense effectively is in the nature of an unliquidated setoff. Although the majority asserts that CCB could not know the ultimate amount for which it would be held responsible and thus should not be liable for prejudgment interest, a defendant in an action for breach of contract who asserts an unliquidated offset for defective performance is in no better position and yet case law upholds a plaintiff’s right to prejudgment interest in those actions. Further, in both scenarios the defendant’s unliquidated “offset” arises out of the same transaction as plaintiff’s liquidated claim. In the breach of contract situation, the offset for defective performance arises directly out of the parties’ actions relating to the contract. In the comparative negligence situation here, the “offset” for Wisper’s comparative negligence arises directly out of the parties’ actions relating to the negotiation, deposit and withdrawal of certain checks. I do not discern any logical reason to distinguish the two situations. Accordingly, I believe a defendant’s defense of the plaintiff’s comparative negligence should be treated in the same manner as a defendant’s assertion of an *967unliquidated offset for defective performance of a contract for purposes of Civil Code section 3287 prejudgment interest.
I believe a defendant’s assertion that a plaintiff was comparatively negligent does not make “uncertain” the amount of damages suffered by a plaintiff. Rather, a plaintiff’s comparative negligence merely affects the parties’ comparative fault or liability and, on a finding of comparative liability, the judgment amount is calculated by simply multiplying the plaintiff’s total damages by the defendant’s proportionate liability. Given that a plaintiff’s total damages are certain (e.g., cash or other liquidated amounts), a plaintiff’s comparative negligence should not prevent the plaintiff from being made whole for defendant’s negligence with an award of prejudgment interest on the proportionate amount for which the defendant is liable.
Although I, like the majority, find no California case which has dealt with the instant issue, I note that the South Dakota Supreme Court struggled with this issue in S.D. Bldg. Auth. v. Geiger-Berger Assoc. (S.D. 1987) 414 N.W.2d 15 (Geiger). In Geiger the court assumed that the amount of damages awarded to the plaintiff (i.e., 70.07 percent of its alleged damages) reflected a reduction for the plaintiff’s comparative fault. (Id. at p. 20.) In a three-to-two decision, the court held that the plaintiff’s damages were “uncertain” and prejudgment interest was properly denied under South Dakota’s statute (identical to our Civil Code section 3287),2 stating in part: “Since a defendant cannot, with any degree of certainty, tender an amount of damages to a plaintiff until a jury sets the proportionate fault, he cannot be held responsible for prejudgment interest under [South Dakota’s statute].” (414 N.W.2d at p. 22.) The majority in Geiger stated: “The uncertainty lies not in the damages themselves, but rather in the proportion of those damages that a defendant caused, which only a jury can decide.” (Ibid.) The majority opinion reasoned: “It is . . . not a question in this case of what losses did the plaintiff sustain, but rather what does the defendant owe the plaintiff for the damages which the plaintiff sustained.” (Ibid.) Accordingly, the majority in Geiger interpreted South Dakota’s statute effectively to include the words “caused by another” resulting in the statute reading as follows: “ ‘Every person who is entitled to recover damages (caused by another) certain, or capable of being made certain . . . .’” (Ibid.)
However, Justice Sabers in dissent stated: “Prejudgment interest should be allowed even where there is an offset, counterclaim or claim of contributory *968negligence. . . . [South Dakota’s statute] does not say that every person is entitled to prejudgment interest, unless there is an offset, counterclaim or claim of contributory negligence. The statute specifies two, and only two, exceptions, i.e., where debtor [is] prevented by 1) law, or 2) creditor from paying the debt.” (414 N.W.2d at pp. 27-28 (cone, and dis. opn. of Sabers, J.), original italics.) He concluded: “In summary, plaintiff sued in contract, and in negligence. Plaintiff’s damages are supported in contract, and in negligence. To the extent that the defendant’s contributory negligence claim was successful, both damages and prejudgment interest on those damages have already been denied. To deny prejudgment interest a second time on sustainable damages is contrary to the letter and the spirit of [the South Dakota statute].” (Id. at p. 28, original italics.)
I find the reasoning in the dissenting opinion of Justice Sabers more compelling than the reasoning of the majority opinion because the dissent focuses on the certainty of damages suffered by a plaintiff, rather than on whether a defendant knows exactly how much to tender to the plaintiff. In any event, the majority opinion in Geiger is distinguishable from our situation, because South Dakota, unlike California, does not award prejudgment interest where an unliquidated setoff is asserted. (Geiger, supra, 414 N.W.2d 15, 21.) The Geiger court noted: “[W]e . . . denied prejudgment interest where a liquidated claim of $7,222,530 was set off by an unliquidated counterclaim award of $300,000. [Citation.]” (Ibid.) South Dakota therefore applies its prejudgment interest statute in a much more restrictive manner than California.
The Florida Supreme Court has held that prejudgment interest should be awarded to plaintiffs even if they are contributorily negligent. In a subrogation action, the subrogee’s claim against a plumbing company that negligently caused a fire which destroyed an apartment building was subject to the building owner’s 25 percent contributory negligence, thereby reducing the judgment against the defendant by that proportion. (Argonaut Ins. Co. v. May Plumbing Co. (Fla. 1985) 474 So.2d 212, 213 (Argonaut).) In a unanimous decision, the Florida Supreme Court upheld the trial court’s award of prejudgment interest, reversing a district court of appeal’s opinion that “the comparative negligence factor made the award of damages uncertain and, thus, unliquidated.” (Ibid.) The court noted that there are two theories upon which awards of prejudgment interest are justified—the “penalty theory” and the “loss theory.” (Id. at pp. 214-215.) The “penalty theory” views prejudgment interest as a “penalty” for a “defendant’s ‘wrongful’ act of disputing a claim found to be just and owing.” (Id. at p. 215.) The court noted: “The distinction between liquidated and unliquidated claims is closely linked to this ‘penalty theory’ of prejudgment interest. To punish a defendant for *969failure to pay a sum which was not yet certain or which he disputed would be manifest injustice. But where the amount is certain and the defendant refuses to surrender it because of defenses determined to be meritless, the defendant may properly be punished for abuse of his privilege to litigate. Under the Toss theory,’ however, neither the merit of the defense nor the certainty of the amount of loss affects the award of prejudgment interest. Rather, the loss itself is a wrongful deprivation by the defendant of the plaintiff’s property. Plaintiff is to be made whole from the date of the loss once a finder of fact has determined the amount of damages and defendant’s liability therefor.” (Ibid.) Because Florida has long followed the “loss theory,” the court held that the subrogee was entitled to prejudgment interest as an element of its damages. (Id. at pp. 214-215.) Although Argonaut is distinguishable from our situation because of Florida’s differing and apparently more liberal approach to the award of prejudgment interest, its discussion of the “penalty theory” and “loss theory” is helpful in analyzing California cases which often cite either or both ideas as reasons to award prejudgment interest.
The majority opinion here relies heavily on the “penalty theory,” concluding it is not fair to penalize a defendant for failing to pay an amount to plaintiff unless it knows exactly how much it owes the plaintiff. However, I prefer to place the emphasis on the plaintiff’s position and recoupment of its loss. The primary purpose of our tort law is to make a plaintiff whole for damages suffered due to tortious actions by others. Therefore California tort law begins with the “loss theory” of damages. A plaintiff, like Wisper, generally should be made whole for damages suffered due to the negligence of another, such as CCB. I believe Civil Code section 3287 should be construed consistently with that purpose and, accordingly, Wisper should be entitled to prejudgment interest to make it whole for damages it suffered due to the 25 percent comparative negligence of CCB. Construing Civil Code section 3287 in this manner, I conclude the damages that must be “certain” are those damages suffered by the plaintiff, without regard to any setoffs, counterclaims or comparative negligence asserted by the defendant as a defense. Here there are certain damages and Wisper should be awarded prejudgment interest on the amount of damages for which CCB was found proportionately responsible. Only by interpreting Civil Code section 3287 in this manner can Wisper be made whole for loss of the use of those funds due to CCB’s negligence. The majority’s concern with whether a defendant knows exactly how much it might have to pay if found liable is merely a secondary concern and is collateral to the primary purpose of tort law to make plaintiffs whole. The majority’s disposition of this issue places more emphasis on this collateral concern than is warranted in light of the purposes of our tort law.
*970I disagree with the majority’s heavy reliance on whether CCB actually knew the amount it owed Wisper. The majority reasons that CCB could not know how much it owed Wisper, because CCB asserted the defense of comparative negligence against Wisper. However, like the setoff and counterclaim cases discussed above, Wisper’s damages were “certain” and its entitlement to Civil Code section 3287 prejudgment interest should not be defeated by an unliquidated claim or defense which CCB raises as a partial “offset” to Wisper’s damages. In fact, even in pre-Li cases, when the defense of contributory negligence was raised the plaintiff would not know the “certain” amount of damages for which it was liable until the issue of liability was determined. If contributory negligence was established then no amount was owed.
The majority’s agreement with the Showa case (National Union Fire Ins. v. Showa Shipping Co. (9th Cir. 1995) 47 F.3d 316) is ill-founded. Admittedly there are close parallels between equitable indemnity (in Showa) and comparative negligence (in this case) for purposes of Civil Code section 3287. However, I would not follow the approach of the United States Ninth Circuit Court of Appeals in the Showa opinion. That opinion failed to cite any California or other case in support of its holding, and contained no analysis of the pertinent issues and historical background or underlying objectives of Civil Code section 3287. Rather, it summarily disposed of the prejudgment interest issue with the language quoted by the majority in part Xm, ante. Further, and more importantly, the Showa opinion failed to acknowledge, much less distinguish, a factually apposite California case in which Civil Code section 3287 prejudgment interest was awarded. In E. L. White, Inc. v. City of Huntington Beach (1982) 138 Cal.App.3d 366 [187 Cal.Rptr. 879], the Fourth District Court of Appeal, Division Two, unanimously held that two indemnitees were entitled to Civil Code section 3287 prejudgment interest from the time they paid their portions of a personal injury judgment. Rejecting a contention that their damages were not certain, the court in E. L. White, Inc. stated:
“Huntington Beach claims that the damages were not certain or ascertainable until judgment was entered in this indemnity action, because the amount of White and Royal Globe’s recovery was uncertain until the trial court made its determination of comparative fault under the principles set forth in American Motorcycle. This argument is not convincing.
“Although we have found no cases directly on point, we conclude that the present situation is analogous to similar cases in which prejudgment interest has been allowed. In Hansen v. Covell (1933) 218 Cal. 622 .... the Supreme Court held that a plaintiff was entitled to prejudgment interest even *971though the plaintiff’s certain and liquidated claim under a contract was reduced by a defendant’s unliquidated set-off or counterclaim. [Citations.] . . . Here, White and Royal Globe’s claim for indemnity was certain in amount from the date the underlying judgments were satisfied, but was subject to a possible reduction if White was found to have been more than vicariously liable. The possibility of that reduction, or even an actual reduction, does not render White and Royal Globe’s damages any less certain.” (E. L. White, Inc. v. City of Huntington Beach, supra, 138 Cal.App.3d 366 at pp. 377-378, italics added.) Had the Showa court considered the effect of this California decision, I believe its disposition would have been different. The court in E. L. White relied on the same analogous situation as do I. The court noted that unliquidated setoffs asserted by a defendant do not make an indemnity claim uncertain. (Ibid.) The court held that the possibility that the plaintiff’s comparative fault might reduce the defendant’s liability in the equitable indemnity action did not make the plaintiff’s damages uncertain. (Id. at p. 378.) It further commented, albeit in dictum, that an actual reduction for the plaintiff’s comparative fault would not make the plaintiff’s damages uncertain. (Ibid.) The court therefore awarded Civil Code section 3287 prejudgment interest to the plaintiff. (138 Cal.App.3d at p. 378.)
The situation in the instant matter is factually apposite to that in E. L. White. The apportionment of comparative fault in an equitable indemnity action is no different from that in a comparative negligence action. Accordingly, a reduction in Wisper’s award due to apportionment of comparative fault should not preclude it from receiving Civil Code section 3287 prejudgment interest on the balance attributed to CCB’s comparative fault.
Finally, I believe the express language of Civil Code section 3287 supports the interpretation I propose. Civil Code section 3287, subdivision (a) begins: “Every person who is entitled to recover damages certain . . . .” Thus, the statute focuses on the plaintiff, not the defendant, and whether the plaintiff’s damages are certain. The majority’s focus on whether the defendant knew exactly how much it would have to pay the plaintiff changes the meaning of the statute and has no basis in the express language of Civil Code section 3287.
I believe that the majority’s stance on this issue is affected by the substantial evidence of Wisper’s negligence in hiring and supervising Benitez and failing to monitor its own bank statements. However, the majority fails to accord sufficient consideration to the fact the jury also found CCB negligent and a cause of Wisper’s damages. Absent Wisper’s comparative negligence, I doubt the majority would deny Civil Code section 3287 *972prejudgment interest to Wisper based on the negligence of CCB. California abandoned the “all-or-nothing” contributory negligence system over 20 years ago; California should not now revive that system in the context of Civil Code section 3287 prejudgment interest.
CCB should be liable for prejudgment interest to the extent of its 25 percent proportionate liability. A primary purpose of our tort law, including our comparative negligence system, and of Civil Code section 3287 is to make a plaintiff whole for certain damages suffered by a plaintiff, and the denial of prejudgment interest when a plaintiff’s damages are undisputed and certain would be contrary to this important purpose. Accordingly, I respectfully dissent from the majority opinion’s disposition of the Civil Code section 3287 prejudgment interest issue as to Wisper. I would reverse the trial court’s denial of prejudgment interest and remand for calculation of the appropriate amount of prejudgment interest to be awarded Wisper. In so doing, I would instruct the trial court to award Wisper Civil Code section 3287 prejudgment interest on 25 percent of the amount of each check diverted by Benitez and deposited into CCB’s Wisper account from the date of loss, which I would set as the date of each deposit. Upon deposit into the account on which Benitez was the sole signatory, Benitez at that time obtained sole control over the funds and created the loss to Wisper. (See, e.g., Bullís v. Security Pac. Nat. Bank (1978) 21 Cal.3d 801, 815 [148 Cal.Rptr. 22, 582 P.2d 109, 7 A.L.R.4th 642] [affirming award of Civil Code section 3287 prejudgment interest from date of loss]; Stein v. Southern Cal. Edison Co. (1992) 7 Cal.App.4th 565, 573 [8 Cal.Rptr.2d 907].)
A petition for a rehearing was denied October 23, 1996, Me Donald, J., was of the opinion that the petition should be granted. The petition of defendants and appellants for review by the Supreme Court was denied December 23, 1996.

 Many hypotheticals exemplify this dilemma. If the “line” is drawn at 49 percent negligence, why should a plaintiff be denied Civil Code section 3287 interest if it is 50 or 51 percent negligent? Because Li abandoned the “all-or-nothing” approach of contributory negligence, I doubt the California Supreme Court would uphold an “all-or-nothing” approach to prejudgment interest.

 South Dakota’s statute is South Dakota Codified Laws Annotated section 21-1-11, which was originally enacted in 1877. It reads: “Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor, from paying the debt.” (Geiger, supra, 414 N.W.2d at p. 18.)