CACI No. 3935. Prejudgment Interest (Civ. Code, § 3288)

New December 2016

Nakase Wade | California Business Lawyers & Corporate Lawyers

Give this instruction if the court determines that the jury may award prejudgment interest. 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. (Civ. Code, § 3288.) The statute allows the jury to award prejudgment interest on any claim within its scope. (Bullis v. Security Pac. Nat’l Bank (1978) 21 Cal.3d 801, 814 [148 Cal.Rptr. 22, 582 P.2d 109].) The special verdict form may need to be augmented for the jury to make any factual findings that are required in order to calculate the amount of prejudgment interest.

The role of the jury in awarding prejudgment interest is not clear from Civil Code section 3288. This instruction assumes that the court exercises a gatekeeper function of deciding whether the case is one to which the statute applies. The jury does not select the interest rate, which is seven percent as a matter of law. (Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1585 [36 Cal.Rptr.2d 343].)

It is settled that prejudgment interest cannot be awarded on damages for the intangible, noneconomic aspects of mental and emotional injury because they are inherently nonpecuniary, unliquidated, and not readily subject to precise calculation. (Greater Westchester Homeowners Assn v. L.A. (1979) 26 Cal.3d 86, 102–103 [160 Cal.Rptr.733, 603 P.2d 1329].) This instruction assumes that implicit in the reasoning for denying prejudgment interest for noneconomic damages is authorization to award it on all past economic damages, as these amounts are pecuniary and subject to more precise calculation. This instruction should not be given unless damages of this nature are claimed.

Since the statute is permissive, the jury has the discretion to deny prejudgment interest, even if it might otherwise be authorized. (See King v. Southern Pacific Co. (1895) 109 Cal. 96, 99 [41 P. 786] [error to instruct jury that it must add prejudgment interest to award of damages].)

Whether interest may be compounded is also not resolved. (Compare Douglas v. Westfall (1952) 113 Cal.App.2d 107, 112 [248 P.2d 68] [trustee cannot be charged with compound interest unless s/he has been guilty of some positive misconduct or willful violation of duty; in cases of mere negligence, no more than simple interest can properly be added] and State v. Day (1946) 76 Cal.App.2d 536, 554 [173 P.2d 399] [general rule is that interest may not be computed on accrued interest unless by special statutory provision, or by stipulation of the parties] with Michelson, supra, 29 Cal.App.4th at p. 1588 [jury is vested with discretion to award prejudgment interest under section 3288, including compound interest] and McNulty v. Copp (1954) 125 Cal.App.2d 697, 712 [271 P.2d 90] [compound interest is properly allowed on a claim for wrongful and fraudulent detention of personalty].)

•Interest on Obligation Not Arising From Contract. Civil Code section 3288.

•“Under Civil Code section 3288, the trier of fact may award prejudgment interest ‘[in] an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud, or malice … .’ “ (Bullis, supra, 21 Cal.3d at p. 814, original italics.)

•“[U]nlike Civil Code section 3287, which relates to liquidated and contractual claims, section 3288 permits discretionary prejudgment interest for unliquidated tort claims.” (Greater Westchester Homeowners Assn, supra, 26 Cal.3d at p. 102.)

•“Conceptually, prejudgment interest is an element of damages, not a cost of litigation.” (Watson Bowman Acme Corp. v. RGW Construction, Inc. (2016) 2 Cal.App.5th 279, 293 [206 Cal.Rptr.3d 281].)

•“In Bullis, we characterized prejudgment interest as ‘awarded to compensate a party for the loss of his or her property.’ The award of such interest represents the accretion of wealth which money or particular property could have produced during a period of loss. Using recognized and established techniques a fact finder can usually compute with fair accuracy the interest on a specific sum of money, or on property subject to specific valuation. Furthermore, the date of loss of the property is usually ascertainable, thus permitting an accurate interest computation.” (Greater Westchester Homeowners Assn, supra, 26 Cal.3d at pp. 102–103, internal citations omitted.)

•“The award of [prejudgment] interest represents the accretion of wealth which money or particular property could have produced during a period of loss.” (Canavin v. Pac. Southwest Airlines (1983)148 Cal.App.3d 512, 525 [196 Cal.Rptr. 82].)

•“However, damages for the intangible, noneconomic aspects of mental and emotional injury are of a different nature. They are inherently nonpecuniary, unliquidated and not readily subject to precise calculation. The amount of such damages is necessarily left to the subjective discretion of the trier of fact. Retroactive interest on such damages adds uncertain conjecture to speculation. Moreover where, as here, the injury was of a continuing nature, it is particularly difficult to determine when any particular increment of intangible loss arose. Acknowledging the problem, the trial court arbitrarily resorted to an ‘averaging’ method applied to both the amount and duration of the loss. In our view this process was impermissibly speculative.” (Greater Westchester Homeowners Assn, supra, 26 Cal.3d at p. 103.)

•“The amount of damages awarded in a wrongful death case designed to compensate these noneconomic losses are akin to those awarded for pain and suffering and emotional distress in Greater Westchester and do not support prejudgment interest. However, plaintiffs are entitled to prejudgment interest on those damages attributable to an ascertainable economic value, such as loss of household services or earning capacity, as well as funeral and related expenses. ‘[It] is important to underscore that [an] award is invalid only to the extent it represents interest on “the intangible noneconomic aspects of mental and emotional injury” claimed by plaintiffs. [Citation.] If plaintiffs allege specific damage that is supported by tangible evidence, prejudgment interest may properly be awarded under Civil Code section 3288.’ ” (Canavin, supra, 148 Cal.App.3d at p. 527, internal citations omitted.)

•“Whether the proper interest rate was applied is a question of law. There is no legislative act specifying the rate of prejudgment interest for a fraud claim, and therefore the constitutional rate of 7 percent applies … .” (Michelson, supra, 29 Cal.App.4th at p. 1585.)

•“Section 3288 … allows interest from date of monetary loss at the discretion of the trier of fact even if the damages are unliquidated.” (Stein v. Southern Cal. Edison Co. (1992) 7 Cal.App.4th 565, 572 [8 Cal.Rptr.2d 907].)

•“[T]his action lies in tort and it is the generally accepted view that [prejudgment] interest cannot be awarded on damages for personal injury.” (Curtis v. State of California ex rel. Dept. of Transportation (1982) 128 Cal.App.3d 668, 686 [180 Cal.Rptr. 843].)