Ninety Five Ten v. Crain

Opinion

CARR, Acting P. J. This appeal presents a single legal issue of whether a creditor may recover prejudgment interest on interest-only installment payments due on a standard note. The trial court determined such interest was not recoverable. We shall affirm.

Because of the single issue in this appeal, an exhaustive recitation of the factual and procedural history is unnecessary. The record discloses that in a complex real estate transaction, a “Starker” exchange under 26 United States Code section 1031 (see Starker v. United States (9th Cir. 1979) 602 F.2d 1341), Roy L. Crain (Crain) sold his interest in a shopping center to a limited partnership, named Ninety Five Ten for $1,175,000. He received as partial payment a $250,000 note providing for interest-only payments at 11 percent until the maturity date of the note, at which time the entire principal plus accrued interest was due. This note was secured by a deed of trust on the [38]shopping center. Ninety Five Ten and others (Elzey) sued Crain and others on May 2, 1986, seeking rescission of the contract and damages, alleging that the sellers had misrepresented the value of the property. Crain cross-complained for judicial foreclosure under the sales contract. As part of his damages he sought the delinquent monthly installments on the $250,000 note from Ninety Five Ten.

Crain prevailed on the complaint and cross-complaint. The court ultimately denied Crain’s request for prejudgment interest on the delinquent installment of interest. The court did award Crain prejudgment interest on the principal amount due. Crain timely appealed.

Discussion

Crain argues a sum certain ($2,395.83) was due each month, beginning August 31, 1985, and that no payments were made following a partial payment of $692.25, made on January 31, 1986. He urges that he is entitled to interest on these monthly payments. Ninety Five Ten’s sole legal argument is to refer to certain pleadings filed in the trial court and urge that Crain’s position is an attempt “to change existing law regarding the compounding of interest.”

We are concerned with division 4, title 2 of the Civil Code, dealing with compensatory relief.1 Chapter 1, article 2, beginning with section 3287, discusses interest as damages, “(a) 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. . . . [f] (b) Every, person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.” (§ 3287.) “Any legal rate of interest stipulated by a contract remains chargeable after a breach thereof, as before, until the contract is superseded by a verdict or other new obligation.” (§ 3289, subd. (a).)