Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC330936, Robert H. O’Brien, Judge.
Cox, Castle & Nicholson, Perry D. Mocciaro, Alicia N. Vaz and Heather E. Stern for Defendant and Appellant.
Ivie, McNeill & Wyatt, Rickey Ivie, Eulanda L. Matthews and Kendall E. James for Plaintiff and Respondent.
CROSKEY, J.
AMCAL Multi-Housing, Inc. (AMCAL), challenges an award of prejudgment interest on damages for breach of contract in favor of Affordable Shelters, Inc. (Affordable Shelters). AMCAL contends the prejudgment interest award was based on the court’s speculation as to the elements of damages awarded by the jury, and the damages purportedly awarded were neither due and owing nor ascertainable as required to support an award of prejudgment interest under Civil Code section 3287, subdivision (a). We conclude that the award of prejudgment interest on some of the damages awarded by the jury was based on speculation as to the elements of damages awarded, and therefore was improper. We conclude further that although it appears that the jury award included $75,000 in damages for loss of a developer’s fee on a project, that amount was not due and owing before the entry of judgment and therefore cannot support an award of prejudgment interest. Therefore, Affordable Shelters is not entitled to an award of prejudgment interest under the statute and we will modify the judgment accordingly.
All statutory references are to the Civil Code unless stated otherwise.
FACTUAL AND PROCEDURAL BACKGROUND
1. Factual Background
Affordable Shelters is a nonprofit corporation that purchases and rehabilitates real property and offers it as housing for purchase or rental by lower income persons. AMCAL is a real property developer. Affordable Shelters and AMCAL met with a City of Pomona city official and proposed working together to develop affordable housing in the city. They discussed potential development sites in Pomona, including one that later became the site of the Serenity Villas project.
Affordable Shelters, AMCAL, and American Developers International (ADI) entered into a written agreement dated July 20, 2000. The agreement stated that the parties agreed to “work together to acquire land in the city of Pomona, on which to construct and develop three separate affordable, rental, multi-family or senior housing facilities,” and that each development would be completed within three years of the date of the agreement. It stated that the agreement was “based on an exclusive relationship for the purpose of developing rental apartment projects in the City of Pomona only.” It referred to a “to be formed limited partnership with the tax credit investor.” It stated that Affordable Shelters would “act as a non-profit managing general partner to manage the affairs of the partnership and oversee the property management company upon completion of construction,” and that AMCAL would “act as the managing general partner prior to construction completion and as an administrative co-general partner after construction completion . . . [and] as the developer and general contractor for the development.” The agreement described ADI as a consultant to AMCAL.
The agreement stated, “Each site shall constitute a minimum of 100 units, and shall be launched and completed within three years from the date of this Agreement.”
The agreement stated that Affordable Shelters would receive “the sum of $100,000 from AMCAL’s share of the developer fee, which will be paid to [Affordable Shelters] in the same proportion and at the time that AMCAL received it’s [sic] share of developer fee from the to be formed limited partnership with the tax creditor investor.” It stated that Affordable Shelters would also receive “an annual asset management fee of $20,000 per year.” It stated further that ADI would receive “the sum of $50,000 payable $25,000 by AMCAL and $25,000 by [Affordable Shelters], which will be paid in the same proportion and at the same time that AMCAL and [Affordable Shelters] receive their share of developer fee from the to be formed limited partnership with the tax credit investor.” The agreement did not expressly state how any additional profits would be divided.
AMCAL stated in a letter to Affordable Shelters dated March 29, 2001, regarding Serenity Villas that AMCAL had “selected another non-profit to partner with us on the subject project because of the ability to score the maximum points for experience on the TCAC application.” That statement referred to the application to the state for a low-income housing tax credit and the experience points that can allow a project to qualify for a greater tax credit. AMCAL later established a relationship with another nonprofit organization and, on June 22, 2001, submitted a tax credit application for the Serenity Villas project with that organization as its partner. Construction began in November 2001, and the project was completed in November or December 2003.
AMCAL commenced construction on another housing project in Pomona known as Portofino Villas sometime after construction began on Serenity Villas. Portofino Villas was substantially completed in August 2005.
2. Trial Court Proceedings
Affordable Shelters filed a complaint against AMCAL in March 2005, alleging counts for breach of contract, conversion, and breach of fiduciary duty. Affordable Shelters sought damages arising from AMCAL’s termination of their relationship and its development of Serenity Villas and Portofino Villas without Affordable Shelters as a participant.
The court instructed the jury on breach of contract and breach of fiduciary duty. The jury returned a special verdict finding that the agreement dated July 20, 2002, was a valid contract, that AMCAL breached the contract on March 29, 2001, and that AMCAL breached its fiduciary duty to Affordable Shelters on June 22, 2001. The jury found that Affordable Shelters suffered $413,764 in damages as a result. The jury was not asked to explain how it arrived at that amount.
Affordable Shelters submitted a proposed judgment that did not include an award of prejudgment interest, and then submitted a second proposed judgment that included such an award with the amount left blank. The second proposed judgment stated that Affordable Shelters “is awarded $413,764.00 and interest thereon [p]ursuant to Civil Code Section 3289, at the rate of 10% per annum from March 29, 2001 to date in the sum of $_________.” The court signed the second proposed judgment and entered the judgment on August 28, 2006.
AMCAL filed a motion to preclude an award of prejudgment interest or limit the amount to be awarded. AMCAL argued that Affordable Shelters was not entitled to a mandatory award of prejudgment interest under section 3287, subdivision (a) because the amount of damages awarded was not ascertainable before the jury verdict. AMCAL also argued that a discretionary award of prejudgment interest under subdivision (b) of the statute would be inappropriate and, as a matter of law, interest could begin to accrue no earlier than the date that the complaint was filed. AMCAL argued further that Affordable Shelters should have sought prejudgment interest by filing a motion before the entry of judgment but failed to do so.
Affordable Shelters argued in opposition that the damages award included only its share of the developer and management fees, that those amounts were ascertainable based on the amounts stated in the agreement, and that the jury had reduced the total amount of developer and management fees for the two properties by $179,367 to reflect the asset management costs that Affordable Shelters would have incurred. Affordable Shelters argued further that even if the award included other damages that it sought at trial, those other amounts also were ascertainable, and that it was entitled to prejudgment interest under section 3287, subdivision (a) on the entire damages award regardless of the basis for the award.
The court in a minute order filed on October 4, 2006, stated that the $413,764 damages award included $75,000 as the developer fee for one project and $338,764 as the present value of future management fees. It concluded that those amounts were based on amounts stated in the agreement and that the damages award therefore was ascertainable from the date of the breach on March 29, 2001. After further proceedings concerning the total amount of prejudgment interest, the court entered a revised judgment on January 2, 2007, awarding Affordable Shelters $413,764 in damages and $224,112.70 in prejudgment interest. The revised judgment states that the prejudgment interest is awarded “[p]ursuant to Civil Code Section 3289, at the rate of 10% per annum from March 29, 2001 to date.” The total amount of the judgment, including costs, is $637,865.70. AMCAL timely appealed the revised judgment.
AMCAL filed objections to the proposed revised judgment and moved to vacate the award of prejudgment interest or, alternatively, for a new trial based on excessive damages and other grounds. The court granted the motions in part by vacating the prior award of prejudgment interest and awarding a reduced amount.
A judgment is final and appealable only if it leaves no issue to be determined between the parties. (Sullivan v. Delta Air Lines, Inc. (1997) 15 Cal.4th 288, 304; see Code Civ. Proc., § 577.) Prejudgment interest awarded under section 3287 is an element of damages, rather than an item of costs. (Lineman v. Schmid (1948) 32 Cal.2d 204, 208-209; North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830; see also Cal. Rules of Court, rule 3.1802.) The judgment entered on August 28, 2006, was not a final, appealable judgment because it did not finally determine the rights of the parties as to the amount of damages, including prejudgment interest. Accordingly, we treat the notice of appeal filed on December 15, 2006, from the judgment of August 28, 2006, and the orders of October 4 and November 15, 2006, as if it were filed immediately after the entry of judgment on January 2, 2007. (Cal. Rules of Court, rule 8.108(e)(2).)
CONTENTIONS
AMCAL contends (1) the elements of damages awarded by the jury cannot reasonably be discerned from the verdict, so the court’s determination that particular amounts were awarded was based on speculation and cannot support an award of prejudgment interest under section 3287, subdivision (a); (2) assuming arguendo that the court was correct in its determination of the amounts awarded by the jury, prejudgment interest on those amounts cannot be awarded under the statute because the amounts were not due and owing on the date of the breach or at any time before the entry of judgment, and because the amounts were not ascertainable at the time of the breach or at any time before the jury returned its verdict; and (3) Affordable Shelters failed to file a formal noticed motion for prejudgment interest and therefore is not entitled to an award under the statute.
DISCUSSION
1. Civil Code Section 3287, Subdivision (a)
Civil Code section 3287, subdivision (a) states: “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. This section is applicable to recovery of damages and interest from any such debtor, including the state or any county, city, city and county, municipal corporation, public district, public agency, or any political subdivision of the state.”
Section 3287, subdivision (a) provides that a party may recover prejudgment interest on an amount awarded as damages from the date that the amount was both (1) due and owing and (2) certain or capable of being made certain by calculation. (Koyer v. Detroit F. & M. Ins. Co. (1937) 9 Cal.2d 336, 345; Gray v. Bekins (1921) 186 Cal. 389, 399; see also Rest.2d Contracts, § 354(1).) The primary purpose of an award of prejudgment interest is to compensate the plaintiff for the loss of use of money during the period before the entry of judgment, in order to make the plaintiff whole. (Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 663; Lewis C. Nelson & Sons, Inc. v. Clovis Unified School Dist. (2001) 90 Cal.App.4th 64, 71-72.) The prejudgment interest rate on damages for breach of a contract that was entered into after January 1, 1986, and does not stipulate a rate of interest is 10 percent. (§ 3289, subd. (b).)
Damages are certain or capable of being made certain by calculation, or ascertainable, for purposes of section 3287, subdivision (a) if the defendant actually knows the amount of damages or could readily compute that amount from information reasonably available to the defendant. (KGM Harvesting Co. v. Fresh Network (1995) 36 Cal.App.4th 376, 391.) In contrast, damages that must be determined by the trier of fact based on conflicting evidence are not ascertainable. (Lineman v. Schmid, supra, 32 Cal.2d at p. 212; Fireman’s Fund Ins. Co. v. Allstate Ins. Co. (1991) 234 Cal.App.3d 1154, 1172-1173.)
2. The Award of Prejudgment Interest on the Entire Amount of Damages Was Error
A court can determine whether damages awarded by a jury were due and owing and ascertainable on a date before the entry of judgment, as necessary to support a prejudgment interest award under section 3287, subdivision (a), only if the court can discern the elements of damages awarded by the jury. If the court cannot discern the elements of damages with a reasonable degree of confidence, a determination that the amounts were due and owing and ascertainable on a date before the entry of judgment would be based on speculation. We conclude that an award of prejudgment interest under section 3287, subdivision (a) would be speculative and improper in those circumstances.
Prejudgment interest may be available in some cases under other statutory provisions. Section 3287, subdivision (b) authorizes prejudgment interest on “damages based upon a cause of action in contract where the claim was unliquidated,” in the court’s discretion. The interest may accrue from the date the action was commenced, at the earliest. (Ibid.) Section 3288 authorizes prejudgment interest in the discretion of the jury, “[i]n an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud, or malice.” (Ibid.) Section 3291 authorizes prejudgment interest in a personal injury action if the defendant fails to accept an offer to compromise and the plaintiff obtains a more favorable judgment.
Affordable Shelters sought the following items of damage at trial, totaling $10,111,246:
(1) $150,000 for loss of developer fees on the two completed projects (calculated at $100,000 per project minus $25,000 per project payable to ADI);
(2) $104,367 for loss of past asset management fees on the two completed projects (calculated at $20,000 per year per project from the commencement date of each project);
The asset management fee was compensation for overseeing a property management company after the completion of the project.
(3) $338,764 for loss of future asset management fees on the two completed projects (calculated at $20,000 per year per project from the trial date until the end of the projected 15-year duration of the parties’ joint investment, and stated as a present value);
(4) $28,119 for loss of past cash flow in excess of fees (assuming that Affordable Shelters and AMCAL shared profits equally);
(5) $1,651,103 for loss of future excess cash flow (same assumption and stated as a present value); and
(6) $7,838,893 for loss of future capital gains from the projected sale of the two properties to third parties after 15 years (assuming that ADI received 10 to 15 percent of profits and Affordable Shelters and AMCAL shared the remaining profits equally, and stated as a present value).
AMCAL argued in closing arguments that there was no valid contract and no partnership due to a mutual mistake; that Affordable Shelters was entitled to no fees or profits from the Portofino Villas project because that project was not completed within three years after the date of the agreement; that the costs of asset management would have exceeded the $20,000 per year asset management fee; that Affordable Shelters was not entitled to 50-percent ownership of Serenity Villas and was entitled to no profits; and that the most that the jury should award was a single $75,000 developer’s fee for Serenity Villas. AMCAL also presented evidence through its expert witness, Frank Thompson, that a nonprofit partner in this type of real estate investment typically receives much less than 50 percent of the profits.
AMCAL argued that the statement in the agreement that each project “shall be launched and completed within three years from the date of this Agreement” meant that Affordable Housing was entitled to no compensation for its participation in a project that was not completed within the three-year period.
The jury awarded Affordable Shelters $413,764 in damages. The trial court’s determination that the award included a $75,000 developer fee for one of the projects and $338,764 for loss of future asset management fees is unconvincing. There appears to be no reason for the jury to conclude that (1) Affordable Shelters was entitled to recover a $75,000 developer fee for only one project, but was entitled to recover future asset management fees for both projects; or (2) Affordable Shelters was entitled to recover future asset management fees for both projects, but was entitled to recover no past asset management fees. No evidence or argument presented at trial by either party would support such an internally inconsistent award. The fact that the award equals the sum of the two figures does not support the conclusion that the jury awarded those two amounts contrary to logic and inconsistent with the evidence and argument presented at trial.
Affordable Shelters does not seriously attempt to support the trial court’s reasoning, and instead argues on appeal that the jury reduced the total amount of developer fees ($150,000), past asset management fees ($104,367), and future asset management fees ($338,764) requested for both projects by $179,367, and awarded none of the other amounts requested, to arrive at the $413,764 figure. Affordable Shelters argues that it is reasonable to infer a finding by the jury that Affordable Shelters would incur $179,367 in asset management costs. AMCAL elicited testimony on cross-examination to the effect that Affordable Shelters was likely to incur costs to oversee a project management company, potentially including the cost to hire its own staff qualified to perform the oversight. AMCAL elicited no testimony, however, as to the amount of those costs, past or future, and argued in closing argument that the amount would exceed $20,000 per year. Although it is possible that the jury performed its own calculations to arrive at the $179,367 figure, we cannot conclude with any reasonable degree of confidence that the jury did so or that the jury calculated the total amount of damages in the manner suggested by Affordable Shelters.
In our view, there is no single convincing explanation for the amount of damages awarded by the jury. We could no more readily conclude that the jury calculated damages in the manner suggested by the trial court than we could conclude that the jury calculated damages in the manner suggested by Affordable Shelters, or in some other manner. The variables include not only which of the six items of damages were awarded, for how many projects (one or two), and the amount of any reduction for asset management costs, but also the percentage of profits payable to Affordable Shelters, if any. We conclude that the award of prejudgment interest under section 3287, subdivision (a) on the entire amount of damages awarded by the jury was based on speculation as to the elements of damages awarded, and therefore was improper.
3. Affordable Shelters Is Not Entitled to an Award of Prejudgment Interest on the $75,000 Developer’s Fee
The only item of damages that we can be reasonably certain was included in the amount awarded by the jury is $75,000 for the loss of the developer’s fee for Serenity Villas. AMCAL conceded that Affordable Shelters was entitled to a $75,000 developer’s fee for Serenity Villas if the jury found that the agreement was enforceable. Moreover, all of the damages requested at trial related to the loss of income or profits that Affordable Shelters allegedly would have earned through its participation in a successful project. The jury’s damages award therefore indicates a finding that Affordable Shelters would have realized some earnings from a successful project if its relationship with AMCAL had continued, necessarily including Affordable Shelter’s agreed share of the developer’s fees for at least one project.
Affordable Shelters is entitled to prejudgment interest only on amounts that, as of a date before the entry of judgment, were both (1) due and owing and (2) certain or capable of being made certain by calculation, as we have stated. A developer’s fee was payable to Affordable Shelters under the terms of the agreement “at the same time that AMCAL received it’s [sic] share of developer fee from the to be formed limited partnership with the tax credit investor.” The undisputed evidence at trial was that AMCAL had not received its developer fee for the Serenity Villas project as of the time of trial, and there is no evidence in the record that AMCAL received its developer fee for either of the two projects at any time before the entry of judgment. Affordable Shelters does not argue otherwise, but instead argues that the breach on March 29, 2001, was an anticipatory breach for which it was immediately entitled to recover all resulting damages.
We conclude that regardless of when Affordable Shelters was first entitled to sue for a breach and recover damages, an amount was due and owing for purposes of prejudgment interest under section 3287, subdivision (a) only if the amount was due and owing under the terms of the contract. (Koyer v. Detroit F. & M. Ins. Co., supra, 9 Cal.2d at p. 345 [held that prejudgment interest could be awarded under the statute from no earlier than the time that the loss was payable under the insurance policy]; Overholser v. Glynn (1968) 267 Cal.App.2d 800, 810 [held that prejudgment interest could be awarded under the statute from no earlier than the time that the amount was due under the implied contract]; see Rest.2d Contracts, § 354(a) & com. b, p. 151.) The fact that the law affords a remedy for an anticipatory breach before performance is due under a contract does not compel the conclusion that prejudgment interest on damages for breach of that obligation begins to accrue at that time. Rather, the purpose of prejudgment interest to compensate the plaintiff for the loss of use of money suggests that an award of prejudgment interest from a time before performance was due under the contract would be an unjustified windfall.
Section 3287, subdivision (a) is substantially the same as the rule from the Restatement of Contracts, section 337(a) (Lineman v. Schmid, supra, 32 Cal.2d at p. 211; Axell v. Axell (1952) 114 Cal.App.2d 248, 256), which is continued in the Restatement Second of Contracts, section 354(1). Section 354(1) of the Restatement Second states, in pertinent part, “interest is recoverable from the time for performance . . . .” Comment b states, “[i]nterest is not payable as damages for non-performance until performance is due.” (Rest.2d Contracts, § 354, com. b, p. 151.)
We conclude that Affordable Shelters is not entitled to prejudgment interest under section 3287, subdivision (a) on the $75,000 of damages for loss of the developer’s fee because that amount was not due and owing at any time before the entry of judgment. In light of our conclusions, we need not address AMCAL’s third contention.
DISPOSITION
The judgment is modified by striking the award of prejudgment interest in the amount of $224,112.70, thus reducing the total amount awarded, including costs, to $413,773. The judgment, as so modified, is affirmed. AMCAL is entitled to recover its costs on appeal.
We Concur: KLEIN, P. J., KITCHING, J.