General

Procedural Posture

Plaintiffs, a company and its owner, formed a limited liability company with defendant company. Plaintiffs’ action arose from a disagreement about the value of plaintiffs’ capital account for purposes of a buyout. The jury found that the value was $ 143,040 and that the owner was entitled to severance of $ 400,000. The Superior Court of Sacramento County, California, entered judgment with prejudgment interest of $ 489,550. Both parties appealed.

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Overview

Defendant argued that prejudgment interest was improper because the amount owed on plaintiffs’ breach of contract claim was uncertain until the jury reached its verdict. The reviewing court held that uncertainty in the amount of damages was not a bar to recovery of prejudgment interest under the circumstances of the case. Although Civ. Code, § 3287, subd. (a), required that the amount of damages be certain or capable of being made certain by calculation, it did not apply where prejudgment interest was part of the contractual amount owed. Under the express terms of the operating agreement, defendant was obligated to pay interest on any amount not paid within 30 days of a triggering event. Hence, plaintiffs did not need to resort to Civ. Code, § 3287, subd. (a), to obtain prejudgment interest. The court also held that the 18 percent interest rate provided by the agreement was not prohibited under the usury provision of Cal. Const., art. XV, § 1, or the liquidated damages provision of Civ. Code, § 1671, subd. (b). No “forbearance” was involved within the meaning of Cal. Const., art. XV, § 1, because there was no agreement between the parties to extend payment of a debt.

Outcome

The court affirmed the judgment.