Wednesday, March 14, 2007

S.C. Court of Appeals issues guidance on award of pre-judgment interest

In Vaughn Development v. Westvaco, Westvaco promised to install sewer mains in connection with the sale of the property to Vaughn Development but failed to perform the instillation. Vaughn Development hired Superior Utilities to install two sewer mains and manholes and four service crossings at a cost of $88,691. Vaughn Development requested reimbursement from Westvaco and Westvaco responded by stating it would pay only $18,746.12 for the sewer work, which represented the cost of one sewer main based on Superior Utilities’ cost detail. The jury awarded Vaughn Development $37,492.24, a sum equivalent to the cost of two sewer mains. The court awarded Vaughn Development prejudgment interest.

The Court if appeals reversed the award of prejudgment interest because the measure of recovery could not have been determined at the time the claim arose. According to the Court, prejudgment interest is allowed on a claim of liquidated damages; i.e., the sum is certain or capable of being reduced to certainty based on a mathematical calculation previously agreed to by the parties. Prejudgment interest is not allowed on an unliquidated claim in the absence of an agreement or statute. The fact that the amount due is disputed by the opposing party does not render the claim unliquidated for the purposes of an award of prejudgment interest.

Because we find the measure of recovery was not fixed at the time the claim arose, the trial court erred in awarding prejudgment interest.

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