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In Cadlo v. Metalclad
Insulation Corporation (March 30, 2009) 09 C.D.O.S. 4004, Division
Five of the First Appellate District reviewed an issue of first
impression regarding the amount of prejudgment interest owed by two
defendants in a personal injury action after both rejected
plaintiff’s CCP section 998 offers to compromise and plaintiff went
on to obtain a more favorable judgment against both of them. The
trial court held that each defendant was jointly and severally
liable for prejudgment interest on the judgment and each was
obligated to pay the statutory annual rate of 10 percent on the
amount of the judgment attributable to it. Plaintiff argued each
defendant should be obligated to pay the 10 percent on the amount of
the entire judgment. The court of appeal rejected plaintiff’s
contention and affirmed.
“Civil Code section 3291 provides that if a defendant does not
timely accept a Code of Civil Procedure section 998 offer to
compromise (hereafter 998 offer) and the plaintiff obtains a more
favorable judgment, the plaintiff is entitled to specified annual
interest.” The statutory rate is 10 percent.
After the trial, “respondents stipulated to satisfy the joint and
several economic damages award by the same allocation ratio made by
the jury (4 percent of fault to Metalclad, 3 percent of fault to
John Crane). Thus, Metalclad agreed to compensate appellant for 57
percent of the economic damages award and Crane agreed to compensate
appellant for 43 percent of the economic damages award.” Thereafter,
the court entered a remittitur and both respondents tendered their
payments to appellant in an effort to satisfy the judgment.
Appellant rejected respondent’s tenders of payment on the ground
that neither contained enough interest. Appellant maintained she was
entitled to 10% annual interest on the entire judgment award from
each defendant.
Defendants moved for a final determination on the judgment and for
entry of satisfaction of judgment. The trial court agreed with
defendants that they were jointly and severally liable for the
interest under section 3291, and rejected appellant’s assertion. The
court observed that appellant was seeking double the amount of
interest to which she was entitled by statute. The trial court found
that each tendering defendant had satisfied its share of the
judgment and stopped the accrual of interest as of the date each
tendered to appellant. Appellant timely appealed the court’s order
on respondent’s motion for determination of final judgment and
satisfaction of judgment.
The Court of Appeal rejected appellant’s efforts to seek 20%
interest on the judgment and affirmed. “The words of the statute are
clear and unambiguous: the judgment shall bear interest at the legal
rate. Though two defendants were found liable by the jury, only one
judgment resulted, and the interest imposed by section 3291 is to be
calculated on that amount.”
Appellant’s effort to seek 20% interest on the judgment was
inconsistent with the purpose and intent of the statute. “Section
3291 serves two purposes. It encourages settlements in personal
injury cases by creating “‘an incentive for recalcitrant defendants
to accept reasonable settlement offers in a timely manner.’”…[and]
“‘to provide just compensation to the injured party for loss of use
of the [damage] award during the prejudgment period—in other words,
to make the plaintiff whole as of the date of the injury.’” The
court would not countenance appellant’s effort to obtain a windfall.
“Section 3291 creates a penalty to be imposed on those defendants
who reject reasonable settlement offers, but limits that penalty to
making the plaintiff whole as of the date of the injury.”
This decision makes clear that when multiple defendants reject
section 998 offers to compromise and plaintiff gets a more favorable
judgment against them, defendants will be jointly and severally
liable for the prejudgment interest on the judgment pursuant to CC
3291 and plaintiff is not entitled to more than 10% prejudgment
interest on the judgment.
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