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Prejudgment Interest Awarded at Daily Rate of 1%
In a recent opinion, the Court of Appeals of South Carolina awarded prejudgment interest as provided under a construction contract notwithstanding that the stated interest rate was an astonishing 1% per day. Homeowners entered into a contract with a builder to remodel their home. Homeowners brought suit against Builder for damage that occurred in their home after a water line broke. Builder counter claimed for, among other claims, breach of contract and included a claim for interest on any payment due pursuant to the contract. The contract provided for interest on any payment due at a daily rate of 1%.
The case went to trial and the jury awarded Builder $6,437.62. Thereafter, Builder made a post-trial motion for prejudgment interest. The circuit court granted Builder's motion and awarded prejudgment interest as defined by the contract - at a daily rate of 1%. Homeowners appealed this order. The Court of Appeals upheld this order, finding that (1) the "award of prejudgment interest is the function of the trial court," and (2) the test for awarding prejudgment interest is whether the measure of recovery is fixed at the time the claim arose and since the Homeowners and Builder entered into a contract for a fixed amount, recovery was fixed at the time the claim arose. This held true even though the amount due was in dispute and the jury awarded much less to Builder than he had claimed.
In a footnote of the opinion, the Court states that since the jury verdict came 725 days after the amount was due under the contract, the prejudgment interest would be at least $46,672.75 (calculated by multiplying one percent of the award by 725). While the court noted that this amount may be unconscionable or absurd, it stated that it could not evaluate these arguments because the Homeowners did not make these arguments in the trial court.
This case shows that South Carolina courts may impose significant prejudgment interest if provided for in a contact. However, parties should be aware that they can challenge an award if unconscionable as long as those arguments are timely pursued. |
