Superior Court of Pennsylvania Holds Award of Prejudgment Interest on Damages for Breach of Contract is Discretionary in Most Circumstances

Cresci Constr. Servs., Inc. v. Martin
2013 Pa. Super. LEXIS 154 (Pa. Super. Ct. Mar. 28, 2013)

Martin hired Cresci to build a home in exchange for $184,730. The Contract included a liquidated damages clause that applied if Martin canceled the contract before Cresci began constructing the home. The Contract did not include any other liquidated damage clauses.

Martin sued Cresci for breach of contract, claiming that Cresci failed to complete several of the contract’s required obligations. A jury, finding that Cresci did breach the contract, awarded Martin $66,000 in damages. The trial court held that prejudgment interest was not warranted. On appeal to the Superior Court, Martin sought prejudgment interest on the breach of contract damages, arguing that pre-judgment interest in a breach of contract case is a legal right. Specifically, Martin sought prejudgment interest because he had to pay additional mortgage expenses, legal expenses, inspection fees, and other costs associated with maintaining two properties since the home was uninhabitable.

The Superior Court affirmed the trial court’s decision. Specifically, the Superior Court held that under Pennsylvania law prejudgment interest is only awarded as a matter of right in four limited circumstances, when the contract involved: 1) paying a monetary amount defined in the contract; 2) rendering a performance for a monetary amount defined in the contract; 3) rendering a performance for a monetary amount that could be calculated from standard set forth in the contract; or 4) rendering a performance for a monetary amount calculated from an established market price. In all other circumstance, prejudgment interest is awarded as a matter of discretion. A court must examine the relevant contract to determine if prejudgment interest is mandatory or discretionary in any particular matter.

After an examination of the Contract, the Superior Court held that prejudgment interest was discretionary. The only monetary amount specified in the Contract was $184,730, the amount that would be paid to Cresci for completing performance of the construction of the home. The Contract did not provide for the payment of additional mortgage expenses, legal expenses, inspections fees, or other costs associated with maintaining two properties, and the Contract did not provide a manner of calculating the monetary value for those items. Thus, these amounts are not liquidated or ascertainable sums owed under the Contract. Also, the jury’s award of $66,000 was not fixed by the Contract. Thus, this amount was not a liquidated or ascertainable sum owed under the Contract. As a result, the trial court was not required to award Martin prejudgment interest as a matter of right. The Superior Court held that it was in the trial court’s discretion whether to award prejudgment interest on the $66,000 of consequential damages awarded to Martin. The Superior Court affirmed the trial court’s decision.

Lindsay J. Levine

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