Digital & Analog Design Corp. v. North Supply Co.

• Decision Date: 20 May 1992
• Docket Number: No. 91-128,91-128
• Citation: 590 N.E.2d 737,63 Ohio St.3d 657
• Parties: DIGITAL & ANALOG DESIGN CORPORATION, Appellee, v. NORTH SUPPLY COMPANY, Appellant.
• Court: Ohio Supreme Court

Page 657

63 Ohio St.3d 657

590 N.E.2d 737

DIGITAL & ANALOG DESIGN CORPORATION, Appellee, v. NORTH SUPPLY COMPANY, Appellant.

No. 91-128.

Supreme Court of Ohio.

Submitted Feb. 19, 1992.

Decided May 20, 1992.

SYLLABUS BY THE COURT

1. Prejudgment interest is properly awarded under R.C . 1343.03 on compensatory damages when, because of the failure of a tortfeasor to negotiate in good faith, it becomes necessary to compensate a plaintiff for delay in receiving compensation for his injuries, even if that plaintiff has been awarded punitive damages in an amount that otherwise would be sufficient to compensate him for such delay. (Villella v. Waikem Motors, Inc. [1989], 45 Ohio St.3d 36, 543 N.E.2d 464, clarified.)

2. A litigant does not have a constitutional right to trial by jury as to the determination of whether, or in what amount, attorney fees should be awarded in a tort action. (Section 5, Article I of the Ohio Constitution, construed.)

3. In view of the public policy of this state that favors jury determination of issues of liability, as evidenced by the General Assembly's passage of R.C. 2315.21 and its amendment to R.C. 2315.18, a trial court must submit to a jury the issue of whether attorney fees should be awarded in a tort action. The amount of those fees, however, shall be determined by the trial judge, who may, in his or her discretion, submit the question of the amount of the fees to the jury.

In late August 1984, appellee, Digital & Analog Design Corporation ("DAD"), filed suit against appellant, North Supply Company ("NSC"), for damages resulting from NSC's unlawful seizure of goods from DAD's warehouse on the morning of August 1, 1984. In its eight-count complaint, DAD asserted that NSC's actions constituted conversion, trespass, tortious interference with business relations, wrongful seizure of property, and breach of contract. In response, NSC filed a counterclaim, asserting that DAD owed NSC $330,725.72 on account.

On January 14-23, 1987, the cause was tried before a jury, and at the close of the evidence, the trial court directed a verdict for DAD on a portion of the conversion claim. Subsequently, the jury returned a verdict in favor of DAD as to all counts in the complaint, and also in DAD's favor on NSC's counterclaim. The jury awarded DAD $1,187,000 in compensatory damages and $1,500,000 in punitive damages. The trial court granted, in part, NSC's motion for a judgment notwithstanding the verdict on its counterclaim, finding that NSC was entitled to $135,253.12 on DAD's account.

After the trial, but prior to NSC's initial appeal to the court of appeals, DAD filed post-trial motions for prejudgment interest and attorney fees. It appears that the trial court, relying upon Davis v. Owen (1985), 26 Ohio App.3d 62, 26 OBR 236, 498 N.E.2d 202, determined that the issues would not be presented to a jury, and deferred action on these motions pending the outcome of NSC's appeal.

Upon appeal, the court of appeals found in favor of DAD on all issues, and upon further appeal this court affirmed the court of appeals in every respect, except that the punitive damage award was reduced to $1,000,000. Digital & Analog Design Corp. v. North Supply Co. (1989), 44 Ohio St.3d 36, 540 N.E.2d 1358.

Subsequent to this court's decision on the initial appeal, NSC paid the judgment, and DAD requested a hearing on its pending motions for prejudgment interest and attorney fees. NSC then moved to strike DAD's motions, asserting that the awarding of punitive damages obviated DAD's motion for prejudgment interest and contending that a post-trial procedure for determining attorney fees violated its right to trial by jury. The trial court, agreeing with NSC's assertions, overruled DAD's motions.

Upon appeal, the court of appeals reversed the trial court's judgment and remanded the cause for a hearing on the motions for attorney fees and prejudgment interest.

The cause is now before this court pursuant to an allowance of a motion to certify the record.

Wickens, Herzer & Panza, A L.P.A., Richard D. Panza, William F. Kolis, Jr., and Matthew W. Nakon, Lorain, for appellee.

Gallagher, Sharp, Fulton & Norman, John B. Robertson and Robert H. Eddy, Cleveland, for appellant.

WRIGHT, Justice.

Appellant's propositions of law raise essentially two issues for our review: (1) whether, and under what situations, it is proper to award prejudgment interest, pursuant to R.C. 1343.03(C), if the plaintiff has been awarded punitive damages; and (2) whether a litigant in a tort action is entitled to have a jury determine whether, or in what amount, attorney fees should be awarded. We address each of these issues in turn.

I

R.C. 1343.03(C) reads as follows:

"Interest on a judgment, decree, or order for the payment of money rendered in a civil action based on tortious conduct and not settled by agreement of the parties, shall be computed from the date the cause of action accrued to the date on which the money is paid, if, upon motion of any party to the action, the court determines at a hearing held subsequent to the verdict or decision in the action that the party required to pay the money failed to make a good faith effort to settle the case and that the party to whom the money is to be paid did not fail to make a good faith effort to settle the case."

In our latest interpretation of this provision, Villella v. Waikem Motors, Inc. (1989), 45 Ohio St.3d 36, 543 N.E.2d 464, we rejected the award of prejudgment interest on punitive damages. In so ruling, we stated that " * * * because punitive damages over and above the amount adequate to compensate the plaintiff were awarded, prejudgment interest to compensate for delay in payment was unnecessary and the award of prejudgment interest must be vacated." Id. at 42, 543 N.E.2d at 471.

Appellant has seized upon this language to support his proposition that the award of prejudgment interest on compensatory damages is not warranted, even if plaintiff has met the requirements of R.C. 1343.03, when punitive damages are awarded in an amount sufficient to compensate for delay in payment of those compensatory damages. Appellant's argument is based upon a reading of Villella that is out of context, and thus it must fail.

At issue in Villella was the propriety of awarding prejudgment interest on the punitive damages portion of a judgment. Although selective quotations from the opinion might lead one to find merit in appellant's position, a reading of the entire opinion belies its stand. The opinion reveals instead that the issue of whether the plaintiff in Villella was entitled to prejudgment interest on the compensatory damage award of $250 was not raised, no doubt because the interest that would have accrued on such a relatively small sum was insignificant in comparison to the punitive damages awarded. An issue more important to the litigants was the issue we addressed--the propriety of awarding prejudgment interest on the $150,000 punitive-damages award to the plaintiff.

The import of Villella is simply that a litigant is not entitled to prejudgment interest on the punitive damages portion of a judgment. At issue here is whether a litigant is entitled to prejudgment interest on the compensatory damages portion of an award when that litigant has also been awarded punitive damages in an amount sufficient to compensate him for the defendant's failure to negotiate in good faith.

From a policy perspective, one can easily distinguish between the award of prejudgment interest on compensatory damages and the award on punitive damages. Punitive damages are awarded to punish the guilty party and deter tortious conduct by others. Detling v. Chockley (1982), 70 Ohio St.2d 134, 136, 24 O.O.3d 239, 240, 436 N.E.2d 208, 209. Those goals are fully accomplished, if at all, at the time punitive damages are awarded. The amount of punitive damages is not fixed at the time the tort occurs, but rather accrues only after a reasoned determination by a jury of an amount that fairly punishes the tortfeasor for his malicious or malevolent acts and that will deter others from similar conduct.

Compensatory damages, on the other hand, are awarded to make the tort victim whole and, in a sense, accrue at the time of injury. Because the prejudgment interest statute is designed to compensate the aggrieved party for the delay encountered by the failure of the tortfeasor to negotiate in good faith, the law recognizes as a basis for such interest only those damages that would have been measurable with some degree of certainty prior to trial. Thus, the law provides for an award of prejudgment interest on compensatory damages in order to preserve the full compensation those damages represent, but imposes no similar penalty or compensation with respect to the punitive-damages portion of an award.

As we have previously emphasized, "* * * '[a]warding prejudgment interest on punitive damages * * * [would serve] neither the compensatory purposes of prejudgment interest nor the exemplary purposes of punitive damages. * * * ' " (Emphasis sic.) Villella, supra, 45 Ohio St.3d at 42, 543 N.E.2d at 471. Awarding prejudgment interest on compensatory damages, however, ensures that just compensation to the tort victim is not eroded by the dilatory tactics of the tortfeasor, and comprises a sanction wholly separate from any punitive damages awarded. This purpose would not be served were the law construed in the manner suggested by the appellant.

The tortfeasor who is subject to punitive damages should not be permitted to escape responsibility for his additional failure to negotiate in good faith simply because an award of punitive damages is sufficient to compensate his victim for delay resulting from the tortfeasor's recalcitrance. Accordingly, prejudgment interest is properly awarded under R.C. 1343.03 on compensatory damages when, because of the failure of a tortfeasor to negotiate in good faith, it becomes necessary to...