Morin v. Aba Recovery Service, Inc.

• Decision Date: 30 September 1987
• Citation: 195 Cal.App.3d 200,240 Cal.Rptr. 509
• Court: California Court of Appeals Court of Appeals
• Parties: Real A. MORIN, et al., Plaintiffs and Appellants, v. ABA RECOVERY SERVICE, INC., et al., Defendants and Respondents. D004512.

Page 509

240 Cal.Rptr. 509

195 Cal.App.3d 200

Real A. MORIN, et al., Plaintiffs and Appellants, v. ABA RECOVERY SERVICE, INC., et al., Defendants and Respondents.

D004512.

Court of Appeal, Fourth District, Division 1, California.

Sept. 30, 1987.

Singleton & Ronquillo, Terry Singleton and David Ronquillo, Escondido, for plaintiffs and appellants.

Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & Casey, Michael L. Lipman, Paul E. Pierce, Jr., Sullivan, Duvall & Noya and Ronald W. Noya, San Diego, for defendants and respondents.

KREMER, Presiding Justice.

Plaintiffs Real and Shirley Morin (Morin) appeal an order denying their request for prejudgment interest under Civil Code section 3291 against defendants ABA Recovery Service, Inc., Richard Egley and Henry Rose. Morin contends section 3291 mandates an award of interest. Although we find section 3291's language to be mandatory,

on this record we are unable to determine whether Morin is entitled to an award of prejudgment interest. We thus reverse the order and remand the matter to the superior court for further proceedings.

I

In August 1980 Morin sued defendants for wrongfully repossessing Morin's trailer, alleging causes of action for intentional infliction of emotional distress and possession of personal property. Morin sought compensatory damages according to proof and $15,000 punitive damages. In September 1980 defendants answered Morin's complaint.

In December 1983 Morin served defendants with an offer to settle for $24,000 under Code of Civil Procedure section 998. Defendants allowed Morin's offer to expire.

In March 1984 the matter was arbitrated. The arbitrator awarded Morin $75,000. Defendants rejected the arbitrator's award and sought a trial de novo.

In June 1985 defendants offered Morin $40,000 under Code of Civil Procedure section 998. Morin did not accept defendants' offer.

In September 1985 Morin filed an amended complaint for possession of personal property, intentional infliction of emotional distress, negligent infliction of emotional distress and negligence.

In September 1985 jury trial began. After Morin rested, defendants offered Morin $72,000 plus an additional $10,000 over time. Morin declined. The matter went to the jury. In November 1985 the court entered $67,500 judgment on general verdict favoring Morin, including $27,500 compensatory damages and $40,000 punitive damages.

Morin filed a cost memorandum seeking prejudgment interest under Civil Code section 3291. After hearing, the court denied Morin's request for prejudgment interest. The court stated it believed it had "... discretion to deny prejudgment interest otherwise awardable under CC 3291." Morin appeals the order denying prejudgment interest.

II

Code of Civil Procedure section 998 provides in relevant part:

"(a) The costs allowed under Sections 1031 and 1032 shall be withheld or augmented as provided in this section.

"(b) Not less than 10 days prior to commencement of trial, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken in accordance with the terms and conditions stated at that time.

"(1) If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly.

"(2) If the offer is not accepted prior to trial or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn, and cannot be given in evidence upon the trial.

"...

"(d) If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment, the court in its discretion may require the defendant to pay a reasonable sum to cover costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, the preparation or trial of the case by the plaintiff, in addition to plaintiff's costs."

Civil Code section 3291 provides in relevant part:

"In any action brought to recover damages for personal injury sustained by any person resulting from or occasioned by the tort of any other person, corporation, association, or partnership, whether by negligence or by willful intent of the other person, corporation, association, or partnership, and whether the injury was fatal or otherwise, it is lawful for the plaintiff in the complaint to claim interest on the damages alleged as provided in this section.

"If the plaintiff makes an offer pursuant to Section 998 of the Code of Civil Procedure which the defendant does not accept

prior to trial or within 30 days, whichever occurs first, and the plaintiff obtains a more favorable judgment, the judgment shall bear interest at the legal rate of 10 percent per annum calculated from the date of the plaintiff's first offer pursuant to [195 Cal.App.3d 205] Section 998 of the Code of Civil Procedure which is exceeded by the judgment, and interest shall accrue until the satisfaction of judgment."

III

Morin contends the court erred in denying prejudgment interest, asserting Civil Code section 3291 mandated an award of such interest here.

" 'The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law.' (Select Base Materials v. Board of Equal., 51 Cal.2d 640, 645 ; Civ.Code, § 4.) In ascertaining the will of the Legislature, '[t]he court turns first to the words themselves for the answer. It may also properly rely on extrinsic aids.... Primarily, however, the words, in arrangement that superimposes the purpose of the Legislature upon their dictionary meaning, stand in immobilized sentry, reminders that whether their arrangement was wisdom or folly, it was wittingly undertaken and not to be disregarded. [p ] ... If the words of the statute are clear, the court should not add to or alter them to accomplish a purpose that does not appear on the face of the statute or from its legislative history. [Citations.] Certainly the court is not at liberty to seek hidden meanings not suggested by the statute or by the available extrinsic aids. [Citation.]' (People v. Knowles, 35 Cal.2d 175, 182-183 .) (See also In re Miller, 31 Cal.2d 191, 198-199 ; Code Civ.Proc., § 1858.)" (Hogya v. Superior Court (1977) 75 Cal.App.3d 122, 132-133, 142 Cal.Rptr. 325.)

On its face Civil Code section 3291 appears to impose upon the court a mandatory obligation to award prejudgment interest where the statutory conditions are met. The words of the statute providing the judgment "shall" bear 10 percent prejudgment interest are reasonably clear. Generally the word "shall" connotes a mandatory obligation. "The word 'shall' is ordinarily 'used in laws, regulations, or directives to express what is mandatory.' [Citations.] 'May,' on the other hand, is usually permissive." (Hogya v. Superior Court, supra, 75 Cal.App.3d at p. 133, 142 Cal.Rptr. 325.) The Legislature is aware of this distinction and used "shall" in section 3291. This ordinary meaning of "shall" supports Morin's interpretation of the statute. Nothing in the language of section 3291 suggests its word "shall" should be construed as other than mandatory. If the Legislature intended trial courts to have discretion to deny prejudgment interest, the Legislature should have used the word "may" instead of "shall." (Ibid.)

However, as defendants correctly note, a statute's use of the word "shall" does not always mean its provisions are mandatory. "Shall" has sometimes been judicially construed as directory or permissive. (Governing Board v. Felt (1976) 55 Cal.App.3d 156, 161-163, 127 Cal.Rptr. 381.)

" 'The test is this: "If to construe it as directory would render it ineffective and meaningless it should not receive that construction." [Citations.] Thus, a statute was held to be mandatory where "to construe this provision of the section as directory merely would be to defeat the very purpose of its enactment." [Citation.] "... [I]t appears that if public policy is in favor of the imperative meaning, the words referred to will be held mandatory." [Citation.] "In construing a statute matters of substance are to be construed as mandatory." [Citation.]' " (Hogya v Superior Court, supra, 75 Cal.App.3d at p. 134, 142 Cal.Rptr. 325, citing People v. Municipal Court (1956) 145 Cal.App.2d 767, 775, 303 P.2d 375.)

Thus, whether the word "shall" is to be construed as mandatory or merely permissive depends on the legislative intent. (Nasser v. Superior Court (1984) 156 Cal.App.3d 52, 58, 202 Cal.Rptr. 552.)

Defendants contend the Legislature could not have intended to allow prejudgment interest under Civil Code section 3291 where the plaintiff's conduct during settlement negotiations was unreasonable, inequitable or in bad faith. However, defendants point to nothing in section 3291's legislative history suggesting the Legislature intended an award of prejudgment interest to be merely discretionary. On the contrary, the available legislative history leads to the conclusion the statute's language is, indeed, mandatory. The manifest purpose of section 3291 is to encourage settlement. (Ops.Cal.Legis.Counsel, No. 17984 (Nov. 2, 1982) Judgment and Prejudgment Interest; accord, Woodard v. Southern Cal. Permanente Medical Group (1985) 171 Cal.App.3d 656, 666, 217 Cal.Rptr. 514; Gutierrez v. State Ranch Services (1983) 150 Cal.App.3d 83, 88, 198 Cal.Rptr. 16.) Section 3291 "... substantially increases the stakes for a defendant faced with a pretrial offer to settle [under Code of Civil Procedure section 998]." (Id. at p. 88, fn. 7, 198 Cal.Rptr. 16.) Construing section 3291 as granting the trial court discretion to deny prejudgment interest would impair the very purpose of the statute's enactment. (Cf. People v. Municipal Court, supra, 145 Cal.App.2d at p. 775, 303 P.2d 375.) Interpreting the statute as mandatory furthers the legislative intent to encourage settlements. ¹

Construing Civil Code section 3291 as...