Schwartz v. Piper Aircraft Corp., Docket No. 78-1452

• Decision Date: 22 May 1979
• Docket Number: Docket No. 78-1452
• Parties: Gregory J. SCHWARTZ and Judith M. Schwartz, Plaintiffs-Appellees, v. PIPER AIRCRAFT CORPORATION, a Foreign Corp., Defendant-Appellant. 90 Mich.App. 324, 282 N.W.2d 306
• Court: Court of Appeal of Michigan — District of US

Page 306

282 N.W.2d 306

Gregory J. SCHWARTZ and Judith M. Schwartz Plaintiffs-Appellees, v. PIPER AIRCRAFT CORPORATION, a Foreign Corp. Defendant-Appellant.

Docket No. 78-1452.

90 Mich.App. 324, 282 N.W.2d 306

Court of Appeals of Michigan.

May 22, 1979.

Released for Publication Aug. 22, 1979.

[90 MICHAPP 324] Vandeveer, Garzia, Tonkin, Kerr & Heaphy by Mark D. Willmarth and John M. Heaphy, Detroit, for defendant-appellant.

Ronald C. Winiemko, Southfield, for plaintiffs-appellees.

G. Cameron Buchan, Troy, for defendants Logan and Berz.

Before DANHOF, C. J., and J. H. GILLIS and KAUFMAN, JJ.

KAUFMAN, Judge.

On July 26, 1974, an Oakland County jury returned verdicts in favor of the [90 MICHAPP 325] plaintiffs as a result of an airplane accident which occurred on March 29, 1969. After the conclusion of various appellate proceedings, defendant paid the principal sum due plus simple interest of six percent per year. ¹ Thereafter, on January 18, 1978, Judge Gilbert entered an order granting plaintiffs' motion to compel payment of judgment interest compounded annually from the date of the filing of the complaint. Defendant appeals from that order by right.

Our question of first impression is whether M.C.L. § 600.6013; M.S.A. § 27A.6013, which provides for interest at the rate of six percent per annum on a judgment from the date of the filing of the complaint, allows a trial court to compound the interest from the date that suit was filed. We conclude that it does not.

As the parties point out, this case does not deal with interest as a part of damages. ² We are only concerned with the statutory interest referred to in M.C.L. § 600.6013, which states:

"Interest shall be allowed on any money judgment recovered in a civil action, such interest to be calculated[90 MICHAPP 326] from the date of filing the complaint at the rate of 6% Per year unless the judgment is rendered on a written instrument having a higher rate of interest in which case interest shall be computed at the rate specified in the instrument if such rate was legal at the time the instrument was executed. In no case shall the rate exceed 7% Per year after the date judgment is entered. In the discretion of the judge, if a bona fide written offer of settlement in a civil action based on tort is made by the party against whom the judgment is subsequently rendered and the offer of settlement is substantially identical or substantially more favorable to the prevailing party than the judgment, then no interest shall be allowed beyond the date the written offer of settlement is made."

The purpose of the statute is to compensate the prevailing party for delay in the payment of money damages. Waldrop v. Rodery, 34 Mich.App. 1, 190 N.W.2d 691 (1971). But since the statute under consideration is in derogation of common law, which did not generally allow interest on judgments, it must be strictly construed. See Motyka v. Detroit, G H & M R Co., 260 Mich. 396, 244 N.W. 897 (1932).

While Michigan appellate courts have not addressed the precise issue under consideration, those courts which have dealt with similar problems have uniformly rejected compound interest except where specifically authorized by statute or in cases where compounding of interest was granted as a penalty for some misconduct on the part of a defendant. See Anno.: Right to interest on overdue installments of interest, in absence of provision therefore, 27 A.L.R. 81, and see generally 14 Michigan Law & Practice, § 12, p. 453.

Recently, in Lewis v. Stran-Steel Corp., 58 Ill.App.3d 280, 15 Ill.Dec. 368, 373 N.E.2d 714 (1978), the Illinois Court of Appeals held that Section 3 of the Illinois Interest Act, which provides that "Judgments recovered [90 MICHAPP 327] before any court or magistrate shall draw interest at the rate of 5% (6%) per annum from the date of the same until satisfied", did not allow for recovery of compound interest on a judgment. ³

And in State Highway Dep't v. Owens, 120 Ga.App. 647, 171 S.E.2d 770 (1969), the Georgia Court of Appeals concluded that the statutory language " 'All judgments in this State shall bear lawful interest upon the principal amount recovered' " did not permit interest on interest.

Finally, in Indiana Telephone Corp. v. Indiana Bell Telephone Co., 360 N.E.2d 610 (Ind.App.1977), the Indiana Court of Appeals cited early precedent and contract law and held that interest may not be compounded by computing interest upon an amount awarded as damages in the form of interest for delayed payment of a debt.

In the present case, the trial court concluded and plaintiffs argue that the words "at the rate of 6% Per year " mean six percent per annum, compounded on a per annum basis. We disagree. M.C.L. § 600.6013 provides for interest solely on the judgment amount. And since interest which accrues on the judgment is not part of the judgment, the statute does not permit interest on accrued interest. The statute provides only for simple interest at the rate of six percent per year. See Lewis, supra.

[90 MICHAPP 328] Plaintiffs also claim that it was the intent of the Legislature to fully compensate the...