Sterilite Corp. v. Continental Cas. Co.

• Decision Date: 02 July 1986
• Citation: 494 N.E.2d 1008,397 Mass. 837
• Parties: STERILITE CORPORATION v. CONTINENTAL CASUALTY COMPANY.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 1008

494 N.E.2d 1008

397 Mass. 837

STERILITE CORPORATION v. CONTINENTAL CASUALTY COMPANY.

Supreme Judicial Court of Massachusetts,

Suffolk.

Argued March 3, 1986.

Decided July 2, 1986.

Charles Mark Furcolo (Terrance J. Hamilton, Boston, with him), for defendant.

Lisa G. Arrowood, Boston, for plaintiff.

Before HENNESSEY, C.J., and WILKINS, NOLAN, LYNCH, and O'CONNOR, JJ.

LYNCH, Justice.

This case presents a question regarding the appropriate way to calculate prejudgment interest under G.L. c. 231, § 6C (1984 ed.). The present controversy arises out of a judgment entered in the Superior Court awarding the plaintiff, Sterilite Corporation (Sterilite), damages for breach of a liability insurance contract. That judgment, which awarded Sterilite the costs incurred in defending itself in litigation instituted by Henry Heide, Inc. (Heide), was affirmed by the Appeals Court with a modification not relevant here. Sterilite Corp. v. Continental Casualty Co., 17 Mass.App.Ct. 316, 458 N.E.2d 338 (1983). ¹ After the rescript from the Appeals Court was entered in the Superior Court, the defendant issued and delivered a draft payable to Sterilite which included interest from the date the action was filed, October 20, 1980. Sterilite did not accept that draft, however, and sought, via a motion for entry of judgment after rescript, interest from January 5, 1976, the date on which the defendant notified Sterilite that it would not defend Sterilite in the litigation initiated by Heide. The motion was allowed over objection and a judgment after rescript was entered for Sterilite on April 27, 1984. After the Appeals Court affirmed that judgment, Sterilite Corp. v. Continental Casualty Co., 20 Mass.App.Ct. 215, 479 N.E.2d 205 (1985), we allowed the defendant's motion for further appellate review. We reverse.

The trial judge ruled that, under the terms of its policy with Sterilite, the defendant was obligated to defend Sterilite or to retain and pay for counsel of Sterilite's choosing. The damages awarded consisted of legal expenses Sterilite had incurred over a period of approximately six years. These expenses were incurred in over twenty billings, the bulk of which were submitted to Sterilite after the commencement of the action on October 20, 1980. The judge determined that interest was due from January 5, 1976, the date of the defendant's notification that it would not defend Sterilite.

In construing G.L. c. 231, § 6C, ² the statute applicable to this case, the Appeals Court relied upon the plain meaning doctrine: "We think § 6C 'means just what it says on its face....' Sprague v. O'Connell, 18 Mass.App.Ct. 230, 235, 464 N.E.2d 404 (1984). In unequivocal language it directs that the clerk of court shall, see Hashimi v. Kalil, 388 Mass. 607, 609, 446 N.E.2d 1387 (1983), add interest to contract damages as of the date of the breach of the contract when that date has been established. In these circumstances the statute permits no compromise; it commands a ministerial act." 20 Mass.App.Ct. at 218, 479 N.E.2d at 205.

Ordinarily, if the language of a statute is plain and unambiguous it is conclusive as to legislative intent. Local 589, Amalgamated Transit Union v. Massachusetts Bay Transp. Auth., 392 Mass. 407, 415, 467 N.E.2d 87 (1984). State Bd. of Retirement v. Boston Retirement Bd., 391 Mass. 92, 94, 460 N.E.2d 194 (1984). Bronstein v. Prudential Ins. Co., 390 Mass. 701, 704, 459 N.E.2d 772 (1984). After all, "statutory language is the principal source of insight into legislative purpose." Bronstein, supra. See Commonwealth v. Lightfoot, 391 Mass. 718, 720, 463 N.E.2d 545 (1984). However, time and again we have stated that we should not accept the literal meaning of the words of a statute without regard for that statute's purpose and history. Oxford v. Oxford Water Co., 391 Mass. 581, 587-588, 463 N.E.2d 330 (1984). See Commissioner of Corps. & Taxation v. Boston Ins. Co., 328 Mass. 641, 646, 105 N.E.2d 382 (1952); Hanlon v. Rollins, 286 Mass. 444, 447, 190 N.E. 606 (1934); Commonwealth v. Welosky, 276 Mass. 398, 401-402, 177 N.E. 656 (1931), cert. denied, 284 U.S. 684, 52 S.Ct. 201, 76 L.Ed. 578 (1932). ³

Although G.L. c. 231, § 6C, commands a ministerial act, its sole or primary purpose was not to provide administrative ease by establishing "a fixed rule for mathematically calculable interest to avoid the costs and delays incident to disputes over details such as might be presented ... if interest were awarded separately on many elements of damages from many different dates of accrual." Charles D. Bonanno Linen Serv., Inc. v. McCarthy, 550 F.Supp. 231, 246-247 (D.Mass.1982) (construing G.L. c. 231, § 6B, as amended by St. 1974, c. 224, § 1, relating to prejudgment interest in tort actions), aff'd in part, rev'd in part on other grounds, 708 F.2d 1 (1st Cir.), cert. denied, 464 U.S. 936, 104 S.Ct. 346, 78 L.Ed.2d 312 (1983). The Legislature clearly did not opt for the greatest possible administrative ease since the statute, in accord with the common law, contemplates calculating interest from multiple points of breach of contract or demand. United Cal. Bank v. Eastern Mountain Sports, Inc., 546 F.Supp. 945, 975-977 (D.Mass.1982), aff'd, 705 F.2d 439 (1st Cir.1983). Perkins School for the Blind v. Rate Setting Comm'n, 10 Mass.App.Ct. 656, 666, 411 N.E.2d 1317 (1980), modified, 383 Mass. 825, 836, 423 N.E.2d 765 (1981). See Massachusetts Gen. Hosp. v. Commissioner of Pub. Welfare, 359 Mass. 206, 209-210 (1971), 268 N.E.2d 654; Nutting v. Kneeland, 328 Mass. 497, 510 & n. 1, 105 N.E.2d 199 (1952); Selectmen of Danvers v. Commonwealth, 184 Mass. 502, 515, 69 N.E. 320 (1904).

The Legislature intended, as the Appeals Court noted, "to abrogate the common law rule which distinguished between liquidated and unliquidated damages." 20 Mass.App.Ct. at 218, 479 N.E.2d at 205. At common law, prejudgment interest in a contract action usually ran "from the date of the writ" if damages were unliquidated. Cochrane v. Forbes, 267 Mass. 417, 420, 166 N.E. 752 (1929). Compare Frazer v. Bigelow Carpet Co., 141 Mass. 126, 4 N.E. 620 (1886). Liquidated damages, however, accrued interest from the date of the demand. Cochrane v. Forbes, supra. The enactment of G.L. c. 231, § 6C, changed the common law's concern for the form of damages into a concern for the date of the breach or demand. ⁴

The primary purpose of G.L. c. 231, § 6C, though, is the same as the common law rule before, even if different in scope. In Perkins School for the Blind v. Rate Setting Comm'n, 383 Mass. 825, 835, 423 N.E.2d 765 (1981), we stated that G.L. c. 231, § 6C, "is designed to compensate a damaged party for the loss of use or unlawful detention of money." An award of interest is made "so that a person wrongfully deprived of the use of money should be made whole for his loss." Id. The common law was particularly sensitive to the possibility that a liberal award of prejudgment interest could result in a windfall for plaintiffs amounting, in essence, to an award of punitive damages. ⁵ See McGrimley v. Hill, 232 Mass. 462, 464, 122 N.E. 186 (1919); Childs v. Krey, 199 Mass. 352, 358, 85 N.E. 442 (1908). There is nothing in G.L. c. 231, § 6C, indicating that the Legislature intended to abandon this long-standing concern. It is our task, therefore, to interpret the statute in a manner that recognizes the elimination of the distinction between liquidated and unliquidated damages but preserves the principle of restoring to the party only that which he has lost.

The judge mechanically used January 5, 1976, as the date of the breach of contract. The Appeals Court rejected the argument that the breach of contract was on the various dates on which Sterilite was billed for the legal expenses incurred in the Heide litigation. 20 Mass.App.Ct. at 220, 479 N.E.2d at 205. While the defendant was in breach of its duty to defend Sterilite on January 5, 1976, there was no duty at that time to reimburse Sterilite for legal expenses incurred at later dates. This duty arose when Sterilite, on notice that the defendant would refuse to pay for those expenses, was forced to pay those expenses itself. The dates of the payment of the various bills, which are readily ascertainable, determine the points at which Sterilite was obliged to commit sums which it rightfully should not have been obliged to commit. Before those bills were paid, Sterilite was not deprived of the use of its money. No interest is due on sums when Sterilite was not deprived of the use of those sums. Any other rule would result in a windfall for Sterilite, which the Legislature did not intend. Therefore, prejudgment interest under G.L. c. 231, § 6C, should be calculated in this case on the basis of the various dates on which the legal bills were paid by Sterilite.

The judgment is reversed and the case is remanded to the...