Perry Roofing Co. v. Olcott

This case involves prejudgment interest. Perry Roofing Company installed a new roof for Eugene D. Olcott. The roof leaked. Olcott sued Perry not only for the cost of replacing the roof itself but also for the cost of repairing the damage done to the interior of his home. The jury found that the damage was caused by the roof’s improper installation and awarded Olcott $15,000.00 in damages. The damages included the replacement value of the roof as well as the cost of repairs to the interior of Olcott’s home. The trial court rendered judgment on the jury’s verdict and awarded prejudgment interest at the rate of six percent pursuant to Tex.Rev.Civ.Stat.Ann., art. 5069-1.03. The court of appeals affirmed the trial court’s judgment except in its award of prejudgment interest. The court of appeals awarded prejudgment interest at the rate of ten percent in accordance with Tex.Rev.Civ.Stat.Ann., art. 5069-1.05. 722 S.W.2d 538. We affirm the judgment of the court of appeals.

By its express terms, the statutory prejudgment interest rate set forth in article 5069-1.03 applies only to “accounts and contracts ascertaining the sum payable.” Although we have liberally construed this provision, we have at least required that the contract provide the conditions upon which liability depends and that it fix “a measure by which the sum payable can be ascertained with reasonable certainty.” La Sara Grain Co. v. First National Bank of Mercedes, 673 S.W.2d 558, 567 (Tex.1984); Federal Life Insurance Co. v. Kriton, 112 Tex. 532, 249 S.W. 193, 195 (1923). The contract between Perry Roofing and Olcott contains no measure by which a sum payable could be ascertained for damages resulting from Perry Roofing’s failure to properly install the roof. Therefore, article 5069-1.03 cannot provide the basis for awarding prejudgment interest to Olcott.

Article 5069-1.03 is not, however, the only possible basis for an award of prejudgment interest. This court has also awarded prejudgment interest based on equity. This court held in Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex.1985) that equitable prejudgment interest would be awarded in personal injury and wrongful death cases and that the rate for equitable prejudgment interest would be the same as the rate of interest on judgments as set out in Tex.Rev.Civ.Stat. Ann. art. 5069-1.05.

In Cavnar, this court pronounced two main policy reasons for allowing injured victims and survivors to recover prejudgment interest under the prevailing market rate set forth in article 5069-1.05: to encourage settlements and to discourage delay. These policy reasons are also applicable in a case such as this in which the amount of damages is not ascertainable from the face of the contract.

Perry Roofing relies upon Missouri-Kansas-Texas Railroad Co. v. Fiberglass Insulators, 707 S.W.2d 943 (Tex.App.—Houston [1st Dist.] 1986, writ ref’d n.r.e.), to support its contention that all contractual claims are limited by the six percent statutory rate of article 5069-1.03. That reliance is misplaced. Fiberglass Insulators involved a claim for contractual damages that were clearly ascertainable from the face of the contract; therefore, the issue of unascertainable damages was not presented because the case was governed by article 5069-1.03. The court of appeals in Fiberglass Insulators cited with approval several decisions rendered before Cav-nar. Cases decided prior to Cavnar may indicate that the six percent rate available under article 5069-1.03 is the maximum legal rate of prejudgment interest. However, Cavnar provides, “[t]o the extent that other cases conflict with this holding, they are overruled.” 696 S.W.2d at 554.

As the most recent decision by this court, Cavnar prevails over those cases that conflict with an award of prejudgment interest in excess of six percent. Therefore, the court of appeals correctly decided to extend this court’s holding in Cavnar and apply its rationale to a breach of contract action for unascertainable damages. As in Cavnar, the availability of properly pleaded prejudgment interest for unascertainable or unliquidated contractual damages is prospective, applying to all future cases and those presently in the judicial process. See Benavidez v. Isles Construction Co., 726 S.W.2d 23 (Tex.1987); Vidor Walgreen Pharmacy v. Fisher, 728 S.W.2d 353 (Tex.1987).

We affirm the judgment of the court of appeals.

WALLACE, J., dissents with opinion joined by PHILLIPS, C.J., and GONZALEZ, J.

CULVER, J., not sitting.