Judge Gregory Keosian, Case Number: B692058, Date: 2023-11-07 Tentative Ruling

Plaintiffs Dan Sherlock and Jason Blaylock’s Motions for Prejudgment Interest is DENIED.

Plaintiffs Dan Sherlock and Jason Blaylock’s Motions for Spearman Fees is GRANTED in the amount of $40,488.47.

“A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt.” (Civ. Code § 3287, subd. (a).)

The test for recovery of prejudgment interest under [Civil Code] section 3287, subdivision (a) is whether defendant actually know[s] the amount owed or from reasonably available information could the defendant have computed that amount. The statute [Civil Code, § 3287] does not authorize prejudgment interest where the amount of damage, as opposed to the determination of liability, ‘depends upon a judicial determination based upon conflicting evidence and is not ascertainable from truthful data supplied by the claimant to his debtor. Thus, where the amount of damages cannot be resolved except by verdict or judgment, prejudgment interest is not appropriate.

(Wisper Corp. v. California Commerce Bank (1996) 49 Cal.App.4th 948, 960, internal citations and quotation marks omitted.)

“The test for determining certainty under section 3287(a) is whether the defendant knew the amount of damages owed to the claimant or could have computed that amount from reasonably available information.” (Howard v. American National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 535.)

Plaintiffs Dan Sherlock and Jason Blaylock (Plaintiffs) seek prejudgment interest in three alternative amounts and on three theories. First, they argue that they may receive $704,305.58 in prejudgment interest on a judgment principal of $675,792.68, from the first date of leakage in their home in March 2013, on the theory that their damages were at all times certain and capable of being made certain. (Motion at pp. 5–6.) Plaintiffs next argue that if their damages are not certain, they may nonetheless receive $372,519.14 in interest from the date of the inception of this lawsuit in January 2018, in this court’s discretion under Civil Code § 3287, subd. (b). (Motion at pp. 6–7.) And finally, Plaintiffs argue that they may recover up to $493,013.91 in interest on their tort claims for property damage under Civil Code § 3288. (Motion at pp. 7–8.)

Plaintiffs are not entitled to damages under Civil Code § 3287, subd. (a), because their damages were not certain or capable of being made certain prior to a verdict or judgment. The issue of damages was the sole issue litigated at trial, and was the subject of vigorous dispute. Although Plaintiffs reason that the jury’s damages award was “informed” by the testimony of Defendant’s expert, Plaintiff’ interpretation of the verdict itself requires modification of one of this expert’s estimates. (Bederman Decl. ¶ 7.)

As to the second alternative claim for interest, Plaintiff relies on Civil Code § 3287, subd. (b), which states:

Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.

The factors upon which the decision to award discretionary prejudgment interest may be based have no received extensive elucidation in published decisions, but courts are encouraged to consider the “factors most relevant to the prejudgment interest question as it [arises]” in the case before them. (Hewlett-Packard Co. v. Oracle Corp. (2021) 65 Cal.App.5th 506, 577.) In the Hewett-Packard case, the factors considered in the trial court’s denial of prejudgment interest, upheld on appeal, were (1) the “dilatory” pursuits of the losing party, including an anti-SLAPP suit and subsequent appeal brought on the eve of trial; (2) the “highly contested and uncertain damages,” which the trial court deemed “the most important consideration,” given the continuing accrual of damages through the litigation and the impact of the losing party’s partial mitigation of damages. (Id. at p. 577.)

Plaintiffs here argue that the following factors favor an award of discretionary interest: (1) their damages claimed against Defendant for cost of repair did not change through the litigation; (2) Defendant was given multiple chances to settle the case; and (3) the case has been pending since January 2018. (Motion at pp. 6–7.)

These factors are not persuasive for an award of discretionary interest. First, although Plaintiffs contend that their damages did not change through the case, as in Hewlett Packard, they argued that their damages continued to accrue as litigation proceeded, and they acknowledge in reply that their damages “were effectively constant during litigation.” (Reply at p. 4.) The issue of damages was further complicated by questions of mitigation and comparative fault, which substantially reduced the damages awarded to Plaitniff. Although “[d]amages are not made uncertain by the existence of unliquidated counterclaims or offsets interposed by defendant,” (Howard, supra, 187 Cal.App.4^th at p. 536), such questions as mitigation are relevant to a determination of whether discretionary interest is permitted under Civil Code § 3287, subd. (b), as recognized in Hewlett-Packard, supra, 65 Cal.App.5^th at p. 577.) Additionally, although Plaintiffs cite the long-running nature of this case, they do not attribute any of that delay to dilatory conduct on the part of Defendant, who stipulated to liability and to a trial solely on the issue of damages. They note only that Defendant rejected their settlement demands, which were for $1 million, and substantially exceeded Plaintiffs’ ultimate damages award. (Bederman Decl. Exhs. C, D.) Accordingly, discretionary interest is not proper here.

This leaves Plaintiff’s request for prejudgment interest under Civil Code § 3288, which states, “In an action for the breach of an obligation not arising from contract, and in every case of oppression, fraud, or malice, interest may be given, in the discretion of the jury.” As above, the award of prejudgment interest is discretionary, and the factors weighing against an award under Civil Code § 3287 favor the same result under Civil Code § 3288.[1]

This leaves Plaintiff’s motion for Stearman fees, which are fees paid to experts to investigate construction defect claims, which are “properly recoverable as part of the cost of repair.” (Stearman v. Centex Homes (2000) 78 Cal.App.4th 611, 623.) Such fees are distinct from costs related to “litigation,” which if not recoverable as costs under Code of Civil Procedure § 1033.5 or another statute, are not recoverable. (Id. at pp. 623–624.)

· $47,181.23, paid to Mark Savel, who itemized defects and recommended a scope of repairs;

· $2,510.00, paid to Michelle Smith, to price the packing and storing of personal property while further repairs proceeded; and

· $7,557.50, paid to Dan Poyourow to price the fair rental value of Plaintiffs’ home during repairs.

The court notes as an initial matter that these expenses contain fees expressly incurred for trial preparation and testimony, which are not recoverable. The investigative costs permissible under Stearman are to be considered as part of the cost-of-repair damages, and not as expert litigation costs compensable under Code of Civil Procedure §§ 998 or 1033.5. (Stearman, supra, 78 Cal.App.4^th at p. 623–625.) Plaintiffs rely on language from El Escorial Owners' Assn. v. DLC Plastering, Inc. (2007) 154 Cal.App.4th 1337, in which the court stated: “[A]lthough the experts in Stearman made repair plans, the doctrine of awarding expert fees as damages is not confined to the unique facts of that case. Other decisions have applied the doctrine more broadly to include expenses for retaining experts to evaluate a party's claim or to discover construction defects.” (Id. at p. 1362.)

This language was, first of all, obiter dicta, coming in a brief “[m]oreover” paragraph after the court had already determined that the expert testimony at trial had provided substantial basis for finding the fees incurred were compensable as “repair evaluations.” (Id. at p. 1361–1362.) Second, neither of the two cases that were cited for the proposition held that a party could be reimbursed for an expert’s litigation services separate from their services to investigate the feasibility of repair. The first case, Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934, 949, did not involve the recovery of Stearman costs, but assessed when the statute of limitations for an accounting malpractice claim began to accrue. The court cited Stearman for the proposition that “[i]nvestigation costs . . . are recoverable tort damages,” and therefore that therefore “the out-of-pocket expenses the [malpractice plaintiff] incurred when it engaged its accountant and legal counsel, in an effort to determine the extent of the improper payments and arrange for reimbursement of funds improperly received, constituted actual injury for limitations purposes.” (Id. at p. 949.) The other case, Regan Roofing Co. v. Superior Court (1994) 21 Cal.App.4th 1685, 1708, assessed the propriety of seeking “$250,000 for expert fees incurred as investigation costs concerning the discovery of defects at the plaintiffs' residences” as an element of settlement consideration when approving a good-faith compromise under Code of Civil Procedure § 877. (Regan Roofing Co. v. Superior Court (1994) 21 Cal.App.4th 1685, 1708.) None of these cases permit a defective construction plaintiff to be reimbursed for the expert’s fees incurred solely to advance their litigation.

Considered with the above authority, the fees that Plaintiffs seek here must be substantially reduced. Plaintiffs note that, of Mark Savel’s fees, $17,587.50 were incurred solely to prepare for and appear for trial. (Reply at p. 3.) Similarly, $14,887.50 of Jan Brussel’s fees were for trial testimony and preparation. (Ibid.) These fees are not compensable as Stearman costs.

For much the same reason, no costs may be awarded for the work of Michelle Smith and Dan Poyourow, as these experts were retained to to price the storage of Plaintiff’s items and the reasonable rental value of their house while repairs proceeded. AS Defendant notes in opposition, they testified as pure damage experts, not as investigators contributing to the repair process. Thus their expert costs — $2,510.00 and $7,557.50 — are properly excluded from any award.

Defendant further argues that there is no evidence that these expert costs have been actually incurred. (Opposition at pp. 9–11.) However, there is ample evidence that the experts in question actually billed these expenses, and Plaintiff’s counsel testifies that they were authorized to be paid. (Bederman Decl. ¶¶ 4–7; Exh. C at pp. 42–44; Exh. F at pp. 34–35.)

Defendant notes further that both Savel and Bruseel apportioned their investigation charges among multiple defendants erroneously, dividing their pre-settlements charges among six defendants, rather than the seven defendants that were actually sued at the outset of this litigation. (Opposition at pp. 6–9.) Brussel’s pre-settlement costs attributable to Defendant are therefore properly reduced from $5,594.00 (one sixth of $33,567) to $4,795.29, one seventh of the same amount. (Bederman Decl. Exh. F at pp. 34–35.) Savel’s pre-settlement costs ought similarly be reduced from $9,419 (one sixth of $56,515.77), to $8,073.68, one seventh of that number. (Savel Decl. Exh. C at pp. 42–44.)

Plaintiffs’ motion for Spearman fees is therefore GRANTED in the amount of $40,488.47.

[1] Although Civil Code § 3288 states that a jury must award prejudgment interest under Civil Code § 3288, the parties here stipulated to have the question determined by the court after trial. (Bederman Decl. Exh. A.)