Magill, Nicholas H.

English

University of Denver

Denver Law Review Volume 28 Issue 8 Article 5 June 2021 Interest as Damages in Colorado Nicholas H. Magill Follow this and additional works at: https://digitalcommons.du.edu/dlr Recommended Citation Nicholas H. Magill, Interest as Damages in Colorado, 28 Dicta 285 (1951). This Article is brought to you for free and open access by the Denver Law Review at Digital Commons @ DU. It has been accepted for inclusion in Denver Law Review by an authorized editor of Digital Commons @ DU. For more information, please contact jennifer.cox@du.edu,dig-commons@du.edu. INTEREST AS DAMAGES IN COLORADONICHOLAS H. MAGILL*of the Denver BarThe purpose of this study is to inquire into the law of Colo-rado with respect to the rights of a party litigant to recover inter-est on, or as, damages for the injury to, or the detention, loss ordestruction of, property, where the interest claimed is for a periodof time prior to judgment. Discussion of interest on damages forpersonal injuries occasioned by the tort of another is eliminated,except to note, in passing, that such interest is recoverable fromthe time suit is filed by virtue of chapter 50, section 5, of the 1935Colorado Statutes Annotated.It is convenient, and perhaps necessary to an orderly approachto the question of interest, to consider, first, chapter 88, section 2,of the 1935 Colorado Statutes Annotated, which, while enumeratingthe circumstances under which interest will be allowed, in effectprovides that interest, where there is no conflicting agreement,shall be allowed on all claims for money due where the amountof the claim is liquidated. In substance, this statute provides thatcreditors shall be allowed to receive interest, when there is noagreement as to rate, at the rate of six per cent. per annum forall moneys after they become due on:(1) any bill, bond, promissory note, or other instrument inwriting from the time the same becomes due;(2) any judgment from the date of the entry of the judgment;(3) money due on mutual settlement of accounts from the dateof such settlement;(4) money due on account from the date the same became due;(5) money received to the use of another and retained withoutthe owner's consent, from the time of the receipt thereof;and(6) on money taken or retained and fraudulently convertedto the taker's use, from the time of the taking.This statute, as now embodied in our statutes, although sinceits origin has been subjected to minor amendments, is substantiallythe same as the statutes which were in effect at the time the caseshereinafter cited were decided.Perhaps the import of the above statute, with respect to inter-est on claims for unliquidated damages, can in no way be bettermanifested than in quoting from the opinion in Denver, SouthPark & Pacific R. R. Co. v. Conway,' a leading case on this ques-tion. This was an action to recover damages for injury to propertyas a result of a fire caused by the defendant's negligence. A claimfor interest on the damages was disallowed, the court holdingthat: "Interest in this state is a creature of statute and regulatedthereby. It is only recoverable, in absence of contract, in theWritten while a student at the University of Denver College of Law.18 Colo. 1, 5 P. 142 (1884).August, 1951 DICTA 285cases enumerated in the statute, and damages to property arisingfrom the wrong or negligence of a defendant is not one of theenumerated cases." 2WHERE DAMAGES ARE UNLIQUIDATEDThere are several cases in Colorado which have seeminglyallowed interest on a claim for unliquidated damages, and whichdo not come under any of the circumstances enumerated in theinterest statute. At first blush, these cases appear to conflict withthe rule set forth in Railroad v. Conway, supra; but, upon exami-nation, it will be found that in all these cases there was a wrongfuldetention of property. While an equivalent of interest on the valueof the property detained was recovered, it was not recovered asinterest, as such, but as damages for the detention of the property,the legal rate of interest being used merely as a convenient meas-ure of the plaintiff's loss occasioned by the detention of his prop-erty by the defendant. The distinction is emphasized in the fol-lowing cases.Machette v. Wanless 3 was an action of replevin for grain inwhich the plaintiff was permitted to recover, as damages for thedetention of the grain, an amount equal to legal interest on thevalue of the property for the period of the detention. The courtused the interest rate as a convenient measure of the damages forthe detention, and not to allow recovery of interest as such. Thisis brought out in the following quotation.Where the property is domestic animals, valuable for serviceonly, the value of the use of the animals is, of course, the measureof compensation; but where, as in this case, the article is intendedfor consumption, interest upon the value of it would seem to be thetrue compensation. If the owner of grain should wish to obtain thelike quantity, he must purchase in the market, at current prices, andhe would be deprived of the use of the money thus invested. Thebest estimate of his loss is interest upon the amount of money whichhe would, for that purpose, be compelled to pay out.'Omaha & Grant Smelting & Ref. Co. v. Tabor 5 was an actionto recover damages for the conversion of ore, in which the plaintiffwas denied, by the trial court, interest as damages for the deten-tion. The Supreme Court of Colorado, in reversing for this error,said:It is true, as stated by the learned Judge, "that interest in thisstate is a creature of statute and regulated thereby; that it is onlyrecoverable, in the absence of contract, in cases enumerated in thestatute; and that damages to property arising from a wrong ornegligence of defendant is not one of the enumerated cases." This[case] could not come under the last clause of the instruction. Itis not for damages to property. It is for the wrongful detention ofmoney [since to detain the ore or the money into which it was con-verted was indirectly to detain the money] belonging to plaintiff.2 8 Colo. at p. 16, 5 P. at p. 151, Accord: Railroad v. Moynahan, 8 Colo. 56, 5 P.(1884).'2 Colo. 169 (1873).4 2 Colo. at p. 180.513 Colo. 41, 21 P. 925 (1889).Vol. 28DICTAAugust, 1951It is clearly distinguishable from 1;'ailroad v. Conway, 8 Colo. 1 .... Inour state damages for detention of the money equal to the legal in-terest upon the value of the chattels converted from the time of theconversion has been allowed, not as interest, but as damages.6Greeley, Salt Lake & Pac. R. Co. v. Yount 7 was an action torecover damages for the unauthorized appropriation of land, inwhich it was held, on the authority of Railroad v. Conway, supra,that interest was not recoverable. The court, confronted with thedecisions in Machette v. Wanless, supra, and Refining Co. v. Tabor,supra, distinguished these cases on the basis that interest wasthere allowed, not as interest, but as damages for the detentionof personal property. Said the court: "These decisions were notbased on the statute, and the statute did not figure in them, exceptin so far as the rate of interest which it allowed on money wasused as a criterion by which the damages might be estimated." 8The foregoing cases would seem to sufficiently emphasize thedistinction between those cases which have allowed interest asdamages and those which have disallowed interest on damages onan unliquidated claim. In all of the cases in which interest hasapparently been recovered on an unliquidated claim it will befound that there was a wrongful detention of the plaintiff's prop-erty by the defendant, and the interest was allowed, not as inter-est, as such, but as damages for the detention.WHERE FRAUD IS INVOLVEDThere is another line of cases in Colorado-those dealing withfraud in the sale of property-in which the courts have againseemingly permitted a recovery of interest in conflict with therule that interest, as such, can only be recovered under the cir-cumstances enumerated in the statute. But, again, a study ofthese cases will reveal that the interest was not recovered on dam-ages, but rather as damages. Although in these cases there hasnot been a detention of property in the technical sense, still, theconduct of the defendant, in a practical sense, is tantamount toa withholding of the plaintiff's property, and the interest has beenallowed, as in the conversion cases, as damages for the wrongfulwithholding of property from the plaintiff. Let us consider someof these cases.Mayo v. Wallgreen 9 was an action for deceit in the purchaseof land. The defendant, having an option to buy land at $100 peracre, falsely represented to the plaintiff that he was to pay $150per acre, and induced the plaintiff to join with him in the pur-chase of the land at the higher figure. The plaintiff, upon learningthat the defendant had purchased the land at the lesser figure,while plaintiff's contribution to the defendant had been at thehigher figure, sought damages for the deceit. The court held thatthe plaintiff was entitled to recover the difference between the613 Colo. at p. 57, 21 P. at 931.7 Colo. App. 189, 42 P. 1023 (1895).8 7 Colo. App. at p. 193, 42 P. at p. 1025.'9 Colo. App. 506, 50 P. 40 (1897).DICTAthe two prices with interest from the time plaintiff gave defend-ant the money until the date of recovery. Said the court:In this state, in the absence of some statutory provision per-mitting interest to be recovered, it may not generally enter into orform a part of the damages which a party may receive if he getsjudgment. The general rule is subject to some exceptions, and we areof the opinion that this case is brought within the exception sanc-tioned by the Supreme Court. Omaha & Grant Smelting and Ref. Co.v. Tabor, 13 Colo. 41."1 [sapra].The opinion is devoid of any discussion, other than the lan-guage above quoted, of the exception to the general interest ruleunder which this case was held to come. It is clear, however, thatthe Court of Appeals was referring to the rule of the conversionand detention cases as the exception to the general interest rule.This is manifest in the court's citation of Refining Co. v. Tabor,discussed supra, as authority for its holding.Three later cases apparently contra to the Mayo case areClark v. Giacomini 11 Keeney v. Angell,12 and Otis v. Grimes.13These were actions to recover damages for false representationsinducing an exchange of property, indistinguishable in fact, tothis writer's mind, from the Mayo case. Apparently ignoring theMayo case, or else tacitly declining to follow it, our Supreme Courtheld that interest was not recoverable, making no distinction be-tween interest on and interest as damages.But a still later case dealing with fraud in the exchange ofproperty, in which the distinction between interest on and interestas damages has again been observed, is Bankers Trust Co. v. Inter-national Trust Co.14 This was an action against a trust companyto recover money paid for mortgage notes, the purchase of whichwas allegedly induced by the misrepresentation of the value ofthe mortgage security. The plaintiff waived the action in tort fordeceit and, instead, rescinded the contract for fraud, and sued inquasi-contract to recover the money paid for the notes. The courtheld that the plaintiff was entitled to recover interest from thetime of the transaction until restitution was made.The court, although citing the Clark, Keeney and Otis cases,supra, for the proposition that interest could not be recovered inactions for damages for deceit, neither expressly overruled thesecases, nor did it distinguish them. Nor was the case brought withinthe purview of the interest statute. But, rather, the interest wasallowed under the authority of the conversion and detention cases,discussed supra, which permit the recovery of interest as damagesfor the detention of property. This is clear from the followinglanguage in the opinion:Notwithstanding that in this jurisdiction the decisions areuniform in holding that interest is a creature of statute, and, in10 9 Colo. App. at p. 518, 50 P. at p. 45.11 85 Colo. 530, 277 P. 306 (1929).1292 Colo. 213, 19 P. 2d 215 (1933)." 97 Colo. 219, 48 P. 2d 788 (1935).."108 Colo. 15, 113 P. 2d 656 (1941).Vol. 28DICTAabsence of contract, is recoverable as such only in such cases asare enumerated in the state, [citations omitted] . . . the courts ofthis state, even when interest is not recoverable under the statute,by distinguishing between interest as such, and interest as damages,many times have allowed the equivalent of interest in the way ofdamages, for the tortious taking and detention of money or prop-erty.5To bring the case within the rule of the conversion and de-tention cases, the court reasoned that where, as here, the defraudedparty rescinds the contract, the recission relates back to the timeof the fraudulent transaction; that there is a duty upon the de-fendant to make restitution, and a concurrent breach of that duty,as of the time of the fraudulent transaction; and that (althoughthis is not expressly stated by the court, it seems a necessary andproper inference from that which was expressly stated) the breachof the duty to make restitution was tantamount to a detention ofthe plaintiff's money.Now, let us consider the distinction, if any, between this caseand the Clark, Keeney, and Otis cases, supra. The fact that theBankers Trust Co. case was an action ex contractu, following arecission for fraud, while the latter cases were actions ex delictofor deceit, glaringly presents itself to be seized as the point ofdistinction. It is easy-too easy-to accept this as the basis of dis-tinction and conclude that there is a real difference in fact, whendifference there is none. The distinction is in form only. It isillusory, and vanishes as we look to the substance of the respectiveactions, the substance being the tortious conduct of the defend-ants upon which their legal liabilities are predicated. In all ofthese cases the substance-the tortious conduct-was the same,to wit: fraud and misrepresentation in the exchange of property.In all, the plaintiffs were wrongfully deprived of money throughthe conduct of the defendants which was tantamount to a deten-tion of the plaintiff's money.True it is, in the law of damages, that the basis of recoveryin actions ex contractu is n6t the same as in actions ex delicto;the basis of the former being the value of the benefit to the de-fendant, while the latter is the detriment to the plaintiff. Butthis distinction, although important in other respects in the lawof damages, would seem to be immaterial to the question of inter-est as damages in fraud cases. Where a defendant has obtainedmoney or other property from a plaintiff through fraud, there isboth a benefit to the defendant and a detriment to the plaintiff,the quantum of each, although theoretically different, can be con-veniently measured only by using the interest rate as the criterion.The writer does not disagree with the decision in the BankersTrust Co. case, nor does he doubt the validity of the court's reason-ing as a matter of abstract law. He submits, however, that rea-soning along the line of recission and relation back to the time ofthe fraudulent transaction with a breach of a duty to make resti-15 108 Colo. at p. 33, 113 P. 2d at p. 665.August, 1951 DICTA 289290 DICTA Vol. 28tution, was not necessary to the decision. The case could havebeen brought under the rule of the conversion and detention cases,as it was, but without the circuitous reasoning set forth above,upon the authority, of Mayo v. Wallgren, supra, which, it will berecalled, permitted a recovery of interest in an action ex delictofor deceit. Of course, the Clark, Keeney, and Otis cases, supra,which are contra to the Mayo case, would have had to have beenoverruled. But, unless we accept the illusory distinction betweenactions ex contractu and actions ex delicto in this respect, thesecases have been impliedly overruled anyway by the Bankers TrustCo. case.Be that as it may, the point which all of the .cases emphasizeis that, if interest is recoverable at all, it is so recoverable becausethe circumstances of the particular case constrain the court tolook upon the defendant's conduct as amounting to a detention,or a withholding, if you please, of the plaintiff's property. Thus,interest is recovered, not as such, but as damages for the with-holding of the property.In summary, the writer has drawn the following conclusionsas a result of this study:1. Interest will be allowed as a matter of right on damagesfor personal injuries occasioned by the tort of another, pursuant toCoLo. STAT. ANN., c. 50, § 5 (1935).2. Interest will be allowed as a matter of right upon any claimfor money due, from the time the same became due until paid inthe cases enumerated in COLO. STAT. Asp,., c. 88, § 2 (1935). It seemsreasonable to conclude that this statute, although it must be strictlyconstrued, is, nevertheless, sufficiently broad to cover all cases ofclaims for money due where the amount of the claim is liquidated.Of course, if the rate of interest is specified in a contract, the statutewould not be applicable.3. Interest in this state is a matter of statute, not of commonlaw, and is recoverable only in cases enumerated in the statutes, anddamages to property arising from the wrong or negligence of a de-fendant is not enumerated in the statute. Nor will interest beallowed on damages for the unauthoriZed taking of land, or, statedconversely, in eminent domain proceedings, for any period prior tothe judgment or the condemnation award.4. Where there has been a wrongful detention of property, inan action either in replevin or trover, interest will be allowed fromthe time of the conversion until the time of recovery, not as intereston damages, but as damages for the detention of the property.5. In actions involving fraud in the exchange of property, wherethe circumstances are such that the court can look upon the de-fendant's conduct as tantamount to a detention of property, thesame rule will be applied to permit the plaintiff to recover interestas damages from the time of the fraudulent transaction until thedate of recovery.6. With the exception of interest on damages for personal in-juries, and interest as damages for the detention, or what amountsto a detention, of property, interest for any period prior to judg-ment cannot be recovered in Colorado on an unliquidated claim fordamages.

Interest as Damages in Colorado

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Interest as Damages in Colorado

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