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Keywords

contractbreach of contractdamagesstatuteappealtrialverdictcontractual obligationliquidated damages
contractbreach of contractdamagesappealverdictliquidated damagescommon law

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Funkhouser v. J.B. Preston Co., 290 U.S. 163, 54 S.Ct. 134, 78 L.Ed. 243

Facts

The action was initiated for breach of a contract made in 1923 for the sale of red slate granules, with delivery scheduled over four years. In 1930, the trial court awarded a verdict to the J. B. Preston Company, which included interest on the amount awarded. However, the Appellate Division later struck out the interest allowance, stating it was not permissible for claims arising before the statute allowing such interest was enacted. The case was then brought before the New York Court of Appeals.

The claim in suit was admittedly for unliquidated damages. There was no provision in the contract with respect to the recovery of interest in case of breach, that is, either for or against such recovery.

Issue

Did the allowance of interest on unliquidated damages for breach of contract impair the obligation of the contract under the contract clause of the Federal Constitution?

The allowance of interest did not impair the obligation of the contract.

Rule

Section 480 of the Civil Practice Act of New York allows for the recovery of interest on the principal sum awarded for breach of contract, whether the sum is liquidated or unliquidated.

Section 480 of the Civil Practice Act of New York, as amended by chapter 623 of the Laws of 1927, provides for the allowance of interest on the principal sum awarded by verdict, report, or decision for breach of contract whether the principal sum so awarded was ‘theretofore liquidated or unliquidated.’

Analysis

The court analyzed the historical context of the law regarding interest on unliquidated damages and determined that the amendment to Section 480 did not impair the contractual obligations. The court noted that the law at the time of the contract was unclear regarding the allowance of interest, and the amendment served to clarify and provide a remedy for breach of contract without altering the fundamental obligations of the parties.

The court added that ‘it has never been held to be a part of the obligation of the contract that no interest should be allowed on unliquidated demands. * * * The amendment to section 480 of the Civil Practice Act changes a rule of the common law but it conflicts with no constitutional guaranty.'

Conclusion

The New York Court of Appeals affirmed the lower court's decision, restoring the allowance of interest on the unliquidated damages awarded to the J. B. Preston Company.

Judgment affirmed.

Who won?

J. B. Preston Company, Inc. prevailed in the case because the court found that the statutory allowance of interest was consistent with the rights under the contract and did not impair the contractual obligations.

The court directed that the item of interest be restored, and from the judgment entered accordingly this appeal is taken.

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