The opinion of the court was delivered by: KNOX
Plaintiff has filed a motion to mold a judgment in its favor by adding $168,270, representing pre-judgment interest from May 1, 1967, to March 15, 1976, to the jury verdict of $316,000 against the defendant in a diversity action for breach of contract. This motion is being considered by leave of the U.S. Court of Appeals for the Third Circuit where defendant's appeal from the jury verdict and entry of judgment is pending. This motion is treated as a motion to alter or amend a judgment under Rule 59(e).
This dispute arises from the design, construction and installation of a large electromagnetic channel-type furnace for melting, holding and superheating copper. In 1967, when this furnace was designed, it was possibly the world's largest copper furnace, although there are now larger such furnaces in operation. The furnace in question had a molten copper capacity of up to 40,000 pounds and was powered by two 600 kilowatt inductors.
The parties entered into three separate written contracts concerning this furnace. After the equipment contract was initially awarded for the furnace itself, defendant was asked to undertake the engineering and design for the installation. Thereafter, defendant was given the contract to make the installation. The furnace was duly produced, delivered and installed. This dispute is over whether the furnace worked properly. Plaintiff alleged that the furnace's operations were plagued with mechanical failures and that the furnace never met the production standards required by the contract specifications. Defendant admitted to certain initial problems, but says it corrected these and that the problems were mainly caused by plaintiff's poor operating procedures and maintenance programs.
The jury found in favor of plaintiff for $316,000 and at the court's direction found for defendant on its counterclaim in the amount of $45,000. The jury also found that plaintiff had "accepted" the furnace, as "accepted" is used in § 2-607 of the Uniform Commercial Code, on May 12, 1969. Judgments were entered accordingly with "interest as provided by law."
At the outset we hold that the parties waived a jury trial on the question of pre-judgment interest. During the trial lasting approximately six weeks the court expressed the opinion to counsel that instructing the jury on interest would add hopeless confusion to a damage question that was already almost unmanageable, and that the question of interest could be handled separately by the court. Plaintiff did not take exception to the court's failure to instruct the jury on awarding interest (or compensation for the delay in payment.) Rule 51 F.R.C.P. requires objections to the giving or failing to give instructions must be made before the jury retires "stating distinctly the matter to which he objects and the grounds of his objection". To the extent that the allowance of interest may be a question for the trier of fact rather than one of law, we hold that the court has been entrusted with that fact-finding duty.
Whether or not pre-judgment interest is recoverable under Pennsylvania law which controls this case is not readily generalized. In tort cases, interest eo nomine, that is, interest under the name of interest, is not recoverable. Nevertheless, as re-affirmed in Marrazzo v. Scranton Nehi Bottling Co., 438 Pa. 72, 263 A.2d 336 (1970):
"'. . . there are cases sounding in tort, and cases of unliquidated damages, where not only the principle on which the recovery is to be had is compensation, but where, also, the compensation can be measured by market value or other definite standard. Such are cases of the unintentional conversion or destruction of property, etc. Into these cases the element of time may enter as an important factor, and the plaintiff will not be fully compensated unless he receive not only the value of his property, but receive it, as nearly as may be, as of the date of his loss. Hence it is that the jury may allow additional damages in the nature of interest for the lapse of time. It is never interest as such, nor as a matter of right, but compensation for the delay, of which the rate of interest affords the fair legal measure.' Richards v. Citizens Natural Gas Company, 130 Pa. 37, 40, 18 A. 600 (1889)."
In cases where compensation for detention of damages or delay in payment may be recoverable, the onus for the delay falls upon the party responsible for the delay. For example, a plaintiff who makes an "excessive and unconscionable demand" may not penalize a defendant who is forced to protect himself by litigation. Pierce v. Lehigh Valley Coal Co. (No. 2), 232 Pa. 170, 81 A. 142 (1911).
The distinction between interest and compensation for delay in payment measured by the legal rate of interest has been criticized, and Pennsylvania is one of few jurisdictions that still maintains such a distinction. The confusion over this area of law and its changing ramifications is revealed in Tennessee Carolina Transportation, Inc. v. Strick Corp., 283 N.C. 423, 196 S.E.2d 711 (1973) (decided under Pennsylvania law) and in Comment, Allowance of "Interest" on Unliquidated Tort Damages in Pennsylvania, 75 Dickinson L.Rev. 79 (1970). In Richards v. Citizens Natural Gas Co., 130 Pa. 37, 18 A. 600 (1889), the court itself recognizing the confusion in the state of the law, stated:
". . . The contest has been whether the allowance should be made or not, and the name by which it should be called, whether interest or compensation for delay, measured by the rate of interest, received little attention, and it was incautiously said that interest was or was not to be allowed. The distinction, however, is important, for failure to observe it leads to confusion, as in the present case. Interest is recoverable of right, but compensation for deferred payment in torts depends on the circumstances of each case. The plaintiff may have set his damages so inordinately high as to have justified the defendant in refusing to pay, or in other ways the delay may be plaintiff's fault; or the liability of defendant may have arisen without fault, . . . In such cases the jury probably would not and certainly ought not to make the allowance."
While these principles are said to apply to actions sounding in tort,
many of the cases including Marrazzo itself involve the loss of use of property, albeit tortiously caused. Logic does not inherently require separate rules where the loss of use of property or detention of damages results not from tort but from breach of contract.
Nevertheless, in breach of contract cases the starting point is Section 337(a) of the Restatement of the Law of Contracts (1932), which was adopted by the Pennsylvania Supreme Court in Penneys v. Pennsylvania R.R. Co., 408 Pa. ...