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Hoffmann v. Wirth (12/1/95), 907 P 2d 454
NOTICE: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
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THE SUPREME COURT OF THE STATE OF ALASKA
WERNER HOFMANN, )
) Supreme Court Nos. S-6597/6617
Appellant and )
) Superior Court No.
v. ) 3AN-90-6757 CI
BRIGITTA VON WIRTH, indivi- ) O P I N I O N
dually and d/b/a H. VON WIRTH )
G M B H & CO., INTERNATIONALES)
REISEBgRO KG, )
Appellee and )
Cross-Appellant. ) [No. 4287 - December 1, 1995]
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
John Reese, Judge.
Appearances: Bernd C. Guetschow, Bernd C.
Guetschow, APC, Anchorage, for Appellant and
Cross-Appellee. Lawrence A. Pederson, Paul
J. Nangle & Associates, Anchorage, for
Appellee and Cross-Appellant.
Before: Moore, Chief Justice, Rabinowitz,
Matthews, Compton, and Eastaugh, Justices.
I. FACTS AND PROCEEDINGS
Werner Hofmann and Brigitta von Wirth are German
nationals, formerly married. A travel agency owned by von Wirth
purchased land in Alaska and developed it. In January 1993,
while on a visit to Anchorage, von Wirth signed a deed conveying
the property to herself and Hofmann as tenants in common. The
property was not divided in a German divorce proceeding that took
place in April of that year. Von Wirth incurred costs for the
maintenance and upkeep of the property from 1983 to 1993; these
costs varied from year to year and were not reimbursed by
In mid-1990 von Wirth filed a complaint in superior
court seeking rescission of the deed or, in the alternative,
partition of the property. The superior court denied rescission
and ordered the property sold, as it was not susceptible to
partition in kind. It also found that Hofmann owed von Wirth one-
half of the expenses incurred by her, as well as prejudgment
interest (PJI) from January 1 of the year following each payment
made by von Wirth. One-half of the incurred expenses was
approximately $32,000. Interest, although not calculated by the
court, amounted to well over $10,000. The court found that
neither party prevailed, and thus it did not award attorney's
fees or costs to either. Hofmann appeals the award of PJI on the
recouped money; von Wirth appeals the court's failure to award
attorney's fees and costs. We reverse in part, vacate in part,
and remand for further proceedings.
A. The Superior Court Erred in Granting Von Wirth Pre-
Judgment Interest From the Time She Paid the Various
Hofmann argues that von Wirth is not entitled to
interest because "she failed to specify reimbursable costs
incurred until a few days prior to trial." He also argues that
if interest is awarded, it should only be from shortly before
trial, the time he alleges an accounting was provided. Finally,
Hofmann argues that the superior court's factual findings as to
the dates of accrual of interest are deficient.1
Von Wirth asserts that in 1985 she demanded payment for
costs incurred for maintenance and upkeep of the property.
However, the only evidence of this is her testimony at trial, in
which she claims she made a general demand for cost sharing. No
specific figures were provided by her to Hofmann. Hofmann admits
receiving an accounting in May 1990.
The time when interest begins to accrue is a question
of law, subject to this court's independent judgment. Tookalook
Sales and Service v. McGahan, 846 P.2d 127, 129 (Alaska 1993).
While "[c]ourts in other jurisdictions have generally
held that the decision to grant prejudgment interest rests within
the discretion of the trial court," in Alaska such interest is
awarded largely as a matter of course. Id. In cases not
involving personal injury, death, or property damage, "all
damages 'should carry interest from the time the cause of action
accrues, unless for some reason peculiar to an individual case
such an award of interest would do an injustice.'" Id. (quoting
State v. Phillips, 470 P.2d 266, 274 (Alaska 1970)2). The
rationale is that the interest compensates "the prevailing party
for the loss of use of money received as damages," and encourages
defendants to settle by stripping away a reason to fight the
suit. Id. The award is not meant to penalize the loser. Bevins
v. Peoples Bank & Trust Co., 671 P.2d 875, 881 (Alaska 1993).
"Interest is generally owing by the debtor from the
date the debt is due or from the date the debtor refuses to pay."
Merdes v. Underwood, 742 P.2d 245, 250 n.7 (Alaska 1987). The
Restatement (Second) of Contracts, cited with approval in Merdes,
states, "If the performance is to be rendered on demand, interest
does not begin to run until a demand is made, even though an
action might be maintained without a demand." Restatement
(Second) of Contracts ' 354 cmt. b (1981).
Thus the question before us is whether a demand was
required in this case for the interest to accrue. American Law
Reports indicates that when a demand is necessary to alert the
obligor of the obligation, interest begins to run from the time a
demand was made:
While a demand is ordinarily not necessary to
fix the liability for interest on a sum
recoverable by way of contribution where the
party owing is cognizant of the sum owed, a
demand may be necessary where there is no
such knowledge until a demand is made . . . .
C.S. Patrinelis, Rights of One Entitled to Contribution to
Recover Interest, 27 A.L.R.2d 1268, 1270 (1953 & Supp. 1994).
Although the annotation and cases cited therein may be
distinguished on the ground that Alaska, unlike many other
states, typically awards PJI, this distinction is not significant
here. The basic reasoning still applies, since Hofmann cannot be
said to have failed to perform any duties owed to von Wirth when
he apparently had no knowledge of the sums she expended.
We hold that prejudgment interest runs only from the
date a demand was made by von Wirth for reimbursement of costs
incurred for the maintenance and upkeep of the property.3
Our holding that a demand is required is supported
indirectly by Alascom, Inc. v. North Slope Borough, Board of
Equalization, 659 P.2d 1175 (Alaska 1983). In Alascom, the
borough demanded back taxes and interest on real and personal
property that had not been taxed in several years. We held that
no penalties or interest could be assessed against the real
property, for it could not be taxed properly until the borough
assessed the property and notified the taxpayer.4 Id. at 1180.
We reached the opposite conclusion with respect to the personal
property, for "the taxpayer participates in the taxing process by
furnishing the borough with a personal property tax return
listing his taxable property." Id.
Reliance on cases from other jurisdictions is
complicated by the fact that their laws on PJI typically differ
from Alaska's. As mentioned above, most jurisdictions do not
award PJI as a matter of course; they leave the matter to the
discretion of the trial court instead. Despite this difference,
however, opinions from other states are helpful in this case
because the basic reasoning still applies: a party who cannot
ascertain the amount of her obligation should not be charged
interest for a failure to meet this obligation. We found no case
where PJI was awarded against a party who had no knowledge of the
sums for which she might be liable. When PJI is awarded, it is
on amounts that are either liquidated5 or ascertainable.6
A case from the Minnesota Court of Appeals appears to
hold otherwise, but its holding is not entirely clear. Germann
v. F.L. Smithe Co., 384 N.W.2d 227 (Minn. App. 1986). Germann
involved a contribution action in a negligence case. A statute
provided for PJI. Although the amount of contribution recovered
was neither liquidated nor readily ascertainable prior to the
verdict at trial, PJI was awarded from time of the enactment of
the statute, which was shortly after suit was filed. However,
language in the case is ambiguous as to whether the statute
encompassed PJI in the Alaska sense, or merely interest covering
the period from commencement of the action until verdict.
The Oregon Court of Appeals has held that PJI accrues
from the time the cotenant made the payment, not from the time of
the demand, but this case is distinguishable. Miller v. Miller,
790 P.2d 1184 (Or. App. 1990). Miller involved disproportionate
payments by one cotenant for property purchased in 1951.
Discussions that included references to each parties' interest in
the property took place from 1978 to 1984. One eventually sued,
and in 1990 the court ordered the difference redressed, with
interest from 1951. Although this case might be viewed as
cutting against the rationale of our holding, Miller is
distinguishable in that the party against whom interest was
awarded had constructive knowledge of the imbalance, as he knew
of the outstanding balance on the purchase contract and made no
additional payments himself.
In the case before us, a demand was necessary for
interest to begin to accrue. Instead, the superior court awarded
interest on monies expended by von Wirth from the time she paid
them. Therefore, we reverse and direct the superior court to
determine when a proper demand was made by von Wirth.
B. Entitlement to Costs and Attorney's Fees
In denying fees to both parties, the superior court
stated that "for purposes of Civil Rule 82 neither party has
prevailed in this litigation, in that each party prevailed on
important issues." Von Wirth cross-appeals, arguing that the
superior court abused its discretion when it found that neither
party prevailed and denied von Wirth's motion for attorney's
fees. She argues that her complaint sought the alternative
remedies of rescission or partition. The superior court denied
her plea for rescission, instead ordering the property sold and
awarding her (1) fifty-percent of the sale proceeds, (2) a
portion of the remaining proceeds sufficient to reimburse her
expenditures, plus interest, and (3) if the proceeds were
insufficient, a judgment against Hofmann. In response, Hofmann
attempts to portray rescission as the principal remedy sought by
We need not address this issue. The decision on remand
may alter the outcome of this case. Determination of prevailing
party should be made after the PJI issue is decided. Therefore,
the denial of fees and costs is vacated.
We REVERSE the superior court's award of prejudgment
interest and remand for a determination of when a proper demand
was made that started the accrual of prejudgment interest. We
VACATE the denial of attorney's fees to either party pending the
court's redetermination of the interest issue.
1 Hofmann claims that von Wirth is not entitled to any
PJI because she asserted exclusive title to the property. He
provides little support for this argument, and candidly cites
case law which defeats his argument. In Willmon v. Koyer, 143 P.
694 (Cal. 1914), the Supreme Court of California held that the
assertion of exclusive title by one cotenant, from the time
payments were made, did not defeat his right to contribution from
another cotenant. Id. at 696. Furthermore, pleading in the
alternative is specifically allowed by Civil Rule 8(a).
2 Phillips was a tort case, and some distinctions between
tort and non-tort cases exist with regard to PJI. See AS
09.30.070 (encompassing personal injury, death, and property
damage cases); AS 45.45.010 (encompassing all other cases);
Navistar Intern. Transp. Corp. v. Pleasant, 887 P.2d 951, 959
(Alaska 1994) (noting that PJI in cases encompassed by AS
09.30.070 begins to run from the time of process service or
written notice of claim); Tookalook Sales and Service v. McGahan,
846 P.2d 127, 129 (Alaska 1993) (noting that interest in a
contract case runs from the time of accrual of the cause of
3 Compare AS 09.30.070(b), which provides:
Except when the court finds that the parties
have agreed otherwise, prejudgment interest
accrues from the day process is served on the
defendant or the day the defendant received
written notification that an injury has
occurred and that a claim may be brought
against the defendant for that injury,
whichever is earlier. The written
notification must be of a nature that would
lead a prudent person to believe that a claim
will be made against the person receiving the
notification, for personal injury, death, or
damage to property.
4 In Cool Homes, Inc. v. Fairbanks North Star Borough,
860 P.2d 1248 (Alaska 1993), we clarified this statement,
indicating that "[t]his rationale is not applicable where the
municipality makes an assessment of the real property in
question, but makes a mistake as to the amount of the
assessment." Id. at 1257.
5 The liquidated or unliquidated status of the claim is
not relevant to the decision to award PJI in Alaska. State v.
Phillips, 470 P.2d 266, 274 (Alaska 1970).
6 See, e.g., Farmington Nat. Bank v. Basin Plastics,
Inc., 615 P.2d 985 (N.M. 1980) (payment on note by joint obligor,
who then recovered judgment against co-obligor; PJI awarded from
date of payment since court found amount to be "fixed and
certain," which "partook of none of the attributes of an
unliquidated amount"); Glimcher v. Reinhorn, 587 N.E.2d 462 (Ohio
App. 1991) (PJI normally at discretion of trial court; PJI on a
note is awarded from the date of demand on a maker or from the
date of accrual of the cause of action; remand to determine date
of demand on joint obligor of note); Sandblast v. Williams, 460
P.2d 1014 (Or. 1969) (tenant had previously agreed to reimburse
cotenant for tax payment; PJI awarded from date of payment
without explanation); Reid v. Ayscue, 436 S.E.2d 439 (Va. 1993)
(PJI not awarded since liability for ascertainable amount not
clear until verdict); Car Wash Enterprises, Inc. v. Kampanos, 874
P.2d 868 (Wash. App. 1994) (no PJI in contribution action since
claim unliquidated); Employers Mut. Liability Ins. Co. v. Derfus,
49 N.W.2d 400 (Wis. 1951) (contribution action arising from auto
collision, PJI allowed since defendant knew exact amount sought
and demand had been made).