American National Watermattress Corp. v. Manville
In American National Watermattress Corp. v. Manville, 642 P.2d 1330 (Alaska 1982), the Alaska Supreme Court reversed a trial court's computation of interest in which the lower court deducted a $ 60,000 settlement from the judgment before computing prejudgment interest.
Manville brought suit against a waterbed manufacturer for injuries she sustained when she was pinned beneath the bed after it rolled off its pedestal. Prior to trial, Manville received a $ 60,000 settlement from the retailer.
The jury awarded $ 146,715 in damages against the manufacturer. The trial court deducted the $ 60,000 settlement from the judgment before computing prejudgment interest.
The Supreme Court reversed, finding this method unfairly deprived her of her prejudgment interest from the date of injury until the date of settlement.
The court also rejected Manville's proposed computation which would have awarded her prejudgment interest on the entire sum.
The court found that this method would amount to a windfall recovery as she would receive interest on the $ 60,000 settlement from the date of settlement to the date of judgment when she was not actually deprived of the use of the money during that period. Manville, 642 P.2d at 1344.
The court determined that the correct answer could be found somewhere between the contentions of the parties and held that the $ 60,000 settlement should be treated as a payment on the final judgment with the $ 60,000 itself containing both prejudgment interest and principal.
The court then created an algebraic formula to compute these sums and the correct amount of interest.