When Does Prejudgment Interest Start In Texas ?
In Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549 (Tex. 1985), the Texas Supreme Court held that, "as a matter of law, a prevailing plaintiff may recover prejudgment interest compounded daily (based on a 365-day year) on damages that have accrued by the time of judgment." Cavnar v. Quality Control Parking, 696 S.W.2d 549, 554 (Tex. 1985).
The court later abrogated the Cavnar holding and explained that the "when the Court decided Cavnar, there was no statute governing prejudgment interest." Johnson & Higgins of Tex., Inc. v. Kenneco Energy, 962 S.W.2d 507, 530 (Tex. 1998).
In Johnson, the court adopted the statutory predecessor to the Texas Finance Code and held that "prejudgment interest begins to accrue on the earlier of:
(1) 180 days after the date a defendant receives written notice of a claim or;
(2) the date suit is filed." Id. at 531; see TEX. FIN. CODE ANN. 304.104 (Vernon Supp. 2000) (providing similar provisions).
The court recognized that the statutory approach to prejudgment interest "'works as a system of rewards and penalties' intended to encourage settlements." Johnson, 962 S.W.2d at 530-31.
Accrual of prejudgment interest is not automatic.
For example, "a court may order that prejudgment interest does not accrue during periods of delay in the trial." Id. 304.108(a).
"A court shall consider:
(1) periods of delay caused by a defendant;
(2) periods of delay caused by a claimant." TEX. FIN. CODE ANN. 304.108(b) (Vernon Supp. 2000). Johnson recognizes that this provision, among others, helps encourage settlements. See Johnson, 962 S.W.2d at 529 (discussing the predecessor to 304.108.
Yet, "the statute does not mandate such offsetting, which is entirely within the discretion of the trial court." Casas, 960 S.W.2d at 260.