Bouten Construction Co. v. H.F. Magnuson Co.

Justice SCHILLING,

Pro Tern., concurring in part and dissenting in part.

I concur with the Court’s opinion except that I respectfully dissent from Sections D and E. In my view, the additional costs claimed by Bouten were capable of ascertainment for purposes of the District Court’s award of pre-judgment and interjudgment interest.

I. INTRODUCTION

It is weh settled law in Idaho that prejudgment interest may be awarded where the amount of liability is liquidated or capable of ascertainment by mere mathematical process. Farm Development Corp. v. Hernandez, 93 Idaho 918, 920, 478 P.2d 298, 300 (1970).

Whether damages are sought through contract or statute, a grant of prejudgment interest requires a showing that the damages were liquidated or ascertainable. Idaho Code § 28-22-104 allows for an award of prejudgment interest for money due by express contract or when it becomes due. Id.; Child v. Blaser, 111 Idaho 702, 706, 727 P.2d 893 (Ct.App.1986). See also Bott v. Idaho State Bldg. Authority, 128 Idaho 580, 592, 917 P.2d 737 (1996), citing Ervin Constr. Co. v. Van Orden, 125 Idaho 695, 704, 874 P.2d 506, 515 (1993); I.C. § 28-22-104(1), (2). In a breach of contract action, interest may be awarded from the date of the breach “when the amount upon which the interest is to be based is mathematically and definitely ascertainable.” Ervin Const., 125 Idaho at 704, 874 P.2d at 515, citing Barber v. Honorof, 116 Idaho 767, 770, 780 P.2d 89, 92 (1989).

A claim is liquidated if the evidence furnishes data which, if believed, makes it possible to compute the amount with exactness, without reliance on opinion or discretion. Examples are claims upon promises to pay a fixed sum, claims for money had *769and received, claims for money paid out, and claims for goods and services to be paid for at an agreed rate.

Seubert Excavators, Inc. v. Eucon Corp., 125 Idaho 744, 750, n. 2, 874 P.2d 555 (Ct.App.1993), citing C. McCormick, Handbook on the Law of Damages § 54, at 213; accord Trimble v. American Sav. Life Ins. Co., 152 Ariz. 548, 733 P.2d 1131 (App.1986); Jet Boats, Inc. v. Puget Sound Nat. Bank, 44 Wash.App. 32, 721 P.2d 18, 23 (1986).

Equitable principles are emphasized, and prejudgment interest is deemed proper “in order to fully compensate an injured party for the loss of the use of their money during the pendency of the action.” Chenery v. Agri-Lines Corp., 115 Idaho 281, 289, 766 P.2d 751 (1988), citing Ace Realty, Inc. v. Anderson, 106 Idaho 742, 682 P.2d 1289 (1984); Mitchell v. Flandro, 95 Idaho 228, 506 P.2d 455 (1972); Farm Development, 93 Idaho at 920, 478 P.2d at 300. See also Seubert, 125 Idaho at 750, 874 P.2d 555, citing I.C. § 28-22-104; Meldco, Inc. v. Hollytex Carpet Mills, 118 Idaho 265, 270, 796 P.2d 142, 147 (Ct.App.1990); C. McCormick, Handbook on the Law of Damages, ch. 7, § 50, at 205 (1935).

The question here is whether Bouten’s damages, the increased costs of construction, were ascertainable prior to remand.

II. IDAHO CASE LAW

Idaho courts determine on a case by case basis whether damages are liquidated, or ascertainable, for purposes of awarding prejudgment interest. A review of Idaho case law suggests that the trial bench and bar would benefit from clear guidance regarding the application of prejudgment interest.

In Farm Development, this Court affirmed the trial court’s holding that although the price was set in the contract, conflicting evidence on the amount actually paid and the value of the product led to a conclusion that the amount was not ascertainable. Farm Development, 93 Idaho at 920, 478 P.2d 298.

This Court found the principal amount of liability ascertainable in Rosecrans v. Inter-mountain Soap & Chem. Co., 100 Idaho 785, 788, 605 P.2d 963 (1980), where Rosecrans was by employment contract to receive $1,000 per month salary and the return of a $10,000 deposit with interest fixed at 8%. In a footnote, this Court distinguished the case from Farm Development, noting that while the contract in that case specified that plaintiff was entitled to one-half the cost of fertilizing a piece of land, the amount actually paid for the fertilizer and its value were in dispute. Rosecrans, 100 Idaho at 788, n. 1, 605 P.2d at 966, n. 1.

In Child, the Court of Appeals found that the value of certain lots was not ascertainable, and prejudgment interest was therefore improper, where the trial court determined the value of the lots based on conflicting expert testimony and differing theories of recovery. Child, 111 Idaho at 707, 727 P.2d at 898. However, prejudgment interest was allowed on amounts expended for taxes and water assessments against the lots, as the amounts and dates of those expenditures were not disputed. Id. The Court found those amounts were liquidated and plaintiffs were entitled to interest from the dates paid to the date of judgment. Id.

This Court found that liability was not mathematically ascertainable under a construction contract that provided for termination of the contract by payment of “an appropriate percentage of work completed based on net contract amount and value of materials installed.” Ervin Construction, 125 Idaho at 704, 874 P.2d 506. The trial court found that the net contract amount was readily ascertainable at the time of the breach, but numerous defects of construction and materials used affected the value of the installed materials and thus rendered the value unascertainable. Id.

In another case, this Court held damages to be “definitely ascertainable” where cheeks paid and delivered by a certain date allowed the district court to calculate damages by adding up the amount of the checks. Davis v. Professional Business Services, 109 Idaho 810, 817, 712 P.2d 511, 518 (1985), aff'd on r’hrg.

In contrast, it found that an overpayment amount not sufficiently definite to support a prejudgment interest award where the par*770ties produced conflicting evidence regarding the amount of the overpayment. Burt v. Clarendon Hot Springs Ranch, 117 Idaho 1042, 1045, 793 P.2d 715 (1990).

Indefinite damages also barred prejudgment interest where, at the time plaintiff took possession of defendant’s cattle, “neither party had any idea how long [plaintiff] would retain the livestock or how much the reasonable costs of caring for them would be.” Nelson v. Holdaway Land and Cattle Co., 111 Idaho 1035, 1038, 729 P.2d 1098 (Ct.App.1986). “It was not until the district court, on remand, determined the recoverable loss — based on reasonably incurred costs and fixing the amount of a nominal award— that either party had any idea of the extent of damages.” Id.

In Haley v. Clinton, 128 Idaho 123, 127, 910 P.2d 795 (Ct.App.1996), prejudgment interest was held inappropriate where a main issue at trial was the amount of fees incurred and the amount that had been previously paid. The Court of Appeals found that the amount was not ascertainable nor liquidated because “[i]n order to calculate the amount, the district court was required to make credibility determinations, examine conflicting documentary evidence and choose between competing arguments regarding different sums.” Id.

In Seubert, the appellant argued that the amount due to Respondent was not liquidated until fixed by the district court where both parties had prevailed on offsetting claims. Seubert, 125 Idaho at 750, 874 P.2d at 561. The Court of Appeals found that the respondent’s claim for the withheld payment of $10,622.93 was clearly for a fixed, liquidated amount. Id. Further, “the fact that it was subject to reduction, and was in fact reduced, [did] not change its liquidated character.” Id.

This Court affirmed the district court’s award of prejudgment interest, finding that the principal amount of liability was ascertained by appellant’s August 27, 1984, letter to respondent. Additionally, “substantial and competent evidence ... supported] the conclusion of the district court that the balance of the accounts was ascertained as of that date, since the withheld sum [was] not ... subsequently amended.” Seubert Excavators, Inc. v. Eucon Corp., 125 Idaho 409, 416, 871 P.2d 826 (1994) (emphasis added).

III. DISCUSSION

A review of Washington law also provides guidance on this issue. “A claim is liquidated when damages are easily computed by reference to objective sources.” Flint v. Hart, 82 Wash.App. 209, 917 P.2d 590, 599 (1996), citing Walla Walla County Fire Prot. Dist. 5 v. Wash. Auto Carriage, 50 Wash. App. 355, 358, 745 P.2d 1332, 1335 (1987). “A liquidated claim occurs when the ‘evidence furnished data which, if believed, makes it possible to compute the amount [owed] with exactness, without reliance on opinion or discretion.’” Id., citing Kiewit-Grice v. State, 77 Wash.App. 867, 872, 895 P.2d 6 (quoting Prier v. Refrigeration Engineering Co., 74 Wash.2d 25, 32, 442 P.2d 621 (1968)), rev. denied, 127 Wash.2d 1018, 904 P.2d 299 (1995).

The Court of Appeals of Washington found appellant’s claim liquidated where respondent did not offer any evidence of fair market value and did not controvert the witness’s testimony or the amount claimed. Walla Walla County Fire, 745 P.2d at 1335.

The Washington Court of Appeals, Division 3, found that awards of “reasonable” damages' could only be determined through an exercise of discretion after weighing conflicting evidence, opinion, and testimony, and that such subjective analysis would result in unliquidated claim amounts. Flint, 917 P.2d at 599. The court held that a prejudgment interest award on a specific claimed amount of attorney fees was proper where its reasonableness was not challenged and the jury was not charged with determining its reasonableness. Id.

However, the Supreme Court of Washington has held that it is the character of the claim and not of the defense that determines whether a claim is liquidated or not. Prier, 442 P.2d at 627. In this writer’s opinion, the Prier court offers the correct analysis and easiest application for determining whether sums are liquidated for purposes of prejudgment interest. The court states:

*771It would seem that the existence of a dispute over the whole or part of the claim should not change the character of the claim from one for a liquidated, to one for an unliquidated, sum, and this conclusion finds support in the cases. * * * The same question, of course, arises in connection with any claim's, whether resting upon contract, tort, or quasi contract, which have for their basis allegations that money has actually been received or dealt with under such circumstances that a definite sum is due to the plaintiff. In these cases also the sum is still “liquidated” according to what is believed to be the better view, although the sum is not fixed by agreement and although the facts upon which the claim is based may be disputed, and even though the adversary successfully challenges the amount and succeeds in reducing it.

Under this view, only those claims would be termed “unliquidated” where the exact amount of the sum to be allowed cannot be definitely fixed from the facts proved, disputed or undisputed, but must in the last analysis depend upon the opinion or discretion of the judge or jury as to whether a larger or a smaller amount should be allowed. If this be so, a claim, for the full amount of a note for $1,000 is “liquidated” though the defendant claims, and the evidence is in dispute on such defense, that he has paid half this sum. So also a claim for $1,000 alleged to have been in small amounts at different times embezzled by a bank cashier should be considered “liquidated,” though the fact and amount of each separate taking is disputed. In short, it is the character of the claim and not of the defense that is determinative of the question whether an amount of money sued for is a “liquidated sum. ”

It follows from the foregoing that, where the amount sued for may be arrived at by a process of measurement or computation from the data given by the proof, without any reliance upon opinion or discretion after the concrete facts have been determined, the amount is liquidated and mil bear interest. Id. at 626, citing C. McCormick, Damages (Hornbook Series) § 54 (1935) (Italics by Supreme Court of Washington). Additionally, the Washington court quotes:

“It may be safely said that the tendency has been in favor of allowing interest rather than against it, and that the degree of certainty or ease with which the approximate amount can be ascertained has grown less and less stringent. * * *
“The true principle, which is based on the sense of justice in the business community and on our statute, is that he who retains money which he ought to pay to another should be charged interest upon it. The difficulty is that it cannot well be said one ought to pay money, unless he can ascertain how much he ought to pay with reasonable exactness. Mere difference of opinion as to amount is, however, no more a reason to excuse him from interest than difference of opinion whether he legally ought to pay at all, which has never been held an excuse.”

Id. at 627, quoting Laycock, v. Parker, 103 Wis. 161, 79 N.W. 327 (1899), as quoted in 5 A. Corbin, Contracts § 1046 n. 69 (1964).

The majority opinion concludes that Bouteris damages were not readily ascertainable until the district court ruled on which of the increased costs were proved reasonable. Conflicting Idaho case law must be carefully examined to clarify this issue, and the opportunity to provide clear guidance should not be overlooked.

Where reasonableness was at issue, this Court found prejudgment amounts unascertainable where the parties introduced conflicting testimony regarding a reasonable hourly rate that the trial court determined was necessary for reaching the amount of damages. Barber, 116 Idaho at 770, 780 P.2d at 92.

Prior to Barber, however, this Court held that an amount was readily ascertainable based on evidence that $10 per hour was a “reasonable charge” for leveling land. Guyman v. Anderson, 75 Idaho 294, 297, 271 P.2d 1020 (1954). In Guyman, the Court found that while the dispute between the parties involved the rate of pay, and no *772agreement existed as to what the rate would be, there was

... some evidence that $10 per hour is a reasonable charge for leveling land with the equipment used by plaintiff, and that such a rate was charged by others. Although scant, this furnishes some proof of a recognized standard for the determination of the amount due. The above rule [interest on unliquidated claim allowed where amount due can be readily ascertained by mere computation or by a legal or recognized standard] is, therefore, applicable here and interest at the legal rate should have been allowed from the date the work was completed____

Id. at 296-297, 271 P.2d at 1021 (citations omitted); but see Washington cases, Tri-M Erectors, Inc. v. Donald M. Drake Co., 27 Wash.App.2d 529, 618 P.2d 1341, 1346 (1980) (holding a claim for attorney fees unliquidated where the principal must be arrived at by a determination of reasonableness); Ski Acres Development Co. v. Douglas G. Gorman, Inc., 8 WashApp. 775, 781, 508 P.2d 1381, 1385 (1973) (holding that where there was a question of reasonableness of the cost of repairs, the claim was unliquidated until resolved by the jury).

Read together, Barber and Guyman suggest that a determination of “reasonableness” for purposes of awarding prejudgment interest does not immediately render an amount due as “unascertainable.” The Barber Court found damages unascertainable due to conflicting evidence of reasonableness; the Guyman Court indicated that evidence of reasonableness merely supplied some proof of a recognized standard for determination of the amount due.

Bouten had the burden at trial to prove each change made, that the change was more costly, the amount of such increased cost, and that the amount was reasonable. Bouten Constr. Co. v. M & L Land Co. (Bouten I), 125 Idaho 957, 968, 877 P.2d 928 (Ct.App.1994). The court on remand was directed to base its decision on Bouten’s claims for additional costs of changes upon evidence previously offered at trial, unless Bouten showed it was prevented from meeting its burden of proof at trial. Id.

This directive led to the analysis that the amounts were not ascertainable until the court made the “reasonableness” determination. If so, any time a party must prove reasonableness it would be deprived of prejudgment interest and no court could award prejudgment interest even though by not doing so it could not afford complete relief. In this case, the district court proceeded by considering only that evidence established at trial, finding that some changes were reasonable based on the evidence presented and others were not.

If a decision not to award interest is based on whether the claim was disputed or litigated, “... prejudgment interest would never be awarded — a party could delay payment without incurring interest expense by disputing and litigating any claim.” Ace Realty, 106 Idaho at 751, 682 P.2d 1289, citing e.g., Giant Food, Inc. v. Jack I. Bender & Sons, 399 A.2d 1293, 1302 (D.C.App.1979); Fluor Corp. v. U.S. ex rel Mosher Steel Co., 405 F.2d 823, 829 (9th Cir.1969). See also Seubert, 125 Idaho at 750, 874 P.2d at 561.

Similarly, if this Court allows a determination of reasonableness under these facts to negate prejudgment interest on the additional costs, the effect will be the same. A party could delay payment, waiting until trial to challenge the reasonableness of costs to avoid prejudgment interest, and prejudgment interest would only be allowed in rare circumstances.

Under Guyman, a determination of reasonableness merely operates as proof of a recognized standard for determining an amount due. Bouten’s burden to show reasonableness did not render the costs claimed unascertainable. Prejudgment interest should be awarded here where the amounts due were determinable by mathematical process. The court determined that an amount was due, Magnuson had the benefit of the amounts expended in construction of the Inn, and the amounts due were calculable by the parties even if disputed.

On the cross appeal in Bouten, the Court of Appeals upheld the district court in finding that Bouten had proved the reasonableness of its site-work costs through substantial evi*773dence on the record. Bouten Const. Co. v. M & L Land Co., 125 Idaho 957, 968, 877 P.2d 928 (Ct.App.1994). The substantial and competent evidence included testimony regarding the extent and complexity of the work, the amount of structural material placed on the site, and the fact that the owners had access to all billings submitted by the subcontractor. Id. at 973, 877 P.2d 928. The court stated:

[a]fter considering all the evidence in the record, we conclude that BCC [Bouten] made out a prima facie case that its costs for the site work were reasonable and necessary. In short, there was substantial and competent evidence of the reasonableness of the costs. M & L produced no evidence to prove that any of the claimed costs were unreasonable.

Id.

The Court of Appeals was essentially resolving a dispute as to the amounts owed. The amounts owed were capable of ascertainment by mathematical calculation and, although disputed by M & L, were proved by Bouten. Here, the same analysis should apply. Bouten expended certain amounts, capable of mathematical ascertainment. Although HFMCO disputed those amounts, they would have had to produce evidence that they were unreasonable in order to have a particular cost amount reduced. As indicated in Prier, 442 P.2d at 626, “where money has actually been received or dealt with under such circumstances that a definite sum is due to the plaintiff, it is the better view that the sum is still ‘liquidated,’ although the sum is not fixed by agreement and although the facts upon which the claim is based may be disputed, and even though the adversary successfully challenges the amount and succeeds in reducing it.”

The reasonableness determination here should be treated as merely the necessity of proving of a recognizable standard, not requiring the exercise of the court’s opinion or discretion. The trial court was not required to make decisions regarding value of property, workmanship, or quality of materials used in relation to the additional costs, thus it did not exercise the opinion or discretion that would disallow an award of prejudgment interest. This determination, whether made at trial or on remand, did not affect the character of the claim that specific amounts were due.

Additionally, a party is entitled to prejudgment interest on liquidated sums even where the entire claim is not considered liquidated or ascertainable. Child, 111 Idaho at 707, 727 P.2d at 898; Flint, 917 P.2d at 599. Therefore, Bouten should not lose its entitlement to all prejudgment interest based on the district court’s denial of certain costs.

While no clear authority has been found, this Court could clarify the law and ease its application in the future by determining that prejudgment interest is a finding of fact which shall not be set aside unless clearly erroneous. Although not specifically setting out the standard for review, several Idaho cases suggest that trial courts’ decisions regarding prejudgment interest were reviewed as findings of fact. See Seubert Excavators, Inc. v. Eucon Corp., 125 Idaho 409, 416, 871 P.2d 826, 833 (1994); Ervin Construction, 125 Idaho at 704, 874 P.2d at 515; Haley, 128 Idaho at 126-127, 910 P.2d at 799.

IV. CONCLUSION

In this court’s opinion, prejudgment and interjudgment interest should be awarded in this case for the following reasons:

1. Bouton’s damages were ascertainable notwithstanding the directive to the lower court regarding reasonableness;

2. An award of prejudgment interest here would be consistent with this Court’s and other courts’ movement towards awarding prejudgment interest, thereby affording more complete relief; and

3. The award of prejudgment interest, based on the trial judge’s determination that the amount was ascertainable, should be considered a finding of fact subject to review under the “clearly erroneous” standard.

Accordingly, I respectfully dissent.

Justice STEGNER, Pro Tern., concurs.