Opinion ID: 1366742
Heading Depth: 2
Heading Rank: 2

Heading: Was the award of prejudgment interest correct?

Text: In its memorandum decision, the district court awarded Steelman-Duff prejudgment interest on its claim of $10,622.93 from September 12, 1983, which was Steelman-Duff's last day of performance of the contract. The district court later amended its ruling by awarding Steelman-Duff prejudgment interest on $9,590.93 from August 27, 1984, based on a letter of that date from Seubert to Steelman-Duff. The letter stated, in relevant part: Attached is our check in the amount of $58,309.97 for payment on the above referenced project. Below is a breakdown on how this amount was arrived at. . . . . This leaves $10,622.93 that we have withheld for liquidated damages. There are also backcharges on both sides for work performed and equipment used. Seubert contends that the subcontract with Steelman-Duff established a mutual account between the two contractors, upon which prejudgment interest may not be awarded until ascertainment of the balance. Idaho Code § 28-22-104.5. [1] Because the arguments of both parties display a fundamental misapprehension of mutual and open accounts, we explain the significance of such accounts here. Courts sometimes treat open and mutual accounts as substantially synonymous expressions. 1 Am.Jur.2d Accounts and Accounting § 4 (1962). An open account refers to a continuing series of transactions between the parties, where the balance is unascertained and future transactions between the parties are expected. Id. Where there are items debited and credited on both sides of the open account, rather than one party always in debt and the other extending credit, the account is called a mutual open account. Id., § 5. There must also be a mutual agreement, express or implied, that the claims upon the one side and the other are to be set off against each other. Id. Employment relationships may give rise to mutual open accounts; thus when a farmhand was paid at irregular intervals, minus the value of items furnished him by his employer, this Court found that a mutual open account existed. McCarthy v. Paris, 46 Idaho 165, 171, 267 P. 232, 233 (1928); see also Kugler v. Northwest Aviation, Inc., 108 Idaho 884, 887, 702 P.2d 922, 925 (Ct.App.1985) (ordering district court on remand to find whether open account was mutual or unilateral). When, however, only one party to the transaction extends credit to the other, the account is not mutual. Van de Wiele v. Koch, 256 Or. 349, 352-53, 472 P.2d 803, 805 (1970). The subcontract agreement between Seubert and Steelman-Duff stated in relevant part: 16. Partial Payment. Partial payment for work performed under this agreement will be made by the CONTRACTOR as and within ten days of the time he is paid therefor by the PRINCIPAL, and will equal the value of the work done by the SUBCONTRACTOR according to the Engineer's estimate of the said unit, or lump sum, prices, less the sum of previous payments and less a percentage equal to the percentage retained by the PRINCIPAL, PROVIDED, that if the SUBCONTRACTOR is indebted to the CONTRACTOR or anyone else for cash, advances, supplies, materials, equipment, rental, or other proper charges against the work, the amount of such indebtedness may be deducted from any payment or payments made under this provision. (emphasis added). The subcontract agreement clearly contemplates that Steelman-Duff would be indebted to Seubert during the course of the project. Even if the subcontract formed a mutual account, however, the district court was correct in establishing prejudgment interest from August 27, 1984, for at least two reasons. First, Seubert's attorney asserted at oral argument that Seubert's letter of August 27, 1984 did not refer to the items included in the subcontract. Thus, we find that the sums which were withheld from Steelman-Duff as of August 27, 1984 constituted money due by express contract, prejudgment interest on which is due pursuant to I.C. § 28-22-104.1. Even if the items enumerated in the August 27 letter did relate to the items specified in the subcontract, substantial and competent evidence still supports the conclusion of the district judge that the balance of the accounts was ascertained as of that date, since the withheld sum has not been subsequently amended. Notwithstanding Seubert's arguments to the contrary, our decision today is consistent with our recent decision in Ervin Constr. Co. v. Van Orden, 93.18 I.S.C.R. 993, 997-98, ___ Idaho ___, ___-___, ___ P.2d ___, ___ - ___ (Aug. 25, 1993). In Ervin, we reversed the trial court's award of prejudgment interest because the principal amount of liability under the contract was unascertainable. Id. at ___, ___ P.2d at ___. Here, the principal amount of liability was ascertained by Seubert's own letter of August 27, 1984. Accordingly, we affirm the district court in its award of prejudgment interest.