Reliable Mechanical v. Naylor Indus. Serv., 2002-CA-000321-MR.

• Decision Date: 28 February 2003
• Docket Number: No. 2002-CA-000321-MR.,2002-CA-000321-MR.
• Citation: 125 S.W.3d 856
• Parties: RELIABLE MECHANICAL, INC. and Liberty Mutual Insurance Company, Appellants v. NAYLOR INDUSTRIAL SERVICES, INC., Appellee.
• Court: Kentucky Court of Appeals

125 S.W.3d 856

RELIABLE MECHANICAL, INC. and Liberty Mutual Insurance Company, Appellants v. NAYLOR INDUSTRIAL SERVICES, INC., Appellee.

No. 2002-CA-000321-MR.

Court of Appeals of Kentucky.

February 28, 2003.

Discretionary Review Denied by Supreme Court February 11, 2004.

Case Ordered Published by Supreme Court February 11, 2004.

Thomas E. Roma, Jr., Louisville, KY, for appellants.

Cornelius E. Coryell, II, Louisville, KY, for appellee.

Before EMBERTON, Chief Judge; BARBER and COMBS, Judges.

OPINION

COMBS, Judge.

This was an action originally based on a breach of contract. The issue before us on appeal is whether pre-judgment interest awarded to the prevailing party should have been compounded annually. Having considered the arguments we conclude that the trial court did not abuse its discretion in this case by awarding compound interest. Thus, we affirm.

The action underlying this appeal involved a subcontract between Reliable Mechanical, Inc. ("Reliable"), and Naylor Industrial Services, Inc. ("Naylor"), for the cleaning and flushing of pipe systems that had been installed by Reliable at a stainless steel processing facility owned by North American Stainless ("NAS") in Carrollton, Kentucky. Naylor completed its work at the facility in early January 1992. However, a dispute arose among the parties, and Reliable refused to pay the contract price on its subcontract with Naylor.

Reliable filed this action against NAS on November 11, 1992. Through a series of counterclaims and cross-claims, Naylor became involved in the litigation. Naylor defended the claims asserted against it and attempted to recover payment for the services which it had provided earlier in the year. On March 8, 2000, the Carroll Circuit Court entered judgment in Naylor's favor and ordered Reliable to pay the sum of $53,750.00, the outstanding balance on the contract. The trial court also ordered Reliable to pay pre-judgment interest on that sum from February 3, 1992, to the date of the order. Reliable appealed. The court's order was eventually affirmed in all respects.

In October, 2001, Reliable tendered a check to Naylor purporting to represent the principal amount awarded together with pre-judgment interest (not compounded) and post-judgment interest (compounded annually). Naylor had expected Reliable to calculate the pre-judgment interest award by compounding the interest annually. Because of Reliable's failure to do so, the sum tendered to Naylor was $13,000.00 less than Naylor had anticipated. Naylor contested the payment, advising Reliable that it disagreed with the method of calculating the award and requested that Reliable adjust its tender. Reliable clung to its position that the pre-judgment interest award was simple interest and was not to be compounded. Following a hearing, the trial court ordered that the amount awarded to Naylor be calculated by compounding annually the pre-judgment interest awarded. This appeal followed.

Absent a contractually agreed upon rate, the appropriate rate of interest is governed by statute. KRS¹ 360.010 (setting the legal rate of interest in general) provides that the "legal rate of interest is eight (8%) percent per annum." As Reliable emphasizes, that statute is silent as to whether the interest is to be compounded. In contrast, Reliable observes that KRS 360.040 (a statute pertaining to post-judgment matters) specifically provides...