Unpublished Disposition, 845 F.2d 1029 (9th Cir. 1983)

MEMORANDUM^*

In this action on a guaranty, Northwest Acceptance Corporation (Northwest) sought to recover from the guarantor, Ira Rennert, over $1.3 million in loans made to Dubowy, a corporation owned by Rennert. The district court reformed the guaranty, holding that Rennert was liable for not more than $300,000 in overadvances made prior to October 31, 1983.

We affirm the judgment for the reasons stated in the opinion of the trial judge except as to the sufficiency of Northwest's demand for payment of the overadvances. We need not reach this issue because we agree with the district court that the clause holding Rennert liable for all of Dubowy's debt if he failed to pay overadvances upon demand was an unenforceable penalty. We need elaborate only upon the issues regarding the law of the case, the scope of the pretrial order, and the denial of prejudgment interest.

Northwest contends that Judge Leavy's prior ruling that Rennert's liability under the demand-for-payment clause was not a disproportionate penalty precluded Judge Panner from reconsidering the issue. While the concept of law of the case generally "precludes a court from re-examining an issue previously decided by the same court in the same case," Russell v. Commissioner, 678 F.2d 782, 785 (9th Cir. 1982), the doctrine is discretionary and does not require a trial court to render an erroneous judgment, Arizona v. California, 460 U.S. 605, 618 & n. 8 (1983). A judge should modify an interlocutory order of another judge when convinced that it is erroneous rather than wait for reversal on appeal. Preaseau v. Prudential Ins. Co. of America, 591 F.2d 74, 79-80 (9th Cir. 1979) (citing Castner v. First Nat'l Bank of Anchorage, 278 F.2d 376, 380 (9th Cir. 1960)).¹ 

Here, Judge Leavy erroneously based his conclusion on the printed language of the guaranty, which stated that Rennert unconditionally guaranteed the entire amount of Dubowy's debt. Judge Panner held, however, that the written guaranty did not reflect the parties' agreement because Rennert promised to guarantee only $300,000. This limitation of Rennert's liability undermines the basis of Judge Leavy's interlocutory order. Accordingly, Judge Panner properly exercised his discretion in reconsidering Judge Leavy's order.

Northwest alternatively argues that Judge Panner could not reconsider the unenforceable penalty issue because it was not listed as an issue in the pretrial order. While a pretrial order is controlling unless modified, Fed. R. Civ. P. 16(e), the order nevertheless is liberally construed and capable of de facto amendment by the trial court's findings. Miller v. Safeco Title Ins. Co., 758 F.2d 364, 368 (9th Cir. 1985). Here, Judge Panner's ruling regarding the unenforceability of the penalty clause constituted an informal amendment of the pretrial order. Moreover, his decision was not an abuse of discretion. See id. at 369. First, the decision was necessary to correct a prior ruling. Second, there is no disputed factual issue relating to the penalty clause. Finally, Northwest does not challenge the conclusion that the clause would be unenforceable if Rennert agreed to guarantee only $300,000. Accordingly, Judge Panner's consideration of the issue was not barred by Fed. R. Civ. P. 16(e).

Regardless of whether Northwest made a sufficient demand for the amount due, we agree with the district court that Northwest was not entitled to prejudgment interest. Under Illinois law, absent an express agreement,²  prejudgment interest may be awarded only when the sum due is fixed or easily ascertainable. Spagat v. Schak, 130 Ill.App.3d 130, ----, 473 N.E.2d 988, 993-94 (1985); Cushman & Wakefield of Illinois, Inc. v. Northbrook 500 Ltd. Partnership, 112 Ill.App.3d 951, ----, 445 N.E.2d 1313, 1321 (1983) (no prejudgment interest awarded because amount due was disputed and depended upon many factors); U.C. Castings Co. v. Knight, 754 F.2d 1363, 1376 (7th Cir. 1985).

Here, the parties disputed the actual amount due. While the limit of Rennert's liability is $300,000, the district court found that the parties were not certain whether the overadvances made as of October 31, 1983 amount to $300,000. The trial court found that Rennert believed the overadvances amounted to about $200,000 and that Northwest valued the overadvances at $205,000. While Northwest believed there was an inventory shortfall not reflected in its books, Northwest failed to demonstrate that this shortfall increased the amount of overadvances to at least $300,000. Because the sum due was uncertain, Northwest is not entitled to prejudgment interest.

AFFIRMED.