Opinion
300884.
Decided November 22, 2006.
Hession, Bekoff Cooper, Garden City, NY (Attorneys for Respondent, Martin L. Shapiro).
Stephen B. Hand, Esq., Jaspan, Schlesinger Hoffman, LLP, Garden City, NY (Attorneys for Petitioner, Beth Stearns).
Office of the Attorney General, New York, New York (Attorneys for ultimate beneficiaries).
This is a motion to charge pre-judgment interest on the order dated September 16, 2003 which fixed the fee of Kathleen Trum, the attorney for the former trustee, Martin Shapiro, and directed her to refund excess legal fees paid to her of $428,475.63. The order further directed that the judgment to be entered be made jointly and severally against both Kathleen Trum and Martin Shapiro. Mr. Shapiro's later motion to vacate his default in appearing in the proceeding to fix Ms. Trum's fee was denied by order of September 15, 2004 and affirmed on appeal ( Matter of Shapiro, 26 AD3d 440).
The prior decision and order on this motion dated September 20, 2006 requested a further submission of papers detailing the petitioner's efforts to enforce the judgment, observing that while a motion to add interest may be made post-verdict or judgment, "it must be made prior to the execution of the judgment (citations omitted)."
It is clear from the further submission that while the petitioner commenced proceedings in the Supreme Court, Nassau County to enforce the judgment against funds which have been restrained, the proceedings have not resulted in a turnover of the restrained funds in satisfaction of the judgment primarily because of various temporary stays which have been granted by this court, the Supreme Court and the Appellate Division, Second Department.
As previously observed interest may be added post-verdict or judgment provided there has been no "execution of the judgment" ( McClaughlin v Brinkerhoff, 222 AD 458). Blacks Law Dictionary [8th ed. 2004] defines "execution" as "the act of carrying out or putting into effect (as a court order) execution of the court's decree ." While proceedings to enforce it have been made under that definition the judgment has yet to be given effect by payment of the sum due.
Actually the cases such as McClaughlin v Brinkerhoff which speak of execution of the judgment as terminating any right to interest are in effect a subcategory of a broader and well-settled line of cases which hold that payment of the principal amount due under a judgment bars any right to interest where interest is not payable by the terms of the contract itself ( Crane v Craig, 230 NY 452; Keybro Enterprises v Four Seasons Country Club Caterers, Inc. 25 AD2d 307; Stone v Bent, 12 Misc 3d 137 (A) 2006 NY slip. op. 51277 (U); NY Jur 2d, Interest and Usury, section 47).
The rationale for the rule is stated as follows: "[W]here the interest is not payable by the terms of the contract, but is simply allowable as damages for the default and payment, then the interest is not regarded as a part of the debt, but as a mere incident to it, and the receipt of the principal bars a subsequent claim for the interest for the reason that in such cases interest being a mere incident, cannot exist without the debt, and the debt being extinguished the interest must necessarily be extinguished also." ( Crane v Craig, 230 NY 452, 461). Accordingly, the judgment not having been paid, interest is not foreclosed because of payment of the principal sum due.
The prejudgment interest statute provides: "interest shall be recovered upon a sum awarded because of . . . an act or omission depriving or otherwise interfering with title to or possession or enjoyment of property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court's discretion." (CPLR 5001 [a]). Whether an injury to property constitutes a breach of contract, negligent or intentional injury to property or damages to or interference to enjoyment of property, pre-judgment interest is recoverable as a matter of right ( Flamm v Noble, 296 NY 262; Delulio v 320-57 Corp., 99 AD2d 253; Cleartone Transparent Products Co., Inc. v Dunn and Bradstreet, Inc. 118 AD2D 832 [1986]; Loeb v Titelbaum, 112 Misc 2d 1039; 63 Carmody Wait 2d, section 63:83). Here the negligence of the trustee and the misconduct of his attorney combined to deprive the trust of over $400,000 in grossly excessive fees and accordingly interest is mandatory under the statute.
Since the fees and disbursements were paid on various dates, CPLR 5001(b) provides that where "damages were incurred at various times, interest shall be computed upon each item from the date it was incurred." While the petitioner has included a schedule of proposed interest charges based on the fees and disbursements computed from the various dates of payment, the fees represented to have been paid total $438,116.00, whereas the fees directed to be refunded total $428,475.63 with an allowable fee of $20,000. The petitioner is accordingly directed to submit a further schedule of interest at 9% per annum (CPLR 5004) computed from the various dates of payment of fees, the total fees aggregating $428,475.63, with the $20,000 allowance being considered as paid last. The dates of payment and the amounts should be supported by copies of the relevant accounting schedules. While the order of September 16, 2003 as affirmed, also directed a refund of disbursements of $6,962.38, the only amount expressly made a joint and several liability is the refund of legal fees of $428,475.63.
The additional papers should be filed on or before December 11, 2006 and the matter resubmitted for decision.
This constitutes the decision and order of the court.