Opinion
HUC 4565-10.
Decided June 7, 2011.
Callaghan Parente, LLP, Andrew M. Doktosfsky, Esq., Attorney for the Plaintiff, Bohemia, New York.
Peter L. Blodnick, Esq., Attorney for the Defendant, Syosset, New York.
Pursuant to order dated March 18, 2011, the Court granted Dennis McPartland (hereafter "the plaintiff') summary judgment in lieu of complaint pursuant to New York CPLR § 3213 to recover money owed upon a promissory note and scheduled a hearing on April 14, 2011 to determine what, if any, reasonable attorney's fees were due the plaintiff under said note. The Court's decision determined that $8,281.00 was due and owing under the original $19,000.00 note together with interest, costs and attorney's fees.
At the hearing, and as part of the judgment settled for signature, it was the plaintiff's contention that he was entitled to recover $5,765.00 representing 10% contractually agreed interest from the April 1, 2004 note default date plus $1,575.00 of attorney's fees, together with $161.50 of costs and the outstanding $8,281.00 of principal. The total judgment amount requested is $15,782.00. The Court notes that the plaintiff's counsel submitted an affirmation of legal services detailing $9,906 of legal services rendered. The plaintiff's complaint requests attorney's fees of "no less than $1,500.00". The Court awards the $1,575.00 requested by the plaintiff in his proposed judgment.
The complicating factor which the Court must consider prior to entry of judgment herein is that the New York Jud. Law (UDCA Sec. 201- 202) limits this Court's plaintiff's complaint monetary jurisdiction to $15,000.00 "exclusive of interest and costs". See generally, Board of Managers of Mews at North Hills Condo. v. Farajzadeh, 189 Misc 2d 38 (App. Tm., 9th 10th Dists. 2nd Dept. 2001). No lesser Court than the Court of Appeals has determined that contractually agreed default attorney's fees are not considered an independent cause of action and are "in truth a single obligation" which must be combined with the contract default damages in considering jurisdictional limitations. See, 930 Fifth Corp. v. King, 42 NY2d 886 (NY 1977); See also, Board of Managers of Sea Breeze II Condominium v. Kwiecinski 2003 NY Slip Op. 51434 (U) (App. Term 9th 10th, 2001). These attorney's fees are not an impediment to entry of judgment as the $8,281.00 of principal when added to the requested $1,575.00 of attorney's fees constitutes less than the $15,000.00 jurisdictional limit. However, the $5,765.00 of interest requested represents contractually agreed 10% interest as different from CPLR Sec. 5004 "Court awarded" 9% interest and exceeds the jurisdictional limit if added.
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New York Definition of Interest
Precedent construing the definition of the term (monetary) "interest" in New York State is limited. The only two reported cases on point involve the New York City Civil Court which is a sister Court whose $25,000.00 jurisdictional grant also arises out of the Judiciary Law and utilizes identical statutory language in the N.Y.C.C.C. Act. Sec. 201 which states the limit is "exclusive of interest and costs". In a case of first impression in 1990, the New York Civil Court created a distinction between interest which is a "component of the debt" as different from interest which is Court awarded". Irni v. Williams, 146 Misc 2d 894 (N.Y.C. Civ. Ct. 1990). Only one other reported Court case thereafter dealt with the issue and also adopted the "Court award" vs. "contractually agreed" interest distinction. See, Metrotran Advertising Trust Fund v. Cado Trans., Inc., 601 N.Y.S.2d 684 (NY Civ. Ct. 1993). The McKinney's Commentaries adopted the Irni Court distinction and classified the difference by calling Court awarded interest "penalty interest". Seigel, Practice Commentaries, McKinney's Cons. Laws of NY, Book 29, NY City Civ. Ct. Act § 201. Upon the strength of these commentaries, it appears that little judicial debate has occurred since then.
See also, 167 A LR 1243 citing to Texas and Arkansas cases creating an "interest eo nomine" vs. "interest as damages" jurisdictional distinction. Federal cases are also cited qualifying the general federal rule that eo nomine is not calculated in determining whether jurisdiction is obtained.
The New York legislature has not defined "penalty interest" although the Second Department Appellate Division utilized this term as recently as 2008 to describe the 24% interest provided in NY Insurance Law Sec. 5106(a). Global Surgical Supply Co. v. Geico Ins. Co. , 59 AD3d 129 (N.Y.A.D. 2nd Dept. 2008). Surprisingly, the legislature has also never expressly defined the term "interest", (although it refers to the term in a myriad of statutes and Art. 6 Sec. 16 (d) of the New York Constitution) other than to indirectly refer to it as the receipt of "money, goods or things . . . on the loan or forbearance of any money . . ." See, New York Gen. Oblig. Law Sec. 5-501(2).
It is interesting to note that the legislature did not state "penalty interest" in the constitution or statute.
This exceedingly broad statutory definition of "interest" evidences no intent of the legislature to create a distinction between contractually agreed interest; Court awarded interest; penalty interest, or any other judicially created sub category. The first rule of judicial statutory construction (interpretation) is that it applies only to "subjects which lie beyond the direct expression of the text". New York Statutes Sec. 71. Words should be given the meaning intended by the lawmakers. New York Statutes Sec. 230, and should not be expanded to enlarge their meaning. See, Bright Homes, Inc. v. Wright, 8 NY2d 157 (N.Y. 1960); People v. Shafer, 30 AD2d 213 (NY A.D. 4th Dept. 1968). "Words of ordinary import used in a statute are to be given their usual and commonly understood meaning, unless it is plain from the statute that a different meaning is intended". New York Statutes, Sec. 232. See, Lee v. Dill, 39 Barb. 516, aff'd. by 41 NY 619 (NY 1869). Courts must apply the statute as written and not as they believe it should have been written. Fullerton v. General Motors Corp., Rochester Products Division, 46 AD2d 251 (N.Y.A.D. 3rd Dept. 1974) citing to People v. Olah, 300 NY 96 (NY 1949).
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Black's Law Dictionary defines interest (for money) as "the compensation allowed by law or fixed by the parties for the use or forbearance of money". Black's Law Dictionary (9th ed. 2009). Art. 6 Sec. 16 (d) of the state constitution granted the legislature the authority to establish the District Court and to determine its jurisdiction, "exclusive of interest and costs". The legislature thereafter again excluded "interest", from the $15,000.00 jurisdictional limit in UDC Sec. 201. Absent a legislative directive to the contrary, the Court may not seek to give the term any other than its ordinary meaning when considering which claims it will jurisdictionally entertain or reject.
Accordingly, the Court determines it has subject matter jurisdiction to enter judgment in this action for the plaintiff as against the defendant for $15,782.00, which is inclusive of interest, and directs the Clerk of the Court to do so.