Opinion ID: 720637
Heading Depth: 2
Heading Rank: 1

Heading: Bank of Baroda's Appeal

Text: 8 The primary issue on appeal is whether interest should have been added to the amount due to Baroda under the promissory note on its counterclaim before offsetting that amount against the award in favor of Indu Craft. Upon reinstating the $3.25 million jury verdict, the district court offset only the principal amount due on the promissory note. In doing so, the district court relied on the interest on the balance rule, which states that prejudgment interest should be awarded on the net balance of the jury verdict remaining after deduction of Baroda's setoff. See Indu Craft, 1995 WL 479516, at  1; see also Manshul Constr. Corp. v. Dormitory Auth., 79 A.D.2d 383, 436 N.Y.S.2d 724, 727 (1st Dep't 1981). 9 The parties hotly contest the proper characterization of the award on appeal by this court to Baroda, which was realized as a setoff against Indu Craft's jury verdict. Baroda contends that because it prevailed on appeal for the amount due on the promissory note, it is entitled to interest as a matter of right under New York law. In opposition, Indu Craft claims that because the setoff was an equitable adjustment to Indu Craft's jury award, rather than a recovery on its breach of contract counterclaim, Baroda is not a prevailing party and thus was properly denied prejudgment interest. 10 Baroda's contention that it is entitled to an award of prejudgment interest as a party that has prevailed on a breach of contract claim is based on New York C.P.L.R. § 5001(a), which states: 11 Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or 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. 12 Section 5001(a) entitles a prevailing party to prejudgment interest as a matter of right. State v. Williams, 140 A.D.2d 836, 528 N.Y.S.2d 353, 353 (3d Dep't 1988); Delulio v. 320-57 Corp., 99 A.D.2d 253, 472 N.Y.S.2d 379, 381 (1st Dep't 1984). An award of prejudgment interest on an equitable claim is discretionary. Scheller v. Bowery Sav. Bank, 630 N.Y.S.2d 62, 64 (1st Dep't 1995); Margo Properties, Inc. v. Nelson, 99 A.D.2d 1029, 473 N.Y.S.2d 822, 823 (1st Dep't 1984). 13 Unable to explain why its $1.7 million award should be considered a recovery on its contract claim in light of the jury's verdict, rather than an equitable adjustment, Baroda is reduced to quoting our earlier holding that directed the magistrate judge to grant[ ] the Bank's motion for judgment under its contract claim. Indu Craft, 47 F.3d at 498. Baroda mischaracterizes this court's holding, however, for in discussing the damage award, we stated: 14 We now consider the remaining issue, which is the denial of the Bank's motion for judgment as a matter of law on its $1.7 million contract claim after the jury returned a no cause for action against it. Under its line of credit Indu Craft owed the Bank approximately $1.7 million for which the Bank asserted a counterclaim. Plaintiff admits this amount was outstanding, but maintains the Bank's actions in driving it out of business prevented it from performing under the note and thereby excuse performance. 15 .... 16 While the parties have exerted much energy disputing the applicability of the prevention defense to the note, we are persuaded by a more compelling rationale urged by the Bank that judgment should have been granted. It is the purpose of damages under a breach of contract action to place the aggrieved party in the same economic position than it would have occupied absent the breach. Awarding Indu Craft the value of its business and at the same time relieving it from its obligation under the note actually place[d] Indu Craft in a better economic position than it would otherwise have occupied, a result the law disfavors. To avoid such a windfall and place Indu Craft in the position it would have been in but for the Bank's breach of contract, the debt under the note must be set off from the damages owed Indu Craft. 17 Id. at 497-98 (internal quotation and citations omitted). 18 It is plain that we did not disturb the jury's finding that Baroda's bad faith in reducing the credit line caused Indu Craft's inability to honor the promissory note. Rather, we allowed the setoff simply to avoid a windfall to Indu Craft. To that end, Baroda's reliance on Studiengesellschaft Kohle mbh v. Novamont Corp., 548 F.Supp. 234 (S.D.N.Y.1981), is unavailing, for in Novamont the district court found that the counterclaimant had a meritorious breach of contract claim. Id. at 235. 19 In sum, our direction to reduce Indu Craft's award by the amount of Baroda's counterclaim was based on equitable principles, and Baroda therefore does not have a right to prejudgment interest under New York C.P.L.R. § 5001(a). In addition, because Baroda is in no sense a prevailing party, the district court did not abuse its discretion in denying prejudgment interest. 20 Under a similar theory of recovery, Baroda also seeks an award of attorneys' fees under the loan agreement, which provides, [i]f an attorney is used to enforce or collect this note, the undersigned shall be obligated to pay all costs and expenses of collection, including reasonable attorneys' fees. Baroda again relies on its assertion that it is a prevailing party, an argument that we have already rejected. As the party in breach, Baroda is not entitled to its attorneys' fees. See Nestor v. McDowell, 81 N.Y.2d 410, 599 N.Y.S.2d 507, 510, 615 N.E.2d 991 (1993).