Court Opinion

ID: 5860935
Source: CourtListenerOpinion
Date Created: 2022-01-13 01:18:33.308328+00
Date Added: 2024-06-11T08:44:25.760515
License: Public Domain

Kupferman, J. P., dissents in part in a memorandum as follows:
I dissent only with respect to the dismissal by the majority of plaintiff-respondent’s contention that the statutory interest rate of 3% per year* is unconstitutional. I would hold that the application of the 3% annual rate, under the circumstances of this case, constitutes a deprivation of property without the requisite “judicially acceptable, fair return for the deprivation of the use of that property or the money equivalent of that use” (see Matter of County of Nassau [Eveandra Enterprises], 42 NY2d 849, 850-851). This appeal is the latest round in protracted litigation between the City of New York and a fuel oil distributor over payment for certain fuel oil deliveries made in 1979 and 1980. The plaintiff distributor has obtained a money judgment in the principal amount of $367,837.33 representing the difference between the market price of the fuel oil delivered and the price used by the city in making payment for the deliveries, which price was derived from an alleged contract that has been judicially declared nonexistent. (A.R. Fuels v City of New York, 72 AD2d 517, affd 49 NY2d 749.) It became clear at an early stage of this litigation that the city’s position with respect to the formation of a contract was unmeritorious. Yet the city persisted in contesting the balance due, all the while retaining the amount owed plaintiff at a claimed annual interest rate of 3%. (See A.R. Fuels v City of New York, 83 AD2d 510 [Kupferman, J. P., dissenting]; cf. Matter of South Bronx Neighborhood Dev. Plan, 110 Misc 2d 751.) A rate of interest on accrued claims owed by the city that is low in comparison to the city’s usual borrowing rate is a temptation to use the supplier as a convenient, if involuntary, banker by the simple practice of deferring the payment of debts owed by the city. (See Meilink v Unemployment Comm., 314 US 564, 567.) In the words of Cardozo, “While the dispute as to value was going on, the defendant had the benefit of the money, and the plaintiff was without it. Interest must be added if we are to make the plaintiff whole”. (See Prager v New Jersey Fid. & Plate Glass Ins. Co. of Newark, 245 NY 1, 5-6.) Under the circumstances, the 3% annual interest rate not only fails to make the plaintiff whole, it operates as a deprivation of property without just compensation, and it is confiscatory.

 The applicable section of the General Municipal Law, in effect at the relevant time, provided as pertinent: “§ 3-a. Rate of interest on judgments and accrued claims against municipal corporations. 1. Except as provided in subdivisions two [condemnation awards] and four [municipal securities] of this section, the rate of interest to be paid by a municipal corporation upon any judgment or accrued claim against the municipal corporation shall not exceed three per centum per annum”. It is noteworthy that the Legislature has since amended the section raising the statutory maximum from 3 to 9%. (L 1982, ch 681.)