Interest on Distributive Awards

Every money judgment shall bear interest from the date of its entry. Every order directing the payment of money which has been docketed as a judgment shall bear interest from the date of such docketing.'

Unlike CPLR ' 5001, which confers upon the court discretion over whether to award prejudgment interest and to determine the rate, CPLR ' 5003 provides that every “money judgment shall bear interest from the date of its entry.” Therefore, pursuant to the explicit language of the statute,' interest on a money judgment is mandatory.

Inasmuch as the courts have relied upon CPLR ' 5003 as the basis for post-judgment interest on a distributive award, it would appear that the courts should be without the discretion to decline to impose interest on a distributive award paid out over time. Some courts have adopted this view. For example, in Aloi v. Simoni, 82 AD3d 683 (2nd Dept. 2011), the Appellate Division held that the Supreme Court “erred” (as opposed to “abused its discretion”) in failing to award interest on the wife's distributive award from the date of the decision until the entry of the judgment and, citing CPLR ' 5003, from the entry of the judgment to payment. This holding, which indicates that the trial court erred as a matter of law in failing to award interest, is consistent with the statutory language set forth above. See also Markel v. Markel, 197 AD2d 934 (4th Dept. 1993).

A Matter of Discretion

Other courts have viewed an award of post-judgment interest as a matter of discretion. In DeWitt v. Sheiness, 42 AD3d 776 (3rd Dept. 2007), the Appellate Division, Third Department, held that the trial court did not abuse its discretion in permitting the husband to pay a distributive award to the wife over a period of three years, without interest. The court found that the three-year interest-free pay out was a proper exercise of the trial court's discretion in view of the husband's lack of liquid assets and limited income. A similar conclusion was reached by the Appellate Division, Second Department, in Rosenberg v. Rosenberg, 126 AD2d 537 (2nd Dept. 1987), in which the court held that the trial court's failure to award interest on a distributive award was not an abuse of discretion, considering the amount of the distributive award ($150,000) and the fact that the husband's financial ability to pay interest on the award was questionable.

The cases above, which hold that an award of post-judgment interest is a matter of discretion, are inconsistent with the explicit language of CPLR ' 5003. However, unless and until the Court of Appeals takes up the issue, it will remain unsettled.

Rate of Interest

The rate of interest to be applied in matrimonial cases is governed by CPLR ' 5004, which provides that “[i]nterest shall be at the rate of nine percent per annum, except where otherwise provided by statute.” With respect to prejudgment interest, CPLR ' 5001(a) expressly authorizes the court to deviate from the legal rate of 9% in awarding prejudgment interest in actions which are equitable in nature. Consequently, there is no question that the court may award prejudgment interest at less than the statutory rate of 9%. See Litman v. Litman, 280 AD2d 520 (2nd Dept. 2001); Madonna v. Madonna, 265 AD2d 455 (2nd Dept. 1999); Selinger v. Selinger, 250 AD2d 752 (2nd Dept. 1998).

With respect to post-judgment interest, it would appear that interest at the rate of 9% is mandatory. That is because there is no statutory provision equivalent to CPLR ' 5001(a) (which pertains to prejudgment interest) that would permit a court to deviate from the statutory rate fixed by CPLR ' 5004 in awarding post-judgment interest. Consistent with the foregoing, in Verdrager v. Verdrager, 230 AD2d 786 (2nd Dept. 1996), the Appellate Division, Second Department, held that the trial court erred in ordering interest on the wife's distributive award to accrue at the prime rate rather than the statutory rate set forth in CPLR ' 5004. The appellate court stated that, unless otherwise provided by statute, interest on a judgment is to accrue at the statutory rate. It also noted that CPLR ' 5001(a) merely permits the discretionary award of interest on an equitable claim prior to the time of verdict, report or decision.

Notwithstanding the unequivocal language of CPLR ' 5004, some courts have deviated from the statutory rate of interest in granting post-judgment interest. For example, in Hamroff v. Hamroff, 35 AD3d 365 (2nd Dept. 2006), the Second Department, while citing CPLR ' 5004 and Madonna v. Madonna, supra (a case dealing with prejudgment interest), affirmed an award of post-judgment interest at the rate of 3%, finding that the rate of interest was a proper exercise of discretion. See also Powers v. Wilson, 56 AD3d 639 (2nd Dept. 2008) (interest at the rate of 6% per annum on a counsel fee award deemed a proper exercise of discretion). The cases that have awarded post-judgment interest at other than the statutory rate are contrary to the unequivocal language of CPLR ' 5004, which mandates that interest be set at the rate of 9% unless otherwise provided by statute.'

Conclusion

In light of the fact that an award of interest may have a substantial financial impact on the resolution of a contested matrimonial action, it is important for the matrimonial practitioner to have an understanding of the statutory bases for an award of interest, as well as the various cases, including the conflicting holdings set forth above, that have interpreted these statutes.'

Thomas A. Elliot, a member of this newsletter's Board of Editors, is a partner in the Garden City firm of Moran, Broderick & Elliot.

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Family law practitioners need to understand the statutes and case law applicable to the concept of interest on distributive awards, as these can have a profound impact on each party's financial health. Last month, we discussed when and how prejudgment interest is awarded in matrimonial actions. We now turn to post-judgment interest.

Post-Judgment Interest

The statutory basis often cited for an award of post-judgment interest on a distributive award which is to be paid out over time is found in CPLR 5003. See, e.g., Klein v. Klein , 296 AD2d 533 (2nd Dept. 2002). CPLR ' 5003 provides as follows:

Every money judgment shall bear interest from the date of its entry. Every order directing the payment of money which has been docketed as a judgment shall bear interest from the date of such docketing.'

Unlike CPLR ' 5001, which confers upon the court discretion over whether to award prejudgment interest and to determine the rate, CPLR ' 5003 provides that every “money judgment shall bear interest from the date of its entry.” Therefore, pursuant to the explicit language of the statute,' interest on a money judgment is mandatory.

Inasmuch as the courts have relied upon CPLR ' 5003 as the basis for post-judgment interest on a distributive award, it would appear that the courts should be without the discretion to decline to impose interest on a distributive award paid out over time. Some courts have adopted this view. For example, in Aloi v. Simoni , 82 AD3d 683 (2nd Dept. 2011), the Appellate Division held that the Supreme Court “erred” (as opposed to “abused its discretion”) in failing to award interest on the wife's distributive award from the date of the decision until the entry of the judgment and, citing CPLR ' 5003, from the entry of the judgment to payment. This holding, which indicates that the trial court erred as a matter of law in failing to award interest, is consistent with the statutory language set forth above. S ee also Markel v. Markel , 197 AD2d 934 (4th Dept. 1993).

A Matter of Discretion

Other courts have viewed an award of post-judgment interest as a matter of discretion. In DeWitt v. Sheiness , 42 AD3d 776 (3rd Dept. 2007), the Appellate Division, Third Department, held that the trial court did not abuse its discretion in permitting the husband to pay a distributive award to the wife over a period of three years, without interest. The court found that the three-year interest-free pay out was a proper exercise of the trial court's discretion in view of the husband's lack of liquid assets and limited income. A similar conclusion was reached by the Appellate Division, Second Department, in Rosenberg v. Rosenberg , 126 AD2d 537 (2nd Dept. 1987), in which the court held that the trial court's failure to award interest on a distributive award was not an abuse of discretion, considering the amount of the distributive award ($150,000) and the fact that the husband's financial ability to pay interest on the award was questionable.

The cases above, which hold that an award of post-judgment interest is a matter of discretion, are inconsistent with the explicit language of CPLR ' 5003. However, unless and until the Court of Appeals takes up the issue, it will remain unsettled.

Rate of Interest

The rate of interest to be applied in matrimonial cases is governed by CPLR ' 5004, which provides that “[i]nterest shall be at the rate of nine percent per annum, except where otherwise provided by statute.” With respect to prejudgment interest, CPLR ' 5001(a) expressly authorizes the court to deviate from the legal rate of 9% in awarding prejudgment interest in actions which are equitable in nature. Consequently, there is no question that the court may award prejudgment interest at less than the statutory rate of 9%. S ee Litman v. Litman , 280 AD2d 520 (2nd Dept. 2001); Madonna v. Madonna , 265 AD2d 455 (2nd Dept. 1999); Selinger v. Selinger , 250 AD2d 752 (2nd Dept. 1998).

With respect to post-judgment interest, it would appear that interest at the rate of 9% is mandatory. That is because there is no statutory provision equivalent to CPLR ' 5001(a) (which pertains to prejudgment interest) that would permit a court to deviate from the statutory rate fixed by CPLR ' 5004 in awarding post-judgment interest. Consistent with the foregoing, in Verdrager v. Verdrager , 230 AD2d 786 (2nd Dept. 1996), the Appellate Division, Second Department, held that the trial court erred in ordering interest on the wife's distributive award to accrue at the prime rate rather than the statutory rate set forth in CPLR ' 5004. The appellate court stated that, unless otherwise provided by statute, interest on a judgment is to accrue at the statutory rate. It also noted that CPLR ' 5001(a) merely permits the discretionary award of interest on an equitable claim prior to the time of verdict, report or decision.

Notwithstanding the unequivocal language of CPLR ' 5004, some courts have deviated from the statutory rate of interest in granting post-judgment interest. For example, in Hamroff v. Hamroff , 35 AD3d 365 (2nd Dept. 2006), the Second Department, while citing CPLR ' 5004 and Madonna v. Madonna, supra (a case dealing with prejudgment interest), affirmed an award of post-judgment interest at the rate of 3%, finding that the rate of interest was a proper exercise of discretion. See also Powers v. Wilson , 56 AD3d 639 (2nd Dept. 2008) (interest at the rate of 6% per annum on a counsel fee award deemed a proper exercise of discretion). The cases that have awarded post-judgment interest at other than the statutory rate are contrary to the unequivocal language of CPLR ' 5004, which mandates that interest be set at the rate of 9% unless otherwise provided by statute.'

Conclusion

In light of the fact that an award of interest may have a substantial financial impact on the resolution of a contested matrimonial action, it is important for the matrimonial practitioner to have an understanding of the statutory bases for an award of interest, as well as the various cases, including the conflicting holdings set forth above, that have interpreted these statutes.'

Thomas A. Elliot, a member of this newsletter's Board of Editors, is a partner in the Garden City firm of Moran, Broderick & Elliot.

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