BUCKLEY GNH v. SHERIDAN (2024)

Presently pending before the Court is the motion of defendants Maura Sheridan, as Executor of the Estate of John T. Driscoll, and Cathleen Driscoll (defendants) to vacate the judgment entered on April 29, 2024, following this Court's decision after a bench trial on the ground that the judgment improperly includes pre-judgment interest. Plaintiff Gerald Buckley d/b/a GNJ Home Improvement (plaintiff) opposes. For the reasons that follow, defendants' motion is denied.

Background

As relevant to the present motion, plaintiff commenced his action in 2013 to recover damages for restoration work he performed to defendants' vacation home in Hensonville, New York, in 2011 following a fire.¹ After the Court (Mott, J.) decided defendants' motion for summary judgment, the matter proceeded to a bench trial on plaintiff's quantum meruit claims for his restoration work, as well as defendants' counterclaims. Trial commenced on December 18, 2023, and concluded on January 17, 2024. Thereafter, on April 24, 2024, the Court issued a written decision in which it awarded plaintiff $49,310.02 in damages on his quantum meruit claim and rejected defendants' counterclaims. The Court did not grant or otherwise address plaintiff's request for prejudgment interest in its post-trial decision. On April 29, 2024, plaintiff filed a judgment with the Greene County Clerk for a total sum of $104,694.60, consisting of $49,310.02 in damages awarded in the Court's decision after trial; $54,349.58 in prejudgment interest from “the date of the breach of contract, January 31, 2012”; and costs of $1,035.00 (NYSCEF Doc No. 6).

On May 13, 2024, defendants moved by order to show cause, supported by a memorandum of law and attorney's affirmation with exhibits, to vacate the April 29, 2024, judgment and/or stay any efforts to enforce it on the ground that it improperly included prejudgment interest (see NYSCEF Doc Nos. 3-10). Plaintiff submitted a letter brief in support of his entitlement to prejudgment interest on May 14, 2024 (NYSCEF Doc No. 11). After considering the parties' submissions, the Court executed the order to show cause on May 15, 2024, and set the deadline for submissions in opposition as May 24, 2024 (see NYSCEF Doc No. 12). Plaintiff submitted a memorandum of law in opposition (see NYSCEF Doc No. 18), and defendants submitted a memorandum of law in reply (see NYSCEF Doc No. 19).

Defendants contend that the April 29, 2024 judgment must be vacated on the ground that inclusion of prejudgment interest was improper because the Court did not award plaintiff such interest. Defendants acknowledge that plaintiff's post-trial memorandum or law and post-trial response requested prejudgment interest. But, relying on Precision Foundations v. Ives, 4 A.D.3d 589, 772 N.Y.S.2d 116 (3d Dept. 2004), defendants contend that pre-judgment interest on a claim of quantum meruit is within the discretion of the Court and, under the circumstances here, the Court properly denied plaintiff's request for 12 years of prejudgment interest. Plaintiff contends that prejudgment interest on his quantum meruit claims is mandatory under CPLR 5001 (a). Citing Ogletree, Deakins, Nash, Smoak & Stewart P.C. v. Albany Steel Inc., 243 A.D.2d 877, 663 N.Y.S.2d 313 (3d Dept. 1997), in addition to authority outside the Third Department, plaintiff argues that Ives is an outlier case that this Court should decline to follow.

Analysis

CPLR 5001 (a) provides, in relevant part, that “[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract, ․ 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]). The courts of New York are in disarray on the issue of whether prejudgment interest is mandatory, as in breach of contract actions, or is discretionary, as in most equitable matters.²

 The Third Department

This Court is bound under the doctrine of stare decisis by the case law of the Third Department, unless the Court of Appeals has spoken, even where there are conflicting decisions from the other Departments. But the Third Department itself has conflicting decisions on the issue of mandatory versus discretionary prejudgment interest in quantum meruit cases.

The Third Department's most recent decision squarely deciding the issue is Precision Foundation v. Ives, decided in 2004. Like this action, Ives involved a quantum meruit claim for money damages for residential construction work performed by the plaintiff for the defendant (see Ives, 4 A.D.3d at 591, 772 N.Y.S.2d 116). The Third Department affirmed the trial court's decision, following a nonjury trial, to award damages to the plaintiff on its cause of action for quantum meruit, but reversed so much of the award as included prejudgment interest (see id. at 592, 772 N.Y.S.2d 116). Citing CPLR 5001 (a), the Court held that awards of prejudgment interest “are discretionary for a quantum meruit claim” (id.). And observing that the plaintiff waited nearly four years after rendering its services before bringing its action against the defendant, the Third Department concluded that, “[u]nder the particular circumstances herein, [it] do[es] not find sufficient basis for a discretionary award of pre[judgment] interest on plaintiff's quantum meruit claim” (id.). The Court neither cited any authority, nor provided any rationale. Nor did it overrule, nor even reference, the Third Department's prior decision in Ogletree, which held to the contrary.

In Ogletree—a decision rendered seven years prior to Ives—the Third Department “reject[ed the] defendant's categorization that [the] plaintiff's [quantum meruit] claim [wa]s equitable and, therefore, any award of interest was discretionary” under CPLR 5001 (a) (Ogletree, 243 A.D.2d at 879, 663 N.Y.S.2d 313). The Court relied on (Hudson View II Assocs. v. Gooden, 222 A.D.2d 163, 644 N.Y.S.2d 512 [1st Dept. 1996] [holding quantum meruit actions seeking damages are quasi-contract actions subject to jury trials]). The Court in Ogletree concluded that prejudgment interest was mandatory under CPLR 5001 (a) because the “[p]laintiff's quantum meruit action is essentially an action at law, inasmuch as it seeks money damages in the nature of a breach of contract, ‘notwithstanding that the rationale underlying such causes of action is fairness and equitable principles in a general rather than legal, sense’ ” (Ogletree, 243 A.D.2d at 879, 663 N.Y.S.2d 313, quoting Gooden, 222 A.D.2d at 168, 644 N.Y.S.2d 512).

More recently, in Matter of David Frueh Contr., LLC [BCI Const., Inc.], 129 A.D.3d 1285, 11 N.Y.S.3d 724 (3d Dept. 2015), the Third Department noted the conflict between Ives and Ogletree. But it had no occasion to resolve the issue of mandatory versus discretionary prejudgment interest under CPLR 5001 (a). In that case, the interest dispute was governed by CPLR 5002, as it pertained to interest from the date of an arbitration award to the date of entry of the judgment confirming the award (see 129 A.D.3d at 1287, 11 N.Y.S.3d 724).

While the Third Department's decision in Ives has recency weighing in defendants' favor, Ives did not address or overrule Ogletree, or otherwise set forth a rationale for its holding. Ogletree, on the other hand, provided rationale for its holding. Under these circumstances, this Court does not consider itself bound by either Third Department precedent, and will look to authority and reasoning outside the Third Department's jurisdiction to determine the weight of authority.

 The Sister Departments

The Fourth Department has treated prejudgment interest on quantum meruit claims as discretionary under CPLR 5001 (a). In Crane-Hogan Structural Sys., Inc. v. State, 88 A.D.3d 1258, 930 N.Y.S.2d 713 (4th Dept. 2011), the Fourth Department, citing to Ives, held that an award of prejudgment interest was a matter within the “discretion” of the trial court (88 A.D.3d at 1260, 930 N.Y.S.2d 713). The Fourth Department reached that same result in a case three years prior, Home Insulation & Supply, Inc. v. Buchheit, 59 A.D.3d 1078, 872 N.Y.S.2d 808 (4th Dept. 2009), without relying on Ives. In Buchheit, the Fourth Department cited the Second Department's decision Bank of New York v. Spiro, 267 A.D.2d 339, 700 N.Y.S.2d 207 (2d Dept. 1999), to hold that the “plaintiff [wa]s entitled to a discretionary award of preverdict interest” on its quantum meruit cause of action (see Buchheit, 59 A.D.3d at 1078, 872 N.Y.S.2d 808, citing Spiro, 267 A.D.2d 339, 700 N.Y.S.2d 207). In Spiro, citing CPLR 5001 (a), the Second Department had reasoned that “[i]n an action of an equitable nature, an award of interest is within the court's discretion” and “under the circumstances of this case, we decline to award interest” Spiro, 267 A.D.2d at 340, 700 N.Y.S.2d 207.

But in TY Elec. Corp. v. Delmonte, 101 A.D.3d 1626, 1626, 956 N.Y.S.2d 727 [4th Dept. 2012], the Fourth Department held that the plaintiff's claim for money damages alone based on a theory of quantum meruit was legal, rather than equitable, in nature (see 101 A.D.3d at 1626, 956 N.Y.S.2d 727, citing Gooden). But the Court applied such reasoning to determine whether the Rochester City Court had jurisdiction over the plaintiff's quantum meruit claim, which it concluded it did (see id.). And though the Fourth Department affirmed the entirety of the Monroe County Court's affirmance of the City Court's award, which included statutory interest on the plaintiff's quantum meruit claim, the Fourth Department did not specifically address the issue of prejudgment interest.

The First and Second Departments have held that prejudgment interest is mandatory under CPLR 5001 (a) on quantum meruit claims where the relief sought is money damages on the ground that such claims are legal rather than equitable in nature. In Leroy Callender, P.C. v. Fieldman, 252 A.D.2d 468, 676 N.Y.S.2d 152 (1st Dept. 1998), the First Department held that plaintiff established its entitlement to prejudgment interest on its quantum merit verdict (see 252 A.D.2d at 469, 676 N.Y.S.2d 152). And in Tesser v. Allboro Equip. Co., 73 A.D.3d 1023, 904 N.Y.S.2d 701 (2d Dept. 2010), and Brent v. Keesler, 32 A.D.2d 804, 302 N.Y.S.2d 349 (2d Dept. 1969), the Second Department has, articulating more robust rationale, held that prejudgment interest is mandatory in quantum merit cases seeking damages (see Tesser, 73 A.D.3d at 1027-1028, 904 N.Y.S.2d 701; Brent, 32 A.D.2d at 805, 302 N.Y.S.2d 349).

The Second Department's rationale finds its footing in former Civil Practice Act § 480, CPLR 5001 (a)'s predecessor. Tesser and Brent relied on Neimark v. Martin, 7 A.D.2d 934, 183 N.Y.S.2d 812 (2d Dept. 1959), which, under the former Civil Practice Act § 480, held prejudgment interest mandatory based on the language of Civil Practice Act § 480. The former provision provided for mandatory prejudgment interest “upon a cause of action for the enforcement of or based upon breach of performance of a contract, express or implied” (former Civ Prac Act § 480). Recodification at CPLR 5001(a) intended no substantive change. In replacing former Civil Practice Act § 480 with CPLR § 5001, the Third Report to the Legislature explained that “[t]he provision for contract actions [contained in CPLR 5001 (a)] is a simplification of the second sentence of § 480 of the civil practice act with no change in meaning intended” (Legislative Studies and Reports, CPLR 5001 [emphasis added]).

Inasmuch as a claim of quantum meruit, as a quasi-contractual claim, may be considered a species of implied contract (see Villnave Constr. Services, Inc. v. Crossgates Mall Gen. Co. Newco, LLC, 201 A.D.3d 1183, 1184-1185, 161 N.Y.S.3d 480 [3d Dept. 2022]; Kapral's Tire Serv., Inc. v. Aztek Tread Corp., 124 A.D.2d 1011, 1012, 508 N.Y.S.2d 777 [4th Dept. 1986]), the weight of current state court authority holds that quantum meruit claims for damages are governed by the mandatory interest provision for contract claims under CPLR 5001 (a).

One final observation about New York caselaw. The official practice commentary to CPLR 5001 cites Ives and Crane-Hogan Structural Sys. to reach the conclusion that interest on a quantum meruit claim is discretionary under CPLR 5001 (a) (see Hon. Mark C. Dillon, Prac Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5001:6). But in the 2024 updated pocket part, the commentary notes that the mandatory prejudgment interest rule applicable to breach of contracts “has been applied where the plaintiff's recovery is based upon quasi-contract” (Hon. Mark C. Dillon, Prac Commentaries, McKinney's Cons Laws of NY, Book 7B, CPLR C5001:2, citing Chicago Tit. Ins. Co. v. Crossroads Abstract Corp., 75 Misc.3d 1223 [A], 2022 N.Y. Slip Op. 50647 [U], 2022 WL 2797786 [Sup. Ct., NY County 2022]).

 The Federal Courts Applying New York Law

In (Agence Fr. Presse v. Morel, 645 Fed. Appx. 86 [2d Cir. 2016] [unpublished]), the Second Circuit, citing to Tesser, Ogletree, and Gooden, held that “New York case law holds that prejudgment interest is mandatory with respect to a quantum meruit[ ]cause of action” (645 Fed. Appx. at 88). In (Stillman v. InService Am., Inc., 455 Fed.Appx. 48, 52 [2d Cir. 2012] [also unpublished]), the Second Circuit similarly relied on Tesser, Ogletree, and Gooden, as well as on its earlier decision in United States Fire Ins. Co. v. Federal Ins. Co., 858 F.2d 882 (2d Cir. 1988), to conclude that prejudgment interest is mandatory under CPLR 5001 (a) on quantum meruit claims (see Stillman, 455 Fed.Appx. at 52). In United States Fire Ins. Co. v. Federal Ins. Co., the Second Circuit reached that conclusion in a published decision after fully analyzing both the doctrinal nature of quantum meruit as quasi-contract and the history of CPLR 5001 (a) (see United States Fire Ins. Co. v. Federal Ins. Co., 858 F.2d at 888-889). The Stillman Court acknowledged that the Third Department in Ives held to the contrary, but concluded that “the New York Court of Appeals would likely agree with the reasoned analysis set forth in cases holding that pre-judgment interest on quantum meruit claims is mandatory under [CPLR] 5001 (a)” (Stillman, 455 Fed.Appx. 48 at 51).

 Conclusion

The Appellate Division, Third Department has issued conflicting decisions on the issue whether prejudgment interest is mandatory in quantum meruit claims seeking damages. The weight of persuasive authority leads this Court to conclude that under CPLR 5001 (a), prejudgment interest is mandatory in quantum merit claims seeking damages.

Accordingly, it is hereby

ORDERED that defendants' motion to vacate the award of prejudgment interest (Motion #3) is denied.

This constitutes the Decision and Order of the Court, the original of which is being uploaded to NYSCEF for electronic entry by the Albany County Clerk. Upon such entry, counsel for plaintiff shall promptly serve notice of entry on all other parties entitled to such notice.

FOOTNOTES

1.   A complete recitation of the facts and procedural history are contained in the Court's April 24, 2024 decision.

2.   Plaintiff argues as a threshold matter that defendants waived any challenge to plaintiff's request for pre-judgment interest by failing to raise their arguments in opposition in their post-trial briefs. Because the issue whether prejudgment interest is mandatory under CPLR 5001 (a) is purely a legal issue, the Court has addressed the merits.

Denise A. Hartman, J.