§ 5001.Interest to verdict, report or decision.

(See also Advisory Committee notes preceding this section, under subheading “Interest”).

Subd. (a) of this section establishes a single rule for the awarding of interest in all contract and property damage cases. The provision for contract actions is a simplification of the second sentence of former § 480, with no change in meaning intended. The provision for property damage actions is new, and is adopted from a 1950 proposal of the Law Revision Commission, NY Law Rev Comm'n Rep 95, 97 (1950). It abolishes the distinction between property damage actions in which interest is granted as of right and those in which it is granted in the discretion of the trier of fact. The distinction is commonly stated as one between negligence and nonnegligence cases, with interest a matter of right in the latter type of action only. The Court of Appeals has sharply criticized the former law, terming it “manifestly unsound, because interest is essential to complete indemnity in both classes of cases.” Flamm v Noble, 296 NY 262, 268, 72 NE2d 886, 888 (1947). See also Wilson v City of Troy, 135 NY 96, 104–105, 32 NE 44, 46 (1892); Committee on State Legislation, Bulletin No. 3, 100–101 (Association of the Bar of the City of New York 1957); Committee on State Legislation, Bulletin No. 6, 299–301 (Association of the Bar of the City of New York 1956); Committee on State Legislation, Bulletin No. 1, 21–22 (Association of the Bar of the City of New York 1955); Committee on State Legislation, Bulletin No. 2, 103–104 (Association of the Bar of the City of New York 1954); Committee on State Legislation, Bulletin No. 1, 15–16 (Association of the Bar of the City of New York 1953); Committee on State Legislation, Bulletin No. 2, 53–57 (Association of the Bar of the City of New York 1950). In addition to its failure to assure complete indemnification to an injured party, the distinction between “as of right” and “discretion” cases has been criticized as an uncertain one; there is doubt, for example, about cases of trespass to real property. See Law Rev Comm'n Rep 95, 124–25 (1950). The artificiality of the former law was demonstrated by the fact that interest might apparently have been recovered as of right in certain cases of negligent injury to property because the action could have been considered one in contract under CPA § 480. See Flamm v Noble, supra at 267, 72 NE2d at 887; A. L. Russell, Inc. v City of New York, 138 NYS2d 455, 457–58 (Sup Ct 1954); Squibb & Sons Inter-American Corp. v Springmeier Shipping Co. 194 Misc 813, 814, 87 NYS2d 876, 878 (Sup Ct 1949). Finally, there was serious dispute about the former state of the law. Three decisions have relied upon the dictum in Flamm v Noble to hold interest recoverable as of right in cases of negligent injury to property rights. Harmon & Regalia, Inc. v City of New York, 286 App Div 825, 141 NYS2d 877 (1st Dep't 1955); A. L. Russell v City of New York, 138 NYS2d 455 (Sup Ct 1954); Barry v Doctor's Hospital, Inc. 137 NY LJ no. 91, p 7, col 6 (NYC Ct 1957). Concurrently, other decisions have held interest in such cases to be discretionary only, usually citing the same Flamm decision as authority. Keilson v City of New York, 126 NYS2d 606, 607 (NYC Munic Ct 1953); Hamburger v Met. Dist. 135 NY LJ no. 70, p 10, col 4 (NYC Ct 1956); Cocchiarella v Hi-Hat Distributors, Inc. 126 NY LJ p 1427, col 3 (NYC Ct 1951). See also Stein Hall & Co. v Sealand Dock and Terminal Corp. 2 M2d 727, 733, 149 NYS2d 537, 543 (Sup Ct 1955). A compounding of this confusion results from a 1955 Second Circuit Court of Appeals decision, where Judge Learned Hand, in a dictum reviewing the effect of the Flamm case, stated: “[A]nd, although, as the plaintiff says, that was only a dictum, the lower courts of that state have taken it as authoritative, and so must we.” Newburgh Land & Dock Co. v The Texas Co. 227 F2d 732, 735 (2d Cir 1955). This subdivision is designed to bring a measure of certainty to this area. Interest on damages for personal injuries involves difficult policy considerations because it often includes compensation for future loss and damages of a speculative nature. In view of the Temporary Commission on the Courts' conclusion not to recommend legislation allowing interest in personal injury cases, the advisory committee has not considered changing the former status of the law. See NY Temp Comm'n on the Courts Rep IV 48, Leg Doc 6(c) (1957); see also Institute of Judicial Administration, Recovery of Interest as Damages in Personal Injury cases 15–18 (March 4, 1957); but cf: Committee on State Legislation, Bulletin No. 3, 169–71 (Association of the Bar of the City of New York 1959). Where a suit combines causes of action for property damage and personal injury, the plaintiff should request separate verdicts on each cause of action. Otherwise, there will be no basis upon which to compute interest for any property damage award, and the right to such interest will be waived. See Helman v Markoff, 255 App Div 991, 8 NYS2d 448 (2d Dept 1938), affd 280 NY 641, 20 NE2d 1012 (1939). This subd. contemplates the award of interest on compensatory damages only. Since punitive damages, which may be awarded in certain tort actions, are intended only to impose punishment upon a defendant, interest on such damages for the period before verdict is unnecessary to assure full compensation to an injured party. See 2 Clark, New York Law of Damages 83 et seq. (1925). Once the punitive damages have been awarded, however, they become a debt due the plaintiff, and interest will be earned under CPLR §§ 5002 and 5003. The committee has adopted a proposal to make the award of interest in equity actions discretionary. See Law Rev Comm'n Rep 101, 114–16 (1950). Such discretion was formerly exercised in tort actions arising in equity (e.g., Ellis v Kelsey, 241 NY 374, 379–80, 150 NE 148 (1925); Frey Realty Co. v. Ten West 46th Street Corp., 1 Misc. 2d 371, 145 N.Y.S.2d 670 (Sup Ct 1955)), whereas in actions based upon a contract, the second sentence of CPA § 480 was held to have made the award of interest at the legal rate mandatory. See Frey Realty Co. v Ten West 46th Street Corp., supra at 372, 145 NYS2d at 672.

Subd. (b). Reference to the date from which interest is to be measured is new. The date the cause of action accrued is the time normally used in computing interest. See, e.g., Greater New York Coal & Oil Corp. v Philadelphia & Reading Coal & Iron Co. 278 NY 270, 272, 15 NE2d 801, 802 (1938); Aronowsky v Goldberger-Raabin Co. 250 App Div 731, 293 NY Supp 527 (2d Dept 1937); E. R. Squibb & Sons Inter-American Corp. v Springmeier Shipping Co. 194 Misc 813, 815, 87 NYS2d 876, 878 (Sup Ct 1949); Freedman v Hart & Early Co. 162 Misc 487, 488, 293 NY Supp 525, 526–27 (NYC Ct 1935). Where this date is a matter of conjecture, the courts normally award interest from the time of commencement of the action. Aronowsky v Goldberger-Raabin Co. supra; Leehoke Corp. v Plastoid Corp. 193 Misc 208, 83 NYS2d 672 (Sup Ct 1948), affd without opinion, 276 App Div 903, 94 NYS2d 903 (1st Dept 1950); Freedman v Hart & Early Co. supra; Sacks-Sons Luggage Corp. v Louis DeJonge & Co. 135 NY LJ no. 85, p 11, col 6 (Sup Ct 1956). Subd. (b) of this section encompasses these rules, but also permits the awarding of interest from any earlier date at which it can be ascertained that the cause of action had already accrued. This provision is based upon the method of computing interest employed by the court in Mathis v Matthews, 39 NYS2d 242, 244 (Sup Ct 1943). It is intended to insure fuller indemnification of an injured party wherever possible. In the Mathis case, plaintiff secured damages for breach of a contract to construct a building resulting from a failure to do so in a good, workmanlike manner. Since the date of breach could not be determined, the court awarded interest from the day after completion of the work, stating that the breach must have occurred at least by that time. This subdivision offers a method for arriving at a fair award of interest in cases involving items of damage arising after the accrual of the cause of action. It avoids both the under-indemnification of a successful claimant by an award which computes interest from the time of commencement of suit, as well as the granting of a “windfall” to such a party by an award of interest from the first accrual of a cause of action. Where there are various items of damage, alternative methods of computation are provided: each item may be separately computed or a constructive single date utilized.

Under former practice interest for the period prior to verdict, report or decision might in the first instance have been awarded by the trier of fact. Where a jury failed to award interest in a case in which it accrued as of right, the court might have done so. Mayaguez Drug Co. v Globe & Rutgers Fire Ins. Co. 260 NY 356, 183 NE 523 (1932). The failure of the civil practice act to place the responsibility for fixing interest solely upon either the trier of fact or the court frequently left unsettled whether a jury verdict included interest; the courts would add interest to a verdict only when it was clear that the verdict did not already include it. See, e.g., Mayaguez Drug Co. v Globe & Rutgers Fire Ins. Co. supra; First Int’l. Pictures, Inc. v F. C. Pictures Corp. 262 App Div 21, 22, 27 NYS2d 816, 818 (4th Dept 1941); Gottesman v Havana Importing Co. 72 NYS2d 426, 428 (Sup Ct 1947); McQuade v Monroe, 135 NY LJ no. 97, p 10, col 4 (NYC Ct 1956). The cases have sought to minimize this problem by creating a rebuttable presumption that interest was not included in a verdict where no instruction was given to do so. Mathis v Matthews, 39 NYS2d 242 (Sup Ct 1943); Sacks-Sons Luggage Corp. v Louis DeJonge & Co. 135 NY LJ no. 85, p 11, col 6 (Sup Ct 1956); Richard Silk Co. v Bernstein, 130 NY LJ 1159, col 2 (Sup Ct 1953). Normal procedure was to instruct a jury that interest must be added to damages awarded in certain types of actions. At least one trial judge, however, instructed juries not to consider the question of interest at all. Kaufman v Farah, 131 NY LJ no. 122, p. 6, col 7 (Sup Ct 1954); Milco Garage Corp. v Wendy Garage Inc. 131 NY LJ no. 62, p 8, col 7 (Sup Ct 1954). In order to avoid later confusion as to whether a verdict contained interest, the jury was advised that “the law will take care of that subject [interest] by awarding interest on the recovery from the time plaintiff was entitled to the money.” Milco Garage Corp. v Wendy Garage, Inc. supra.

Subd. (c) of this section by placing the responsibility for adding interest to a verdict solely upon the clerk of the court, seeks to overcome the above difficulties. The jury is required only to fix a date. Should the plaintiff fail to request an instruction that the date from which interest is to accrue be specified in the verdict, he will be deemed to have waived his right to a jury trial on this question and the court will fix the date. Where the demand for the addition of interest comes at a time before the jury has been discharged, however, the interest date question should be submitted to it. A motion to add interest to an award under this subdivision may be made at any time prior to execution of judgment in the action. See McLaughlin v Brinckerhoff, 222 App Div 458, 226 NY Supp 623 (1st Dept 1928), distinguishing Urband v Lubell, 245 NY 156, 156 NE 649 (1927). A referee may correct his omission to specify the date from which interest is to be computed, since the new CPLR permits post-trial motions addressed to him. See notes to CPLR § 4301.

Add, L 1962, ch 308; amd, L 1992, ch 55, § 71, eff April 10, 1992.