Busik v. Levine

• Citation: 307 A.2d 571,63 N.J. 351
• Parties: John R. BUSIK, Plaintiff-Respondent, v. Joseph M. LEVINE, Defendant-Appellant. Gilma GIRALDO (Busik) Plaintiff-Respondent, v. Joseph M. LEVINE, Defendant-Appellant. Donald F. FOLEY and Lillian Foley, husband and wife, Plaintiffs-Respondents, v. UNITED ENGINEERS & CONSTRUCTORS, INC. and Public Service Electric and Gas Co., Defendants-Appellants.
• Decision Date: 06 July 1973
• Court: United States State Supreme Court (New Jersey)

Page 351

63 N.J. 351

307 A.2d 571

John R. BUSIK, Plaintiff-Respondent, v. Joseph M. LEVINE, Defendant-Appellant.

Gilma GIRALDO (Busik) Plaintiff-Respondent, v. Joseph M. LEVINE, Defendant-Appellant.

Donald F. FOLEY and Lillian Foley, husband and wife, Plaintiffs-Respondents, v. UNITED ENGINEERS & CONSTRUCTORS, INC. and Public Service

Electric and Gas Co., Defendants-Appellants.

Supreme Court of New Jersey.

Argued Feb. 20, 1973.

Decided July 6, 1973.

Richard J. Carroll, Jersey City, for appellant Levine (Louis J. Pantages, Newark, of counsel; Gleeson, Hansen & Pantages, Newark, attorneys).

Donald F. Stevens, Jersey City, for appellant United Engineers and Constructors, Inc. (Beggans & Stevens, Jersey City, attorneys).

Dino D. Bliablias, Newark, for intervenor National Association of Independent Insurers (A--92) (Kenneth J. McGuire, Newark, on the brief; Stein, Bliablias & Goldman, Newark, attorneys).

Robert S. Johnson, Middlesex, for respondent Giraldo (Busik) Johnson & Johnson, Middesex, attorneys; Samuel Chiaravalli, Bound Brook, for respondent John R. Busik).

Patrick D. Conaghan, Bayonne, for respondents Foley (Donald D. Campbell, Bayonne, on the brief).

The opinion of the Court was delivered by

WEINTRAUB, C.J.

These cases involve the validity of R. 4:42--11(b), adopted on December 21, 1971 and effective on January 31, 1972, which authorizes prejudgment interest in tort actions. The accidents here involved occurred before the rule was adopted, but the cases came to trial after the effective date of the rule. Interest as provided in the rule was included in the judgments. We certified defendants' appeals before they were argued in the Appellate Division.

The principal charge is that prejudgment interest is a matter of 'substantive' law and as such beyond the constitutional grant to the Supreme Court of the power to 'make rules governing * * * the practice and procedure' in all courts, Art. VI, § 2, 3. Hence, it is argued, we trespassed upon the legislative domain in adopting the rule, in breach of the principle of separation of powers embodied in Art III, § 1, of the Constitution. The argument is supplemented with the proposition that defendants were thereby deprived of the opportunity to be heard required by due process of law.

The rule was upheld in Riley v. Savary, 120 N.J.Super. 331, 293 A.2d 744 (Law Div.1972), but that case did not come to us for review.

I

Although it is said with respect to interest on claims that 'in this country interest is generally of statutory origin,' Consolidated Police and Firemen's Pension Fund Commission v. City of Passaic, 23 N.J. 645, 653, 130 A.2d 377, 382 (1957), the contrary is true in our State. The Legislature has dealt with usury; that is, it has fixed the upper limit of the interest for which an ordinary loan may be made, see N.J.S.A. 31:1--1, but there is no statute dealing with interest upon other obligations or claims or with interest upon judgments. The controlling rules have always been and remain judge-made. See Jersey City v. O'Callaghan, 41 N.J.L. 349, 353--354 (E. & A.1879); Verree v. Hughes, 11 N.J.L. 91, 92 (Sup.Ct.1829); Erie Railway Co. v. Ackerson, 33 N.J.L. 33, 36 (Sup.Ct.1868); Simon v. New Jersey Asphalt and Paving Co., 123 N.J.L. 232, 234, 8 A.2d 256 (Sup.Ct.1939); Cohrs v. Igoe Brothers, Inc., 71 N.J.Super. 435, 448, 177 A.2d 284 (App.Div.1962).

And, briefly, these are the rules which the courts of this State developed: As to interest upon judgments, the practice permitted collection at the 'legal' rate, that is, at the rate permitted to be contracted under the usury statute to which we have referred. With respect to prejudgment interest, our courts of law assessed interest, if the demand was liquidated, at the same 'legal' rate on the assumption that the creditor could have earned such interest if his obligor had paid him what was due, see Jersey City v. O'Callaghan, Supra, 41 N.J.L. at 354, but declined to allow interest on claims that were unliquidated. The justice of that limitation has been questioned, as we will develop in a moment. Our courts of equity allowed or withheld interest or fixed the rate as justice dictated. See Small v. Schuncke, 42 N.J. 407, 415--416, 201 A.2d 56 (1964); Agnew Co. v. Paterson Board of Education, 83 N.J.Eq. 49, 67--70, 89 A. 1046 (Ch. 1914), affirmed o.b., 83 N.J.Eq. 336, 90 A.2d 1135 (E. & A.1914); Jardine Estates, Inc. v. Donna Brooks Corp., 42 N.J.Super. 332, 340--341, 126 A.2d 372 (App.Div.1956); Dial Press, Inc. v. Phillips, 23 N.J.Super. 543, 551--552, 93 A.2d 195 (App.Div.1952), certif. denied, 12 N.J. 248, 96 A.2d 454 (1953); McGlynn v. Schultz, 90 N.J.Super. 505, 529--530, 218 A.2d 408 (Ch.Div.1966), affirmed, 95 N.J.uper. 412, 231 A.2d 386 (App.Div.1967), certif. denied, 50 N.J. 409, 235 A.2d 901 (1967); Brown v. Home Development Co., 129 N.J.Eq. 172, 178, 18 A.2d 742 (Ch.1941).

In this setting we adopted R. 4:42--11 which reads:

'Interest: Rate on Judgments; in Tort Actions.

(a) Rate. Judgments, awards and orders for the payment of money and taxed costs shall bear interest at 6% Per annum from the date of entry, except as otherwise ordered by the court.

(b) Tort Actions. In tort actions, including products liability actions, the court shall include in the judgment interest at 6% Per annum on the amount of the award from the date of the institution of the action or from a date 6 months after the date of the tort, whichever is later. The contingent fee of an attorney shall not be computed on the interest so included in the judgment.'

It will be noted that paragraph (a) deals with interest upon judgments. We dealt in that rule with post-judgment interest because the Legislature had amended the usury statute, N.J.S.A. 31:1--1, to permit the rate upon ordinary loans to go as high as 8% If the Commissioner of Banking and Insurance so provides. By adopting paragraph (a), we advised the bar and the clerks of the courts that judgments would continue to carry interest at the rate of 6%, in accordance with our prior practice. That paragraph has not drawn fire, although the constitutional challenges addressed to paragraph (b) would be no less appropriate if they have substance. We could have waited until some litigant raised the issue, but we thought it good sense and good administration to inform all concerned through the vehicle of a rule incorporated in our rules of civil practice. As we have said, our doing so has not excited criticism. It is subparagraph (b), relating to prejudgment interest, which is attacked.

We repeat there is no conflict with any statute; there is no statute on the subject. Nor can it be doubted that the Court has the power and the continuing responsibility to change these judge-made rules of law as justice may require. In short, had the proposition in paragraph (b) been announced in a case of A against B, there could be no claim that the Court lacked the power or in any way transgressed upon the area constitutionally allotted to the Legislature. Thus it is not our power to act that is questioned; it is the method we chose to exercise that power.

But if we erred in adopting that method (we will demonstrate in Point II below that we did not), this litigation would not end. For plaintiffs here are entitled to ask for the same result which the challenged rule provides. They cannot be denied their due merely because we mistakenly expressed our view in a rule of court. The underlying issue is thus before us. The merits have been argued fully, and the litigants thus afforded a hearing. Nothing new, however, emerged. This is not surprising, for the subject is not new, and was fully explored at a public hearing before we adopted the rule.

We turn then to the merits. Interest is not punitive, Wilentz v. Hendrickson, 135 N.J.Eq. 244, 255--256, 38 A.2d 199 (E. & A. 1944); here it is compensatory, to indemnify the claimant for the loss of what the moneys due him would presumably have earned if payment had not been delayed. We mentioned earlier the judge-made limitation that interest should not be allowed if the claim was unliquidated. That limitation apparently rested upon the view that a defendant should not be deemed in default when the amount of his liability has not been adjudged. But interest is payable on a liquidated claim when liability itself it denied, even in good faith, Kamens v. Fortugno, 108 N.J.Super. 544, 552--553, 262 A.2d 11 (Ch.Div.1970) . The fact remains that in both situations the defendant has had the use, and the plaintiff has not, of moneys which the judgment finds was the damage plaintiff suffered. This is true whether the contested liability is for a liquidated or for an unliquidated sum. For that reason, the concept of a 'liquidated' sum has often been strained to find a basis for an award of interest.

It is said there is now, in general, a willingness to allow interest on unliquidated claims as justice may dictate. 22 Am.Jur.2d, Damages, § 181, pp. 259--260. In upholding the retrospective application of a New York statute providing for interest in contract actions upon unliquidated damages, the United States Supreme Court observed that 'The statutory allowance is for the purpose of securing a more adequate compensation by adding an amount commonly viewed as a reasonable measure of the loss sustained through delay in payment,' and that 'It has been recognized that a distinction, in this respect, simply as between cases of liquidated and unliquidated damages, is not a sound one.' Funkhouser v. J. B. Preston Co., 290 U.S. 163, 168, 54 S.Ct. 134, 136, 78 L.Ed. 243, 246 (1933).

So also, a refusal to allow interest in tort matters has been criticized. See Moore-McCormack Lines v. Amirault, 202 F.2d 893 (1 Cir. 1953). It is questioned whether justice is thereby done as between parties to the suit. But beyond their interest, there is also a public stake in the controversy, for tort litigation is a major demand upon the judicial system. Delay in...