J.B. Preston Co. v. Funkhouser

• Decision Date: 28 February 1933
• Citation: 261 N.Y. 140,184 N.E. 737
• Parties: J. B. PRESTON CO., Inc., v. FUNKHOUSER et al.
• Court: New York Court of Appeals Court of Appeals

261 N.Y. 140

184 N.E. 737

J. B. PRESTON CO., Inc.,

v.FUNKHOUSER et al.

Court of Appeals of New York

Feb. 28, 1933.

Action by the J. B. Preston Company, Incorporated, against Raymond J. Funkhouser and another, doing business under the firm name and style of R. J. Funkhouser & Company. From a judgment of the Appellate Division (235 App. Div. 200, 256 N. Y. S. 681), modifying and affirming as modified a judgment of the Trial Term on a directed verdict for plaintiff, a jury being waived, plaintiff and defendants appeal.

Modified, and affirmed as modified.

LEHMAN, J., dissenting.Appeal from Supreme Court, Appellate Division, First Department.

Jeremiah A. O'Leary, of New York City, for plaintiff.

George Link, Jr., of New York City, for defendants.

POUND, Chief Judge.

The question arises in this case of the effect of section 480 of the Civil Practice Act, as amended by chapter 623 of the Laws of 1927, in effect April 4, 1927, on contracts entered into prior to that date, when at the time of the trial the principal sum is unliquidated.

The section now reads as follows: ‘§ 480. Interest to be included in recovery. Where in any action final judgment is rendered for a sum of money awarded by a verdict, report or decision, interest upon the total amount awarded, from the time when the verdict was rendered or the report or decision was made to the time of entering judgment, must be computed by the clerk, added to the total amount awarded, and included in the amount of the judgment. In every action now pending or hereafter brought wherein any sum of money shall be awarded by verdict, report or decision upon a cause of action for the enforcement of or based upon breach of performance of a contract, express or implied, other than a contract to marry, interest shall be recovered upon the principal sum whether theretofore liquidated or unliquidated and shall be added to and be a part of the total sum awarded.’

The court below has held that so much of the statute as makes it compulsory to allow interest on unliquidated claims cannot apply to a claim for unliquidated damages on a contract entered into before April 4, 1927, as the obligation of such contract would be thereby impaired, Cf. Sweeney v. State, 251 N. Y. 417, 167 N. E. 519, modifying 225 App. Div. 606, 233 N. Y. S. 503.

‘No State shall * * * pass any * * * Law impairing the Obligation of Contracts.’ U. S. Const. art. 1, § 10. ‘A contract is * * * an agreement in which a party undertakes to do, or not to do, a particular thing.’ Ogden v. Saunders, 15 Wheat. (U. S.) 213, 316, 317, 6 L. Ed. 606. By the ‘obligation of a contract’ is meant the legal obligation of the parties to adhere to the agreement which at the time of contracting the law recognized and made enforceable. Ogden v. Saunders, supra. The question thus resolves inself into this: When the parties enter into a contract the breach of which results in a claim for unliguidated damages, do the parties make an agreement that no interest shall be charged on the principal sum found due in an action thereon, which agreement would be impaired by a later statute which permits the recovery of interest? Coombes v. Getz, 285 U. S. 434, 52 S. Ct. 435, 76 L. Ed. 866.

Earl, J., writing for the court in 1879 in White v. Miller, 78 N. Y. 393, 397,34 Am. Rep. 544, discussing the allowance of interest in common-law actions, concluded that it was difficult to deduce from the decided cases any certain rule and suggested that ‘a statute could probably be framed which would produce more certain, if not juster results.’ The rule had not been made certain in 1922 (Blackwell v. Finlay, 233 N. Y. 361, 135 N. E. 600), nor has it since been clarified. Prager v. N. J. Fidelity & Plate Glass Ins. Co. of Newark, N. J., 245 N. Y. 1, 7, 156 N. E. 76, 52 A. L. R. 193. A rule of uniformity must be found to enable justice to be done. The tendency is to make interest an incident of the recovery.

In Faber v. City of New York, 222 N. Y. 255, 262,118 N. E. 609, 610, the court said: ‘The question of the allowance of interest on unliquidated damages has been a difficult one. The rule on this subject has been in evolution. To-day, however, it may be said that if a claim for damages represents a pecuniary loss, which may be ascertained with reasonable certainty as of a fixed day, then interest is allowed from that day. The test is not whether the demand is liquidated. Was the plaintiff entitled to a certain sum? Should the defendant have paid it? Could the latter have determined what was due, either by computations alone or by computation in connection with established market values, or other generally recognized standards?’

When the contract in suit was entered into, this was the somewhat vague and indefinite law of the state of New York. It has never been held to be a part of the obligation of the contract that no interest should be allowed on unliquidated demands. Missouri & Arkansas L. & M. Co. v. Sebastian County, 249 U. S. 170, 173, 39 S. Ct. 202, 63 L. Ed. 538. Interest has been added where the demand has been greatly in excess of the amount determined to be due. Carricarti v. Blanco, 121 N. Y. 230, 24 N. E. 284; cf. Prager v. N. J. Fidelity & Plate Glass Ins. Co., supra, page 5 of 245 N. Y., 156 N. E. 76, 52 A. L. R. 193.

The mere fact that the statute is retroactive does not bring it in conflict with the Federal Constitution. League v. Texas, 184 U. S. 156, 161, 162, 22 S. Ct. 475, 46 L. Ed. 478. Nor has a person a vested interest in any rule of law entitling him to have the rule remain unaltered. Truax v. Corrigan, 257 U. S. 312,...