Matter of City of New York
Annotate this CaseDecided on August 24, 2006
Supreme Court, Kings County
In the Matter of the Application of the City of New York relative to acquiring title in fee simple, where not heretofore acquired for the West Bushwick Urban Renewal Area, Phase 2
35057/04
Abraham G. Gerges, J.
Facts and Procedural Background
By mortgage dated March 3, 1995, Jen Jen lent Ms. Cho $165,688, secured by a mortgage [*2]on the Property. As is relevant to the instant dispute, the mortgage provided that the amount to be paid:
"includes interest thereon to be computed from the date hereof, at the rate of THIRTEEN (13) per centum per annum, and to be paid on the 1st day of May 1995, next ensuing and monthly thereafter, until April 1, 2010 when the unpaid principal and interest should become due and payable."
(the Mortgage). Jen Jen alleges that its mortgage was duly recorded.
The City of New York commenced this eminent domain proceeding on October 25, 2004 to acquire property for urban renewal purposes. On February 28, 2005, title to the Property vested in the City. On April 5, 2005, Ms. Cho filed and served a notice of claim. Thereafter, the City certified an advance payment of $650,000 for the Property, subject to the clearance of certain title objections, including Jen Jen's mortgage in the amount of $165,688.
The Parties' Contentions
In support of its motion, Jen Jen argues that when title to the subject Property vested in the City on February 28, 2005, the mortgagor owed $468,458.61 on the Mortgage and that Jen Jen is entitled to 6% interest on that sum from the date of vesting.
In opposition to Jen Jen's motion and in support of her cross motion, Ms. Cho admits that she failed to make all of the payments required by the Mortgage. Accordingly, she does not object to the issuance of an order directing the City to pay Jen Jen the balance outstanding. Ms. Cho argues, however, that in demanding a payment in the amount of $468,458.61, Jen Jen is seeking to recover compound interest, while the Mortgage agreement required the payment of simple interest. Ms. Cho thus concludes that Jen Jen is owed only $292,438.43 as of February 28, 2005.
Ms. Cho further notes that the Certification of Advance Payment issued by the City shows that Jianing Fang and Diana Fang, who are believed to be the principals of Jen Jen, have a mortgage in the amount of $45,000 to the City. If this mortgage has not yet been satisfied, $45,000 should be deducted from the amount paid to Jen Jen.
The City does not oppose the relief requested by Jen Jen, but requests that any order issued by the court should: (1) direct the Comptroller to cancel those warrants now existing and redraw warrants to those persons named by the court; (2) provide that no additional interest shall accrue against the City to any awardee, mortgagee, or any other person or entity as a result of the cancellation and/or redrawing of said warrants; (3) provide that before any payments are made, any sum due and owing for real estate assessments, sewer rents, water charges, use and/or occupancy, and all other prior liens, including possible franchise and business taxes, be deducted from the payment; (4) directing any lienor being paid to furnish the Comptroller with satisfaction or certificate of reduction of such lien; and (5) providing for the submission of the decision and proposed order to the Office of the Corporation Counsel for approval as to form.
In reply, Jen Jen alleges that Ms. Cho was aware that the parties intended that [*3]compound interest be paid on the mortgage. More specifically, movant asserts that the monthly payment of $2,103.74 "clearly corresponds to compound interest." Further, when Ms. Cho requested a summary of payments made under the Mortgage, Jen Jen's cover letter stated that "the mortgage interest is still compounding." Jen Jen thus argues that Ms. Cho's acceptance of the compound interest schedule ratified the agreement, and hence the compound interest.
The Law
In addressing the instant dispute, it is first necessary to note the distinction between simple interest and compound interest:
"Compound interest is commonly defined as interest on interest' or interest that is paid on both the principal and the previously accumulated interest' (Black's Law Dictionary 817 [7th ed 1999] [emphasis added]). This contrasts with simple interest, which is paid on the principal only and not on accumulated interest' (id. [emphasis added]). The difference between these two formulations is that simple interest does not merge with principal and thus does not become part of the base for the computation of future interest."
(Spodek v Park Prop. Dev. Assocs., 96 NY2d 577, 580 [2001]).
As a general rule, agreements to pay compound interest have not found favor with the courts ( see e.g. Giventer v Arnow, 37 NY2d 305, 308 [1975]). Moreover:
"It is established law that in the absence of an express agreement for either compound interest or interest on interest, or statutory authority, such interest is not recoverable' (72 NY Jur 2d, Interest and Usury, § 12, at 20-21 [footnotes omitted]; see, e.g., In Re Realty Assocs. Sec. Corp., 66 F Supp 416, 421, affd sub nom. Kelby v Manufacturers Trust Co., 162 F2d 350, mod on other grounds 163 F2d 387, cert denied sub nom. Manufacturers Trust Co. v Realty Assocs. Sec. Corp., 332 US 836; see also, General Obligations Law § 5-527 [1], [2]; cf., Matter of American Sav. Bank v State Tax Commn., 65 NY2d 824, 826)."
(Rourke v Fred H. Thomas Assocs., 216 AD2d 717, 718 [1995], appeal dismissed 86 NY2d 837 [1995]). In this regard, New York courts "have not interpreted a per annum' rate as compound unless such has been expressly stated" (American Sav. Bank v. State Tax Com., 103 AD2d 963, 964 [1984], appeal granted 64 NY2d 606 ]1985)], citing Giventer, 37 NY2d 305; Young v Hill, 67 NY 162 [1876]; Stewart v Petree, 55 NY 621 [1874]). In contrast, compound interest is recoverable only where the agreement at issue specifically sets forth plaintiff's entitlement to interest compounded annually (Gutman v Savas, 17 AD3d 278, 279 [2005]).
Discussion
Applying the above general principles of law to the facts of this case, the court holds that Jen Jen is not entitled to recover compound interest, since the parties did not enter into an express agreement so providing. In this regard, the Mortgage note itself provides only that interest shall be paid at the rate of 13% per annum. Thus, there is not evidentiary [*4]support for movants' assertion that Ms. Cho agreed to pay compound interest.
The court further finds that Jen Jen's reliance upon the amortization table supplied to Ms. Cho to establish its right to collect compound interest is unfounded. This conclusion is supported by the fact that the table consists only of a compilation of numbers, and nowhere indicates that it reflects compound interest. In view of the fact that the calculation of interest due on a mortgage is complex, the court declines to hold that Ms. Cho should have known that compound interest was being charged because of the amount of interest indicated on the table corresponds to compound interest. Jen Jen's statement that "interest is still compounding" in its letter dated May 20, 2004 does not alter the agreement between the parties. Similarly, since Ms. Cho paid varying amounts due on the mortgage at sporadic intervals, her payment history will not be construed to constitute an agreement to pay compound interest.
Having determined that Jen Jen is entitled to recover only simple interest, the court accepts Ms. Cho's assertion that movant is entitled to recover $292,438.43, since Jen Jen does not argue that the calculation is incorrect.
Finally, the court does not address the demands for relief as made by Ms. Cho and the City in the body of their papers, since the requests were not made by motion or cross motion (see generally CPLR 2214 and 2215; Chun v North American Mort. Co., 285 AD2d 42 [2001] [the court was without jurisdiction to grant the relief afforded to defendants where there was an absence of a notice of cross motion or any other notice to plaintiff that she would be required to respond to a motion to dismiss]; Bauer v Facilities Dev., 210 AD2d 992 [1994] [affidavits submitted in opposition to defendants' motions were insufficient to constitute a cross motion]; Guggenheim v Guggenheim, 109 AD2d 1012 [1985] [it was not sufficient to demand relief in opposing affidavits or memoranda; an outright notice was required to avoid surprise to the original movant]; Braver v Nassau County Office of Administrative Servs., 67 Misc 2d 120 [1971] [an affidavit in opposition to a motion was not sufficient to constitute a cross motion]). Moreover, neither Ms. Cho nor the City asserts a sufficient factual basis and/or legal authority upon which the relief sought could be granted.
Conclusion
For the above discussed reasons, the motion and cross motion are granted to the extent of declaring that Jen Jen is entitled to recover $292,438.43, plus 6% interest, from February 28, 2005, and directing the City to make an advance payment in this amount to Jen Jen, which payment shall be made prior to payment being made to Ms. Cho and/or to any other mortgagee.
The foregoing constitutes that order and decision of the court.
E N T E R,
J. S. C.
[*5]
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