N. Bloom & Son (Antiques), Ltd. v. Skelly

673 F. Supp. 1260 (S.D.N.Y. 1987)

 

RULE:

In a diversity case, prejudgment interest is controlled by the rule of the jurisdiction whose law determines liability.

FACTS:

In a diversity action, plaintiffs, a foreign antiques dealer and an insurer, filed three claims against defendant customer for breach of three sales contracts. On the first claim, the customer had returned jewelry to the dealer prior to the time payment was due. On the second claim, the customer was never at her residence to accept delivery of the merchandise; written notice of the attempted deliveries was left, and the merchandise was returned to the dealer. On the third claim, the customer retained a piece of jewelry with a promise by her to promptly pay a reduced amount. The court held that the customer was not liable to plaintiffs on the first claim, but that she was liable to plaintiffs on the second and third claims.  As to the second claim, the court held that the dealer was entitled to the full contract price pursuant to N.Y.U.C.C. Law § 2-709(1)(a) because it had made a proper tender of the merchandise, which entitled it to acceptance. The invoice pertinent to the second claim contained an interest provision of 2% in the event of defendant's default in payment. Defendant maintains that this interest rate is excessive and therefore unenforceable. Plaintiff's relied on English law to govern the interest rates but the Court held it was to be governed by New York law.

ISSUE:

Is the finance charge prescribed by English law void as a penalty?

ANSWER:

Yes.

CONCLUSION:

Prejudgment interest is controlled by the rule of the jurisdiction whose law determines liability. The case was tried under the jurisdiction of New York courts. In any event, plaintiff is entitled to prejudgment interest on the recoverable damages, New York Civil Practice Law and Rules (CPLR) § 5001(a), at a rate of nine percent per year.

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