Summary
In Smith v. Board of Education (208 N.Y. 84, 86) the same rule was applied in an action against the Board of Education, the court stating: "It must be regarded as well settled that a claim against a municipality, although liquidated and due at a definite date, does not draw interest until demand has been made for its payment, unless it is otherwise agreed.
Summary of this case from Rapid T. Subway Constr. Co. v. City of N.YOpinion
Argued March 20, 1913
Decided April 4, 1913
Archibald R. Watson, Corporation Counsel ( Terence Farley and Charles McIntyre of counsel), for appellant.
John E. O'Brien and Richard J. Doyle for respondent.
In 1903 the board of aldermen of the city of New York adopted a resolution fixing the salary of the position of architectural draftsman in the department of education in said city at thirty-five dollars a week. In June, 1906, respondent was appointed to such a position in said department, and continued to discharge the duties thereof until December 20, 1909. His salary became payable at the end of each month, but he only collected the same at the rate of thirty dollars a week, so far as appears making no claim for compensasation in excess of said sum until April 18, 1911, when he filed a claim for the balance of five dollars a week and interest. The only question presented to us is whether he is entitled to recover interest on said sum of five dollars per week from the end of each month when it became due, or only from the date when he filed his claim.
It must be regarded as well settled that a claim against a municipality, although liquidated and due at a definite date, does not draw interest until demand has been made for its payment, unless it is otherwise agreed. This rule is independent of any statutory requirement such as the familiar one that notice of claim must be served on the municipality some time before suit can be commenced thereon. It is based rather on the consideration that it would be inconvenient and burdensome for the officials of a municipality to seek its creditors and tender payment of their claims, and also that it would be oppressive and unjust to permit creditors of a municipality with good credit to turn claims into investments through omitting to present them and then collecting interest thereon.
This question was considered in O'Keeffe v. City of New York ( 176 N.Y. 297). That action was brought to recover installments under a contract which were liquidated and due at definite dates. No demand had been made for the payment thereof until long after they became due, and for the reasons above outlined it was held that interest could only be recovered from the date when demand for payment had been made. (See, also, Taylor v. Mayor, etc., of N.Y., 67 N.Y. 87; Paul v. Mayor, etc., 7 Daly, 144; Donnelly v. City of Brooklyn, 26 N.Y.S.R. 27; affirmed, 121 N.Y. 9; Stoddart v. City of N.Y., 80 App. Div. 254. )
I see no reason why the rule which would thus prevail if this action were against the city of New York should not be applied to the advantage and protection of the board of education of that city which, speaking in general terms, stands as a substitute for the latter as a corporate agency of the state for the purpose of administering educational matters. It is suggested that while the rule might very well be applied in behalf of the municipality itself on account of its multifarious duties and very numerous creditors, it should not be applied for the benefit of a mere department like the board of education which is charged with the performance of a much more limited range of duties, and has a much smaller number of claims to watch. This differentiation, however, does not commend itself to our judgment. In the first place, it is safe to assume that measured by the proposed test the duties of the appellant board of education much more entitle it to the protection of the principle which is invoked than would the duties of a small municipality which beyond question would come within the rule. In the second place, the attempt to determine the question of the application of the principle which underlies the rule by measurement in each case of the duties imposed upon a municipality or department like the appellant would lead to endless confusion. It is much better to have a uniform rule, especially where, like the present one, it imposes no hardship.
Apparently, from the fact that the respondent collected each month part of his salary, he was in communication with the appellant, and, therefore, it would not have been literally necessary for the latter to seek him for the purpose of paying the balance of the salary, and, therefore, come within the precise language used in the O'Keeffe case. I do not think, however, that this circumstance relieves the respondent or should lead us to deviate from the rule. If a claimant sees fit to collect part of his claim and leave the balance with the municipality without demand therefor, the latter ought not to be required to pursue him and tender such balance in order to prevent the accrument of interest.
For these reasons I recommend that the judgment be reversed and a new trial granted, costs to abide event, unless the respondent consents that the judgment be reduced by the sum of $166.70, which represents the interest which has been allowed on balances due respondent from the dates the same respectively accrued until April 18, 1911, when he filed his claim, in which case the judgment as thus modified should be affirmed, without costs in this court to either party.
I cannot agree with Judge HISCOCK that the special rule, to which he refers, has its proper application in the present case; namely, that a claim against a municipality draws interest only from the time of demand. This case is differentiated by its facts from the class of cases, in which such a rule is enforced. The salary attaching to the position of architectural draftsman, filled by the plaintiff, had been legally and duly fixed at $35 a week and, under the rules of the defendant, was payable monthly, on the last day of each month. He only received from the defendant these monthly payments at the rate of $30 a week. Thus, default was made by the defendant in the full payment of an indebtedness, fixed by the resolution of the board of aldermen and entered upon its books, when due by its own rules. The defendant is an independent corporation, with which the statute required no previous filing of any notice of claim, as in the case of the city, and its relations with the plaintiff were contractual. ( Gunnison v. Board of Education, 176 N.Y. 11.) How can it be held, upon the peculiar facts of the case, that a demand was necessary to be shown for the portion of the salary withheld each month? It is true that there is no evidence upon the subject of any demand; but why should there have been? Each month that the plaintiff applied for the salary, then legally due him and payable by the terms of his employment, and received less than the amount so due him, the defendant was in default and wrongfully withheld from him a portion of the debt. Impliedly, there was involved in each of these monthly transactions a demand for what his engagement with the defendant entitled him to receive. To hold, in the absence from the record of proof of a formal demand each month for the five dollars a week withheld by the defendant, that a recovery of interest upon the amounts in default, and eventually recovered, is barred, seems to me to be an unreasonable application of the special rule. In the case of Donnelly v. City of Brooklyn, ( 121 N.Y. 9, 19), which Judge HISCOCK cites, the opinion states the general rule to be that "when interest is not stipulated by contract, but default is made to pay a liquidated debt when due, interest is recoverable as damages from the date of default;" but holds, under the circumstances of the case, that it could not be said that "the sum for which the city was liable was so fixed and certain or the time of payment so definite that a period can, before demand, be accurately determined from which the interest shall commence to run." In the case of O'Keeffe v. City of New York, ( 176 N.Y. 297), the plaintiff did not make any demand for the payment of the installments, when due under his contract. Its authority cannot be controlling in this case against the board of education, with the peculiar facts to which I have called attention.
I think the courts below have decided correctly and that the judgment, as rendered, should be affirmed.
CULLEN, Ch. J., WERNER, COLLIN and CUDDEBACK, JJ., concur with HISCOCK, J.; GRAY, J., reads dissenting opinion; MILLER, J., not sitting.
Judgment accordingly.