Decision Denying Application for Clerk's Default Judgment

Plaintiff, Teachers Federal Credit Union, applies for a clerk's default judgment under the "sum certain" provisions of CPLR 3215 (a). Because the application includes a claim for contractual attorney's fees as part of plaintiff's damages, the application was referred to the Court for its review.

Plaintiff's proposed judgment, on its face, seeks breach of contract damages totalling more than $16,000. The amount claimed includes unpaid loan obligations ($12,964.82), contractual interest at 11.15% ($1,130.50), and attorney's fees as allowed or agreed to ($1,935.17). After deducting "credits on account" of $8.74, the application requests a money judgment for $16,021.75, plus applicable costs and disbursements.

Under the circumstances presented, may the Court grant a default judgment against defendant if the principal amount of plaintiff's claim exceeds $15,000? The issue requires close analysis of the Court's jurisdictional limits, the component elements of plaintiff's claim, caselaw decisions, and principles of statutory construction.

The District Courts of the State of New York, like New York City's Civil Courts and other lower courts established by our State Legislature, are courts of limited jurisdiction. Pursuant to one section of the Uniform District Court Act (UDCA §202), [*2]this Court is granted jurisdiction over "actions and proceeding for the recovery of money... where the amount sought to be recovered... does not exceed $15,000." A second section of the UDCA qualifies the general rule when a plaintiff joins "several causes of action" in one complaint (UDCA §211). As long as "each of them would be within the jurisdiction of the court if sued upon separately, the court shall have jurisdiction of the action" and it may render judgment in excess of $15,000 "if such excess result solely because of such joinder" (id.).

Plaintiff's complaint, in this case, purports to set forth two separate causes of action. In pertinent part, the first cause of action alleges that defendant entered into a credit line agreement with plaintiff, but failed to make payments due under the agreement.

As a result, defendant allegedly owes plaintiff "12,964.82, with interest on $12,679.48 from 6/13/13 at the rate of 11.15% per annum."

The second cause of action, in turn, alleges that defendant "agreed to pay attorneys' fees in the event of a default in payment of the said balance." By reason of that default, plaintiff claims that defendant owes plaintiff $1,935.17 "for the fair and reasonable value of [plaintiff's counsel's] professional legal services."

Although the claim for attorneys' fees is labeled as a separate cause of action, that label is not dispositive. In Board of Managers of Sea Breeze II Condominium v Kwiecinski, 2003 NY Slip Op 51434 (App Term 2d Dept), the plaintiff brought suit in this Court "to recover $10,511.31 in damages for defendant's unpaid common charges, assessments, late fees, interest and other charges." It also sought $5,000 for attorney's fees. Together, plaintiff's claimed damages exceeded the Court's $15,000 monetary jurisdictional limit. Nevertheless, based on the assumption that the attorney's fees could be treated as "a separate cause of action," plaintiff obtained summary judgment awarding it more than $15,000.

The Appellate Term reversed. "Inasmuch as plaintiff's claim for attorney's fees is interrelated with its breach of contract claim... said claims comprise a single cause of action." Id. Since the total damages claimed by plaintiff exceeded this Court's jurisdiction limit, the Appellate Term, searching the record, concluded that plaintiff's action "must be dismissed." Id.

Applying Board of Managers to the facts of this case, this Court concludes that plaintiff's complaint must likewise be deemed to set forth a single cause of action. So viewed, plaintiff's complaint, in the aggregate, seeks damages well in excess of the court's $15,000 jurisdictional limit. It therefore presents circumstances, akin to those in Board of Managers, where a single cause of action impermissibly seeks damages beyond the amount that this Court may lawfully award.

However, the facts at bar present an interesting wrinkle. In the first cause of action, the amount claimed by plaintiff for unpaid loan obligations totals less than [*3]$13,000. Inclusion of an attorney's fee claim of less than $2,000 leaves a principal balance slightly below $15,000 in the aggregate. But the addition of a claim for contractual 11.15% interest brings the total amount sought to more than $16,000.

The appellate courts of this state have not yet addressed whether contractual interest should be included or excluded in determining whether this Court has jurisdiction over a given claim. Article 6, §16[d] of the NYS Constitution, and comparable language in UDCA §201, provide a starting point for the Court's analysis of the question. In pertinent part, these provisions both contain language limiting District Court jurisdiction in money actions to cases where the amount sought does not exceed $15,000 "exclusive of interest and costs" (NY Const. Art. 6, §16[d] UDCA §§201-201). Similar provisions apply in money actions brought in New York City Civil Court (NY Const. Art. 6, §15[b] NYC Civil Court Act §§201-202).

In Irni v Williams, 146 Misc 2d 894 (Civ Ct Kings Co. 1990), the Civil Court concluded that it lacked subject matter jurisdiction to grant a motion for summary judgment in lieu of complaint (CPLR 3213) against the defendant when the plaintiff sought judgment on an unpaid $25,000 promissory note, plus 16% interest and attorney's fees. Notwithstanding the similar language of NYC Civil Court Act §201 excluding "interest and costs" from that Court's $25,000 jurisdictional limit, the Civil Court held that the Civil Court Act "merely excludes court-awarded interest and cost" from the calculus. Id.

The Civil Court went on to hold that "interest that is part of a debt is included in the relief requested" for the purposes of addressing the Court's jurisdictional limit. Although the Civil Court found no other case precisely on point, it concluded "on this novel point of law" that the claim for contractual interest was not excludable, "thereby rendering the relief requested more than $25,000." Id.

The facts at bar are almost identical. Since plaintiff's first cause of action requests breach of contract damages which include contractual interest(11.15%) different from the 9% statutory rate provided in the CPLR (see CPLR §§5001, 5004), the amount of interest sought by plaintiff must be deemed part and parcel of a single, inseparable cause of action. Irni v Williams, supra. When combined with plaintiff's claim for contractual attorney's fees, see Board of Managers of Sea Breeze II Condominium v Kwiecinski, supra, the total amount of plaintiff's claim exceeds the $15,000 jurisdictional limit of this Court.

Sound principles of statutory construction provide further support for such a reading of the statute. As a general rule, statutory exceptions "must be strictly construed in order that the major policy underlying the legislation itself is not defeated." See McKinney's Statutes, §213. "They extend only so far as their language fairly warrants, and all doubts should be resolved in favor of the general provision rather than the [*4]exception." Id. Furthermore, applying the maxim "noscitur a sociis" (which means literally "it is known from its associates"), any ambiguity respecting the meaning of the word "interest" may be resolved "by reference to the meaning of words associated with it." McKinney's Statutes, §239(a). Viewed in this manner, the exception for "interest and cost" clearly refers to the provisions of law providing for "court awarded" statutory interest, costs, and disbursements, see CPLR §§5001, 5002, 5004, 8101, 8201, 8301, which are included by right as part of a final judgment.

Consequently, in the absence of controlling appellate authority disagreeing with the decision in Irni, this Court holds that it is precluded by law from granting judgment in plaintiff's favor for the full amount requested by the application. It therefore denies plaintiff's application for a default judgment on the ground that it exceeds the Court's jurisdictional limits under the NY Constitution and the UDCA. See Board of Managers of Sea Breeze II Condominium v Kwiecinski, supra; Irni v Williams, supra; see also David D. Siegel, Supplementary Practice Commentaries to McKinney's New York City Civil Court Act, §201 (1990) (discussing Irni v Williams).

In so holding, the Court acknowledges the existence of recent contrary authority. See McPartland v Young, 2011 NY Slip Op 51024 (Dist Ct Suffolk Co.). The Court in that case cited to the "exceededly broad statutory definition of interest'" as set forth in New York's usury law (see GOL §5-501), and an equally broad definition of "interest" in Black's Law Dictionary.

The first definition prohibits the charging of "any money, good, or things in action as interest on the loan... at a rate exceeding the rate... prescribed" (GOL §5-501[2]). While useful in the context of defining what is usury, it sheds no light on the meaning of the word "interest" as used in UDCA §201. Likewise, general definitions from law dictionaries provide little useful guidance. While dictionary definitions may sometimes be informative, they are not controlling. See McKinney's Statutes, §234.

With all due respect for the views expressed in McPartland v Young, this Court will instead follow the decision in Irni. Since plaintiff's claim for contractual 11.15% interest may not be excluded in determining whether plaintiff's claim exceeds the $15,000 jurisdictional limit of this Court, it reiterates that the claim exceeds that jurisdictional limitation.

Finally, this brings the Court to a final question: must it dismiss plaintiff's case because its complaint exceeds the jurisdictional limit of the Court? I think not. As long as plaintiff is willing to give up part of its claimed damages in order to bring its claim within the court's monetary jurisdiction, it can avoid a dismissal. Although the Appellate Term's 2003 decision in Board of Managers ended up dismissing plaintiff's complaint on appeal, due to its finding that the claim exceeded the Court's jurisdictional limit, the Court's subsequent 2004 decision in Bing v Fairfield Presidential Mgmt. Corp., 2004 NY [*5]Slip Op 51297 (App Term 2d Dept), gave a similarly situated plaintiff the opportunity to avoid dismissal by stipulating to reduce the ad damnum clause to an amount within the lower court's monetary jurisdictional limits. The latter ruling is consistent with Court of Appeals precedent. Cf. Jackson v National Grange Mut. Liability Co., 299 NY 333, 335 (1949) (Justice Court's lack of jurisdiction over claim that exceeded that court's monetary limit "can immediately be remedied by an amendment of the complaint" giving up demand for interest on breach of contract claim). Since the amounts at stake in this case exceed the court's monetary limit by only $1,021.75, plaintiff will be afforded the same opportunity.

Accordingly, for the foregoing reasons, plaintiff's application for a default judgment seeking more than $16,000 in monetary damages must be denied. Nevertheless, the Court will allow plaintiff to file a stipulation within 30 days of the date of this order consenting to a reduction of its claimed damages to bring its claim within the Court's $15,000 jurisdictional limit. See Bing v Fairfield Presidential Mgmt. Corp., supra.If it does so, the application may be presented again to the Clerk for processing in accordance with law.

So Ordered:

District Court Judge

Dated: April 28, 2014

cc:Rubin & Rothman LLC

Marlene Leal, pro-se