Some New York courts have begun routinely tolling prejudgment mortgage interest as a sanction against mortgage lenders and servicers for perceived delays in the foreclosure process. Exercising their “equitable powers,” courts have canceled prejudgment interest as a penalty for delays resulting from, among other things, failing to comply with discovery deadlines or a failure of proof on summary judgment. Close scrutiny reveals that New York courts do not have the power to toll prejudgment interest as a sanction.
This power is predicated on decisions of New York’s intermediate appellate courts, interpreting New York Civil Practice Law & Rules (CPLR) 5001(a) as allowing only a discretionary award of prejudgment interest in “an action of an equitable nature.” This application, however, misunderstands foreclosure actions by conflating the underlying claim at law (breach of contract) with the equitable remedy (foreclosure). When viewed in its proper context, tolling prejudgment interest is contrary to the plain language of CPLR 5001(a), legislative intent and Court of Appeals precedent.