On March 2, 2022, Justice Masley of the New York County Commercial Division issued a decision in BNP Paribas, Singapore Branch v. Natixis, N.Y. Branch, 2022 NY Slip Op 30679(U), awarding pre-judgment interest at the contract rate, not the statutory rate, explaining:
In motion sequence number 012, defendant Natixis, New York Branch (Natixis) moves, pursuant to CPLR 2221 (d), 5015, and 5019, for leave to reargue and/or to correct the court’s order dated January 7, 2022 to provide for the computation of pre-judgment interest at the applicable contractual rate rather than the statutory rate.
. . .The Standby Letter of Credit (SBLC) directs that any draw request must include a written drawing certification in the form provided in the SBLC. The drawing certification form provides, in relevant part,
2.WE HAVE REQUESTED PAYMENT FROM BUYER PER THE ATTACHED PHOTOCOPY, FACSIMILE OR TELEX COPY OF THE INVOICE IN THE AMOUNT OF U.S. DOLLARS … (AMOUNT IN WORDS AND FIGURES) AND AS OF THE DATE HEREOF BUYER HAS FAILED TO PAY US SUCH AMOUNT. THIS DRAWING IS IN THE AMOUNT OF U.S. DOLLARS … (AMOUNT IN WORDS AND FIGURES) WHICH IS NOT IN EXCESS OF THE AMOUNT FOR WHICH PAYMENT HAS BEEN REQUESTED AS SET FORTH IN PARAGRAPH 2 HEREOF, PLUS INTEREST (INTEREST SHALL BE CALCULATED ON THE ONE MONTH LONDON INTERBANK OFFERED RATE (LIBOR) FOR U.S. DOLLAR DEPOSITS OFFERED BY BLOOMBERG PUBLICATION AT 11 :00 AM. LONDON TIME AS QUOTED ON PAGE BBAM IN EFFECT ON THE DATE BUYER’S PAYMENT WAS DUE, PLUS THREE PERCENT PER ANNUM) FROM … (DATE BUYER’S WAS DUE) THROUGH THE DATE OF YOUR PAYMENT HEREUNDER. PAYMENT OF THE AMOUNT DEMANDED HEREUNDER, INCLUDING INTEREST, IS REQUESTED TO BE MADE NOT LATER THAN 10:00 AM. LOCAL TIME AT YOUR OFFICE WITHIN THREE BANKING DAYS AFTER THE DATE OF YOUR RECEIPT OF THIS REQUEST.”
Plaintiff asserts that this language clearly was intended to apply to the period between the buyer’s default and defendant’s payment of beneficiary’s draw, and that interest was to be included in defendant’s payment made within three days after the draw.
New York courts have long held that when an agreement involving an indebtedness provides that the interest shall be at a specified rate until the principal shall be paid, then the contract rate governs until payment of the principal, or until the contract is merged in a judgment. Said another way, when the principal on a loan is due on a date certain and the debtor fails to make payment, the interest rate in the contract will be used to calculate interest on unpaid principal from the date of maturity of the loan to the entry of judgment. Thus, inclusion of a clause directing that interest accrues at a particular rate ‘until the principal is paid’ (or words to that effect) alters the general rule that interest on principal is calculated pursuant to New York’s statutory interest rate after the loan matures or the debtor defaults.
The interest referred to in the SBLC was due from February 20, 2020 through the date when defendant made payment, which was to occur within three business days of plaintiff’s request. Defendant did not pay the full amount owed. Thus, the interest continued to run at the rate prescribed by the SBLC.
(Internal quotations and citations omitted).