Ebert v. New York City Health & Hospitals Corp., 82 N.Y.2d 863 (1993)

When a public entity is obligated to indemnify an employee for a judgment, the statutory interest rate applicable to judgments against the public entity applies to the judgment against the employee.

Summary

This case concerns the applicable interest rate on a judgment against a doctor employed by New York City Health and Hospitals Corporation (NYCHHC), who was entitled to indemnification. The Court of Appeals held that the 3% interest rate applicable to judgments against NYCHHC, as prescribed by McKinney’s Unconsolidated Laws of NY § 7401, should apply, rather than the standard 9% rate. The Court reasoned that because NYCHHC was ultimately responsible for paying the judgment due to its obligation to indemnify its employee, it was the real party in interest and the lower statutory rate should prevail. The court prioritized the statute’s purpose over strict formalism.

Facts

The plaintiff, Ebert, obtained a judgment against Doctor Escaño, an employee of the New York City Health and Hospitals Corporation (NYCHHC). NYCHHC was obligated to indemnify Doctor Escaño for the judgment. The Appellate Division ruled that the 9% interest rate should apply because the action against NYCHHC had been dismissed.

Procedural History

The Supreme Court entered judgment against Doctor Escaño. The Appellate Division affirmed the judgment but modified the interest rate calculation, concluding that the standard 9% interest rate should apply since the claim against NYCHHC was dismissed. The New York Court of Appeals granted leave to appeal and reviewed the Appellate Division’s decision regarding the applicable interest rate.

Issue(s)

Whether the statutory 3% interest rate applicable to judgments against the New York City Health and Hospitals Corporation (NYCHHC) applies to a judgment against an employee of NYCHHC when NYCHHC is obligated to indemnify that employee.

Holding

Yes, because NYCHHC is ultimately responsible for satisfying the judgment against its indemnified employee, it stands in place of the employee, and the statutory 3% interest rate applies.

Court’s Reasoning

The Court of Appeals reasoned that while the standard interest rate on judgments is 9% under CPLR 5004, McKinney’s Unconsolidated Laws of NY § 7401(5) specifically prescribes a 3% interest rate for judgments against NYCHHC. The court found that this specific statute should prevail over the general one. The court rejected the plaintiff’s argument that there was no judgment or accrued claim pending against NYCHHC. The court stated, “A de facto accrued claim exists against NYCHHC because it is inevitably and unavoidably responsible to its indemnitee, Doctor Escaño. The essential purpose of the statute should prevail over pure formalism.” The court further noted that because NYCHHC must indemnify its officers and employees pursuant to General Municipal Law § 50-k and any judgment payable under that provision shall be payable from the public moneys of the corporation (McKinney’s Uncons Laws of NY §7401 [6]), NYCHHC effectively stands in the place of its employee. The court emphasized that “Ultimately NYCHHC cannot escape payment of the judgment at issue against Doctor Escaño and, thus, becomes by operation of law the real party in interest, obligated to pay only the 3% interest.” The Court prioritized the substance of the situation—NYCHHC’s ultimate responsibility for the debt—over the formalistic argument that the judgment was technically against the employee. This decision underscores the principle that courts should look beyond the surface to identify the real parties in interest and apply the law in a manner consistent with its underlying purpose.