This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.
COUNTY SHERIFF -- Enforcement of Judgment (method of computing interest on income executions) -- Poundage Fees (method of computing poundage fees on income executions)
CIVIL PRACTICE LAW AND RULES, §§5003, 5004, 5231; COUNTY LAW, §650: The proper method of computing interest on income executions is the declining balance method.
CIVIL PRACTICE LAW AND RULES, §8012(b)(1); COUNTY LAW, §650: A sheriff is entitled to poundage fees on income executions amounting to 5% of the principal and interest collected. Poundage is collected in addition to principal and interest, and should be withheld from each installment. The method of computation is explained.
Our opinion has been requested on the proper method of computing interest on income executions served pursuant to section 5231 of the Civil Practice Law and Rules (CPLR).
Sections 5001 and 5002 of the CPLR provide respectively for a payment of interest, in certain cases, from the time a debt arose until the time of the verdict and from the time of the verdict until the time the judgment is entered. However, because interest which accrues prior to judgment is merged by the court clerk into the final principal amount of the judgment, such interest is not relevant to the present discussion.
Section 5003 of the CPLR provides that:
"Every money judgment shall bear interest from the date of its entry. Every order directing the payment of money which has been docketed as a judgment shall bear interest from the date of such docketing."
Section 5004 of the CPLR provides that the interest rate in all of the above cases shall be 9 per centum per annum, except where otherwise provided by statute.1 For purposes of this opinion, however, we will assume that the general interest rate of 9% per annum is applicable.
A number of judicial decisions indicate that the proper method of computing interest and allocating partial payments where no other method is provided for or agreed to is the declining balance method (see Shepard v. City of New York, 216 NY 251, 110 NE 435; Haffey v. Lynch, 193 NY 67, 85 NE 817; Equitable Lumber Corp. v. Staton Development Corp., 82 Misc 2d 677, 371 NYS2d 358). Further, in Beneficial Discount Co., etc. v. Spike, 91 Misc 2d 733, 398 NYS2d 651, the court directed a sheriff to utilize the declining balance method to compute the interest due on a judgment which the judgment-creditor sought to enforce by issuing an income execution to the sheriff (also see, National Surety v Macy & Company, 116 Misc 2d 780, 455 NYS2d 1007 which indicates that a sheriff is responsible for computing the interest). Therefore, we believe that this method should be applied. Under the declining balance method, interest is computed at the proper rate of interest on the full amount of the judgment, from the date of the judgment until the date of the first payment or first salary deduction pursuant to an income execution. At that point, the amount withheld pursuant to an income execution is first applied to whatever interest has accrued during such period, and if any money then remains it is applied to principal. From that point on, interest is computed on the new principal balance which reflects the original judgment amount less the amount of any principal payment. If, on the other hand, the amount of accumulated interest at that point exceeds the amount of the initial installment of the income execution, the entire payment will be applied to interest, and the same procedure will be applied to the next and subsequent installments until such time as all outstanding interest is satisfied. Once all accrued interest has been paid, any amount left over from that installment will be used to reduce principal. Each installment thereafter will be applied first to any interest which has accrued on the principal balance from the date of the preceding installment and the remainder applied to principal. This procedure will continue until the principal amount of the judgment is satisfied.
The declining balance method can be illustrated by the following example. Please note that the following example assumes an interest rate of 9% and does not take into account any poundage which is payable to the sheriff.
In our example, we shall assume a judgment is entered on April 1, 1986 in the amount of $1,000, that the employer commences income execution on such judgment on April 1, 1987, and that the gross salary of the judgment debtor is $300 every two weeks. In such a case, $90 of interest would accumulate from April 1, 1986 until April 1, 1987. Therefore, the sheriff in the first three payroll periods thereafter would apply the entire amount of each installment of the income execution (10% of $300, or $30) to interest and to satisfy the amount of interest which accrued between April 1, 1986 and April 1, 1987. In the fourth payroll period, the sheriff would first compute the amount of interest which would have accrued during the four payroll periods since April 1, 1987, and out of the $30 installment allot the appropriate amount to satisfy such accrued interest.
The remainder of the $30 would then be applied to reduce the principal amount of the debt. In the fifth payroll period, the sheriff would compute interest on such new principal balance for the preceding two week period and then allocate the appropriate portion of the $30 to such accrued interest, and the remainder to principal, and so on through each payroll period until the total principal amount of the debt is satisfied.
As was noted above, the above example did not take into account the effect of poundage on the allocation of the amount withheld from an employee's salary pursuant to an income execution. Section 8012(b)(1) of the CPLR provides that:
"A sheriff is entitled, for collecting money by virtue of an execution... to poundage of, in the counties within the city of New York, five per cent of the sum collected and in all other counties, five per cent upon the first $250,000 collected, and three per cent upon the residue of the sum collected."
Since it is unlikely that any income execution served against an employee will exceed $250,000, we shall assume for purposes of this opinion that the 5% rate applies to poundage on all income executions.
As noted, section 8012 states that the 5% rate is applied to the "sum collected". Therefore, since the 5% poundage fee is based on the amount collected by the sheriff, the poundage collected will be a percentage of not only the principal of the debt due to the judgment creditor but also, the interest and any fees collected by the sheriff from the judgment debtor.
The sheriff is entitled to his poundage on any amount collected by him pursuant to an execution, even if this amount does not constitute the total amount of the execution (Famous Pizza Ltd., 119 AD2d 721, 501 NYS2d 135). Furthermore, the courts have held that poundage must be collected under the execution itself (DeLia v DeLia, 32 AD2d 987, 302 NYS2d 5). In our view, because the sheriff must collect his poundage as part of the execution, it would be unfair and unreasonable not to allow him to retain a portion of each installment since, if the judgment debtor leaves the State or otherwise becomes immune from execution, the sheriff will be unable to collect the poundage on the portion of the debt previously collected.
With regard to the computation of poundage upon income executions, we note that if 5% of the total amount collected is simply allocated to poundage, the result is that poundage is collected on poundage. To illustrate, assume that an income execution provides for periodic withholdings from salary in the amount of $100. If $5.00 of this amount is withheld as poundage, the judgment creditor will receive only $95 from such execution. Under these circumstances, the sheriff would be receiving more than 5% of the amount paid to the judgment creditor. This does not appear to be a reasonable interpretation of the statutory directives.
The poundage fees provided for in section 8012 apply to various types of executions, attachments and collections by a sheriff, not just to income executions. In these other forms of executions, the sheriff seizes or attaches property in an amount equal to the amount to be collected for the judgment creditor, together with an additional 5% to cover poundage (see Campbell v Cothran, 56 NY 279, which indicates that poundage is in addition to the debt owed; Gomenez v Great Atlantic and Pacific Tea Co., 242 App Div 485, 275 NYS 948, (1934); Southern Indus. Inc. v Jeremias, 66 AD2d 178, 411 NYS2d 945, (1978); Thorton v Montefiore Hospital, 117 AD2d 552, 498 NYS2d 828). It seems logical to assume that income executions should be treated similarly and that therefore, the 5% poundage should be applied only to that amount of each installment which is to be paid to the judgment creditor.
The amount of each installment of an income execution will equal 10% of the employee's salary (see CPLR 5205[d] and 5231[b]) except as provided in CPLR 5231.2 Therefore, because the employee's salary may vary or his employment may be terminated before all principal and interest due the judgment creditor is collected, it will be impossible to know initially what portion of the amounts collected pursuant to an execution will ultimately be paid over to the judgment creditor as principal and interest. However, it is possible to devise a formula whereby a constant percentage can be applied to the total amount of the execution which will yield poundage in an amount equal to 5% of the amount of principal and interest to be paid over to the judgment creditor. Such a percentage may be ascertained by use of the following algebraic formula where x represents such percentage (expressed as a decimal): x/(1.00 - x) = .05.
The theory of the above formula is that x equals that percentage which is 5% of the whole (1.00 or 100%) less the amount of x itself. When this algebraic equation is solved, x is found to be .047619047 or 4.7619047%. Thus, it would appear that when moneys withheld pursuant to an income execution are apportioned, 4.76% of the whole should be treated as poundage and the remainder applied to interest and/or principal as the case may be. To illustrate, in the example of a case where $100 is withheld pursuant execution, if 4.76% of the $100, or $4.76 is applied to poundage, this will leave $95.24 to be applied to interest and principal. Then, if $95.24 is multiplied by 5%, the result is $4.76.
Having discussed the proper method of computing poundage, it is still necessary to discuss how poundage will affect the periodic installments of income executions. In the earlier discussion in this opinion, it was assumed that all moneys collected pursuant to an income execution would be allotted either to interest and/or principal. However, since poundage is to be withheld by the sheriff from each installment forwarded to him, it will be necessary to determine the proper amount of poundage to be allotted to each installment before any allocation of principal and interest can be made. Therefore, as each installment of an income execution is withheld from the salary of an employee, 4.76% of this amount should be allotted as poundage to the sheriff and the remainder applied to interest and/or principal under the declining balance method. This 4.76% computation is properly used for every installment of the execution except the last.
For the last installment, since the amount of principal and interest is less than the maximum permissible amount of the installment which may be collected under the execution, poundage can be computed by simply computing 5% of the principal and interest remaining due. Thus, the amount of the last installment will equal the amount of any principal and interest remaining due plus five per cent for poundage.
April 8, 1988
Cornelius F. Healy
First Deputy Comptroller
1 See e.g., General Municipal Law, §3-a, which generally provides that the rate of interest to be paid by a municipality upon any judgment or accrued claim shall not exceed 9%. However, that statute also provides that the rate of interest to be paid on judgments or accrued claims arising out of condemnation proceedings or wrongful death actions shall not exceed 6%, and that interest on any bond or note of the city of New York which is guaranteed under the New York City Loan Guarantee Act of 1978, Public Law 95-339, and which the city has not paid, or made funds available to pay when due, shall accrue interest at the rate borne for principal by such obligation.
2 As stated above, the law limits the amount of an income execution to 10% of an employee's salary. The former rule also provided for an eighty-five dollar ($85) threshold, that is, if an employee earned less than eighty-five dollars ($85) per week, all of the earnings were exempt from levy. The law was amended effective August 7, 1987 (see L. 1987, c. 829, §1), and eliminated that threshold. The current limitations on an income execution are that (1) an income execution cannot exceed ten percent (10%) of the judgment debtor's gross income; (2) no deduction can be made if a judgment debtor's weekly disposable earnings are less than thirty (30) times the current federal minimum wage; (3) a judgment debtor's weekly disposable earnings cannot be reduced below an amount which is equal to thirty (30) times the current federal minimum wage; (4) if deductions are being made for alimony, support or maintenance for family members or spouses which equal or exceed twenty-five percent (25%) of the judgment debtors disposable income, no further deductions can be made; (5) if deductions are being made for alimony, support or maintenance for family members which are less than twenty-five (25%) of the judgment debtor's income, additional deductions can be made from the judgment debtor's income, but the total of all deductions cannot exceed twenty-five percent (25%) of the judgment debtor disposable income (see CPLR 5231).