The state's highest court Monday ruled that Long Island guitar-string maker D'Addario & Co. is not obliged to pay $227,000 in interest for reneging on a 2006 real estate deal.

The New York State Court of Appeals upheld a lower court decision, finding the East Farmingdale company's initial sales agreement with Embassy Industries Inc., a Hauppauge-based heating equipment business, does not require it to pay 9 percent in statutory interest for backing out of the deal.

The dispute arose after D'Addario broke off an agreement to buy a property in Farmingdale from Embassy for $6.5 million over concerns of groundwater contamination.

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Embassy refused to release D'Addario's $650,000 down payment, saying it had unlawfully defaulted on the deal. D'Addario sued, and a lower court found Embassy was entitled to keep the down payment -- plus $227,000 in interest.

An appeals court agreed that Embassy should keep the $650,000, but said D'Addario did not have to pay the interest under the terms of the sales agreement. The court of appeals upheld that ruling.