On March 11, 2025, in the case of H1 Lincoln, Inc. v. South Washington Street, LLC, the Massachusetts Supreme Judicial Court had to decide whether a defendant’s payment of an adverse trial judgment stops the accrual of post-judgment interest on the judgment, even if the defendant has appealed the judgment. The SJC held that post-judgment interest does not accrue in this situation. While the holding applies to all civil lawsuits, it is especially relevant to real estate disputes, such as the H1 Lincoln case.
The plaintiff in H1 Lincoln does business as Majestic Honda, a tenant that brought suit against its landlords and recovered a judgment over $20 Million. The landlords paid the full amount of the judgment AND filed an appeal. The landlords argued that, because they paid the judgment, they were not required to pay the statutory 12% annual post-judgment interest rate after the appeal was concluded. Honda argued that post-judgment interest was required because the landlords’ appeal made its payment “conditional” – i.e., if the landlords prevailed on appeal, Honda may have been required to return some or all of the money.
The post-judgment interest statute is Massachusetts General Laws, Chapter 235, Section 8, which provides that “[e]very judgment for the payment of money shall bear interest from the day of its entry.” (This is in addition to any pre-judgment interest that may apply.) The SJC surveyed past cases noting that “[p]ostjudgment interest accrues daily until the judgment is fully satisfied” and “conditional payments do not constitute full satisfaction of the judgment.” For instance, a losing defendant “may not escape the accrual of postjudgment interest by making an offer to satisfy the judgment conditioned on a party forgoing its appellate rights[.]” However, this begged the “question whether a payment in full by a [defendant] who intends to appeal is only a ‘conditional payment’ – that is, a payment that does not fully satisfy a judgment.”
The SJC concluded that taking an appeal while paying a judgment does not make the payment conditional, reasoning (while again citing past case law) that “[t]he purpose of postjudgment interest is to compensate the prevailing party ‘for loss of the use of money when damages are not paid on time [and] thereby places ‘the judgment creditor and the judgment debtor in the same position they would have enjoyed had the debtor paid the judgment promptly.’” On the other hand, “[p]ostjudgment interest is not … meant to punish or discourage appeals[, which] may, of course, result in the reversal or reduction of verdicts and the restitution of payments that have already been paid in full.”
In response to Honda’s argument that, during the appeal, it did “not have full use and enjoyment of the judgment payment because the payment remains subject to risks and uncertainties of appeal,” the SJC said that “risk and uncertainty is necessary given the right of appeal.” In response to the landlords’ view that, “when they paid the judgment, they assumed a significant financial risk in that the plaintiff might dissipate the funds before the defendants had an opportunity to prevail on appeal[,]” the SJC said that “if that risk is unacceptable to them, the[y] may choose not to pay the judgment; but if they so choose, postjudgment interest should accumulate reflecting the trial court judgment and the time value of money that the plaintiff does not have in its possession.”
The SJC further noted that “when the judgment has been paid in full, additional interest should not be required; the plaintiff has the money in its possession consistent with the trial court’s judgment.” Also, that “requiring postjudgment interest to accrue during an appeal, even after payment is made in full directly to the prevailing party, would discourage judgment debtors who exercise their right to appeal from paying the entire judgment entered against them; they would have no incentive to do so.”
Therefore, the SJC held that “where, as here, a judgment debtor unconditionally pays the full value of a monetary judgment directly to the judgment creditor, the debtor has ‘fully satisfied’ the trial court judgment and the accrual of postjudgment interest halts upon payment, notwithstanding the debtor’s appeal. The exercise of appellate rights does not constitute a condition on the payment such that the judgment has not been satisfied and postjudgment interest continues to accrue.”
The SJC seems to have made the right call, but this probably was not an easy decision for the Court. Honda had a very good point – If it might have to return some or all of the money after the appeal was concluded, then it could not really do whatever it wanted with the money. Indeed, if Honda lost the appeal but could not return the money to the landlords, then Honda would have been the subject of a new collection proceeding. Moreover, if Honda invested the money during the appeal, this certainly would not have automatically yielded 12% per year.
Going forward, the question of whether to pay a judgment while an appeal is pending can only be answered by litigants on a case-by-case basis. In the H1 Lincoln case, the landlords were faced with thousands of dollars in post-judgment interest every day. Stemming this tide made sense, especially if Honda seemed capable of returning the money after the appeal. But other cases may require a different strategy, for instance if the plaintiff is not well-heeled (or may lose, spend, or “relocate” the money during the appeal); if the judgment is not very substantial; if the appeal may not be very strong; or if the appeal may be resolved fairly soon, which is more common in real estate disputes than most others.
If you have questions about this decision, please contact Michael Sullivan or any member of Prince Lobel’s Real Estate or Construction groups.
