Damages – Partial payment – Post-judgment interest

Where (1) the plaintiffs in a medical malpractice action obtained a judgment of $473,317.87, including $360,000 in compensatory damages, and (2) the defendant’s insurer paid the plaintiffs $168,199.45 in partial satisfaction of the judgment, the partial payment should have been applied first against the accrued post-judgment interest.

“The plaintiffs, Alan and Dianne Gallotta, filed a motor vehicle negligence action in Superior Court. Following a trial, the jury returned a verdict for the plaintiffs against the defendant. Judgment entered awarding the plaintiffs $360,000 in compensatory damages, $109,557 in prejudgment interest, and $3,760.87 in statutory costs, for a total of $473,317.87. On February 8, 2023, the defendant’s insurer paid the plaintiffs $168,199.45, in partial satisfaction of the judgment. …

“… In general, ‘trial judges have discretion to consider the circumstances of each case . . . when deciding whether and how to halt the accrual of postjudgment interest.’ H1 Lincoln, Inc. v. South Washington Street, LLC, 104 Mass. App. Ct. 256, 266 (2024). However, in City Coal Co. of Springfield v. Noonan, 434 Mass. 709, 710 (2001) (City Coal III), the Supreme Judicial Court addressed how a partial payment of a monetary judgment must be allocated among principal, prejudgment interest, and postjudgment interest. In that case, although the defendant contended that his partial payment should be applied to ‘the principal portion of the amount due’ under the original judgment, the trial judge ordered that it ‘be applied to the outstanding interest obligation first, then to the principal.’ … The Supreme Judicial Court agreed, citing the ‘well established’ rule that ‘when a debtor pays money to a creditor, absent any express agreement to the contrary, the payment is first applied to the outstanding interest obligation and then to principal.’ …

“The holding in City Coal III is controlling here. Because there is no ‘express agreement’ between the parties ‘designed to govern the allocation of funds among various sections of the judgment,’ City Coal III, 434 Mass. at 713, it was error for the first judge to order that the partial judgment be applied exclusively to the $360,000 damages award, so that the defendant would no longer have to pay postjudgment interest on that portion of the damages award. Instead, the partial payment should have been applied ‘to postjudgment interest first and then to the remainder of the sum of the principal and prejudgment interest.’ …

“We vacate the amended judgment dated May 5, 2023, and remand the matter to the Superior Court for entry of a new amended judgment consistent with this memorandum and order.”

Gallotta, et al. v. Burns (Lawyers Weekly No. 81-108-24) (5 pages) (Docket No. 23-P-1317) (Oct. 3, 2024).

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