Damages – Pre-judgment interest – Deposit

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Where a judge ruled in favor of the defendant in a dispute over a contract to construct a pier, a remand is necessary for further consideration on the issue of pre-judgment interest.

“This action concerns a contract for the defendant, Great Eastern Marine Service, Inc. (GEM), to construct a pier for the plaintiff, Intershell International Corp. (Intershell). The parties dispute whether the agreement included a condition precedent that GEM would obtain a building permit such that construction would be complete before June 1, 2020. GEM did not obtain a building permit in time to do so (through no fault of either party), and Intershell then brought this action in which both parties alleged, among other claims and counterclaims, that the other breached their agreement. After a bench trial, a judge of the Superior Court concluded that the agreement did contain an unfulfilled condition precedent and, as a result, the contract was unenforceable. The judge ordered GEM to return the $100,000 that Intershell previously had paid GEM, less $5,000 that GEM expended in preparation to complete the work.

“The parties cross-appealed from the judgment. GEM argues that the judge’s findings that the contract contained a condition precedent and that Intershell’s $100,000 payment constituted a refundable deposit were clear error. Intershell counters that it was entitled to prejudgment interest on the amount it received under the judgment. We vacate so much of the judgment as declined to award prejudgment interest and remand for reconsideration. We otherwise affirm. …

“Intershell’s sole argument on cross appeal is that it was entitled to prejudgment interest under G.L.c. 231, §§6C and 6H. GEM counters that no such interest is permitted because the judge’s order to return the deposit did not constitute a damages award. …

“We turn then to whether the statute applies to the judge’s order for the return of Intershell’s deposit. The circumstances here are analogous to those in National Starch & Chem. Co. v. Greenberg, 61 Mass. App. Ct. 906, 906 (2004) (National Starch), which pertained to an agreement for the sale of commercial property. …

“Here, after it became clear that the permit would not issue in time for the work to be completed by the June 1 deadline, Intershell requested that GEM return its deposit less GEM’s expenses for the preparation work. GEM refused to do so and took the position that it was ‘not contractually obligated to refund any portion of the first payment due to delays in the permit process.’ Ultimately, Intershell initiated this action to recover the $100,000 deposit. Although the judge did not explicitly find that the deposit was ‘wrongfully withheld,’ the facts as found suggest that threshold was met for the same reasons as in National Starch.

“We recognize that G.L.c. 231, §6C, sets forth different events that trigger the accrual of prejudgment interest — i.e., the date of breach (of which there was none here), demand, or commencement of the action. When prejudgment interest begins to accrue is a question for the fact finder. … Accordingly, we remand the case for further consideration on the issue of prejudgment interest.”

Intershell International Corp. v. Great Eastern Marine Service, Inc. (Lawyers Weekly No. 81-112-24) (16 pages) (Docket No. 23-P-1117) (Oct. 4, 2024).

Click here to read the full text of the opinion.