United States of America, Plaintiff-appellant, v. John P. Hannon, Defendant-appellee, 728 F.2d 142 (2d Cir. 1984)

The question in this case is whether the appellant (the Government) may sue on a federal money judgment it previously obtained against the appellee (Hannon), in order to renew that judgment for the balance of the amount still unpaid plus accumulated interest. We hold that such a suit is proper. Accordingly, we reverse the district court's denial of summary judgment to the Government, its corresponding grant of summary judgment to Hannon, and its dismissal of the Government's complaint. The case is remanded to the district court with instructions to enter a new money judgment against Hannon.

* On October 3, 1968, the Government filed a complaint in the district court for the Western District of New York against Hannon and two other parties, seeking judgment on a defaulted note. Hannon and one of the other parties failed to appear, answer, or raise any objection to the complaint.¹  The court entered a default judgment against them for $4,514.67 on June 2, 1969. On June 10, 1969, the default judgment was docketed in the Erie County Clerk's office and became a lien on Hannon's local realty pursuant to 28 U.S.C. § 1962 (1976).² 

According to the Government, Hannon made eight partial payments on the judgment between 1973 and 1976, reducing his obligation by $625.00.³  The Government also alleges that it sought several writs of execution between 1974 and 1977, but was not successful in obtaining any levies on Hannon's property. The lien resulting from the 1969 judgment expired by New York law on June 2, 1979, ten years after the judgment was docketed.⁴ 

Following the expiration of the New York lien period, the Government again filed (in January 1982) a complaint against Hannon, seeking a judgment on the balance of the 1969 judgment plus accumulated interest. On January 21, 1983, the court denied the Government's motion for summary judgment on its complaint and, treating Hannon's oral opposition⁵  to the Government's motion as a cross-motion for summary judgment, granted that cross-motion and dismissed the Government's complaint. The court said that the Government could not sue to renew the prior money judgment since the "only purpose served ... is to reduce to judgment the interest on the former judgment". In the court's view, this would result in an award of "interest on interest" exceeding the rate of interest allowed pursuant to 28 U.S.C. § 1961.⁶ II

Federal courts have consistently recognized that a party who obtains a federal money judgment against a second party may later bring an action upon that judgment, although not upon the original cause of action. See, e.g., Gaines v. Miller, 111 U.S. 395, 399, 4 S. Ct. 426, 427, 28 L. Ed. 466 (1884); United States v. Kellum, 523 F.2d 1284 (5th Cir. 1975); Indemnity Ins. Co. v. Smoot, 152 F.2d 667 (D.C. Cir.), cert. denied, 328 U.S. 835, 66 S. Ct. 981, 90 L. Ed. 1611 (1946); United States v. Levin, 550 F. Supp. 859 (E.D. Mo. 1982); United States v. Estes, 448 F. Supp. 971, 976-77 (N.D. Tex. 1978). See generally Restatement (Second) of Judgments Sec. 18 comment c (1980).

Although the lien on Hannon's realty expired in 1979, the judgment itself continued, and the Government was free to bring an action to renew that judgment in order to revive the lien, or for any other purpose. See Kellum, supra, at 1287; United States v. Overman, 424 F.2d 1142, 1147 (9th Cir. 1970).

There is no applicable limitation bar in New York law even if it assumed (contrary to Kellum, supra, at 1286-87 and Overman, supra, at 1147) that a state statute could limit the Federal Government's right to sue for a renewed judgment. The federal limitation statute, 28 U.S.C. § 2415 (1976), refers only to contract and tort actions and is inapplicable to actions on judgments. Kellum, at 1287; United States v. Johnson, 454 F. Supp. 762, 763 (D. Idaho 1978); United States v. Welborn, 495 F. Supp. 833, 836 (M.D.N.C. 1980).

In his answer to the Government's complaint, Hannon alleged that the original debt was not supported by adequate consideration. This would have been a proper defense in the original action, but may not be considered in a suit to renew the judgment. Indemnity Ins. Co. of America, supra, at 669; Restatement (Second) of Judgments Sec. 18 comment c (1980).

The ground for the district court's denial of summary judgment to the Government and its simultaneous granting of such relief to Hannon may have been the court's mistaken belief that New York law does not permit the awarding of interest on interest, in the sense that the new judgment would thereafter bear interest on the total of the principal plus accrued interest since 1969. To the contrary, when a prior judgment consisting of both principal and accumulated interest is not paid, a court renewing the judgment may award interest on the entire amount due. See Hellenic Lines Limited v. Gulf Oil Corporation, 359 F.2d 403, 404 (2d Cir. 1966); Dorey v. Dorey, 609 F.2d 1128, 1133 (5th Cir. 1980). Appellant seeks and is entitled to a new judgment for the amount of the unpaid principal plus accrued interest, at the appropriate rates. Cf. Kotsopoulos v. Asturia Shipping Co., 467 F.2d 91, 95 (2d Cir. 1972); Grunenthal v. Long Island Railroad Co., 418 F.2d 1234, 1235 (2d Cir. 1969).

For these reasons, we reverse the district court's decision on the parties' motions for summary judgment and its dismissal of the Government's complaint. We remand the case to the district court with instructions to enter a new money judgment against Hannon for the amount of the unpaid principal plus accrued interest from June 2, 1969, the date of the original judgment, to the date the new judgment is entered.⁷  Once the new judgment issues, interest will accrue on it at the Treasury bill rate and will be compounded annually, pursuant to 28 U.S.C. § 1961 (West Supp.1983).⁸ 

NEWMAN, Circuit Judge, concurring:

Whether and in what circumstances a second judgment may enter that bears interest on the interest accrued on a first judgment is a matter less clear than the majority opinion suggests. To support such compounding of post-judgment interest, the majority relies upon our prior decision in Hellenic Lines Limited v. Gulf Oil Corp., 359 F.2d 403 (2d Cir. 1966), and the Fifth Circuit's decision in Dorey v. Dorey, 609 F.2d 1128 (5th Cir. 1980), which read Hellenic as permitting compounding of post-judgment interest. Hellenic is not authority for permitting a party to achieve compounding of post-judgment interest by securing entry of a second judgment. The first judgment in that case, dated March 30, 1964, had awarded pre-judgment interest, i.e., interest on the amount of the claim to the date of judgment. 359 F.2d at 404. The first judgment properly bore interest on its total sum, i.e., the amount of the damages plus pre-judgment interest. In affirming the district court's entry of the second judgment, our Court simply noted that the total sum of the first judgment had not been paid and "interest has been running on it." Id. Examination of the briefs reveals that appellant complained only of the allowance of post-judgment interest on pre-judgment interest, and appellee asserted a claim only to this traditional type of compounding. No claim was made for compounding of post-judgment interest. Moreover, the records reveal that the new judgment, entered October 29, 1965, stated that the post-judgment interest was to run from March 30, 1964, the date of the first judgment. Thus, the new judgment simply renewed the plaintiff's right to recover the sum of the original judgment plus interest on that judgment from its date until payment. Nothing in the Court's opinion nor in the records of the case supports compounding of post-judgment interest, i.e., a second judgment entered for the sum of the first judgment plus interest accrued from the date of the first judgment to the second judgment, with interest running on the total of the second judgment.

Since 28 U.S.C. § 1961 (1964), as it was phrased at the date the United States secured its first judgment, permitted post-judgment interest at the rate provided by state law and was silent as to whether simple or compound interest was contemplated, it may be permissible to apply state law in determining whether the second judgment should include the interest accrued from the date of the first judgment or be limited to the principal sum of that judgment with a provision that interest runs on that sum until payment, calculated at the different rates applicable to the pertinent time periods. New York law appears to permit compounding of post-judgment interest in a second judgment, Yonkers Contracting Company, Inc. v. New York State Thruway Authority, 25 N.Y.2d 1, 302 N.Y.S.2d 521, 250 N.E.2d 27 (Ct.App.1969), modified 26 N.Y.2d 969, 311 N.Y.S.2d 14, 259 N.E.2d 483 (Ct.App.1970); D'Angelo v. State of New York, 200 Misc. 657, 106 N.Y.S.2d 350 (Ct. Cl. 1951), though the matter is not free from doubt, see Cahn v. Cahn, 119 Misc.2d 150, 462 N.Y.S.2d 535 (N.Y.City Civ.Ct.1983) (renewal judgment does not include interest accrued from the date of the first judgment); Beneficial Discount Co. v. Spike, 91 Misc.2d 733, 398 N.Y.S.2d 651 (Sup.Ct.1977) (execution on judgment permitted for interest from judgment to payment, not compound interest for post-execution interest on interest from judgment to date of writ of execution). Moreover, the United States has an entirely legitimate reason for securing a second judgment in this case--to renew its judgment lien, which has expired pursuant to state law. That circumstance and the likely authority for compounding of post-judgment interest under state law persuades me to agree with the majority's direction that the new judgment should include interest accrued from the date of the first judgment on the unpaid balance. I therefore concur in Judge Davis's opinion.

However, it is important to recognize that by ordering such a result in this case we are not recognizing a general right to obtain compounding of post-judgment interest every time a plaintiff chooses to secure a second judgment. Caution in this area is especially warranted now that Congress has amended the interest-on-judgments statute in two significant respects: (1) the state law rate has been displaced in favor of the Treasury bill rate prevailing just prior to the date of the judgment, and (2) annual compounding is specified. See 28 U.S.C.A. Sec. 1961(a), (b) (West Supp.1982). It remains to be determined in subsequent cases whether a judgment-creditor can gain either an increased interest rate or more than annual compounding by securing entry of a second judgment.