Hudson Tubes, In re

• Decision Date: 10 June 1966
• Docket Number: AUTHORITY-TRANS
• Citation: 271 N.Y.S.2d 95,50 Misc. 2d 613
• Parties: In re HUDSON TUBES. Application of the PORTHUDSON CORPORATION to acquire title tocertain property in the State of New York and the State of New Jersey forHudson Tubes purposes. (Condemnation)
• Court: New York Supreme Court

Page 95

271 N.Y.S.2d 95

50 Misc.2d 613

In re HUDSON TUBESApplication of the PORT AUTHORITY-TRANS HUDSON CORPORATION to acquire title tocertain property in the State of New York and the State of New Jersey forHudson Tubes purposes.

Supreme Court, Special Term, New York County, Part VI (Condemnation).

June 10, 1966.

Sidney Goldstein, New York City, for PATH by Milton H. Pachter, Robert S. Tobin, New York City, Simpson Thacher & Bartlett, New York City, of counsel, by Whitney North Seymour, John A. Guzzetta, New York City.

Sullivan & Cromwell, New York City, for claimant, by David W. Peck, Michael A. Cooper, L. Robert Driver, Theodore N. Tarlau, New York City, of counsel.

Egan & Bliss, New York City, for Benson's Bar & Rest., Inc., by Herbert Bliss, New York City, of counsel.

Nathan L. Goldstein and Joseph Z. Goldstein, New York City, for Byrne Assoc. Inc., Dr. Leonard Sandles, Seymour Kessler d/b/a Federal Sandwich Shop & Hudson Nut Products, Inc., by Joseph Z. Goldstein, New York City, of counsel.

CHARLES A. LORETO, Justice.

The award in condemnation of the railroad having been made (48 Misc.2d 485, 265 N.Y.S.2d 925), there remain several questions as to the rate of interest that should be applied to it.

I

One is whether the railroad should be viewed as a 'unitary operating entity' and, therefore, as PATH contends, the New York rate of interest should apply even though the property is also located in New Jersey.On the other hand, the claimant argues with reason that if the railroad were to be considered a unitary entity, it should be the New Jersey rate, where the greater part of the railroad physical assets are located, and not the New York rate, which should apply.For the purpose of computing interest, it has been stipulated to allocate 65% Of the physical assets to New Jersey and 35% To New York.

Although in determining the amount of the award there was reason for considering the railroad as a unitary entity, there is no valid basis for applying that concept to the determination of the interest rate.For interest on the award is the measure of additional payment justly allowed for the delay in the payment of the award.The constitutional mandate requires payment to the owner of condemned property of its value 'at the time of the taking plus an amount sufficient to produce the full equivalent of that value contemporaneously with the taking'.(United States v. Klamath Indians, 304 U.S. 119, 123, 58 S.Ct. 799, 801, 82 L.Ed. 1219(1938).)

Since the award is readily apportioned between the two States in the ratio of the physical assets in each of them, the interest on one portion may differ from the other, as the laws of the two States differ as to what they consider permissible interest.The bi-state legislation authorizing this condemnation requires the valuation of the property to be valued according to the laws of the State in which 'the property is located or has its situs'.(L.1962, ch. 209, § 14, McK.Unconsolidated Laws, § 6614(Supp.1965);L.1962, ch. 8, N.J.Stat.Ann. § 32:1--35.63(1963).)Too, it is logical to apply to the award allocable to each State the interest rate allowable in that State since the right to interest is but an extension of the underlying substantive right of recovery (Davenport v. Webb, 15 A.D.2d 42, 222 N.Y.S.2d 566(1st Dept.1961), affd.11 N.Y.2d 392, 230 N.Y.S.2d 17, 183 N.E.2d 902(1962)).

The next question is what rate of interest is allowable both in New York and in New Jersey.

II

The law in the State of New York at present by statute and court decision, prescribes 4% As the rate of interest payable on property situated in New York.(Matter of City of New York (Maxwell)15 A.D.2d 153, 179, 222 N.Y.S.2d 786, 809--810, aff'd sub nom.;Matter of City of New York (Schnurmacher Corp.), 16 N.Y.2d 497, 260 N.Y.S.2d 439, 208 N.E.2d 172;Matter of City of N.Y. (5th Ave. Coach Lines), 23 A.D.2d 463, 261 N.Y.S.2d 784, sub judice in the Court of Appeals.)However, the claimant seriously argues that in this instance, on the record here made, limiting the interest to that rate would result in less than just compensation mandated by the constitution because it would not meet the standard of the 'full equivalent' of the payment of the award 'contemporaneously with the taking'(United States v. Klamath Indians, supra, p. 123, 58 S.Ct. 799).

Chapter 585 of the Laws of 1939,section 2501 of the Unconsolidated Laws of New York provides that the rate of interest to be paid by a 'public corporation' upon 'any judgment or accrued claim' shall not exceed 4% Annually.Indisputably, the award is an accrued claim and PATH, a public corporation.Recently in Matter of City of New York (Bronx River Parkway), 284 N.Y. 48, 54, 29 N.E.2d 465, 468, affd.A.F. & G. Realty Corp. v. City of New York, 313 U.S. 540, 61 S.Ct. 839, 85 L.Ed. 1508, the court overruled a similar contention as claimant's stating: 'In the absence of evidence as to what such additional sum should be, interest, as provided by law, meets the constitutional requirement'.In order to overcome this objection, the claimant has submitted evidence on this point to which PATH objected as irrelevant.

Although the New York statute has treated public corporations as 'favored debtors', surely they may not be unduly favored so as to deprive the owner of his constitutional right to just compensation.For the years 1962 through 1965, the proof offered fails to show that PATH would be unduly favored in New York by reason of the 4% Prescribed interest.For the year 1966, however, there appears a sharp rise in interest rate on the varied types of certificates, notes and bonds.This has signs of continuing into the unpredictable future.And surely payment of the award because of appeals that will be taken, may not be made for some appreciable time.

Although in this proceeding for the years 1962 through 1965 the maximum rate of 4% Fixed by statute represents 'a median which cannot seriously be questioned as substantially just'(Matter of City of New York (Maxwell), 15 A.D.2d 153, 182, 222 N.Y.S.2d 786, 812, affd.16 N.Y.2d 497, 260 N.Y.S.2d 439, 208 N.E.2d 172), on the uncontradicted proof that rate for the year 1966, would appear to unduly favor PATH.

The judgment of the New York legislature of 1939 read in the statute cannot forever remain immutable.After the lapse of many years and firm proof showing a marked and continuing rise in interest rate throughout the country, it is and can be seriously questioned as constitutionally valid.No statute may interfere with or prejudice the right to just compensation, including the right to additional compensation for any delay in making payment (Matter of City of New York (Schnurmacher)16 N.Y.2d 497, 260 N.Y.S.2d 439, 208 N.E.2d 172(1965)).

Of the several years involved here, the proof is satisfactory only as to the year 1966 in establishing the statutorily prescribed 4% Interest to be unjust.This is not enough to warrant a departure from the interest rate currently approved by the latest decisions of the New York appellate courts.What can or may be done in the matter if several years more elapse before payment and the general market rate of interest continues at its present or even higher levels, the court need not venture to say.In any event, a reconsideration of the statute by the legislature may well be in order.

III

For the New Jersey portion of the award, claimant asks 6% Interest and PATH contends that it should be 4%.Unlike New York, the allowance of interest is not prescribed by statute in New Jersey.It is not based on any equitable principles but is deemed to be part of the just compensation.

Thus, in State by State Highway Commissioner v. Seaway, Inc., 46 N.J. 376, 217 A.2d 313(decided Feb. 21, 1966), although the court noted in the beginning of its opinion that 'The rate of interest is not an issue on this appeal', and declared that the State is constitutionally required to make an award of interest because of the delay in making payment, it pertinently added: '* * * This requirement is not based upon any equitable principles, nor upon a theory that the owner must be reimbursed for the income he might have obtained had he remained in possession of his property.Rather, the Constitution demands that the condemnee receive interest as a part of his right to just compensation'.

However, regarding the amount or rate of interest, the New Jersey courts declare this is assessable upon a consideration of general equitable principles (N.J. Highway Authority v. Ellis, 24 N.J. 1, 7, 130 A.2d 601(1957));Acquackanonk Water Co. v. Weidmann Silk Dyeing Co., 99 N.J.L. 175, 178, 122 A. 825(Court of Errors and Appeals, 1923)).

Therefore, PATH argues, since the railroad was not a profitable operation prior to the taking, this fact should be treated as an equitable consideration favoring a 4% Rate of interest.This argument stems from a viewing of interest as compensation for deprivation of the use of the property and its deficit operation as an important factor to consider in determining the interest rate.This is an erroneous conclusion based on a false premise; for interest is viewed by the Supreme Court as compensation for the delay in making payment for the property taken and not compensation for deprivation of property.This view is contrary to the significance that should be given to the portion of the quoted passage in State by State Highway Commissioner v. Seaway, Inc.(supra) to the effect: '* * * This requirement (i.e. of interest) is not based * * * upon a theory that the owner must be reimbursed for the income he might have obtained had he remained in possession.'

Also, in City of East Orange v. Board of Chosen Freeholders, Essex Cty., 89 N.J.Super. 493, 501, 215 A.2d 566, 571(App.Div.1965) where, the plaintiff having conceded that equitable considerations did not warrant 6% Interest, the court explained its allowance of interest at 4%, as follows: 'From August...