People of State of Cal. ex rel. Dept. of Transp. v. U.S., ex rel. Dept. of Transp., Federal Highway Administration

• Decision Date: 22 June 1977
• Docket Number: No. 75-2284,75-2284
• Citation: 561 F.2d 731
• Parties: PEOPLE of the STATE OF CALIFORNIA ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff-Appellant, v. U. S. of America ex rel. DEPARTMENT OF TRANSPORTATION, FEDERAL HIGHWAY ADMINISTRATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 731

561 F.2d 731

PEOPLE of the STATE OF CALIFORNIA ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff-Appellant, v. U. S. of America ex rel. DEPARTMENT OF TRANSPORTATION FEDERAL HIGHWAY ADMINISTRATION, Defendant-Appellee.

No. 75-2284.

United States Court of Appeals Ninth Circuit.

June 22, 1977.

O. J. Solander, Dept. of Transp., Sacramento, Cal., argued for plaintiff-appellant.

Karen K. Siegel, William Kanter, Leonard Schaitman, Appellate Section Civ. Div., U. S. Dept. of Justice, Washington, D. C., argued for defendant-appellee.

Appeal from the United States District Court for the Eastern District of California.

Before WALLACE and SNEED, Circuit Judges, and ZIRPOLI, ^* District Judge.

WALLACE, Circuit Judge:

The State of California sued the United States for reimbursement of interest paid in obtaining a voluntary right of entry for the construction of a portion of Interstate Highway 5. The district judge granted summary judgment to the United States on the ground that the provisions of Policy and Procedure Memorandum (PPM) 80-4, P 3i, a Federal Highway Administration directive, ¹ apply to limit the amount of interest which the United States is legally obligated to pay. We affirm.

I.

Pursuant to the provisions of the Federal-Aid Highways Act, 23 U.S.C. §§ 101 et seq., representatives of the federal government and the State of California entered into an agreement for the construction of a portion of Interstate 5 in Siskiyou County, California. As contemplated by the Act, the federal government agreed to pay 90% of the total cost of the project and the State agreed to undertake the actual construction, subject to the approval of the Secretary of Transportation. In connection with the construction of the highway, the State took steps to acquire the necessary right-of-way, including the parcel of land giving rise to this dispute.

Under California law, a condemnor may obtain from a landowner a voluntary right of entry upon land sought to be condemned prior to the actual condemnation, with interest based upon the final sales price accruing to the landowner from the date the condemnor makes his entry and takes possession of the property. People ex rel. Dept. of Public Works v. Williams, 30 Cal.App.3d 980, 106 Cal.Rptr. 795 (1973); Cal.Code Civ.Pro. § 1268.310. Interest continues to accrue by law until full payment is made to the landowner. Cal.Code Civ.Pro. § 1268.320. With respect to the parcel involved in this case, the State obtained a voluntary right of entry and took possession on August 1, 1968. Pursuant to the agreement with the landowner and certain California statutes, ² interest accrued at 7% annually from that date until October 15, 1968, when the property was formally acquired by sale. As ultimately calculated, interest for this entire period was $1,169.01. The United States reimbursed the State in the amount of $467.69, representing 90% of the interest for the first 30 days, but refused to participate in any further interest payment.

After exhausting its administrative remedies, California brought suit under the Tucker Act, 28 U.S.C. § 1346(a)(2), to recover $642.34, representing 90% of the interest for the remainder of the period before the sale was consummated. The district judge, granting the motion of the United States for summary judgment, found that the provisions of PPM 80-4, P 3i, ³ "which limits payments for interest under the Federal Aid Highway Act to a period of thirty (30) days after the date payment is made available to the landowner, apply to situations in which plaintiff has taken a voluntary right of entry on a negotiated basis . . . ." Accordingly, the court held that the State was entitled to no further reimbursement.

II.

Our task on appeal is to determine whether the district judge was correct in granting summary judgment. There are two issues involved in the court's decision: the validity of PPM 80-4, P 3i and the applicability of this section to voluntary rights of entry.

We resolved the first issue in California ex rel. Dept. of Transportation v. United States ex rel. Dept. of Transportation, Federal Highway Administration, 547 F.2d 1388 (9th Cir., 1977), where we held that PPM 80-4, P 3i is consistent with the purposes and policies of the Federal-Aid Highways Act. Accordingly, the only issue remaining in this case is whether this directive can be interpreted as applicable to voluntary rights of entry.

In this case, the Federal Highway Administration has interpreted its policy pertaining to interest payments in excess of 30 days, i. e., PPM 80-4, P 3i, as being applicable to rights of entry. ⁴ While not dealing with a rule, the Supreme Court has held that an interpretation of a regulation by the issuing agency is entitled to great deference:

Since this involves an interpretation of an administrative regulation a court must necessarily look to the administrative construction of the regulation if the meaning of the words used is in doubt. . . . (T)he ultimate criterion is the administrative interpretation, which becomes of controlling weight unless it is plainly erroneous or inconsistent with the regulation.

Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 413-14, 65 S.Ct. 1215, 1217, 89 L.Ed. 1700 (1945); accord, Udall v. Tallman, 380 U.S. 1, 16-17, 85 S.Ct. 792, 13 L.Ed.2d 616 (1965). See also Northern Indiana Public Service Co. v. Porter County Chapter of the Izaak Walton League, Inc., 423 U.S. 12, 15, 96 S.Ct. 172, 46 L.Ed.2d 156 (1975). Although the PPM may be an interpretative rule rather than a formal regulation, see California ex rel. Dept. of Transportation v. United States ex rel. Dept. of Transportation, Federal Highway Administration, supra, 547 F.2d at 1389-1390; Lathan v. Brinegar, 506 F.2d 677, 682 n. 6 (9th Cir. 1974) (en banc), administrative construction provides the best indication of the issuing agency's intent in either case. ⁵ Thus the same deference in interpretation is appropriate whether the PPM is a formal regulation or an interpretative rule. Accordingly, the issue before us is whether the Federal Highway Administration's interpretation of PPM 80-4, P 3i as applicable to rights of entry is plainly erroneous or inconsistent with the memorandum.

California contends that the Federal Highway Administration's interpretation is inconsistent with the memorandum in two ways. First, it argues that the term "settlement" within paragraph 3i ⁶ is usually understood in the context of litigation and hence does not refer to a settlement negotiated without the filing of a lawsuit. Upon an examination of the language of the memorandum as a whole, we find this to be too narrow a reading. First, PPM 80-4, by its title, deals with "Right-of-Way Procedures (Negotiations)." Thus it is clear from the title that the memorandum specifically contemplates the acquisition of a right-of-way through negotiation. Moreover, the memorandum itself speaks of "settlements" reached through both "condemnation procedures" and "negotiation." ⁷ Accordingly, the term "settlement," when referring to the acquisition of right-of-way, is not restricted to usage involving litigation. "Settlement" may also refer to a settlement such as the one negotiated in this case.

Second, California argues that PPM 80-4, P 3i applies by its terms to circumstances where a partial payment is made. Because there was no evidence of partial payment here, the State contends that the interest limitation should not apply. We do not agree that the memorandum is so limited.

Paragraph 3i of PPM 80-4 presupposes partial payment because, within the framework of the memorandum as a whole, an interest limitation clause normally will be required only where such payment is involved. The PPM contemplates a partial payment to the property owner of at least 75% of the fair market value of the property before the State can take physical possession, unless the owner waives in writing his right to such payment. ⁸ Because partial payment normally is required in order for the condemning state to take possession, interest will accrue in ordinary circumstances only where the payment is deposited in an escrow or other account and a fund is thereby created. Thus the need for an interest limitation will usually arise where a partial payment is involved.

Nevertheless, where the state takes possession without payment and, pursuant to state law, interest accrues without creation of a fund, the basic policy of limiting interest payments remains in effect. Whether or not there is a partial payment, if delay permits the accrual of interest, the absence of limitations on interest payments may discourage the expeditious and economical acquisition of rights-of-way by the states. ⁹ Cf. California ex rel. Dept. of Transportation v. United States ex rel. Dept. of Transportation, Federal Highway Administration, supra, 547 F.2d at 1390. Thus reading PPM 80-4 as a whole, we interpret "partial payment" as merely indicative of the normal situation where interest accrues and not a prerequisite for application of paragraph 3i.

The Federal Highway Administration interprets PPM 80-4, P 3i as applicable to rights of entry. We find that this is neither plainly erroneous nor inconsistent with the memorandum. Thus the administrative interpretation is controlling in this case.

Summary judgment is proper where there is no genuine issue of material fact and the moving party is clearly entitled to prevail as a matter of law. Zweig v. Hearst Corp., 521 F.2d 1129, 1134 (9th Cir.), cert. denied, 423 U.S. 1025, 96 S.Ct. 469, 46 L.Ed.2d 399 (1975); see Caplan v. Roberts, 506 F.2d 1039, 1042 (9th Cir. 1974); Stansifer v. Chrysler Motors...