State ex rel. Dept. of Transp. v. Barsy
| Decision Date | 17 June 1997 |
| Docket Number | No. 26739,No. 1,1,26739 |
| Citation | 113 Nev. 712,941 P.2d 971 |
| Parties | The STATE of Nevada, on Relation of Its DEPARTMENT OF TRANSPORTATION, Appellant/Cross-Respondent. v. Kenneth J. BARSY; Shelby R. Seiler; Young Electric Sign Company, a Utah Corporation; Golden West Mechanical, Inc., a Nevada Corporation; Wyatt, Tieder, Killian and Hoffer, a Virginia Partnership; Sharon L. Barsy; Land Title Company, Inc., a Nevada Corporation; Coldwell Banker Commercial Real Estate Group, Inc., a Delaware Corporation; Nevada Title Company, a Nevada Corporation; Valley Bank of Nevada, a Nevada Corporation; United States of America ex rel. Its Department of Treasury and Internal Revenue Service; Clark County Treasurer; Clark County Sanitation District; County of Clark, a Political Subdivision of the State of Nevada; and All Other Persons Unknown Claiming Any Right, Title, Estate, Lien or Interest in the Real Property Described in the Complaint, Respondents/Cross Appellants. |
| Court | Nevada Supreme Court |
Appellant State of Nevada, on relation of its Department of Transportation (NDOT), initiated an eminent domain action to condemn a two-acre parcel of land owned by respondent Kenneth Barsy (Barsy). Barsy filed a counterclaim, seeking lost rental income due to NDOT's unreasonable delay in condemning the property. The district court granted partial summary judgment for NDOT on Barsy's counterclaim.
A jury determined that just compensation for Barsy's property amounted to $432,000 more than the amount originally offered by NDOT. The district court entered a judgment of condemnation in the amount awarded by the jury, plus an additional amount for prejudgment interest pursuant to NRS 37.175. The district court subsequently amended the prejudgment interest rate, finding that the statutory rate unreasonably compensated Barsy, and declaring the fair rate of prejudgment interest to be the prime rate plus two percent.
On appeal, NDOT argues that Barsy's challenge to the interest rate was untimely and that the district court's findings in its amended judgment are clearly erroneous. We disagree and affirm the district court's ruling.
On cross-appeal, Barsy argues that the district court erred in granting NDOT's motion for partial summary judgment. 1 We agree, reverse the partial summary judgment and remand the issue for trial.
On April 13, 1987, the Nevada State Senate passed Resolution No. 19 encouraging NDOT to proceed as quickly as possible to provide a full interchange at the intersection of Interstate 15 and Spring Mountain Road in Las Vegas. The resolution contemplated reliance on federal funding for ninety-five percent of the cost of the project.
In 1988, a design and alternatives were developed, and public input was solicited. Ultimately, NDOT decided to reconstruct the Spring Mountain Road interchange and to extend Desert Inn Road over I-15. An environmental assessment was also prepared in 1988 and provided to the Federal Highway Administration (FHWA) as a prerequisite to obtaining federal highway funds for the project.
Barsy owned property, with a building and two tenants, that would be affected by the project. In late 1988 or early 1989, a NDOT representative visited the two tenants, Decratrend Paints and Golden West Mechanical, informing them of the imminent project and of the relocation costs and benefits which NDOT would pay them. Due to NDOT's inability to indicate an accurate time frame for the acquisition of the property, the tenants refused to renew their leases upon expiration. 2 Barsy was unable to attract new tenants because of the uncertainty surrounding the acquisition by NDOT.
In October 1989, a design for the new interchange and Desert Inn overpass was completed in time to allow NDOT to compete for certain federal funds. However, the funds were insufficient to complete the project. In order to compete for and acquire all necessary federal funding for acquisition and construction, and still meet the needs of the community by expediting construction, the project was divided into five stages. Each stage would provide significant transportation benefits independent of the other stages in the event funding for subsequent stages was delayed or denied. Construction of stage 1 started in the spring of 1991 and was completed in the fall of 1992. Barsy's property was scheduled to be acquired in 1993 or 1994 for stage 3.
Recognizing the inconvenience faced by Barsy and several of his neighbors, NDOT on three separate occasions from mid-1989 to early 1992, unsuccessfully sought federal funding for acquisition of those properties. In early 1991 and through the summer of 1992, Barsy requested that his property be acquired ahead of schedule because of the hardships he was suffering. Garth Dull, Director of NDOT, testified that since early 1991 he was aware of the inconvenience imposed on Barsy as a result of early project announcements, and sought to expedite acquisition of the property. In November 1991, Dull decided to obligate state highway funds, otherwise budgeted for highway maintenance, to appraise and prepare to acquire Barsy's property. 3
In order to expedite the Barsy acquisition, and contrary to generally established NDOT procedure, NDOT contracted with Gary Kent on February 4, 1992 to perform the Barsy appraisal prior to receiving FHWA approval, thus risking the possibility of bearing the expense of the appraisal without FHWA reimbursement. On April 28, 1992, NDOT presented a written offer to Barsy to purchase his property for the appraised value of $1,455,000. Barsy rejected the offer.
On October 15, 1992, NDOT filed the underlying condemnation action, and deposited $1,455,000 with the district court on October 21, 1992. On October 15, 1993, Barsy filed a first amended counterclaim requesting that the court award Barsy lost rental income caused by the unreasonable delay in commencing the condemnation action.
On August 15, 1994, NDOT filed a motion for partial summary judgment on Barsy's claim for lost rents, and Barsy filed a countermotion for partial summary judgment. The district court granted NDOT's motion on September 9, 1994. 4 Barsy filed a notice of appeal on September 21, 1994. 5
On September 15, 1994, the jury awarded Barsy $1,887,000 as just compensation for his property, valued as of October 20, 1992. 6 NDOT, having previously deposited $1,455,000 upon occupancy of the real property, owed a deficiency of $432,000.
Based upon the jury's verdict, the district court entered a judgment of condemnation on October 6, 1994, which included prejudgment interest at the rate provided in NRS 37.175. 7 Barsy filed two post-trial motions, claiming that the statutory interest rate was improper and asking that NRS 37.175(1) be declared unconstitutional as violative of the Equal Protection Clause of the Fourteenth Amendment. Alternatively, Barsy requested the district court to adopt an interest rate equal to the prime lending rate plus two percent, or to hold an evidentiary hearing to determine the proper rate of interest.
The district court rejected Barsy's equal protection argument, 8 and ordered an evidentiary hearing. At the latter hearing, both parties presented expert testimony regarding the proper rate of interest. On December 14, 1994, the district court filed an amended judgment of condemnation, in which it found that: 1) the rate provided in NRS 37.175 was unreasonable in compensating Barsy for the delay in payment of the difference between NDOT's initial deposit and the jury's valuation; and 2) "the fair rate of prejudgment interest is eight percent, computed by adding two percent to the prime rate which remained static at six percent from July 1, 1992 through January 1, 1994."
On appeal, NDOT argues that Barsy's challenge to the interest rate was untimely and that the district court's two findings in its amended judgment are clearly erroneous. In his cross-appeal, Barsy insists that the district court erred in granting NDOT's motion for partial summary judgment.
NDOT contends that the statutory rate operates as prima facie evidence of a fair rate. In County of Clark v. Alper, 100 Nev. 382, 685 P.2d 943 (1984), this court referred to the statutory rate as a floor on permissible rates, and allowed that legislative amendments increasing the statutory rate were prima facie proof of an increase in interest rates, not prima facie proof of a fair rate. This court further held that the determination of the proper interest rate is a question of fact, and that the district court was not bound by the statutory interest rate. Id. at 394, 685 P.2d at 951. We stated that just compensation requires that the landowner Id. at 392, 685 P.2d at 950 (quoting Seaboard Air Line Ry. v. United States, 261 U.S. 299, 43 S.Ct. 354, 67 L.Ed. 664 (1923)). While the statutory rate should be used if unchallenged, once competent evidence is presented supporting another rate of interest as being more appropriate, the district judge must then determine which rate would permit the most reasonable interest rate.
Barsy's expert testified that a prudent landowner would have paid off the mortgage on the land or invested his money in land similar to that condemned rather than hold the land at such a low rate of return. He further testified:
My opinion is that the ... interest of prime plus two comes reasonably close to anticipating what property owners would have done with the money. The...
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