Stewart & Grindle, Inc. v. State

• Decision Date: 12 June 1974
• Docket Number: 1982,1986,Nos. 1941,s. 1941
• Citation: 524 P.2d 1242
• Parties: STEWART & GRINDLE, INC., Appellant, v. STATE of Alaska, Appellee. Leslie B. PACE, Appellant, v. STATE of Alaska, Appellee. Robert J. ROGERS, Appellant, v. STATE of Alaska, Appellee.
• Court: Alaska Supreme Court

Page 1242

524 P.2d 1242

STEWART & GRINDLE, INC., Appellant, v. STATE of Alaska, Appellee.

Leslie B. PACE, Appellant, v. STATE of Alaska, Appellee.

Robert J. ROGERS, Appellant, v. STATE of Alaska, Appellee.

Nos. 1941, 1982, 1986.

Supreme Court of Alaska.

June 12, 1974.

As Modified on Rehearing July 22, 1974.

LeRoy J. Barker, Robison, McCaskey, Strachan & Hoge, Anchorage, for appellants.

Richard P. Kerns, Asst. Atty. Gen., Anchorage, John E. Havelock, Norman C. Gorsuch, Attys. Gen., Juneau, for appellee.

Before RABINOWITZ, Chief Justice, CONNOR, BOOCHEVER and ERWIN, Justices, and DIMOND, Justice Pro Tem.

OPINION

BOOCHEVER, Justice.

In these three cases consolidated for review, owners of vacant, unimproved land condemned by the state appeal from the denial of their motions for interest, costs and attorney's fees.

The State of Alaska needed Stewart & Grindle's property for the 30th Avenue Couplet Highway Project. On July 29, 1971, the corporation was offered $94,900 for its property. This offer was rejected, and on March 23, 1972, the State filed a condemnation action to acquire the appellant's realty. At the hearing on the States motion for an order of necessity and authority for the taking, the State disavowed any intention to seek immediate possession. The matter was referred to a master, and on August 28, the master filed his report finding the amount of $142,500 to be just compensation for the property. On September 22, after the time for appeal had expired, the parties stipulated to the sum of the master's appraisal pursuant to Civ.R. 72(h)(4). This amount was deposited in the court registry on October 4. On January 24, 1973, the court denied Stewart & Grindle's motion to tax the State with interest from the date of commencement of the suit, appraiser's costs of $2,200, and attorney's fees in the sum of $1,125 incurred during the course of the proceedings.

Leslie Pace and his co-owners, Arthur Guess, Jr., Keith McGranahan, and Belton Stephens, d/b/a Adriatic Land Co., were also casualties of the highway project. These appellants declined the State's offer of $85,000 as compensation for their property, and a complaint was filed on March 23, 1972. After the matter had been referred to a master, but before the master had conducted a hearing as to the value of the property, the State tendered a much more generous offer in the sum of $186,000, which appellants accepted. This sum was deposited in the court registry on December 22. On April 11, 1973, the court denied appellant's motoin for interest from the date of filing, for an assessment against the State of appellants' appraisal costs of $1,600, and for attorney's fees of $1,100.

In connection with the same highway project, Robert Rogers was offered $50,000 for his acreage. Upon rejection of its offer, the State instituted condemnation proceedings on March 23, 1972. The task of ascertaining just compensation was referred to a master, and he valued the property at $92,500 in a report filed on September 25. The parties stipulated to that amount on October 19, and on November 14, the State deposited $92,500 in the court registry. On April 11, 1973, the court denied appellant's motion for interest, for costs of an appraiser in the sum of $200, and for attorney's fees of $1,000.

I. PRE-SETTLEMENT INTEREST

The appellant property owners contend that the court below erred in denying their motions for interest running from the date eminent domain proceedings were instituted to the date of payment into the court registry, upon the amount each accepted as just compensation.

Alaska statutorily provides for the payment of interest in eminent domain actions only where the State enters into immediate actual or constructive possession. If the State requires immediate use of the property, ¹ AS 09.55.330 specifies that:

If an order is made letter the plaintiff into possession, as provided in § 380 of this chapter, the compensation and damages awarded shall draw lawful interest from the date of the order. . . .

And where the State taken immediate legal title by filing a declaration of taking and depositing estimated just compensation into the court pursuant to AS 09.55.440, that statute directs that:

The compensation shall be ascertained and awarded in the proceeding and established by judgment. The judgment shall include interest at the rate of six per cent per year on the amount finally awarded which exceeds the amount paid into court under the declaration of taking.

There is no statutory provision for payment of interest from the date a condemnation action is instituted where the property owner remains in possession, and it has long been recognized that unless interest is specifically authorized by legislative enactment, it may not ordinarily be assessed against that State in any action. ² Consequently, the property owners' reliance upon our holding in State v. Phillips ³ is misplaced. In Phillips, we ruled that under AS 09.50.280, ⁴ plaintiffs in a wrongful death action against the State were entitled to interest from the date of death, and not merely from the date f judgment. But AS 09.50.250 authorizes causes of action against the State sounding in tort, contract or quasi-contract exclusively. ⁵ Since AS 09.50.250 and 09.50.280 were passed together and amended together by the same legislative act, ⁶ it is clear that AS 09.50.280 was intended to afford a right to pre-judgment interest against the State only where AS 09.50.250 established a substantive cause of action. The two statutes, being in pari matera, are to be construed together. One cannot therefore simply imply from our decision in Phillips a right to pre-judgment interest in the instant case, in view of the widely-recognized principle that only the legislature has the power to direct the assessment of interest against the sovereign.

We are also aware that eminent domain proceedings are unique, ⁷ and are governed by comprehensive rules of procedure applicable to condemnation actions alone. ⁸ This singularity tends to undermine any deductive extrapolation from the procedure followed in other types of actions.

It is well established, however, that the payment of interest is, in appropriate circumstances, a necessary component of constitutionally guaranteed ⁹ 'just compensation.' ¹⁰ As we stated in Russian Orthodox Greek Catholic Church of North America v. Alaska State Housing Authority: ¹¹

(The fifth amendment to the U. S. Constitution and art. I, § 18 of the Alaska Constitution require) that a property owner be compensated for delays incurred between the dates of the government's taking of property and making payment. If an award were paid immediately upon the taking of the land by the state no damages to the property owner would ensue. But where, due to the necessity of legal proceedings to ascertain fair market value of property, delays ensue, the property owner is entitled to an adequate sum to reimburse him for the loss of use of the money during the period of such delay. To hold otherwise would constitute a taking of the property without just compensation (footnote omitted). ¹²

Before interest can accrue then, there must be a 'taking'. ¹³ Whether the landowners here are entitled to interest turns on whether the commencement of eminent domain proceedings constitutes a constitutionally-compensable appropriation of property.

It is the general rule that a taking does not occur until: 1) legal title vests in the State, 2) the State enters into actual possession, or 3) the State takes constructive possession either by causing damage to property or by depriving the owner of full beneficial use of his land. ¹⁴ A number of courts have specifically held that interest running from the date of institution of eminent domain proceedings may not be recovered. ¹⁵ Most of the decisions which have awarded interest from the commencement of suit turned on statutory interpretation or application. ¹⁶

The New Jersey Supreme Court, however, has unequivocally held that interest from the inception of an eminent domain proceeding is constitutionally compelled, at least where the property condemned by the State is, as here, vacant and unimproved realty. In a provocative departure from established precedent, the court in State v. Nordstrom ¹⁷ observed:

A considerable period of time can go by after the filing of the complaint before compensation is paid to the landowner. In the meantime, the landowner remains responsible for the payment of taxes, plus interest payments on a mortgage, if any. These expenses cannot be considered by the commissioners or the jury, nor can they take notice of any rise in value of the property since the filing of the complaint.

* * *

* * *

In the present case the Nordstroms' land was vacant, unimproved acreage, which produced no income stream to be applied in abatement against interest. The economic purpose of such investment landholding is readily apparent: By purchasing the unimproved land, the Nordstroms undoubtedly hoped that the land would increase in market value at a rate which would more than offset taxes and interest payment on mortgage loans . . .. Profit would be generated upon the eventual improvement or sale of the property. By filing a complaint in a condemnation action, however, the State effectively foreclosed the possibility of improving the property or selling it to a third party while the proceedings were pending. . . . The landowner's property is virtually straitjacketed, but tax and mortgage obligations continue unabated. ¹⁸

We find this analysis sensitive to the economic realities of public condemnation. Before the institution of an eminent domain action, possession of unimproved and untenanted property is desirable economic asset if: 1) the property may appreciate in value; and 2) the owner is afforded the opportunity to improve the property toward whatever end he might desire. ¹⁹ Under the Alaska statutory scheme, an owner is deprived of both investment...