Dodson v. Anne Arundel County

Couch, J., delivered the opinion of the Court. In this case, we are presented with three issues: (1) whether there is authority for applying the legal rate of interest to judgments in conventional condemnation proceedings; (2) whether, in conventional condemnation proceedings, the application of the legal rate of interest rather than the prevailing market rate of interest denies the condemnee "just compensation” as constitutionally required; and (3) whether the 110-day "delay” by the County in paying the judgment was reasonable. The appellants, Joseph Dodson et al., owned approximately 243 acres of undeveloped land, located in the 8th Election District of southern Anne Arundel County, in an area known as Jug Bay. They had successfully obtained a special zoning exception and the necessary permits to allow for development of the property as a campground for recreational vehicles.

On September 15,1977, Anne Arundel County (County) filed condemnation proceedings in the circuit court in order to acquire this property. On September 26,1977, Joseph Dodson, unaware of the pending condemnation proceedings, went to the County Office of Inspections and Permits to obtain the grading permits which had been approved. At that time, one of the employees attempted to give Dodson written notice of the condemnation proceeding. However, Dodson refused to accept the letter, and it was subsequently mailed to him.

On December 14, 1978, the parties stipulated that the value of the property would be fixed as of December 19,1978, and the landowners’ out-of-pocket expenses for development ($30,000) would be included in the jury award. The matter proceeded to trial, and, on March 12,1980, the jury returned its inquisition in the amount of $500,000. Judgment nisi was entered by the circuit court on March 13, 1980. Final judgment was entered on March 18, 1980, and the inquisition ⁴⁹³ was recorded in the judgment index the same day.

Although it was forwarded to the Land Records office, the inquisition was not recorded because a certificate of payment had not been filed as required by Maryland Rule U22 a. Neither party appealed the judgment. Therefore, pursuant to Maryland Code (1974, 1981 Repl. Vol.), Real Property Article, § 12-109 (d) (2), and Maryland Rule U26 c 2, the County had "120 days after the entry of final judgment” to determine whether to take the property or abandon the proceedings.

On June 30, 1980, 110 days after entry of the judgment, the County elected to take the property and paid the appellants a total of $508,958.93, the amount of the award plus interest at the legal rate of six percent 1 from the date of entry of judgment to the date of payment. The certificate of payment was filed by the County and the jury inquisition was recorded in the Land Records office that same date, effectively vesting title in the County. Subsequently, the property owners filed a two-count declaration asserting I) that the 110-day delay in payment of the award was unreasonable, and II) that the payment of the prevailing legal rate of interest (six percent) on the award was unconstitutional. On March 10, 1981, the trial court sustained, without leave to amend, the County’s demurrer to Count II, on the basis that while there is no constitutional right to receive interest on a condemnation award, there is a statutory right to such interest; and, pursuant to Md. Rule 642, the legal rate of interest applied.

The order was stayed pending a trial on the merits of Count I. On June 10, 1981, the landowners’ motion for summary judgment as to Count I was denied. At the trial of the merits, the circuit court, sitting without a jury, found that the County’s delay in paying the award was reasonable. Judgment was rendered for the County on November 6, 1981, and the property owners appealed both rulings. We granted certiorari in order to finally put to rest the controversy surrounding the ⁴⁹⁴ payment of the legal rate of- interest on condemnation awards.

(1) The appellants argue, first, that there is no statutory authority for application of a six percent interest rate in a conventional condemnation case. Even if such interest rate does apply, the appellants further contend that it is unconstitutional because it violates the just compensation clauses of the United States and Maryland Constitutions. We hold that the trial court properly sustained the County’s demurrer to Count II. It is elementary that the sovereign may not take private property for public use without payment of "just compensation” to the property owners.

See U.S. Const, amend. V and Md. Const., art. Ill, § 40. The Supreme Court has interpreted "just compensation” to be the "full and perfect equivalent in money of the property taken” from the landowner.

United States v. Miller, 317 U.S. 369, 373 , 63 S.Ct. 276, 279 , 87 L.Ed. 336, 342 (1943), reh’g denied, 318 U.S. 798 , 63 S.Ct. 557 , 87 L.Ed. 1162 (1943). This compensatory award is no more than indemnity for the loss caused by the taking and is intended to put the landowner in as good a pecuniary position as if no taking had occurred. Toward this end, the Supreme Court did not lay down a general formula applicable to all cases. Instead, since the monetary award is dependent on the facts of each case, the fair market value of the property, at the time of the taking, serves as a practical guide and standard. 2 This Court has traditionally equated "just compensation” with "fair market value of the land at the time of the taking.” State Roads Comm. v. Warriner, 211 Md. 480, 485 , 128 A.2d 248, 251 (1957).

For purposes of condemnation proceedings, the legislature has defined "fair market value” as: "the price as of the valuation date 3 for the highest and best use of the property which a vendor, willing ⁴⁹⁵ but not obligated to sell, would accept for the property, and which a purchaser, willing but not obligated to buy would pay,...” Code (1974,1981 Repl. Vol.), Real Property Article, § 12-105 (b). The jury may properly consider various elements that influence market value at the time of the taking in its determination of damages. For example, we have held that "consideration may be given to any utility to which [the land] is adapted and for which it is immediately available!;]” as well as the condition of the land, improvements on the land, and the effect, if any, on the remainder of the land where only a portion is taken.

Pumphrey v. State Roads Comm., 175 Md. 498, 506 , 2 A.2d 668, 671-72 (1938). The jury may also take into account the sales of comparable lands, State Roads Comm, of Maryland v. Wood, 207 Md. 369, 373 , 114 A.2d 636, 638 (1955); evidence of reasonable probability of rezoning, Warriner, supra, at 484 , 128 A.2d at 251-252 ; and, "any special features which may enhance [the property’s] marketability . . . .” Brack v. M. & C. C. of Baltimore, 125 Md. 378, 381 , 93 A. 994, 995 (1915). However, the jury should disregard any enhancement in value caused by the proposed project for which the property is taken. State Roads Comm. v. Parker, 275 Md. 651, 683 , 344 A.2d 109, 127 (1975); Code (1974, 1981 Repl.

Vol.), Real Property Article, § 12-105(b). In each case, the value of the land, with reference to its uses and purposes, is the essential fact to consider, and the appropriate approach to the fair market value determination will depend on the facts of the case. Miller, supra, 317 U.S. at 373-74 , 63 S.Ct. at 280 , 87 L.Ed. at 342 . While the jury determines the amount of just compensation in condemnation cases (i.e., fair market value), the legislature has provided that the condemnees are entitled to additional elements of damage.

In Lore v. Board of Public Works, 277 Md. 356 , 354 A.2d 812 (1976), this Court held ⁴⁹⁶ that one of those additional elements is interest on the judgment. Judge Digges stated for the Court: "Having concluded that in condemnation cases the General Assembly may grant property owners more than the constitutional minimum of'just compensation,’ we must ask whether the Maryland Legislature has done so in regard to takings such as the one now before us and, if so, whether interest on the award is one of the additional elements of damage it has authorized. We think it clear that when in 1963, as a result of an extensive study undertaken at the direction of its Legislative Council, the General Assembly completely revised this State’s law pertaining to eminent domain, it specifically provided that, in addition to the payment of 'just compensation,’ other elements of damage should be included in the award to be paid the property owner. It seems equally obvious to us that one of the extra elements of damage this revision authorizes to be disbursed to property owners, is the very one at issue here — interest on the award, computed from the date of the entry of the judgment nisi to the time the judgment is satisfied.” Id. at 359 , 354 A.2d at 814 (footnote and citation omitted).

This Court has also held that the general rules of procedure apply to condemnation proceedings. See Hammond v. State Roads Comm., 241 Md. 514, 517 , 217 A.2d 258, 260 (1966). Therefore, under Md. Rule 642, the property owners are entitled to the legal rate of interest on the judgment in a conventional condemnation proceeding. 4 See Paape v. Grimes, 256 Md. 490, 494 , 260 A.2d 644, 646 (1970) (where no specific rate is given, term "interest” is construed to be at legal rate). The legal rate of interest for the time period in question was six percent.

Md. Const., art. Ill, § 57. See footnote 1, supra. Accordingly, we hold that the appellants ⁴⁹⁷ were legally entitled to interest on the award at the rate of six percent from the date of entry of judgment to the date of payment.

The second prong of the appellants’ argument, that the six percent rate is unconstitutional, is without merit. As discussed above, "just compensation” means "the full and perfect equivalent in money of the property taken [,]” Miller, supra, 317 U.S. at 373 , 63 S.Ct. at 279 , 87 L.Ed. at 342 , and does not include interest. Moreover, we would point out that interest in condemnation cases was not allowed at common law and is a matter of legislative grace. See Lore v. Board of Public Works, supra.

Accord Norcross v. Cambridge, 166 Mass. 508, 511 , 44 N.E. 615, 616 (1896); Dept. of Transp. v. New Century, 436 N.E.2d 225, 228 (Ill. App. 1982). It is well settled in Maryland that "just compensation” in a condemnation case does not include interest. In Norris v. Baltimore, 44 Md. 598 (1876), Judge Miller stated: "It is insisted on the part of the appellants, that interest in [a condemnation] case when payment is thus delayed, is a necessary ingredient of the 'just compensation’ provided by the Constitution for taking private property for public use.

We cannot, however, so regard it. It has long been the settled law of Maryland, that both private and municipal corporations, when authorized to exercise the power of eminent domain, have the right to renounce the inquisition and select a more eligible route, or to wholly abandon the improvement or enterprise, at any time before actual payment of the amount assessed, either by commissioners or jury, and until that time no title to the property condemned vests in the corporations. But when this sum is paid or tendered, the title vests, and the constitutional requirement is gratified. Nothing more than this sum can, in any case, be demanded by the property owner, as, and for the compensation which the Constitution secures to him.

This we consider to be the firmly ⁴⁹⁸ established law of this State.” Id., at 604 (emphasis in original) (numerous citations omitted). While the legislature has provided for the additional element of interest on the judgment, Lore, supra, the interest paid for the period between the judgment ñisi and the taking is not intended to be part of the "just compensation” to which the condemnees are constitutionally entitled for the taking of the land. Rather, the purpose of the interest is to compensate for the "loss of the use of the monies represented by the judgment . .., and the loss of income thereon, between the time of the entry of the judgment nisi... and the satisfaction of the judgment by the payment.” I. W. Berman Properties v. Porter Brothers, Inc., 276 Md. 1, 24 , 344 A.2d 65, 79 (1975). (2) The appellants next argue that, under the due process clauses of the United States and Maryland Constitutions, they are entitled to the amount of interest earned by the County on the amount of the verdict during the intervening period.

At the trial on the merits, the parties stipulated that the average yield on the County’s short-term investments was as follows: March 14.48 percent April 15.28 percent May 9.18 percent June 8.59 percent The appellants contend that a taking occurred as early as the date of institution of the condemnation proceedings because they took no further action toward developing the land once warned that such development could have an adverse effect on the condemnation award. They assert that they were denied the use of their land, and, therefore, should recover the actual amount of interest earned by the County. The appellants also claim that they are entitled to compensation for the appreciation of the value of their property. We reject the appellants’ arguments on both points.

As the County points out, the parties stipulated, prior to the trial in ⁴⁹⁹ the condemnation proceedings, that the value of the property would be fixed as of December 19,1978. This stipulation was entered at the risk of both parties since, in these uncertain economic times, the property value could have depreciated by the time the inquisition award was entered. Having entered such stipulation freely and voluntarily, the appellants cannot now claim entitlement to an alleged appreciation of the property value from the agreed date to the date of payment. Moreover, the appellants were not entitled to any compensation until a taking occurred.

In a conventional condemnation case, the time of taking is statutorily defined. See Code (1974, 1981 Repl. Vol.), Real Property Article, § 12-102. Section 12-102 (1) prescribes the time of taking in "quick-take” procedures; section 12-102 (2) states that a taking occurs "[i]n every other case, if the plaintiff pays the judgment and the costs pursuant to Subtitle U of the Maryland Rules” (emphasis supplied). 5 Accord Schreiber v. Baltimore City, 248 Md. 425, 427 , 236 A.2d 732, 733 (1968).

We hold that, by definition, a taking did not occur until June 30, 1980. While there may be circumstances that warrant a finding that a compensable taking has occurred prior to payment of judgment, we hold that there was no such taking in this case. As we stated in Stevens v. City of Salisbury, 240 Md. 556 , 214 A.2d 775 (1965); "It is an accurate statement to say that every restriction upon the use and enjoyment of property is a 'taking’ to the extent of such restriction; but every 'taking’ is not a 'taking’ in a constitutional sense for which compensation need be paid.'... [I]t is now established that reasonable regulation, which is not confiscatory, but which leaves the owner in substantial enjoyment of his property, although diminishing its value through the restriction of its use, is valid without compensation.’ ... [I]n order to be compensable, the damage resulting ⁵⁰⁰ from the restriction must be 'substantial,’ and constitute 'severe interferences which are tantamount to deprivations of use or enjoyment of property.’ ” Id. at 567 , 214