King v. State Roads Commission of the State Highway Administration

MURPHY, Chief Judge. The primary issue in this “quick-take” condemnation case is whether the constitutional requirement that the State pay “just compensation” for private property taken for public use includes, as an integral part thereof, interest at the prevailing market rate from the time possession of the property is taken to the time of payment of the condemnation award. I Both the Fifth Amendment to the Federal Constitution and Article III, § 40 of the Constitution of Maryland prohibit the taking of private property for public use without the payment of just compensation to the property owner. 1 The Fifth Amendment protection is applicable to the states through the Fourteenth Amendment. Chicago, B. & Q.R.R. v. Chicago, 166 U.S. 226 , 17 S.Ct. 581 , 41 L.Ed. 979 (1897); Md.Nat’l Cap.

P. & P. Comm’n v. Chadwick, 286 Md. 1 , 405 A.2d 241 (1979). Decisions of the Supreme Court ⁸⁴ interpreting the Fifth Amendment’s just compensation clause are therefore practically direct authority for our interpretation of the identical provision in Art. Ill, § 40 of the Constitution of Maryland. Bureau of Mines v. George’s Creek, 272 Md. 143 , 321 A.2d 748 (1974). In this regard, “just compensation” for the taking of property means the full monetary equivalent of the property taken; the property owner is to be put in the same position monetarily as he would have occupied if his property had not been taken.

Almota Farmers Elevator & Whse Co. v. U.S., 409 U.S. 470, 473-74 , 93 S.Ct. 791, 794-95 , 35 L.Ed.2d 1 (1973); United States v. Miller, 317 U.S. 369, 373 , 63 S.Ct. 276, 279 , 87 L.Ed. 336 (1943); Dodson v. Anne Arundel County, 294 Md. 490, 494 , 451 A.2d 317 (1982). 2 II A distillation of the pertinent principles pertaining to the two basic methods of property condemnation is essential to a proper understanding of the issue now before us. (A) Conventional Condemnation In conventional condemnation cases, the condemnor files a condemnation petition pursuant to the provisions of Subtitle U (Eminent Domain) of the Maryland Rules. No right to possession of the property is obtained by the condemning authority until it pays the full amount of the condemnation judgment, plus costs. Walker v. Acting Di ⁸⁵ rector, 284 Md. 357, 361 , 396 A.2d 262 (1979); Maryland Code (1974, 1981 Repl.Vol.), § 12-102(2) of the Real Property Article; Maryland Rule U22.

While the property owner is not entitled to prejudgment interest for the period between the filing of the petition and the entry of judgment upon the inquisition, he is entitled to receive post-judgment interest on the award at the legal rate from the date of entry of the judgment nisi to the date the award is actually paid. Dodson v. Anne Arundel County, 294 Md. 490 , 451 A.2d 317 (1982); Lore v. Board of Public Works, 277 Md. 356 , 354 A.2d 812 (1976); Maryland Rule 642. Post-judgment interest at the legal rate is paid in conventional condemnation cases as a matter of legislative grace, and not as of constitutional right, since in such cases interest is not an element of the constitutionally mandated just compensation formulation; rather, it is an element of damages, additional to the just compensation required by the constitution, authorized by statute to compensate the condemnee for the loss of the monies due and owing to him from the date the condemnation judgment is entered until it is paid. Dodson, supra, 294 Md. at 497 , 451 A.2d 317 ; City of Baltimore v. Kelso Corp., 294 Md. 267 , 449 A.2d 406 (1982); Walker, supra; Lore, supra.

The legal rate of interest, as prescribed by § 57 of Art. Ill of the Constitution of Maryland, is six percent per annum “unless otherwise provided by the General Assembly.” By ch. 798 of the Acts of 1980, now codified as Code (1980, 1983 Cum.Supp.), § 11-107 of the Courts and Judicial Proceedings Article, the legal rate of interest to be paid on most judgments, including condemnation judgments, was increased to ten percent, effective July 1, 1980; this rate applies to all outstanding judgments and runs from that date until the judgment is satisfied. Kelso, supra. (B) Quick-take Condemnation In quick-take cases, the condemning authority takes possession of the property prior to trial upon payment into ⁸⁶ court of its estimate of the value of the property taken. The condemnee may immediately withdraw the amount of the quick-take deposit and may also recover the amount of any deficiency where the value of the property is later determined at trial to be greater than the amount initially deposited by the condemnor.

In addition, the condemnor is required by § 12-106(c) of the Real Property Article to “pay interest at the rate of 6 percent per annum on any difference between the amount of money initially paid into court for the use of the defendant and the jury award as stated in the inquisition, from the date the money was paid into court to the date of the inquisition or final judgment, whichever date is later.” The prejudgment interest authorized by § 12-106(c) in quick-take cases is not a matter of legislative grace, as with the post-judgment interest authorized in conventional condemnation cases. Rather, it is a part of the just compensation required by the constitution to be paid for the taking; it is designed to pay the condemnee the “time value” of the money he should have received for his property on the day it was taken. Kelso, supra, 294 Md. at 271, 449 A.2d 406 ; Hammond v. State Roads Comm., 241 Md. 514, 519 , 217 A.2d 258 (1966). In other words, interest in quick-take cases, unlike interest in conventional condemnation cases, is a constitutionally required element of just compensation and no specific statutory authority is required for its payment.

Our cases, citing extensive Supreme Court authority, have repeatedly recognized the principle that the constitutional requirement of just compensation in quick-take cases entitles the property owner, as a matter of constitutional right, to recover interest from the date of the taking to the date of payment. Kelso, supra, 294 Md. at 271, 449 A.2d 406 ; Walker, supra, 284 Md. at 361 , 396 A.2d 262 ; Hammond, supra, 241 Md. at 519 , 217 A.2d 258 . “Quick-take” condemnation proceedings are authorized in limited circumstances by §§ 40A through 40C of Art. Ill of the Constitution of Maryland. Section 40B, applicable in this case, authorizes the General Assembly to provide by law ⁸⁷ for the State Roads Commission to take immediate possession of property needed for State highway purposes “upon payment therefor to the owner or owners thereof ..., or into Court, [of] such amount as said State Roads Commission shall estimate to be of the fair value of said property, provided such legislation also requires the payment of any further sum that may subsequently be awarded by a jury.” The constitutional provision has been implemented by statutory provisions contained in Code (1977), Title 8 of the Transportation Article. Ill Utilizing its quick-take authority, the State Roads Commission (the Commission) filed a petition on April 26,1977 t,o take immediate possession of the appellant King’s property for highway purposes.

The Commission estimated the value of the property at $16,875 and paid that sum into court. Over three years later, the case came to trial before a jury in the Circuit Court for Montgomery County which, on October 20, 1980, determined the value of the land taken and the damage to the remainder to be $64,693.50, resulting in a deficiency of $47,818.50. On January 13, 1981, the Commission paid into court $59,284.31, representing the amount of the deficiency, plus six percent interest from the date of the taking on April 26, 1977 to the date of payment of the condemnation award. King withdrew these funds shortly thereafter.

On February 6, 1981, King filed a motion with the court seeking “supplemental interest.” He claimed that the six percent interest rate authorized by § 12-106(c) was unconstitutional in the present economy, as it deprived him of part of the constitutionally mandated “just compensation” for the taking of his property. King asked the court to conduct a separate hearing on the issue of the constitutionality of the six percent interest rate set forth in § 12-106(c), and to pass an order awarding interest on the deficiency at a rate which would fulfill the constitutional requirement of just ⁸⁸ compensation. The Commission opposed the motion, claiming that the § 12-106(c) six percent rate was constitutional. It also contended that the constitutional issue had been waived since King had failed to raise the question at trial.

The court (Bell, J.) denied King’s motion. It held that the six percent interest payment made by the State under § 12-106(c) was not required by the constitution as a part of the “just compensation” paid for the property but rather was an additional element of damages, i.e., that “interest on the award is in addition to, not an integral part of ‘just compensation.’ ” The court relied for its holding on two conventional condemnation cases, Lore v. Board of Public Works, 277 Md. 356 , 354 A.2d 812 (1976), and Walker v. Acting Director, 284 Md. 357 , 396 A.2d 262 (1979). King appealed. After granting certiorari, we found it necessary to dismiss the appeal because a final judgment had not been entered in the case.

See King v. State Roads Comm’n, 294 Md. 236 , 449 A.2d 390 (1982). We did not, therefore, address the merits of King’s supplemental interest claims. Final judgment was thereafter entered in the case. The court awarded interest at six percent on the deficiency from April 26,1977, the date of taking, through October 20, 1980, the date of the jury’s award, and from that date until the time of actual payment in January of 1981 at the ten percent post-judgment interest rate set forth in § 11-107 of the Courts Article.

From that determination, King again appealed. We granted certiorari prior to decision by the Court of Special Appeals to resolve the important question presented in the case. IV King urges that we remand the case to the trial court to determine the proper rate of interest to be paid on the deficiency award. First, he claims that in quick-take condemnations, interest on the difference between the amount initially deposited on the date of the taking and the amount of the final award is a constitutionally mandated integral ⁸⁹ part of just compensation.

Second, he urges that the six percent interest rate prescribed by § 12-106(c) of the Real Property Article is merely a statutory minimum and that a higher interest rate may be awarded if necessary to satisfy the constitutional requirement of just compensation. Third, he suggests that § 12-106(c) is unconstitutional because (a) it usurps the authority of the judicial process to determine the proper rate of interest to be paid as part of just compensation for the taking and (b) because the six percent rate is inadequate to satisfy the constitutional just compensation requirement. King asserts that “the determination of the interest rate which constitutes just compensation is a matter to be judicially determined, not by a jury, but rather by a Court following a determination that there is, in fact, a deficiency on the [condemnor’s] initial deposit .... ” As we have already indicated, the trial judge was wrong in concluding that interest is not an integral part of just compensation in a quick-take case. The principle that it is an element of just compensation is clearly recognized by our cases of Hammond and Kelso, supra, both quick-take condemnations, as well as by dicta in Walker , a conventional condemnation proceeding.

The Supreme Court recognized and applied the principle in Seaboard Air Line Ry. v. U.S., 261 U.S. 299 , 43 S.Ct. 354 , 67 L.Ed. 664 (1923), holding that when the government takes private property before paying full value for it, the property owner has a federal constitutional right to receive interest from the date of the taking to the date of payment. Other Supreme Court cases have reached the same result. See, e.g., United