State Roads Commission of the State Highway Administration v. G.L. Cornell Co. Savings & Profit Sharing Trust

WILNER, Chief Judge. The State Roads Commission, a Constitutional unit within the State Highway Administration, appeals a judgment of the Circuit Court for Montgomery County entered in a “quick-take” condemnation case. Its sole complaint concerns the award of pre-judgment interest. Although much of the basis for appellant’s complaint was of its own making, we think that there is merit in it.

We therefore shall remand the case for an appropriate amendment to the judgment. I. CONSTITUTIONAL AND STATUTORY BACKGROUND The issue before us arises from an interplay between appellant’s Constitutional obligation to pay just compensation when it condemns private property and the statutory framework implementing its separate Constitutionally-derived authority to engage in “quick-take” condemnation. It will be helpful to a consideration of that issue to begin by examining the Constitutional provisions and the relevant statutes and Rules implementing them. As the Court of Appeals pointed out in King v. State Roads Com’n of St. Hwy.

Admin., 298 Md. 80 , 467 A.2d 1032 (1983), in conventional eminent domain cases, the State commences the condemnation process by filing a petition in court to condemn the property. Unless the parties agree on the amount of damages to be paid for the taking, a trial ⁷⁶⁸ ensues and the. court, generally through a jury, determines the fair value of the property. That amount is entered as a judgment. The State has no right to possess the property and does not acquire title to it until it pays the full amount of the judgment, plus costs.

In a “quick-take” case, the State is entitled to take, and usually does take, possession of the property before the fair value of the property is established. See State Roads Comm. v. Orleans, 239 Md. 368, 377 , 211 A.2d 715 (1965). At the commencement of the proceeding — at or before the time it takes possession — it pays to the owner, or into court for the owner’s benefit, what it estimates the fair value of the property to be. If the parties are unable to agree on fair value, that issue is tried and resolved by a jury, and, if the fair value ultimately determined is greater than what the State has previously paid, it must make up the difference, together with interest on that difference.

The State Roads Commission was not authorized to engage in “quick-take” condemnation until 1942. Art. Ill, § 40 of the Maryland Constitution provided then, as it does now, that the General Assembly shall enact no law authorizing private property to be taken for public use “without just compensation, as agreed upon between the parties, or awarded by a Jury, first being paid or tendered to the party entitled to such compensation.” The only exception to that requirement was a special provision in § 40A of art. Ill, adopted in 1912, authorizing the General Assembly to permit the State or Baltimore City to take land in the City for public .use upon payment of an amount determined by court-appointed appraisers and “securing the payment of any further sum that may be awarded by a jury____” The Commission’s authority to use this variation stems from 1941 Md. Laws, chs. 606 and 607. The latter enactment proposed a new § 40B to art.

Ill, which was ratified by the voters in November, 1942. It states: “The General Assembly shall enact no law authorizing private property to be taken for public use without just compensation, to be agreed upon between the parties or ⁷⁶⁹ awarded by a jury, first being paid or tendered to the party entitled to such compensation, except that where such property in the judgment of the State Roads Commission is needed by the State for highway purposes, the General Assembly may provide that such property may be taken immediately upon payment therefor to the owner or owners thereof by said State Roads Commission, or into Court, such amount as said State Roads Commission shall estimate to be 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.” This Constitutional provision did not grant any “quick-take” authority to the Commission itself. It simply empowered the General Assembly to enact legislation providing such authority. That was the function of ch. 606.

Contingent on the ratification of ch. 607, it authorized the Commission to take possession of property and proceed with highway construction prior to the ultimate determination and payment of fair value, provided that (1) it first pay to the owner, or into court, the amount it estimates to be the fair value, and (2) if the parties were unable to agree on compensation, it institute condemnation proceedings, in accordance with the general statutes governing such proceedings, within 60 days after completion of construction. Implicit in that latter proviso was that the Commission promptly pay the amount ultimately determined to be due. See 1939 Md.Code, art. 33A, §§ 13, 17. The provisions first enacted by ch. 606 have been amended, expanded, and recodified several times in the ensuing years.

They now appear as Parts III (§§ 8-318 through 8-331) and IV (§§ 8-334 through 8-339) of title 8, subtitle 3 of Md. Transp. Code Ann. These two parts provide alternative methods by which the Commission may exercise its “quick-take” authority. Part III sets forth a non-judicial process for resolving disputes over fair value that the Commission, at its option, may invoke before commencing formal judicial proceedings. Part IV allows the Commis ⁷⁷⁰ sion to dispense with that process and proceed directly to court.

See King v. State Roads Comm’n., 294 Md. 236 , 449 A.2d 390 (1982). In this case, the Commission proceeded pursuant to Part III, and so we shall deal only with the relevant statutes in that Part, as supplemented by some of the Md. Rules. Sections 8-320 and 8-321 seek to assure that the Commission completes all the necessary groundwork before proceeding to exercise quick-take authority. Section 8-320 requires that “[bjefore any property is condemned under this part,” the State Highway Administration must “[c]omplete appropriate engineering and other studies” and prepare a construction plan showing the location of the proposed highway, the length of the construction, and the width of the right-of-way necessary for the construction.

It must then prepare plats showing, among other things, “[t]he fee simple and easement area to be acquired” and the property lines of the owners whose property will be affected by the acquisition. Finally, after the plats are prepared, the Administration must make the necessary studies and evaluations to determine the fair value of the property to be acquired, prepare an estimate of the fair value, and provide for payment of that amount as required by § 8-323. Section 8-321 requires these plats and estimates to be submitted for approval by the Commission. After such approval, the plats must be filed with the appropriate circuit court clerk for recording.

Section 8-323 continues the chronological sequence. It states that after the plats are filed for record, the Commission “immediately” shall file a petition for condemnation, stating, among other things, the Commission’s approved estimate of fair value, and pay to the property owner or into court the estimated fair value specified in the petition. If the money is paid into court, the property owner is entitled to withdraw it without prejudice to any of his rights if he agrees to repay the Commission any excess of what he withdraws over the final award. Subsection (c) makes clear that a payment under subsection (a) does not limit in any ⁷⁷¹ way the amount of the final award that may be allowed in the subsequent condemnation proceedings.

Section 8-324 provides that, upon the filing of the petition and the payment of money pursuant to § 8-323, the Administration may take immediate possession of the property and proceed with construction. That, in effect, is the “quick-take” provision. Sections 8-325 through 8-329 set forth a procedure for resolving disputes over the amount of compensation to be paid. Section 8-325 requires the Commission, after payment under § 8-323, to seek to acquire the property “by amicable negotiation.” Subsection (b) provides that “[f]or purposes of these negotiations, the Commission shall determine the value of the property to be acquired as of the date the payment is made to the property owner or into court under § 8-323____” (Emphasis added.) Sections 8-326 through 8-329 provide for a form of non-binding arbitration in the event amicable negotiation proves unsuccessful.

Section 8-327 establishes a board of property review in each county of the State. With exceptions not relevant here, § 8-326 requires the Commission, upon the failure of negotiations, to certify the case to the appropriate board for a determination of fair value. Md. Rule U27, which implements the statute, allows any party to have a case certified to the board “not later than six months after the plats ... have been recorded.” Section 8-323 empowers the board to hear promptly all cases certified to it and to determine the total amount of the award to be paid by the Commission. Md. Rule U27 d., indeed, requires the board to hear the case within three months after the referral, and if the board fails in that duty or fails to file an award within 30 days after its hearing, any party, by complying with section f. of Rule U27, can divest the board of further jurisdiction and have the case remanded to the court.

Section 8-328(c), consistently with § 8-325, provides that the board shall determine the fair value of the property to be acquired as of the date the payment is made under ⁷⁷² § 8-323. Section 8-329 makes the award of the board non-binding. It provides that, if any party is dissatisfied with the board’s findings or award, “the case may be appealed to the court,” which “shall hear and determine the case de novo, as provided by law and the Maryland Rules.” In fact, the court proceeding is not in the nature of an “appeal” but an original action to condemn the property. Volz v. State Road Commission, 221 Md. 209 , 156 A.2d 671 (1959).

Supplementing § 8-329 is Md. Rule U27 g., which provides that any party who is dissatisfied with the board’s award may, within 30 days after filing of the award, file a notice of dissatisfaction with the clerk. Within 30 days after the filing of such a notice, the condemning authority must file a proceeding for condemnation “by filing in court a petition for condemnation.” 1 The heart of the dispute before us arises from §§ 8-330 and 8-331. Section 8-330 provides that: “If, within 1 year after payment is made under § 8-323 of this subtitle, the Commission fails to ascertain the entire amount to be paid for the property and acquire title to it by deed or condemnation or, within that same 1-year period, fails to file timely a petition for condemnation as required by the Maryland Rules, then the fair value of ⁷⁷³ the property shall be the greater of the values determined as of: (1) The date the title to the property is acquired; and (2) The date the payment was made under § 8-323 of this subtitle.” (Emphasis added.) Section 8-331 states: “At the conclusion of all proceedings, the Commission shall pay to the property owner: (1) Any excess of the final award over the amount paid under § 8-323 of this subtitle; and (2) Interest on the excess from the date of payment under § 8-323 of this subtitle at the rate of 6 percent a year.” Section 8-331 parallels a similar provision in title 12 of the Real Property article, which deals generally with eminent domain. Section 12-106(c) of that article provides: “In proceeding under Article III of the Constitution of the State ... the plaintiff shall 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.” Where, as here, § 8-330 comes into play, several different dates may become relevant in determining the full amount to which the property owner is entitled — the date payment is made under § 8-323, the date the property is taken (if that is different from the date of payment under § 8-323), the date the “final award” is paid, and the date “the title to the property is acquired.” II.

FACTUAL BACKGROUND On October 9, 1985, the State Roads Commission filed in the Circuit Court for Montgomery County an “informal” petition to condemn, by “quick-take,” certain property ⁷⁷⁴ owned by appellee. In the petition, the Commission asserted its belief that the fair value of the property was $1,275,-800, and it therefore deposited that amount with the clerk of the court. On December 12, 1985, the Commission filed a notice of referral of the case to the Montgomery County property review board, alleging that the parties had been unable to agree on the fair value of the property. A hearing was set before the board on April 23, 1986, but a week before that scheduled hearing, the Commission informed the board that the plats and construction plans were in need of revision and so it asked for a postponement.

Nothing more happened until October 10, 1986, when the Commission filed a formal condemnation petition in the circuit court. Four days later, it informed the board that, “[d]ue to pending Plat Revisions,” it was “removing this case from your jurisdiction and will proceed directly to trial.” The Commission did not actually take possession of appellee’s property and begin construction until June 15, 1987. On February 29, 1988, the Commission informed appellee that there were to be no changes to the plats after all and that it was ready to proceed to trial. The filing of the formal petition came, as the above-noted dates indicate, a year and a day after the payment of the $1,275,800 into court, and so the question arose as to what the appropriate valuation date would be.

In an order entered May 19, 1988, the court, through Judge Weinstein, rejected appellee’s position that the valuation date was to be determined under § 8-330(1), i.e., the date title to the property is acquired, and ruled instead that the valuation was to be determined under Real Property article, § 12-103, namely, the date of taking, June 15, 1987. The case first came to trial in July, 1988, before Judge Messitte. Over appellee’s objection, Judge Messitte refused to depart from Judge Weinstein’s conclusion as to the appropriate valuation date, and so it appears that the jury was instructed to value the property as of June, 1987 rather than the date of trial (which, as a practical matter, would most closely approximate the date of title acquisition). On ⁷⁷⁵ July 21, the jury returned an inquisition verdict establishing a fair value of $2,400,000, whereupon, on August 12, 1988, the Commission deposited with the court an additional $1,320,840, making the total deposit $2,596,640.

Appellee was dissatisfied with that result, largely because of what it regarded as an erroneous valuation date, and it promptly filed a motion for new trial which, in December, 1988, the court granted. Prior to retrial, the parties entered into three basic stipulations. First, they agreed that the valuation date was to be November 27, 1989. Second, through both a stipulation and a Consent Inquisition, they agreed that the full extent of damages sustained by appellee from the taking, other than pre-judgment interest, was $3,300,000 and that, upon payment of that sum, title to the property would vest in the Commission.

And finally, they agreed that their dispute over the amount of pre-judgment interest to be awarded would be separately heard and determined by the court, sitting without a jury. The dispute over pre-judgment interest centered on three issues: (1) whether, because the agreed fair value was calculated as of the time of trial, and was greater in amount than the fair value at the time of taking, any pre-judgment interest was due, (2) if such interest was due, whether it was limited to the 6% rate provided for in § 8-331 and Real Prop, art., § 12-106, and (3) if not, what the rate should be. The Commission’s view as to the first issue was, and remains, that where the value of the property has appreciated since the taking and the owner receives the benefit of that appreciation through a current valuation date, pre-judgment interest is neither Constitutionally nor statutorily required. The court rejected that argument and proceeded to hear evidence as to the appropriate rate.

In an order entered January 30, 1990, the court found that pre-judgment interest was Constitutionally due and that the appropriate rate of pre-judgment interest was 9% per annum. Applying that rate to the difference between the $3,300,000 agreed fair value and the amounts previously ⁷⁷⁶ deposited by the Commission, it awarded pre-judgment interest of $611,848. The Commission’s appeal is from that part of the judgment. It raises essentially the first two issues just noted — whether any pre-judgment interest is due and, if so, whether it is limited to the statutory rate.

III

DISCUSSION As we have indicated, the issues raised by the Commission involve an interplay between the Constitutional requirement that “just compensation” be paid for the taking of private property and the statutory implementation of the Legislature’s power to authorize “quick-take” condemnation by the Commission. Although the statutory scheme is obviously subject to the supervening Constitutional mandate of just compensation and, to some extent, serves to implement that mandate, it also serves other purposes and has to be viewed in that light. It would be helpful, we think, to look at the two separately before analyzing how they mesh together. A. Just Compensation The requirement of just compensation emanates not only from art.

Ill, §§ 40 and 40B of the Maryland Constitution but also from the Fifth and Fourteenth Amendments to the United States Constitution. As pointed out in King v. State Roads Com’n of St. Hwy. Admin., supra, 298 Md. at 84 , 467 A.2d 1032 , “ ‘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.” From the Constitutional perspective, it has long been the rule that “[w]ith respect to the property taken the award must be