Case Law Summaries

The Port Authority of New York and New Jersey v. Hartz Mountain Industries, Inc.

• Opinion Date: December 19, 2001
• Real Property Law
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CONDEMNATION; INTEREST RATES—A court has the discretion to set the interest rate to be paid by a condemning authority on the deficiency between the ultimate award and the amount previously deposited by the authority, and that rate can be the “tort” rate, the prime rate or some other interest rate appropriate under all of the circumstances.

A public authority condemned land. Dispute arose as to whether the condemnation actually should have been filed under Title 20 instead of Title 32. The key difference is that under Title 32, the condemning authority only needs to deposit an amount equal to the assessed value of the property, whereas under a Title 20 condemnation, the estimated fair market value has to be deposited with the court. The authority deposited the assessed value of the property and the property owner withdrew those funds, with accrued interest. Ultimately, an award equal to the fair market value, about seven times the property’s assessed value, was entered by the Condemnation Commissioners. The condemning authority was directed to pay the difference and both parties were ordered to either agree to an appropriate judgment interest rate or submit the issue to a trial judge. The parties could not agree on an appropriate interest rate. The lower court took the position that conservative U.S. Treasury bill rates should apply, whereas [the property owner] asserted that the prime rate ... should apply.” Each party offered expert testimony that the interest rate advocated was the appropriate indicator of market interest rates. The condemning authority’s expert testified that it was “her ultimate opinion that a reasonable, prudent investor would not expect a rate of return equal to the prime rate but, rather, would expect the rate of return reflected by U.S. Treasury Bills.” The property owner’s expert opined that a public entity might seek conservative investments, but a property owner, as a private business, “seeks and typically obtains rates of return on its investments of [much more] reflecting the greater risks associated with its business.” The property owner further contended that the condemning authority “had borrowed money from [it] by not depositing the full amount pending final judgment and that, as a lender, [the property owner] would demand at least the prime rate.” The lower court rejected both views. If elected to apply the rate as provided in R. 4:42-11(a)(iii) making awards of prejudgment interest within the discretion of a trial judge. As such, a trial judge should consider “prevailing commercial interest rates, the prime rate or rates, and the applicable legal rates of interests.” In condemnation proceedings, “interest is imposed to ‘best indemnify’ the condemnee for the loss of the use of the compensation from the date of taking.” The Appellate Division felt that the court rule interest rate struck a balance between two positions. It pointed out that the property owner was not a lending institution and that there was no evidence that it could have earned an amount equal to the prime rate. There was no actual support that the much, much higher rate of return it claimed it would have been received with the money in hand. The Court noted that in a different matter, a different Appellate Division panel had awarded interest at the prime rate. Here, the record was quite different. Further, the Court had previously held that the condemning authority had the discretion to bring the condemnation action under Title 32. As such, the Court did not believe that the condemning authority should have been penalized for doing so by imposing an interest rate greater than that reasonably determined by the lower court to be appropriate, based on the record before the lower court.

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