441 Mass. 605 | Mass. | 2004
As in M.B. Claff, Inc. v. Massachusetts Bay Transp. Auth., ante 596 (2004), the present appeal contends that the Superior Court judge erred in utilizing the statutory interest rate set by G. L. c. 79, § 37, to calculate the interest to be awarded as part of an eminent domain damages case. The landowner, Liberty Square Development Trust (Liberty), filed a motion on the day of trial asking the judge to determine the interest rate based on a “prudent investor” standard rather than on the statutory standard. The judge ruled that interest was to be calculated at the statutory rate. After entry of judgment reflecting that rate, Liberty appealed. We transferred the case to this court on our own motion. For the following reasons, we conclude that Liberty did not make a sufficient showing that the statutory rate, as applied to the land taking in question, failed to provide reasonable compensation, and we therefore affirm the judgment.
1. Background. On June 7, 1995, the city of Worcester (city) effected a taking of two parcels of land owned by Liberty, located on Commercial and Central Streets. The city offered a nominal sum as compensation, which Liberty rejected. Liberty filed an action for its damages on May 6, 1998.
On June 19, 2002, immediately prior to the start of trial, Liberty filed a “motion to determine and assess a proper rate of interest.” In that motion, Liberty contended that the interest rate set by G. L. c. 79, § 37, was inadequate to provide it with just compensation. Specifically, whereas the statutory formula would provide a rate of 5.88 per cent per year (that rate being based on the auction price of one-year United States Treasury bills immediately prior to the date of taking), Liberty contended that “[a] prudent investor, investing in a mix of low to moderate risk securities of varying maturity, would have realized an annual return of 6.5% to 7.5% depending upon the mix in the portfolio.” The motion recited the rates earned on various forms of investments during the years 1994 through the first quarter of 1999 (Moody’s AAA rated corporate bonds, thirty-year Treasury bonds, five-year Treasury notes, six-month bankers acceptances, and the prime rate), advising the court that “[ejvidence of the rates quoted shall be provided post-verdict, pre-judgment by affidavit or testimony” and that it was “prepared to offer testimony and/or affidavit as to the prudent investor standard in real estate.” No action was taken on the motion prior to trial.
On July 17, Liberty filed a motion to amend the judgment, asking to adjust the interest rate from the 5.66 per cent rate referenced in the judge’s ruling to “the correct rate” of 5.88 per cent.
On July 25, the city also filed a motion to amend the judgment. The city’s motion asked the judge to reduce the interest award on account of Liberty’s dilatory conduct during discovery, which had allegedly caused considerable delay in reaching trial.
On August 16, prior to any ruling on either party’s motion to amend the judgment, Liberty filed a motion for reconsideration of the judge’s ruling on its earlier motion to determine a proper
On August 23, the city tendered a check in the amount of $1,059,132.88 to Liberty’s counsel “in full satisfaction” of the judgment. On August 26, Liberty’s counsel replied that, in light of the unresolved issues concerning the interest award, Liberty was not willing to accept the tendered check “in full satisfaction” of the judgment, but would only be willing to accept it as payment on account.
It appears that the judge held a hearing on the outstanding motions on August 28. At that hearing, he denied the city’s motion to amend the judgment (thereby rejecting the city’s contention that Liberty’s pretrial delay warranted a reduction in the interest award) and allowed Liberty’s motion to amend the judgment, correcting the rate from 5.66 per cent to the 5.88 per cent rate provided by G. L. c. 79, § 37. During the course of the hearing, Liberty also asked (for the first time) that the interest be calculated as compound interest, and raised a concern as to whether the city’s tender of its check on August 23 operated to stop the accrual of postjudgment interest as of July 31.
2. Discussion. The principal issue on appeal is whether the judge erred in denying Liberty’s request to calculate interest based on a “prudent investor” standard rather than at the rate set by G. L. c. 79, § 37.
a. Waiver. As we discussed in M.B. Claff, Inc. v. Massachusetts Bay Transp. Auth., ante 596, 599-601 (2004), there is some merit to requiring a party to plead and then prove at trial a claim that “just compensation” for the taking in question requires application of an interest rate higher than that provided by G. L. c. 79, § 37. Here, Liberty did not raise this issue until literally the morning of trial, normally viewed as a time that is too late to insert a new, substantive claim into the case. Moreover, it did not introduce any evidence on the point at trial, but instead sought leave to produce affidavits or testimony after trial, to the extent that such evidence was deemed necessary to verify the various figures submitted in its motion. However, as we also noted, procedures for determining interest rates in eminent domain cases are not uniform, and property owners have been allowed to challenge the adequacy of statutory interest rates after trial on damages. Id. at 600-601, and cases cited.
Here, it does not appear that the city objected to Liberty’s motion on grounds of untimeliness,* ****
The city next argues that, when Liberty did file a motion to amend the judgment pursuant to Mass. R. Civ. R 59 (e), 365 Mass. 827 (1974), it waived its claim to any interest rate higher than the statutory rate because it asked that the judgment be amended to reflect the “correct interest rate” of 5.88 per cent pursuant to the statute. We do not think that that motion operated to waive the issue. Liberty had already requested, by written motion, that the judge set interest at the rate that a “prudent investor” would have earned, rather than at the statutory rate. That motion had effectively been denied with the judge’s determination that the statutory rate should be utilized. When the interest calculation in the subsequent judgment mistakenly utilized a figure even lower than the statutory rate, Liberty could ask that that technical mistake be corrected without thereby waiving its right to claim that the judge’s earlier substantive decision on the issue was erroneous. When a party’s rights on a prior ruling have already been preserved, that party is not required to raise the same issue again in a rule 59 (e) motion. Where, as here, there is another, independent ground for a rule 59 (e) motion, that motion can assert that other ground without waiving prior issues that have already been raised and decided.* ****
We do agree with the city that Liberty’s later “amended” motion for determination of the interest rate, and Liberty’s
b. Challenge to the statutory interest rate. Under State and Federal constitutional principles, an owner whose property is taken by eminent domain is entitled to “just” and “reasonable” compensation, under the Fifth Amendment to the United States Constitution (“just compensation”) and art. 10 of the Massachusetts Declaration of Rights (“reasonable compensation”). Where, as here, there is delay between the time of the taking and the time the owner receives compensation, an award of interest to compensate the owner for that delay is itself part of the “just compensation” to which the owner is entitled. See Seaboard Air Line Ry. v. United States, 261 U.S. 299, 306 (1923); Verrochi v. Commonwealth, 394 Mass. 633, 636-637 (1985); Woodworth v. Commonwealth, 353 Mass. 229, 231-233 (1967). Because it is a component of the compensation mandated as a matter of constitutional law, the ultimate determination as to what interest rate will provide adequate
However, the Legislature may address the issue of the interest to be paid on damage awards in land taking cases, and any interest rate set by statute enjoys a rebuttable presumption that it is a reasonable rate that would satisfy constitutional requirements. See Tucson Airport Auth. v. Freilich, 136 Ariz. 280, 284 (1983); State v. Jim Lupient Oldsmobile Co., 509 N.W.2d 361, 364 (Minn. 1993); Adventurers Whitestone Corp. v. City of N.Y., 65 N.Y.2d 83, 87-88, appeal dismissed, 474 U.S. 935 (1985). A claimant seeking compensation above the statutory interest rate may overcome that presumption by showing that the statutory rate is so low that it fails to meet the constitutional standard of reasonableness. See Tucson Airport Auth. v. Freilich, supra; Adventurers Whitestone Corp. v. City of N.Y., supra.
A claimant does not meet that burden merely by demonstrating some alternate measurements for an interest rate that might also qualify as “reasonable.” See Tucson Airport Auth. v. Freilich, supra at 283 (finding that twelve per cent was “reasonable rate” did not mean statutory rate of ten per cent was “unreasonable”); Matter of the City of N.Y., 58 N.Y.2d 532, 537-538 (1983), and cases cited (“slight variations” between statutory rate and prevailing rates do not make statutory rate so “unreasonably low” as to be unconstitutional). The concept of a “reasonable” interest rate to compensate for delay in payment connotes a range of figures, not one precise figure. See Tuscon Airport Auth. v. Freilich, supra. Thus, as the first step to proving entitlement to a rate other than the statutory rate, a claimant must demonstrate that the statutory rate is significantly or substantially lower than what would meet the constitutional minimum. See id. at 284 (statutory rate constitutional unless market rates “far in excess”); Redevelopment Agency of Burbank v. Gilmore, 38 Cal. 3d 790, 806 n.19 (1985) (statutory rate provides just compensation if not “substantially below” what prudent investor would have earned); Matter of S. Bronx Neighborhood Dev. Plan, 110 Misc. 2d 571, 572-573 (N.Y. Sup. Ct. 1981), aff’d, 58 N.Y.2d 532 (1983) (statutory rate unconsti
We therefore look at Liberty’s motion, as originally filed, to assess whether Liberty made that initial, threshold showing of unreasonableness.
Moreover, while Liberty’s motion did not set forth how it weighed the investment figures presented to reach its ostensible pmdent investor range of 6.5 per cent to 7.5 per cent, it is apparent from the face of the motion that Liberty’s calculation included higher rates from a time period that was totally irrelevant. Specifically, in each of the investment categories listed, Liberty included rates prevailing in 1994, and in every one of those categories, the rates in 1994 were higher than in any of the subsequent years.
The judge’s assessment of the reasonableness of the statutory rate could also consider the method by which that rate was set. Much of the jurisprudence concerning the inadequacy of statutory rates concerns statutes that set a single, flat rate to be applied to every taking, without regard to any rate being set by the marketplace. See, e.g., United States v. Blankinship, supra at 1276; Miller v. United States, 620 F.2d 812, 837-840 (Ct. Cl. 1980); Redevelopment Agency of Burbank v. Gilmore, supra at 795; Matter of the City of N.Y., supra at 538. By their nature, such fixed rates have a degree of arbitrariness, reflecting a Legislature’s attempt to set its own price for the taking of property without regard to the market.
More recently, however, statutes setting interest rates for eminent domain cases have shifted (as has G. L. c. 79, § 37) to specification of a formula or methodology that is itself tied to some market rate. See, e.g., 40 U.S.C. § 258e-l (2000) (recodified at 40 U.S.C. § 3116); Minn. Stat. § 117.195 (1997); Minn. Stat. § 549.09 (2000). Such fluctuating statutory rates respond to the marketplace and are thus driven by forces that are outside the control of the Legislature (or the taking authority). While an owner remains free to challenge such a rate (see United States v. 50.50 Acres of Land, supra at 1355-1356), courts have been inclined to show greater deference to statutory rates that rise and fall in accordance with market forces on the theory that it is “reasonable” to use a market-driven measure as a fair means of determining just compensation. See United States v. Certain Land Situated in Detroit, 286 F. Supp. 2d 865, 871 (E.D. Mich. 2003); Tulare Lake Basin Water Storage Dist. v. United States, 59 Fed. Cl. 246, 266 (2003). See also Redevelopment Agency of Burbank v. Gilmore, supra at 807 n.21 (court would show deference to legislative adoption of “prevailing-rate formula” as
For these purposes, a legislative selection of an extremely safe form of investment as the yardstick for the interest rate in eminent domain cases is a reasonable choice of measure — judgments in eminent domain cases, after all, are virtually certain of being paid, and the rate of return on a conservative investment with a comparable degree of safety fairly compensates the owner for the delay in payment. See State v. Jim Lupient Oldsmobile Co., 509 N.W.2d 361, 364 (Minn. 1993) (comparing statutory rate to rate on investments that “guarantees safety of principal”). See also United States v. Blankinship, supra at 1276; United States v. Certain Land Situated in Detroit, supra; Matter of S. Bronx Neighborhood Dev. Plan, 110 Misc. 2d 571, 573 (N.Y. Sup. Ct. 1981) (medium term public securities provide basis for calculating proper rate). But see Miller v. United States, supra at 839; United States v. 429.59 Acres of Land, 612 F.2d 459, 464-465 (9th Cir. 1980); Redevelopment Agency of Burbank v. Gilmore, supra at 804-805. Put differently, the constitutional standard of “just compensation” does not require that someone who is guaranteed a return of principal (which is effectively the position of a landowner awaiting payment for a governmental taking) nevertheless be allowed to recoup a rate of return that could only be achieved by placing that principal at greater risk.
Since 1993, G. L. c. 79, § 37, has employed a fluctuating market rate to determine the interest payable on eminent domain damages awards. See St. 1993, c. 110, § 137. The statute employs an interest rate based on the auction price of one-year Treasury bills, a very conservative investment vehicle that appropriately reflects the essentially nonexistent risk that the landowner faces with respect to ultimate payment of the principal owed. See Pettro v. United States, 47 Fed. Cl. 136, 155 (2000) (one-year Treasury bills represent reasonable rate for eminent domain cases because they “account for inflation while avoiding a reward for risks which the plaintiff did not undertake”). Liberty has not identified anything unreasonable
We recognize that the rate set by § 37 could, despite the fact that it is set by a market measure, result in a rate that would be unreasonable in a particular case. Specifically, § 37 sets the rate as of the date of taking (by reference to the last auction prior to the taking), and that rate then remains fixed.
We thus conclude that there was no error in denying Liberty’s request for an alternative computation of interest, as Liberty did not meet its burden of demonstrating that the statutory rate of 5.88 per cent was so unreasonably low as to deprive it of just
However, we note with some urgency that other developments now render G. L. c. 79, § 37, obsolete, as the interest rate defined in that section is premised on the issuance of a form of United States Treasury security that no longer exists. The statute sets the interest rate at the “annual rate equal to the coupon issue yield equivalent, as determined by the United States Secretary of the Treasury, of the average accepted auction price for the last auction of 52-week United States Treasury bills settled immediately before the date of taking.” G. L. c. 79, § 37. However, the fifty-two week United States Treasury bill was discontinued in 2001, with the final auction of that security occurring on February 27, 2001.
It was the Legislature’s obvious intent in § 37 that the interest rate for eminent domain takings be set by reference to a specific market rate that prevailed immediately prior to the date of taking. Now, however, the statute has the effect of setting a permanently fixed rate that does not, even as of the date of taking, reflect market reality by any measure. It has been suggested that the problem of allegedly confiscatory interest rates can be better dealt with by a legislative solution (i.e., the adoption of a market-driven method for calculating interest that would, at least in most cases, satisfy the constitutional requirement of just and reasonable compensation) than by judicial determination on a case-by-case basis, an approach that leads to uncertainty and inconsistency. See Pettro v. United States, 47 Fed. Cl. 136, 154 (2000) (favoring “uniform interest rates in order to avoid discrimination among litigants”); Tucson Airport Auth. v. Freilich, 136 Ariz. 280, 283 (1983). However, if the statute does not utilize a reasonable method for determining an interest rate, constitutional requirements will necessitate judicial determination, and the resulting uncertainty and inconsistency will be unavoidable. Although G. L. c. 79, § 37, operated to set a rate that met constitutional requirements for this particular taking back in 1995, the statute is now outdated, no longer serves the purpose the Legislature originally intended, and may fail to satisfy constitutional requirements in future. We thus commend this issue to the Legislature’s immediate attention.
Judgment affirmed.
The motion also asked that the judgment be amended to reflect the addition of costs in the amount of $9,564.40.
See 28 U.S.C. § 1961 (2000).
In the course of pretrial discovery motions, the city had raised objections to the delay and had asked that, as a result of that delay, no interest be awarded as part of any judgment ultimately rendered in favor of Liberty. The judge who heard those discovery motions declined to grant that particular form of relief at the time, noting that the request should be referred to the trial judge.
The statute provides that postjudgment interest ceases to accrue as of “the last day of the month prior to the month in which such judgment is satisfied.” G. L. c. 79, § 37.
In its appeal, Liberty also attempts to raise a series of new theories and claims, all of which have been waived. Liberty’s claim that the city violated its civil rights, that G. L. c. 79, § 37, violates equal protection guarantees, and that it is entitled to attorney’s fees were not raised below, and therefore cannot be raised on appeal.
The city’s brief on appeal, submitted prior to the Appeals Court’s decision in M.B. Claff, Inc. v. Massachusetts Bay Transp. Auth., 59 Mass. App. Ct. 669 (2003), suggested the precise opposite, namely, that Liberty’s motion regarding interest was premature because the issue could only be raised by way of a motion to amend the judgment under Mass. R. Civ. P. 59 (e), 365 Mass. 827 (1974). See Shawmut Community Bank, N.A. v. Zagami, 419 Mass. 220, 223 (1994); J.W. Smith & H.B. Zobel, Rules Practice § 59.15, at 454 (1977 & Supp. 2004). In M.B. Claff, Inc. v. Massachusetts Bay Transp. Auth., ante 596, 603
The mere fact that Liberty’s motion used the term “correct interest rate” when referring to the statutory rate of 5.88 per cent does not change this analysis. In context, the motion was simply (and accurately) noting that the 5.66 per cent rate used by the clerk was based on an error in an unofficial source, with 5.88 per cent being the “correct” rate under the statute.
We also agree with the city that Liberty’s request for compound interest was untimely. That request was not made in Liberty’s original motion, in its rule 59 (e) motion, or in its “amended” motion, and was raised for the first time at a hearing more than two months after trial. We therefore do not address the question whether the constitutional requirement of just and reasonable compensation mandates the compounding of interest in eminent domain cases. Compare United States v. 429.59 Acres of Land, 612 F.2d 459, 465 (9th Cir. 1980) (upholding award of compound interest), and United States v. 319.46 Acres of Land, 508 F. Supp. 288, 290-291 (W.D. Okla. 1981) (awarding compound interest), with Washington Metro. Transit Auth. v. One Parcel of Land, 706 F.2d 1312, 1322 n.22 (4th Cir.), cert. denied, 464 U.S. 893 (1983) (declining to award compound interest), and United States v. 97.19 Acres, 511 F. Supp. 565, 569-570 (D. Md. 1981) (same).
While Liberty’s motion ostensibly asked leave to submit evidence on the issue after trial, the motion as filed referenced the sources and figures it intended to present and verify (if need be). We thus take those figures as given and assume their accuracy.
For example, Liberty’s motion referenced that Moody’s AAA bonds had averaged a return of 7.96 per cent in 1994, but had fallen to 6.53 per cent in 1998. Thirty-year Treasury bonds, also referenced in Liberty’s motion, were at 7.37 per cent in 1994, but had fallen to 5.69 per cent (a rate slightly below the statutory rate) in 1998. Five-year Treasury notes (which covered a time period “closest in duration to the delay in payment in this case”) averaged 6.69 per cent in 1994, but had fallen to 5.15 per cent (a figure well below the statutory rate) by 1998. For reasons that are unclear, Liberty’s motion, although filed in June, 2002, also failed to include any reference to prevailing rates for any time period later than 1998 or the first quarter of 1999. In its later amended motion, some of those figures were updated, and those updates confirmed that rates had continued at lower levels than the 1994 fates utilized in Liberty’s original calculation.
It also appears that Liberty’s calculation paid no heed to the rates for fifty-two week Treasury bills, the measuring rate for the statute itself and a security that ought to be considered. See United States v. 50.50 Acres of Land,
Indeed, Liberty has cited no example of a market-driven statutory rate being found inadequate to provide just compensation.
In its “amended” motion, Liberty pointed to some rates of return that were considerably higher, but the investments referenced went far beyond the low-risk investments that are properly used for these purposes.
By comparison, when payment for a Federal taking is delayed by more than one year, the Federal statute now computes the interest rate separately for each year according to that year’s market formula. 40 U.S.C. § 3116. The Federal statute also compounds the interest. Id.
Our affirmance of the judge’s order on the issue of prejudgment interest also resolves Liberty’s claim for one more month of postjudgment interest. The check tendered by the city in August, 2002, was in an amount sufficient to satisfy the judgment and all accrued postjudgment interest — in fact, due to a slight arithmetic error, it was slightly more than the amount owed — and the city therefore cannot be held liable for any additional postjudgment interest. We understand that Liberty initially balked at the provision that that check was “in full satisfaction” of the judgment, but when that check has turned out to be sufficient to satisfy the entire judgment, we see no basis on which the city could be required to pay an additional month’s worth of interest.
The interest rate on Federal takings, and on money judgments in civil cases in Federal court, was also tied to the auction price of fifty-two week United States Treasury bills. See Pub. L. 99-656 § 1(2), 100 Stat. 3668 (1986); Pub. L. 97-164, § 302(a)(1), 96 Stat. 25 (1982). In anticipation of the United States Treasury Department’s decision to cease issuing fifty-two week Treasury bills, Congress amended various statutory provisions that had calculated interest based on that security, substituting instead “the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System.” See Pub. L. 106-554, § 1(a)(7) (Title III, § 307), 114 Stat. 2763, 2763A-635 (2000), amending 40 U.S.C. 258e-l (2000), 18 U.S.C. § 3612(f)(2)(B) (2000), 28 U.S.C. §§ 1961(a), 2516(b) (2000), and I.R.C. § 995(f)(4) (2000).