STATE of Minnesota, by Hubert H. HUMPHREY, III, its Attorney General, Petitioner, Appellant, v. JIM LUPIENT OLDSMOBILE COMPANY, formerly Lupient Oldsmobile Company, et al., Respondents. STATE of Minnesota, by Hubert H. HUMPHREY, III, its Attorney General, Lower Court Petitioner, v. Douglas J. KRUEGER, et al., Lower Court Respondents.
No. C4-92-1190.
Supreme Court of Minnesota.
Dec. 17, 1993.
361
David D. Meyer, William S. Rosen, St. Paul, for respondents.
KEITH, Chief Justice.
In this case, we are asked to clarify the standards to be used by a trial court in determining what interest rate provides just compensation to landowners in condemnation proceedings. We reverse and remand.
The state commenced this action to acquire by eminent domain certain property owned by Respondent James W. Lupient as part of a project to upgrade Highway 12 in Golden Valley, Minnesota. On October 17, 1988, thе state acquired title and right of possession to this property and deposited its appraised amount of damages in the sum of $73,960 with the Hennepin County District Court Administrator. On February 6, 1992, three court-appointed commissioners, after hearings in August of 1991, awarded dаmages of $172,384 for this taking. Neither party appealed the commissioners’ award. Both parties anticipated that the state would owe yearly interest as part of just compensation on the difference between the amount paid by the state since the taking and the commissioners’ award.
On April 6, 1992, the state deposited its final payment with the trial court which amount included simple interest computed at the rate set by
The state opposed Lupient‘s mоtion, asserting that the yearly rates based on the secondary market yield of one-year Treasury Bills provided by
The court of appeals affirmed the district court‘s award of 13.2 percent per year interest noting:
The proper inquiry is: what return would have been available to the landowner had he been paid in money the value of the property at the time of the taking and had made reasonable and prudent investments? Had Lupient been paid at the time the State took possession, he could have put his money at reasonable and prudent risk. There is no reason to limit him to a “risk-free” return because the operational assumption is that he has received his principal and could have put it to work.
State by Humphrey v. Jim Lupient Oldsmobile Co., 1993 WL 44202 at *5 (Minn.App. 1993) (citations omitted).
We granted review to clarify the standard by which a trial court should determine the interest rate in condemnation cases.
This court first dealt with this issue in 1981, in the case оf State by Spannaus v. Carney, 309 N.W.2d 775 (Minn.1981). In that appeal, the appellants contended that the statutory interest rate of six percent provided by
In 1984, the Minnesota legislature set forth the present procedure used to determinе interest rates in condemnation actions. These statutes set a flexible interest rate based on the secondary market yield of one-year United States Treasury Bills.
We have occasionally permitted a statute to stand as a matter of comity, even where the legislature has encroached somewhat upon a judicial function, so long as the statute does not conflict with this court‘s inherent authority to make the final decision. See Sharood v. Hatfield, 296 Minn. 416, 424-25, 210 N.W.2d 275, 278-80 (1973) (noting that the court has “acquiesced in legislative acts prescribing administrative procedures for admission and discipline of attorneys as long as such acts do not usurp the right of the Court to make the final decision.“) See also Maynard E. Pirsig and Randall M. Tietjen, Court Procedure and the Separation of Powers in Minnesota, 15 WM. MITCHELL L.REV. 141, 182 (1989). In this case, because we have not set out guidelines by which trial courts may determine interest rates in condemnation actions, we believe that, as a matter of comity, the statutory interest rate should be wеighed by the trial court as evidence of an appropriate rate.
We believe that a reasonable rate is what a reasonable and prudent investor would earn while investing so as to maximize the rate of return over the relevant рeriod of time, yet guarantee safety of principal. This definition is consistent with definitions articu-
The requirement that a reasonable rate on investments be one which guarantees safety of principal means that the types of investmеnt to which a trial court should look as evidence of a reasonable rate must be those which have a very low risk.3 In this case, the evidence before the trial court failed to show that the 13.2 percent rate was based on investments which guarantee safety of principal. Lupient stated in his deposition that he believed that Investment Advisors, Inc. had invested the pension plan in stocks which do not guarantee a return of principal. Lupient did not release information to show the perсentage of the pension plan that was invested in stocks but the state‘s expert‘s affidavit showed that the state had a similar rate of return on a plan in which 60 percent of the funds were invested in stocks. Further, Lupient‘s evidence showed that the rate оf return on the pension plan had varied widely from year-to-year, from 23.4 percent in 1989, to 0.6 percent in 1990, and then back up to 23 percent in 1991. These fluctuations do not appear to be consistent with a low-risk investment.
On remand, and in future condemnation actions, the trial court should presume that the statutory rate is reasonable and, therefore, meets the requirements of just compensation and should order judgment at that rate unless the condemnee rebuts this presumption and affirmatively shows that another rate is reasonable and affords just compensation. In determining a reasonable rate, the trial court should look to rates on investments which guarantee safety of principal.
The state also urges that the trial court should have held a full trial-type evidentiary hearing to determine the appropriate interest rate. The statutory scheme does not require a full evidentiary hearing to determine just compensation in each condemnation action. See
The decision of the court of appeals is reversed and the case remanded for further proceedings consistent with this opinion.
SIMONETT, Justice (concurring specially).
I join in the court‘s opinion but wish to comment on what is a “judicial question.”
It is said that determining the mеasure of compensation in condemnation proceedings is a “judicial and not a legislative question” because the government may not constitute itself the judge in its own case. Monongahela Navigation Co. v. United States, 148 U.S. 312, 327, 13 S.Ct. 622, 626, 37 L.Ed. 463 (1892). Thus the government as a taker should not be setting the rate of interest for what it is taking; or at least the legislative branch, which pays the award, should not be setting the interest. This determination, so the reasoning goes, is better made by the judicial branch which is structured to be a neutral arbiter. Nevertheless, the question of interest relаtes not to the amount of the award itself but to preserving the value of the award. While an award reflects the many unique characteristics of the particular parcel taken, an interest rate is less unique or particularized, more easily identified, and allows for some relaxation of the “judicial question” test. Thus courts have allowed a
In Monongahela, Congress authorized the condemnation of the property owner‘s lock аnd dam but added a proviso that in determining the amount of the award, the property owner‘s franchise to collect tolls was not to be considered. It was in the context of rejecting this proviso that the Court said the right to compensation was a judiсial, not a legislative, question. In Seaboard Air Line Ry. Co. v. United States, 261 U.S. 299, 306, 43 S.Ct. 354, 356, 67 L.Ed. 664 (1923), the United States Supreme Court held that a property owner was entitled to interest on its condemnation award as part of “just compensation“; but there Congress had made no provision for any interest, so the Court approved use of South Carolina‘s legal rate.
The majority opinion in this case is consistent with State by Spannaus v. Carney, 309 N.W.2d 775, 776 (Minn.1981). Here the interest rate, although prescribed by statute, is tied to a rate outside the control of the state legislature, is updated every year, and is the rate paid on other money judgments. In enacting this statutory rate it is presumed the legislature did not intend to violate the constitutional requirements for just compensation. Hence,