Church Loses Interest Awarded on Condemnation Judgment

by: Joseph Grather
24 Aug 2020

I remember long ago, my first case against NJDOT where a judgment awarding constitutional just compensation triggered a duty to pay interest on the award.  I also remember reading “Title 27” (NJDOT statute) and finding the 6% “solution” to my interest problem.  I mentioned the great news to one of the founders of my firm (who had been practicing since before the Eminent Domain Act was adopted in 1971) and his response was ‘the 6% statute has never been followed or enforced.  He said, “DOT won’t pay 6%, they’ll pay market interest rate.” Well, now there’s a case that so holds.

On August 14, 2020, the Appellate Division issued a published opinion in State, DOT v. St. Mary’s Church   The Appellate Division reversed a trial court award of 6% interest to the property owner.  Title 27 expressly requires DOT to pay 6% interest on condemnation awards.  The Eminent Domain Act also compels the payment of interest, but grants the court the authority to determine interest in a summary manner.

DOT argued on appeal that the 6% interest provision in Title 27 was repealed when the Eminent Domain Act was adopted by way of the general repealer found in section 50.  St Mary’s argued that the State was exempted from the repealer.  The Appellate Court agreed with DOT.  The Appellate Court observed, “[w]hile the trial court in this instance viewed the six-percent rate in N.J.S.A. 27:7-22 as too high for present conditions, adhering to N.J.S.A. 27:7-22 could,  in other circumstances, result in the property owner receiving less interest than would be awarded under N.J.S.A. 20:3-32.”  Indeed.  Probably the right result in a long-overdue case.

Lastly, the Appellate Division also reversed the award of simple interest.  There are several cases that have found compound interest would have to be awarded to satisfy the constitutional duty of just compensation but, ultimately, the award of interest is to be made by the trial court, in its discretion, in such amount that will make the owner whole for the taking of the owner’s property. State by Roe v. Nordstrom, 54 N.J. 50, 53 (1969).  The statute “requires the judge, rather than the jury, to fix the amount of interest whenever the parties are unable to agree. Jersey City Redev. Agency v. Clean-O-Mat Corp., 289 N.J. Super. 381, 400 (App Div. 1996). Plenary hearings are mandated for the presentation of expert evidence as to the prevailing commercial and legal rates of interests where the action has been pending for a substantial amount of time during which the interest rates have been changing. Id. This general rule for the allowance of interest is liable to be controlled by the circumstances of each particular case. State by Roe v. Nordstrom, 54 N.J. 50, 54 (1969). Moreover, our courts have construed a flexible approach on a case-by-case basis in determining the “rate or rates of interest which will best indemnify the condemnee for the loss of use of the compensation…from the date on which the action for condemnation was instituted.  Twp. of Wayne in Passaic County v. Cassatly, 137 N.J. Super. 464, 474 (App. Div. 1975) (emphasis added).

On remand, it will be “interesting” to see whether the award from the trial court is appreciably different than the original award, as the compounding of interest may, for the period in question, yield an overall award that is eerily similar to the six percent “simple” interest awarded the first time around.