In the Matter of New York Urban Development Corporation, Relative to Acquiring Title to Real Property for a Land Use Improvement Project Known as the 42nd Street Development Project.
Goldstein, Goldstein, Rikon & Gottlieb, New York City (M. Robert Goldstein of counsel), for Aztec Associates and others, claimants.
Carter, Ledyard & Milburn, New York City (Jean M. McCarroll of counsel), for New York Urban Development Corporation, condemnor.
Stanley Parness, J.
Condemnor and claimant both move to resettle the judgment
to be entered as it relates to interest on condemnation awards made on properties taken in the above 1994 and 1995 vestings. Claimant seeks prejudgment interest at the 9% rate permitted by the statute, while condemnor urges interest at 6%.
In the judgments entered against this same condemnor upon the awards made on the properties vested in 1990, interest was fixed by this court at the 9% rate set forth in CPLR 5004 for the reasons stated in this court's March 1998 decision (Matter of New York State Urban Dev. Corp. [42nd St. Dev. Project], 176 Misc.2d 772). With respect to the judgments at issue, condemnor asks the court to consider a rate lower than 9%, citing Rodriguez v New York City Hous. Auth. (91 N.Y.2d 76, 81) as authority for such trial court discretion. Rodriguez essentially held that the statutory 9% as applied to judgments against certain governmental entities (including condemnor) sets only the maximum rate.
However, though Rodriguez determined that a judgment court under CPLR 5004 could set an interest rate at less than 9%, it set no specific guidelines as to the discretionary factors that should be considered. Of course, on the issue of what interest would be appropriate, account must be given to the fact that, in condemnation, the owner's property at vesting is in effect converted to an immediate claim for compensation. Any delay in payment of same warrants imposition of prejudgment interest not as a matter of legislative grace, as it is in the usual case awarding damages, but as part of the just compensation mandated by the Constitution when property is expropriated. " To ensure that a condemnee obtains just compensation, the State is constitutionally required to pay prejudgment interest to compensate for delay in making payment and deprivation of use of the property (Matter of City of New York [Brookfield Refrig. Corp.], 58 N.Y.2d 532, 536-537)." (Matter of Metropolitan Transp. Auth. v American Pen Corp., 94 N.Y.2d 154, 158.) " The amount of interest necessary to bring the payment into accord with the constitutional requirement is a judicial question, although the interest rate fixed by the Legislature will be deemed presumptively reasonable." (Adventurers Whitestone Corp. v City of New York, 65 N.Y.2d 83, 87.)
Condemnor, citing the discretionary authority granted to the trial court by Rodriguez to fix a lower rate than 9%, asks the court to consider the " virtual risk free" nature of the condemnation award as warranting a lower rate. To that end, it cites to interest paid on " risk free" short-term government debt
securities. However, condemnor cites no precedent for the proposition that the financial soundness of a judgment debtor and the " risk free" collectability of the award should mitigate the interest paid. Further, a judgment debt is not an investment in the condemnor, and thus measuring the interest to be paid thereon on the risk of its collection has no relevancy.
In opposition to condemnor's application and in support of the statutory 9% interest, claimant asserts, inter alia, the 9% rate applied by the State to New York State capital gains tax to which the award is subject, the capitalization rate of 10% employed by condemnor's appraiser at trial (the court applied 9.5%), and returns obtained on various other types of investment.
To date various appellate and trial courts (including this one) have sustained the 9% rate for relevant interest periods, essentially determining that the various objectants to the 9% rate have failed to persuade that the presumptively reasonable statutory rate is " unreasonably ...