METROPOLITAN TRANSPORTATION AUTHORITY v. Frank Bonito, etc., Respondent.

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Supreme Court, Appellate Division, First Department, New York.

METROPOLITAN TRANSPORTATION AUTHORITY, Petitioner-Appellant, v. AMERICAN PEN CORP., etc., Respondent-Respondent, Frank Bonito, etc., Respondent.

Decided: August 13, 1998

LERNER, P.J., ELLERIN, RUBIN, TOM and ANDRIAS, JJ. Anthony P. Semancik, for petitioner-appellant. M. Robert Goldstein, for respondent-respondent.

Judgment, Supreme Court, Bronx County (Howard Silver, J.), entered December 24, 1996, which, inter alia, added 9% prejudgment interest to the $420,000 additional compensation awarded to respondent (an additional $321,300), plus additional interest at 9% on the combined amount ($741,300) until the date of payment pursuant to McKinney's Unconsolidated Laws of N.Y. § 2501 (L. 1939, ch. 585, as amended by L. 1982, ch. 681, § 4), unanimously modified, on the law, to the extent of vacating the award of prejudgment interest and remanding the matter for a hearing as to whether the 9% maximum statutory rate applicable to prejudgment interest is reasonable, and to the further extent of striking that portion of the judgment indicating that postjudgment interest is to be awarded at a rate of 9% and substituting therefor the direction that postjudgment interest is to be awarded at a rate of 4% pursuant to Public Authorities Law § 1276(5), and otherwise affirmed, without costs.

 We agree with the trial court to the extent that the statutorily applicable rate of prejudgment interest on the instant condemnation award may be as high as 9% pursuant to Unconsolidated Laws § 2501 (Matter of Metro. Transp. Auth. v. Capolino Design and Renovation, Ltd., 123 A.D.2d 696, 700, 507 N.Y.S.2d 63, lv. denied 69 N.Y.2d 610, 517 N.Y.S.2d 1025, 511 N.E.2d 84 [applying the 9% rate set forth in Unconsolidated Laws § 2501 to a prejudgment condemnation award] ), since that section applies to accrued claims as well as judgments (compare, Public Authorities Law § 1276(5);  see also, McGale v. Metro. Transp. Auth., 76 A.D.2d 38, 47, 429 N.Y.S.2d 418, lv. denied 52 N.Y.2d 862, 437 N.Y.S.2d 79, 418 N.E.2d 672 [4% rate set forth in Public Authorities Law § 1276(5) applies only to judgments] ).   However, since prejudgment interest is constitutionally required on condemnation awards, and since its determination is essentially a judicial, and not a legislative, function, the statutorily applicable rate of interest is only presumptively valid (see, Adventurers Whitestone Corp. v. City of New York, 65 N.Y.2d 83, 87-88, 489 N.Y.S.2d 896, 479 N.E.2d 241, appeal dismissed, 474 U.S. 935, 106 S.Ct. 299, 88 L.Ed.2d 276).   The matter should, therefore, be remanded for a hearing to determine whether the maximum applicable statutory prejudgment interest rate of 9% is, under the circumstance of the instant case, reasonable.   Upon remand, MTA, as the party challenging the reasonableness of the 9% statutory rate, bears the burden of proving that it is unreasonably high, and that a lower rate of interest would be constitutionally sufficient (see, id.;   Matter of 42nd St. Dev. Project, 176 Misc.2d 772, 674 N.Y.S.2d 562 (Sup.Ct., N.Y. County, Parness, J.)).

 Postjudgment interest upon a condemnation award, on the other hand, is a matter of legislative grace (see, Rochester Carting Co. v. Levitt, 36 N.Y.2d 264, 267-268, 367 N.Y.S.2d 242, 326 N.E.2d 808), and therefore should be fixed in accordance with Public Authorities Law § 1276(5) (see, McGale v. Metropolitan Transp. Auth., supra).   While that statute sets 4% per annum as a ceiling that shall not be exceeded (see, Rodriguez v. New York City Hous. Auth., 91 N.Y.2d 76, 666 N.Y.S.2d 1009, 689 N.E.2d 903), we find the 4% rate to be reasonable in this case.

We have considered petitioner's remaining contention and find it to be without merit.

MEMORANDUM DECISION.