IN RE: NEW YORK URBAN DEVELOPMENT CORPORATION

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Supreme Court, New York County, New York.

IN RE: 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. Claimants:  Eppy & Company, Aztec Associates, New Rock Asset Partners, Edward L. Lublin, as Trustee, Gladys L. Mehler.

Decided: July 24, 2001

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.

Condemnor and claimant both move to re-settle 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 pre-judgment interest at the 9% 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 (Re:  New York State Urban Development Corp. 176 Misc.2d 772, 674 N.Y.S.2d 562).   With respect to the judgments at issue, condemnor asks the court to consider a rate lower than 9%, citing Rodriguez v. New York City Housing Authority, 91 N.Y.2d 76, 81, 666 N.Y.S.2d 1009, 689 N.E.2d 903, 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 pre-judgment 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 pre-judgment interest to compensate for delay in making payment and deprivation of use of property (Matter of City of New York [Brookfield] 58 N.Y.2d 532, 536-537 [462 N.Y.S.2d 619, 449 N.E.2d 399]).”  (Matter of MTA v. American Pen Corp. 94 N.Y.2d 154, 158, 701 N.Y.S.2d 301, 723 N.E.2d 50.)  “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, 489 N.Y.S.2d 896, 479 N.E.2d 241.)

 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 high.”  (Auer v. State, 283 A.D.2d 122, 727 N.Y.S.2d 507 and cases cited therein)

The issue remaining unresolved under Rodriguez, however, is to what extent and how often may or must a judgment court (and specifically this court), upon application, continually re-examine the propriety of the 9% rate.   Rodriguez, in leaving the interest rate issue to the trial court's discretion, could not have intended that each court entering judgment be free to make its own determination as to the interest rate, subject only to the statutory maximum 9%. Such ad hoc approach obviously raises the potential for different rates on different judgments for the same interest period, a circumstance the avoidance of which prompted a change in 1972 in CPLR 5004.   As the Court of Appeals pointed out in Rodriguez, the reason CPLR 5004 was amended was to provide for a fixed rate rather than its previous reference to the fluctuating legal rate fixed by the Banking Board this “․ (to) facilitate the administrative act of entering judgment with interest ‘without possible controversy over differing rates for differing periods.’ ” (Rodriguez, supra, p. 78, 666 N.Y.S.2d 1009, 689 N.E.2d 903)

As a result of a stated rate in CPLR 5004 rather than the previous fluctuating one, rarely is the trial court now involved in the actual computation of interest paid and entry into the judgment, a matter more appropriately left to the expertise of the judgment clerk.   Leaving the issue of interest rate to continual examination by each judgment entering court would lead to the “controversy over rates,” which, as noted, the amendment to CPLR 5004 sought to avoid.

Further, uncertainty as to judgment rate would turn entry of judgment, presently now a clerk administered function, into a post verdict litigated matter (as it now has) further burdening an already busy trial court.   This aside from the potential for different interest rates being fixed by different courts for the same interest period, and the constitutional implications of such occurrence in condemnation cases.   Indeed, it has been held that differentiation of rates for the same interest period is “unreasonable and palpably improper ․ the Constitution guarantees the same measure of just compensation to all owners of property.”  (MTA v. American Pen Corp., supra p. 160-161, 701 N.Y.S.2d 301, 723 N.E.2d 50)

 In sustaining the various lower courts' use of the 9% rate (or reversing those that did not), the cited appellate courts have relied on the failure of objectants to persuade that the 9% rate “is unreasonably high” rather than said courts affirmatively holding that 9% rate is the appropriate rate to be applied for the various interest periods at issue.   Though said appellate decisions may thus lack technical precedential value as to the interest rate to be employed, it does not appear to this court that under the facts herein, there could be any further arguments advanced for a lower rate that would be any more persuasive than those raised and rejected by both the appellate and trial courts cited herein.   It is, therefore, this court's opinion that the 9% rate has sufficiently and significantly withstood challenge both at the trial and appellate level (and in this court) to warrant its preclusive application to the interest periods at issue, herein, this without further examination as to its propriety.   Further, a finding of a lesser rate for the judgments herein than that fixed by this and other courts for condemnation awards for relevant interest periods would, as noted before, be unconstitutionally discriminatory, and therefore “unreasonable and palpably improper” (MTA v. American Pen Corp., supra).

Accordingly, the court fixes that the rate of pre-judgment interest to be paid in the above-captioned matters at 9% per annum until date of payment and judgments shall be entered consistent with this determination.

STANLEY PARNESS, J.

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