A.A. Lang, Jr. v. PennDOT , 135 A.3d 225 ( 2016 )

IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Andrew A. Lang Jr., :
Appellant :
:
v. :
:
Commonwealth of Pennsylvania, : No. 551 C.D. 2014
Department of Transportation : Submitted: December 19, 2014
BEFORE: HONORABLE DAN PELLEGRINI, President Judge1
HONORABLE MARY HANNAH LEAVITT, Judge2
HONORABLE ANNE E. COVEY, Judge
OPINION BY
JUDGE COVEY FILED: March 14, 2016
Andrew A. Lang, Jr. (Lang) appeals from the Allegheny County
Common Pleas Court’s (trial court) March 24, 2014 order denying his Motion to
Determine Computation for Delay Damages (Motion). Lang raises four issues for
this Court’s review: (1) whether Hughes v. Department of Transportation, 523 A.2d
747 (Pa. 1987) supports the Department of Transportation’s (DOT) calculation; (2)
whether the uncertainty of the condemned property’s value precludes interest from
running; (3) whether DOT’s calculation constituted just compensation; and, (4)
whether applying DOT’s payment to interest first, constitutes compound interest
which is prohibited by the Eminent Domain Code3 (Code). After review, we affirm.
On March 31, 2009, Lang owned real property commonly known as the
Millvale Industrial Park, located in Millvale, Allegheny County (Property). On that
date, DOT filed a Declaration of Taking relating to the Property. DOT offered Lang
1
This case was assigned to the opinion writer on or before December 31, 2015, when
President Judge Pellegrini assumed the status of senior judge.
2
This case was assigned to the opinion writer before January 4, 2016, when Judge Leavitt
became President Judge.
3
26 Pa.C.S. §§ 101-1106.
$2 million as just compensation for the Property. On August 25, 2009, DOT paid
Lang $1.5 million of the $2 million. On October 2, 2009, DOT paid the remaining
$500,000.00 to Lang. Dissatisfied with the estimated just compensation (EJC), Lang
requested a hearing before a Board of Viewers (Board), after which the Board
awarded him $2 million for the Property. Lang appealed from the Board’s
determination to the trial court and requested a jury trial. On September 23, 2013, a
jury awarded Lang $3.75 million as just compensation for the Property.
Thereafter, Lang and DOT entered into a stipulation (Stipulation) which
the trial court approved on December 17, 2013. The Stipulation established June 6,
2009 as DOT’s date of possession of the Property, selected February 7, 2014 as the
final payment date by which DOT was to pay Lang, and set an interest rate of 4.25%
for DOT’s delay in paying Lang as a damage calculation. The Stipulation also
required DOT to pay Lang $4,000.00 for reasonable appraisal, attorney fees and
engineering fees. Importantly, the Stipulation further provided:
[I]n addition to the agreed amount as set forth above,
[DOT] shall pay [Lang] delay compensation as calculated
by [DOT] in accordance with its interpretation of Section
713 of the [Code] from June 6, 2009, the agreed-upon date
of [DOT’s] possession of the condemned premises, to
February 7, 2014, the projected date of payment of the
balance of the jury verdict as set forth above. [DOT] has
calculated that [sic] delay compensation to be in the amount
of $368,643.83 and will process payment in accordance
with that calculation.[4] [Lang] does not agree with that
4
DOT explained in its brief to this Court:
In calculating the delay damages, DOT made an initial calculation at
the agreed-upon interest rate of 4.25% on the total jury verdict of
$3,750[,]000 from June 6, 2009 (the date of possession) through
August 26, 2009 (the date of the initial EJC payment). It then made a
second calculation at the same interest rate on $2,250,000 (the jury
verdict of $3,750,000 minus the first EJC payment of $1,500,000)
from August 26, 2009 through October 2, 2009 (the date of its second
EJC payment). Finally, it made a third calculation at the 4.25%
2
calculation and acceptance of the payment in accordance
with this calculation shall be without prejudice to [Lang] to
seek additional delay compensation in the amount of
$10,606.90 in accordance with [Lang’s] method of
calculation and interpretation of the [Code].
Reproduced Record (R.R.) at 10a.
On January 3, 2014, Lang filed the instant Motion seeking the additional
$10,606.905 of delay damages. Specifically, Lang asserted his position as follows:
[W]hen [DOT] made the first payment to him, in the
amount of $1.5 million, [DOT] was only entitled to credit
for $1,465,068.49[,] as delay damages accrued on the $3.75
million from the date of possession to the date of payment.
Lang’s position was that the payment consisted of
$34,931.51 of interest on the amount of $3,750,000 that was
due as of the date of possession, albeit as determined by the
jury in its verdict in 2013. Therefore, Lang contends that
when the payment of $1.5 million was made, it should have
been calculated thusly (R. 13a, 19a):
June 6, 2009, amount due………………$3,750,000.00
August 25, 2009, interest due on $3,750,000
at 4.25% annual rate …………………….$ -34,931.51
August 25, 2009, Payment of $1,500,000, less
interest of $34,931.51 ………………… $1,465,068.49
Principal Balance due as of
August 25, 2009:……………………….$2,284,931.51
Lang Amended Br. at 7.6 DOT filed its Answer to the Motion on January 13, 2014.
On January 14, 2014, the trial court issued its Memorandum and Order denying
interest rate on $1,750,000 (the jury verdict minus $2,000,000, the
total of the two EJC payments) from October 2, 2009 through
February 7, 2009 (the date of DOT’s final payment).
DOT Br. at 4.
5
Lang conceded during argument before the trial court that, due to an error in calculations,
the amount in dispute was actually $8,517.00 rather than $10,606.90.
3
Lang’s Motion. In reaching its decision, the trial court relied on the case of Gross v.
City of Pittsburgh, 58 Pa. D. & C. 4th 445 (2000), wherein Lang’s counsel had raised
the same argument, which argument was rejected.7 Lang appealed to this Court.8
In this appeal, Lang challenges the calculation of interest as delay
damages, arguing that “[a]pplying a [p]ayment on [a]ccount of an [i]nterest [b]earing
[o]bligation, to [i]nterest [f]irst, [does not] [c]onstitute[] [c]ompound [i]nterest[.]”
Lang Br. at 13. Lang further contends: “In every instance when interest is to be
calculated under Pennsylvania law, payments are to be applied ‘first to any interest’ .
. . and then to any balance of principal.” Lang Br. at 14. Lang relies in part on
Hughes, wherein our Supreme Court affirmed the lower court’s finding that a
6
In his brief, Lang stated that the calculation pertaining to the first payment “is presented for
illustrative purposes. The second payment would be treated the same[.]” Lang Amended Br. at 7
n.3.
7
The Gross decision was affirmed by this Court in an unreported decision. On further
appeal, the Pennsylvania Supreme Court affirmed by per curiam order. In a concurring statement,
Justice Lamb explained:
In this appeal, [the condemnee] quibbles with the trial court’s
calculation of delay damages, arguing that the $ 2.0 million in
estimated just compensation paid by the city as it was ordered to do
on March 5, 1997 should have reduced the delay damages as they had
accrued to that date instead of, as the trial court applied the payment,
reducing the $ 6.5 million just compensation as it was finally
determined. There can be no doubt that this issue was waived by [the
condemnee] since the precise method of accounting for the March 5,
1997 payment adopted by the trial Court was proposed by [the
condemnee].
Gross v. City of Pittsburgh, 828 A.2d 1007, 1008 (Pa. 2003) (Lamb, J., Concurring) (footnote
omitted).
8
“In eminent domain cases, this Court reviews whether the trial court committed an abuse
of discretion or an error of law. ‘When an appeal presents a question of law, such as statutory
interpretation, our scope of review is plenary.’” In re PPL Elec. Utils. Corp. of Real Estate Situate
in Schuylkill Cnty., 68 A.3d 15, 18 n.5 (Pa. Cmwlth. 2013) (citation omitted) (quoting In re
Condemnation of Springboro Water Auth. of Prop. of Gillette, 898 A.2d 6, 8 n.3 (Pa. Cmwlth.
2006)).
4
legislatively-fixed 6% interest rate for delay damages in the then-existing Code was
an impermissible legislative interference with the condemnees’ constitutional right to
just compensation, and that rather than a fixed 6% interest rate, “the landowners were
entitled to delay compensation at the commercial loan rates of interest prevailing
during the detention period in question.” Id. at 753 (emphasis added).
Initially, we note that Section 713 of the Code specifically addresses
delay damage calculation and payment. That section states:
(a) General rule. -- Compensation for delay in payment
shall be paid at an annual rate equal to the prime rate as
listed in the first edition of the Wall Street Journal
published in the year, plus 1%, not compounded, from:
(1) the date of relinquishment of possession of the
condemned property by the condemnee; or
(2) if possession is not required to effectuate
condemnation, the date of condemnation.
....
(c) Award or judgment. -- Compensation for delay shall
not be included by the viewers or the court or jury on
appeal as part of the award or verdict but shall, at the
time of payment of the award or judgment, be calculated
under subsection (a) and added to the award or
judgment. There shall be no further or additional
payment of interest on the award or verdict.
26 Pa.C.S. § 713 (emphasis omitted; bold and italics emphasis added).
In In re Condemnation of Property Located in Lower Windsor Township,
986 A.2d 190 (Pa. Cmwlth. 2009) (Lauxmont), this Court explained:
The Code establishes that delay compensation is payable for
any late payment of just compensation for a taking, and that
the compensation is calculated from the time the property
was relinquished until the time the money has been paid.
Nothing in the Code, nor the comments thereto, require
more than one payment of delay compensation. Said
payment is to occur ‘at the time of payment of the
5
award or judgment.’ Section 713(c) [of the Code]. Nor is
there anything in the Code that specifically requires the
payment of EJC delay compensation at a time different
from delay compensation on the entire award provided
for in Section 713 of the Code.
Id. at 192-93 (emphasis added). The Lauxmont Court further recognized that “the
Code does not require that delay compensation is due at the same time that the EJC
was paid.” Id. at 193 (emphasis added).9
Thus, in the instant matter, although delay damages accrued from the
date of Lang’s relinquishment of the Property, which by Stipulation was June 6,
2009,10 “the Code does not require that delay compensation [was] due at the same
time that the EJC [was] paid.” Lauxmont, 986 A.2d at 193 (emphasis added).
Pursuant to Section 713(c) of the Code, compensation for delay damages could not be
calculated until the time of payment of the “award or judgment[.]”11 26 Pa.C.S. §
9
Notably, the Lauxmont Court calculated delay damages in the same manner as DOT did
here, stating:
The County owes [condemnee] delay compensation on the awarded
amount of $17,250,000. Section 713 of the Code determines how the
delay compensation will be calculated, i.e., the amount of delay
compensation on $5,500,000 from November 9, 2005 (date
possession was tendered) through September 20, 2007 (date
$5,500,000 was paid), and the amount of compensation on the
difference in just compensation awarded and EJC of $9,750,000 from
November 9, 2005 (date possession was tendered) through July 16,
2008 (date of jury award of just compensation).
Id. at 193.
10
In the instant action, on August 25, 2009, DOT paid Lang $1.5 million of the $2 million
offered for the Property as EJC. On October 2, 2009, DOT paid the remaining $500,000.00. Lang
appealed to the Board of Viewers and then to the trial court. On September 25, 2013, a jury
awarded Lang $3.75 million for the Property. Lang argues that the Property’s uncertain value does
not prevent interest from accruing. See Lang Amended Br. at 20. We agree with Lang’s argument
that interest ran from the date of the Property’s relinquishment. However, Lang is incorrect that the
interest was due from that date. See Lauxmont.
11
The 4.25% interest rate was not approved by the trial court until December 17, 2013, more
than two years after the EJC payments were made.
6
713(c) (emphasis added). There was no award or judgment at the time the EJC
payments were made. Therefore, no delay damages could have been calculated, and
none could have been due, since “payment [of delay damages occurs] . . . ‘at the time
of payment of the award or judgment.’”12 Lauxmont, 986 A.2d at 193 (quoting 26
Pa.C.S. § 713(c)).13 DOT’s 2011 EJC payments could not be applied to delay
damages that were not calculated until December 17, 2013, when the trial court
approved the Stipulation, and were not due until February 7, 2014 (the stipulated date
set for final payment).
Notwithstanding, Lang argues that in accordance with Hughes, Lang is
entitled to delay compensation calculated consistent with commercial loans – that
payments first be applied to interest, and then to principal. Lang further asserts that
the trial court mischaracterized his method of delay damage calculations as providing
for compound interest14 in violation of Hughes. He contends that applying a payment
on account of an interest-bearing obligation to interest first does not constitute
compound interest.
Specifically, Lang references Section 713(a) of the Code which states
that “[c]ompensation . . . shall be paid at an annual rate equal to the prime rate . . . .”
26 Pa.C.S. § 713(a). Lang maintains that since the terms “annual rate” and “prime
rate” are “commercial term[s] identifying certain rates charged by banks, [the General
Assembly] intended . . . that delay damages be similarly calculated, as a commercial
loan.” Lang Amended Br. at 17 (emphasis in original). In addition, Lang asserts that
12
The prohibition in Section 713(c) of the Code against calculating and, thus, not paying
delay damages until the time the award or judgment is paid is consistent with the concept that
interest may not accrue on delay damages.
13
The EJC payments were intended to reduce the principal, thereby minimizing the accrual
of interest, rather than paying down already-accrued interest. Pursuant to the Code, paying down
the interest is not allowed because that interest cannot itself accrue interest.
14
“[C]ompound interest” is defined as “[i]nterest paid on both the principal and the
previously[-]accumulated interest.” Black’s Law Dictionary 887 (9th ed. 2009).
7
since the current Code was enacted after Hughes and reflects the Hughes Court’s
rejection of a fixed interest rate, the Code requires that delay damages be calculated
as a commercial loan.
DOT counters that “Lang’s computation causes delay damages to be
calculated on a higher right-of-way damage[15] figure with each subsequent
calculation because all of the prior EJC payments are not applied to right-of-way
damages.” DOT Br. at 6. According to DOT, “[Lang’s] calculations by their very
nature considers [sic] the interest from the initial calculations in completing the
remaining calculations thereby increasing the amount of delay damages payable
compared to DOT’s calculations. This is a type of compounding[,]” and thus, it is
prohibited by the Code. DOT Br. at 9; see 26 Pa.C.S. § 713(a). In other words,
under Lang’s approach, when DOT’s payment is applied, the outstanding EJC
principal balance would be reduced by an amount less than the EJC payment, since
part of the EJC payment would be used to pay delay damages first. The effect of
paying the delay damages before the principal would result in less money available to
apply to reduce the principal balance, and thus the remaining higher principal balance
would subsequently accrue more interest in the form of delay damages.
This Court explained in McGaffic v. Redevelopment Authority of City of
New Castle, 732 A.2d 663, 669 (Pa. Cmwlth. 1999):
The interest rate utilized by the trial court in Hughes,
however, was not compounded. The Supreme Court
specifically stated that it had ‘no intention of striking the
General Assembly’s policy against imposing double interest
on an award.’ Id. at . . . 753. Double interest or compound
interest is interest that is paid not only on the principal, but
also on any interest accrued. [Black’s Law Dictionary] 286
(6th Ed. 1990). Thus, despite the standard application of
15
In its brief, DOT refers to “damages caused to the owner’s real property interest as a result
of the condemnor’s exercise of its eminent domain powers[,]” as “right-of-way damages.” DOT Br.
at 23.
8
compound interest in the commercial banking industry,
an award of compound interest on delay compensation
has not been permitted under Pennsylvania law.
McGaffic, 732 A.2d at 669 (emphasis added; footnote omitted).
Section 307(c)(1) of the Code provides that EJC amounts paid by a
condemnor “shall be without prejudice to the rights of either the condemnor or the
condemnee to proceed to a final determination of the just compensation, and any
payments made shall be considered only as payments pro tanto of the just
compensation as finally determined.” 26 Pa.C.S. § 307(c)(1). In support of his
argument that the EJC payments should be applied under Section 307 of the Code to
both delay damages and principal, Lang contends that “delay damages constitute one
element of ‘just compensation.’” Lang Amended Br. at 15. Lang relies upon the
language of Section 701 of the Code which states: “A condemnee shall be entitled to
just compensation for the taking, injury or destruction of the condemnee’s property,
determined as set forth in this chapter[, and] [o]ther damages shall also be paid or
awarded as provided in this title.” 26 Pa.C.S. § 701 (emphasis added). Lang argues
that since the Code section providing for delay damages (Section 713) is within the
same chapter, delay damages must be a part of just compensation.
Our Courts historically have not included delay damages within the term
“just compensation.” See Ridley Twp. v. Forde, 459 A.2d 449, 451 (Pa. Cmwlth.
1983) (“Delay damages are not properly within the scope of condemnation damages
for the property; rather they are separate compensation for the condemnee’s loss of
use of the property during the period after he relinquishes possession and before he
receives his just compensation.”); see also In re DeFacto Condemnation & Taking of
Lands of WBF Assocs., L.P., 972 A.2d 576, 592 (Pa. Cmwlth. 2009) (“[D]elay
damages must be based on the outstanding just compensation award . . . .”);
Lauxmont, 986 A.2d at 192 (“The Code establishes that delay compensation is
payable for any late payment of just compensation for a taking[.]”); Redevelopment
9
Auth. of the City of Phila. v. Associated Retail Stores, Inc., 408 A.2d 181, 182 (Pa.
Cmwlth. 1979) (“Section 611 [of the former Code, Act of June 22, 1964, Special
Sess., P.L. 84, as amended,] 26 P.S. § 1-611, sets forth a mandatory requirement of
delay compensation for delays in payment of just compensation for property taken.”).
Further, although Section 713 of the Code is within the same chapter as
Section 701 of the Code, Section 702(a) of the Code explicitly defines the term
“[j]ust compensation” as “the difference between the fair market value of the
condemnee’s entire property interest immediately before the condemnation and
as unaffected by the condemnation and the fair market value of the property
interest remaining immediately after the condemnation and as affected by the
condemnation.” 26 Pa.C.S. § 702(a) (emphasis added). “Generally, the best
indication of legislative intent is the statute’s plain language.” Phoenixville Hosp. v.
Workers’ Comp. Appeal Bd. (Shoap), 81 A.3d 830, 840 (Pa. 2013). Notably, the
Code’s definition of “just compensation” does not include or otherwise refer to delay
damages or any other damages.16 Therefore, Lang’s argument fails.
Citing to Wolf v. Commonwealth, 170 A.2d 557 (Pa. 1961), Lang next
argues that DOT’s calculation would not meet the constitutional requirement of “just
compensation.” We disagree. Our Supreme Court in Wolf stated:
The Constitution of the State requires that just
compensation be first made or secured for the taking of
private property for public use. Where that is not first done,
16
The predecessor to Section 702 of the Code (the statutory provision at issue in Gross)
defined ‘just compensation’ as “the difference between the fair market value of the condemnee’s
entire property interest immediately before the condemnation and as unaffected thereby and the fair
market value of his property interest remaining immediately after such condemnation and as
affected thereby, and such other damages as are provided in this code.” Act of June 22, 1964,
P.L. 84, §602, as amended, 26 P.S. § 1-602 (repealed by the Act of May 4, 2006, P.L. 112)
(emphasis added). Lang’s counsel, also counsel in Gross, argues in Lang’s brief that Gross was
wrongly decided because the lower court disregarded the highlighted language. Even if Lang’s
counsel is correct, the General Assembly’s omission of such language in Section 702(a) of the Code
compels the conclusion that it did not intend delay damages to be included in just compensation.
10
i.e., at the time of the taking, the integrity of the
constitutional requirement can be respected only by
including in the award for the value of the property taken
such damage as there may have been (within legally
prescribed limits) due to the delay in payment for the
property.
Id. at 560 (quoting Fid.-Phila. Trust Co. v. Commonwealth, 42 A.2d 585, 586 (Pa.
1945)). The award calculated by DOT and adopted by the trial court conforms to the
Code’s requirements and “includ[es] in the award for the value of the property taken
such damage as there may have been . . . due to the delay in payment for the
[P]roperty.” Id. Accordingly, Lang’s argument is without merit.17
For all of the above reasons, the trial court’s order is affirmed.
__________________________
ANNE E. COVEY, Judge
17
In support of his position, Lang also relies on Woods v. Department of Transportation,
641 A.2d 633 (Pa. Cmwlth. 1994), for the proposition that “partial payments are always applied first
to interest and then to principal.” Lang Br. at 18. Notably, Woods involved the payment of delay
damages in a personal injury action and thus the payments in that case were not governed by the
Code. Rather, that payment is controlled by Pennsylvania Rule of Civil Procedure No. 238(a)(1).
11
IN THE COMMONWEALTH COURT OF PENNSYLVANIA
Andrew A. Lang Jr., :
Appellant :
:
v. :
:
Commonwealth of Pennsylvania, : No. 551 C.D. 2014
Department of Transportation :
ORDER
AND NOW, this 14th day of March, 2016, the Allegheny County
Common Pleas Court’s March 24, 2014 order is affirmed.
___________________________
ANNE E. COVEY, Judge