Opinion ID: 1918364
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Heading: Whether Prejudgment Interest is a Part of Just Compensation

Text: The Takings Clause of the Fifth Amendment of the United States Constitution provides that private property shall not be taken for public use without just compensation. This clause has been interpreted as requiring that to be just, the compensation must be the full and perfect equivalent for the property taken. This clause has been applied to the states through the Due Process Clause of the Fourteenth Amendment. Monogahela Navigation Co. v. United States, 148 U.S. 312, 326, 13 S.Ct. 622, 37 L.Ed. 463 (1893). In addition, Article XII, § 235, Constitution of Alabama 1901, requires that just compensation be paid to landowners whose property is taken by a corporation invested with the privilege of taking property for public use. In 1921, the Supreme Court of the United States recognized that, where compensation is not paid at the time of the taking, the payment of interest from the time of the taking until full payment is made is a convenient and fair method of ascertaining the sum to which the owner of the land is entitled. United States v. Rogers, 255 U.S. 163, 169, 41 S.Ct. 281, 65 L.Ed. 566 (1921). Two years later, in Seaboard Air Line Ry. v. United States, 261 U.S. 299, 304, 43 S.Ct. 354, 67 L.Ed. 664 (1923), the Supreme Court held that just compensation requires that a landowner be put in as good a pecuniary position as he would have been if the landowner's property had not been taken. Expanding upon Rogers, the Court stated that, where the condemnor takes possession before full compensation is paid to the landowner, the landowner is entitled to such addition as will produce the full equivalent of that value paid contemporaneously with the taking. Interest at a proper rate is a good measure by which to ascertain the amount so to be added. Seaboard Air Line Ry., 261 at U.S. 306, 43 S.Ct. 354. Since Seaboard Air Line Ry., the Supreme Court has further defined the role of prejudgment interest as part of just compensation in delayed-payment condemnation actions. It is now generally recognized that [i]nterest from the time of the taking to the time of payment is constitutionally required as a component of just compensation. Powell on Real Property, Vol. 13 § 876.18(3)(b), pp. 79F-168 to 169 (1996); see also Phelps v. United States, 274 U.S. 341, 47 S.Ct. 611, 71 L.Ed. 1083 (1927); Jacobs v. United States, 290 U.S. 13, 54 S.Ct. 26, 78 L.Ed. 142 (1933); Webbs Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 101 S.Ct. 446, 66 L.Ed.2d 358 (1980); and Kirby Forest Indus., Inc. v. United States, 467 U.S. 1, 104 S.Ct. 2187, 81 L.Ed.2d 1 (1984). This Court has also recognized that prejudgment interest is a required element of just compensation in delayed-payment condemnation actions. Jefferson County v. Adwell, 267 Ala. 544, 103 So.2d 143 (1956); McLemore v. Alabama Power Co., 285 Ala. 20, 228 So.2d 780 (1969). In McLemore, this Court held that a landowner is entitled to interest from the date the condemnor takes actual possession of the property until the date of the jury's verdict. In explaining our reasoning, we set forth the following: `While the assessed value, if paid at the date taken for the assessment, might be just compensation, it certainly would not be, if payment be delayed, as might happen in many cases, and as did happen in this case, till several years after that time. The difference is the same as between a sale for cash in hand, and a sale on time.' 285 Ala. at 27, 228 So.2d at 786-87 (quoting Warren v. First Div., St. Paul & Pacific R.R., 21 Minn. 424, 427 (1875)). Before the enactment of § 18-1A-211, Alabama did not have a statute providing for the calculation of prejudgment interest in delayed-payment condemnation cases. [3] However, in 1985, Alabama joined a majority of states in adopting a uniform method of calculating prejudgment interest. See the commentary to § 18-1A-211, Ala.Code 1975. In its original form, § 18-1A-211(a) was a modified version of § 1202 of the Uniform Eminent Domain Code. It read as follows: (a) Except as provided in subsection (b), the judgment shall include interest at a rate equal to the rate allowed to be charged on money judgments as set forth in section 8-8-10 as amended at the date of the final order in the circuit court upon the unpaid portion of the compensation awarded. The interest shall commence to accrue upon the date of valuation and be calculated to the earlier of the date of deposits into the probate court or date of entry of the judgment. However, § 18-1A-211(a) was amended effective July 28, 1995. The amended § 18-1A-211(a) no longer addresses prejudgment interest. It reads, in pertinent part as follows: (a) Except as provided in subsection (b), the judgment shall include interest at a rate equal to the annual interest rate prevailing on the 52-week United States Treasury Bills at the date of the final order in the circuit court upon the unpaid portion of the compensation awarded. The interest shall commence to accrue on the date of entry of the judgment.  (Emphasis added.) Although the commentary to § 18-1A-211 was not amended in 1995 and continues to discuss the award of prejudgment interest, the clear language of the amended § 18-1A-211(a) addresses only post-judgment interest. [4] In holding that Williams was not entitled to prejudgment interest, the trial court must first have held that, absent legislative authority, a landowner has no right to prejudgment interest as part of a condemnation award. Alabama Power makes the same argument and cites a series of cases purportedly standing for the proposition that condemnees have no right to interest as part of a condemnation award except as that right is granted by the Legislature. If this argument was correct, the trial court's order would have to be affirmed, because Alabama currently has no statute providing for prejudgment interest in condemnation cases. However, Alabama Power's argument overlooks the constitutional requirement that a condemnee be paid just compensation for the property taken and fails to consider the role of prejudgment interest in a delayed-payment condemnation action. The cases cited by Alabama Power address only the role of post-judgment interest in condemnation actions, which, like the interest awarded on judgments in most types of cases, is a statutorily created right that can be taken away by the Legislature. See State of Alabama Highway Dep't v. Newton, 448 So.2d 384 (Ala.Civ.App.1984); Southern Elec. Generating Co. v. Lance, 269 Ala. 25, 110 So.2d 627 (1959); State v. LeCroy, 279 Ala. 428, 186 So.2d 142 (1966); and State v. Moore, 269 Ala. 20, 110 So.2d 635 (1959). However, the prejudgment-interest portion of a condemnation award, unlike its post-judgment counterpart, is part of the just compensation mandated by both the state and federal constitutions. Therefore, prejudgment interest cannot be made to depend upon state statutory provisions. Seaboard Air Line Ry., 261 U.S. at 306, 43 S.Ct. 354. As the United States Supreme Court stated in Monogahela Navigation Co. v. U.S., 148 U.S. at 327, 13 S.Ct. 622, 37 L.Ed. 463: The legislature may determine what private property is needed for public purposes; that is a question of political and legislative character. But when the taking has been ordered, then the question of compensation is judicial. It does not rest with the public, taking the property, through congress or the legislature, its representatives, to say what compensation shall be paid, or even what shall be the rule of compensation. In Seaboard Air Line Ry., the Supreme Court addressed the specific issue whether, absent a statutory provision providing for the calculation of prejudgment interest, a landowner is entitled to prejudgment interest in a delayed-payment condemnation action. In holding that the right to just compensation cannot be taken away or qualified by the absence of a statutory provision authorizing the imposition of prejudgment interest, the Court stated that the landowner is entitled to such addition as will produce the full equivalent of that value paid contemporaneously with the taking, and that no specific command to include interest is necessary when interest or its equivalent is part of such compensation. 261 U.S. at 306, 43 S.Ct. 354. See also Jacobs, 290 U.S. at 13, 54 S.Ct. 26; Rogers, 255 U.S. at 163, 41 S.Ct. 281. The payment of just compensation for private property taken for a public purpose is constitutionally mandated, and the decision of the Legislature not to provide for the calculation of prejudgment interest cannot prevent Williams from recovering prejudgment interest in this case. As noted above, a landowner must receive an amount equal to the value of his land as if that amount were paid contemporaneously with the taking; prejudgment interest represents `[t]he difference... between a sale for cash in hand, and a sale on time.' McLemore, 228 So.2d at 786-87 (quoting Warren, 21 Minn. At 427). Even if the legislature had amended § 18-1A-211 to expressly prohibit the inclusion of prejudgment interest in a delayed-payment condemnation award, Williams would still be entitled to prejudgment interest from the date of the taking of his property to the date of payment, because such an amendment would not withstand constitutional scrutiny. See United States v. Thayer-West Point Hotel Co., 329 U.S. 585, 588, 107 Ct.Cl. 714, 67 S.Ct. 398, 91 L.Ed. 521 (1947) (holding that a federal statute prohibiting the recovery of interest on unpaid claims could not apply in condemnation actions because the Fifth Amendment entitled a property owner to receive, as part of just compensation, interest from the date of the taking to the date of payment). We therefore reverse the trial court's judgment.