Ark. State Hwy. Comm. v. Rich , 235 Ark. 858 ( 1962 )

George Rose Smith, J.

This is a condemnation proceeding in which the State Highway Commission was compelled to deposit in court a great deal more money than the jury later found the land to have been worth. The landowners had the use of the excessive deposit for more than two. years. This appeal is from a judgment holding that the landowners are not liable to the State for interest during the time they had the use of the State’s money.

The facts are simple. On August 18, 1958, the Highway Commission brought suit to condemn 50.454 acres of the appellees’ land, filed a declaration of taking, and paid into court the sum of $69,500 as estimated compensation and damages. On motion of the landowners the circuit court, after a hearing, directed that the deposit be increased to $544,000. The commission complied with the order on January 1, 1959, and on the following day the landowners were allowed to withdraw the entire sum of $544,000. The case was not tried on its merits until July 10,1961, when the jury fixed the award to the landowners at $325,000.

In entering judgment upon the verdict the court charged the State with interest in the total sum of $7,-858.25. This amount was arrived at by adding two items: (a) Interest at 6 per cent upon the entire $325,000 valuation from the date of the commission’s entry upon the land (which was about a month before suit was filed) until the date of the commission’s deposit of $69,500 in court, and (b) interest at 6 per cent upon the value of the land less the $69,500 deposited, computed from the date of the first deposit until the date on which the landowners withdrew the whole-$544,000.

On the other hand, as we have said, no interest charge was made against the landowners for their use of $219,-000 of public funds (the excess of the withdrawal over the value of the land) for a period of some thirty-one months. At the rate of 6 per cent per annum the use of the State’s money was worth more than $32,000 to the landowners.

In seeking to defend the inequality that is inherent in the trial court’s judgment the appellees make two principal arguments.

First, it is pointed out that the State is liable for the payment of interest in any event, because an award of interest is required by the constitutional guaranty of just compensation when there is a delay between the time of the taking and the time of the payment for the property. Ark. State Highway Comm. v. Stupenti, 222 Ark. 9, 257 S. W. 2d 37. In fact, the statute under which the action at bar was filed recognizes the State’s liability for interest, Ark. Stats. 1947, § 76-536, but this clause was evidently inserted merely as a necessary introduction to the declaration that interest is not to be allowed to the landowner upon sums paid into court. We are unable to agree with the appellees in their attempt to interpret the legislature’s casual reference to the State’s undoubted duty to pay interest as a positive declaration that the landowner has no similar duty. To the contrary, the controlling section of the act, providing for judgment either for or against the State, makes no mention of interest in either case. Ark. Stats., § 76-537.

The landowners, unlike the State, are not under a constitutional compulsion to pay interest. Hence, the argument runs, they are exempt from liability under the rule that interest is not ordinarily payable upon an unliquidated demand, there being no default until the exact amount due has been determined.

In the circumstances before us this argument is not sound. The rule against paying interest upon an unliquidated demand is not inflexible. This point was discussed in Loomis v. Loomis, 221 Ark. 743, 255 S. W. 2d 671, where we said: “Yet when the defendant is actually in default there are many instances in which interest is allowed even though the precise extent of his liability is not determined until the trial. For example, a defendant’s liability for breach of a contract to pay a definite sum of money may be uncertain, for the default may have saved the plaintiff the expense of full performance on his own part, and that saving may be a matter for the jury to determine. In spite of this uncertainty interest is recoverable from the date of the breach.’’

An analogous situation was considered in City of Ft. Smith v. Southwestern Bell Tel. Co., 220 Ark. 70, 247 S. W. 2d 474, where the telephone company, after having put into effect a rate increase later found to have been excessive, was required to pay interest from the date of each overcharge rather than from the date when the exact extent of the excess was determined. We reasoned that “the utility should not have the benefit of the free use of the subscribers’ money, when such use came about through the utility’s own effort.”

In like manner these appellees ought not to have the free use of the State’s money after having compelled its payment only by the assertion of a claim based upon an exaggerated idea of their losses. If the appellees’ view of the law should prevail it would inevitably result in encouraging landowners to present exorbitant claims against the State in condemnation cases. (Counsel for the appellees quite properly make no particular point of the fact that in this instance the landowners’ damages may have been reduced by a change in plan that the commission adopted after the amount of the additional deposit had been fixed by the court. It appears that the commission, before complying with the court’s order, unsuccessfully sought to have the court reconsider the matter in the light of the new plan.)

Secondly, the appellees rely upon a number of decisions from other jurisdictions, holding that the landowner is not required to pay interest after having had the use of an excessive deposit in a condemnation proceeding.

All the cases cited are easily distinguishable, for in none of them did the landowner obtain the excessive deposit through his own efforts. For instance, in a representative case, City of Atlanta v. Lunsford, 105 Ga. App. 247, 124 S. E. 2d 493, the amount of the condemnor’s deposit was fixed by three independent assessors. The court, in holding that the property owner was not bound to pay interest when the jury’s valuation proved to be smaller than that of the assessors, pointed out that otherwise the condemnor would be able to force the landowner to accept an involuntary loan.

Here the transaction bears no resemblance to an involuntary loan, for the appellees took the initiative in the matter, demanding that the amount of the deposit be increased and adducing proof to sustain their claim. Upon these facts we cannot in good conscience hold that the appellees are entitled to profit by their own error. Yet that would be the result if they were permitted to use almost a quarter of a million dollars of public funds, interest free, for more than two and a half years.

The judgment is reversed and the cause remanded for the entry of a judgment charging the appellees with interest at the rate of 6 per cent per annum in accordance with this opinion.

Bohlinger, J., not participating. Johnson, J., dissents.