Public Utility District No. 1 v. Washington Water Power Co.

I am in accord with the majority opinion in the conclusion reached on both appeals, but I desire to state some additional reasons which lead me to agree with the majority in the conclusion reached upon the question first discussed by the majority in connection with plaintiffs' appeals. As stated in the opinion, these appeals raise two questions: (a) whether the judgment should have provided for the offset of earnings against interest on the awards for the periods between the dates of the respective judgments and the time when the award shall be paid; and (b) whether the judgments should have provided for compensation to the utility company for improvements made during the periods referred to.

The prior decisions of this court pertinent to proposition (a) are discussed in the majority opinion, and I am in entire accord with the majority opinion in the discussion of these cases.

The matter of the allowance of interest on awards in condemnation cases has been considered by the courts of many states, and it seems to me that some further discussion of these authorities may not be out of place.

As stated by the majority, it has been held in several jurisdictions that no interest upon the award should be allowed during the period the property owner retains possession of the land. For my part, I am convinced, however, that the better rule is that interest should be allowed. It seems clear that that rule is supported by the weight of authority and the better reason.

The property owner is certainly always damaged, to some extent at least, by the fact that a proceeding in condemnation has been instituted, and his beneficial use of the property is further impaired when the value of the land being condemned has been fixed by the verdict. From that time until the amount of the award is paid and possession of the property taken by the condemner, the value of the property to the owner is manifestly greatly lessened. The allowance of interest on the award covers, to a greater or less extent, such damages, which in most cases cannot be accurately determined. The allowance is not strictly interest, but represents a fair equivalent to the owner for the damage suffered.

I have been unable to find any case (save the opinions of this court cited in the majority opinion) in which it has been intimated that the property owner should receive both interest on the award and any profits which have accrued to him from the property between the date of the award and the payment to him of the amount thereof in money, if the profits which he has received exceed the amount of interest computed on the award at the legal rate.

In the case of Brown v. United States, 263 U.S. 78,68 L.Ed. 171, 44 S.Ct. 92, the supreme court had before it for consideration a statute of the state of Idaho which provided that the right to compensation for property condemned and resulting damage to the owner should accrue as of the date of the summons in the condemnation proceeding. The statute referred to having been judicially construed as requiring the payment of interest from the statutory date, the supreme court held that interest should be allowed from that date, even though the owner remained in possession of the property. No question concerning the set-off of profits against interest was raised, the annotator stating:

"It will be observed that the court does not consider in this case the matter of set-off or allowance for rents and profits to the owners who remained in possession, but holds merely that they were entitled to interest."

In the same annotation is found the following:

"There is a conflict of authority on the question indicated in the above title. [Interest in eminent domain proceedings as affected by retention of possession by owner.] Some courts deny the right of the landowner to interest pending condemnation proceedings where he retains possession of the property. Other courts, however, hold that the owner is entitled to interest notwithstanding the fact that he retains possession, but that the amount of interest must be reduced by the value to him of the rents and profits; in other words, that allowance must be made for possession in computing interest, and the value of such possession to the owner must be set off or accounted for. The better rule would appear to be that which allows interest, but requires the owner to account for rents and profits."

In the later case of Danforth v. United States, 308 U.S. 271,84 L.Ed. 240, 60 S.Ct. 231, the court denied interest to the property owner prior to the date of the taking of possession of the property by the condemner, and distinguished the Brown case as based upon the law of Idaho.

In the case of Lake Koen Nav. Co. v. McLain Land Inv. Co.,69 Kan. 334, 76 P. 853, the court said:

"In condemnation appeals the issue is, What shall be full compensation? Interest is allowed merely as a means of securing such compensation. If, upon the condemnation of land, complete deprivation do not follow at once, still, further tenure is rendered precarious. Possession may be disturbed at any time, and all property rights are exercisable only under doubt and uncertainty as to their duration. As a recompense for the loss attending this embarrassed use of the land and this qualification of dominion over it pending the payment of the condemnation money, interest may be allowed. If, however, as a matter of fact the owner should suffer no injury in these respects no occasion for compensation by way of interest would arise. The owner should not have his land and interest too, for the constitution does not contemplate the payment of anything beyond full compensation. It is the better rule, therefore, to allow interest on general damages from the date of condemnation, then reduce the amount by the value, if any, to the owner of whatever subsequent possession and use of the land he has enjoyed."

The supreme court of Michigan, in the case of Campau v.Detroit, 225 Mich. 519, 196 N.W. 527, 32 A.L.R. 91, recognized the rule, although in the case then before the court the land being unimproved was incapable of any temporary beneficial use. Concerning the law upon the question under discussion, the court said:

"It is true as defendant's counsel points out that in instituting such proceedings under the Federal law, and of some States, the condemnor may and usually does first take actual possession of the property sought to be condemned, and it is argued that in those jurisdictions where judgment precedes that right, leaving the owner in possession till paid, the beneficial use attending such possession should be construed as the equivalent of interest on the award. Some authorities are found favoring such rule in construction of their statutes. We think the great weight of authority repudiates any such general rule, although generally recognizing that if the owner has not been disturbed in his possession of the premises and has profited thereby, either in receipt of rents or other beneficial use, it should be taken into consideration as an offset to the interest he otherwise would be entitled to, and the same abated accordingly."

The case is reported in 32 A.L.R. 91, the following appearing in the annotation:

"It seems settled according to the authorities in those jurisdictions in which interest is allowed notwithstanding the retention of possession by the owner, that the latter is not entitled both to interest and rents and profits, but must account for the value of the use of the property, and may be required to allow the same by way of set-off against or in reduction of the interest."

The supreme court of Minnesota, in the case of Warren v. FirstDivision etc., 21 Minn. 424, said:

"If, therefore, the allowance of interest upon the amount of the assessment shall be necessary to make the compensation just, we have no doubt of authority in the court to make it; and we think that, generally, it is necessary, to allow interest from the date of the award, to give to the owner just compensation. 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.

"It is true that until the company actually takes possession, at the end of the proceedings, the owner has the legal right to possess and use the land. It cannot be assumed that the value of this legal right is equivalent to the interest on the assessed value of the land. From the time of the award, he is practically deprived of his right to dispose of the land. His possession is precarious, liable to be terminated at any time; he cannot safely rent; he cannot safely improve; if he sows, he cannot be sure that he will reap. As he is not placed in this position by any act of his own, is not in as a wrongdoer, nor under any contract, there would be no justice in charging him with any assumed value of the use. Where the owner has actually derived benefit and value from his possession and use, between the filing of the award and the assessment by the jury, the value of such possession and use may be ascertained by the jury, and the amount of it deducted from the interest allowed."

In the later case of Minneapolis v. Wilkin, 30 Minn. 145,15 N.W. 668, it was held that the property owner was entitled to interest upon the award prior to payment thereof, the Warren case, supra, being cited as authority. No question of set-off was considered, but in the later case of Ford Motor Co. v.Minneapolis, 143 Minn. 392, 173 N.W. 713, the court discussed both of its prior decisions, holding that profits should be set off against the interest allowed. This rule was followed in Inre Acquiring Lands for an Alley, 147 Minn. 211, 179 N.W. 907, in which the supreme court of Minnesota required the owner in possession to deduct from the amount of interest due the profits which had accrued to him from the land prior to the payment of the award.

In the case of Fink v. Newark, 40 N.J.L. 11, the supreme court of New Jersey adopted the following rule in regard to this question:

"With respect to the claim for interest, in my opinion, the demand should prevail. The statute makes the compensation to be due to the owner of the land in six months after the ratification of the assessment of his damages. If no countervailing assessment for benefits is made within that period no reason appears why the compensation for damages should be withheld; and if withheld without right, it is entirely consonant with the usual practice to add an increase to the claim by way of interest. If the landowner, after the date of ratification, has made any beneficial use of the property condemned, it would seem proper that the value of such use should be taken into account in diminution of this interest claim, for it must be remembered the sum to be allowed for nonpayment of the damagemoney is not strictly interest, but damages for the detention of the money due, and what such damages should be is to be measured by the circumstances of the case."

In the case of West v. Milwaukee etc. Co., 56 Wis. 318,14 N.W. 292, the supreme court of Wisconsin quoted with approval from the case of Metler v. Easton etc. R. Co., 37 N.J.L. 222, the following:

"``If the owner has had the profitable use of the premises or has received rents pending the appeal, these circumstances should be taken into account, and interest abated accordingly.'"

In the later case of Uniacke v. Chicago etc. R. Co.,67 Wis. 108, 29 N.W. 899, the supreme court of Wisconsin directed that interest be paid from the date of the award and during the pendency of an appeal, but noted that there should be offset against the interest the value of any profitable use of the land to the owner during this period. The court observed, however, that in the case before it the land had not been put to any profitable use.

In the case of In re Mayor etc., 59 App. Div. 603, 69 N.Y. Supp. 742, the supreme court, appellate division, said:

"We conceive the proper rule in this case to be that interest and taxes are to be added to the award, but, as an offset, a deduction may be made of rentals actually received by the owner, or where rentals have not been received, of the value of the use and occupation of the premises from the date of the appropriation of the property to the time of the award."

On appeal, the decision of the inferior court was affirmed without opinion (167 N.Y. 627, 60 N.E. 1116).

In the cases of In re Mayor etc., 40 App. Div. 281, 58 N.Y. Supp. 58, and Application of Corporation Counsel, 258 App. Div. 490,17 N.Y.S. 2d 111, it was held that no interest on awards should be allowed, as it appeared that the beneficial use of the property by the owner was an equivalent. In the latter case, interest was allowed from the time the beneficial use ceased.

The opinion of the district court of appeal of California, in the case of Los Angeles v. Aitken, 32 Cal.App.2d 524,90 P.2d 377, is of interest in connection with the question under discussion, since the court discussed and relied upon, among other authorities, the case of North Coast R. Co. v. Aumiller,61 Wn. 271, 112 P. 384, cited and discussed in the majority opinion. After quoting at length from the Aumiller case, the California court said:

"We believe that the fairest and most equitable course is followed in the foregoing cases, and therefore take the view that while interest should be allowed, notwithstanding the possession of the owner, the latter is not entitled to both interest and profits resulting from such possession, and such profits may be allowed by way of set-off against the interest, or in reduction thereof. The burden of alleging and proving that such profits were received, and the amount thereof, rests upon the condemnor, as was held in the case of North Coast R.R. Co. v. Aumiller (above)."

The supreme courts of Pennsylvania and North Carolina, in the cases of Wayne v. Pennsylvania R. Co., 231 Pa. 512,80 A. 1097, and Miller v. Asheville, 112 N.C. 759, 16 S.E. 762, approved the rule allowing interest upon the award, but setting off against the amount of interest the profit accruing to the owner of the land while he remained in possession thereof.

From study of the authorities, I am convinced that the majority opinion lays down the rule which is supported by the weight of authority and reason, to wit, that the owner of property under condemnation, after the fixing of the award to be paid for the property, cannot at the same time enjoy the beneficial use of the land and receive interest on the award, without being required to set off against the interest the actual value accruing to him from the use of the property. The award, until paid and possession taken by the condemner, represents the amount the property owner shall receive for his land. Until he receives payment of the award, he should receive interest by way of damages for the delay in payment, but, if during this period he puts the land to profitable use, the amount of interest to be paid should be reduced pro tanto. If the income from the land exceeds the amount of interest, then the property owner should retain all of the income, but should receive no interest.

I concur in the opinion of the majority.