Opinion
No. C0-02-1531.
Filed April 29, 2003.
Appeal from the Carver County District Court, File No. C701473.
Mike Hatch, Attorney General, Michael A. Sindt, Assistant Attorney General, (for respondent)
Patrick J. Neaton, Patrick J. Neaton Associates, (for appellants)
Considered and decided by Minge, Presiding Judge, Kalitowski, Judge, and Hudson, Judge.
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2002).
UNPUBLISHED OPINION
In a condemnation proceeding, the district court denied the landowner's request for various costs, including attorney fees, pursuant to the Minnesota Equal Access to Justice Act (MEAJA), and limited interest on the condemnation award to the statutory rate. Because we conclude the district court did not abuse its discretion in finding that the state's position was "substantially justified" under MEAJA, and because the statutory rate of interest was reasonable, we affirm.
FACTS
Appellants J.P. Links, Inc. and John B. Przymus were the owners and operators of a driving range and mini-golf course located on approximately 17.5 acres of land in Chanhassen. In August 2000, respondent State of Minnesota began quick-take condemnation proceedings under Minn. Stat. § 117.042 (2002) to acquire possession of a portion of appellants' land for highway improvements.
The court appointed commissioners to determine damages resulting from the taking. Two appraisals were presented: the state's appraisal set forth damages of $740,000, and appellants' appraisal set forth damages of $1,956,910. The original appraisal at the time of the quick take was $382,000. The commissioners awarded appellants $1,320,000. The state appealed to the district court and appellants cross-appealed, arguing that their damage was more than $1,320,000. In addition, appellants demanded that the state pay appellants three-fourths of the commissioners' award pursuant to Minn. Stat. § 117.155 (2002). The state contested appellants' request but paid appellants after a court ruled in appellants' favor.
A jury trial was held in May 2002. The jury found that appellants' damages were $1,600,500.
Pursuant to the MEAJA, appellants filed a post-trial motion for an award of: (1) costs and disbursements in the amount of $32,450.68; and (2) attorney fees in the amount of $72,800. In addition, appellants requested interest on the unpaid portions of damages at a rate of 7% per annum, and appellants requested the $500 appraisal cost awarded to appellants by the commissioners pursuant to Minn. Stat. § 117.085 (2002). The district court ruled that though appellants were the prevailing party, the state's position was substantially justified and that appellants were therefore not entitled to attorney fees or other expenses under the MEAJA. The district court awarded appellants interest at the statutory rate in the amount of $69,135.89 and did not order the state to pay the $500 appraisal fee awarded by the commissioners.
DECISION I.
This court reviews MEAJA cases under an abuse of discretion standard. Donovan Contracting of St. Cloud, Inc. v. State, Dep't of Transp., 469 N.W.2d 718, 720 (Minn.App. 1991), review denied (Minn. Aug. 2, 1991). This abuse of discretion standard is meant to "implement [the court's] view that a request for attorney's fees should not result in a second major litigation." Id. (quotations omitted).
Appellants argue that the district court abused its discretion by finding that the state's position in the litigation was substantially justified under the MEAJA. Specifically, appellants argue that (a) the district court abused its discretion by not making specific findings as to why the state's position was substantially justified; (b) the state cannot rely on its own appraisals to demonstrate that its position was substantially justified; and (c) the state's position was not substantially justified because it failed to comply with the 75% payment requirement of Minn. Stat. § 117.155 (2002).
The MEAJA provides:
If a prevailing party other than the state, in a civil action or contested case proceeding other than a tort action, brought by or against the state, shows that the position of the state was not substantially justified, the court or administrative law judge shall award fees and other expenses to the party unless special circumstances make an award unjust.
Minn. Stat. § 15.472(a) (2002). Under the MEAJA, a state's position is substantially justified when the state's position "had a reasonable basis in law and fact, based on the totality of the circumstances before and during the litigation or contested case proceeding." Minn. Stat. § 15.471, subd. 8 (2002).
Donavan Contracting, which is the only reported condemnation case that discusses the MEAJA in detail, took the position that because the statute "is a limited waiver of sovereign immunity, courts should strictly construe its language." 469 N.W.2d at 720 (citing Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3278 (1983)). Donovan Contracting construed "substantially justified" to mean "`justified to a degree that could satisfy a reasonable person' rather than `justified to a high degree.'" 469 N.W.2d at 720 (quoting Pierce v. Underwood, 487 U.S. 552, 565, 108 S.Ct. 2541, 2550 (1988)). The court in Donovan Contracting also noted that "no presumption arises that the agency's position was not substantially justified simply because the agency did not prevail." Id. at 720-21 (quoting Minn. R. 1400.8401, subp. 3(A)(2)(c)).
To prevail on its post-trial motion for attorney fees and other expenses pursuant to the MEAJA, appellant had the burden of showing that the state's position was not substantially justified. Minn. Stat. § 15.472(a). In reviewing the district court's determination that the state's position was substantially justified, this court examines the basis for the state's arguments "based on the totality of the circumstances before and during the litigation." Donovan Contracting, 469 N.W.2d at 721 (quoting Minn. Stat. § 3.761, subd. 8).
Appellants argue that the district court abused its discretion by not making specific findings as to why the state's position was substantially justified. As the claimants, the appellants had the burden of proof. But appellants did not point to any legal authority to support their argument that a district court must make specific findings as to why the state's position is substantially justified in any given case. Minn. Stat. § 15.472(a) does not impose any such requirement on a district court. Appellants' argument is not persuasive.
Next, appellants argue that this court should formulate a new test for determining whether the state's position is substantially justified in cases like this dispute. Appellants' proposed test involves comparing the state's appraisal with the commissioners' award and the jury verdict. But appellants' proposed test ignores the statute, which defines "substantially justified" as "based on the totality of the circumstances before and during the litigation or contested case hearing." Minn. Stat. § 15.471, subd. 8. We decline to abandon the statutory definition of substantially justified in favor of appellants' suggested test. Our focus is on whether the district court abused its discretion by finding that the state's appraisals were substantially justified based on the totality of the circumstances.
Appellants argue that the state's position was not substantially justified because the state's appraisals were significantly lower than the commissioners' award and the jury verdict. But standing alone, that difference does not mean the appraisals have no basis in law or fact.
Appellants also claim that because the state did not promptly and voluntarily pay them 75% of the commissioners' award as required by Minn. Stat. § 117.155, the state's position was not substantially justified. The state offered to pay the money into court and submitted a reasoned memorandum to the court. In the memorandum, the state questioned appellants' solvency and claimed that because the state might not be able to recover any overpayment, it had a legitimate state interest for withholding payment. The court ordered the state to pay 75% of the commissioners' award. After the court order, the state promptly paid appellants the 75%. The record does not demonstrate that in raising this concern the state acted in bad faith. To establish a rule that the state cannot raise issues related to its financial interest would penalize the state for attempting to protect the public fisc in a court proceeding. That would be a dangerous precedent. In sum, we conclude that the district court did not err in determining that the state's position was substantially justified.
II.
The next issue is whether the district court abused its discretion by awarding appellants only the statutory interest without determining whether statutory interest is reasonable and provides just compensation. Minn. Stat. § 117.195, subd. 1 (2002) provides that damages allowed under that chapter shall bear interest and that "[t]he rate of interest shall be determined according to section 549.09." Id. Because interest on a condemnation award is an element of just compensation, and the "determination of the interest rate on condemnation awards is a judicial decision" the court is not bound by the statutory interest rate. State v. Baillon Co., 480 N.W.2d 673, 676 (Minn.App. 1992) (citing State v. Carney, 309 N.W.2d 775, 776 (Minn. 1981), review denied (Minn. Mar. 26, 1992)). The
landowner is entitled to that return which would have been available if the landowner had been timely paid and had made reasonable and prudent investments." * * * [T]he return which satisfies just compensation may be more, less or equal to the return permitted by statute.
Id. (quoting Carney, 309 N.W.2d at 776). Minn. Stat. § 549.09 (2002) provides for simple interest; a condemnee is entitled to compound interest only if reasonable and prudent investments would allow the condemnee to earn compound interest. State v. Briggs, 488 N.W.2d 811, 816 (Minn.App. 1992), review denied (Minn. Sept. 15, 1992). In determining the appropriate interest rate,
the trial court should presume that the statutory rate is reasonable and, therefore, meets the requirements of just compensation and should order judgment at that rate unless the condemnee rebuts this presumption and affirmatively shows that another rate is reasonable and affords just compensation. In determining a reasonable rate, the trial court should look to rates on investments which guarantee safety of principal.
State v. Jim Lupient Oldsmobile Co., 509 N.W.2d 361, 364 (Minn. 1993).
In this case, if appellants wanted to apply an interest rate other than the statutory interest rate, they had the burden of showing that the statutory rate would not provide just compensation. Appellants' 7% interest rate was based on the interest rates they were paying on mortgage debt and based on rates that they claim would have been available to them on certificates of deposit at federally insured banks. The state argues that appellants' 7% rate is not a reasonable rate and presented evidence on the interest rates of Treasury bills, U.S. bonds, AAA municipal tax exempts, six-month certificates of deposit, and two-year Treasury yields. The interest rates for those low-risk investments were between 3.8% and 5.14%; the statutory interest rate applied in this case was 4.85%. The state calculated that 4.85% interest would amount to $69,135.89. The district court awarded exactly that amount of interest without further comment.
The district court implicitly found that appellants did not rebut the presumption that the statutory interest rate provides just compensation. Appellants argue that the district court abused its discretion by not making specific findings to support its determination. Since the district court is not obligated to make specific findings supporting such a determination, our inquiry is focused on whether the district court abused its discretion by finding that appellants did not rebut the presumption that the statutory interest rate provides just compensation. There is adequate evidence in the record to support a finding that the statutory rate provides just compensation. The district court did not abuse its discretion by implicitly finding that appellants did not rebut the presumption that the statutory interest rate provides just compensation.
Because the parties have stipulated that the state paid appellants the $500 appraisal fee awarded by the commissioners and that the issue is moot, we dismiss that portion of the appeal.
Affirmed in part, and dismissed in part.