The Turnpike Authority acquired a parcel of property in 1962 by condemnation. It was not until 1987 that a suit was filed to fix the award. At that time, the Authority deposited $27,000.00 with the court. It was determined that the parcel was worth $11,500.00 in 1962. Mr. Mori is now constitutionally entitled to his "just compensation".
To fix "just compensation" required that consideration be given to a variety of factors. Is the claim akin to damages or restitution? Is it to be based solely on interest and, if so, what rate should apply? What factors should influence the fixing of the rate? Should it matter that the Authority which was obligated to make payment maintained a portfolio which was income producing? Or, that the Authority was paying a certain rate of interest on its obligations for the use of money? Should the rate relate to Rule 4:42-11 rate or to Moody's rate or a 52-week treasury bill or the court's trust fund rate?
N.J.S.A. 27:23-5(j) provides:
". . . If the amount of the award as finally determined shall exceed the amount so deposited, the person or persons to whom the award is payable shall be entitled to recover from the authority the difference between the amount of the deposit and the amount of the award, with interest at the rate of six per centum (6%) per annum thereon from the date making the deposit. . . ."
No precedent was cited to resolve whether this act applies where there is a 25-year hiatus going back to 1962. Mori challenged it as violative of the separation of power doctrine because the Legislature sought to usurp a judicial function.
The Authority would limit the claim to interest damages measured by the three-year treasury note rate as a "prudent investment" which recognized the need to consider the safety of principal, reasonableness of rate of return, the need to hold market validity, the importance of maintaining liquidity, the reasonableness of the time factor, the advantage of minimizing capital risk of loss and market volatility. It gave no separate consideration to the Consumer Price Index in prudent investing
since the treasury bill rate took into consideration the effect of inflation.
Mori, too, urged that a proper interest rate was the approach to "just compensation" and that a "prudent investment" analysis would yield the appropriate rate. He argues for a rate based on Moody's Composite Index on A-Rated Corporate Bonds (because the Turnpike bonds were A-rated) with a minimum rate of 6% compounded annually.
Neither party addressed the issue of broad diversification. Neither considered the stock market nor the type investments authorized statutorily for fiduciaries. Both approached their analyses looking backwards at what the market had been between 1962 and 1987. Neither opined what a prudent investor would have done on analysis of the pre-1962 market. Each, therefore, as a Monday-morning quarterback, urged a Conclusion as if they, as prudent investors, could have known how long a period would elapse between debt and payment. Each assumed that a prudent investor would have had the foresight to anticipate what eventuated.
Although the Authority's expert was highly qualified, skilled in her discipline and came with vast experience, it is difficult to accept a blanket 3-year term on a single type instrument as realistic when the time spread is over 25 years and the litigants did not know whether the obligation was going to be satisfied within a short or long time frame.
Much has been written on the issue of "just" compensation and on delayed payment. Among others, is Kaplan, Interest Rates in Eminent Domain: Is 6% Just Compensation in a 12% World?, 12 Loyola of Los Angeles L.Rev. # 3, (6/79); ...