Guam SCT: Eminent Domain Statute Cannot Limit Right To Just Compensation

by Robert Thomas, Inverse Condemnation, April 18, 2016

Guam land titles can be seriously messed up. This case, Gov't of Guam v. 162.40 Square Meters of Land, No. CVA14-011 (Mar. 17, 2016), about which we posted earlier (when it went up to the U.S. Supreme Court and was denied review) is an example. To reconfigure irregular lot lines left over from the World War II Japanese occupation and American liberation and the resulting destruction of records, Guam adopted the "Agana Plan," which it viewed as a redevelopment plan of sorts. Or at least that's how it was employed, even though the Plan had until 1981, never been used to take any property.

But 1981 was different. Ilagan owned land in Agana on which he ran an apartment building. Ungacta -- who was then the Mayor of Agana -- owned a neighboring residentially-zoned lot. In 1981, the Ungacta property did not have access to a road. Ungacta appraised a part of the Ilagan property that had access, and which was used for parking for Ilagan's tenants. Soon after, the Guam government condemned the appraised area, paying for it with compensation supplied by Ungacta, and transferred it to Ungacta. The government deposited $9,744 and took possession.

The Supreme Court of Guam held the taking was for public use, and the U.S. Supreme Court declined review. So back the case went to the trial court for a calculation of compensation. In 2009.

The trial resulted in a $45,000 judgment for just compensation. As condemnation lawyers know, when the condemnor takes title or possession to property before the final award of compensation, and the final award exceeds the deposit, the property owner is entitled to the time value of the money she should have been paid contemporaneous with the taking.

In this case, the time value of approximately $35,000 for nearly 35 years.

Many states have statutes that require the payment of interest in these circumstances. Hawaii calls it "blight of summons," but that is a somewhat confusing label, since it is easy to get that mixed up with precondemnation blight, which it isn't. Guam has a statute that requires that a condemnation judgment "include, as part of the just compensation awarded, interest at the rate of six percent (6%) per annum on the amount finally awarded as the value of the property as of the date of taking, from said date to the date of payment" minus the interest on the amount on deposit.

But just like Hawaii's statute isn't really about "blight," the "interest" provided for in these statutes isn't really interest, even though the statutes call it that. They are supposed to be codifications of the constitutional requirement of just compensation, aka, the "full and perfect equivalent" of the property taken. And if property is taken but payment of full comp is delayed, then the full and perfect equivalent means the time value of the money. 

Which is exactly what the Guam Supreme Court held. The former property owner challenged the 6% interest rate provided for in the statute, arguing it did not make him totally whole. Guam opposed, arguing that the statute is the statute and the trial court can rely on the statutory interest rate. Not so, held the court, there has to be a fact-specific approach to determine whether the statutory rate was proper and reasonable. In other words, "constitutionally adequate." This means the rate of "interest" must yield the same as what a reasonably prudent investor with the proceeds would have received. That's what "full and perfect" means, not the rate set by the legislature.

Yes, the statutory interest rate is presumably reasonable. But the landowner may rebut the presumption

by showing that the rate fails to meet the constitutional standard of "just compensation." Thus, the court is not bound by the statutory rate and must consider evidence offered to rebut the presumption of reasonableness. Furthermore, we hold that the statutory rate operates as a floor; while the court is not bound by the rate, it may only deviate upward, not downward.

Slip op. at 12.

Instead of doing this, the trial court merely applied the statutory rate, despite evidence which the owner submitted of a better rate of return.

The court also concluded that the Fifth Amendment allows compounding of the interest, and the statute's silence on the method of interest (compound vs simple) was not dispositive. See slip op. at 16 ("Thus, the trial court erred in simply relying upon the silence in the statute as being dispositive of the issue; where, as here, the condemnee argues that simple interest would be inadequate and presents evidence in support of an award of compound interest, the court should assess whether such compounding of interest is necessary to satisfy the requirement of just compensation.").

So after 34 years, maybe there will be some measure of justice?

PDF: Gov't of Guam v. 162.40 Square Meters of Land, No. CVA14-011 (Guam Mar. 17, 2016)