Eminent Domain

Ronmar Realty v. State of New York

Court: Supreme Court of New York, Appellate Division, Second Judicial Department
Docket #: 2013-05862
Citation: 2014 NY Slip Op 07343
Plaintiff: Ronmar Realty, Inc.
Defendant: State of New York

Facts: Plaintiff appealed an award of damages in the sum of $34,857.72 granted after a non jury trial. Defendant had acquired a temporary easement over a portion of plaintiff's property in connection with a road widening project. Plaintiff claimed that the award was inadequate

Holding: The court of claims upheld the verdict of the lower court. The court of claims determined that given the limited disruption to the subject property, the monetary award was adequate since any interference with access to the property was sporadic and brief. The damage award was designed to compensate plaintiff for the rental value of the land encompassed within the temporary easement together with the cost to repair actual damages to the property caused by the defendant's activities

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Faisal Sheikh

 

Matter of Western Ramapo Sewer Extension Project

Court: Supreme Court of New York, Appellate Division, Second Judicial Department
Docket #: Not mentioned
Citation: 2014 NY Slip Op 05889
Plaintiff: Western Ramapo Sewer Extension Project. Split Rock Partnership
Defendant: Rockland County Sewer District No. 1

Facts:Defendant is appealing a decision by the Supreme Court of the amount of compensation granted to the Plaintiff for the taking of Plaintiff’s real property by Defendant under eminent domain. This determination of property value was based on evidence of the highest and best use of the property, which reasonably could or would be made in the near future, regardless that the property was not being put to such use at the time. The Plaintiff had executed a contract for the sale of the subject property to a developer for commercial development of an office center prior to the eminent domain. However, this contract was never consummated. The Defendant contends that Plaintiff failed to satisfy the burden of demonstrating highest and best use of the property, and that the contract was entered into in bad faith.

Holding:The Appellate Court dismissed the Defendant’s appeal. The Appellate Court agreed with the Supreme Court’s consideration of the unconsummated development contract as admissible evidence, since the Defendant failed to demonstrate that the transaction was either abnormal or not an arm’s length transaction. The Court also dismissed the Defendant’s contention that the Plaintiff’s knowledge of the potential condemnation prior to the unconsummated contract demonstrated bad faith for the purpose of inflating the property value. Furthermore, the Appellate Court agreed with the Supreme Court’s preclusion of witnesses on the basis of noncompliance, as the  Defendant did not identify or disclose the witnesses until after trial had begun, nor provide any explanation for that failure. Lastly, the Appellate Court also agreed with the Supreme Court’s discretion in granting the Plaintiff’s adverse inference against the Defendant, with respect to the destruction of draft appraisal reports and draft feasibility studies provided by the Defendant.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Faisal Sheikh

 

Dong v. Town of North Hempstead

Court: United States District Court, Eastern District of New York
Case #: 2:2013cv00255
Citation: No. 13-CV-0255 (JS) (ARL)
Plaintiff: Qing Dong
Defendant: Town of North Hempstead

Facts:The Plaintiff, an owner of an undeveloped parcel of land, was denied a building permit by the Defendant's Department of Buildings because the Plaintiff's property dimensions did not meet the zoning ordinance requirements to allow for development. The Plaintiff subsequently sought a variance, which was denied by the Board of Zoning Appeals. The Plaintiff is appealing this decision, alleging a Fifth Amendment takings claim and seeking an injunction to require the Defendant to either issue the Plaintiff a building permit or variance. The Defendant is moving for a motion to dismiss this complaint, claiming that the complaint is not ripe for review and barred by collateral estoppel.

Holding:The District Court ruled in favor of the Defendant and dismissed the Plaintiff's complaint. The Court ruled that the Plaintiff had not exhausted all potentially available reasonable, certain and adequate state procedures for obtaining just compensation, and therefore, the Plaintiff had not satisfied the ripeness requirement for adjudication. The Court also ruled that the Plaintiff previously had the full and fair opportunity to litigate the issues in the Plaintiff's Article 78 proceedings and subsequent appeal. Thus, the Plaintiff's claim for injunctive relief was barred by collateral estoppel. Lastly, the statute of limitations to commence the Article 78 proceedings, a period of 4 months, had passed, and thus the Plaintiff's taking claim will be dismissed with prejudice.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Faisal Sheikh

 

Matter of City of Long Beach v. Sun NLF Ltd. Partnership

Court: Supreme Court of the State of New York, Appellate Division, Second Judicial Dept.
Case #: 14660/05
Citation: 2015 NY Slip Op 00371
Plaintiff: Sun NLF Limited Partnership et al.
Defendant: City of Long Beach

Facts:Plaintiff is the owner of three noncontiguous parcels of land in the City of Long Beach, which were condemned by the Defendant. The Plaintiff then sought just compensation for the taking of the parcels. The Court determined that the highest and best use of two of the Plaintiff's three parcels (Parcels 11 and 13), would be as assembled with a narrow parcel of land (Parcel 12), which connects the two parcels. These Parcels were to be used as a multifamily development by the Plaintiff. The Defendant is appealing the Court's determination as to assembly of Parcel 12 for the highest and best use of Parcels 11 and 13.

Holding:The Appellate Division, in agreement with the lower court's decision, rejected the Defendant's claim and agreed that the assembly of Parcel 12, in determination of the value of Parcel 11 and 13 for the highest and best use of the property, was done properly. The Court, using precedence as guidance, agreed that the Plaintiff is entitled to the fair market value of the condemned property for its highest and best available use, even though that use is in connection with adjoining properties, provided there is reasonable probability that the condemned property would be combined with other tracts in the reasonably near future. Furthermore, the Court acknowledged that although the property owners did not privately assemble the properties in the years preceding the condemnation, the fact does not undercut the probability of such assemblage, as a building moratorium had been in effect for numerous years in anticipation of condemnation. Therefore, the Plaintiff had established the reasonable probability of the assemblage.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Faisal Sheikh

 

Matter of City of Long Beach v. Sun NLF Ltd. Partnership

Court: Supreme Court of the State of New York, Appellate Division, Second Judicial Dept.
Case #: 14660/05
Citation: 2015 NY Slip Op 00370
Plaintiff: Sun NLF Limited Partnership et al.
Defendant: City of Long Beach

Facts: The Plaintiff filed for just compensation for the taking of the five undeveloped parcels of oceanfront property in the City of Long Beach that were owned by the Plaintiff and were part of condemnation proceedings by the Defendant of an area known as the Superblock. The Court determined that, in awarding the compensation based on the highest and best use of the property, was as assembled with the other properties of the Superblock for mixed-use development. The Court awarded the sum of $8.5 million, with the principal amount of $5.5 million, less $3 million in advance payments with prejudgment interest at the rate of 9% per annum. The Defendant is appealing the Court's determination of the assembly of the other properties in the Superblock as well as the prejudgment interest rate of 9%.

Holding: The Appellate Court agreed in part with the lower court's decision and amended the decision in part. The Appellate Court agreed that the lower court was right in its assessment of the fair market value of the condemned property for its highest and best available use, which was as assembled with the other properties in the Superblock for mixed-use development, even though that use might not be occurring at the time of condemnation – the assumption being that there is a reasonable probability that the condemned property would be combined with other tracts in the reasonably near future. As to the second part of the appeal, the Court looked at General Municipal law for the constitutional requirement to pay prejudgement interest to compensate for delay in payment and use of property, which stated the rate of prejudgment was not to exceed 6% per annum. It is then the Plaintiff's burden to prove the constitutional insufficiency of the statutory rate if the Plaintiff wants to be entitled to a higher rate. Here, the Plaintiff failed to present any expert testimony as to their entitlement to a higher rate. Thus, the prejudgement rate is amended to 6% per annum.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Faisal Sheikh

 

Joy Builders, Inc. v. Town of Clarkstown

Court: Appellate Division, Second Department
Citation: ___ AD3d ___, 2015 NY Slip Op 03328(2nd Dept., 2015)

Overview: Inverse condemnation is a lawsuit brought by a property owner seeking compensation for land taken for a public use by a government entity with eminent domain powers. Eminent domain is the taking of private land for public use with payment of compensation by a government entity. Inverse condemnation actions are usually brought when the government has limited use of private land to an extent that the value of that land is greatly reduced, or where the government has allowed the public to make use of private land.

Inverse condemnation may be a direct, physical taking of or interference with real or personal property by a public entity. For example, inverse condemnation liability has been found due to flooding, escaping sewage, interference with land stability, impairment of access, or noise from overflying aircraft.

A claim of inverse condemnation may also arise from a "regulatory taking." In such cases, a government regulation is claimed to amount to a taking or damaging of property, such as overly restrictive zoning regulations, denial of building or demolition permits, and burdensome conditions placed on development.

Facts: Defendant, The Town of Clarkstown, took property from Plaintiff, Joy Builders, Inc., through the powers of eminent domain. After a period of time without claiming compensation, Plaintiff ultimately made claims for just compensation for the property the Town took and the diminished value of Plaintiff's remaining property.

Holding: The Appellate Division, Second Department affirmed the judgment of the Supreme Court. The Appellate Division found that triable issues of fact existed to deny Plaintiff's motion for summary judgment. The Court also held that Plaintiff submitted a timely claim for damages as a result of Defendant's taking of its property, and ordered a hearing to determine whether any economic viability exists on Plaintiff's property.

Editor's Note: A government entity may be liable for compensation of property without an actual taking. If zoning regulation, improper engineering studies of other factors affect the ultimate use of a property, a municipality may be liable for the diminished value of the property, without an actual transfer of ownership. Also, it is imperative that a property owner submits, in a timely manner, any claims for compensation in any type of condemnation/eminent domain proceeding.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 


594 Associates, Inc. v. The City of New York

Court: Supreme Court of the State of New York, Kings County
Citation: ___ Misc. 3d ___, ___NYS3d____ (Sup. Ct., Kings Co., 2015)

Overview: The City of New York, as condemnor of a parcel of land located on Staten Island, New York, moved to have the Plaintiff's appraisal report stricken, since the report did not appraise the property on the date of vesting of title as required by existing law.

Facts: Plaintiff, 594 Associates, Inc., owned a parcel of wetlands property on Staten Island, New York. As part of its Bluebelt project, The City of New York, through its powers of eminent domain, condemned Plaintiff's property and took title on October 26, 2010. Plaintiff alleged that on or about September 26, 2005, the City installed a headwall and an overflow outlet on Plaintiff's property without its permission or license. Plaintiff alleged that neither the headwall nor the overflow outlet are visible from the road and are only visible from within the property.

The Plaintiff filed a claim for compensation on November 15, 2010. Plaintiff hired an appraiser who determined the appraised value of the property on September 26, 2005, the date the headwall and overflow valve were installed on Plaintiff's property, rather than October 26, 2010, the date title was vested in the City of New York.

The City moved to strike the appraiser's report on the grounds that it was improper and of no probative value, because it did not value the property as of the vesting date of October 26, 2010, and further, that the claim for compensation was untimely and beyond the statute of limitations.

Holding: Where a property is taken by eminent domain, it is valued as of the date of the taking. Any claim for condemnation accrues at the time of taking, even when the encroachment is not visible to the landowner. Since the City entered upon Plaintiff's property on September 26, 2005 for the installation of the headwall and overflow outlet, it created a de facto taking and any claim for compensation must be measured by that date.

Since the claim for compensation for the installation of the headwall and overflow outlet was submitted well beyond the applicable statute of limitations against The City (one year and ninety days), the appraiser's report was untimely and of no probative value. The Court held that Plaintiff was entitled to compensation based upon the report of the City's appraiser, as of the date of vesting of title, since that was the only report in evidence before the Court.

Editor's Note: A property owner who has any inclination that any part or use of its property is being taken, must file a timely claim for compensation under the Eminent Domain Law.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Pack It Away Storage Systems, Inc. v. New York State Urban Development Corporation d/b/a Empire State Development Corporation

Court: Supreme Court of the State of New York, Kings County
Citation: Unreported Decision (Index Number: 1686/2012)

Overview: Defendant, New York State Urban Development Corporation d/b/a Empire State Development Corporation (hereinafter referred to as “Empire”), by its powers of eminent domain, condemned several parcels of land used for a public storage facility. Following a trial, Empire moved the Court to strike any award for compensation for fixtures upon the Plaintiff’s property.

Facts: Defendant, Empire condemned real property owned by Plaintiff Pack it Away Storage Systems, Inc. The properties consisted of several lots used for public storage facilities. Following a hearing, the Court determined the value of the condemned property to be worth $5,134,000.00 and ordered Empire to pay same to Plaintiff.  Defendant submitted a post-trial motion to strike any award for the fixtures (tangible personal property attached to the real estate and buildings), since Plaintiff’s parent corporation, PJK, Inc. was awarded the value of the fixtures in a separate action and payment cannot be made twice for the same property.

Holding: The Supreme Court held that whether PJK and Plaintiff were related was not, the determinative issue since even if they were, they would still be entitled to an award for both the property and the fixtures, because the fixtures were consistent with the highest and best use of the property.

The Court further held that it was improper for Empire to submit the motion post-trial, since no objections were made during the trial for the value of the fixtures. Furthermore, Empire's motion to reargue contained facts that were not presented in its original motion, and new facts cannot be presented in a motion to reargue since they were available to Empire during the initial post-trial submission.

Editor's Note: An award for condemnation of land includes the highest and best use of the land as of the date of transfer of title. The highest and best use may include fixtures to the property, but only if such claim is made in the original claim for compensation under the Eminent Domain Law.  

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Village of Haverstraw v. AAA Electricians, Inc.

Court: Division, Second Department
Citation: 114 AD3d 955, 981 NYS2d 436( 2nd Dept., 2015)

Overview: In a condemnation proceeding under the Eminent Domain Law, the Court was faced with the issue of whether the potential inclusion of a parcel of land in a redevelopment project could be considered when evaluating the “highest and best use” of a property for compensation purposes. 

Facts: The Village of Haverstraw, New York, through its eminent domain powers, condemned a parcel of land owned by Defendant, AAA Electricians, Inc. The property was to be included in the Village's redevelopment plans. Following a non-jury trial, the trial judge awarded AAA Electricians, Inc. $6,500,000 as just compensation for the taking of the property.

The Village appealed, claiming the award for compensation was excessive and AAA Electricians, Inc. appealed, claiming the Court erred in failing to find that the highest and best use value of the property was to include the zoning in the Village's new redevelopment plans.

Holding: The Appellate Division, Second Department affirmed the judgment of the Supreme Court. The Appellate Division found the measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, regardless of whether the property is being put to such use at that time. Where an increment is added to the value of vacant land to reflect its development potential, the specific increment, which is selected and applied, must be based on sufficient evidence and satisfactorily explained. It is also necessary to show that there is a reasonable probability that the property’s highest and best use could or would have been made within the reasonably near future, and a use, which is no more than speculative or hypothetical arrangement, may not be accepted as the basis for an award.

AAA Electricians, Inc.'s property may not receive an enhanced value, where the enhancement is due to the property's inclusion within a redevelopment plan. Properties zoned within a specific zoning district should be valued should be valued in accordance with the highest and best use within such zoning regulations. A property owner is only entitled to compensation for what it has lost, not for what the governmental agency condemning the property has gained.

Editor's Note: This case demonstrates the need to have a highly-skilled and competent appraiser. Condemnation evaluation proceedings usually come down to who has the more experienced and credentialed appraiser.   

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Paula Nelson v. City of New York, Andes Town Board, et al.

Court: Appellate Division, Third Department
Citation: 117 A.D.3d 1221, 985 N.Y.S.2d 329 (3rd Dept., 2014)

Overview: In a quirky fact pattern, the owner of a parcel of land in Delaware County, New York sued due to a governing municipality NOT condemning her property via eminent domain or acquiring a conservation easement on her property.

Facts: Petitioner, Paula Nelson was the owner of a 58-acre dairy farm in Delaware County, New York. Petitioner's property was located in a watershed area that supplied much of New York City's drinking water. Petitioner's property was impacted by a series of Memoranda of Agreement ("MOA") between several governmental agencies that were involved in supplying New York City's drinking water. The MOA included a land acquisition program whereby New York City could acquire undeveloped land in upstate counties to protect the watershed. Local municipalities within the watershed area could designate certain areas as excluded from the acquisition program so as to protect future economic vitality. Petitioner's property was excluded from acquisition in fee, but the MOA did not prohibit the watershed commission from purchasing a conservation easement of the property. In 2006, Petitioner applied to the watershed agency hoping to sell a conservation easement. No offer was ever made.

In 2010, the Department of Environmental Conservation issued a 15-year water supply permit authorizing future land acquisition within the watershed areas. The permit specifically provided that a local municipality could exclude certain lands from acquisition, in fee or by easement, if the local municipality passed a resolution designating such areas as hamlets (and excluded from acquisition). The Town of Andes held public hearings where Petitioner appeared, and eventually passed a resolution excluding certain areas in the Town (that encompassed Petitioner's farm) from any acquisition as per the permit. Petitioner sued to annul the Town's Resolution. The Supreme Court found in favor of Respondents, and Petitioner appealed.

Holding: The Appellate Division, Third Department affirmed the Supreme Court's decision. The Court found the Town's Resolution did not exceed the authority vested by improperly restricting ownership or transferability rights. The Court stated the longstanding rule that towns have broad authority to regulate land use within their borders. The Court found that there were no restrictions on Petitioner to sell or otherwise transfer the rights to her farm. The mere fact that an agency elected not to acquire her property through condemnation or easement did not give rise to an action.

Editor's Note: One can hardly wonder if Petitioner bought the property with the intent of maintaining the dairy farm or simply as a way of getting a payout based upon an anticipated acquisition.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Acquisition of Easements by Bluestone Gas Corporation of New York v. Iaboni

Court: Appellate Division, Third Department
Citation: 116 A.D.3d 1182, 984 N.Y.S.2d 201 (3rd Dept., 2014)

Overview: The owner of a parcel of land challenged the taking of her property for an easement to allow construction of a major gas pipeline through Broome County.

Facts: In July 2011, Petitioner Bluestone Gas Corporation of New York ("Bluestone") filed an application with the New York State Public Service Commission seeking a certificate of environmental compatibility and public need to permit construction of a nine-mile, underground natural gas pipeline in Broome County, New York. The proposed route of the pipeline crossed a portion of Respondent's 141-acre property. Respondent opposed the application raising various concerns before the Public Service Commission.

In September 2012, the Public Service Commission granted certificates authorizing the project under terms imposed by the Department of Environmental Conservation and the Delaware (County) Highlands Conservancy. After obtaining the certificates, Petitioner commenced an action under Article 4 of the Eminent Domain Law, authorizing the pipeline and seeking to condemn the necessary portions of Respondent's property in the form of a permanent easement. Respondent opposed the application in Supreme Court.

The Supreme Court granted the Petition and ordered Bluestone to post an undertaking of $138,000 (the full appraised value of Respondent's property) and to file an acquisition map. Upon meeting the conditions, title for the easement would vest with Bluestone.

Holding: The Appellate Division, Third Department affirmed the Supreme Court's decision. The Court dismissed Respondent's arguments of jurisdictional defects since the return date of the papers in Supreme Court did not give the requisite 20-day notice required under Article 4 of the Eminent Domain Law. The Court noted that Respondent timely filed an Answer in the underlying proceeding and made no objection to the procedure. The Appellate Court noted that the CPLR "generally" applied in Eminent Domain proceedings and there was no need to apply an "unwavering rigidity" to proceedings such as these.

The Appellate Court also dismissed Respondent's argument that the taking was excessive in light of the project. Respondent made the same objection before the Public Service Commission. Since Respondent failed to challenge the scope of the taking in the lower Court, she is foreclosed on raising the issue on appeal.

The Court did not address Respondent's contention of insufficiency of compensation, since it was not a basis for dismissal. The Court noted that Respondent can challenge the actual award under Article 5 of the Eminent Domain Law once the evaluation is made.

Editor's Note: This case highlights the need to preserve each and every issue for appellate review. An argument cannot be raised for the first time on appeal, if not made before the Court for which review is sought.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Lerner v. State of New York

Court: Appellate Division, Third Department
Citation: 113 AD3d 916, 978 NYS2d 443 (3rd Dept., 2014)

Overview: An interesting case that discusses whether an appraiser's report prepared during a condemnation proceeding can be subpoenaed during litigation by a property owner.

Facts: Plaintiff was the owner of four (4) parcels of land located in Sullivan County, New York. Defendant, The State of New York through its powers of eminent domain, condemned Plaintiff's properties as part of work to bring State Route 17 into compliance with federal highway standards. Plaintiff brought an action for damages as a result of Defendant's condemnation and also brought a separate action for trespass and property damage to the unseized portions of Plaintiff's property used by Defendant during the construction and alteration of Route 17. All claims were joined together for trial purposes.

Prior to the State appropriating any property, it retained an appraiser. During the litigation, Plaintiff served a subpoena on the State's appraiser, seeking appraisals, valuations, reports, notes and photographs. Defendant moved to quash the subpoena, claiming it was privileged under Article 45 of the CPLR as material prepared in anticipation of litigation. The Court of Claims granted the State's motion and quashed the subpoena. Plaintiff appealed.

Holding: The Appellate Division, Third Department reversed the Court of Claims and upheld the subpoena. The Court held that Plaintiff demonstrated entitlement to the material. Materials prepared in anticipation usually enjoy conditional immunity and are subject to disclosure only upon a showing of substantial need of the materials to prepare for trial and the inability to obtain equivalent materials by other means without undue hardship.

An appraisal report loses its immunity when it is adopted by a municipality. When the State submitted the appraisal report to the Federal agency to show compliance with roadway standards and to seek reimbursement, it was "adopted" and lost its conditional immunity.

Regardless of whether the report was adopted, the Appellate Division found the subpoena proper under the "showing of substantial need" test. Plaintiff submitted affidavits that demonstrated it had no records of proof of the condition of the property prior to the condemnation. Photographs, notes, reports and appraisal were taken by Defendant shortly before condemnation and, as such, made the need for them highly relevant. Since the material was necessary to support the claim for damages and not available from other sources, the Court reversed the Court of Claims and ordered the subpoenaed material to be exchanged.

Editor's Note: Clearly, the applicability of this case is limited to condemnation proceeding involving municipalities. The rules of procedure will likely apply to appraisal reports in private litigation.

Submitted: Phillip Sanchez www.spnylaw.com

Precis: Joel Grossbarth

 

Rose Park Place, Inc., et al. v. State of New York

Court: Appellate Division, Fourth Department
Citation: 120 AD3d 8, 985 NYS2d 350 (4th Dept., 2014)

Facts: Plaintiff, Rose Park Place, Inc. was the owner of a 17.3-acre parcel of land in upstate New York. The State, through its powers of eminent domain, condemned a 1.22-acre tract of Plaintiff's land. Plaintiff brought an action for the diminished value of the remaining 16 acres. However, prior to the taking, Plaintiff sold 4.63 acres of land to Progressive Casualty Insurance for $1,800,000. Plaintiff still claimed the remaining land was diminished in value by the State's taking.

The Court of Claims awarded Plaintiff damages with respect to 12.835 acres of land. Included in the 12.835 acres was the land Plaintiff sold to Progressive. Defendant appealed.

Holding: The Appellate Division, Fourth Department held that the award of consequential damages for the 12.835-acre parcel was erroneous, since Plaintiff was not the owner of all of the land at the time of the taking. The Court noted that it was not concerned with the amount of the award, but if ANY award was due Plaintiff for the land sold prior to the taking. The Court upheld the long-standing rule that a claimant seeking compensation for eminent domain purposes must be the actual owner of the property. Since Plaintiff sold the land prior to the State's taking, it cannot now claim diminished value by the taking, since it was Plaintiff who effectively diminished its own land. The Court reduced the Court of Claims award by $1,925,275, based upon the remaining land owned by Plaintiff.

Precis: Joel Grossbarth

 

Matter of J. Owens Bldg. Co., Inc. v. Town of Clarkstown

Court: Appellate Division, Second Department
Citation: ___AD3d____ , 2015 NY Slip Op 04487 (2nd Dept., 2015)

Overview: A review of the necessity to conduct proper environmental assessments as part of any municipality's attempt to condemn land through eminent domain powers.

Facts: The Town of Clarkstown (Rockland County) sought to acquire property owned by Petitioner for purposes of drainage and storm water management in connection with a larger project known as the West Nyack Downtown Revitalization Project.

The Town Board conducted an environmental review as required under State Environmental Quality Review Act ("SEQRA"). However, the Town Board's SEQRA review was segmented to address only the drainage aspect of the project, and not the overall project itself. "Segmenting" is defined under SEQRA as the "division of the environmental review of an action such that various activities or stages are addressed as though they were independent, unrelated activities, needing individual determinations of significance. (6 NYCRR §617.3(g)(1).

Petitioner challenged the Town Board's determination on the basis that the Board did not comply with SEQRA.

Holding: The Appellate Division, Second Department reversed the judgment of the Supreme Court and found the Town Board failed to fully comply with the requirements of SEQRA. Based upon the Town Board's failure to comply with SEQRA, its determination must be annulled and the matter remitted back to the Town Board to undertake the appropriate review that considers the entire revitalization process as a whole.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Executive Touch Landscaping & Construction, LLC v. The Village of Haverstraw

Court: New York State Supreme Court, Rockland County
Citation: Unreported Decision, Index Number: 1843/06

Facts: During a trial for compensation resulting from appropriation by Defendant of Plaintiff's property, Plaintiff objected to the introduction of Defendant's expert witness's report. Plaintiff claimed the expert's report was defective and deficient. Plaintiff argued that the Village of Haverstraw's expert's report purports to value various fixtures on the property as of April 2012, almost six (6) years after the date of vesting of title in the Village. Claimant argues that the expert's evaluations are not relevant or probative, since the report is devoid of any connection of the date of vesting of title and the evaluations in the report some six years later. Plaintiff also claimed the expert's report did not conform to the requirements contained in the court's rules regarding appraisal reports.

Defendant conceded that the appraiser's report contained evaluations six years after vesting, but argued since Plaintiff remained on the property after vesting, it was appropriate for the expert to evaluate the fixtures for 2012 evaluations.

Holding: The trial judge sustained the Plaintiff's objections and precluded the expert for testifying regarding the evaluation of Plaintiff's fixtures. The court held that too much time had passed for the court to allow any testimony regarding the six-year gap in evaluation of fixtures. Also, since Defendant chose to utilize the 2012 date for evaluation, any reliance on prior case law (see Eckerd Corp. V. Burin, 83 AD3d 1239, 920 NYS2d 824) was unpersuasive.

The Court would rely on Plaintiff's expert witness for a determination of the value of the disputed property and fixtures.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Fairchild Corporation v. State of New York

Court: Appellate Division, Second Department
Citation: 117 AD3d 780, 985 NYS2d 687 (2nd Dept., 2014)

Overview: A very rigid application of the Court of Claims Act leads to a result that is difficult to accept.

Facts: The State of New York condemned a parcel of land owned by Fairchild Corp. After the de facto taking, Plaintiff filed a verified claim alleging damages as a result of the taking. During the pendency of the litigation, the State moved to dismiss pursuant to CPLR §3211, arguing the claim did not allege "when the claim arose" as required by Court of Claims Act §11(b). The Court of Claims granted the State's Motion and Plaintiff appealed.

Holding: The Appellate Division, Second Department affirmed the judgment of the Court of Claims. The court stated that the statutory requirements of the Court of Claims Act must be strictly construed. Plaintiff's failure to allege the statutory requirements in the claim was a jurisdictional matter which mandated the dismissal of the claim.

Editor's Note: While the decision may seem unreasonably harsh, the legal precedents are straightforward. A claim for damages against the state (in any form) must comply with the statutory prerequisites, or possibly face dismissal. One would imagine that Plaintiff probably brought a legal malpractice claim against the attorney that prepared the actual claim.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of State of New York (KKS Props., LLC)

Court: Appellate Division, Third Department
Citation: 119 AD3d 1033, 990 NYS2d 105 (3rd Dept., 2014)

Overview: What happens when a court ultimately disallows both appraisers' reports in an action for evaluation stemming from an eminent domain taking.

Facts: Claimant, KKS Properties, LLC, was the owner of a 31.77-acre parcel of real property on New Scotland Road in the Town of Bethlehem, Albany County, which it acquired in January 2006. On May 12, 2006, in conjunction with the construction of an extension of State Route 85 – also known as the Slingerlands Bypass, Petitioner, the State of New York, appropriated a 9.594-acre parcel of Claimant's property, which bifurcated (split) the property from north to south, leaving a 3.736-acre parcel to the east of the bypass and an 18.44-acre parcel to the west. The eastern parcel continued to enjoy access from its frontage on New Scotland Road, while access to the western parcel was reduced to a 43-meter conditional right of access, which was encumbered by wetlands, a fire hydrant and road signage. Claimant and Petitioner entered into an agreement for an advance payment to Claimant in the amount of $718,500 for the appropriated land. However, believing such compensation to be insufficient, Claimant thereafter commenced a proceeding, asserting that the limited access granted to the western parcel of its land had rendered the northernmost 16.04 acres unsuitable for development to its highest and best use, and sought consequential damages of $1,583,000.

After trial, the Court of Claims concluded that Claimant had suffered total damages of $532,000 as a result of the taking, and Petitioner then moved pursuant to Eminent Domain Procedure Law §304(H) for an order awarding it judgment against Claimant for its overpayment. The court thereafter dismissed the claim and entered judgment in favor of Petitioner for $304,679.57, which included Petitioner's overpayment of $186,500, plus statutory interest. Claimant appealed.

Holding: The Appellate Division, Third Department reversed the Court of Claims. The court held that when private property is appropriated for public use, just compensation must be paid, which requires that the owner be placed in the financial position that he or she would have occupied had the property not been taken. Upon a partial taking of real property, an owner is not only entitled to the value of the land taken, i.e., direct damages – but also to consequential damages, which consist of the diminution in value of the owner's remaining land as a result of the taking or the use of the property taken. Damages must be measured based upon the fair market value of the property as if it were being put to its highest and best use on the date of the appropriation, whether or not the property was being used in such manner at that time. Here, as part of a comprehensive rezoning of the Town of Bethlehem in September 2005, the eastern portion of the subject property, as it existed prior to the taking, was rezoned from residential to hamlet, while the western portion was rezoned to commercial hamlet. At trial, Claimant presented the report and testimony of a professional engineer, who opined that Petitioner's appropriation and the corresponding restrictions to vehicular and utility access that resulted, severely limited Claimant's ability to develop the western portion of its land for its highest and best use. Claimant also presented the appraisal report and testimony of a licensed real estate appraiser, who opined that the highest and best use of the parcel, both before and after the appropriation, was for commercial development, consistent with the zoning requirements. The appraiser valued the land before the taking at $2,360,000, and after the taking, at $350,000, thus estimating total direct and consequential damages to be $2,010,000.

The Court determined that the change in zoning of the subject property, which occurred prior to the taking, was part of a comprehensive rezoning of the entire town and included many other parcels zoned with the new hamlet and commercial hamlet designations, both in the area of the bypass extension, as well as areas far removed from that project. The Court found that the appraisal submitted by Petitioner's expert was of no probative value.

The predominant rule in condemnation cases is that in determining an award to an owner of condemned property, the findings must either be within the range of the expert testimony, or be supported by other evidence and adequately explained by the court. Because the appraisals of both parties' experts were flawed, leaving the trial court without competent proof on which to base its valuation, the court found itself constrained to remit the matter to the Court of Claims for further proceedings to determine the valuation of Claimant's property and the calculation of Claimant's damages based on the property's highest and best use as hamlet and commercial hamlet lands.

Editor's Note: The Court remitted the matter back to the Court of Claims for a determination "not inconsistent" with the opinion. It didn't give much more guidance as to what the Court of Claims should do.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

196 Broadway Food Court, Inc. et al. v. Metropolitan Transportation Authority

Court: New York State Supreme Court, New York County
Citation: ___Misc. 3d___, ___NYS2d___ (Sup. Ct. NY Co., 2015)

Facts: Three Claimants brought an action for damages associated with a condemnation brought by Respondent Metropolitan Transportation Authority ("MTA"). Claimants were leaseholders and tenants of a food court in Manhattan. Following the interposing of answers, MTA moved to consolidate for purposes of the Motions the claims submitted by each Claimant for damages associated with fixtures associated with the use of the property.

MTA claimed that pursuant to each respective lease, Claimants had no aright to remove any fixtures from the demised premises and any claims submitted for damages for the fixtures should be struck down by the Court.

Holding: The New York County Supreme Court (Judge Shulman) granted MTA's Motions. The Court found that "a reading of the plain terms of the leases"...indicates that Claimants were not entitled to remove from the demised premises existing fixtures, furniture or new furniture, and were only entitled to remove their 'movables'. To the extent Claimants sought just compensation related to the fixtures, the claims for damages were precluded.

Editor's Note: Clearly, the Motions only related to compensation for fixtures. Claimants' damages associated with their loss of use of the property pursuant to the leasehold interests still went forward.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Tehan's Catalog Showrooms, Inc. V. State of New York

Court: Appellate Division, Fourth Department
Citation: 118 A.D.3d 1497, 988 N.Y.S.2d 823 (4th Dept., 2014)

Overview: A discussion of damages when a governmental agency takes two contiguous parcels of land.

Facts: Defendant, The State of New York, condemned two parcels of contiguous land owned by Plaintiff Tehan's Catalog Showrooms, Inc. ("Tehan's"). Tehan's then commenced an action seeking just compensation for the taking of its properties. At trial, The Court of Claims awarded Tehan's $43,314.53 plus interest for the value of the land taken.

Tehan's appealed, claiming that the Court of Claims should have excluded the State's appraiser from testifying, since the appraiser improperly valued the two parcels as a single economic unit.

Holding: The Appellate Division affirmed the Court of Claims ruling. In order to establish the propriety of valuing two separate parcels of land as a single economic unit for purposes of awarding condemnation damages, a party must show that the subject parcels are contiguous, and that there is a unity of use and ownership. The appellate record established that the State appraised each parcel separately, assigning a different "highest and best use" value to each parcel.

The Court also rejected Tehan's argument that it was entitled to indirect damages for the taking. Tehan's argued the highest and best use of the two parcels was for retail use, but it failed to establish that retail use would have complied with all local zoning ordinances without having to obtain variances.

Editor's Note: Tehan's made subsequent motions to reargue, and sought leave to appeal to the Court of Appeals. All were rejected.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Sunny Lumber & Hardware, Inc. V. State of New York

Court: Court of Claims, Albany
Citation: Unreported Decision; Claim number: 122535

Overview: A discussion of damages in connection with trade fixtures when a municipality exercises its eminent domain power.

Facts: Sunny Lumber & Hardware, Inc. was a commercial tenant in Brooklyn, New York, when the State Department of Transportation condemned land in connection with the Kozciuszko Bridge. The owner of the property, 513 Porter Avenue, LLC, filed a claim for compensation for the real property, and also made a claim for advance payments. The judge who awarded the advance payment held that the advance payments did not include any claim for fixtures. Sunny Lumber asserted its claim for fixtures. The State moved to dismiss the fixtures claim on the grounds that the corporate-tenant owner executed an assignment of claim and release in favor of the land owner.

Sunny Lumber claimed any assignment was invalid due to the fact that Sunny Lumber's owner was a Chinese immigrant who speaks little English and executed the assignment and release by mistake. The State submitted affidavits from the real estate specialists involved in the negotiations with Sunny Lumber, stating that all communications with the owner were through a translator and everything was understood.

Holding: The Court of Claims denied the State's motion, finding that there was sufficient evidence that the release signed by Sunny Lumber was obtained under circumstances which indicate unfairness, overreaching and unconscionability. Additionally, the Court of Claims held that issues existed as to whether Sunny Lumber's release did not waive any right to bring a claim for trade fixtures.

The court held that the issues could not be resolved by motion and required a trial for determination.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Metropolitan Transit Authority v. Riedi

Court: Appellate Division, First Department
Citation: 118 AD3d 590, 987 NYS2d 166 (1st Dept., 2104)

Facts: As part of the expansion project of the Second Avenue Subway in New York City, certain tenants living on and around Second Avenue, were temporarily displaced and forced to find new residences during the project. The tenants sued, claiming the assistance they were given in finding new housing was inadequate. The Metropolitan Transportation Authority (“MTA”) also applied a 6% net present value discount to the lump sum payments to be made under the Uniform Relocation Assistance and Real Property Acquisition Policies Act (42 USC  §4621, et seq.) as replacement housing assistance to the displaced tenants. The Supreme Court denied the Petition and tenants appealed. 

Holding: The Appellate Division, First Department, unanimously affirmed the decision of the Supreme Court. The Court held that the Act and accompanying regulations give the MTA broad latitude in carrying out its statutory obligations. Furthermore, the MTA took all efforts to minimize the hardships and provide reasonable, fair and equitable assistance at a reasonable cost. The MTA was not required to give displaced tenants "dollar for dollar" coverage of the difference in rent between the vacated rent-regulated apartment and the comparable replacement apartment.

Editor's Note: It is important for a practitioner to be familiar with all aspects of condemnation, especially when, as a result of a temporary loss, his/her client is displaced without permanent loss of use of real property.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Rocky Point Realty, LLC v. Town of Brookhaven

Court: Appellate Division, Second Department
Citation: ___AD3d___, 2015 NY Slip Op. 012807 (2nd Dept., 2015)

Facts: The Claimant, Rocky Point Realty, LLC, owned a parcel of real property in Rocky Point in the Town of Brookhaven, New York. The property was approximately 37,500 square feet and improved with a vacant Burger King restaurant building. It was located in the J-2 Business District. In 2004, the claimant entered into a 15-year lease with a national auto parts retailer. Site plan approval for development of the parcel in accordance with the lease was granted in 2005. The Town thereafter commenced a condemnation proceeding to take the premises for public use. The petition was granted, and title vested on August 11, 2008. The claimant then filed this claim to recover damages for the taking of its real property.

At the valuation trial, both parties' appraisers opined that the highest and best use of the property was for commercial development, and both used the market sales approach to appraise value. The claimant's appraiser focused on certain specific commercial uses, such as a national retail chain, bank, drugstore chain, and general retail or office use, and valued the premises at $1,387,500. The Town's appraiser valued it at $910,000. Both appraisers also analyzed the 2004 lease as a secondary method to confirm their primary valuations. The Supreme Court rejected the claimant's focus on high-end users, giving more weight to the comparable sales utilized by the Town's appraiser, but found that the Town's appraisal was under-market. It determined that an award in the principal sum of $1,120,125 constituted just compensation for the taking, and entered judgment in that principal sum. The Town appealed.

Holding: The Second Department affirmed the trial court's judgment. The measure of damages in a condemnation case must reflect the fair market value of the property in its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time. In determining an award to an owner of condemned property, the findings must either be within the range of the expert testimony, or be supported by other evidence and adequately explained by the court. Where the trial court's explanation of its award is supported by the evidence, it is entitled to deference and will not be disturbed on appeal.

The Town contended that the Supreme Court rejected the claimant's appraisal as based on an inappropriate highest and best use, and thus, the court was bound to either accept the Town's appraisal or explain the basis for any departure. Contrary to this contention, both parties' appraisers proffered a highest and best use valuation of commercial development, and the Supreme Court merely accorded more weight to the comparable sales analyzed by the Town's appraiser. The award of a sum higher than the appraisal proffered by the Town's appraiser was supported by evidence. The court was permitted to accord some weight to the subject lease in valuing the condemned property.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

730 Equity Corp. v. New York State Urban Development Corporation d/b/a Empire State Development Corp.

Court: New York State Supreme Court, Kings County
Citation: Unreported Decision, Index Number:1689/12

Facts: The Condemnor, Empire State Development Corporation condemned an irregularly-shaped lot of 20,738 square feet owned by Claimant, 730 Equity Corp., located on Atlantic Avenue in Brooklyn, New York. On the date of vesting of title, the lot was vacant. There had been a gas station on the lot which was demolished some ten years prior to the taking. In 2001, the Claimant entered into a 15-year lease with Amoco Oil Company which contained a five-year extension. Claimant argued the highest and best use of the property was to develop a 12-story budget hotel. Claimant contended there was a "reasonable probability" that the parcel would have been re-zoned to allow the use. Claimant's appraiser appraised the property at $20,650,000, as mixed-use with a hotel.

The Condemnor contended there was no probability that the property would have been re-zoned and that the highest and best use was that of a gas station, parking lot or garage. Condemnor's appraiser appraised the property at $2,075,000, based upon the presence of a gas station. However, the Empire State Development Corp.'s appraiser used three comparables in her evaluation. Each one of the comparables used were automobile- related lots, which were ultimately re-zoned to allow for hotels.

Holding: The Kings County Supreme Court Judge (Wayne Saitta) found that the property would likely have been re-zoned and that it would be appropriate for a hotel to be erected. Judge Saitta surveyed the surrounding area and noted that Atlantic Avenue "acts as a corridor that separates Prospect Heights from Fort Greene and Downtown Brooklyn." Given the nature and location of Atlantic Avenue, the Judge went on, "It is not integrally a part of any particular neighborhood." Unlike neighboring Pacific Street, Atlantic Avenue "creates a situation that can support a larger development," Saitta said, allowing a basis for Claimant's appraisal assumption.

Physical probability aside, the court also looked at whether or not it would be financially acceptable to allow a hotel on the Atlantic Avenue site. Even though a 124,000-square-foot hotel is physically possible on the site, the Court must also consider whether such a hotel is financially feasible.

The Judge was presented with the tedious task of valuing the property, factoring in the costs of lawyers, zoning experts, and traffic consultants needed for the re-zoning process and the time frame for development. Using a detailed calculation and appropriate adjustments, the site was valued by the Judge at $9,186,000.

Editor's Note: The appeal of Judge Saitta's decision is currently pending in the Appellate Division. One can only wonder whether the Judge went too far in performing his own research and not simply basing his findings based upon the evidence adduced at trial.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

National Railroad Passenger Corporation v. McDonald

Court: United States Court of Appeals, Second Circuit
Citation: 779 F.3d 97 (2nd Cir., 2015)

Facts: Amtrak is a private corporation created by the Rail Passenger Service Act of 1970, 49 U.S.C. § 24101, to operate intercity commuter rail service throughout the United States. In furtherance of its objectives, Amtrak owns and uses real property, much of which was conveyed to it pursuant to the Regional Rail Reorganization Act of 1973.

The New York State Department of Transportation ("NYSDOT") is currently engaged in a project called the Bronx River Greenway, involving joint federal and state efforts to convert a 23-mile long stretch of land along both sides of the Bronx River into urban parkland. Part of the planned Greenway adjoins Amtrak's Northeast Corridor rail lines. In the course of carrying out the project, NYSDOT determined that it needed to build on several parcels of land owned by Amtrak. The Commissioner sought to acquire the land by eminent domain under the authority given her by the New York State Highway Law and the New York State Eminent Domain Procedure Law.

Before resorting to eminent domain, NYSDOT contacted Amtrak and attempted to negotiate the purchase of the land and easements it needed. As a result, beginning in 2001, NYSDOT and Amtrak communicated for several years about the Greenway project's need for the land in question. However, a stalemate resulted. Although Amtrak was willing to sell the land to New York, it demanded indemnification from all potential environmental cleanup liability and the right to pre-approve NYSDOT's entering and working on the land. NYSDOT did not make the desired concessions.

In April 2005, NYSDOT began proceedings under the Eminent Domain Law to condemn the properties. In accordance with the law, NYSDOT published notices of a public hearing. It also notified Amtrak officials that the hearing would occur on May 19, 2005. On May 11, 2005, Roger Weld, a NYSDOT employee, called and emailed a regional Amtrak official, Earl Watson, and notified him of the hearing. Watson, in turn, forwarded the NYSDOT email to the Amtrak personnel with authority to act in eminent domain cases, namely the Project Director of Real Estate Development — Sheila Sopper — and the legal department. However, NYSDOT's Eminent Domain Law mandated notice was sent to an erroneous address for Amtrak, not at the statutory address where Amtrak is to receive service of process. On May 19, 2005, NYSDOT held the public hearing as scheduled. No one from Amtrak attended, and Amtrak did not submit written comments. Subsequently, on August 17, 2005, NYSDOT published the determinations and findings necessary for condemnation of the land. See N.Y. Em. Dom. Proc. Law § 204. Amtrak could have challenged the condemnation under the EMINENT DOMAIN LAW's judicial review provision, see id. § 207, but did not. As it conceded at oral argument, it could also have brought the present action. Instead, from 2005 through 2008, it continued to discuss the Greenway project with NYSDOT.

Meanwhile, in 2007 and 2008, NYSDOT sent Amtrak notice that it planned to condemn six parcels and made an offer of compensation. On February 19, 2008, the Commissioner filed notices of appropriation and maps with the county clerk. When those documents were filed, title to the land vested in New York State. A year-and-a-half later, on August 13, 2009, Sopper sent NYSDOT agreement of sale documents that proposed to sell the land and easements for the same price as the compensation proffered by NYSDOT, but also provided for Amtrak's pre-approval of construction and for indemnification for environmental liability. On August 28, 2009, NYSDOT responded that it had already acquired title to the parcels by eminent domain. Nearly two-and-a-half years later, on April 9, 2012, Amtrak brought the present action claiming that the takings were invalid under the Supremacy Clause as expressly or impliedly preempted by federal law.

The United States District court held that Amtrak's Supremacy Clause claims against NYSDOT were barred under the Eleventh Amendment. Alternatively, it held them time-barred, because Amtrak brought suit more than six years after it knew or should have known that it had a claim.

Holding: The United States Court of Appeals affirmed on the statute of limitations grounds only. The Court stated that Eleventh Amendment immunity exists, but can be waived either expressly or impliedly.

At oral argument, recognizing that the limitations issue was dispositive as to all the parcels, the State urged the Court to exercise its discretion to reach the statute-of-limitations issue without deciding whether the suit is barred by sovereign immunity. In view of our disposition of the limitations issue, the Court treated the State's suggestion as a waiver of the immunity issue for purposes of this appeal.

The parties disagreed as to the relevant statute of limitations. The NYSDOT urged a 30-day appeal period under the Eminent Domain Law or, alternatively, a three-year period. Amtrak argues for a six-year period. The Court found it did not need to resolve the dispute because Amtrak had notice of its claims well before April 9, 2006, the date six years before it filed the present action on April 9, 2012. The action is therefore barred even if the six-year limitations period applied.

Amtrak argued that various deficiencies in the NYSDOT's giving of notice of the eminent domain proceedings prevented the limitations period from beginning to run. For example, NYSDOT failed to give Amtrak formal notice strictly according to the procedures of the Eminent Domain Law and did not serve Amtrak at the address referenced in federal statutes for notice on Amtrak. But full compliance with formal notice requirements is not necessarily the trigger beginning the relevant limitations period.

The Appellate Court further held that "under federal law, a cause of action generally accrues `when the plaintiff knows or has reason to know of the injury that is the basis of the action.'" In 2005, when Weld sent the email informing Amtrak that NYSDOT would hold a May 2005 public hearing on the subject of condemning Amtrak's land, Amtrak arguably had reason to know of the alleged Supremacy Clause violation that was the basis of its present claim. Accordingly, Amtrak had actual notice more than six years before it filed its lawsuit.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Hannon v. City of Newton, Massachusetts

Court: United States Court of Appeals, First Circuit
Citation: 744 F.3d 759 (1st Cir., 2014)

Overview: In what was described as a case of first impression, a federal appeals court had to decide the priority of creditors when a property is taken by eminent domain.

Facts: In the spring of 2007, Patrick J. Hannon owed the United States more than $4 million for unpaid taxes, and the IRS held tax liens for that sum against his property, including a parcel of land he owned at 20 Rogers Street in Newton, Massachusetts. In March 2007, the City of Newton, seeking to take the 20 Rogers Street property by eminent domain, asked the IRS to assist it by discharging that parcel from tax liens, thus avoiding any question as to Newton's power to take the property free of those liens. On May 4, 2007, the IRS discharged that specific parcel of land from its tax lien via a Certificate of Discharge. That Certificate expressly stated that it "saved and reserved ... the force and effect of said tax lien against and upon all other property or rights to property to which said lien is attached, wheresoever situated." Three days later, on May 7, 2007, Newton paid $2.3 million to take Hannon's property at 20 Rogers Street by eminent domain. The IRS had authorized the tax lien discharge on 20 Rogers Street upon its receipt of $57,214.55, which was its estimate of what would remain of the $2.3 million paid by Newton after the mortgagee, a senior creditor, was paid in full.

Following the taking, on November 10, 2008, Hannon exercised his statutory right under Massachusetts eminent domain law to sue Newton in state court, claiming that Newton had not sufficiently compensated him for taking his property. He was awarded $420,000 as damages for under-compensation. Both the government and Rita S. Manning, a lower-priority creditor who had obtained a judgment against Hannon, intervened in this land damages suit and asserted priority to receive the damages award. The government removed the case to federal court, and both the government and Manning moved for summary judgment on the question of whose lien had priority. The district court entered summary judgment in favor of Manning, holding that the IRS's decision to discharge 20 Rogers Street from federal tax liens in exchange for payment from the taking also meant the government had relinquished any tax lien on the later damages award. The government appealed.

Holding: The United States Court of Appeals reversed. Under federal law, if a person, such as Hannon, failed to pay federal taxes despite a demand for payment, tax liens in favor of the United States automatically attach to all of that person's property and rights to property, whether real or personal. The appeals Court emphasized the lien is not only attached to property, but also to "rights to property, whether real or personal." As a result, federal tax liens attach to property acquired by the delinquent taxpayer at any time during the life of the lien.

Here, the Discharge Certificate was precise and discharged only 20 Rogers Street, Newton, Massachusetts, defined as "a certain parcel of land more fully described at the Registry of Deeds, Southern Middlesex, State of Massachusetts in Book 36209, Page 167. Of the "bundle of sticks" or collection of rights that comprised Hannon's ownership of 20 Rogers Street, the Certificate discharged only a specific piece of real property that Hannon was parting with and Newton was taking. It did not discharge the other sticks that made up Hannon's ownership interest in 20 Rogers Street, such as his contingent rights to property if that parcel of land was taken by eminent domain; these included the right to receive an initial damages award, which accrued after the parcel of land was taken by eminent domain, and the right to sue for more damages if Hannon deemed the initial award inadequate. Were there any doubt as to the limited scope of the discharge, the Certificate saved and reserved the force and effect of the tax lien against and upon all other property or rights to property to which said lien is attached, wheresoever situated.

Since federal tax liens take priority over all other liens, Manning's lien was declared subordinate to that of the Internal Revenue Service.

Editor's Note: This was a rather harsh result that affected an innocent judgment holder. Wouldn't the better result to be to proportionately split any award to compensate both lien holders?

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of City of New York (New Creek Bluebelt, Phase 4)

Court: New York State Supreme Court, Richmond County
Citation: ___Misc 3d.___ (2015 NY Slip Op. 50934)

Facts: At issue in this condemnation proceeding was the just compensation to be awarded to Claimant, Staten Island Land Corp., for the taking of its property located on Staten Island, New York. The Condemnor, the City of New York, took title on November 3, 2006 (the vesting date). The Court viewed the property on June 16, 2014, and a non-jury trial was held on June 23, 2014.

The City acquired the subject property for use as part of the New Creek Bluebelt Phase 3 project. The total size of the property taken was 45,208 square feet, which includes a noncontiguous lot of approximately 5,203 square feet. The property was located between Hylan Boulevard and Joyce Street, between Stobe Avenue and New Creek, with another lot running partially in the bed of an unbuilt portion of Joyce Street and fronting 30 feet on Stobe Avenue. Virtually, the entire site consisted of wetlands and the subject property was regulated as wetlands on the vesting date. The Claimant purchased the property prior to the enactment of the wetland regulations and was the owner of the subject property on the vesting date. Both parties agreed that because of the wetlands regulations, the owners of the property would not be able to obtain a permit to develop it and its highest and best use, as regulated, is vacant.

The parties also stipulated that on the date of vesting, the value of the property as regulated was $248,600, and the value of the property as unregulated, and after deducting extraordinary costs, was $4,552,000. The City instructed its appraiser in preparing his appraisal to assume that there was a reasonable likelihood that a regulatory takings challenge to the wetland regulations would succeed.

The parties agreed that the wetlands regulations would prohibit any productive use of the property. The stipulation as to the regulated and unregulated values of the property indicates that the wetlands regulations have eliminated almost 95% of the value of the property. Further, as the property was purchased by Claimant for investment purposes before the wetlands regulations were imposed on the property, the Claimant had reasonable expectations to develop the property. Based on the foregoing, and the reports of the appraisers, the Court found that it is reasonably probable that a regulatory challenge to the wetlands regulations, as applied to the subject property, would have succeeded.

The parties disagreed as to what increment, if any, should be added to the regulated value of the property to determine its value at the time of vesting. The City argued that no increment should be added because investors do not purchase wetlands on Staten Island with the intention of challenging the wetlands regulations in order to develop the property. The City argued in the alternative, that if an increment is to be added, the best market-based evidence available indicates that a buyer would pay 32% of the unregulated value of the property.

The Claimant asserts that the increment should be 75% of the difference between the unregulated and regulated value of the property. The increment is determined by the realities of the marketplace, which are that a knowledgeable buyer would not pay the full unregulated value of the property, but would adjust his purchase price to offset the cost in time and money of applying for a wetlands permit and challenging a denial of the permit as confiscatory. A buyer would pay only the value of the property as restricted, plus an increment representing its enhanced value at such future time if and when he successfully in nullifies the wetlands restrictions in court.

In his testimony, the City’s appraiser stated that he did not believe that an investor on Staten Island would pay an increment over the regulated value of a wetlands property, even where it is probable that a challenge to the regulations would be successful. He based his belief on the fact that he knew of no sales of wetlands on Staten Island, where a buyer purchased designated wetlands and subsequently challenged the regulations as a regulatory taking.

The Claimants contended that the increment to be added to the regulated value should be 75% of the difference between unregulated value and the regulated value, citing Berwick v. State of New York, 159 AD2d 544, 552 NYS2d 409 (2nd Dept. 1990), and Matter of New Creek Bluebelt, Phase 4 (Paolella), 122 AD3d 859, 997 N.Y.S.2d 447, 2014 NY Slip Op. 08029.

Holding: When adding an increment to the value of vacant land to reflect its development potential, the specific increment selected and applied must be based on sufficient evidence and be satisfactorily explained. While the 75% increment set forth in Berwick may not be applicable to all wetlands properties, it is an appropriate increment to apply in this case.

In this case, the Claimant's appraiser based his estimate of a 75% increment in part on instructions from Claimant's counsel and partially on the property's commercial zoning and its location on Hylan Boulevard. He testified that Hylan Boulevard is the major commercial corridor of Staten Island and connects Staten Island's north and south shore communities. The subject property, with the exception of one small lot, was zoned R5 with a C1-2 overlay. Permitted development in a C1-2 overlay includes offices, hotels, restaurants, grocery stores and beauty parlors. In his appraisal, Claimant's appraiser described the portion of Hylan Boulevard where the subject property is located by stating, "commercial activity is good, particularly in the southeasterly section of the neighborhood along Hylan Boulevard, a major traffic artery on Staten Island that offers a wide variety of commercial uses." His assessment of the location was similar. In describing the location of the subject property in his appraisal, he stated that "it fronts on a busy commercial corridor lined with a multitude of store, restaurant, bank and other commercial-type properties."

Although the property is part of a larger wetlands, that wetlands crosses Hyland Boulevard roughly perpendicularly. The block between Stobe Ave. and Seaver Ave. is the only gap in development on Hylan Boulevard in the area. Several blocks to both the north and south of the subject property were solidly developed commercially. The subject property is one of the few remaining undeveloped commercially zoned parcels on Hylan Boulevard. Also, both appraisers agreed that the extraordinary costs involved in developing the subject property are not significant in comparison to the value of the property and do not preclude development.

Given the commercial zoning of the subject property and its unique location in the midst of a solidly developed major commercial artery, the court found that an increment of 75% of the difference between the adjusted unregulated value of the property and the regulated value is appropriate. The difference between the unregulated value of $4,552,000 and regulated values of $248,600 is $4,303,400, and 75% of that difference is $3,227,550. When that increment of $3,227,550 is added to the regulated value of the property of $248,600, the total is $3,476,150, or $3,500,000 rounded.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Whitney Lanes Holdings, LLC v. Don Realty, LLC

Court: New York Supreme Court, Appellate Division Third Department
Citation: 130 AD3d1218, ___NYS2d ___, (3rd Dept., 2015)

Facts:In November 2004, Plaintiff purchased commercial property in the Town of Clifton Park, Saratoga County, New York, from Defendants Don Realty, LLC. Plaintiff received a warranty deed for the property in exchange for a cash payment of approximately $1 million and a $3.55 million promissory note for the benefit of Defendant, which was secured by purchase of a money mortgage of the property. In September 2006, Defendant assigned the mortgage to DLL Family Limited Partnership, and in June 2007, DLL assigned the mortgage to OSJ of Clifton Park, LLC.

Several months after Plaintiff purchased the property, the Town commenced an action to acquire a portion of the property by eminent domain. In August 2005, this property was granted to the Town. In November 2006, Plaintiff commenced this fraud action against Defendants, alleging that it knew that the Town intended to commence the eminent domain action when they sold the property to Plaintiff, but intentionally misrepresented that there was no such plan, and that the taking had interfered with its commercial use of the property and thus resulted in damages to Plaintiff. Immediately after commencing this action, Plaintiff defaulted on the mortgage by failing to make a balloon payment, and DLL commenced a foreclosure proceeding. Supreme Court later joined this action with the foreclosure proceeding for trial, but did not consolidate the actions. After the June 2007 mortgage assignment, OSJ was added to the action as a defendant.

Plaintiff filed for bankruptcy. In December 2010, a reorganization plan was approved, which directed that a new note and mortgage be issued by plaintiff to OSJ, and required a settlement and resolution of all claims between plaintiff and OSJ. In March 2011, Supreme Court granted OSJ's unopposed motion to dismiss the complaint against it in this action, with prejudice. Defendants then moved to dismiss the complaint in this action against them, contending that OSJ was the only liable party as a result of the mortgage assignments and that, due to the dismissal of the complaint against OSJ, res judicata barred plaintiff from recovering against defendants. The motion was denied. Defendant appealed.

Holding: The Appellate Division affirmed the judgment. The Court held that the Supreme Court properly rejected the claim that OSJ is the only liable party. While after an assignment, a mortgage remains subject to defenses existing between the original parties and that, when there is a claim of fraud or misrepresentation in the procurement of a mortgage, "an assignee of the mortgage takes it subject to the equities attending the original transaction." Here, Plaintiff made no claim of fraud in the procurement of the mortgage or the subsequent assignments. Rather, the allegation is that the sale of the underlying real property was procured through misrepresentations by Defendants. Defendants were not parties to the mortgage, which was given by DDA & A, and DDA & A, in turn, was not a party to the warranty deed or the purchase and sale contract.

Nevertheless, the corporations are separate entities, and Plaintiff did not claim or show that they are so related to one another as to be alter egos. Further, Plaintiff made no allegations of fraud or misrepresentation against the assignees of the mortgage. Nothing in the record revealed that anything other than the note and mortgage was assigned, or that Defendants held or assigned a mortgage that could have passed Plaintiff's claims against them to OSJ. Thus, although the assignments passed rights and liabilities relating to the assignees and assignors, they did not affect rights and liabilities against Defendant, and the settlement of Plaintiff's claims against OSJ arising from the mortgage had no effect upon Plaintiff's separate misrepresentation claim against the Defendant arising from the purchase.

The claims against Defendants were not precluded by res judicata, which bars successive litigation based upon the same transaction or series of connected transactions if: (i) there is a judgment on the merits rendered by a court of competent jurisdiction; and (ii) the party against whom the doctrine is invoked was a party to the previous action or proceeding, or in privity with a party who was. In determining whether privity exists, a court must analyze the relationship between the parties to determine whether preclusion would be fair, and doubts should be resolved against imposing preclusion to ensure that the party to be bound can be considered to have had a full and fair opportunity to litigate.

Here, the record did not reveal the nature of the relationship, if any, between Defendants and OSJ, or the prior mortgage holders. It was not shown that Defendants' interests were represented in the proceedings involving OSJ, or that Plaintiff’s misrepresentation claim against Defendants could have been addressed in those proceedings. Plaintiff's misrepresentation claim did not arise from the mortgage-related transactions that formed the basis of the settled claims against OSJ, and Plaintiff did not have the requisite "full and fair opportunity to litigate" its misrepresentation claims against Defendants.

Accordingly, the Supreme Court properly rejected Defendants' claim that res judicata bars Plaintiff from recovering against them and, therefore, properly denied the motion to dismiss as to Defendants.

Prevailing Attorney: Kim I. McHale & Associates, PC

Precis: Joel Grossbarth

 

Jack Kurtz et al., v. Verizon New York, Inc., et al.

Court: United States Court of Appeals, Second Circuit
Citation: 758 F.3d 506 (2nd Cir., 2014)

Overview: Telecommunications networks, particularly in congested urban areas, may require installation of network equipment on private property. Often, the company secures permission from the owner in the form of a license or easement. If consent cannot be obtained however, New York law permits the company to employ the state's power of eminent domain. Section 27 of the Transportation Corporations Law provides this authority: this case discusses the authority and the right to compensation thereunder.

Facts: The Plaintiffs, a putative class of property owners in New York, allege that Verizon exercised its power of eminent domain to install multi-unit terminal boxes on their properties. These boxes, typically attached to an exterior wall or to a pole in the yard, split the local high-capacity cables into the lines that serve individual phone subscribers in nearby buildings. Thus, these boxes serve the neighborhood as well as the subscribers on the subject property.

The plaintiffs asserted that Verizon failed to pay full compensation for placing terminals on their properties. They further asserted that Verizon violated their procedural due process rights by (1) concealing their right to full compensation, or failing to notify them of it; (2) offering them no compensation; (3) giving the false impression that they must consent if they wanted telephone service in their own buildings; and (4) placing the onus on them to initiate an eminent domain proceeding if no agreement was reached. Defendants denied Plaintiff’s complaint and moved for dismissal, claiming the matters were not ripe (or ready) for review since no state action was finalized.

The United States District Court for the Eastern District of New York  dismissed the complaint because the claims were unripe under the test established by Williamson Cnty. Reg'l Planning Comm'n v. Hamilton Bank of Johnson City, 473 U.S. 172 (1985). That case held that a takings claim under the Fifth Amendment is not ripe for federal review until a final decision is reached by local authorities and the owner exhausts all state remedies.

Holding: The Second Circuit repeated the longstanding rule regarding ripeness. To be justiciable, a cause of action must be ripe – it must present a real, substantial controversy, not a mere hypothetical question. A claim is not ripe if it depends upon contingent future events that may or may not occur as anticipated, or indeed may not occur at all. The doctrine's major purpose is to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements.

To test the ripeness of a constitutional takings claim in federal court, the Court used the Williamson County. In that case, a plaintiff owner of a tract of land sued a Tennessee regional planning commission, alleging that the commission's application of various zoning laws and regulations to the plaintiff's property amounted to an unconstitutional `taking' under the Fifth Amendment. Williamson County held that the claim was unripe: "a plaintiff alleging a Fifth Amendment taking of a property interest must ... show that (1) the state regulatory entity has rendered a `final decision' on the matter, and (2) the plaintiff has sought just compensation by means of an available state procedure.

Applying this test, the Second Circuit held  that the Williamson County ripeness requirement (finality and exhaustion) applies to all procedural due process claims arising from the same circumstances as a taking claim. Since New York's inverse condemnation procedures are adequate on their face, the Court determined  no claim would arise until the plaintiffs, having availed themselves of those procedures, show them to be wanting in practice. The procedural due process claims in this case, which are based on the circumstances surrounding the takings claim, are therefore premature. Because the plaintiffs did not exhaust available state remedies, their due process claims were not ripe for federal review.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Lost Tree Village Corporation v. United States

Court: U.S. Court of Appeals, Federal Circuit
Citation: ___F.3d____ , No. 2014-5093. (Fed., Cir., 2015)

Overview: An interesting decision when a landowner asserts a “regulatory taking” and just compensation without a governmental agency actually taking title to land.

Facts: Plaintiff Lost Tree Village Corporation (“Lost Tree”) entered into an option agreement to purchase 2,750 acres of property on the Mid-Atlantic coast of Florida. Located just north of Vero Beach, FL, much of the land consisted of small islands, a peninsula and a barrier island, all of which comprise John’s Island. From 1969 to 1974, Lost Tree purchased most of the land and developed it into residential communities. When Lost Tree learned that a developer intended to apply for a wetlands permit for land south of Lost Tree’s land, it filed for permission to develop Plat 57, which consisted of 5 acres of undeveloped island land. Lost Tree applied to the Town of Indian River Shores for plat approval and obtained all planning approvals and zoning variances. However, when the application went to the Army Corps of Engineers, the Corps denied the application, claiming Lost Tree realized a great monetary profit from its investment and had developed most of the area it owned.

Lost Tree sued the United States claiming that the denial from the Army Corps of Engineers’ denial constituted a taking under the Fifth Amendment. At trial, Lost Tree’s appraiser testified that the undeveloped land was worth $25,000 without a fill permit, and $4,800,000 with the permit. The government’s appraiser opined that Plat 57 was worth $30,000 without the permit and $4,720,000 with the permit. The trial court determined that the government’s permit denial diminished the value of Plat 57 by 58.4% and ordered damages paid. Lost Tree initially appealed to trial court’s calculations, and the Federal Circuit Appeals Court remanded the matter with instructions that the trial court apply appropriate “takings” frameworks to determine the loss of value. On remand, the trial court held the loss of value was 99.4% without a fill permit and awarded Lost Tree $4,217,887.93 as just compensation. The government appealed.   

Holding: The Federal Circuit Court of Appeals affirmed the judgment. The Fifth Amendment states that private property cannot be taken for public use without just compensation. However, a regulatory taking occurs when a regulation deprives a landowner of all economic beneficial use while leaving the owner with an “economically idle” property. When considering the “highest and best use” analysis of the property, the Court held that the law required to government to pay the higher award based upon its deprivation of use of Lost Tree’s property.

Editor's Note: Condemnation occurs when a government actually takes land from an owner or when, by regulation or use, it deprives a landowner of the highest use of its property. A prudent practitioner should pursue all available remedies when an owner is deprived of loss of use of land.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Mazur Bros. Realty, LLC v. State of New York

Court: Appellate Division, Second Department
Citation: 117 AD3d 949, 987 NYS2d 74 (2nd Dept., 2014)

Overview:In two related special proceedings, Petitioner Mazur Bros. Realty, LLC, seeks monetary distribution of funds deposited into a special interest-bearing escrow account since, potentially, more than one party was claiming damages as a result of the State’s taking of property.

Facts: The State of New York condemned two parcels of land in White Plains, New York, as part of the widening and improvement of the Cross Westchester Expressway (I-287). The properties were owned by Mazur Bros. Realty, LLC and leased to Mazur Bros., Inc., who operated a furniture store on the adjacent parcels.

Pursuant to an agreement of adjustment, Mazur Bros. Realty, LLC settled its claims for the first parcel for $1,369,500. Prior to the payment, the State demanded an assignment of claim from Mazur Bros., Inc. Mazur failed to produce such assignment and the State deposited the sums in the aforementioned special interest-bearing escrow account. In connection with the second parcel, the State demanded a release from Mazur Bros., Inc., but again, no release came, so the State deposited $1, 011,500 into another special interest-bearing escrow account. The Court of Claims then subtracted Mazur Bros., Inc.’s claim of $548,300 for its trade fixtures on the first parcel, and $219,700 for trade fixtures on the second parcel. Plaintiff appealed.

Holding: The Appellate Division, Second Department reversed the judgment of the Court of Claims. The Court held that Plaintiff correctly contended that any award to Mazur Bros., Inc. should not have been subtracted from the amounts in the agreement of adjustment. In examining the record, the court found that there was no language in either agreement that indicated the amounts were for both real property and trade fixtures. Rather, the offer covered only the real property, and there was no basis for subtracting any amount for trade fixtures. Mazur Bros., Inc. was therefore permitted to submit a separate claim for the loss of its trade fixtures.

Editor's Note: Damages associated for the taking of property by eminent domain cover real, tangible and intangible property. A skilled attorney should not simply claim the value of the real estate, but damages associated with the loss of use of the property.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Mazur Bros. Realty, LLC v. State of New York

Court: Appellate Division, Second Department
Citation: ___AD3d ___, NY Slip Op. 06119 (2nd Dept., 2015)

Facts: The claimant commenced this claim against the State of New York to recover damages resulting from the appropriation and extended use of certain temporary easements. Thereafter, the Attorney General's office determined that there were potentially conflicting claims with regard to any money owed as the result of the State's extended use of the temporary easements. As such, upon request, and in accordance with the Eminent Domain Procedure Law, the New York State Comptroller deposited the money allegedly owed as the result of the State's extended use of the temporary easements in a special interest-bearing account. Although the claimant continued to pursue the instant claim, it also commenced a special proceeding seeking an order of distribution regarding the funds deposited.

Pursuant to an agreement of adjustment, Mazur Bros. Realty, LLC settled its claims for the first parcel for $1,369,500. Prior to the payment, the State demanded an assignment of claim from Mazur Bros., Inc. Mazur failed to produce such assignment and the State deposited the sums in the aforementioned special interest-bearing escrow account. In connection with the second parcel, the State demanded a release from Mazur Bros., Inc., but again, no release came, so the State deposited $1, 011,500 into another special interest-bearing escrow account. The Court of Claims then subtracted Mazur Bros., Inc.’s claim of $548,300 for its trade fixtures on the first parcel, and $219,700 for trade fixtures on the second parcel, respectively. Plaintiff appealed.  

Holding: The Appellate Division, Second Department affirmed the judgment of the Court of Claims. Eminent Domain Procedure Law (“EDPL”) §304(E)(1) provides that when the Attorney General determines that there is a conflict with regard to the person or persons legally entitled to receive payment for the value of property acquired by the State through the power of eminent domain, he or she shall request the Comptroller to deposit the funds in an interest-bearing account "to be distributed as ordered by the Court of Claims on application of any person claiming an interest in the amount." The statute further provides that the procedure to be employed in connection with such an application shall be the same as provided in Court of Claims Act and that no judgment of distribution shall be made unless the court shall first obtain personal jurisdiction over all persons certified by the Attorney General as having or claiming to have an interest in the fund.

Claimant argued that Mazur Brothers, Inc. (“MBI”), an entity that the Attorney General determined had a possible interest in the subject proceeds, did not in fact have any such interest and that, therefore, the claimant was under no obligation to join MBI as a party to this claim. In advancing this argument, however, the Claimant essentially asked the Court of Claims to assume the very fact that is the ultimate fact that must be proven, namely, that MBI has no interest in the money deposited by the Comptroller. Without jurisdiction over MBI, it would have been improper for the Court of Claims to grant the relief requested by the Claimant in connection with this claim. Claimant’s remedy, under these circumstances, lies in a special distribution proceeding pursuant to EDPL §304.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Dorothy L. Biery, et al. v. United States

Court: United States Court of Appeals. Federal Circuit
Citation: 753 F.3d 1279 (Fed. Cir., 2014)

Facts: Plaintiffs- Dorothy L. Biery, the Julia R. Chalfant Etvir Trust, K.A.K. Farms, Inc., American Packaging Corporation, and Collins Industries, Inc., are landowners in Kansas. Each of them owns land abutting a 2.88-mile stretch of rail corridor near the city of South Hutchinson, Kansas. In the late nineteenth and early twentieth centuries, their predecessors in interest granted various deeds covering that land to the Hutchinson & Southern Railroad Company. The Burlington Northern and Santa Fe Railway ("BNSF") eventually succeeded to the interests of that railroad. Up until 2004, the corridor served the operations of the BNSF. Plaintiffs brought this action in the United States Court of Federal Claims, alleging that the subsequent conversion of the corridor to a recreational trail pursuant to the National Trail Systems Act ("Trails Act"), 16 U.S.C. § 1247(d), constituted a taking of their several property interests in the land underlying the corridor. As a result, they claimed they were entitled to compensation under the Fifth Amendment.

On April 9, 2013, pursuant to Rule 54(b) of the Rules of the United States Court of Federal Claims ("RCFC"), the Court of Federal Claims entered judgment in favor of the government on plaintiffs' claims. The court did so after ruling on summary judgment that none of the plaintiffs-appellants possessed a fee-simple property interest in the land underlying the rail corridor that could be the subject of a taking. The court concluded that the land had been conveyed to the BNSF's predecessor in fee simple, contrary to Plaintiffs claim that the several conveyances at issue had only granted easements. Plaintiffs appealed from the Court's judgment.

Holding: The United States Court of Appeals affirmed the judgment of the U.S. Court of Claims.

The Fifth Amendment to the Constitution provides that private property shall not "be taken for public use, without just compensation." In 2004, the stretch of rail corridor at issue was converted to a public trail pursuant to the Trails Act. If, prior to the conversion, the BNSF held fee-simple title to the land underlying the corridor, then, for their part, Plaintiffs possessed no compensable property interests. That is because the railroad's fee-simple title would constitute complete ownership in the land. If, however, the BNSF held only easements over the land, then Plaintiffs retained a fee-simple interest in the land. Under those circumstances, if the BNSF's conversion of the railroad tracks to a recreational trail was outside the scope of the easements and thus constituted abandonment, then the BNSF would have lost its interest because "if the beneficiary of an easement abandons it, the easement disappears, and the landowner resumes his full and unencumbered interest in the land.” In short, if Plaintiffs held fee-simple title to the land, they may potentially have a compensable property interest for purposes of a takings claim.

In construing a deed, the first step is to determine whether it is ambiguous. In making this determination, courts apply the plain, general, and common meaning of the terms used in the instrument. An instrument is ambiguous when the application of pertinent rules of interpretation to the whole fails to make certain which one of two or more meanings is conveyed by the words employed by the parties. If the language of a deed is ambiguous, courts may consider facts surrounding the deed's execution in order to clarify the parties' intent.

The Court concluded that the deeds transferred fee-simple title to the Hutchinson & Southern Railroad. The words of the deed were unambiguous. The Court found no language in the deed indicating that the parties intended to limit the railroad's interest to a right-of-way. Rather, the deed conveyed "all the estate, title, and interest" and Plaintiffs retained no reversionary interest. Accordingly, the deeds transferred fee-simple title to the railroad.

The Court was not persuaded by Plaintiffs’ arguments regarding the words "over and across." Those words reflect the simple truth that the railroad tracks run over and across the land transferred; they do not place a limitation on the transfer itself. Further, the fact that the railroad paid $3,500 for the land indicates that, contrary to Plaintiffs’ suggestion, the railroad received more than just confirmation of an easement.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Eisenhauer v. County of Jefferson

Court: Appellate Division, Fourth Department
Citation: 122 AD3d 1312, 996 NYS2d 441 (4th Dept., 2104)

Overview: Discussion regarding the standard of judicial review when a property owner seeks to have a determination of condemnation overturned.

Facts: Petitioner commenced a proceeding in the Appellate Division (as the court of original jurisdiction) to review the County of Jefferson’s determination to condemn certain real property for the purposes of expanding a runway at a local airport. Petitioner argues that there was no actual public use, benefit or purpose served by the proposed taking of property. Petitioner also argued that the taking was excessive both in volume and in nature.

Holding: The Appellate Division unanimously confirmed the order of condemnation from the County of Jefferson. Initially, the burden is on the party challenging the condemnation to establish that the determination was without foundation and baseless. If an adequate basis for determination is shown and the objector cannot show that the determination was without foundation, the government’s decision to condemn should be confirmed.

The Court stated that what constitutes a public purpose or public use is broadly defined as encompassing virtually any project that may confer upon the public a benefit, utility or advantage. The proposed expansion of a runway was indeed a public benefit.

The Court also held that it is generally accepted that a condemning authority has broad discretion in deciding what land is necessary to fulfill the proposed public benefit. Based upon the record before it, the Court concluded that the County neither abused its discretion nor improvidently exercised its discretion in determining the scope of the taking.

Editor's Note: Ironically, Petitioner initially sought permission from the court to file its brief late, then after filing, requested an expedited hearing. The expedited hearing request was denied.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Incorporated Village of Westbury v. IACO Realty, Inc.

Court: Appellate Division, Second Department
Citation: ___AD3d___, 2015 NY Slip Op. 06820 (2nd Dept., 2015)

Overview: Discussion regarding the standard of judicial review when a property owner seeks to have a determination of condemnation overturned.

Facts: In April 2007, the Incorporated Village of Westbury commenced this proceeding to condemn property located in Westbury, New York. The Village served notice of the condemnation proceeding pursuant to Eminent Domain Procedure Law (“EDPL”) Section 402(B)(2) upon interested parties, including Wachovia Bank, on behalf of the appellant, nonparty First Union National Bank, Custodian for MDSASS. MDSASS was a holder of certain tax liens encumbering the subject property. By order dated June 5, 2007, the Supreme Court granted the Village's petition and ordered that title to the subject property vest with the Village. The vesting order also provided that any purported owners, lienors, and mortgagees were required to file a written claim before November 30, 2007. The Village also served notice of the vesting order pursuant to EDPL 502(B) upon all condemnees, including the appellant. On February 13, 2008, the Nassau County Treasurer's office paid the condemnation award to the condemnees.

On or about October 8, 2010, the appellant allegedly learned for the first time that the subject property had been condemned, and on March 31, 2011, moved to intervene and to vacate the vesting order. The appellant contended that the Village failed to notify it of the condemnation proceedings and, as a result, it did not make a claim for the condemnation proceeds and suffered financial loss. In an order dated August 10, 2012, the Supreme Court granted so much of the appellant's motion which was to intervene, stating that its tax liens had been extinguished and replaced by an equitable lien on the proceeds of the condemnation award, but denied so much of its motion which was to vacate the vesting order. In January 2013, the appellant moved to enforce its equitable lien and to hold the Village jointly and severally liable for the wrongful payment of the condemnation proceeds. In the order appealed from, the Supreme Court denied its motion.

Holding: Contrary to the appellant's contentions, the claims in its motion that are premised upon the wrongful payment of the condemnation proceeds sounded in tort, and the notice of claim requirements of General Municipal Law § 50-e were applicable. The appellant’s claims accrued on the date the condemnation proceeds were paid. Since the appellant never filed a notice of claim pursuant to General Municipal Law § 50-e, its claims for relief in its motion made in January 2013, almost five years after the condemnation award was paid out and distributed, was time-barred. The appellant also did not demonstrate that the doctrine of equitable estoppel applied so as to preclude the statute of limitations defense, as it did not allege any separate and subsequent act of wrongdoing that prevented it from timely bringing suit.

Submitted by: Phil Sanchez, Esq www.spnylaw.com

Precis: Joel Grossbarth

 

County of Orange v. Monroe Bakertown Road Realty, Inc., et al.

Court: Appellate Division, Second Department
Citation: ___AD3d ___, ___NYS2d ____, 2015 Slip OP. 06143 (2nd Dept., 2015).

Overview: Discussion regarding the standard of judicial review when a property owner seeks to have a determination of condemnation overturned.

Facts: In this partial taking condemnation proceeding, the undeveloped property at issue was located in the Village of Kiryas Joel, Orange County, New York. The land consisted of 70.70 acres prior to the taking, and 69.23 acres after the taking. Both the Claimant, Monroe Bakertown Road Realty, Inc. (hereinafter “Monroe Bakertown”), and the Petitioner, County of Orange, agreed that high-density housing was the highest and best use of the subject property. However, at a non-jury trial, Monroe Bakertown and the County offered opposing evidence as to the density and scope of the housing project that could be built on the property.

The appraiser for Monroe Bakertown testified at trial that he employed a comparable sales approach that analyzed three sales of vacant land within the Village which had taken place in the three years prior to his appraisal and had been approved for multi-family residential units. After making various adjustments to those sales prices based on time, location, size, zoning, and topography, the appraiser valued the entire property, prior to taking, at $27,150,000, and after taking, at $26,050,000, or a difference of $1,100,000.

The County's appraisal was also based on a comparable sales methodology, but it analyzed four recent sales of vacant land located outside the Village limits. After adjusting sales prices of the comparables based on varying factors, the County appraiser arrived at a value for the entire property, before the taking, at $1,555,400, and a value of the remaining property, after the taking, at $1,522,400, or a difference of $33,000. The County also presented the testimony of a County Department of Health engineer, which the trial court credited, who testified that the DOH would not have issued a permit allowing Monroe Bakertown's asserted 18-unit per acre housing project on the subject property because the Village's water supply was inadequate for such a project. In its decision following the non-jury trial, the Supreme Court concluded that the lack of adequate water supply is a predominant factor which could not be disregarded and led the court to accept the evaluation placed on the property by the County of Orange. Based on this conclusion, the court rejected Monroe Bakertown's appraisal, accepted the appraisal by the County, and entered judgment in favor of Monroe Bakertown and against the County in the principal sum of $33,000 as damages for the taking of the parcel.

Holding: The Appellate Division, Second Department reversed. The Appellate Division restated the customary language that the measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time. The evidence demonstrated, and the parties agreed, that a high-density, multi-family residential development was the highest and best use of the subject property. However, there was disagreement as to whether such use was reasonably possible at the time of the taking or could have been achieved within the reasonably near future. Although the County's witness testified that the County would not have permitted a high-density residential project on the property due to the lack of available water, proof was adduced at trial that the Village had undertaken efforts to increase its water well supply capacity. Additionally, there was testimony that the Village had secured funding and had begun the approval process to connect its water supply to the New York City Aqueduct reservoir system.

Given this testimony, the record did not support a conclusion that the subject property could never have been developed or that it would have remained vacant land. The crucial issue to be determined in evaluating the subject property is not whether the water issue would be conclusively resolved and, concomitantly, whether the County would approve a high-density residential development, but rather how such uncertainty would figure into the marketplace. In determining the valuation of condemned land, probabilities of a change or changes in critical circumstances affecting the subject property may be shown to have an actual effect on an existing market. By rejecting the appraisal of Monroe Bakertown and simply adopting the County's appraisal, the Supreme Court failed to adequately take into account how the market would factor the water supply uncertainty and governmental approval issues into the selling price of this property. This is especially true in view of the evidence that the Village had taken steps to address its water capacity issue. Accordingly, condemnation valuation should be determined in accordance with the theory that a knowledgeable buyer, recognizing the potential changes in the available uses for the property would make similar adjustments in valuing the property.

Edior's Note: This litigation has been highly contentious. This was the third series of decisions and appeals regarding condemnation in the Village of Kiryas Joel. As the Village continues to expand, more litigation is likely.

Prevailing Attorney: Gerald Orseck, Esq www.orsecklawoffices.com

Precis: Joel Grossbarth

 

Candlewood Holdings, Inc. v. Nicanor Valle, Jr., et al.

Court: New York State Supreme Court, Appellate Division, Second Department
Citation: ___AD3d___, 2015 NY Slip Op. 09239 (2nd Dept., 2015)

Facts: Plaintiff Candlewood Holdings brought a declaratory judgment action seeking a judicial declaration. It is the beneficial owner of 676 Holding Corp., and is entitled to the proceeds of a certain condemnation award and injunctive relief.

Rosalie Moore was the owner of one-third of the stock of Plaintiff Candlewood Holdings, Inc. The other two-thirds of Candlewood's stock is owned by ANO, Inc., which was not a party to the action. Prior to May 2000, Candlewood owned all of the stock of Cutlass Enterprises, Inc. (hereinafter “Cutlass”), which owned real property located at 676 Grand Concourse in the Bronx. In May 2000, Candlewood sold its interest in Cutlass to nonparty Jacko Car Wash Corp. (hereinafter “Jacko”), in return for a promissory note and a security interest in the Cutlass stock. In 2002, upon defaulting on the promissory note, Jacko agreed to assign all of its assets to Candlewood in lieu of foreclosure. Instead of accepting the return of the Cutlass stock, however, the shareholders of Candlewood formed 676 Holding Corp. (hereinafter “676 Holding”) for the purpose of receiving any assignment of the Cutlass stock from Jacko. The shareholders of Candlewood decided that the stock of 676 Holding should be held by Nicanor Valle, Jr., who was not affiliated with Candlewood. Valle was thus made the record owner of the stock of 676 Holding, and all relevant tax returns were prepared consistent with this arrangement.

In 2007, the City of New York condemned the property located at 676 Grand Concourse in an eminent domain proceeding. As a result of that proceeding, Cutlass became entitled to an award from the City. The City made a partial payment of that award, which was retained by Valle, the record owner of the stock of 676 Holding. Thereafter, the Plaintiffs commenced this action for a judgment, declaring that Candlewood is the beneficial owner of 676 Holding and is entitled to the proceeds of the condemnation award, and for injunctive relief. The Plaintiffs alleged that Valle agreed, in writing, to be the "nominee owner" of the shares of 676 Holding so as to allow Candlewood to obtain certain tax benefits, but that Valle gave no consideration for his shares and that Candlewood remained the "rightful beneficial owner."

Valle, 676 Holding, and Cutlass (hereinafter collectively the “Valle Defendants”) moved for summary judgment, dismissing the complaint. They insisted that no such nominee agreement ever existed and that Valle was indeed intended to be the beneficial owner of 676 Holding. The Supreme Court denied that motion, concluding that the Plaintiffs, despite not producing any written agreement, had raised triable issues of fact as to whether Valle was intended to be a nominee owner without any beneficial interest. In doing so, however, the Supreme Court also noted that the Plaintiffs would be barred from seeking declaratory relief, or any other form of recovery, if the creation of 676 Holding was simply a ruse to avoid recognition of capital gain.

Thereafter, the Valle Defendants moved for leave to renew. In support of that motion, they submitted affidavits from two experts who opined that Candlewood created 676 Holding, which was put in Valle's name, as a ruse to avoid significant tax liability. The Plaintiffs opposed the motion for leave to renew, but did not submit any additional evidence regarding the tax treatment of the underlying transaction. The Supreme Court granted the motion for leave to renew and, upon renewal, granted the Valle Defendants' motion for summary judgment to the extent of directing the dismissal of the second, third, fourth, and fifth causes of action, and as to the first cause of action, directing the entry of a judgment, declaring that Valle is the beneficial and legal owner of 676 Holding, thus entitled to the proceeds of the condemnation award. The Plaintiffs appealed.

Holding: The Appellate Division affirmed the ruling of the Supreme Court.

The Appellate Division found that the Supreme Court properly applied the doctrine of in pari delicto, which mandates that the courts will not intercede to resolve a dispute between two wrongdoers. In this regard, the expert affidavits submitted by the Valle Defendants demonstrated, prima facie, that the Plaintiffs were engaged in a fraudulent scheme involving the ownership of the real property at issue. In opposition, the Plaintiffs failed to raise a triable issue of fact, including the issue of whether the underlying transaction was, for example, part of a lawful tax avoidance plan. Accordingly, upon renewal, the Supreme Court properly granted the Valle Defendants' motion for summary judgment, to the extent of directing the dismissal of the second, third, fourth, and fifth causes of action, and as to the first cause of action, directing the entry of a judgment, inter alia, declaring that Valle is the owner of 676 Holding and is entitled to the proceeds of the condemnation award.

Prevailing Attorney: GMichelle S. Stein, Esq www.ackermanlevine.com

Precis: Joel Grossbarth

 

Greece Ridge, LLC v. The State of New York

Court: New York State Supreme Court, Appellate Division, Fourth Department
Citation: 130 AD3d 1559, ___ NYS2d ___ (4th Dept., 2015)

Facts: Plaintiffs allege that the Department of Transportation changed the elevation of a storm drainage system near a mall and other properties owned by Plaintiffs, and that those changes caused Plaintiffs' properties to flood during periods of heavy rain. Plaintiffs commenced this action in Supreme Court seeking, among other relief, an injunction requiring Defendant to correct the drainage system, and damages for injuries caused by the resultant flooding. Plaintiffs also commenced an action in the Court of Claims seeking damages for the same injuries, but the parties stipulated to dismissal of that action without prejudice. Plaintiffs moved to dismiss certain affirmative defenses pursuant to grounds set forth in CPLR 3211, and Defendant cross-moved for summary judgment dismissing the complaint. The Court granted Plaintiffs’ Motion and denied Defendant’s Cross-motion. Defendant appealed.

Holding: The Appellate Division affirmed the ruling of the Supreme Court. The Supreme Court properly denied that part of Defendant’s Cross-motion seeking summary judgment dismissing all claims for money damages. Although Defendant was correct that claims that are primarily against the State for damages must be brought in the Court of Claims, the Supreme Court may consider a claim for injunctive relief as long as the claim is not primarily for damages. Whether the essential nature of the claim is to recover money, or whether the monetary relief is incidental to the primary claim, is dependent upon the facts and issues presented in a particular case. Here, Defendant failed to establish in support of its Cross-motion that the essential nature of the causes of action for negligence, continuing nuisance, and continuing trespass is to recover money damages, and thus the court properly declined to grant summary judgment dismissing those causes of action.

The Appellate Division did agree with the contention of Defendant that the court erred in denying that part of its Cross-motion seeking summary judgment dismissing the cause of action for inverse condemnation. The cause of action alleged that the flooding intruded onto Plaintiffs' properties and interfered with their property rights to such an extent that it constituted "a constitutional taking requiring defendant to purchase the properties from plaintiffs." It is well settled that such a "taking can consist of either a permanent ouster of the owner, or a permanent interference with the owner's physical use, possession, and enjoyment of the property, by one having condemnation powers in order to constitute a permanent ouster.” Defendants’ conduct must constitute a permanent physical occupation of Plaintiffs' property amounting to exercise of dominion and control thereof.

Here, Defendant met its burden on its Cross-motion with respect to the cause of action for inverse condemnation by establishing as a matter of law that any interference with Plaintiffs' property rights was not sufficiently permanent to constitute a de facto taking, and Plaintiffs failed to raise a triable issue of fact in opposition.

We have considered Defendant's remaining contentions and conclude that they are without merit.

Editor’s Note: - In a rare dissenting opinion, one justice voted to dismiss the claims altogether, claiming any of Plaintiffs’ claims should have been brought solely in the Court of Claims.

Prevailing Attorney: Edward Flower, Esq. www.fmmlawyers.com

Precis: Joel Grossbarth

 

Lehn Company v. State of New York

Court: New York State Court of Claims
Citation: 2013 NY Slip Op 33963(U)

Facts: Plaintiff was the owner of a condemned parcel by the State of New York. Prior to the taking, the property was an L-shaped parcel situated on the west side of Route 112 in the Township of Brookhaven, County of Suffolk, with frontage on New York State Route 112 of approximately 149 feet, and an additional frontage of approximately 292 feet along the south side of County Road 83, without access. The property was a vacant unimproved lot.

During the trial, the parties agreed that the title vesting date was August 29, 2008, and that title to the subject property on the vesting date was in the name of Claimant. The sole issue for the Court was the fair compensation due Claimants as a result of the taking by the State of New York.

A real estate appraiser prepared Claimant's appraisal in this matter and testified on Claimant's behalf at trial. The subject property lies within the “J Business 2" zoning district of the Town of Brookhaven, which was explained as a commercial zoning district. She stated that the main use for a J Business 2 zoning district is for a neighborhood business set on a minimum plot size of 15,000 square feet. Permitted uses include banks, commercial centers, stores, pharmacy, personal service shops and offices. Claimant’s appraiser described the subject property as containing 2.33 acres or 101,652 square feet of land area prior to the taking. There is no access permitted from the subject property to County Road 83. Along the State Route 112 frontage, there are concrete curbs and a portion of the frontage that has no curb. The subject property has a perpetual easement and a perpetual cross-access agreement. The easement dated March 15, 2002, is made between Amerada Hess Corporation, the tenant at the adjacent parcel to the east and north of the subject, and Richard Nelin, the owner. Nelin grants Hess the perpetual easement over and across the easement area to construct, connect, replace and maintain a sanitary force-main and appurtenances so that Hess may connect to the sanitary line. Nelin reserves the right to use the easement area. Should Nelin develop the subject property, Hess is responsible to relocate the improvements at its sole cost, should the development of the property so require such relocation. Hess's obligation will cease upon termination of its lease with the property owner.

Claimant’s appraiser considered what was physically possible and legally permissible, financially feasible and maximally productive for the property in determining its highest and best use. She determined that the highest and best use of the subject site, as if vacant, is to be developed with a commercial use, such as a retail structure, in conformance with applicable regulations and used under the existing zoning classification. She found that same highest and best use for the property after the taking. In analyzing the site value of the subject property, Claimant’s appraiser utilized the sales comparison or market data approach, which reflects an estimate of value as indicated by the actual sales market. She selected five different sales of vacant commercial land within the Town of Brookhaven in valuing the subject property. After making certain adjustments to the sales which she determined were appropriate, she found a before-taking per square foot value of the subject property of $21.00. She then multiplied $21.00 by 101,652 (the total before taking square footage of the property) and found a before-taking value of the property of $2,135,000. The appraiser used the same sales in her after-taking analysis of the subject property. After applying certain adjustments to the properties, she found an after-taking square foot value of $19.00 for the subject property. She then multiplied $19.00 by 99,533 (the total square footage of the property after taking) and found an after-taking property value of $1,890,000. She also found a direct-taking value of $44,499, by multiplying 2,119 (the taking area) by $21 a square foot. She also found severance damages of $200,501. She calculated severance damages by first subtracting $1,890,000 from $2,135,000 and getting $245,000. She then subtracted direct damages of $44,499 from $245,000 and was left with severance damages of $200,501.

Andrew Albro, a real estate appraiser, testified on behalf of Defendant and prepared an appraisal and rebuttal report in this matter. Mr. Albro found that the subject property before taking was 101,263 square feet, or 2.32 acres, and was a commercially zoned, J Business 2, parcel. The site has 149 feet of frontage along the west side of State Route 112, and 292 feet of frontage along the south side of County Road 83. The site is a vacant wooded parcel with signage along its Route 112 frontage. Chain link fencing is situated along the subject's County Road 83 frontage. He stated that the partial fee taking involved the acquisition of a 2,146 square foot (2% of the total site area) rectangular parcel along the property's Route 112 frontage. The taking was 14 feet in depth and extended the entire length of the Route 112 frontage. After the taking, the subject property was reduced to 99,117 square feet. Defendant also exercised a temporary easement for a work area over that section of the remainder parcel fronting Route 112. The temporary easement was designated on Map 402 as parcel 412. Parcel 412 is rectangular with 6 feet of depth along the northern and southern property lines and extends the entire 149 feet of the subject's Route 112 frontage. Mr. Albro found that the temporary easement contains approximately 932 square feet of land.

In determining the highest and best use of the subject property, Mr. Albro considered what was physically possible, legally permissible, economically feasible and maximally productive for the property. He determined that the highest and best use for the site both before and after the taking is as a retail service-based development. He explained that after the taking there would be a proportionate reduction in ultimate development potential of the subject property. Mr. Albro testified that, in his opinion, the loss of 600 square feet of building potential would not result in any severance damages to the property. He did not believe the market would react to such a loss and that the property would still be developed to its highest and best use. Mr. Albro envisioned a single use building such as a bank or pharmacy on the site as the highest and best use, which would not be affected by the 600 square foot loss of building development.

Mr. Albro also used the sales comparison approach in order to value the site. Mr. Albro chose four comparable land sales in his analysis. After making adjustments to the comparable sales data, Mr. Albro found a before-taking square foot value of the site as vacant of $22. He then multiplied $22 by 101,263 square feet (the before- taking size of the property) and found a before-taking market value of the property of $2,230,000. After making adjustments to the comparable sales data, Mr. Albro found an after-taking square foot value of $22 for the subject property. He then multiplied $22 by 99,117 (the after-taking size of the property) and found an after-taking market value of $2,180,000 for the subject property. After subtracting the after-taking value of $2,180,000 from the before-taking value of $2,230,000, Mr. Albro calculated direct damages of $50,000 to the subject property.

Holding: The Court found that the sides could not agree to the exact measurements of the size of the subject property or the size of the area taken by Defendant in this matter. Defendant's appraiser, Mr. Albro, had to revise his initial land measurements after being presented with Mr. Savik's rebuttal engineering report. Mr. Savik based his measurements on a survey received from Defendant's appraiser as well as measurements on the taking maps and the property deed. Mr. Jaeger, a licensed land surveyor, conceded at trial that there is some level of inaccuracy in both his and Defendant's calculations, and that the 1.3% difference in the calculations is "pretty close." (He also based his figures partially on a survey conducted by Lee Lutz, which was not in evidence.) Both appraisers conceded that the most accurate method to calculate the measurements of the subject property is to conduct a survey. When asked to calculate the taking area based on the figures contained in the taking map, Mr. Jaeger found a taking area of 2,146 square feet, the same area found by Defendant.

Thus, based on the totality of the reports in evidence and after evaluating the credibility of the witnesses, the Court accepted Defendant's calculations as being the accurate measurements for the size of the property in both the before and after-taking scenario as well as its measurement for the taking area. The appropriate measure of damages for a partial taking of real property is the difference between the value of the whole property before the taking, and the value of the remainder after the taking. The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, whether or not the property is being put to such use at that time. Consequential or severance damages may also occur if there is a diminution in value of the remaining property as a result of the taking. The Court adopted Defendant's methodology and calculation in awarding $50,000 as the accurate valuation of direct damages to the subject property as a result of the taking.

Claimant was awarded a total of $257,500 in damages. This amount was calculated by adding total damages from the taking (direct and severance) of $250,000 to $7,500 in damages related to the temporary easement.

Prevailing Attorney: Michael A. Sims, Assistant Attorney General

Precis: Joel Grossbarth

 

Matter of City of New York (Atlantic Avenue Ext.)

Court: New York State Supreme Court, Queens County
Citation: 41 Misc. 3d 818, 975 NYS2d 478 (Sup. Ct., Queens Co., 2013)

Facts: On February 20, 2013, petitioner City of New York became vested with title to a parcel of property where Fine Foods operates a poultry and meat processing business as a tenant. Petitioner seeks possession of the property in furtherance of the Atlantic Avenue Extension project, which, among other things, will extend Atlantic Avenue and create three public parks. Petitioner asserts that it made a condemnation award available for advance payment to the tenant for fixtures, and served a 30-day notice on or about April 29, 2013, terminating the tenancy of Fine Foods.

Petitioner, City of New York, moved for a writ of assistance pursuant to Eminent Domain Procedure Law § 405(A) directing Fine Foods Wholesale Distributors, Inc. also known as Fair Price Customers Cut Meat to vacate the premises known as 137-44 94th Avenue (block 9990, lots 34 and 35), Queens, New York, and directing the Sheriff of the City of New York to put the City of New York into possession of the premises. Fine Foods appeared in opposition to the motion, asserting that the application was premature because Petitioner City of New York obtained the order to show cause on June 21, 2013, prior to the City's making of the advance payment available to it on June 24, 2013. Fine Foods also asserted that Petitioner City of New York failed to serve a 90-day written notice to vacate pursuant to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 USC § 4601 et seq.) and the corresponding federal regulations (see 49 CFR 24.1 et seq.). Fine Foods further asserted that there is no reason for imminent possession by the City, as the City did not provide any meaningful relocation assistance or payment of relocation expenses, and it should be given an opportunity to have a trial on the issue of the adequacy of any advance payment before issuance of the writ.

Holding: The Supreme Court held that a showing of necessity for possession of the property by a condemnor is not required before a writ of assistance may be granted pursuant to EDPL 405(A). The only prerequisite to such relief is the payment by the condemnor to the condemnee of the statutory advance payment. In this instance, the City complied with the condition precedent to an application for a writ of assistance by providing its notice dated June 14, 2013 to Fine Foods that a condemnation award was available for payment. To rule otherwise would allow a claimant to delay the condemnor's exercise of its right to gain possession of the property. Furthermore, even assuming a showing of necessity was required, the City demonstrated its need for the premises to be vacated to commence demolition of the existing buildings and clear the site for development, and thereby avoid the loss of federal funds by which the project is to be partially financed.

The Court also held that the City must comply with the Uniform Relocation Act and corresponding federal regulations because the project is federally funded in part, and that service of a 90-day written notice to vacate must be provided by the City as the displacing agency to a lawful occupant scheduled to be displaced.

The fact that an issue may exist as to whether the advance payment amount is adequate does not constitute a basis for delaying the issuance of a writ of assistance pursuant to EDPL 405(A). Fine Foods' claim apparently did not include a schedule of fixture items. A condemnee making a claim for compensation for fixtures or for any interest other than the fee in the real property acquired must submit a notice of claim, together with a schedule of fixture items, where applicable.

Prevailing Attorney: Michael A. Cardozo, Corporation Counsel (Holly Gerstenfeld, Esq.)

Precis: Joel Grossbarth

 

Matter of County of Rockland v. Town of Clarkstown

Court: New York State Supreme Court, Appellate Division Second Department
Citation: 128 AD3d 957, ___NYS2d___, (NYAD 2nd Dept., 2015)

Overview: The County of Rockland, New York sought to annul a Resolution of the Town of Clarkstown (a town located within the County), which effectively shut down a county road through the use of the “prior public use” doctrine applicable to eminent domain proceedings in the New York State Town Law.

Facts: In an effort to address complaints concerning traffic and speeding on Newport Road in the Town of Clarkstown, the Town Board of the Town of Clarkstown (hereinafter the “Town Board”) passed Resolution No. 229-2012. The Resolution authorized the placement of a temporary barrier near the intersection of Newport and Samuel Roads, at the boundary between the Village of Chestnut Ridge and the Town, which effectively turned Samuel Road into a dead end. The Resolution also directed the Town Police Department to conduct traffic studies to determine the effect of the barrier on local traffic. The petitioners/plaintiffs, the County of Rockland and related entities and officials (hereinafter collectively “the petitioners”), commenced this hybrid proceeding pursuant to CPLR Article 78 to annul the subject resolution passed by the respondent/defendant Town Board, and action for declaratory relief. The Supreme Court denied the petition and dismissed the proceeding. The petitioners appeal.

Holding: The Appellate Division affirmed the ruling of the Supreme Court. The prior public use doctrine limits the general grant of the power of eminent domain extended in Town Law § 64(2) by prohibiting towns from acquiring rights in property already devoted to another public use, where the acquisition will interfere with or destroy the prior public use. The breakaway barrier that the Town installed on Samuel Road did not interfere with or destroy the prior public use of Samuel Road. Accordingly, the prior public use doctrine was inapplicable and did not prohibit the Town from installing the barrier.

Since the Resolution directed the Town Police Department to conduct traffic studies to determine the effect of the barrier on local traffic, the Town was not required to first undertake a review under the New York State Environmental Quality Review Act (6 NYCRR 617.5[c][21]).

The Town's installation of the barrier was reasonable, nondiscriminatory, conformed with the Vehicle and Traffic Law, and was not irrational, or arbitrary and capricious. The Appellate Court found the Supreme Court properly dismissed the petition.

Prevailing Attorney: Amy Mele, Esq., Town Attorney

Precis: Joel Grossbarth

 

Scottsdale Indemnity Company v. Beckerman

Court: Supreme Court, Appellate Division, Second Department
Citation: 120 AD3d 1215,992 NYS2d 117 (2nd Dept., 2014)

Facts: The Village of Muttontown took a 1.1-acre parcel of real property by eminent domain from the Defendants Richard Entel and his limited liability company, Lexjac, LLC. A predecessor in interest to the Entel Defendants offered to dedicate the parcel to the Village as parkland, but the Village did not accept the dedication. In 2005, the Board of Trustees of the Village of Muttontown with Entel, who was then a member, recusing himself, officially declined the offer of dedication, and Lexjac, LLC, delivered a conservation easement over the parcel to the Village. In 2007, after a hotly contested mayoral election between Entel and the Defendant Julianne W. Beckerman, in which Beckerman prevailed, the Village rescinded its 2005 resolution declining the dedication, and thereupon accepted the dedication.

The Entel Defendants challenged that taking by commencing an action in the United States District Court against, among others, Beckerman, individually and as Mayor of the Village and the remainder of the Village Board members. The Entel Defendants alleged (1) a violation of the right to equal protection, (2) a deprivation of substantive due process, (3) a deprivation of procedural due process, and (4) a violation of the right to free speech. In 2011, after the Entel Defendants were awarded summary judgment on the cause of action alleging a deprivation of procedural due process, the remaining causes of action in the federal court action were dismissed. The Entel Defendants also commenced a hybrid action and proceeding in the Supreme Court, Nassau County, against Beckerman, individually and as Mayor of the Village the Board of Trustees, and the Village, seeking (1) damages for breach of a contract allegedly created by the 2005 resolution of the Board of Trustees declining the offer of dedication, (2) a judgment declaring that the Village failed to comply with the Eminent Domain Procedure Law, (3) to quiet title to the parcel in dispute, (4) damages for a de facto taking, (5) the annulment of the 2007 resolution accepting the dedication on the ground that the determination adopting the resolution was arbitrary and capricious, (6) the annulment of the 2007 resolution on the ground that the acceptance of the parcel did not comply with the State Environmental Quality Review Act (ECL Art. 8), and (7) to compel the Village to decline the dedication.

The Plaintiff is an insurance carrier that insured the Village and its officials for claims arising from public officials' wrongful acts. However, the relevant insurance policy contained an exclusion for "any injury or damage arising out of or resulting from a taking that involves or is in any way related to the principles of eminent domain, inverse condemnation ... or dedication by adverse use or by whatever name used." In 2012, the Plaintiff commenced the instant action against Beckerman and the individual members of the Board of Trustees, the Board of Trustees itself, and the Village for a judgment declaring that the exclusion absolves the Plaintiff from defending and indemnifying the Village, its agencies, and its officials in relation to the Entel Defendants' remaining claims in both the underlying federal and state-court matters.

The Supreme Court denied Plaintiff’s Motion for Summary Judgment. Plaintiff appealed.

Holding: The Appellate Division reversed the Supreme Court’s decision and granted Plaintiff’s Motion.

The Court held that an insurer's contractual duty to defend is liberally construed, and is broader than the duty to indemnify. The duty to defend arises whenever the allegations in a complaint state a cause of action that gives rise to the reasonable possibility of recovery under the policy. The duty to defend is not triggered, however, when the only interpretation of the allegations against the insured is that the factual predicate for the claim falls wholly within a policy exclusion. Policy exclusions are subject to strict construction and must be read narrowly and any ambiguities in the insurance policy are to be construed againstthe insurer. However, unambiguous provisions of insurance contracts will be given their plain and ordinary meaning.

In the context of a policy exclusion, the phrase "arising out of" is unambiguous, and is interpreted broadly to mean "originating from, incident to, or having connection with." A "but-for" test applies to determine the applicability of an "arising out of” exclusion. If the Plaintiff in an underlying action or proceeding alleges the existence of facts clearly falling within such an exclusion, and none of the causes of action that he or she asserts could exist but for the existence of the excluded activity or state of affairs, the insurer is under no obligation to defend the action.

Here, the Plaintiff established its prima facie entitlement to judgment as a matter of law by demonstrating that the remaining claims asserted by the Entel Defendants in the underlying federal and state-court matters all arose out of a taking that involves, or is in any way related to, the principles of eminent domain, inverse condemnation ... or dedication, a situation that is specifically excluded from coverage by the clear and unambiguous language of the policy. In opposition to the Plaintiff's showing, the Village-Defendants failed to raise a triable issue of fact.

Prevailing Attorney: Carroll, McNulty and Kull, LLC www.cmk.com

Precis: Joel Grossbarth

 

Sagres 9, LLC. v. State of New York

Court: New York State Court of Claims
Citation: ___ Misc. 3d. ____, 2015 NY Slip OP. 51820(U) (N.Y. Ct. Claims, 2015)

Facts: The State of New York's appropriated temporary easements in property owned by Claimant located at 43rd Street and 57th Avenue in Maspeth, Queens, New York. Title of the easements vested to the State on March 12, 2014.

The State Department of Transportation (“DOT”), as it is required to do by EDPL § 303, appraised the taking and deposited that amount with the State Comptroller in an account of the State's short-term investment pool (STIP), established under State Finance Law § 97-dd. Such amount is an offer to the condemnee. The owner can accept such amount as full payment or treat it as an advance payment subject to the value of the taking as ultimately determined. The advance payment was deposited in an account, notice was given to all potential interested parties, and any person or entity claiming an interest in the property can file a petition. That was done in this case, and no party has come forward to challenge Claimant Sagres 9 as the proper

distributee.

Claimant sought an order of distribution of the advance payment with interest paid at the nine percent rate set by Section 16 of the State Finance Law, rather than the lower rate at which STIP funds accrue. Claimant contended that the State deposited the advance payment with no notice, no explanation and no basis whatsoever. The Office of the Attorney General, Real Property Bureau, had sent Claimant a letter dated May 5, 2014, advising that the advance payment was deposited in an account subject to disbursement upon application. No date of deposit was referenced in the letter, but respondent's Verified Answer indicated that the advance was deposited on April 23, 2014. Claimant maintained that the State inaccurately depicted the fact of federal involvement in order to expedite the process.

Holding: The Court of Claims denied the Claimant’s request. The State properly deposited the funds into the account as required under the Eminent Domain Law. Any other result would have been patently unfair to the State who complied with the law.

The Court simply viewed this application as Claimant’s attempt to procure more money from the State by using a potentially conflicting provision of the law (State Finance Law § 97-dd).

Prevailing Attorney: Michele M. Walls, Assistant Attorney General

Precis: Joel Grossbarth

 

Tanglewood Commons, LLC v. The State of New York

Court: New York State Court of Claims
Citation: ___Misc. 3d ___, 2014 NY Slip Op. 33603 (N.Y. Ct. Claims, 2014)

Facts: TThe Claimant Tanglewood Properties, LLC (“Claimant”) filed claim for damages caused by the permanent partial and temporary easement appropriation of its property, pursuant to Section 30 of the Highway Law and the Eminent Domain Procedure Law (“EDPL”) of the State of New York in a project entitled "Port Jefferson-Coram” located in Suffolk County, New York. Claimant’s property is located at the northwest corner of New York State Route 112 and Pine Road in Coram, Township of Brookhaven, Suffolk County, New York. Ownership was not contested and both parties' appraisers valued the property on the basis of Claimant's ownership of a fee interest in the subject premises.

A trial was held on the limited issue of whether Claimant sustained severance damages and, if so, the extent or amount of such damages. The parties had settled upon the appropriate level of compensation to the Claimant for the 10-foot strip of Claimant's property, which was appropriated by the Defendant in 2008 pursuant to New York Highway Law § 30 and New York Eminent Domain Procedure Law. The trial was necessitated by the fact that the parties could not agree whether the taking of that 10-foot strip resulted in indirect or consequential damages, referred to alternatively as "severance" damages to the remainder of Claimant's land. Essentially, the Claimant contended that the taking of the 10-foot strip (on the eastern boundary of the property, along State road Route 112, in connection with the widening and reconstruction of Route 112) caused severance damages consisting of two components, specifically (1) loss of yield in the development of the remainder of the property and (2) limited access to the remainder property along the Route 112 border thereof.

The parties stipulated to many of the necessary facts and proceeded to trial on a few outstanding issues, namely just compensation to be paid to Claimant for the loss of actual use of its property and indirect damages.

Holding: The "just compensation" to which the Claimant is entitled for the property taken is comprised not only of direct damages but also the consequential damages occasioned by the taking, sometimes referred to as severance damages. The Court was required to assess the respective expert proof presented by the parties. The Court found that it must credit the opinion of the Claimant's project manager and real estate expert concerning the loss of yield component of severance damages. Specifically, the Court found upon consideration of all the proof before it that Claimant had established by a preponderance of the credible evidence that severance damages were occasioned to the remaining property by reason of the August 29, 2008 taking of the 10-foot strip acquired by the Defendant — to the extent that the yield of potential square footage for commercial development was decreased and that this decrease was shown to result in a severance loss to Claimant in the amount of $386,035.00. Although testimony was given by Claimant's experts on this component of claimed severance damages, it was insufficient and unpersuasive in this Court's view to sustain this separate component. The Court found that the evidence did not support an award of severance damages as to this separate component thereof, which component was predicated upon there being a single means of ingress and egress from Route 112 after the taking. Based upon the foregoing, the Court awarded Claimant the additional amount of $386,035.00 as and for consequential (severance) damages and denied the Claimant's request for other severance damages. Therefore, the total amount awarded to Claimant was $591,474.80.

Editor's Note: Eight months later, the Claimant moved for an order directing an additional allowance for actual and necessary costs, disbursements and expenses consisting of attorneys' fees, expert witness fees and disbursements incurred. Claimant was awarded an additional $281,631.75.

Prevailing Attorney: Edward Flower, Esq. www.fmmlawyers.com

Precis: Joel Grossbarth

 

Matter of Smithline v. Town & Village of Harrison

Court: New York State Supreme Court, Appellate Division, Second Department
Citation: 131 AD3d 1173 ___NYS3d ___, (2nd Dept., 2015)

Facts: The Petitioners were homeowners in the Town and Village of Harrison. A neighboring roadway running roughly parallel to their property was prone to significant flooding, resulting in pools of water up to six-feet deep, which rendered the right-of-way impassable for individuals and emergency vehicles. Accordingly, the Town determined to undertake a project to construct drainage in the area, which would connect to existing storm sewers and alleviate roadway flooding. In service of the drainage project, the Town sought a permanent easement across the petitioners' property to install underground drainage and a temporary easement for access and the stockpiling of materials. When the Petitioners refused to grant the requested easement, the Town commenced proceedings to obtain the easement via its power of eminent domain. After a hearing, the Town determined that use of eminent domain was authorized and resolved to condemn the subject easement. The Petitioners commenced this proceeding pursuant to Eminent Domain Procedures Law (“EDPL”) §207, challenging the Town's exercise of its power of eminent domain.

The Petitioners contended that, in adopting its determination, the Town violated Environmental Conservation Law Article 8 (hereinafter “SEQRA”) and its regulations (6 NYCRR part 617) by failing to properly evaluate the environmental impact of the proposed drainage project and support its determination with adequate findings. However, the Town correctly determined that the drainage project was a SEQRA "Type II" action. Accordingly, the Town had no further responsibilities to conduct environmental review.

The Supreme Court concluded the Town sufficiently detailed its finding and complied with New York State Environmental Conservation Law, Article 8. Petitioners appealed.

Holding: The Appellate Division affirmed the ruling of the Supreme Court. A condemnor need not describe every detail of the project or the area to be condemned. Although it did not describe in detail the scope of the temporary easement for access and the stockpiling of materials which it proposed to acquire, the Town nevertheless adequately described the project in both the notice and determination.

Pursuant to EDPL Sections 202 and 204, a condemnor must give affected parties notice of their right to seek judicial review of the proposed action only on the basis of facts, issues, and objections raised at the hearing, within 30 days of the condemnor's determination. Here, it was undisputed that both the notice of hearing and the notice of determination issued by the Town omitted this information. However, in this case, despite the Town's failure to include these clauses in the notices, the Petitioners appeared and participated at the public hearing and timely sought judicial review of the Town's determination. Accordingly, the Petitioners have been afforded a full opportunity to raise their objections to the proposed condemnation. Because the Petitioners have suffered no prejudice from the Town's omission of the right to judicial review in its notices, the error was harmless and did not warrant invalidation of the Town's determination.

Prevailing Attorney: Frank P. Allegretti, Esq.

Precis: Joel Grossbarth

 

Serrone v. City of New Yorkv

Court: Appellate Division, Second Department
Citation: ___AD3d____ , 2015 NY Slip Op 04472 (2nd Dept., 2015)

Overview: Appellate Court discusses an award of attorneys’ fees authorized by Eminent Domain Law, Section 702(B).

Facts: In September 2008, The New York City Planning Commission approved several resolutions in connection with the redevelopment of Willets Point, located in Queens, New York. Thereafter, the New York City Council approved the same resolutions in November 2008, authorizing the commencement of certain condemnation proceedings in connection with the Willets Point redevelopment project.

On February 11, 2011, the City eventually published a notice of a public hearing to consider the actual condemnation of the affected properties. Three months later, the City published a determination and findings authorizing the acquisition of the properties by eminent domain. On June 2, 2011, the Plaintiff, as owner of several parcels, commenced an action to review the City’s determination. By stipulation dated May 2, 2012, the Plaintiff agreed to withdraw its petition in consideration of the City’s agreement not to proceed under the May 4, 2011 determination. The withdrawal of the proceeding was “without prejudice.”

Plaintiffs then commenced a special proceeding to recover attorneys’ fees pursuant to Eminent Domain Law §702(B), based upon the City’s abandonment of the acquisition procedure.

The Supreme Court dismissed the Plaintiffs’ Complaint insofar as it sought attorneys’ fees and costs incurred before February 11, 2011.

Holding: The Appellate Division, Second Department affirmed the Supreme Court’s ruling. When a condemnor abandons a proceeding to acquire property under the Eminent Domain Law, or was not legally authorized to acquire property, Eminent Domain Law §702(B) authorizes an award to a condemnee of reasonable attorneys’ fees and costs. However, the reimbursement of fees and costs are expressly limited to those actually incurred. The condemnation acquisition did not commence until the City published a notice of public hearing. Since the notice of public hearing was not published until February 2, 2011, only those costs and fees incurred after that date are awardable to Plaintiffs.

The Court simply viewed this application as Claimant’s attempt to procure more money from the State by using a potentially conflicting provision of the law (State Finance Law § 97-dd).

Submitted by: Phil Sanchez, Esq. www.spnylaw.com

Precis: Joel Grossbarth

 

Ronmar Realty, Inc. V. State of New York

Court: New York Supreme Court, Appellate Division Second Department.
Citation: 121 AD3d 1085, 995 NYS2d 194, (2nd Dept., 2014)

Overview: What happens when a governmental agency takes only a small piece of land for a sort duration of time through a temporary easement.

Facts: The Claimant Ronmar Realty, Inc., is the owner of a 12,438-square-foot parcel of real property located in the Town of Brookhaven, New York. The parcel, which is improved with a one-story retail structure, has approximately 77 feet of frontage on the easterly side of New York State Route 112, a major north/south artery. In March 2008, in connection with a highway reconstruction project, the State of New York acquired a temporary easement over a 939 square foot strip of land that spanned the entire front of the parcel, to depths ranging from 8 to 16 feet. The easement reserved to the Claimant "the right of access and the right of using said property and such use shall not be further limited or restricted under this easement beyond that which is necessary to effectuate its purpose." The Claimant filed a timely claim for damages resulting from the taking of the temporary easement.

After a non-jury trial, the Court of Claims awarded damages to the Claimant based on the rental value of the land encompassed within the temporary easement for the length of time that the easement was in effect, together with actual damages for injury to property. Crediting the testimony of the engineer in charge of the road widening and reconstruction project, the Court of Claims found that the entire property was not substantially affected, and that access was not significantly disrupted by the temporary easement. As such, the Court rejected the Claimant's contention that it should be awarded consequential damages based on the rental value of the entire parcel, rather than the portion of the parcel actually encumbered by the temporary easement. Claimant appealed.

Holding: The Appellate Division affirmed the judgment of the Court of Claims. Generally speaking, a claimant is entitled to compensation for any loss suffered as a result of the taking of a temporary easement. There is, however, no recovery where there is no loss. Compensation need not be paid for the State's taking of a temporary easement when there is no actual interference with the property owner's use of his or her property.

Where a taking of a temporary easement encumbers a parcel's entire highway frontage, as in this case, the measure of damages is the rental value of the land encompassed within the temporary easement for so long as the easement is in effect plus, as consequential damages, the rental value of the parcel's unencumbered interior acreage for any period of time when highway access was not possible by virtue of the easement's use. A condemnee is entitled to consequential damages comprising the rental value of the parcel's unencumbered interior acreage for the easement's duration only if the condemnor does not meet its burden of proving the duration of the interval of actual obstruction, or if the condemnee establishes that the mere existence of the temporary easement interfered with highest and best use of the property.

The Court of Claims reasonably concluded that the State proved that the disruption and interference with the subject property were limited, sporadic, and of a very brief duration, and that access was never completely blocked, even on days when disruption occurred. While the Claimant argued that, even when access was not actually interrupted, the temporary easement negatively affected its retail establishment — the highest and best use of the property — the record was devoid of any concrete evidence that the Claimant suffered a significant economic injury to the entire parcel as a result of the temporary taking.

Precis: Joel Grossbarth

 

Matter of City of New York (New Creek Bluebelt, Phase 4)

Court: New York State Supreme Court, Richmond County
Citation: ___Misc 3d.___ (2015 NY Slip Op. 50934)

Facts: At issue in this condemnation proceeding was the just compensation to be awarded to Claimant, Staten Island Land Corp., for the taking of its property located on Staten Island, New York. The Condemnor, The City of New York, took title on November 3, 2006 (the vesting date). The Court viewed the property on June 16, 2014, and a non-jury trial was held on June 23, 2014.

The City acquired the subject property for use as part of the New Creek Bluebelt Phase 3 project. The total size of the property taken was 45,208 square feet, which includes a noncontiguous lot of approximately 5,203 square feet. The property was located between Hylan Boulevard, and Joyce Street, between Stobe Avenue and New Creek, with another lot running partially in the bed of an unbuilt portion of Joyce Street and fronting 30 feet on Stobe Avenue. Virtually the entire site consisted of wetlands and the subject property was regulated as wetlands on the vesting date. The Claimant purchased the property prior to the enactment of the wetland regulations and was the owner of the subject property on the vesting date. Both parties agreed that because of the wetlands regulations, the owners of the property would not be able to obtain a permit to develop it and its highest and best use, as regulated, is vacant.

The parties also stipulated that on the date of vesting, the value of the property as regulated was $248,600, and the value of the property as unregulated, and after deducting extraordinary costs, was $4,552,000. The City instructed its appraiser in preparing his appraisal to assume that there was a reasonable likelihood that a regulatory takings challenge to the wetland regulations would succeed.

The parties agreed that the wetlands regulations would prohibit any productive use of the property. The stipulation as to the regulated and unregulated values of the property indicates that the wetland regulations have eliminated almost 95% of the value of the property. Further, as the property was purchased by Claimant for investment purposes before the wetlands regulations were imposed on the property, the Claimant had reasonable expectations to develop the property. Based on the foregoing, and the reports of the appraisers, the Court found that it is reasonably probable that a regulatory challenge to the wetlands regulations, as applied to the subject property, would have succeeded.

The parties disagreed as to what increment, if any, should be added to the regulated value of the property to determine its value at the time of vesting. The City argued that no increment should be added because investors do not purchase wetlands on Staten Island with the intention of challenging the wetland regulations in order to develop the property. The City argued in the alternative, that if an increment is to be added, the best market-based evidence available indicates that a buyer would pay 32% of the unregulated value of the property.

The Claimant asserts that the increment should be 75% of the difference between the unregulated and regulated value of the property. The increment is determined by the realities of the marketplace, which are that a knowledgeable buyer would not pay the full unregulated value of the property, but would adjust his purchase price to offset the cost in time and money of applying for a wetlands permit and challenging a denial of the permit as confiscatory. A buyer would pay only the value of the property as restricted, plus an increment representing its enhanced value at such future time if and when he successfully in nullifies the wetlands restrictions in court.

In his testimony the City’s appraiser stated that he did not believe that an investor on Staten Island would pay an increment over the regulated value of a wetland property, even where it is probable that a challenge to the regulations would be successful. He based his belief on the fact that he knew of no sales of wetlands, on Staten Island, where a buyer purchased designated wetlands and subsequently challenged the regulations as a regulatory taking before the wetlands regulations were imposed on the property, the Claimant had reasonable expectations to develop the property. Based on the foregoing, and the reports of the appraisers, the Court found that it is reasonably probable that a regulatory challenge to the wetlands regulations, as applied to the subject property, would have succeeded.

The Claimants contended that the increment to be added to the regulated value should be 75% of the difference between unregulated value and the regulated value, citing Berwick v State of New York, 159 AD2d 544, 552 NYS2d 409 (2nd Dept. 1990), and Matter of New Creek Bluebelt, Phase 4 (Paolella), 122 AD3d 859, 997 N.Y.S.2d 447, 2014 NY Slip Op. 08029.

Holding: When adding an increment to the value of vacant land to reflect its development potential, the specific increment selected and applied must be based on sufficient evidence and be satisfactorily explained. While the 75% increment set forth in Berwick may not be applicable to all wetlands properties, it is an appropriate increment to apply in this case.

In this case, the Claimant's appraiser based his estimate of a 75% increment in part on instructions from Claimant's counsel and partially on the property's commercial zoning and its location on Hylan Boulevard. He testified that Hylan Boulevard is the major commercial corridor of Staten Island and connects Staten Island's north and south shore communities. The subject property, with the exception of one small lot, was zoned R5 with a C1-2 overlay. Permitted development in a C1-2 overlay includes offices, hotels, restaurants, grocery stores and beauty parlors. In his appraisal, Claimant’s appraiser described the portion of Hylan Boulevard where the subject property is located by stating, "commercial activity is good, particularly in the southeasterly section of the neighborhood along Hylan Boulevard, a major traffic artery on Staten Island that offers a wide variety of commercial uses." His assessment of the location was similar. In describing the location of the subject property in his appraisal, he stated that "it fronts on a busy commercial corridor lined with a multitude of store, restaurant, bank and other commercial-type properties."

Although the property is part of a larger wetlands, that wetlands crosses Hyland Boulevard roughly perpendicularly. The block between Stobe Ave. and Seaver Ave. is the only gap in development on Hylan Boulevard in the area. Several blocks to both the north and south of the subject property were solidly developed commercially. The subject property is one of the few remaining undeveloped commercially-zoned parcels on Hylan Boulevard. Also, both appraisers agreed that the extraordinary costs involved in developing the subject property are not significant in comparison to the value of the property and do not preclude development.

Given the commercial zoning of the subject property and its unique location in the midst of a solidly developed major commercial artery, the court found that an increment of 75% of the difference between the adjusted unregulated value of the property and the regulated value is appropriate. The difference between the unregulated value of $4,552,000 and regulated values of $248,600 is $4,303,400, and 75% of that difference is $3,227,550. When that increment of $3,227,550 is added to the regulated value of the property of $248,600, the total is $3,476,150, or $3,500,000 rounded.

Submitted by: Phil Sanchez, Esq. www.spnylaw.com

Precis: Joel Grossbarth

 

Metropolitan Transportation Authority v. Longridge Associates, LP

Court: Appellate Division, Second Department
Citation: 122 AD3d 856, ___NYS2d ____ (2nd Dept., 2014)

Facts: Appellant, Metropolitan Transportation Authority (“MTA”), appealed from a judgment of the Putnam County Supreme Court following a non-jury trial to establish damages for condemnation of property owned by Longridge Associates, LP.

At trial, the Judge rejected the appraisal offered by the MTA and accepted the appraisal offered by Longridge Associates, LP. The MTA appealed.

Holding: The Appellate Division, Second Department affirmed the judgment of the Supreme Court. The Appellate Division held that in a condemnation proceeding, when private property is taken for public use, the condemning authority must compensate the owner so that the owner may be put in the same relative position, insofar as this is possible, as if the taking had not occurred. The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time. A property's market value is defined as "`the amount which one desiring but not compelled to purchase will pay under ordinary conditions to a seller who desires but is not compelled to sell. It is necessary to show that there is a reasonable possibility that the property's highest and best asserted use could or would have been made within the reasonably near future, and a use which is no more than a speculative or hypothetical arrangement may not be accepted as the basis for an award. The Court held that the Supreme Court properly rejected the appraisal submitted by the condemnor, MTA, since the evidence demonstrated that the highest and best use of the property was as a retail development, as the claimant's expert concluded, and not as vacant land, as the MTA's expert opined.

Having rejected the appraisal set forth by the MTA, the Supreme Court was bound either to accept the claimant's appraisal or explain the basis for any departure. The claimant's appraiser sufficiently and credibly explained the basis for his selection of comparable properties and relevant adjustments made to the valuation of these properties. Although the court made certain changes to the final results presented in the claimant's appraisal, it adequately explained its reasons for making those changes.

Submitted by: Phil Sanchez, Esq. www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of Central N.Y. Oil & Gas Co., LLC (Porto Bagel, Inc.)

Court: New York State Supreme Court, Appellate Division, Third Department
Citation: 106 AD3d 1152, 964 NYS2d 293 (3rd Dept., 2013)

Facts: Through eminent domain, Petitioner acquired a permanent easement to construct and maintain a gas pipeline across two parcels of land owned by Claimant in the Town of Owego, Tioga County, as well as two temporary easements to facilitate the construction. The first of Claimant's parcels (hereinafter Tract 27) comprises roughly four acres, with a northern boundary that abuts State Route 434 and a southern boundary that abuts Claimant's second 67-acre parcel (hereinafter Tract 26). The permanent easement was approximately 50 feet wide and 2,000 feet long, running in a north/south direction from Route 434 across Tract 27 close to its western boundary, and then continuing in the same direction across Tract 26. This easement prohibited the construction of any "house, structure or obstruction" in the easement area. Claimant sought to develop these properties, but at the time of the taking, they were used primarily for recreation and were undeveloped, except for a small hunting cabin and an unpaved access road that crossed the easement in two locations.

Claimant initially declined several offers from Petitioner to purchase the easements and then agreed to accept $13,100 as an advance payment while reserving the right to contest the amount of compensation due. Following the first two days of a non-jury trial, the trial judge recused himself. Thereafter, another Supreme Court Judge completed the trial, conducted a site visit, and concluded that the advance payment had adequately compensated Claimant for the permanent easement, denied compensation for loss of trees and the temporary easements, and awarded "cost to cure" damages for removal of tree stumps and restoration of the access road. Claimant appealed and Petitioner cross-appeals.

Holding: The Appellate Division affirmed the ruling of the Supreme Court, in part and remitted for recalculation of damages.

Claimant first contended that its motion to strike the appraisal report submitted by Petitioner's expert should have been granted because it did not contain all of "the facts, figures and calculations by which the conclusions were reached" (22 NYCRR 202.59 [g] [2]; see EDPL 508; 22 NYCRR 202.61 [a] [1]; [c]). In particular, Claimant contends that the report did not set forth all of the comparable sales on which its expert relied with sufficient particularity as to permit the transactions to be readily identified, and thus did not contain a clear and concise statement of every fact that Petitioner sought to prove in relation to those comparable properties. Petitioner's appraiser, John Miller, testified that because the easements constituted a partial taking, he could not use standard appraisal methods to quantify the resulting diminution in value. He thus devised a multi-step methodology by which, after using comparable sales to determine the tracts' values before the taking, he conducted a second analysis for each tract using comparable sales of properties encumbered by utility easements. These sales were detailed in Miller's report, but in the next step of his analysis he used information not included in the report to determine a hypothetical market value for each encumbered comparable property as if there were no encumbrance — values which then formed the basis of his ultimate conclusions as to the impact of the permanent easement on the value of Claimant's land. The appraisal report did not include the facts, figures or calculations by which these hypothetical values were determined, stating only that they were based, as to Tract 26, on "market data contained in Miller's files and as to Tract 27, on a sales comparison analysis of each [encumbered comparable] property, the details of which are retained in Miller's work file.

Petitioner argued that it was not required to provide a detailed narrative in its appraisal explaining each of the adjustments made in the report. It is a common practice to use adjustments to reconcile differences among properties in the course of arriving at their market values, and here, Miller's report identified the adjustments he used as real property rights conveyed, financing terms, conditions of sale, market conditions, location and physical characteristics. However, the Court held that the “hypothetical market values” are not mere adjustments — they are instead the conclusions of entirely separate comparisons — and these comparisons were neither included nor described in the report.

Accordingly, Supreme Court erroneously relied upon an analysis which was fundamentally flawed. The Appellate Division remitted the matter to hear testimony from the appraiser which sets forth facts and figures that are acceptable and provable.

Prevailing Attorney: Paul T. Sheppard, Esq., www.hhk.com

Precis: Joel Grossbarth

 

Chester Industrial Park Association, L.P. v. State of New York

Court: Supreme Court, Appellate Division, Second Department
Citation: 103 AD3d 827, 962 NYS2d 236 (2nd Dept., 2013)

Facts: The State of New York condemned a portion of Plaintiff Chester Industrial Park Association, L.P’s property in Chester, New York. Following a non-jury trial, the Court of Claims Judge awarded Plaintiff $250,316 for the “partial” appropriation of Plaintiff’s property. Plaintiff claimed the award was grossly deficient and the Court failed to realize the effect the condemnation had on its entire property and appealed.

Holding: The Appellate Division affirmed the Court of Claims’ ruling.

The measure of damages in a case involving the partial taking of real property is the difference between the value of the entirety of the premises before the taking, and the value of the remainder after the taking. The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, whether or not the property was actually being put to such use at that time.

In this case, the trial court properly rejected the appraisal submitted by the Claimant, since the additional evidence submitted by the Claimant to support its appraisal did not establish that the property, which was subject to federal wetlands regulations, would not be capable of producing a reasonable return or be adaptable to other suitable private use. Having rejected the Claimant's appraisal, the trial court was bound to either accept the State's appraisal or explain the basis for any departure. The trial court properly accepted the State's appraisal. The State's appraiser sufficiently and credibly explained the basis for his selection of comparable properties and relevant adjustments made to the valuation of these properties. Although the trial court made certain changes to the final results presented in the State's appraisal, it explained its basis for the changes. Thus, the trial court's determination was within the range of expert testimony and adequately supported by the record.

Editor's Note: This was the third appeal regarding the State’s appropriation of Claimant’s property.

Prevailing Attorney: Peter H. Schiff, Esq. Assistant Attorney General, NYS

Precis: Joel Grossbarth

 

Matter of Village of Haverstraw v. Ray River Co., Inc.

Court: New York State Supreme Court, Appellate Division Second Department
Citation: ___ AD3d ___ , 2016 Slip Op. 01500 (2nd Dept., 2016).

Facts: The Village of Haverstraw, New York condemned real property owned by the Respondents. In a judgment dated March 27, 2008, the Supreme Court granted the Village’s condemnation petition and ordered that if the condemnee wished to file a claim for damages, same must be filed before March 31, 2009. The landowners thereafter moved for an extension of time to file its claim. The Village appealed.

Holding: The Appellate Division affirmed the ruling.

Eminent Domain Law Section 501(B) states: “In a claim for damages arising from the acquisition of real property, a condemnee shall, within the time specified by the court, file a written claim, or notice of appearance.”

The time to file a claim or notice of appearance is merely a procedural direction to be issued by the court in the exercise of its broad discretion to administer the litigation in an orderly and expeditious manner. It is neither a statute of limitations nor a condition precedent to compensation and may be extended by the Supreme Court.

The landowners established “good cause” for an extension of time to file a notice of appearance. The Village denied access to the property to Claimants’ appraisers so as to exchange appraisal reports.

Prevailing Attorney:Michael Rikon, Esq. www.grrh.com

Precis: Joel Grossbarth

 

Knickerbocker Development Corp. v. State of New York

Court: New York State Supreme Court, Appellate Division, Third Department
Citation: ___AD3d.___ , 2016 NY Slip Op. 04770, (3rd Dept., 2016).

Facts: Claimant Knickerbocker Development Corp. owned three contiguous parcels of property located on the northeast corner of the intersection of State Route 9 and Stonebreak Road in the Town of Malta, Saratoga County, New York. Two of these parcels were undeveloped; each was just less than one acre, with frontage on Route 9. The third parcel, comprising 2.29 acres, was improved with an office building and parking lot, with frontage primarily on Stonebreak Road. In August 2010, Defendant New York State appropriated a wedge-shaped piece of two of Claimant's properties at the intersection of Route 9 and Stonebreak Road for the purpose of constructing a roundabout. This taking, totaling 0.23 acre, included portions of the properties' frontage on Route 9 and Stonebreak Road.

Claimant commenced this action, seeking direct and consequential damages resulting from Defendant's appropriation. Claimant alleged that it had purchased the parcels based upon their development potential and that, after the taking, the remaining properties lacked suitable access for their highest and best use as a high-traffic commercial property. At trial, Claimant presented expert testimony that the properties' corner location and access to two roads were central to development as a high-traffic commercial site and to the properties' valuation as such. Claimant also presented expert testimony that, due to the loss of frontage and issues of traffic safety related to the roundabout, permits necessary for certain access onto both Route 9 and Stonebreak Road — which would have been granted prior to the taking — would be denied.

The Court of Claims credited Claimant's expert testimony regarding the properties' pre-taking use as that of a high-traffic commercial property and awarded claimant $83,713 in direct damages. The court further determined that Claimant failed to support its claim that the appropriation caused access to be unavailable, and that there was no change in the properties' highest and best use, and, accordingly, denied Claimant's request for consequential damages. Claimant appealed, solely as to the denial of such damages.

Holding: The Appellate Division affirmed the Court of Claims ruling.

The Court held that consequential damages may be recovered where Defendant's appropriation has caused access to the remainder of a property to become "unsuitable," that is, "inadequate to the access needs inherent in the highest and best use of the property involved." Access may be rendered unsuitable if the taking of frontage on a property abutting a highway or "the physical construction of an improvement itself, so impairs access to the remaining property that it can no longer sustain its previous highest and best use." The question of suitability is a factual one directly related to the highest and best use of the property. The factual issues as to whet

her a property's remaining access can fairly be characterized as unsuitable are to be determined by the trial court, and that determination will be upheld if supported by the record.

Here, Claimant alleged that access to Route 9 was limited as a result of the taking because it would no longer be permitted to put two access points on the remaining frontage of the two abutting parcels. However, Defendant's expert testified that Department of Transportation policy permitted only one access point for each commercial property on a particular road and would grant exceptions only where an owner provided an engineering report and could justify the need for additional access. Defendant's expert further testified that, in 2006, the Town adopted a comprehensive plan that prioritized the minimization of curb cuts along the Route 9 corridor and required shared driveways wherever feasible. Notably, the assertion that Claimant's parcels would be permitted one access point on Route 9 after the taking "as of right" was uncontested.

Claimant further alleged that suitable access from Stonebreak Road would be prohibited after the taking. Claimant's expert testified that, based on his experience working with DOT, the new traffic pattern and road markings resulting from the construction of the roundabout would prohibit left-hand turns at the proposed pre-taking site of access. As to the possibility of receiving a permit to construct a right-in/right-out access, Claimant's expert testified that such a determination would be the function of the Town's Planning Board. As the Court of Claims highlighted in its decision, Claimant's expert was unable to identify any town or state requirements that would prohibit an access point on the remaining Stonebreak Road frontage. Claimant had not yet sought the permits to construct access to the property. On the basis of this testimony and documentation, including proposed plans and photographs of other properties, the Court of Claims found that Claimant had failed to establish with reasonable probability that two access points on Route 9 would have been permitted before the taking or that a permit for one right-in/right-out access on Stonebreak Road would be denied after the taking.

The Court found that the record supported the determination of the Court of Claims that, after the taking, Claimant had essentially the same property with the same access that it had before the taking — a corner property with two potential access points, and thus, Claimant did not meet its burden of proving consequential damages.

Further, in view of the testimony by Claimant's expert that the installation of the roundabout itself diminished the commercial value of the property — as it replaced the traffic signal that is preferred by commercial developers — it was appropriate for the Court of Claims to note that, to the extent that the property value may have been diminished by its proximity to the roundabout, consequential damages are unavailable. The roundabout was constructed for the benefit of the traveling public, and it is well settled that any "damages resulting from reasonable traffic regulations are not compensable."

Submitted by: Phil Sanchez, Esq. www.spnylaw.com

Precis: Joel Grossbarth

 

Matter of City of New York v. Jamaica Arms Hotel, Inc.

Court: New York State Supreme Court, Appellate Division, Second Department
Citation: 14 AD3d 699, 789 NYS2d 271 (2nd Dept., 2005

Facts: The property at issue is a residential hotel with more than 90 units comprised of one or two rooms, and one three-room unit. The units each have private bathrooms and a kitchen area with a refrigerator and sink. For several years, the City of New York rented the units to provide emergency housing for homeless families. In 1990 the City licensed the facility and operated it as a tier II homeless shelter, providing housing and social services. In 1992 the City condemned the property.

The Claimant's appraiser determined that the highest and best use of the property was as a commercially-operated hotel for the homeless, the use to which the property had been put prior to the license. The City's appraiser determined that the highest and best use of the property was as rental apartments. The Supreme Court agreed with the City and made its condemnation award based almost entirely on the value set forth in the City's appraisal. Claimant appealed.

Holding: The Appellate Division reversed the ruling of the Supreme Court and increased the award to the Claimant.

The determination of the highest and best use of a property must be based upon evidence of a use which reasonably could or would be made of it in the near future. A use which is no more than a speculative or hypothetical arrangement in the mind of the claimant may not be accepted as the basis for an award.

The Appellate Division agreed with the Supreme Court that, as the City argued, the highest and best use for the property was as rental apartments. The property was in an area zoned residential, each unit had an individual bathroom, and complete kitchen facilities could easily be installed. At the time of condemnation, the property was being used as a tier II homeless shelter under a license from the City. Although the property had been used as a commercially-operated hotel for the homeless in the past, the City had determined to eliminate the use of privately-owned hotels as transitional housing for homeless families, and had implemented the use of nonprofit facilities to provide emergency housing.

Furthermore, while the award to the claimant generally was within the range of the expert appraisal testimony, it was supported by the record, and was adequately explained the Appeals Court departed from the Supreme Court's calculation in the following respects. The evidence supported an increase over the value the Supreme Court assigned to the rental income for the subject apartments. The Supreme Court's assignment was based on the City's appraisal, which admittedly was on the "low end of the indicated rental range." Specifically, the record supported a rental income of $550 (as opposed to $500) for the one-room units (39 in total), $750 (as opposed to $650) for the two-room units (53 in total), and $1,000 (as opposed to $700) for the three-room unit (one). With the foregoing adjustment, the annual rent total is $746,400, less the three percent reserve for vacancies, as provided in the City's appraisal, for an effective gross income of $724,008. This leads to a corresponding adjustment on the expense side in the figure for management fees from $25,400 to $28,960. Finally, the evidence warranted an adjustment in the capitalization rate from 11.5% (the figure the Supreme Court applied) to 10%. In all other respects, the Court agreed with the Supreme Court's assessment.

With the foregoing adjustments, the award was increased from $2,864,000 to $3,996,250, and the Court modified accordingly.

Prevailing Attorneys:M. Robert Goldstein and Jonathan Houghton, Esqs. www.grrhpc.com

Precis: Joel Grossbarth

 

Matter of Village of Port Chester v. Bologna, et al.

Court: New York State Supreme Court, Appellate Division Second Department
Citation: ___ AD3d ___ , 2016 Slip Op. 01501 (2nd Dept., 2016).

Facts: In a condemnation proceeding, the Village of Port Chester, New York offered to pay Claimants $975,000 as compensation for the taking of their real property. After trial, the Supreme Court entered judgment awarding Claimants $3,062,000 as just compensation for the taking of their real property.

Thereafter, Claimants moved for an additional allowance pursuant to Eminent Domain Law (“EDL”) Section 701 in the amount of $832,244.59. The Court granted the motion, but only to the extent of adding $406,827. Claimants appealed.

Holding: The Appellate Division affirmed the ruling.

EDL Section 701assures that a condemnee receives “a fair recovery by providing an opportunity for condemnees whose property has been substantially undervalued to receive the costs of litigation establishing the inadequacy of the condemnor’s offer. The section also vests the trial court with discretion in order to limit the incentive for frivolous litigation and the cost of acquiring land through eminent domain.

The Appellate Division held that Section 701 requires two determinations: first, whether the condemnation award is substantially in excess of the condemnor’s proof; and second, whether reimbursement of the condemnee’s costs of litigation is necessary for the condemnee to achieve just and adequate compensation.

The Village conceded the first prong and the Court held the additional allowance for expenses was necessary to award Claimants just compensation.

Precis: Joel Grossbarth

 

Matter of Village of Spring Valley and Sport Club International v. Village of Spring Valley

Court: New York State Supreme Court, Appellate Division, Third Department
Citation: ___ AD3d ___ , 2016 Slip Op. 00985 (2nd Dept., 2016).

Facts: In June 2005, Sport Club International, Inc. (hereinafter “SCI”), entered into a written lease agreement to rent from the nonparty property owner a portion of certain premises for operation of a billiard hall. Article 3 of the lease provided that the landlord would not be given title to any trade fixtures and could not prevent SCI from removing any trade fixtures. Article 3 further provided, "all property permitted or required to be removed by SCI at the end of the term remaining in the premises after SCI's removal shall be deemed abandoned and may, at the election of the Owner, either be retained as Owner's property or may be removed from the premises by Owner at SCI's expense." Article 10 of the lease provided that if title to the premises was acquired in an eminent domain proceeding, SCI shall "have no claim for the value of any unexpired term of the lease." In February 2009, the Village of Spring Valley acquired title to the premises pursuant to an eminent domain proceeding.

In June 2009, SCI asserted a trade fixture claim for trade fixtures that remained annexed to the premises on the date the Village acquired title. Before the completion of discovery, the Village moved for summary judgment dismissing the trade fixture claim, arguing that pursuant to the terms of the lease, any trade fixtures that remained annexed to the premises on the date the Village acquired title were abandoned by SCI. SCI cross-moved to direct the Village to exchange appraisal reports and to file a note of issue and a statement of readiness, and opposed the Village's motion, arguing that the Village failed to establish a prima facie case since the lease does not preclude it from asserting a trade fixture claim.

The Supreme Court granted the Village's motion, finding that the Village established that articles 3 and 10 of the lease precluded SCI from asserting a trade fixture claim, and, in effect, denied, as academic, SCI's cross motion. SCI appealed, arguing that the Supreme Court should have denied the Village's motion and should have granted its cross motion.

Holding: The Appellate Division reversed the Supreme Court’s ruling.

Providing compensation to a trade fixture owner is in derogation of the common-law rule that government taking of real property encompasses the land and everything annexed thereto, including trade fixtures. Under the trade fixture rule, a tenant who owns the trade fixture, but not the property to which the fixture is annexed, may seek compensation for trade fixtures it had a right to remove, but elected not to remove, and thus remained annexed to the property at the time of the taking. A tenant's right to compensation for fixtures installed on the leasehold exists despite provisions in the lease which terminate the lease in the event of a condemnation. Such provisions have been interpreted as an agreement between landlord and tenant that the tenant shall receive out of the award no compensation for his leasehold interest. Even so, the tenant retains the right to compensation for his interest in any annexation to the real property which but for the fact that the real property has been taken, he would have had the right to remove at the end of his lease.

Pursuant to article 10, the lease terminated by operation of law on the date the Village acquired title to the property pursuant to its eminent domain powers. Moreover, a reading of articles 3 and 10 of the lease together created an ambiguity, which raises a triable issue of fact as to whether trade fixtures will be considered "abandoned" by SCI only in circumstances where SCI voluntarily abandoned its fixtures, i.e., "if the tenant [SCI] moves out and fails to remove its fixtures prior to such expiration of the Lease." Thus, the Village failed to establish, prima facie, its entitlement to judgment as a matter of law dismissing the trade fixture claim.

The matter was remanded back to Supreme Court for a hearing to determine the value of SCI’s trade fixtures claim.

Prevailing Attorney: Joshua H. Rikon, Esq. www.grrhpc.com

Precis: Joel Grossbarth

 

Matter of Village of Port Chester v. Bologna, et al.

Court: New York State Supreme Court, Appellate Division Second Department
Citation: ___ AD3d ___ , 2016 Slip Op. 01501 (2nd Dept., 2016).

Facts: In a condemnation proceeding, the Village of Port Chester, New York offered to pay Claimants $975,000 as compensation for the taking of their real property. After trial, the Supreme Court entered judgment awarding Claimants $3,062,000 as just compensation for the taking of their real property.

Thereafter, Claimants moved for an additional allowance pursuant to Eminent Domain Law (“EDL”) Section 701 in the amount of $832,244.59. The Court granted the motion, but only to the extent of adding $406,827. Claimants appealed.

Holding: The Appellate Division affirmed the ruling.

EDL Section 701assures that a condemnee receives “a fair recovery by providing an opportunity for condemnees whose property has been substantially undervalued to receive the costs of litigation establishing the inadequacy of the condemnor’s offer. The section also vests the trial court with discretion in order to limit the incentive for frivolous litigation and the cost of acquiring land through eminent domain.

The Appellate Division held that Section 701 requires two determinations: first, whether the condemnation award is substantially in excess of the condemnor’s proof; and second, whether reimbursement of the condemnee’s costs of litigation is necessary for the condemnee to achieve just and adequate compensation.

The Village conceded the first prong and the Court held the additional allowance for expenses was necessary to award Claimants just compensation.

Precis: Joel Grossbarth

 

Joseph P. Murr et al. v. Wisconsin et al.

Court: Supreme Court of the United States
Citation: 582 U.S. ___ (2017)

Facts: Parents of Petitioners purchased two adjacent lots (Lots E and F) in 1960s along the St. Croix River in Wisconsin. Both lots were purchased at separate times, deeded under different names and maintained separate ownership until the title of both lots passed to Petitioners in 1995.The law of Wisconsin and St. Croix County ordinance prevents “the sale of substandard lots under common ownership, unless an individual lot has at least one acre of land” suitable for development. Unaware of the law and ordinance, Petitioners decided to sell Lot F in order to fund investments on Lot E. The St. Croix County Board of Adjustment denied Petitioners’ improvement plan that includes the sale of the adjacent lot. Petitioners filed suit alleging a regulatory taking; however, a Wisconsin Circuit Court and the Court of Appeals affirmed the Board’s decision stating that Lots E and F effectively merged at the time of their transfer and can neither be sold nor developed separately. Thus, there is no regulatory taking.

Holding: The Supreme Court of the United States affirmed the Court of Appeals’ decision. The Court used a three-factor “balancing test” to determine whether a taking has occurred. Under this test, the Court must consider: (1) the treatment of the property under state and local law; (2) the physical characteristics of the property; and (3) the prospective value of the property under the challenged regulation. First, the Court stated that the lots are rightfully treated as a single parcel under the state and local rules. The Court found that the property of Petitioners was “subject to this regulatory burden only because of voluntary conduct in bringing the lots under common ownership after the regulations were enacted.” Thus, Petitioners could have anticipated that their property would be treated as a single lot by local authority. Second, the topography and narrow shape of the property make it reasonable to expect their potential uses may be limited. Each lot has less than one acre suitable for development, and the location of the property, adjacent to a river, would put the owners on notice of potential regulations. Finally, even though restriction may deprive Petitioners of some economic value of their property, it may also bring benefits, such as increasing privacy and recreation space that can benefit the other lot. Therefore, treating the property as a single parcel is legitimate and no regulatory taking occurred.

Prevailing Attorney: Numerous

Precis: Gozde Siir Hobstetter

 

In the Matter of New Creek Bluebelt, Phase 3.

Court: Supreme Court of New York, Appellate Division, Second Judicial Department
Citation: 2015 NY Slip Op 50934

Facts: The city of New York condemned the plaintiff’s two properties that were subject to wetland regulations through its powers of eminent domain. The Plaintiff commenced this action alleging that he is entitled to an increment above the restricted value of his property. The lower court decided for the plaintiff and awarded him $382,190.25, 75% of the difference between the unregulated and regulated value of the property. The city is appealing the lower court’s decision.

Holding: The Appellate Court affirmed the decision, but reduced the sum award. The court stated that the property must be valued in accordance with all legal restrictions at the time of taking. However, the owner will be entitled to an increment above the restricted value of the property only if he can prove "a reasonable probability of successfully challenging the application of the regulations as an unconstitutional taking” and a potential buyer would be willing to pay for a successful judicial determination. The court furthered explained that unlike what the city argued, a successful regulatory takings claim can be brought by not only the current owner but also any subsequent owner of the property. In this case, because of the wetland regulations, the owner of the property would not be able to obtain a permit to develop his land and this reduced the value by 88%. The claimant established that there was a reasonable probability that the regulations would be found to constitute a regulatory taking and a potential knowledgeable buyer would be willing to pay for a successful judicial determination.

Prevailing Attorney: Goldstein Rikon & Rikon and Houghton, LLP

Precis: Gozde Siir Hobstetter

 

Matter of Johnson v. Town of Caroga

Court: Supreme Court of New York, Appellate Division, 3rd Judicial Department
Citation: 2018 NY Slip Op 00053
Docket #: 524283

Facts: Petitioners are the owners of a property located in the Town of Caroga which was condemned by the respondent in December 2016 for the purpose of providing expanded access to a recrea-tional trail. Following the acquisition, the Petitioners commenced this proceeding pursuant to Eminent Domain Procedures Law (“EDPL”) §207. In April 2017, the Board rescinded the earlier decision of condemnation and moved to motion to dismiss the proceeding, claiming that there is no longer any actual controversy.

Holding: The Appellate Court agreed that the Board’s subsequent rescission of the 2016 decision invali-dated any legal dispute for the Appellate Court to review. Furthermore, the court stated that since the Board revealed its plan to recommence the eminent domain proceeding for the same property in the future, the Petitioners can file a new complaint to recover their expenses and counsel fees. Therefore, the Appellate Court did not award Petitioners reimbursement of their fees, costs and expenses.

Prevailing Attorney: Girvin & Ferlazzo, PC (Christopher P. Langlois of counsel)

Precis: Gozde Siir Hobstetter

 

399 Exterior Street Associates, LLC v. The City of New York

Court: Supreme Court of New York, Appellate Division, First Judicial Department
Citation: 2018 NY Slip Op 00034
Docket #: 5352 105/17-2417

Facts: The City of New York approved the acquisition of Petitioners’ property as a part of the project of the development of the Lower Concourse Harlem River Park in the Bronx. The Petitioners commenced this proceeding pursuant to Eminent Domain Procedures Law (“EDPL”) §207, argu-ing that the city did not address every objection raised at the public hearing.

Holding: According to the EDPL §204(B), “The condemnor, in its determination and findings, shall spec-ify, but shall not be limited to the following: (1) the public use, benefit or purpose to be served by the proposed public project; (2) the approximate location for the proposed public project and the reasons for the selection of that location; (3) the general effect of the proposed project on the environment and residents of the locality; (4) such other factors as it considers relevant.” Appel-late Court stated that contrary to the argument of petitioner, the City of New York fully satisfied the requirements of EDPL 204 (B) with its determination and findings. This rule does not require that a condemnor address every specific concern or objection raised at the public hearing. More-over, the record also does not show that the city failed to consider Petitioners’ objections. Thus, the court confirmed the condemnor's determination and findings.

Prevailing Attorney: Zachary W. Carter (Deborah R. Kerzhner of counsel)

Precis: Gozde Siir Hobstetter

 

Matter of Village of Ballston Spa v City of Saratoga Springs

Court: Appellate Division, Third Department
Citation: 2018 NY Slip Op 05248, published at 163 A.D.3d 1120
Date Issued: July 12, 2018

Overview: A city’s condemnation of a narrow strip of land adjoining wells and a reservoir providing water to a nearby village did not violate the prior public use doctrine; while providing water was certainly a public use, the condemnation did not interfere with or destroy that use. The city’s procedure did not violate the State Environmental Quality Review Act or its supporting regulations, and its actions constituted no abuse of discretion. The Appellate Division confirmed the city’s original and supplemental condemnation resolutions.

Facts: The City of Saratoga Springs (City) planned to build a pedestrian and bicycle trail that included buffers, grading, and drainage (the Project). The strip of land adjoined land on which the Village of Ballston Spa (Village) had wells and a reservoir that provided water for Village residents. Over the Village’s objections, the City issued a resolution condemning the strip of land in fee. The resolution also contained a negative declaration that the Project would have no significant environmental impact. Later, the City issued an amended, supplemental resolution ratifying the negative declaration and including the first two parts of a three-part environmental assessment form (EAF). However, the City never issued an environmental impact statement (EIS). The Village and other adjacent landowners appealed the City’s resolutions.

Holding: The Appellate Division confirmed the resolutions. It held that the condemnation did not violate the prior public use doctrine. The doctrine holds that once land has been taken for public use, it cannot be taken for another public use if that other use would interfere with or destroy the public use first acquired. Here, while providing water to the Village’s residents was certainly a public use, the City’s condemnation would not interfere with or destroy that use.

The Court also rejected the Village’s argument that the City violated procedural requirements of the State Environmental Quality Review Act (SEQRA) and supporting regulations. First, the City’s failure to file an EIS did not violate SEQRA, because it had issued a negative declaration; as a result, it did not have to identify and address all possible environmental impacts. Second, Second, it did not have to complete the third part of the EAF, because it identified no large or potentially large environmental impact. Third, while the City’s original resolution did not have enough information to explain its basis, its supplemental resolution specifically identified each question for which the potential for a small impact was identified. Fourth, the supplemental resolution contained the “reasoned elaboration” required by applicable regulations. Fourth, while the regulations required an amended negative declaration in certain circumstances (and this was not such a circumstance), nothing in the regulations limited the amendment process to those circumstances.

Finally, the City did not abuse its discretion in taking the fee of the strip instead of an easement. Once the public purpose requirement is met, a municipality has broad discretion in deciding what land is necessary to fulfill the public purpose. Here, the City only took a strip of land large enough to accommodate the planned improvements.

Precis: Richard Maseles

 

Forest Enters. Mgt. Inc. v. County of Warren

Court: Supreme Court, Warren County
Citation: ___Misc 3d_____, 2018 NY Slip Op 51208

Overview: A condemnee’s suit for additional compensation for a partial condemnation of his property for an avigation easement failed because the condemnee’s additional damages claim assumed several events that had not occurred as well as facts that had no support in the record.

Facts: The owner owned seven parcels, six to the south and one to the north of a power line owned in fee by another. The owner held rights-of-way across the power line tract to connect the north and south parcels. It submitted a subdivision plan to the town where it was located for the northern tract. However, the northern tract had no road frontage and conflicted with the town’s subdivision regulations in other ways. The parcel also had no road frontage.

An airport was located on land adjacent to the north side of the owner’s land. While the subdivision plan had yet to be approved by the town, the county condemned a small portion of the northern parcel in fee, and took an avigation easement encumbering the rest of the parcel to mitigate obstructions and preserve and protect runway protection zones at the airport. The avigation easement forbade obstruction of the airspace above certain heights, but the town’s regulations also forbade construction above those heights. The county paid $327,000 in compensation for the taking of the fee tract and the avigation easement.

The owner filed this suit against the county, contesting the compensation amount. It argued that damages from the taking totaled $2,524,000, and claimed additional compensation comprising the difference between that amount and the $327,000 paid by the county. The county argued that the owner was only entitled to $297,000 in damages from the taking.

Holding: The Supreme Court rejected the owner’s claim. The court held that the county’s calculation of the difference between the northern parcel’s value before and after the taking accurately reflected the value lost due to the taking. By contrast, the owner’s calculation was based on conclusory assumptions and premises contradicted by the record, such as the dubious assumption that road access would be available even though there was none at the time owner sought approval of the subdivision, the lack of impact of the avigation easement on any structures allowed by the town’s height regulations, and the record in general associated with the subdivision approval process.

 

Matter of Sagres 9, LLC v. State of New York

Court: Appellate Division, Second Department
Citation: 2018 NY Slip Op 05932
Date Issued: August 29, 2018

Overview: A condemnee’s challenge to the Court of Claims’ denial of statutory interest on a condemnation award was sustained in part because the Department of Transportation (DOT) failed to prove that it had made a statutorily-required determination. However, the interest award was limited to two periods due to the suspension of the obligation due to the condemnee’s failure to timely accept payment and provide documentation.

Facts: On September 4, 2013, to obtain temporary easements on Sagres’ property by eminent domain, DOT offered the Sagres $37,205 in compensation. On September 17, 2013, DOT acquired the temporary easements by eminent domain. On October 4, 2013, DOT deposited $37,250 in a special interest-bearing account. On June 5, 2014, Sagres notified the State that it accepted the September 4th payment. On November 5, 2014, DOT notified the owner it had to provide certain documents to the State to have the money released. However, Sagres never provided all the documents.

Sagres sued the State in the Court of Claims for a distribution of the funds. The Court of Claims awarded Sagres the $305,000 principal, as well as statutory interest on the amount accruing between September 17 and October 3, 2013, and interest under the terms of the special account between April 23 and November 4, 2014. Sagres appealed.

Holding: The Appellate Division struck the Court of Claims’ interest award and substituted an award of statutory interest accruing between September 17 and December 3, 2013, and between June 5 and November 4, 2014.

Analysis: In a condemnation under EDPL § 304(E)(2), the condemnor can cease paying statutory interest on a condemnation compensation by paying the amount into a special interest-bearing account, if: (a) the project in question is federally aided; (b) the condemnor pays statutory interest on the amount up to the date of deposit; and (c) the condemnor determines it necessary to make the deposit “…without delay in order to proceed with the letting of a construction contract.”

Here, the Appellate Division held that DOT’s obligation to pay statutory interest was not terminated, because DOT failed to adduce enough evidence to satisfy the third requirement. Therefore, the Court held that the Court of Claims’ grant of interest through only October 3, 2013 (the day before the deposit) was erroneous.

However, the Court also applied EDPL § 304(b), which provides: “The offer shall be deemed rejected in the event that a condemnee, within ninety days of the offer, fails or refuses to notify the condemnor in writing that the advance payment is accepted.” Since the offer was made on September 4, 2013, Sagres had until December 3, 2013, to notify DOT that it was accepting the offer as an advance payment. Sagres, however, did not make that notification until June 5, 2014.

That failure, the Court held, invoked EDPL § 304(c), which provides in relevant part: “In the event…the offer shall be deemed rejected pursuant to subdivision (B)…the condemnor’s obligation to pay interest on the amount of the offer shall be suspended until such time as the condemnee accepts the offer as…an advance payment...” Accordingly, the State’s interest obligation was suspended for the period from December 4, 2013, until June 5, 2014.

After that date, the State’s statutory interest obligation resumed until November 5, 2014, when it notified Sagres of its failure to provide “all papers reasonably necessary to effect a valid transfer of title,” another ground under § 304(c) for suspension of the statutory interest obligation.

 

Matter of Sagres 9, LLC v. State of New York

Court: Appellate Division, Second Department
Citation: 2018 NY Slip Op 59033
Date Issued: August 29, 2018

Overview: A condemnee’s challenge to the Court of Claims’ denial of statutory interest on a condemnation award was sustained in part because the Department of Transportation (DOT) failed to prove that it had made a statutorily-required determination. However, the interest award was suspended starting on the day the State notified the condemnee that it had failed to provide all necessary documents for release of the award.

Facts: On March 4, 2014, to obtain temporary easements on Sagres’ property by eminent domain, the DOT offered Sagres $305,000 in compensation. Sagres accepted the offer as an advance payment on March 5, 2014. On March 12, 2014, DOT acquired the temporary easements by eminent domain. On April 23, 2014, DOT deposited $305,000 in a special interest-bearing account.

On November 5, 2014, DOT notified Sagres it had to provide certain documents to the State to have the money released. However, Sagres never provided all the documents.

Sagres sued the State in the Court of Claims for a distribution of the funds. The Court of Claims awarded the condemnee the $305,000 principal, as well as statutory interest on the amount accruing between March 12 and April 22, 2014 (the day before the deposit), and interest under the terms of the special account between April 23 and November 4, 2014. Sagres appealed.

Holding: The Appellate Division struck the Court of Claims’ interest award and substituted an award of statutory interest accruing between March 12 through November 4, 2014.

Analysis: In a condemnation under EDPL § 304(E)(2), the condemnor can cease paying statutory interest on a condemnation compensation by paying the amount into a special interest-bearing account, if: (a) the project in question is federally aided; (b) the condemnor pays statutory interest on the amount up to the date of deposit; and (c) the condemnor determines it necessary to make the deposit “…without delay in order to proceed with the letting of a construction contract.”

Here, the Appellate Division held that DOT’s obligation to pay statutory interest was not terminated, because DOT failed to adduce enough evidence to satisfy the third requirement. Therefore, the Court held that the Court of Claims’ grant of interest only through only April 22, 2014 (the day before the deposit) was erroneous.

However, on November 5, 2014, the State notified Sagres that it needed to provide certain documents that were needed to effect a valid transfer of title. Sagres failed to do so. That failure, the Court held, invoked EDPL § 304(c), which provides in relevant part: “In the event a condemnee…unreasonably fails to provide the condemnor with all papers reasonably necessary to effect a valid transfer of title as acquired…the condemnor’s obligation to pay interest on the amount of the offer shall be suspended until such time as the condemnee…provides the necessary title papers...” Accordingly, the State’s statutory interest obligation was suspended from that date.