Opinion
# 2014-029-054
11-25-2014
292 PIERMONT, LLC v. THE STATE OF NEW YORK
Claimant's attorney: GOLDSTEIN, RIKON, RIKON & HOUGHTON, P.C. By Jonathan M. Houghton, Esq. Defendant's attorney: ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL By J. Gardner Ryan, Assistant Attorney General
Synopsis
The court grants petitioner's application in full, directing defendant to pay the advance payment to claimant and finding that the deposit of the advance payment into an Eminent Domain account was not authorized by statute and that the deposit did not serve to suspend defendant's obligation to pay statutory interest on the amount that defendant determined represented the fair market value of the appropriated property.
Case information
| UID: | 2014-029-054 |
| Claimant(s): | 292 PIERMONT, LLC |
| Claimant short name: | 292 PIERMONT, LLC |
| Footnote (claimant name) : | |
| Defendant(s): | THE STATE OF NEW YORK |
| Footnote (defendant name) : | |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | None |
| Motion number(s): | SP-169 |
| Cross-motion number(s): | |
| Judge: | STEPHEN J. MIGNANO |
| Claimant's attorney: | GOLDSTEIN, RIKON, RIKON & HOUGHTON, P.C. By Jonathan M. Houghton, Esq. |
| Defendant's attorney: | ERIC T. SCHNEIDERMAN, ATTORNEY GENERAL By J. Gardner Ryan, Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | November 25, 2014 |
| City: | White Plains |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
This is a special proceeding brought pursuant to section 304 (E) of the Eminent Domain Procedure Law in which petitioner seeks an order (1) directing distribution of the amount respondent deposited in an eminent domain account ($850,000), representing the advance payment on the underlying partial appropriation of claimant's property, and (2) directing entry of a money judgment representing interest on that amount at the annual rate of 9% because respondent allegedly improperly and unlawfully deposited the advance payment in the account, for reasons not authorized by the statute, instead of paying it to petitioner, thus nullifying the statutory termination and/or suspension of otherwise-accruing interest in the case of "[a] deposit made pursuant to" the statute.
Petitioner alleges that a portion of its property was taken by the State in eminent domain on August 1, 2013, that it was given notice of the appropriation on August 12, 2013 and that one day later, it was given notice that respondent deposited its advance payment into an eminent domain account with no prior notice that the deposit was being made nor any indication of why. Petitioner contends that the deposit was frivolous and without any authorization in law, that the State routinely deposits the advance payment in virtually all cases where it condemns property, in order to immediately stem the accrual of interest pursuant to State Finance Law § 16 and to encourage the condemnee's agreement to otherwise-unwarranted conditions to its receipt of the advance payment, and that it comes up with an after-the-fact excuse for the deposit if challenged.
According to respondent's answer, and undisputed, the taking involved about a quarter of an acre from a 3.3 -acre site improved by a residential apartment complex.
According to Exhibit 3 to respondent's answer, the deposit was made on August 1, 2013, the day of the taking.
In its answer, respondent notes that petitioner was sent an "offer package" prior to the taking, on July 22, 2013, that the package included a proposed agreement to be executed in the event petitioner agreed with respondent's evaluation of its damages at $850,000, and an alternative agreement for where, as here, they do not agree in which case the amount would constitute an advance payment. Respondent characterizes its proposal as "an Agreement for Advance Payment detailing the essential terms and conditions attaching to payment of the sums offered by the State and explain[ing] what was required of petitioner for it to receive the offered payment: viz. return of an executed agreement and all closing documents required by the Attorney General" (Verified Answer, ¶ 7).
Respondent alleges that petitioner "has failed to enter into the agreement for advance payment, or any 'agreement or stipulation . . . providing for payment . . . either as payment in full or as an advance payment.' [EDPL § 304 (A) (4)]" (id., ¶ 8), and concludes that the comptroller is therefore not authorized to make payment without an order of the court.
In reply, petitioner again asserts that contrary to the provisions and intent of EDPL § 304, every appropriation by the state begins with an automatic, routine, unexplained deposit of the amount that the state has determined constitutes constitutionally-required just compensation into an eminent domain account simultaneous with or shortly following the taking. Petitioner submits that "absent court intervention . . . this practice will continue unabated" (Reply Affirmation, ¶6). This court does not sit in review of state practice generally, rather its jurisdiction is limited to deciding in the particular pending proceeding whether the dictates of the statute have been met, whether the petitioner is entitled to an order of distribution and whether the petitioner is entitled to a further judgment representing lost interest in the event it is determined that the deposit was unauthorized. The court does note that the other distribution proceeding pending before this court - The Other Heights, LLC v State of New York, SP-163 (UID No. 2014-029-053) - is being decided simultaneously with this proceeding and that the discussion in that decision of the purpose behind as well as the operation of EDPL § 304 and the law generally will not be repeated herein but rather the court will assume familiarity with that decision.
The statute requires the condemnee to appraise any property it plans on taking by eminent domain and offer to the owner what it contends is the fair market value of the property. If the owner does not agree with the condemnor's valuation, the amount may be accepted by the condemnee as an advance payment without prejudice to the right to seek further damages. The statute contemplates payment of the advance payment to the owner except in three circumstances: (1) where there is a potential conflict of title or dispute as to who is entitled to receive the payment, (2) where more than 90 days have passed following vesting of title in the condemnor and an agreement has not been reached, or (3) where the taking was "for a federally-aided project and the condemnor determines it necessary to deposit the amount of the highest appraised value without delay in order to proceed with the letting of a construction contract and to comply with federal laws, rules and regulations" (304 [E] [2]). According to respondent, the deposit in this case "was made under the final category: the condemnor's determination of need for a federally-aided project," (the construction of a replacement for the Tappan Zee Bridge) as detailed in the affidavit of Joseph Nolan, a real estate officer with respondent's Department of Transportation, who "attests to the well-known fact that the project is federally aided" (Verified Answer, ¶¶ 16-17).
In his affidavit, Mr. Nolan states the following:
1. The bridge construction project is being processed on a "design-build method of delivery, rather than the traditional design-bid-build method and is receiving extensive federal aid";
2. On August 1, 2013, the date DOT filed the taking map, it also requested the Comptroller to deposit the advance payment into an eminent domain account;
3. The request for the deposit was based on "the determination by the Department of Transportation and this Office of Right-of-Way that a deposit of the compensation offered to the petitioner was needed to avoid delay in the implementation of the project and to allow the Department of Transportation to give certification to the Federal Highway Works Administration of its compliance with the applicable federal laws and regulations relating to acquiring ownership and possession of lands or interests in lands required for the project" (Affidavit of Joseph Nolan, ¶ 5).
Respondent, attempting to connect the information provided by Mr. Nolan with what is at issue in this proceeding, contends (1) that the reference in EDPL § 304 (E) (2) to the "letting of a construction contract" should be read, in cases involving the "design/build" methodology, to refer instead to the filing of a Federal Highway Works Administration "authorization to proceed" because that event is the equivalent of the traditional contract letting under the "design/bid/build" approach, and (2) that federal regulations require that a right-of-way certification be filed when requesting the authorization to proceed which in turn requires either that agreed-upon compensation be paid, or the appraised value be deposited "with the court" as an advance payment, "before requiring the owner to surrender possession" (49 CFR § 24.102 [j]). Thus, submits respondent, the "State's necessary certification of compliance with the federal policies in the course of this project required that it attest that payment of compensation was made or deposited for the benefit of the condemnee and, thus, that under federal law and policy, it obtained a right of possession of the property appropriated" (Verified Answer, ¶ 20).
"(j) Payment before taking possession. Before requiring the owner to surrender possession of the real property, the Agency shall pay the agreed purchase price to the owner, or in the case of a condemnation, deposit with the court, for the benefit of the owner, an amount not less than the Agency's approved appraisal of the fair market value of such property, or the court award of compensation in the condemnation proceeding for the property. In exceptional circumstances, with the prior approval of the owner, the Agency may obtain a right-of-entry for construction purposes before making payment available to an owner."
The problem with respondent's submission is that it ends there. The "State's necessary certification of compliance" and the "authorization to proceed" specifically referred to by counsel and Mr. Nolan as the reason for the deposit are presumably actual documents those men have seen, documents that are crucial to the question before the court and which, accepting respondent's formulation as to their legal effect, would in fact be dispositive of one of the two issues the court must decide. An assistant attorney general and an official with the Department of Transportation have submitted sworn statements to this court specifically alleging that the eminent domain deposit at issue herein was the result of a need to file these documents on August 1, 2013 so that the bridge construction project could proceed. Yet the court is provided with neither copies of the documents nor specific factual allegations as to when they were created and how their creation and filing related to the eminent domain deposit made on August 1, 2013, nor is provided with any information whatsoever relative to the construction situation at the site on that date and for the 90 days thereafter, the only consideration relevant, under the statutory scheme, to the resolution of the question of whether the deposit was authorized despite respondent's failure to wait 90 days from vesting.
Accepting, arguendo, respondent's re-wording of the statute, that its burden in this proceeding is to show that "it was necessary to deposit the amount of the highest appraised value without delay in order to proceed with the filing of an authorization to proceed and to comply with federal laws, rules and regulations," respondent has inexplicably failed to even attempt to demonstrate compliance. Indeed, the defense seems an admission to petitioner's contentions that the scenario in this case - an offer to the condemnee followed quickly by the simultaneous filing of the taking maps and deposit of the advance payment into an eminent domain account - is indeed prototypical since it attempts to obtain judicial sanction based wholly on general principles, without any reference to the specific facts of the case. Like in The Other Heights, it seems that respondent contends that it is entitled to immediately deposit the advance payment into an account in all cases involving projects that receive federal aid. This position is manifestly not the law. Respondent's apparent inability or unwillingness to address the application of what it contends are generally-applicable principles to the specific facts of the case seems to pervade its responses in all of the plethora of pending distribution proceedings, and only serves to lend credence to petitioner's allegations.
See also, e.g., Freiman Coated Fabric Corp. v State of New York (SP-167; Ct Cl Weinstein, J. [August 20, 2014], characterizing the connection between the federal regulations relied on therein and the deposit in that case as "at best, opaque."
The issues raised in this proceeding are the same as in numerous others, recently decided and pending. Facially, the DOT's apparent effort to ameliorate the onerous effect of the current 9% interest rate imposed by the statute in different economic times is understandable. The goal may be laudable but amendment of either statute - to apply a more contemporary interest rate or to allow immediate deposit of the advance payment in all cases - is a legislative prerogative.
The court finds that deposit herein, made on August 1, 2013, the day of vesting, was not pursuant to any of the terms of the statute and that petitioner is be entitled to a judgment for the difference between statutory interest and whatever was paid on the account, for a period of 90 days beginning on that date. At the 90th day without a response from the condemnee, the deposit became authorized and the concomitant suspension of interest "until such time as the condemnee accepts the offer as payment in full, or as an advance payment, or provides the necessary title papers as the case may be" (EDPL § 304 [C]) became effective (with the word "necessary" being a reference to "all papers reasonably necessary to effect a valid transfer of title" earlier in the same sentence.
The condemnee in The Other Heights took respondent's advance payment agreement form, modified it to remove objectionable language, substituted language more in accord with the statute, and returned it, executed. This court rejected respondent's contention that the applicable law was to be found in elementary contract principles relating to offer and acceptance and, applying instead the provisions and intent of the statute, found that the condemnee had agreed to do all that the law required of it in order to receive its money, that respondent should have released the funds in the account at that time, and thus held that the statutory suspension of interest ceased to apply at that point.
Similarly, in Freiman Coated Fabric Corp. (supra, fn. 1), Judge Weinstein - applying the "legislative policy underlying the EDPL . . . that '[t]he condemnor, at all stages prior to or subsequent to an acquisition by eminent domain of real property necessary for a proposed public project shall make every reasonable effort to justly compensate persons for such real property by negotiation and agreement' (EDPL § 301 [emphasis added])" - held that the condemnee's letter response indicating that it elected to receive the funds as an advance payment but would not sign the respondent's form agreement without further information as to what the agreement could potentially require of it, a response that court found to be consistent with the statutory "reasonableness" standard, was "sufficient to lift the suspension of interest accrual."
The equivalent result was reached in a proceeding in Supreme Court - In Re William Cullen Bryant Park & Preserve (87 Misc 2d 1004, 1005 [Sup Ct Nassau Co 1976]) - where the court directed payment to the condemnee of the deposit advance payment notwithstanding that it had deleted portions of the condemnor's advance payment agreement form on the rationale that "since the Legislature has not seen fit to impose conditions on the advance payment . . . the condemnor may not do so."
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The factual background here is essentially the same as in Freiman: By letter dated November 8, 2013, petitioner notified respondent that it elected to receive the $850,000 determined by the State to be the fair market value of its appropriation as an advance payment but that it was unreasonable to condition the receipt of the advance payment on the petitioner's open-ended agreement to provide the Attorney General with any and all documents deemed necessary and that it could not agree to such without the State identifying what information it had with respect to potential interested parties. A few days later, a DOT representative refused to provide any information, holding fast that it was entitled to impose the conditions in question as a matter of general applicability, without bothering to even identify to the condemnee whether and to what extent there may even be an issue with respect to its property.
The scenario here duplicates what appears in decisions in current distribution proceedings, those cited herein and otherwise. It is apparent that the State has taken the approach, whether for legal reasons or because it just requires less work, of requiring compliance with a master advance payment agreement with language so general that it can be construed to apply to anything in order for condemnees to receive what is their constitutionally required compensation rather than making the effort to identify the situation in the particular case and draft an appropriate agreement specific to the property in question. The State then refuses to negotiate, and when the condemnee brings a distribution proceeding, the State's response to the court is the same is it was to the petitioner - in effect, that it has the right to dictate terms and need not explain further.
As this court has noted on a number of occasions, it is not a court of general jurisdiction and does not sit in review of State policy in general. The only thing to be decided here is the disposition of the account in question and petitioner's entitlement to an additional money judgment for interest. The court finds that petitioner adequately accepted respondent's offer in its November 8, 2013 letter, that the amount on deposit should have been released to petitioner forthwith. The court also finds that jurisdiction has been duly obtained over the only two parties identified by the Attorney General as having a potential interest in this partial appropriation - the mortgage holder and a flooring company holding a mechanics lien - that neither has appeared asserting any right to the advance payment. As a result, petitioner is entitled to receive the same.
Accordingly, respondent is directed to provide for the immediate release of the funds on deposit in the eminent domain account (the account number does not appear in the papers before the court). The court additionally finds that petitioner is entitled to a money judgement representing the difference between statutory interest and the amount of interest actually paid on the account for (1) a period of 90 days starting August 1, 2013, and (2) a period starting when payment should reasonably have been made construing the November 8, 2013 letter as acceptance and the date the account is actually released. Petitioner should submit a proposed order directing judgment with supporting documentation, on ten days notice to respondent, outlining the appropriate calculation of interest in accordance with this decision and order.
November 25, 2014
White Plains, New York
STEPHEN J. MIGNANO
Judge of the Court of Claims
Papers considered:
Order to Show Cause, Petition and Exhibits
Verified Answer, Affidavit of Joseph D. Nolan and Exhibits
Attorney's Affirmation in Reply and in Opposition