Opinion
# 2014-029-053
11-07-2014
THE OTHER HEIGHTS, 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 Charles E. Gary, 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 th 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: | 2014-029-053 |
| Claimant(s): | THE OTHER HEIGHTS, LLC |
| Claimant short name: | THE OTHER HEIGHTS, 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-163 |
| 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 Charles E. Gary, Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | November 7, 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) (2) of the Eminent Domain Procedure Law in which petitioner seeks an order (1) directing the distribution of the amount previously deposited by respondent in an eminent domain account pursuant to that statute arising from the appropriation of petitioner's property located in the Town of Yorktown, and (2) directing respondent to pay interest on the amount deposited ($30,000) at the annual rate of 9% because respondent allegedly improperly and unlawfully deposited the advance payment in the eminent domain account, for reasons allegedly unauthorized by the statute instead of paying it to petitioner, thus nullifying the statutory suspension of otherwise-accruing interest
in the case of "[a] deposit made pursuant to" the statute. There are no other claims on the fund, jurisdiction having been obtained over all persons identified by the attorney general as having a potential interest (the typical utility easement holders and one mortgagee bank) having been duly served, and the sole issue before the court is whether respondent's deposit into the eminent domain account (No. W140174) was in accordance with the requirements of section 304 and whether the suspension and/or termination of otherwise-accruing statutory interest (State Finance Law § 16) applies.
Pursuant to Article 3 of the Eminent Domain Procedure Law, once a condemnor decides to take property for a public benefit, it is required to make "every reasonable and expeditious effort" to justly compensate the property owner, a procedure that involves obtaining appraisals, establishing an amount which the condemnor believes represents "just compensation" and making a written offer to the owner to acquire the property for that amount, "wherever praticable" prior to acquiring the property (EDPL §§ 301-303). The written offer must state that it is based on the condemnor's highest approved appraisal and that the condemnee may accept the offer as payment in full for the property or that condemnee may reject the offer as payment in full and instead elect to accept it as an "advance payment," without compromising the right to file a claim for additional compensation (EDPL § 304 [A]).
The statute goes on to provide that upon acceptance of the offer, either as full or partial compensation, "the condemnor shall enter into an agreement or stipulation with the condemnee providing for payment pursuant to such agreement, either as payment in full or as an advance payment. The right of the condemnee to the advance payment shall not be conditioned on the waiver of any other right" (EDPL § 304 [A][4]). If the condemnee does not either accept or reject the offer within ninety days, it is deemed rejected (EDPL § 304 [B]), and if it is so rejected, or if the "condemnee unreasonably fails to provide the condemnor with all papers reasonably necessary to effect a valid transfer of title as acquired, within ninety days of receipt, 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 payment in full, or as an advance payment, or provides the necessary title papers as the case may be" (EDPL § 304 [C]).
The statute then provides for the deposit of the relevant amount into an eminent domain account, rather than payment to the owner in three distinct circumstances:
(1) where the condemnee has accepted the offer as either payment in full or as an advance payment but "the attorney general determines that there is a conflict of title or a conflict arises so that he is unable to make certification of the person or persons legally entitled to the amount payable under an agreement adjusting all legal damages caused by any such acquisition" (304 [E] [1]);
(2) where the property owner rejects the offer or it is deemed rejected via the passage of 90 days from vesting without an agreement (304 [E] [2]); 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]).
A deposit made pursuant to any of the three provisions terminates the condemnor's obligation to pay interest to the condemnee on the amount deposited, provided it is in an interest-bearing account.
In response to petitioner's contention that the deposit herein was unauthorized, defendant clarifies that there was never any issue of a conflict of title, that EDPL § 304 (E) (1) is irrelevant to this proceeding and that the subject deposit was in fact made pursuant to EDPL § 304 (E) (2). Since the deposit was made one day, not ninety days, after the vesting of title, it was not based on constructive rejection but rather, according to defendant's submission, on the alternative provision allowing for a deposit where necessary to facilitate the letting of a construction contract.
Both the United States Constitution and the Constitution of the State of New York mandate that "just compensation" be paid to a property owner whose property is taken by the power of eminent domain. It is beyond cavil that just compensation "necessarily includes not only the full value of the property taken, but also interest on that amount throughout the period between the taking and final payment, for the owner has been deprived of all beneficial use of the property and its dollar equivalent until full payment is received. Matter of City of New York (Bronx River Parkway), 284 NY 48, affd sub. nom. A.F. & G. Realty Corp. v City of New York, 313 U.S. 540" (Marine Midland Bank v State of New York, 118 Misc 2d 472, 472 - 473 [Ct Cl 1983]). Absent the operation of section 304 (E) to suspend or terminate the interest obligation, a condemnee is currently entitled to interest at the statutory rate of 9% per annum (State Finance Law § 16;Pergament v State of New York, 39 AD2d 781 [3d Dept 1972]). The papers before the court do not reflect the rate that has been paid on the $30,000 deposit over the past two years but it is apparent from any basic knowledge of current financial markets that it was and continues to be a great deal less than 9%.
A condemnee is constitutionally entitled to interest. The applicable rate is not a matter of constitutional entitlement but rather the subject of legislative policy and action.
* * *
The parties agree that title in the appropriated property vested on September 18, 2012 with the filing of the relevant maps with the Westchester County Clerk. About a month earlier, respondent had mailed petitioner its usual "offer package" including both an Agreement of Adjustment (to be executed in the event that petitioner agrees with respondent's evaluation) and an Agreement for Advance Payment (in the event they do not agree). As of the vesting date, petitioner had not yet responded to the offer package. Pursuant to the request of Karen D'Aprix, a real estate specialist with the DOT's Acquisition Management group, which was made the day after the taking, the Comptroller deposited the $30,000 into an eminent domain account on September 26, 2012.
The reason for the deposit is set forth in respondent's answer to the petition:
"As set forth in the annexed affidavit w/attachments (see: Aff. K. D'Aprix), DOT determined it necessary, pursuant to EDPL § 304 (E)(2) to deposit the amount of the highest appraised value without delay in order to proceed with the letting of a construction contract for a federally-aided project."
(Verified Answer, ¶ Thirty-Eighth).
Ms. D'Aprix's affidavit addresses the issue as follows:
"A Phase Authorization Form, dated August 26, 2011 (Exhibit 3) stated that this project was partially federally funded. Therefore, after vesting on September 18, 2012, I made a request to Main Office on September 19, 2012 for the deposit of funds."
The referenced form is a one-page DOT memorandum addressed to a planning and program manager titled "Request for Project Authorization," dated June 21, 2011 and signed on behalf of R.A. Peters, Regional Planning and Program Manager on August 26, 2011, a signature representing Peters's approval of the request that the project be authorized. There are two unexplained "Federal Aid Nos." handwritten on the form, clearly in the same handwriting as the signature on behalf of Peters. Also handwritten on the form, above the signature approving the request, and in the same handwriting, are the words "Authorization for Acquisition only."
The two quoted paragraphs from the answer and the D'Aprix affidavit, and the DOT memorandum, without any further explanatory comment or argument, constitute respondent's complete submission in support of its contention that it was "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 (EDPL § 304 [E] [2])."
In response, petitioner notes that it was not until respondent filed its answer to the within petition that petitioner was advised of the reason that the $30,000 was deposited into an account one day after title vested and three weeks before petitioner was served with notice of the appropriation. Petitioner's counsel, familiar to the court from representation of many claimants in appropriations claims and related proceedings, maintains that the "federal funding" argument is an after-the-fact subterfuge, that the State of New York in fact deposits the advance payment for virtually every taking it makes simultaneously or soon after title vests, without regard to the requirements of the statute. Nevertheless, State policy generally is not at issue before this court, only whether this petitioner has established the essential allegations of this petition - that the deposit and the continuing retention of the advance payment was not and is not pursuant to the statute, that petitioner has in fact complied with the statutory requirements for release of the funds and that petitioner is therefore entitled to a judgment in this proceeding directing payment of the amount on deposit in addition to a monetary judgment equivalent to 9% annual interest on the funds from the date of the deposit through the date of payment (presumably less any interest paid on the account).
Thus the reason why this proceeding was initially bought pursuant to § 304 (E) (1), as discussed in the court's prior interim order in this matter filed July 8, 2014.
The court has before it another distribution proceeding - 292 Piermont LLC v State of New York, SP-169, that is being decided simultaneously herewith. That proceeding arises under similar, but materially distinct, facts.
The State's response to the petition evinces a complete misunderstanding of the requirements of section 304 (E) (2). Someone reading that response would expect that the statute authorizes a deposit where the taking is for "a federally-aided project." Because giving respondent's response every benefit of the doubt, ignoring the various ambiguities highlighted by petitioner that respondent ignores, the reasonable inference from the exhibit is that federal funding was involved with the project for which petitioner's property was taken. But that is not what the statute says. Where respondent's position necessarily infers a period after the words "federally-aided project," the Legislature instead utilized a comma, followed by language respondent ignores - the part about it being "necessary" to make the deposit "without delay" in order to proceed with the letting of a construction contract. There is no indication in the record that there was any construction contract in existence or at hand relating to the property taken from petitioner at the time of the deposit. As noted, the deposit seems to have resulted from a misunderstanding as to the statutory requirements, a misunderstanding that apparently persists through the State's position in this proceeding because, as noted, that response ignores or misconstrues the unambiguous statutory language.
Moreover, the one document submitted by respondent in support of its contention that it complied with the statute, the DOT memorandum, in addition to containing absolutely no information relative to what is addressed by the statute, in fact indicates that the contrary was likely the case. The words "Authorization for Acquisition only" necessarily mean that among the things not included in the authorization was the letting of a construction contract, applying the common and indeed sole meaning of the word "only."
Respondent's submission does not even raise an issue as to whether the deposit was made "pursuant to the statute." It clearly was not and the provision of § 304 (E) (2) that provides for the termination of otherwise-accruing statutory interest in the case of a deposit made pursuant to that provision does not apply in this case (Cardinal Development Properties v State of New York, UID No. 2013-049-017, [Ct Cl, Weinstein, J., Mar. 29, 2013]; Herricks v State of New York, UID No. 2009-036-402 [Ct Cl, Schweitzer, J., Oct. 28, 2009]).
Nevertheless, that is not the end of the inquiry. As of the 90th day following vesting - December 17, 2011 - petitioner had not responded to the offer and thus, as of that date the offer was deemed rejected pursuant to § 304 (B). Pursuant to the terms of paragraph (C), statutory interest is suspended as of that date, until the condemnee accepts the offer (either as full payment or an advance payment) and "provides the necessary title papers."
Here, for unexplained reasons, petitioner did not respond to respondent's "offer package" until August 2, 2013 when it returned the executed Agreement for Advance Payment that had been part of respondent's "offer package." The clear contemplation of the statute at that point is that the amount on deposit would then be paid to the condemnee who at that point will have received what it is entitled to: statutory interest for a maximum of 90 days from vesting (where the exception for immediate letting of a construction contract does not apply), whatever interest is paid on the bank deposit in the event that the papers are not returned within 90 days, and release of the amount on deposit when the condemnee does return the agreement.
Nevertheless, when this condemnee returned the executed advance payment agreement, respondent declined to release the amount on deposit in the eminent domain account because respondent maintains that petitioner "altered the terms of the State's offer when it struck out portions of the Agreement for Advance Payment" and that by "altering the offer, petitioner rejected the State's offer" (Verified Answer, ¶ Thirty-Sixth).
Review of the "altered offer" - Ex. 2 to respondent's answer - shows that petitioner altered paragraph 2:
"The Claimant agrees, as a prerequisite to such advance payment, to execute and deliver or cause the execution and delivery to the Attorney General of all formal papers which the Attorney General deems necessary to authorize payment and to secure to the State a full release of all claims (other than the claim of Claimant) by reason of the aforementioned appropriation . . ."
- by striking out the bolded words and adding the following language in its place:
"reasonably necessary to effect a valid transfer of title as acquired. See EDPL sec. 304 (C)."
- and also adding at the end of the paragraph the words: "Claimant will not provide releases by any tenant."
Respondent's position in this regard is expressed in two paragraphs of the answer:
"Thirty-Sixth: Petitioner altered the terms of the State's offer when it struck out portions of the Agreement for Advance Payment. By altering the offer, petitioner rejected the State's offer. . . .
"Thirty-Seventh: EDPL § 304 (A)(4) provides that the right of a condemnor [SIC] to the advance payment shall not be conditioned on the waiver of any other right. Petitioner has failed to demonstrate that the language of the unaltered agreement for advance payment has or could be used to petitioner's detriment. . . ."
While respondent's invocation of one of the basic principles of first-year contracts law in undoubtedly correct (see e.g. Robison v Sweeney, 301 AD2d 815 [3d Dept 2003]), it is misplaced here, where the issues center around interpretation of a statutory scheme that is remedial in nature, designed to facilitate payment to condemnees of funds to which they are constitutionally entitled, not the actions and intentions of freely-bargaining parties (see Matter of Village of Port Chester, 5 Misc 3d 1031(A), 2004 NY Slip Op 51654(U) [Sup Ct, Westchester Co 2004]; Cronk v State of New York, 100 Misc 2d 680 [Ct Cl 1979]).
At issue in Cronk was the admissibility at trial of an unfiled appraisal in view of a provision in the Agreement for Advance Payment that barred such admission. After noting that advance payment agreements "do not possess the prerequisites of a legally binding contract . . . [since they are not] the product of a meeting of the minds . . . reached through free and open bargaining by the parties," Judge Lowery explained that under the former section of the Highway Law at issue in that case, the condemnee "was required to accept the proposed agreement, in its entirety, on penalty of forfeiture of interest" and concluded that "[u]nder such circumstances, it can hardly be said that there was an assent to the formation of the agreement itself, much less than as assent to mutually agreeable terms" (100 Misc 2d 680, 684). The court observed that provisions of advance payment agreements are nevertheless sometimes judicially enforced, but in such cases, "the holdings did not depend on the application of general contract principles" (id., 685).
See e.g. Mazur Bros.Realty v State of New York LLC, 69 AD3d 726 (2d Dept 2010), on subsequent appeal 97 Ad3d 826 (2d Dept 2012); and Mazur Bros. Realty LLC v State of New York, 59 AD3d 401 (2d Dept 2009), litigation involving two competing claimants to the same fund, circumstances not present here.
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The court noted that support for its decision not to enforce the terms of the "contract":
"is found in section 304 (subd [A], par [4]) of the recently enacted Eminent Domain Procedure Law. This section, applicable to all eminent domain proceedings commenced after July 1, 1978, states: 'The right of the condemnee to the advance payment shall not be conditioned on the waiver of any other right.' This clause recognizes the injustice of allowing the State to tack on additional requirements to an 'Agreement for Advance Payment,' at its pleasure"
(id., 687, emphasis added). The reference is to the very provision at issue in the current proceeding, which was obviously viewed as a legislative attempt to address the problem of condemnors attempting to attach conditions to advance payments. (See Matter of Mazur Bros Realty LLC v State of New York, 117 AD3d 949 [2d Dept 2014]), noting that the State's obligation "as a taker in eminent domain is to pay the full and perfect equivalent in money of the property taken, neither more nor less-not to use an incident of its sovereign power as a weapon with which to extort a sacrifice of the very rights the [Fifth] Amendment gives" (id., quoting United States v Certain Property Located in Borough of Manhattan, City, County & State of N.Y., 306 F2d 439, 452-453 [2d Cir 1962]).
Along the same lines as Cronk, the one case cited by respondent in support of its contention that petitioner's response to the State's offer package constituted, under contract law principles, a change in terms and thus a counteroffer and a rejection of the original offer - Matter of County of Nassau (87 Misc 2d 1004 [Sup Ct, Nassau Co 1976]) - in fact reached the opposite conclusion. Notwithstanding that the condemnee in that case had altered the county's proposed advance payment agreement by deleting a paragraph (providing that the condemnee agreed to allow the entry of judgment against it if the final award were less than the advance payment), and notwithstanding that the county thus rejected the modification and deposited the money into the court rather than pay it to the condemnee, the court granted the petition and directed payment of the funds to the petitioner, holding that "since the Legislature has not seen fit to impose conditions on the payment . . . the condemnor may not do so" (87 Misc 2d 1004, 1005). This is the sole authority offered by the State - a decision that holds the opposite of its position herein, completely supporting the relief requested by petitioner.
As noted, the State's contention that this case is governed by elementary principles of contract law consisted entirely of its citation, without elaboration, to one decision which in fact holds the opposite. Addressing the effect here of the then newly-enacted statute referred to in Cronk - specifically the provision that the condemnee's "right . . . to the advance payment shall not be conditioned on the waiver of any other right" - respondent's position is apparently that it can attach whatever provisions it wants to the advance payment agreement unless the condemnee can demonstrate how it could be harmed by what the condemnor wants to attach as a condition to receipt of what the condemnor contends is just compensation; i.e., that the statute creates a presumption in the condemnor's favor. No basis for this startling interpretation is offered and none can be perceived, except perhaps as a part of a conception whereby the advance payment is not the product of an unequivocal constitutional obligation but rather the result of ostensible "bargaining" that in reality amounts to an imperious power dictating the terms under which the innocent landowner is compensated. Respondent does not even deign to provide the court with the basis for its conclusion, merely reciting the general principle that, as a contract offeror, it has the right to dictate terms and, if those terms are not agreed to, then there is simply no meeting of the minds.
The court rejects respondent's position that it is the condemnee that has the burden of proof under these circumstances, that the State can send whatever agreement it wants to a condemnee and if the condemnee wants to change anything, it either has to convince the State to agree or come into court faced with a burden of proof to overcome a presumption that it is seeking to change something that starts out as proper. Here, petitioner excised words purporting to create an open-ended obligation to provide all papers that respondent "deems necessary" and substituted instead the obligation to provide all papers "reasonably necessary to effect a valid transfer of title as acquired," a direct quote from the statute. The statutory language - "reasonably necessary" - is familiar to courts, representing the standard applicable to judicial evaluation in many contexts. "Reasonably necessary" necessarily means that the court decides, a conception at odds with respondent's alternate formulation, which is apparently that it decides, with no need to explain, either to the condemnee or to the court.
The statutory references to the respondent's obligation to make the condemnee an "offer" refer to the tendering of what respondent contends is the full value of the property. As discussed above, if the condemnee does not agree with the valuation, it is constitutionally entitled to receive prompt payment of the respondent's amount as a potential partial payment, towards its right to seek more in the courts. The papers attendant to that situation are not to be viewed as an "offer" meaning that "we offer to give you this amount towards your damages if you agree with our terms which include obligating yourself to do all these other things that you are not otherwise obligated to do and if we can't agree, then so be it, you don't get the advance payment." To the contrary, the State's obligation here is clear: to give the condemnee its advance payment as easily and as expeditiously as possible, subject only to the condemnee's obligation to cooperate by providing what is reasonably required, not what the State has decided to extract from the condemnee, and thereby achieve what it has not been able to achieve in the Legislature and the appellate courts, by withholding its money (Matter of Mazur Bros. Realty LLC v State of New York, supra, 117 AD3d 949 [2d Dept 2014]).
The court finds, contrary to the position advanced herein by respondent, that the burden of proof was on respondent to demonstrate that the modifications to its proposed agreement made by petitioner conflicted with the obligations of the parties under law or provided a reasonable basis for it to have failed to have done what the statute required and request the Comptroller to pay the amount on deposit to petitioner immediately. Respondent having failed to meet this burden, and the court having found that the modifications made to respondent's form by petitioner are reasonable and do not diminish any reasonable obligation that it has under law, the court finds that petitioner complied with all reasonable conditions attendant upon its receipt of the advance payment and the account should have been released in August 2013 when the executed agreement was returned.
Accordingly, there being no other claims on the fund and the court having obtained jurisdiction over all persons and entities identified by the state as having a potential interest, the court directs that the amount on deposit in eminent domain account no. W140174 be paid to petitioner immediately. In addition, petitioner's request for a money judgment against the State is granted in part. The court finds, as noted, that petitioner is entitled to statutory interest for a period of 90 days beginning with the vesting of title, at which point it was suspended pursuant to the operation of EDPL § 304 (E) (2) by virtue of petitioner's constructive rejection, and additionally for the period from the return of the executed agreement in August 2013, when the constructive rejection ended, to the date of actual payment. Petitioner may submit an affidavit setting forth the calculation of interest due under this decision, with appropriate offset for any interest actually received, an affidavit that will be the basis for the entry of a money judgment for the appropriate amount.
November 7, 2014
White Plains, New York
STEPHEN J. MIGNANO
Judge of the Court of Claims