New York Law Review

Tag: eminent domain

  • City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241 (1971): Establishing the Threshold for De Facto Takings

    City of Buffalo v. J.W. Clement Co., 28 N.Y.2d 241 (1971)

    A de facto taking in eminent domain requires a physical entry, physical ouster, legal interference with physical use, or legal interference with the power of disposition; mere manifestation of intent to condemn, even with delays and reduced property values, does not constitute a taking.

    Summary

    J.W. Clement Co. alleged a de facto taking of its property due to the City of Buffalo’s protracted urban renewal plans. Clement argued that the city’s actions, including public announcements and lowered property assessments, forced them to relocate. The Court of Appeals reversed the lower court’s ruling of a de facto taking, holding that the city’s actions did not constitute a taking because there was no physical invasion, ouster, or direct legal restraint on the property’s use. However, the court acknowledged that Clement could present evidence of “condemnation blight” to ensure fair valuation in the formal condemnation proceedings. The Court remanded for a new trial on the issue of proper valuation.

    Facts

    J.W. Clement Co., a printing business, owned property in Buffalo since 1946. In 1954, the city announced the Buffalo Redevelopment Project, which included Clement’s property. Over several years, city officials indicated when the properties would be appropriated. Clement, needing to plan its operations, sought clarity on the timeline. In 1960-61, city officials advised Clement it would need to vacate within 18-36 months. Relying on these representations, Clement acquired a new site in Depew, NY and began relocating its operations in 1962, completing the move by April 1963. The city lowered property assessments in the redevelopment area and directed the Department of Buildings to deny building permits. Clement’s property became unsalable and unrentable, but Clement continued to pay taxes and maintain the property. Clement moved to Depew because of the condemnation, the inadequacy of the existing facilities and the firm’s continued growth.

    Procedural History

    The City of Buffalo initiated condemnation proceedings in 1968. The trial court found a de facto taking occurred on April 1, 1963, and awarded Clement $2,030,306.96. Clement filed objections, which were denied. Clement appealed to the Appellate Division, which modified the judgment, increasing the award for removing machinery and adjusting interest rates. Both parties cross-appealed to the Court of Appeals. The Court of Appeals reversed the finding of a de facto taking and remanded for a new trial on valuation.

    Issue(s)

    1. Whether the City of Buffalo’s actions, including announcements of impending condemnation and subsequent delays, constituted a de facto taking of Clement’s property prior to the formal condemnation proceedings.

    2. Whether Clement was entitled to compensation for moving expenses related to the relocation of its machinery, given that the machinery was moved before the formal taking.

    3. Whether the interest rates awarded by the lower courts provided just compensation to Clement.

    Holding

    1. No, because a de facto taking requires a physical entry, physical ouster, legal interference with physical use, or legal interference with the power of disposition, none of which occurred here.

    2. Yes, because just compensation requires indemnifying the property owner for actual losses incurred as a result of the city’s actions, including reasonable moving costs when the city’s representations caused the premature removal.

    3. Yes, because the interest rate of 6% provided adequate and just compensation, and the court was jurisdictionally precluded from reviewing affirmed findings of fact indicating the rate was not unreasonable.

    Court’s Reasoning

    The court emphasized that a de facto taking requires a substantial interference with the owner’s property rights, amounting to an assertion of dominion and control by the condemning authority. The court distinguished between “condemnation blight,” which affects property value, and a de facto taking, which is a complete appropriation. The court stated, “Despite this obvious confusion, it is clear that a de facto taking requires a physical entry by the condemnor, a physical ouster of the owner, a legal interference with the physical use, possession or enjoyment of the property or a legal interference with the owner’s power of disposition of the property.”

    The court found that the city’s actions did not deprive Clement of its possession, enjoyment, or use of the property. “We simply have a manifestation of an intent to condemn and such, even considering the protracted delay attending final appropriation, cannot cast the municipality in liability upon the theory of a ‘taking’ for there was no appropriation of the property in its accepted legal sense.” Citing Danforth v. United States, 308 U.S. 271, 285, the court stated “A reduction or increase in the value of property may occur by reason of legislation for or the beginning or completion of a project. Such changes in value are incidents of ownership. They cannot be considered as a ‘taking’ in the constitutional sense.”

    The court recognized that Clement could present evidence of value before the “affirmative value-depressing acts” of the city to ensure just compensation in the de jure appropriation. Regarding moving expenses, the court held that because the City’s representations caused the premature removal of the machinery, just compensation required the City to pay the reasonable costs of removing it. The court reasoned that condemning authorities should not benefit from their own actions that caused the condemnee to mitigate damages.

    Regarding interest, the court relied on prior decisions, stating that the statutory rate is presumptively reasonable, and Clement did not present sufficient evidence to rebut that presumption.

  • Weintraub v. State, 30 N.Y.2d 148 (1972): Risk of Loss in Condemnation Proceedings

    Weintraub v. State, 30 N.Y.2d 148 (1972)

    In condemnation proceedings, the risk of loss to property after the official taking but before the condemnor takes physical possession falls upon the condemnor, as the taking is considered equivalent to a sale.

    Summary

    Weintraub owned land leased to Chester Litho Corp. The Palisades Interstate Park Commission appropriated the land, but Chester Litho continued operating until a fire damaged the property. The court addressed whether the destroyed buildings and fixtures were compensable. The court held that because condemnation is equivalent to a sale, the risk of loss falls on the condemnor (the Park Commission) once the taking is complete. Subsequent fluctuations in value, including destruction by fire, do not alter the condemnor’s obligation to compensate for the property’s value at the time of the taking. This principle ensures fairness, as the condemnor has an insurable interest in the property from the time of taking and can protect against such losses.

    Facts

    Claimant Weintraub owned land improved with a building leased to Chester Litho Corp., wholly owned by Weintraub, for ten years with renewal options.
    The Palisades Interstate Park Commission and the State of New York appropriated the land on June 17, 1963.
    Chester Litho continued operating its plant on the property after the appropriation.
    On July 9, 1963, the building and fixtures were damaged by a fire that was not deliberately set and not proven to be caused by the claimants’ negligence.

    Procedural History

    The case originated in the trial court, where the claimants sought compensation for the destroyed property.
    The Appellate Division affirmed the trial court’s decision in favor of the claimants.
    The State of New York appealed to the New York Court of Appeals.

    Issue(s)

    Whether the buildings and fixtures destroyed by fire after the appropriation date, but before the condemnor took physical possession, are compensable items in a condemnation proceeding.

    Holding

    Yes, because condemnation is considered the equivalent of an enforced sale, and the risk of loss shifts to the condemnor upon the taking, which occurs when the description of the property is filed. Subsequent fluctuations in value do not affect the condemnor’s obligation to compensate.

    Court’s Reasoning

    The court reasoned that condemnation is equivalent to an enforced sale, citing Jackson v. State of New York and other cases.
    The taking is complete upon the filing of the property description, according to Conservation Law § 676-a.
    Damages are measured and fixed at the time of the taking, and subsequent changes in value are irrelevant.
    Analogizing to a voluntary sale, the court noted that under the Uniform Vendor and Purchaser Risk Act and common law, the risk of loss would be on the purchaser after title transfer or possession.
    The court dismissed the argument that the State could not take immediate possession, noting the statutory notice requirements for purchasers and the possibility of contractual separation of title and possession.
    The court emphasized that the condemning authority had a choice in how to acquire the property (either by appropriation or by giving notice of intention to take) and must bear the consequences of its choice.
    The court noted the condemnor has an insurable interest in the property from the date of taking. “If this were a sale in fact, the risk would be upon the purchaser, here the appellants, under either the Uniform Vendor and Purchaser Risk Act (General Obligations Law, § 5-1311, subd. 1, par. b) or the common law”.

  • Acme Theatres, Inc. v. State, 26 N.Y.2d 385 (1970): Valuation Methods in Partial Takings of Improved Land

    Acme Theatres, Inc. v. State, 26 N.Y.2d 385 (1970)

    In a partial taking of improved land, the proper measure of damages is the difference between the property’s fair market value before the taking and its fair market value after the taking; separate valuation methods for land and improvements are inconsistent if they assume mutually exclusive uses.

    Summary

    Acme Theatres, Inc. sought compensation from the State of New York for a partial taking of land that housed a drive-in theater. The Court of Claims awarded damages based on a “bands of valuation” approach for the land and separate compensation for improvements. The New York Court of Appeals held that this method was flawed because it valued the land as if it were being used for a higher purpose that would require the demolition of the existing improvements, thus creating an inconsistency. The court reiterated that the proper measure of damages is the difference between the fair market value before and after the taking.

    Facts

    Acme Theatres owned a drive-in theater on 4½ acres at the intersection of Routes 9L and 9. The State appropriated a strip of land to widen Route 9, which included the ticket office, a storage building supporting a theater sign, 49 car spaces, fencing, and part of the entrance drive. The highest and best use of the land was determined to be for commercial purposes, including a drive-in theater.

    Procedural History

    The Court of Claims awarded Acme Theatres $20,600, including compensation for land, improvements, and consequential damages. The Appellate Division affirmed the award except for consequential damages. The State appealed to the Court of Appeals, challenging the method of valuing the land.

    Issue(s)

    Whether the Court of Claims properly computed damages in a partial taking of land with improvements by using a “bands of valuation” approach for the land while also awarding damages for the taken improvements.

    Holding

    No, because the “bands of valuation” method valued the land for a use inconsistent with the continued existence of the improvements, creating an illogical result. The damages should be calculated based on the difference between the fair market value of the whole property before the taking and the fair market value of the remainder after the taking.

    Court’s Reasoning

    The court found that the lower court erroneously departed from the established “before and after” rule for calculating damages in partial taking cases. The “bands of valuation” approach assigned a higher unit value to the land nearest the highway, implying a potential use for other commercial establishments. This valuation was incompatible with the award for improvements because achieving the higher-value use would require demolishing the theater buildings. The court stated, “It is illogical to award damages for buildings that must be destroyed to achieve the use contemplated in the award of damages for the land.” The court emphasized that the claimant had not lost the value attached to the land’s proximity to the highway since the remaining land still fronted Route 9. The court noted, “If, as claimant alleges, the value of his land increases as it nears the highway, the value of his remaining land must obviously be increased by the widening of Route 9 these few feet.” Regarding consequential damages for the reduced visibility of the theater sign, the court reaffirmed that there is no right to have traffic pass by one’s property or to be visible to passing motorists, citing precedent such as Bopp v. State of New York, 19 N.Y.2d 368. The court suggested the State’s per-unit basis for calculating damages or determining the total value of land and improvements before and after the taking as reasonable methods. The case was remanded for a redetermination of damages for the land taken consistent with the “before and after” rule.

  • Arlen of Nanuet, Inc. v. State, 26 N.Y.2d 346 (1970): Valuation of Vacant Land in Eminent Domain

    26 N.Y.2d 346 (1970)

    In eminent domain proceedings, the market value of vacant land should not be based solely on the capitalization of income expected from buildings and improvements that have not yet been financed or constructed on the date of taking.

    Summary

    This case addresses the proper method for valuing vacant land in an eminent domain proceeding when the land is subject to a lease contemplating future development. The Court of Appeals held that it was improper to determine the value of vacant land based solely on the capitalization of income expected from buildings not yet constructed. While executory leases and agreements may be considered, they should not be treated as an income flow already in existence. The court emphasized that valuation must be based on the situation existing on the day of the taking, considering comparable sales and ground rentals in the area.

    Facts

    The State appropriated 16 acres of vacant land, which was part of a 26.78-acre parcel suitable for a shopping center. The fee owners had leased the land to a tenant who intended to sublease it to E.J. Korvette, Inc., for the construction of a retail store, supermarket, and parking area. Subleases were in place. However, no construction had begun on the property as of the date of the taking. The tenant had secured a lease for adjacent property as a contingency.

    Procedural History

    The Court of Claims awarded $702,610 to the fee owners and $875,000 to the tenant, valuing the land based on a capitalization of income method, i.e., the potential rent from the planned buildings. The Appellate Division affirmed the award to the fee owners but reduced the tenant’s award to $525,000. The State appealed, arguing that the valuation method was improper.

    Issue(s)

    1. Whether it is permissible to fix the market value of vacant land, solely on the basis of capitalization of income expected to be realized from buildings and other extensive improvements not yet financed or begun.
    2. Whether the courts below followed the settled procedure in valuing real property in which a tenant may have a leasehold interest that survives the taking.

    Holding

    1. No, because valuing vacant land based solely on the capitalization of future, unrealized income from planned but unbuilt structures is speculative and does not reflect the property’s actual condition on the date of the taking.
    2. No, because the courts did not first value the unencumbered fee and then determine the tenant’s interest based on the difference between the rental value and the ground rent.

    Court’s Reasoning

    The Court of Appeals reversed, holding that valuing the land based on the capitalization of rents from structures not yet begun was erroneous. The court emphasized that the value must be determined as of the day of the taking, and the potential income from future construction is too speculative. The court cited Levin v. State of New York, emphasizing that while executory leases can be given some weight, it is incorrect to treat them as representing an existing income stream.

    The court also noted the lower court erred in valuing the tenant’s leasehold interest. It reiterated the established procedure of first valuing the unencumbered fee and then determining the tenant’s interest based on whether the rental value of the land exceeds the rent reserved in the ground lease. Capitalizing the rent from the subleases to Korvette was improper because it reflected the tenant’s speculative investment and did not accurately reflect the value of the vacant land.

    The court stated, “To sanction the capitalization of income method adopted below would be to overturn the long-established and wise rule, reflected in our Levin decision (13 Y 2d 87, supra). It would be a serious departure from principle, and most unsound, to announce that fair compensation is to be determined not as of the day of taking but, instead, as of the time of trial, whenever that might happen to be.”

    The dissenting opinion, while agreeing the tenant’s award was excessive, argued that the near certainty of the project proceeding should allow for consideration of the income potential, but also acknowledged that the tenant’s entrepreneurial efforts should be factored out of the valuation.

  • Matter of City of New York, 25 N.Y.2d 430 (1969): Use of Assessed Value in Eminent Domain Valuation

    Matter of City of New York, 25 N.Y.2d 430 (1969)

    Assessed valuation may be considered as one factor in determining market value in eminent domain proceedings, but it is not determinative, and an award cannot be based solely or primarily on assessment figures.

    Summary

    This case concerns the valuation of land taken by the City of New York for a housing project. The Special Term awarded $883,754, but the Appellate Division reduced it to $467,000, relying heavily on the original purchase price and applying a percentage increase based on assessed values. The Court of Appeals reversed, holding that while assessed valuation is a factor, it cannot be the primary basis for determining market value. The court emphasized the inconsistencies in the Appellate Division’s approach and reinstated the Special Term’s award, finding it more consistent with the evidence.

    Facts

    The City of New York condemned 554,779 square feet of land for a housing project. The claimants (landowners) sought compensation for the taking. The city conceded that the land value had increased significantly since the landowners’ purchase. The Appellate Division used an increase percentage based upon tax assessment increase to determine the value.

    Procedural History

    The Special Term initially awarded $883,754 to the landowners. The Appellate Division reduced the award to $467,000. The landowners appealed the Appellate Division’s decision to the New York Court of Appeals.

    Issue(s)

    Whether the Appellate Division erred in reducing the Special Term’s award by placing near-total reliance on assessment figures and inconsistencies when determining market value in an eminent domain proceeding.

    Holding

    Yes, because assessment figures are not market value, but a factor to be considered with other evidence. The Appellate Division’s method contained “built-in inconsistencies” and improper reliance on assessment figures, justifying reinstatement of the Special Term’s award.

    Court’s Reasoning

    The court reasoned that the Appellate Division erred by relying too heavily on assessed valuation as the primary indicator of market value. While acknowledging that assessed valuation is a relevant factor to consider, the court emphasized that it is not market value itself. The court criticized the Appellate Division’s inconsistent application of assessment increases and its disregard for other evidence of value. The court stated that, “Assessed valuation may, of course, be shown as one of many recognized factors to be considered in connection with market value, which is the ultimate and basic factor, but it is not market value.” The court also noted that assessment figures can be used to bind the condemning authority when they attempt to impose lower values, but the condemning authority cannot set market value based solely on assessments. The dissent argued that the Special Term’s award was excessive, representing a 500% increase in value over a short period, and that the Appellate Division’s valuation was more consistent with the record.

  • Matter of City of New York (Neptune Ave.), 28 N.Y.2d 146 (1971): Condemnation Award Based on Probable Subsidized Use

    Matter of City of New York (Neptune Ave.), 28 N.Y.2d 146 (1971)

    A condemnation award can be based on the fair market value of property considering its highest and best use as a site for subsidized housing (e.g., a Mitchell-Lama project) if there is a reasonable probability that such a subsidy would have been granted and the project constructed but for the condemnation.

    Summary

    This case addresses whether the possibility of obtaining a Mitchell-Lama subsidy (a New York State program fostering low-cost housing) can be considered when determining the highest and best use of land taken by condemnation. The Court of Appeals held that it can, provided there is a reasonable probability that the subsidy would have been granted and the project constructed. However, because the claimants in this case failed to adequately demonstrate the likelihood of securing a Mitchell-Lama subsidy, the court reversed the lower court’s award and remanded the case for new findings.

    Facts

    The City of New York condemned vacant land in Brooklyn for a high school. The land was divided into three pieces and near a subway station, stores, and schools. Across the street was Harway Terrace, a Mitchell-Lama high-rise housing project built in 1961. The claimants’ experts argued the highest and best use of the property was as a site for a high-rise apartment building, valuing it at $3.25-$3.35 per square foot. The city’s expert said the highest and best use was for one and two-family dwellings, valuing it at $0.75-$1.50 per square foot. The city’s expert also noted that an apartment building could only be built if a Mitchell-Lama subsidy was obtained.

    Procedural History

    The trial court awarded the claimants $2.90 per square foot without a written opinion. The Appellate Division unanimously affirmed this decision. The City of New York then appealed to the New York Court of Appeals.

    Issue(s)

    Whether the possibility of obtaining a Mitchell-Lama subsidy can be considered in determining the highest and best use of land taken by condemnation, and thus in calculating the condemnation award.

    Holding

    No, because the claimants failed to adequately demonstrate a reasonable probability that a Mitchell-Lama subsidy would have been granted.

    Court’s Reasoning

    The court stated that a condemnation award should be determined based on the fair market value of the property in its highest and best use, often determined by comparable sales. It emphasized that the asserted highest and best use must be reasonably probable in the near future, not speculative. The court acknowledged that governmental activity, such as zoning variances, can be considered if obtaining such variances is reasonably probable, citing Masten v. State of New York, 11 A.D.2d 370, affd. 9 N.Y.2d 796. The court reasoned that while sales of other Mitchell-Lama project sites indicated a market for subsidized housing and the possibility of securing a subsidy, the claimants failed to provide sufficient evidence demonstrating the reasonable probability of obtaining a Mitchell-Lama subsidy for the subject property. Specifically, the court noted the “total absence in the record of any evidence concerning the chances of success or failure in obtaining a Mitchell-Lama subsidy.”
    As the court stated, “Without such proof, the award cannot stand.” The court emphasized that while the claimants’ expert testified to some plans to purchase the land as a Mitchell-Lama site, the extent of these plans was not adequately explained, and there was no evidence adequately establishing the likelihood of securing a subsidy. The court concluded, “The absence of evidence adequately establishing the likelihood of securing a subsidy makes it impossible to say that there was a reasonable probability that a Mitchell-Lama subsidy could have been obtained to develop this property as a profitable high-rise apartment building site.”

  • Siegel v. Money, 31 N.Y.2d 624 (1973): Tax Lien vs. Condemnation Award Ownership

    Siegel v. Money, 31 N.Y.2d 624 (1973)

    When property is condemned before the expiration of a tax sale redemption period, the tax sale purchaser’s interest is limited to an equitable lien on the condemnation award, not ownership of the condemned property.

    Summary

    This case addresses the conflict between a tax lien and a subsequent condemnation proceeding. Siegel and Kessler owned property that was sold for unpaid taxes. Before the redemption period expired, Nassau County condemned the land. After the condemnation, the tax sale purchaser’s successors, the Moneys, obtained a tax deed. The court had to determine who was entitled to the condemnation award: the original owners (Siegel and Kessler) or the tax sale purchasers (the Moneys). The court held that the condemnation extinguished the tax lien on the land, but substituted an equitable lien on the condemnation award. Thus, the original owners were entitled to the award, subject to the tax lien.

    Facts

    Respondents Siegel and Kessler owned real property in Freeport, NY.
    The Village of Freeport sold the property at a tax sale to Edward Morse in 1964 for unpaid 1963 taxes.
    Before the two-year redemption period expired, Nassau County condemned the property in July 1964.
    In 1967, the appellants, as executors of Morse’s estate, obtained a tax sale deed from the village.
    Respondents filed a claim in the condemnation proceeding, asserting ownership.
    A title search revealed the appellants’ tax sale deed.

    Procedural History

    Respondents moved in the condemnation proceeding to determine ownership of the condemnation award.
    Special Term held that respondents, as owners of record at the time of condemnation, were entitled to the award, subject to tax liens.
    The Appellate Division affirmed.
    The case was appealed to the New York Court of Appeals.

    Issue(s)

    Whether ownership in condemned real property lies with the owner of record at the time of condemnation, or with the purchaser at a tax sale held before condemnation who obtains a title deed to the property after the condemnation.

    Holding

    No, because the tax sale purchaser only acquires a lien interest until the redemption period expires; condemnation vests full title in the condemnor and extinguishes the tax lien on the property itself, substituting an equitable lien on the condemnation award.

    Court’s Reasoning

    The court reasoned that under the Real Property Tax Law, the tax sale purchaser acquires only a lien interest, not title, until the redemption period expires. The court distinguished its prior decision in Matter of Ueck, noting that the statutes in that case referred to the land as “sold” and “purchased” at the tax sale. In contrast, the Real Property Tax Law identifies the tax sale certificate as evidencing a lien.

    The court emphasized that condemnation vested full title in Nassau County before the expiration of the redemption period. Therefore, the appellants held only a tax lien at the time of the taking. Condemnation extinguished all lien interests in the property itself.

    However, the court also stated that the tax lien was substituted by an equitable lien on the proceeds of the condemnation award. The court cited precedent such as Copp v. Sands Point Marina, 17 N.Y.2d 291, 293, emphasizing that while the tax lien on the property is extinguished, the tax sale purchaser retains a right to the condemnation proceeds to the extent of the tax lien and interest. The court noted that the appellants could assert their equitable lien when the condemnation award is apportioned.

    In conclusion, the tax sale deed obtained by the appellants was deemed invalid because title vested in Nassau County before the redemption period expired and while the tax was only a lien.

  • Matter of Consolidated Edison Co. v. Lindsay, 24 N.Y.2d 309 (1969): Utility’s Duty to Relocate Facilities at Own Expense

    Matter of Consolidated Edison Co. v. Lindsay, 24 N.Y.2d 309 (1969)

    A utility company must relocate its facilities at its own expense when a municipality condemns land for a governmental function, such as urban renewal or building a public school, unless the legislature expressly directs otherwise.

    Summary

    Consolidated Edison (Con Ed) sought compensation from New York City for the costs of relocating its pipes and mains after the city condemned land for an urban renewal project and a public school. The Court of Appeals held that Con Ed was not entitled to compensation. The court reasoned that the common-law rule requires utility companies to relocate their facilities at their own expense when necessitated by governmental functions. The court distinguished this case from situations where the city acts in a proprietary capacity, reaffirming that slum clearance and school construction are governmental functions.

    Facts

    New York City condemned land in lower Manhattan for the Brooklyn Bridge Southwest Urban Renewal Plan and another parcel in the Bronx to build Public School 161. These condemnations required Con Ed to remove and relocate its subsurface infrastructure (pipes, mains, conduits) from the affected streets. The city did not offer compensation to Con Ed for these relocation expenses, citing the common-law rule that utilities bear the cost of relocating facilities in public rights-of-way when required for public projects.

    Procedural History

    In the urban renewal case (Matter of Consolidated Edison Co. v. Lindsay), Con Ed initiated an Article 78 proceeding to compel the city to compensate it for relocation costs; Special Term granted Con Ed’s petition, which the Appellate Division affirmed. In the school construction case (Matter of City of New York [Public School 161]), the city sought an order compelling Con Ed to relocate its facilities at its own expense, which Special Term granted; the Appellate Division reversed. Both cases were appealed to the New York Court of Appeals and were consolidated for review.

    Issue(s)

    1. Whether a utility company is entitled to compensation from a municipality when the municipality condemns land for a governmental function, thereby requiring the utility to relocate its facilities.

    Holding

    1. No, because the common-law rule dictates that utility companies must bear the cost of relocating their facilities when required by governmental functions, such as urban renewal and school construction, unless the legislature expressly directs otherwise.

    Court’s Reasoning

    The Court of Appeals reaffirmed the common-law rule, stating, “utility companies, which have been granted the ‘privilege’ of laying their pipes and mains in the public streets…must relocate them at their own expense ‘whenever the public health, safety or convenience requires the change to be made.’” The Court emphasized that departures from this rule are recognized “only ‘when the change is required in behalf of other public service corporations or in behalf of municipalities exercising a proprietary instead of a governmental function.’” The court determined that urban renewal and the construction of public schools constitute governmental functions. Distinguishing Matter of City of New York (Gillen Place), 304 N.Y. 215, the court clarified that Gillen Place applied only when the city acted in a proprietary capacity. The court noted that the city was not attempting to appropriate Con Ed’s pipes for its own use, but simply compelling relocation. The court stated that statutory definitions of “real property” do not override the common-law rule. “The burden and expense traditionally imposed on the public utility to remove and relocate its property may not be transferred to the taxpayer absent ‘express direction of the Legislature.’”

  • Rose v. State, 24 N.Y.2d 82 (1969): Compensation for Fixtures in Eminent Domain

    Rose v. State, 24 N.Y.2d 82 (1969)

    In eminent domain cases, when the state takes property, just compensation for fixtures requires considering whether the fixtures were removed or could have been removed, and the measure of damages is the higher of either the fixture’s removal costs or the difference between the fixture’s salvage value and its present value in place (reproduction cost less depreciation).

    Summary

    This case concerns the compensation due to a property owner, Rose, whose riparian rights were destroyed by the State’s diversion of a riverbed for highway construction. This diversion forced Rose’s tenants, Binghamton Sand & Crushed Stone and McIntosh Ready Mix Concrete, to relocate their businesses. The Court of Appeals addressed the method for valuing fixtures when a business is forced to relocate due to eminent domain. The court held that compensation should be the higher of either the cost of removing the fixture or the difference between its salvage value and its present value, ensuring fair compensation without unjustly enriching the claimant at the state’s expense. The case emphasizes that the goal of just compensation is to put the owner in the same position as if the taking had not occurred.

    Facts

    Rose owned land adjacent to the Chenango River, which was leased to Binghamton and McIntosh. Binghamton used large quantities of river water for its sand and gravel business. In 1962, the State filed a taking map for the riverbed, and in 1964, Rose learned of the State’s plans to divert the river, which would cut off Binghamton’s water supply. Binghamton could not find an alternative water source and had to relocate its operations in 1965. McIntosh also relocated. Rose, Binghamton, and McIntosh filed claims for compensation, asserting that the buildings and fixtures on the property lost their utility due to the loss of riparian rights.

    Procedural History

    The Court of Claims denied Rose’s claim for land value depreciation but awarded $208,615 to Binghamton and McIntosh for the loss of utility of their buildings and fixtures. The Appellate Division affirmed the Court of Claims’ judgment. The State appealed to the Court of Appeals.

    Issue(s)

    Whether the proper measure of damages for fixtures, when a business is forced to relocate due to the State’s taking of property through eminent domain, is the difference between salvage value and present value, or whether moving expenses should also be considered.

    Holding

    Yes, because in compensating for the taking of fixtures in eminent domain proceedings, the claimant is entitled to the higher of either (1) the cost of removing the fixture, including disassembly, trucking, and reassembly at a new location, or (2) the difference between the fixture’s salvage value and its present value in place (reproduction cost less depreciation), ensuring just compensation without unjustly enriching the claimant at the state’s expense.

    Court’s Reasoning

    The Court of Appeals held that the destruction of riparian rights is compensable under Section 30 of the Highway Law and existing case law. The court emphasized that just compensation aims to indemnify the property owner, placing them in the same position as if the taking had not occurred, and should be measured by what the owner has lost. In determining the value of fixtures, the court highlighted New York’s broad view, considering improvements that are either physically annexed, adapted to the premises, or intended to be permanently affixed. The court reasoned that valuing fixtures solely based on salvage value is insufficient because it fails to account for the cost of removal and reinstallation at a new location. It established that the claimant is entitled to the higher of either the cost of removing the fixture, including disassembly, trucking, and reassembly at a new location, or the difference between the fixture’s salvage value and its present value in place. This ensures fair compensation without allowing the claimant to profit from the state’s taking. The court modified the Appellate Division’s order and remitted the case to the Court of Claims for further proceedings consistent with its opinion, directing the Court of Claims to adjust the award based on the reasonable moving fees for specific items that were moved to the new plant site.

  • In re City of New York (Fifth Ave. Coach Lines), 22 N.Y.2d 618 (1968): Valuation of Intangible Assets in Public Transit Condemnation

    In re City of New York (Fifth Ave. Coach Lines), 22 N.Y.2d 618 (1968)

    In a condemnation proceeding involving a public transit system, intangible assets such as coach routes, operating systems, and trained personnel must be valued based on reproduction cost less depreciation, considering their contribution to the ongoing operation, irrespective of whether the condemnee was operating at a profit.

    Summary

    This case concerns the valuation of intangible assets of Fifth Avenue Coach Lines and Surface Transit, Inc., condemned by the City of New York. The Court of Appeals reviewed a lower court decision that assigned minimal value to several intangible assets, including coach routes, operating systems, and trained personnel. The Court of Appeals held that these intangible assets, essential for the continued operation of the transit system, must be valued based on the cost of reproducing them, less depreciation, considering their contribution to the system’s functionality, even if the original operator wasn’t profitable due to external factors like restrictive rates.

    Facts

    The City of New York condemned the Fifth Avenue Coach Lines and Surface Transit, Inc., in 1962 to continue public transit operations. The tangible assets were valued at $30,353,542. The valuation of intangible assets, including coach routes, operating schedules, operating systems, trained personnel, and franchises, became a point of contention. The transit companies were operating at a loss due to restrictive rate structures, despite having competent personnel and an efficient system.

    Procedural History

    Special Term initially denied a separate valuation for going concern value but later denied an award for intangible assets because the companies weren’t operating at a profit, which was affirmed by the Appellate Division. The Court of Appeals reversed, holding that the potential for profitable operation entitled the companies to an award for intangible assets, and remanded the case to Special Term. Special Term then assigned a value of $2,577,500 to the intangible assets, which was affirmed by the Appellate Division. This appeal followed, challenging the valuation of specific intangible assets.

    Issue(s)

    1. Whether the coach routes should have been assigned a value, considering the complexity of route layout and development.

    2. Whether the operating systems, records, and procedures should have been assigned a value, specifically regarding accounting records, maintenance records, and personnel records.

    3. Whether the operating rights, permits, and perpetual franchises should have been assigned a value, considering the City’s condemnation of these franchises.

    4. Whether certain classes of trained personnel should have been assigned a value.

    Holding

    1. No, because the lower courts’ findings that coach routes had no value were at variance with the proof and contrary to it.

    2. No, because the lower courts’ findings that operating systems, records, and procedures had no value were at variance with the proof and contrary to it.

    3. No, because the denial of any value for the franchises was in contravention of established law.

    4. No, because the finding of no value for some trained personnel was illogical.

    Court’s Reasoning

    The Court found that the lower court erred in assigning no value to coach routes, emphasizing the complexity of route layout and development, particularly in areas like The Bronx, where the street layout isn’t a simple grid. The court also pointed to the expense involved in adjusting routes to population shifts and commercial changes, stating, “That such advancements, designed to retain customers as well as to attract additional patrons were successful is best evidenced by the fact that, in the year preceding condemnation, claimants served a half billion riders. Clearly, such efforts were not undertaken without considerable expenditures—expenditures for which an award must be made.”

    Regarding operating systems, records, and procedures, the Court held that the lower court improperly relied on a single answer from an expert witness to deny the entire claim for accounting records. The Court cited McCardle v. Indianapolis Water Co., 272 U.S. 400, 417-418, emphasizing that the existing system should be evaluated without considering modern alternatives. The Court also rejected the finding of no value for maintenance records and personnel records, stating that the extensive documentation and essential nature of the information warranted an award. The court emphasized that these records were essential in evaluating and classifying each of the nearly 6,000 active employees.

    Concerning operating rights, permits, and perpetual franchises, the Court cited City of Los Angeles v. Los Angeles Gas & Elec. Corp., 251 U.S. 32, stating that a franchise is a form of property protected by the Constitution, requiring fair compensation for its destruction or curtailment. The court stated that the lower court erred in stating that “The City did not need to acquire these franchises in order to operate the buses over the routes theretofore used by claimants, since the City always had the right to do so.”

    The Court affirmed the award for operating schedules and the portion of the award for trained personnel that attributed value to specific employee classes but rejected the finding of no value for other trained personnel based on unsupported speculation.

    The Court concluded by rejecting the lower court’s use of a percentage relationship between the award and the tangible assets, citing Matter of Port Auth. Trans-Hudson Corp. [Hudson Rapid Tubes Corp.], 20 N.Y.2d 457, stating, “There is no basis or warrant in law for any such rule of thumb.”