Hakes v. State, 81 N.Y.2d 392 (1993)

Under EDPL 701, a court has discretion to award costs, including attorney and expert fees, to a condemnee in an eminent domain case where the award is substantially in excess of the condemnor’s initial offer, but this discretion should be exercised to avoid incentivizing frivolous litigation.

Summary

This case clarifies the application of EDPL 701, concerning discretionary awards of costs and fees in condemnation actions. The Court of Appeals held that while EDPL 701 allows courts to award fees when a condemnee receives a substantially higher award than the state’s initial offer, this power is discretionary. The court must determine if the reimbursement is necessary for just compensation, preventing incentives for frivolous lawsuits while ensuring fair recovery for undervalued properties. The Court found no abuse of discretion in the lower courts’ decisions regarding fee awards in two separate condemnation cases.

Facts

In Hakes v. State, the State appropriated 19.46 acres of the Hakes’ 23-acre parcel, offering $13,450. The Hakes claimed $588,000 in damages. The Court of Claims awarded $43,525, rejecting the claimants’ appraiser’s testimony. The Hakes then sought reimbursement for expenses under EDPL 701.

In First Bank & Trust Co. v. State, the State appropriated Parcel B of First Bank’s 857-acre property, offering $51,400. First Bank claimed $2,706,865 in damages. The State later reduced its proposed value to $11,350, arguing the parcel was landlocked. The Court of Claims valued the land at $151,300, finding no consequential damages to Parcel A. First Bank then requested reimbursement for $98,299.48 under EDPL 701.

Procedural History

In Hakes, the Court of Claims awarded $2,642 for attorney fees and travel costs, denying other fees. The Appellate Division modified, increasing the attorney fee award to $5,000. The Court of Appeals reviewed the Appellate Division’s decision.

In First Bank, the Court of Claims denied reimbursement under EDPL 701. The Appellate Division affirmed. The Court of Appeals reviewed the Appellate Division’s decision.

Issue(s)

1. Whether the lower courts abused their discretion in determining that reimbursement of expenses was not necessary for the condemnees to receive just and adequate compensation under EDPL 701.

2. Whether considering the “comparative reasonableness” of the parties’ valuations is an incorrect application of EDPL 701, chilling the condemnees’ right to challenge a condemnation award.

Holding

1. No, because the Court of Claims in each case set forth a thorough and articulate rationale for its decision, and there was no abuse of discretion.

2. No, because the fees and costs allowed under EDPL 701 are not an automatic part of the constitutional right to just compensation but are mere incidences of litigation.

Court’s Reasoning

The Court of Appeals emphasized the discretionary nature of EDPL 701, noting its purpose is to allow courts to ameliorate a condemnee’s costs in appropriate cases where the property was substantially undervalued. The Court referenced the Law Revision Commission’s recommendation against an automatic award of fees and expenses, to avoid incentivizing litigation. The Court stated that the statute requires two determinations: first, whether the award is substantially in excess of the condemnor’s proof, and second, whether the court deems the award necessary for the condemnee to achieve just and adequate compensation. The Court stated that while condemnees are entitled to just compensation, attorney fees and additional costs are not an automatic part of such compensation, quoting City of Buffalo v Clement Co., 28 NY2d 241, 262-264. The Court found that in both cases, the Court of Claims articulated a thorough rationale, thus there was no abuse of discretion.