Blau Rock LLC v State of New York

The Hon. Thomas H. Scuccimarra authored an excellent decision recently in the New York Court of Claims: Blau Rock LLC v State of New York. At issue was the amount of interest due on the deposit of an advance payment owed to Claimant Blau Rock LLC (“Blau Rock” or “owner”) for the acquisition of a portion of its property in connection with the construction of the Palisades Trailway.

The specific background of the case is as follows. Under Eminent Domain Procedure Law 304(A), when a Condemnor acquires property, it must make a written offer to the condemnee stating that:

(1) the offer constitutes the amount of the Condemnor’s highest approved appraisal of the just compensation for the property, and that payment will be made together with the appropriate interest;

…..

(3) the Condemnee may reject the offer as payment in full and instead elect to accept such offer as an advance payment, and that such election shall in no way prejudice the right of a condemnee to claim additional compensation; however, the failure of the condemnee to file a claim within the time of filing claims as provided in subdivision (A) of section 503 of this law shall be deemed an acceptance of the amount paid as full settlement of such claim;

(4) upon acceptance of the written offer or an adjusted offer, 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.

In the instant case, the State sent a letter to the property owner dated March 19, 2014 which stated, “We expect to take title to the property in the near future. It is important that you submit signed agreements within 90 days of this transfer of title to avoid the possible suspension of interest on the amount offered.” Notice to the owner of the appropriation and title vesting was given by a letter dated April 8, 2014, indicating a vesting date of March 28, 2014.

The owner timely accepted the offer as an advance payment by letter dated May 9, 2014. However the owner did not return an executed copy of the agreement for advance payment “because of concerns about the unreasonable language in the form, requiring the owner to obtain a ‘full release of all claims’ and the like.” To quote from the court:

The form agreement contains language petitioner found repugnant, namely the portion of the form agreement wherein rather than tracking the statutory language from Eminent Domain Procedure Law 304(c) [only obligating the owner accepting an offer to provide the state “with all papers reasonably  necessary to effect a valid transfer of title” and the further statutory language whereby “the right of the condemnee to the advance payment shall not be conditioned on the waiver of any other right” (EDPL304(a)(4))], the document instead provides that the petitioner will “cause 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.”

On May 1, 2014, the owner received written notice that the State Comptroller deposited the advance payment into an eminent domain account. Papers produced in this litigation indicate that the timeline of the case is as follows:

• March 19, 2014: Petitioner receives letter advising of future acquisition and enclosing proposed Agreement for Adjustment
• March 28, 2014: Title vests in the State
• April 1, 2014: State asked deposit of advance payment be made
• April 8, 2014: Petitioner is advised of acquisition by letter
• April 9, 2014: Deposit of advance payment into eminent domain account
• May 9, 2014: Petitioner advises State it accepts offer as advance payment

This behavior is simply egregious. A property owner is entitled interest on an advance payment  under the law. Under EDPL 304(c):

In the event a condemnee shall reject the offer or the offer shall be deemed rejected pursuant to subdivision (B) or a 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.

There are only a few situations under the EDPL where interest on the advance payment may be suspended. If the Attorney General determines there is a conflict in title (EDPL 304 (E)(1)); if the offer is deemed rejected under EDPL 304 (E)(2), or where the acquisition is made:

for the purposes of 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, the condemnor may request the comptroller to make the deposit herein provided at any time subsequent to the vesting of title in the state of New York and provide an offer of payment in full or as an advance payment has bee made to the owner. EDPL 304(E)(3).

Here, despite the State’s contentions to the contrary, there was no evidence produced that the deposit of the funds were necessary to “let” a construction contract proceed forward. Affidavits by the Director of Planning and Program Management for the DOT in Region 9, and a Real Estate Specialist with the DOT indicated that the project involved federal-aid highway construction funds and deposit was necessary for the advertisement of the contract. The Court was unpersuaded:

[The State’s] Affidavit does not indicate how deposit of petitioner’s advance payment within days of title vesting was “necessary” to “let” the “construction contract” or comply with federal statutes or rules beyond generalities.

…

… the documents provided by the State show that it had not begun to ask for bids to do the work when the deposit was made, much less had it begun to “let” -or award- the contract.

…

The significant inquiry to be addressed by respondent, and not addressed here, is why such monies needed to be deposited- for the limited reasons allowed- before the 90 day period within which the owner was otherwise entitled to respond. Accordingly, the deposit by the State on April 9, 2014 was not authorized.

It was obvious that the State’s contention was pure fiction and frivolous. Accordingly, the Court ordered the immediate release to Blau Rock of the funds on deposit in the eminent domain account. The Court also found that Blau Rock was entitled to a money judgment representing the difference between statutory interest at 9%, and the amount of interest actually paid on the account.

It is encouraging that after years of bringing these distribution proceedings to obtain funds improperly deposited, courts are beginning to take notice of this unreasonable and unfair practice. Under the law, a property whose land has been acquired is entitled to an advance payment with interest on the award, and may proceed forward with a claim for just compensation, without the waiver of any other right.