WE DON’T WANT TO PAY NO STINKING INTEREST – THE STATE OF NEW YORK’S CONTINUED BAD FAITH IN COMPLIANCE WITH THE LAW

Jonathan Houghton recently won two appeals in the Second Department. Matter of Sagres 9, LLC v State of New York, 2018 NY Slip Op. 05932 and 05933 (2d Dept. August 29, 2018).

The appeals concerned the failure of the State to pay statutory interest at 9%.  In the two different appropriations, the State deposited advance payments with no notice or explanation to Claimant.  There was absolutely no reason for the deposits.  In fact, the improper deposit with the Comptroller into its eminent domain accounts, pursuant to State Finance Law Sec. 97-dd, allowed, instead of accruing interest at 9% pursuant to State Finance Law Sec. 16, the money so deposited to accrue interest at nominal rates.

In addition, a Claimant must now commence a Special Proceeding to obtain a Court Order directing payment.

Let’s make one thing very clear.  Interest is an integral part of “just compensation” required by the Constitution.  The Supreme Court of the United States has held that interest on a condemnation award is part of the just compensation to be paid and as such its amount is a judicial question and the Courts are not bound by statutory provisions.  Seaboard Air Line R. Co. v U.S., 261 U.S. 299.

The Second Department wrote,

Here, the State failed to establish that the DOT properly directed the New York State Comptroller to deposit the amount of the offer of just compensation in a special interest bearing account on October 4, 2013. While the record demonstrates that the acquisition was being made for a federally aided project, the State’s evidence was insufficient to demonstrate that the DOT determined that it was “necessary” to deposit the amount of the offer “without delay in order to proceed with the letting of a construction contract” (EDPL 304[E][2]). We decline the State’s request to take judicial notice of certain publicly available documents that the State referred to for the first time on appeal (see generally Matter of Gary F. [Bronx Psychiatric Ctr.], 143 AD3d 495, 497; Matter of Warren v Miller, 132 AD3d 1352, 1354). Accordingly, the DOT’s obligation to pay statutory interest did not terminate on October 4, 2013.

The Court added,

Pursuant to EDPL 304(B), “in the event that a condemnee within ninety days of the offer fails or refuses to notify the condemnor in writing that the advance payment is accepted,” the “offer shall be deemed rejected.” EDPL 304(C) provides that, “[i]n the event a condemnee shall reject the offer or the offer shall be deemed rejected . . . 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.”

Accordingly, the cases were remitted to the Court of Claims to calculate the amount of interest at 9%.

Automatic deposits of advance payments are contrary to the purpose and intent of the Eminent Domain Procedure Law.  According to EDPL § 101, it is the purpose of the law to, among other things, expedite payments to property owners and to establish rules to reduce litigation.  EDPL § 301 provides that “[t]he condemnor, at all stages prior to or subsequent to an acquisition by eminent domain . . . shall make every reasonable and expeditious effort to justly compensate persons for such real property by negotiation and agreement.”  The deposit delays the payment of compensation, and it creates additional, unnecessary litigation.

Posted in Advance Payments, interest, Just Compensation, State Finance Law Sec. 97-dd
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