The Time Has Come to Stop the State’s Improper Deposit of Advance Payments

By: Jonathan Houghton

Every State appropriation that we are aware of now starts with an automatic, unexplained deposit of the advance payment. This conduct is as egregious as it is pervasive.

The State fails to provide any advance notice and refuses to tell the Claimant when the deposit was made or why. The Claimant first learns the “when” and the “why” when the State submits an Answer. And often times, the purported rationale is questionable.

Unless a court intervenes and stops this improper conduct, the State’s automatic deposits of the advance payment will continue unabated and a constant stream of Distribution Proceedings is guaranteed. The Eminent Domain Procedure Law and the Rules of the Court of Claims state that money is only to be deposited when there is a conflict of title. However, the State deposits the funds in an attempt to avoid paying statutory interest which is 9%.

For the State to automatically deposit the advance payment when there is an absence of any conflict in title, and without prior notice, without explanation, and as a matter of course in each and every appropriation matter regardless of the circumstances is clearly in bad faith, just as the State was recently found to have acted in bad faith by the Second Department in Matter of Zutt v State of New York, 99 AD3d 85 (2d Dept 2012).

Absent court intervention, this procedure will continue to the substantial detriment of private property owners who have had their property appropriated against their will pursuant to the State’s power of eminent domain. The Eminent Domain Procedure Law mandates expeditious payment of just compensation. EDPL Sec. 301.

Federal law provided by the Uniform Relocation Assistance Act of 1970 also prohibits delay in payment of just compensation.“[W]hen a condemnor avails itself of the formidable power of eminent domain, which is so often directed against people who, if it were up to them, would insist that the condemnor go elsewhere…the condemnor should do everything possible to reduce the adverse effects of the condemnation.”  See 1974 Report of the State Commission on Eminent Domain and Real Property Tax Assessment Review, Comment § 304, p. 27 (emphasis added).

In fact, as characterized long ago by the In Matter of Mayor of City of NY, 99 NY 569, 577 [1885] the Court of Appeals wrote:

While it is not necessary, in advance of the taking, to pay to the land-owner his [or her] compensation, it is necessary that the act which invades his [or her] ownership shall provide for certain and definite and adequate source and manner of payment…This necessity is vital and of the most essential character, since if unheeded or disregarded, it transforms the right of eminent domain into a legalized plunder of the citizen. (Citation omitted)

Thus, pursuant to the Eminent Domain Procedure Law (“EDPL”), the condemnor is required to appraise the real property taken, to make an advance payment, and to do so, making “every reasonable and expeditious effort.” See EDPL §§ 101, 301, 302, 303 and 304.   Of great importance is “[protecting] the interests of property owners and [ensuring] that their property is taken only in accord with proper procedure and for just compensation.” East Thirteenth Street Community Assoc. v New York State Urban Dev., 84 NY2d 287, 296 (1994).

The advance payment is “mandatory and seek[s] to alleviate the hardship imposed on owners in financing the purchase, rental or replacement of the property taken by eminent domain.”  In re William Cullen Bryant Park & Preserve, 87 Misc.2d 1004, 1005 (N.Y. Sup. Ct. 1976); see City of New Rochelle v. Sigel, 65 Misc.2d 962, 965 (N.Y. Sup. Ct. 1970) (“the property owner should be placed in a position where at the time the title is divested he receives some moneys to enable him to do what is necessary to compensate him for his loss”); see also, e.g., Whitehall Corners Inc. v. State, 210 AD2d 398, 399 (2d Dep’t 1994) (“as stated by the Court of Appeals over 30 years ago, a condemnor is obliged to pay for the trade fixtures installed by a tenant on the basis that they are part of the real property being appropriated”).

By automatically depositing the advance payment, without notice or explanation or the opportunity to cure any alleged title defects, the State is depriving claimants of its constitutional right to just compensation.

The other part to this wrongful conduct is that it causes unnecessary litigation. In every instance, an entirely new litigation must be commenced in the form of a special proceeding. In the last two years, our firm alone has commenced and prevailed in over twenty such wasteful proceedings. The Court of Claims should not only put an end to this improper conduct but should sanction the Attorney General for violating the law and wasting the judiciary’s valuable time.

Posted in Eminent Domain Abuse, Future of the law, New York, Offer & Compensation
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