Opinion
# 2014-010-029Claim No. 111535Motion Nos. M-84320M-84329
04-22-2014
LERNER PAVLICK REALTY v. THE STATE OF NEW YORK
JACOBOWITZ & GUBITS, LLP By: Robert E. DiNardo, Esq. Antoinette M. Caruso, Esq. HON. ERIC T. SCHNEIDERMAN Attorney General for the State of New York By: J. Gardner Ryan, Assistant Attorney General Michele M. Walls, Assistant Attorney General
Synopsis
Motion is for an order directing compounded pre-judgment interest and an additional allowance pursuant to EDPL § 701.
Case information
UID: | 2014-010-029 |
Claimant(s): | LERNER PAVLICK REALTY |
Claimant short name: | LERNER PAVLICK |
Footnote (claimant name) : | |
Defendant(s): | THE STATE OF NEW YORK |
Footnote (defendant name) : | |
Third-party claimant(s): | |
Third-party defendant(s): | |
Claim number(s): | 111535 |
Motion number(s): | M-84320, M-84329 |
Cross-motion number(s): | |
Judge: | Terry Jane Ruderman |
Claimant's attorney: | JACOBOWITZ & GUBITS, LLP By: Robert E. DiNardo, Esq. Antoinette M. Caruso, Esq. |
Defendant's attorney: | HON. ERIC T. SCHNEIDERMAN Attorney General for the State of New York By: J. Gardner Ryan, Assistant Attorney General Michele M. Walls, Assistant Attorney General |
Third-party defendant's attorney: | |
Signature date: | April 22, 2014 |
City: | White Plains |
Comments: | |
Official citation: | |
Appellate results: | |
See also (multicaptioned case) |
Decision
Defendant's motion is for an order pursuant to Rule 206.18 (b) of the Uniform Rules for the Court of Claims, staying the entry of judgment, and a further order, pursuant to Court of Claims Act § 19 (4), suspending interest from the expiration of 30 days after notification by the Attorney General and transmittal of the closing papers to claimant. Claimant's motion is for an order directing compounded pre-judgment interest and an additional allowance pursuant to EDPL § 701. In addressing these motions, the Court has read and considered the following papers numbered 1-8:
Defendant's Notice of Motion, Attorney's Supporting Affirmation and Exhibit (M-84320).......................................................................................................................1
Claimant's Notice of Motion, Attorney's Supporting Affirmation and Exhibits (M-84329).........................................................................................................................2
Affidavit of Barbara Lerner and Exhibits (M-84329)..............................................3
Claimant's Affirmation in Opposition.....................................................................4
Defendant's Reply Affirmation (M-84320)..............................................................5
Defendant's Affirmation (M-84320, M-84329).......................................................6
Claimant's Reply Affirmation .................................................................................7
Claimant's Memorandum of Law.............................................................................8
Background
On October 2, 2002, the State of New York appropriated a portion of claimant's property in the Town of Montgomery, Orange County for the purpose of constructing a new highway which ultimately bisected claimant's remaining land. Notice of appropriation was served on claimant on or about October 17, 2002 and a claim seeking damages for a fee taking and temporary easement was filed with the Clerk of the Court on October 21, 2005. Following a trial, the Court awarded claimant $394,750 in total damages, including direct damages stipulated to by the parties at the commencement of trial in the amount of $230,500 for the fee takings and $16,250 for a temporary easement (Lerner Pavlick Realty v State of New York, UID No. 2009-010-037 [Ct Cl, Ruderman, J., Oct. 20, 2009]). Both parties appealed. The Appellate Division, Second Department, reversed insofar as cross-appealed by the defendant and remitted for a new trial on the limited issue regarding the purported failure of the Court of Claims to address the State's claim that the construction of Route 747 enhanced the value of the remaining portion of the property (Lerner Pavlick Realty v State of New York, 98 AD3d 567, 568-569 [2d Dept 2012]). Following the retrial, the Court rejected defendant's argument that the package sale discount, applied by defendant's appraiser as part of his valuation methodology in the first trial, was inappropriate in the context of the Court's award of consequential damages. The Court's conclusions as to before and after value and consequential damages attributable to the cost to cure were therefore unchanged and the Court directed entry of judgment in the amount of $394,750 plus appropriate pre-decision and post-decision interest (Lerner Pavlick Realty v State of New York, UID No. 2013-010-047 [Ct Cl, Ruderman, J., Sept. 4, 2013]).
The judgment was affirmed insofar as appealed by claimant.
The Attorney General timely moved for a stay of entry of judgment on the claim and for suspension of interest on the award pursuant to the Court of Claims Act § 19 (4) (22 NYCRR § 206.18 [b]). In accordance with section 206.18 (b) of the Uniform Rules, filing of the motion stayed entry of judgment pending the Court's decision on the application. Claimant subsequently moved for an order directing that the final judgment include compound interest on the appropriation award and granting attorney fees and costs pursuant to EDPL § 701. Claimant opposed defendant's motion.
Suspension of Interest
Pursuant to Rule 206.18 (b) of the Uniform Rules for the Court of Claims (22 NYCRR 208.18 [b]), the Attorney General has 45 days after the filing of the decision in an appropriation matter to notify the Clerk whether a suspension of interest is required under Court of Claims Act § 19 (4). Court of Claims Act § 19 (4) provides:
"[w]here an award is made for the appropriation by the state of real property or any interest therein or for damages to real property caused by the state, interest thereon, if any, shall be suspended by the clerk of the court in and by the judgment from the expiration of thirty days after notification in writing by the attorney-general to the claimant or his attorney that the attorney-general is ready and willing to approve title to the property covered by the award upon the presentation to him of proper proofs, instruments and vouchers, to the date of such presentation, unless otherwise ordered by the court or a judge thereof on an application by the claimant or his attorney, made prior to the entry of judgment and on notice to the attorney-general, showing a satisfactory reason why interest should not be suspended."
On October 25, 2013, a Land Claims Payment Voucher was transmitted to claimant's attorney (Walls Affirmation, ¶ 4, Ex. A). Thus, defendant established that "proofs, instruments and vouchers" were presented to claimant; however they have yet to be returned, thereby depriving the Attorney General of the ability to approve title. In opposition to defendant's motion, claimant asserts that it could not execute the closing papers within the statutory time period because the State's calculation of the advance payment as recited on the voucher is incorrect.
Before the return date of defendant's motion, claimant submitted its motion pursuant to EDPL §701 seeking an additional allowance for fees and costs incurred in the litigation of the appropriation claim. Inasmuch as the threshold issue in an application pursuant to EDPL § 701 is whether the Court's award "is substantially in excess of the amount of the condemnor's proof," the amount of the advance payment is at issue in claimant's EDPL § 701 application and defendant's motion to stay judgment and suspend interest.
The dispute over the advance payment stems from the fact that prior to the appropriation action, claimant was offered and accepted a combination of cash and work. Claimant was served with the Notice of Appropriation in October 2002. In May 2003, defendant offered claimant an advance payment of $248,200 which included direct damages in the amount of $165,000 and rental value of the temporary easement in the amount of $4,000 (Lerner Affidavit, Ex. 1). The offer further included $36,200 for "Land Improvements" including a well, pavement and striping, fencing, a gate and pine trees, all of which were removed by the State because they interfered with the construction of the new highway (Lerner Affidavit, ¶ 5; Ex. 2), and $43,000 labeled "cost to cure for a new well" to replace a well which had been located in the front yard area slated to become a paved parking lot (Lerner Affidavit, ¶ 7). On October 7, 2003, claimant executed an Agreement for Advance Payment which provided as follows:
"1. The State will pay to the Claimant the sum of Two Hundred Forty Eight Thousand Two Hundred and 00/100 ($248,200.00), the amount determined by the Commissioner of Transportation to be the value of all claims for the property appropriated and legal damages caused by such appropriation, including all damages incurred by virtue and during the pendency of said appropriation proceedings, and including all damages to the remainder of said affected property, if any, of which the appropriated area formed a part, whether caused by said appropriation or by the use of said appropriated property, excepting the aggregate value, if any, of claims hereinafter specifically excluded."
(Lerner Affidavit, Ex. 3, ¶ 1). Defendant's Land Claims Payment Voucher, submitted to claimant's attorney on October 25, 2013, recited the Court's award of $394,750.00 "[l]ess principal amount paid pursuant to Agreement for Advance Payment dated October 7, 2003 of $248,200.00 for a balance due to claimant of $146,550.00 (Walls Reply Affirmation, Ex. B).
Claimant argues that for purposes of the EDPL § 701 analysis and the validity of the Land Claims Payment Voucher, the advance payment should exclude the $36,200 for "Land Improvements" appropriated and the $43,000.00 cost to replace the well because "th[ose] costs were not at issue in the litigation" (Memorandum of Law, p 7, n 1). According to claimant, because the Court's award of $394,750 was for direct and consequential damages for the fee taking and temporary easement, the award should only be offset by so much of the advance payment as was attributable to those elements.
Claimant's argument is unavailing. The advance payment agreement executed by claimant specifically provides:
"[i]t is agreed that, if the Court of Claims finds the value of the property appropriated and legal damages caused by said appropriation as set forth in paragraph numbered 1 above is equal to or exceeds the advance payment made hereunder, the amount of such advance payment shall be deducted from the amount so found by the Court and the award of said Court shall be in the amount of the excess, if any, over and above said advance payment. It is also agreed that no interest shall be allowed in such award on the amount of such advance payment [emphasis added]."(Lerner Affidavit, Ex. 3, ¶ 7). The land improvements taken and the cost to relocate the well affected by the plan for construction for the new highway were damages incurred by claimant as a result of the appropriation and use of the property and would be compensable in the appropriation claim. The State's offer of compensation and claimant's acceptance of the amount as satisfactory does not remove those costs from the category of damages incurred as a result of the appropriation. To the extent that claimant wished to exclude the value of the appropriated land improvements and well costs from the Agreement for Advance Payment, those exclusions should have been negotiated by claimant prior to executing the agreement. Moreover, contrary to claimant's contention, the Court cannot simply increase the amount awarded to reflect damages that were not part of the claim nor presented at trial.
The purpose of Court of Claims Act § 19 (4) is to "penalize a claimant who deliberately or negligently fails to clear title to the property appropriated and to procure the proofs and documents reasonably requested by the Attorney-General, while interest continues to run on the award" (D'Agostino v State of New York, 9 AD2d 724, 725 [4th Dept 1959]). Thus, a suspension of interest was granted where the claimant's failure to timely return closing documents was due to its negotiations with a mortgagee in order to retain the proceeds of the appropriation without adverse effect on the interest rate under the mortgage (Grossinger Realty Corp. v State of New York, 20 AD2d 602 [3d Dept 1963], affd 15 NY2d 541 [1964] [although claimant had the right to bargain with the mortgagee, "the Legislature did not intend that the State should be burdened with the payment of interest on the award during the process"]) and where the delay was attributed to a mortgagee's failure to timely return documents to claimant's attorney and claimant gave no indication of the amount of follow-up after the mortgagee was first contacted (Freeman v State of New York, UID No. 2003-018-249 [Ct Cl, Fitzpatrick, J., Sept. 4, 2013] ["the State should not bear the burden of paying interest for the period of time required to obtain the necessary documents from claimant's mortgagee"]). A suspension of interest has been denied where the claimant's tenants refused to discontinue their own actions and provide a release despite a lease provision barring them from sharing in proceeds of the appropriation (see D'Agostino, 9 AD2d 724); "a group of mortgagees of imposing stature . . . either ignored or refused to sign the releases requested on any terms whatsoever" (Sydney Family Corp. v State of New York, 99 Misc 2d 731, 739 [Ct Cl 1979]), and the claimants' inability to obtain releases from mortgagees was "not because of any negligence or lack of effort on [their] part" (Schwartz v State of New York, 72 AD2d 490, 493 [3d Dept 1980]).
In the present case, although claimant's assertion as to the validity of the Land Payment Voucher is rejected, claimant's decision to pursue the argument does not amount to conduct warranting the "imposition of the penalty of suspension of interest" (see Schwartz, 72 AD2d at 493). The State's motion to suspend interest is therefore denied. Claimant is directed to execute the Land Payment Voucher and return it to the Attorney General within 15 days of the filed stamped date of this Decision and Order.
Calculation of Prejudgment Interest
The Court's decision on the appropriation claim provides for entry of judgment in favor of claimant in the amount of $394,750 with appropriate interest thereon from October 2, 2002, the date of taking, to the date of the decision and thereafter to the date of entry of judgment. Claimant contends that it is entitled to an award of prejudgment interest calculated using a compounding methodology. The crux of claimant's argument is that where there is a long delay between the taking and judgment, an award providing for simple interest does not adequately ensure that the condemnee obtains just compensation.
In accord with its contention that the advance payment offset should be limited to so much of the advance payment as compensated claimant for those elements of damages actually litigated, i.e., $169,000, claimant seeks compound interest on $225,750.
The Fifth Amendment to the Federal Constitution and article I, § 7 of the State Constitution require that an owner receive just compensation for property taken for public use. "Just compensation puts the property owner in the same relative position it would have enjoyed had the taking not occurred" (520 E. 81st St. Assoc. v State of New York, 99 NY2d 43, 47 [2002] [citing City of Buffalo v J.W. Clement Co., 28 NY2d 241, 258 (1971)]). The payment of prejudgment interest from the date of the taking is "a substitute for the beneficial use of the property during the period between the date of the taking and the date of final judgment" (Adventurers Whitestone Corp. v City of New York, 65 NY2d 83, 85 [1985], appeal dismissed 474 US 935; Matter of Newtown Cr. Water Pollution Control Plant Upgrade, 65 AD3d 1241, 1242-1243 [2d Dept 2009] [citing EDPL § 514 (A)]; see Matter of Metropolitan Transp. Auth. v American Pen Corp., 94 NY2d 154, 158 [1999]; Matter of County of Nassau [Eveandra Enters.], 42 NY2d 849, 850 [1977]).
EDPL § 514 (A) provides that a condemnee is entitled to "lawful interest from the date of acquisition to the date of payment." Pursuant to State Finance Law § 16 "[t]he rate of interest to be paid by the state upon any judgment or accrued claim against the state shall not exceed nine per centum per annum." The CPLR likewise allows for pre-verdict interest on any sum awarded "because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property" (CPLR 5001 [a]), such interest to be "computed from the earliest ascertainable date the cause of action existed" (CPLR 5001 [b]) and "at the rate of nine per centum per annum, except where otherwise provided by statute" (CPLR 5004).
Per centum per annum has been held to mean simple interest (Matter of Newtown Cr. Water Pollution Control Plant Upgrade, 65 AD3d at 1243 [citing Giventer v Arnow, 37 NY2d 305 (1975); Matter of American Sav. Bank v State Tax Commn., 103 AD2d 963, 964 (3d Dept 1984)]). Therefore, although "[t]he amount of interest necessary to bring the payment into accord with the constitutional requirement is a judicial question . . . the interest rate fixed by the Legislature will be deemed presumptively reasonable unless the claimant rebuts the presumption with evidence of prevailing market rates establishing that the statutory rate is so 'unreasonably low' as not to constitute just compensation" (Adventurers Whitestone Corp., 65 NY2d at 87 [quoting Matter of City of New York (Brookfield Refrig. Corp. - Zoloto)], 58 NY2d 532, 537 [1983] and cases cited therein]), and challenges to prejudgment interest have been to the adequacy of the statutory interest rate, not the method of computing interest (see Adventurers Whitestone Corp., 65 NY2d 83 [General Municipal Law § 3-a (2)], appeal dismissed 474 US 935 [1985]; City of New York [Brookfield Refrig. Corp. - Zoloto], 58 NY2d 532; Matter of Newtown Cr. Water Pollution Control Plant Upgrade, 65 AD3d 1241 [General Municipal Law § 3-a (2)]; Marine Midland Bank v State of New York, 118 Misc 2d 472 [Ct Cl 1983] [holding that the 6% interest rate in effect under State Finance Law § 16 during the pendency of claim until April 1, 1983 was insufficient and that interest at the newly enacted rate of 9 % "would afford substantial justice both to the claimant, and the public which must bear the cost"]; see Thomas J. Olmstead, Compound Pre-Judgment Interest as an Element of Just Compensation: Wilson v City of Fayetteville, 47 Ark L. Rev 937, 947-948 [1994] [New York is one of a minority of jurisdictions which recognize a presumptively valid statutory interest rate subject to proof that prevailing market rates render the statutory rate constitutionally infirm; none of those jurisdictions have allowed compound interest]).
520 E. 81st St. Assoc. v State of New York (19 AD3d 24 [1st Dept 2005], appeal dismissed 5 NY3d 782 [2005], lv denied 5 NY3d 712 [2005]), relied upon by claimant, is not to the contrary. In that case, the claimant property owner sought damages for a temporary regulatory taking effected through the enactment of a statute which essentially precluded it from selling condominium units - the highest and best use for the property on the date of the taking - for a nine-year period before the statute was declared unconstitutional (see 520 E. 81st St. Assoc., 99 NY2d 43 [citing Manocherian v Lenox Hill Hosp., 84 NY2d 385 (1994), cert denied, 514 US 1109 (1995)]). The Court of Appeals held that claimant was entitled to interest on the August 1985 sale value over the course of the takings period as that "represents the amount claimant would have been expected to earn had the money been available for use" (520 E. 81st St. Assoc., 99 NY2d at 48 [citing Washington Mkt. Enters., Inc. v City of Trenton, 68 NJ 107, 124, 343 A2d 408, 417 (1975)]). On remittal for a determination of the amount of that award, the Appellate Division, First Department, held that "in order to put it in the position it would have been in had the apartments been sold in 1985," claimant was entitled to "a money judgment representing a calculation of compound interest at the rate of 11% on $3,264,996, the value of the property on August 1, 1985" for the nine-year period claimant was prohibited from selling it (520 E. 81st St. Assoc.,19 AD3d at 28, 31).
The language of the Court of Appeals and Appellate Division decisions makes clear that compound interest in that case was a measure of the actual damages suffered by the claimant as a result of the deprivation of its right to use the property in accordance with its highest and best use, i.e., sale and reinvestment of the proceeds. As the Court of Appeal stated, "[i]nterest in this context is not an award of prejudgment interest on a liquidated sum in the traditional sense, but is a measure of the rate of return on the property owner's money had there been no delay in payment" (99 NY2d at 48 [quoting Sintra, Inc. v City of Seattle, 131 Wash2d 640, 656, 935 P2d 555, 563 (1997)]; see also Matter of City of New York, 25 Misc 3d 288 [Sup Ct, Kings County 2009] [18% interest on tax liens continuing to accrue against the claimant as a result of the City's refusal to make a timely advance payment may be considered as a component of the damages to be awarded to the claimant]). The Appellate Division further clarified:
Significantly, on the question of pre-verdict interest, the amount compensating the claimant for the time between the date damages became ascertainable in 1994 and the date of the award, the Appellate Division affirmed the payment of 9% simple interest (see 520 E. 81st St. Assoc. v State of New York, 2004 WL 4963402 [Ct Cl, Sept. 20, 2004, Claim No. 91018-A [Judgment]).
"[T]he statutory scheme for awarding postjudgment interest, or, where applicable, prejudgment interest, does not provide for compound interest (see CPLR 5001-5004). However . . . in this context the calculation of interest is simply a way to measure what the property owner would have earned on the money had there been no delay due to the taking.
Additionally, as claimant recognizes, neither New York's Eminent Domain Procedure Law nor the case law applying it have contemplated or awarded compound interest; EDPL 514 specifically contemplates awards of simple interest at up to the statutory rate where the advance payment by the governmental authority was less than the property's value as ultimately determined by the court. Indeed, claimant acknowledges that simple interest is sufficient to ensure just compensation when the procedure set forth in EDPL article 5 is followed. However, the taking here did not follow the procedure contemplated by the EDPL, but rather was a surreptitious and unacknowledged regulatory taking resulting in an over nine-year delay in the property owner's ability to freely market the property."
(520 E. 81st St. Assoc.,19 AD3d at 28-29). In the instant case, the taking followed the procedure contemplated by the EDPL. Further, damages were measured by the diminution in value of the property as a result of the taking, not by the claimant's loss of use of sale proceeds over a period of time, and therefore fall within the category of damages for which simple interest is provided for by EDPL § 514.
Moreover, claimant has not submitted sufficient "evidence of prevailing market rates establishing that the statutory rate is so 'unreasonably low' as not to constitute just compensation" (Adventurers Whitestone Corp., 65 NY2d at 87 [quoting City of New York (Brookfield Refrig. Corp. - Zoloto), 58 NY2d at 537]). Claimant relies solely upon the affidavit of Barbara Lerner who states that in addition to being a partner in the claimant realty company, she is a "trustee, fiduciary and plan administrator" of Quickway Metal Fabricators, Inc. Pension Plan. Lerner references a Vanguard Fund, one of multiple investments held in the pension plan's portfolio. She attests to a 154% return over the 11-year period following the appropriation which, expressed in terms of simple interest, would be 14% per annum (154% divided by 11 years = 14% per year). Claimant's reliance on the return offered by a single mutual fund is insufficient, if not irrelevant, in determining the prevailing market rate for purposes of rebutting the presumption of reasonableness of the statutory 9% rate provided in the State Finance Law (see City of New York [Brookfield Refrig. Corp. - Zoloto], 58 NY2d at 538 [evidence that "average interest rates on stable investments, such as medium term public securities, ranged between 8.3% in 1978 and 12.5% in 1981" supports the trial court's affirmed findings concerning inadequacy of 6% statutory rate]; see generally Denio v State of New York, 7 NY3d 159, 167 n 4 [2006] ["Evidence of stock market rates plays no part in (just compensation for condemnation) analysis because the most logical way to demonstrate that the ceiling rate is constitutionally inadequate is to present evidence that even the interest rates for the most conservative investments--such as U.S. Treasury securities--are higher than the rate set by statute"]). Consequently, claimant is entitled to prejudgment interest at the rate of 9% (see Matter of Newtown Cr. Water Pollution Control Plant Upgrade, 65 AD3d 1241 [in the absence of any expert testimony to rebut the presumption of reasonableness associated with the statutory rate of interest, the trial court should have applied the statutory rate of 6% simple interest]).
EDPL § 701 Additional Allowance
In an appropriation case, the court "may in its discretion" award attorney fees and costs when two conditions have been met: the award must be "substantially in excess of the amount of the condemnor's proof," and the expenses have been necessarily incurred by the condemnee "to achieve just and adequate compensation" (EDPL § 701). The appropriate measure as to whether the award is substantially in excess of the condemnor's proof is the difference between the State's initial offer and the amount awarded (see First Bank & Trust Co. of Corning v State of New York, 184 AD2d 1034 [4th Dept 1992], affd sub nom. Hakes v State of New York, 81 NY2d 392 [1993]). The Court's award of $394,750 exceeded the $248,200 advance payment by $146,550, or 59%, a differential well within the parameters of those held to have satisfied the requirement that the award be substantially in excess of the offer (see Matter of Metropolitan Transp. Auth. v Ausnit, 306 AD2d 190 [1st Dept 2003] [award 35.3% greater than offer]); Matter of Town of Islip v Sikora, 220 AD2d 434 [2d Dept 1995] [37%]; Matter of Town of Riverhead v Lobozzo, 207 AD2d 789 [2d Dept 1994] [38%]; Karas v State of New York, 169 AD2d 816 [2d Dept 1991] [41.6%]; cf. Matter of Village of Johnson City [Waldo's, Inc.], 277 AD2d 773 [3d Dept 2000] [award 19% higher than initial offer did not qualify as substantially in excess of offer]).
Defendant's contention to the contrary, that the proper calculation should incorporate only the Court's award for consequential damages of $148,000 because the direct damages of $246,750 were awarded based upon a stipulation of the parties at the outset of trial, is without merit. The purpose of EDPL § 701 is to ensure that property owners whose properties have been undervalued "will not forego their constitutional and statutory right to receive just compensation" due to the cost of litigation (Matter of New York City Tr. Auth. [Superior Reed & Rattan Furniture Co.], 160 AD2d 705, 709-710 [2d Dept 1990], quoting Governor's approval mem, 1987 NY Legis Ann at 263]). Therefore, the Court "must base [its] determination on the amount that was offered at a time when the litigation expenses could be saved" (Long Is. Pine Barrens Water Corp. v State of New York, 144 Misc 2d 665, 669 [Ct Cl 1989]). The State's stipulation at trial is an offer made at a time when litigation expenses had already been incurred and is, therefore, not relevant to the analysis.
As for the costs claimant is entitled to recover, EDPL § 701 assures a fair recovery by allowing a condemnee whose property has been substantially undervalued to recover the costs of the litigation necessary to establish the inadequacy of the condemnor's offer (Hakes v State of New York, 81 NY2d at 397). The additional allowance is not an element of just compensation, however, and there is no "automatic right to recover additional costs" (General Crushed Stone Co. v State of New York, 93 NY2d 23, 28 [1999]). The determination is left to the sound discretion of the court to "ameliorate the condemnee's costs in cases it considers appropriate" (Hakes v State of New York, 81 NY2d at 398). The discretionary nature of the relief is intended "to limit both the incentive for frivolous litigation and the cost of acquiring land through eminent domain" (id. at 397 [citing Governor's Mem Approving Bill, 1987 McKinney's Session Laws of NY at 2724]).
In determining whether the claimant's litigation costs may be recovered, the inquiry is whether the expenditures were incurred with the aim of achieving just and adequate compensation (id. at 396; Town of Islip, 220 AD2d 434). Where the proof offered had no effect on the final award, it cannot be found to be necessary to achieve just and adequate compensation and the court will not award an additional allowance in that regard (see Carbone v State of New York, 13 Misc 3d 1246[A] [Ct Cl 2006] [citing First Bank & Trust Co. of Corning v State of New York, 184 AD2d 1034, affd 81 NY2d 392 (1993)]; Meyers v State of New York, 166 Misc 2d 586, 589 [Ct Cl 1995]). Further, "where costs are expended to develop and present valuation theories to support a claim for compensation substantially in excess of what the court awarded, the court should exercise its discretion and award additional amounts substantially less than what claimant asks" (Matter of City of New York, 24 Misc 3d 1251[A] [Sup Ct, Queens County 2009] [citations omitted]; see Village of Johnson City, 277 AD2d at 775 [where ultimate award exceeded initial appraisal by less than 20% and "a substantial part of claimant's counsel and appraisal fees were expended in an effort to achieve an inflated value and propounding valuation theories that were totally rejected by Supreme Court" the record supported a finding that expenses were not necessarily incurred to achieve just and adequate compensation]; Matter of City of New York [China Plaza Co.], 254 AD2d 210 [1st Dept 1998]; see also Meyers, 166 Misc 2d at 588 [citing National Fuel Gas Supply Corp. v Cunningham Natural Gas Corp., 191 AD2d 1003, 1004] [4th Dept 1993] ["There should be a reasonable relationship between a fee allowance and the amount recovered]).
Attorney Fees
Claimant seeks attorney fees in the amount of $277,999.50: $182,802.00 through the completion of the first trial; $39,190.00 for the unsuccessful appeal from the judgment following that trial; $56,007.50 in preparation for and litigation of the trial after remittal from the Appellate Division. At the first trial, Claimant sought nearly $2,000,000 in consequential damages for which it was ultimately awarded $148,000. Further, the total award of $394,750 including the stipulated direct damages, exceeded the advance payment by only $146,550. The attorney fees of $182,802.00 clearly were incurred in part "in an effort to achieve an inflated value" and do not bear a reasonable relationship to the amount recovered (Village of Johnson City, 277 AD2d at 775; cf. Matter of Hoffman v Town of Malta, 189 AD2d 968 [3d Dept 1993] ["the value assigned to the property by claimant's expert was within 21% of the actual award and, therefore, it cannot be said that claimant incurred his expenses in an effort to obtain an award far greater than the actual award]). The attorney fees were billed on an hourly basis and claimant's assertion that the rates charged are in line with prevailing rates in the area for similar services by attorneys of comparable skill, experience and reputation is unchallenged (see Claimant's Affirmation in Support [Motion No. M-84329], ¶ 3). However, whether the fee arrangement is reasonable and enforceable between the claimant and the attorney does not end the inquiry. "[A] fee sought by means of § 701 is one to be paid by the condemnor from public funds without any input into the terms of the retainer. Condemnees may not set the standard of reasonableness" (Matter of City of New York, 1 Misc 3d 911[A] [Sup Ct, Kings County 2003]). Had claimant and its attorney opted for a 33% contingency fee, which the Court notes is a customary fee arrangement, the fee would have been $103,335.59 ($146,550.00 plus 9% interest from October 2, 2002 to the date of decision, September 4, 2013 [$144,058.65], and interest thereafter to a projected date of judgment of June 1, 2014 [$19,398.13] = $310,006.78 x 33% = $103,335.59), an amount which bears a more reasonable relationship to the amount recovered. Although claimant's appeal was unsuccessful, claimant's attorney was also charged with defending the award against defendant's appeal (cf. EFCO-FA Dev. Corp. v State of New York, UID No. 2002-028-051 [Ct Cl, Sise, J., Aug. 29, 2002] [expenses of unsuccessful appeal are not recoverable]). Likewise, the fees incurred in connection with the second trial were not expended in the pursuit of unrealistic damages, but rather to defend against the State's efforts to reduce the award. Therefore, the Court exercises its discretion and awards attorney fees in the amount of $198,533.09 ($103,335.59 + $39,190 + $56,007.50).
Expert Fees
The wide discrepancy between the amount sought by claimant and the Court's award was due in large part to a faulty methodology employed by claimant's appraiser. Specifically, the Court refers to the appraiser's valuation of the rear parcel or "excess lands" in the before-taking situation, his treatment of the property as two parcels instead of three in the after-taking situation, and his valuation of the temporary easement at $1,120,500, an element of damages for which the Court made no award. The Court is mindful of the necessity of expert opinion in proving an appropriation claim and, therefore, finds that an additional allowance is warranted. However, the Court has discounted its award for appraisal fees by 50% to reflect that part of the appraiser's opinion which the Court rejected and which the Court considers to be an effort to obtain inflated damages. Accordingly, the Court awards $20,912.25 for claimant's appraiser, Gerald Griffin, Jr. The Court further awards engineer fees paid to Morris Associates in the amount of $14,746.32 and Lanc & Tully in the amount of $2,790.50.
The actual expenses paid to Lanc & Tully for the services of John O'Rourke were $5,581.00. Claimant reduced its claim for those expenses by 50% in recognition of the Court's limited use of O'Rourke's testimony.
Costs
Claimant further seeks an award of costs in the amount of $14,117.97 which reflects a deduction of $1,348.18 attributable to "computer research" (see Matter of City of New York , 2009 WL 8749700). The Court notes that the amounts deducted for computer research includes Lexis charges but not a Westlaw charge of $301.52 delineated on the cost ledger (DiNardo Affirmation in Support, Ex. 4). Claimant has submitted invoices in support of its claim for the remainder of its expenses. Accordingly, the Court awards $13,816.45 for those expenses.
Conclusion
In accordance with the foregoing, defendant's motion for a suspension of interest (Motion No. M-84320) is DENIED. Claimant's motion (Motion No. M-84329) is GRANTED to the extent of awarding claimant $250,798.61 as an additional allowance pursuant to EDPL § 701 and is otherwise DENIED. Claimant is directed to execute the Land Payment Voucher and return it to the Attorney General within 15 days of the filed stamped date of this Decision and Order. In the event claimant fails to comply, interest shall be suspended from that date until the closing papers are returned to the Attorney General. The Attorney General shall have 30 days from the filed stamped date of this Decision and Order to notify the Clerk of the Court in writing of its entitlement to a suspension of interest hereunder. After said 30-day period, the Clerk of the Court shall enter judgment forthwith unless a motion on notice has been made and filed within said period to further stay entry of judgment.
LET JUDGMENT BE ENTERED ACCORDINGLY.
April 22, 2014
White Plains, New York
Terry Jane Ruderman
Judge of the Court of Claims