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Cost To Cure - Only In My Back Yard
By M. Robert Goldstein & Michael J. Goldstein
Generally speaking, there are two kinds of takings in condemnation
proceedings - total and partial. Of the two, all else being
equal, the total taking is the easier valuation problem. Although
it is not as simple as it sounds, all the parties and the
Court usually have to determine is the price the property
would have sold for, had it been for sale and were there no
condemnation.
Partial takings, however, are an entirely different animal.
We must, of course, determine the value of the part taken.
Then we must consider what, if anything, has happened, as
a result of the taking, to the remainder of the property.
The generic term for that concept is consequential damages.
Care must be taken not to confuse consequential damages with
severance damages which is only one of two elements that make
up consequential damages. The other element is also called
consequential damages, confusing as that may be.
Severance damages are those damages that occur to the remainder
of the property simply by virtue of the fact that the part
appropriated is no longer in the condemnee's ownership. An
example of this is the taking that changes the configuration
of the property so that it can not be used with the same utility
it had before. Consequential damages, those that are not severance
damages, refer to damages by reason of the use to which the
portion taken is to be put. (South Buffalo Rwy Co. v. Kirkover,
176 N.Y. 301, Hill & Aldrich v. Mohawk & Hudson River
Rwy Co., 7 N.Y. 152, County of Erie v. Friedenburg, 221 N.Y.
389, Bohn v. Railway Co., 129 N.Y. 576). Obviously, a partial
taking for a sewage disposal plant, a landfill or an airport
runway is going to affect the remainder in a different way
than a passive park. For the purposes of this article, we
will refer to both as consequential damages.
It is of great practical importance to know that the concept
of the total taking or of the direct taking of part of a property
is not the same as a consequential damage in that the value
of the whole or part directly taken, is determined on a taking
basis and that may not be diminished in any way. What the
condemnor takes must be paid for. There may be no mitigation
or offset for benefit. A consequential damage, on the other
hand, is just that, a damage. There is an obligation to mitigate
and there may be an offset. In condemnation, however, sometimes
the rules for mitigation are not the same as elsewhere.
Usually, in condemnation proceedings, the mitigation is called
a "cost to cure." Many people know of the "cost to cure" concept
but, experience tells us not too many fully understand it.
One of the common sense rules, in condemnation, involving
"cost to cure" is that the cost may not exceed the amount
the consequential damages would be were there no "cost to
cure." A lesser known and, in some circles, sometimes forgotten
rule, pertaining to "cost to cure" in condemnation proceedings,
is that you may not look outside the boundaries of the subject
property to find a "cost to cure." An exploration of some
of the cases that have expounded this rule is necessary, we
believe, to understand its application. Many of the cases,
but not all, involve the question of access or its denial
to the remainder property because the denial of access can
not be cured without going outside the boundaries of the remainder
property.
Reading Yochmowitz v. State of New York, 47 Misc.2d 85, a
1965 Court of Claims case, it is important to understand that
decision in the context of the case it cited as support. In
dealing with finding a "cost to cure" the access that had
been denied to the remainder property, the Court said:
"The Court is in accord with claimant's posture that the
traditional `cost to cure' theory utilized to fix the maximum
limit of consequential damages in normal permanent easement
acquisitions should not be applied to the case at bar, since
such an approach must necessarily be predicated on a clear
and unequivocal stipulation by defendant's Department of
Public Works that not only access to the highway as improved
will be guaranteed in perpetuity but also that this agency
will approve the removal of the fill required to restore
access. Wolfe v. State of New York, 23 A.D.2d 136, 259 N.Y.S.2d
13...."
"The Court finds that the express reservation contained
in the aforesaid representa-tion...does not meet the minimum
requirements of the stipulation heretofore mandated by the
Appellate Division in Wolfe v. State of New York, supra.
...Therefore, claimant is entitled to an award for consequential
damages not limited to the cost to cure but based upon the
proof introduced as to the diminished value of claimants
remaining property by reason of the denial of access..."
In effect, the Court of Claims, relying on the Appellate
Division decision in Wolfe v. State of New York, held that
there was a denial of access to the remainder property which
could be cured by going outside the subject property's boundaries
if the condemnor would unequivocally agree to give that access
over its property (the permanent easement). But the Appellate
Division's decision in Wolfe was later reversed (Wolfe v.
State of New York, 22 N.Y.2d 292) on the basis that the access,
which, of necessity, had to be outside the property, had to
be there at the time of the taking, not by a subsequent "cure."
Clearly, then, substituting the Court of Appeals decision
for the Appellate Division decision, the "cost to cure" in
the Yochmowitz case, occurring outside the property, could
not be made to apply by a subsequent act of the condemnor.
Three years later, the Appellate Division, Third Department,
stated it in terms that leave no doubt. In St. Patrick's Church,
Whitney Point v. State of New York, 30 A.D.2d 473, 294 N.Y.S.2d
275, the condemnee actually cured the problem by purchasing
land adjacent to the appropriated property fourteen months
after the appropriation and the State offered the price paid
for the land as the "cost to cure." The Appellate Division,
Third Department said, at 294 N.Y.S.2d 277:
"We are not here dealing with any mitigation of damages
by something that occurred or could occur upon the property
remaining after the appropriation as in Mayes Co. v. State
of New York, 18 N.Y.2d 549, 277 N.Y.S.2d 393, 223 N.E.2d
881 where the `cost to cure' theory was allowed because
the cure was to occur within the bounds of the claimant's
lands. Sound reason requires that the theory cannot be used
in cases of subsequent acquisitions of lands outside the
bounds of the appropriated property; nor should a condemnee's
right to compensation be made to depend upon whether adjacent
land could easily be purchased. These established principles
are clearly recognized in 4 Nichols, Eminent Domain (3d
ed.) (S 14.22, p. 525) where, in referring to the rule of
cost of restoration, it is stated that `the restoration
must be possible without going outside the remaining portion
of the tract in controversy,'....That the adoption of the
novel theory advanced by the State, illogical in its foundation,
might well lead to confusion and havoc in the use of well-reasoned
and judicially founded principles of providing just compensation
for the taking of a citizen's lands, is all too evident."
The same Appellate Division restated that position in 1972,
in Campbell v. State of New York, 39 A.D.2d 615, 331 N.Y.S.2d
75, where it said, "The State's `cost to cure' theory of damages
was properly rejected since the lack of access could not be
cured without using land outside of the subject property."
Following these two decisions, two cases arose with the same
issue. We represented claimants in both of those cases. The
first one, Pollak v. State of New York, 41 N.Y.2d 909, 394
N.Y.S.2d 617 was a taking for a grade crossing elimination,
depressing the grade of the road below the grade of the property,
thereby cutting off all practical access to the property.
During construction, they built a detour that carried vehicles
by the remainder property and provided physical access to
it but neglected to create a legal street. After claimant's
appraisal, on exchange, alerted the State to its error, it
attempted, at that late date, to cure the access problem by
creating a legal road across their own and another's land
to the remainder property where the detour had been built.
The Court of Claims held that the State had thereby cured
the problem and declined to award damages on the basis of
loss of access. We argued to the Appellate Division that,
based on the cases we recited above, and some others, including
Wolfe, that the State could not, after the appropriation,
cure the problem they caused by creating an access outside
the boundaries of the property. The Appellate Division reversed
the decision of the Court of Claims (50 A.D.2d 201, 377 N.Y.S.2d
259) and the Court of Appeals affirmed the decision of the
Appellate Division, saying:
"The fact is that deprivation of the legal right to access
rendered claimants titles unmarketable. In like circumstances,
we have held that the absence of an explicit reservation
of a right to access in the original appropriation may not
be cured by provisional expedients, offered by and subject
to the grace of the State."
Had the "cure" been of the type that it could be effected
within the property's boundaries, an obvious impossibility
in that case, and thereby, inherent in the property, the result
probably would be different.
The second case we referred to above, following on the heels
of the Pollak case, was Matter of County of Suffolk (Arved,
Inc.), 63 A.D.2d 673, 404 N.Y.S.2d 676. In that case, Suffolk
County, in building a limited access highway, took property
from Arved, "without access" to the remainder. It did provide
access at a point further down where they believed another
road existed that led to the remainder property. It was shown
that the road, if it ever existed, even though it was on local
maps, was not shown to be at the point argued for by Suffolk
County leaving another person's property between Arved's property
and the new highway. We also argued that even if the legal
right to use the area described was at that point, the "road"
was not improved and could not be used as an access road.
The trial court declined to find a damage based on a loss
of access and the Appellate Division, Second Department, reversed,
saying, inter alia, at 404 N.Y.S.2d 678:
"Finally, we are of the view that requiring claimant to
cure its access problem by constructing a new road on the
alleged roadbed of Old Town Road which bisects Gifford's
property, from its own westerly property line to the beginning
of the County's paved road, is a prohibited application
of the cost-to-cure doctrine. Claimant had no right or permission
from the County, Town or Gifford, at the time of the taking
to extend the road to its property line; the cure must be
accomplished without going outside the boundary lines of
the subject property if severance damages are to be mitigated
(see Gluckman v. State of New York, 37 A.D.2d 870, 325 N.Y.S.2d
99)."
The Second Department repeated this in 1983 in B&B Food
Corp. v. State of New York, 96 A.D.2d 893, 466 N.Y.S.2d 60
when it said, "Furthermore, the `cost to cure' theory of damages,
proffered by the State may not be used to mitigate consequential
damages where the cure must be accomplished by going outside
the tract in controversy." Also, see Footnote 1 in Matter
of County of Schenectady, 194 A.D.2d 1004, 599 N.Y.S.2d 674
(1993).
As part of this concept, the Courts have included what, to
us, is basically the same proposition but applied to a different
type of fact situation. It is that the "cost to cure" method
of mitigation may not be used if the cure involves getting
a permit or permission from an outside source such as a government
agency, even though the physical work might be accomplished
within the boundaries of the subject property. It really grew
out of the Arved case, supra, and Gluckman v. State of New
York, 37 A.D.2d 870, 325 N.Y.S.2d 99. Although Gluckman involved
the right, asserted by the State, to improve an area as a
road that was outside the subject property when there was
an easement of access over that area, the Third Department
held that the "cost to cure" may not mitigate damages when
it must be accomplished outside the subject property. As the
Court stated, it was based, in part, on the fact that, "the
extension would have to be constructed over a public right
of way and claimants neither had a permit from the town to
complete the road nor even a permit or any document or other
evidence that the State, as of the appropriation, had granted
them a right to complete the road." In Arved, the Second Department,
although holding that there was no public road, said that
even had there been one, Arved did not have permission to
build on it and, therefore, the proposed cure could not be
used.
This application of the concept was referred to more specifically
by the Appellate Division, Third Department and the Court
of Appeals in Donaloio v. State of New York, 99 A.D.2d 335,
472 N.Y.S.2d 946, aff'd 64 N.Y.2d 811, 486 N.Y.S.2d 924).
The Appellate Division said at 472 N.Y.S.2d 950:
"We also must reject the trial court's concept of a `partial
cure' as found in these circumstances. It is clear from
the testimony that the proposed cure, being an on-site sand
filtration system, requires a discharge of effluent through
facilities provided, or to be provided, by the State in
order to be discharged into the Susquehanna River. Obviously,
this requires the use of land outside the subject property,
as well as permits from governmental authorities, a concept
which has consistently been rejected by the Courts of this
State in determining consequential damages." (Emphasis ours)
This was followed by the decision of the Court of Appeals
at 624 N.Y.2d 811 which said:
"The only feasible alternative method demonstrated at trial
for claimants to dispose of the sewage generated by their
restaurant required governmental approval of the use of
certain State facilities not previously committed to this
purpose. Representations at trial, years after the appropriation,
that the necessary authorizations would be forthcoming upon
application by claimants do not satisfy the requirement
-- if the proposed cure is to affect a mitigation of damages
-- for timely unequivocal assurance by the State, the condemnor,
that this alternative would be implemented."
From all that we have recited above, it is clear that, in
condemnation or appropriation proceedings, when there is a
partial taking and a consequential damage, a "cost to cure"
method of mitigating damages may not be used if, after the
acquisition, it requires accomplishing it by going outside
the boundaries of the property, including seeking governmental
approvals not existing at the time of the condemnation or
appropriation.
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