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Costs Of Remediation In Condemnation
By M. Robert Goldstein & Michael J. Goldstein
It has long been held in New York State that the jurisdiction
of the condemnation court is limited by statute solely to
condemnation proceedings and that a non condemnation action
may not be joined to a condemnation action (Culver Contracting
Corp. v. Humphrey, 268 N.Y. 26 (1935); Matter of City of New
York (Triborough Bridge), 159 Misc. 617, aff'd, 257 App. Div.
940, leave to app den, 282 N.Y. 808). Despite this, the issue
of title to the condemned property, as well as priority of
liens, is deemed a condemnation issue and is thus to be determined
in the condemnation court (In re Jefferson Houses, 306 N.Y.
278 (1954); Hemon v. Comptroller of the State of New York,
197 A.D.2d 807, 603 N.Y.S.2d 78 (3d Dept., 1993); In re Board
of Water Supply, 179 A.D. 877, 880, 107 N.Y.S.2d 531 (1917);
Schiff v. Gold et al., 176 Misc. 119, 26 N.Y.S.2d 392 (Sup.
Ct., West. Co., 1991).
This creates an interesting situation in condemnation proceedings
where the property taken is contaminated. What happens where
the property owner is not the contaminator or not the sole
contaminator and would have a right to seek to recover the
costs of remediation or seek contribution for same. That right
is triggered by the cleanup of the property, either by him
or by the condemnor. But the valuation of the property in
condemnation, where the value is reduced based upon cost of
remediation, assumedly does not trigger that right. Or suppose
he knowingly bought a property which was contaminated and
secured a contract from the seller indemnifying him against
any cost of remediation. Or worse still, suppose we are dealing
with non toxic contamination, an oil or gasoline spill, where,
under the Navigation Law, Article 16, only the present owner
of the property can sue the party responsible for the cost
of remediation. Once the condemnee is out of title, he no
longer has that right.
In the normal course of events, in the case of a toxic or
hazardous contamination, under pertinent statutes (eg. CERCLA),
where remediation is ordered, he has a right to seek a recovery
from the actual perpetrator(s) for all or part of the cost.
Thus, if he innocently bought a contaminated property and
the EPA sued him, he could bring the prior owners into the
suit and possibly secure indemnification from the actual culprit(s).
But, as the present law stands in condemnation proceedings,
if the condemnor seeks what is, in effect, an offset against
the value of his property of the cost of remediation, assuming,
for this purpose, that it is a valid approach to value (cf.
Inmar Associates, Inc. v. Borough of Carlstadt, 112, N.J.
593 (1988)), the condemnee cannot shift the cost of remediation
to the party ultimately responsible in that law suit. Having
the value of his property reduced by the cost of remediation,
he must bring a plenary action to seek to be made whole, where
the determination of the condemnation court as to both the
condition and the cost of remediation will not bind the party
he alleges to be ultimately responsible for remediation costs,
but might bind him on the basis of collateral estoppel. In
this way, it is entirely possible for the condemnation court
to make findings disparate with the findings in the plenary
suit, leaving the condemnee not only with the possibility
of being unjustly stuck but faced with double litigation costs.
Or suppose the condemnation court uses the cost of remediation
as the basis for finding a value, but does not make a specific
finding as to the cost of remediation, but only the ultimate
finding of value. Now what does he do. That also impacts on
the condemnee who brought the property based upon a contract
of indemnification from his credit worthy buyer. It also provides
no basis for relief from the actual contaminator. Worse yet,
it might be argued that the impact on market value is totally
different from the cost of remediation and then how do you
seek contribution and that is to assume the mere reduction
in value for a potential remediation will give him that right
as opposed to actual remediation, a very large assumption
indeed.
Take the instance of the property contaminated by an oil
or gasoline spill on adjacent property which found its way
into the water table and has migrated onto the condemned property.
Under New York State law only the present owner of the property
may bring suit to recover the cost of remediation. But once
the property is condemned he no longer is the owner and the
condemnor is the sole party which holds that right. What happens
then when the condemnor seeks an offset from the value of
the property by reason of the cost of remediation and succeeds.
What happens if it succeeds but does not remediate or does
not remediate to the extent claimed. What about his loss of
a right to bring suit against a prior owner who may have been
responsible for the spill while finding the value of his property
has been penalized by the cost of remediation and he has been
denied any remedy by reason of the condemnation. If, indeed,
New York Courts will hold to their long standing position
of the limited jurisdiction of the condemnation court and
the cost of remediation can be sought to be collected by the
condemnor in the guise of a deduction from the value of the
property, we are looking at the potential for very obvious
injustices. Other states have other answers. In New Jersey
the whole issue of property contamination, cost of remediation
and fixing of liability can be tried together with the condemnation
proceedings. We have seen it happen in connection with the
Newport City Development condemnation proceeding. At least
one Appellate Court in the State of Illinois has found a different
answer where, similar to the situation in New York, its statute
provides that the condemnation court's jurisdiction is limited
to the condemnation proceeding itself.
In Department of Transportation of the State of Illinois
v. Parr, 633 N.E.2d 19 (App. Ct., 3d Dist., 1994), the lower
court refused to permit in evidence the alleged costs of an
environmental cleanup of the property. In that case the IDOT
had sought to value the property "at zero due to the
alleged presence of environmental hazards on the property
and the costs of removing the hazards". The case was
appealed with a certified question. As the Court stated; "we
are called upon to determine whether environmental remediation
costs are admissible in eminent domain proceedings to determine
the fair market value of the subject property." The Court
agreed with the trial court and ruled environmental clean
up costs were not admissible in a condemnation proceeding.
Some of the language of the Court is of interest.
"We also find that even if environmental remediation
costs were admissible under section 7-119 (Eminent Domain
Act), such admission would violate the procedural due process
rights of the owners of condemned property. We determine that
the Costs' admission in a condemnation proceeding without
the procedural safeguards provided in the Environmental Protection
Act would permit the IDOT to circumvent the procedures established
by the Legislature and the Environmental Protection Agency
for recovering environment remediation costs. _ _ _ Upon receiving
information that an alleged violation of the act (Environmental
Protection Act) and its regulations has occurred, the agency
may investigate and file a complaint against the offender
with the Board (Pollution Control Board). _ _ _ The Board
has the authority to hear such complaints. At such a hearing,
the complainant bears the burden of proving that a violation
of the Act or its regulations has occurred or may occur and
the respondent has caused the violation, _ _ _ a respondent
may file third party actions against other parties who may
be responsible for environmental contamination _ _ _.
" _ _ _ Due process also requires that orderly proceedings
must advance according to established rules which do not violate
fundamental rights. Under the Act, IDOT is legally entitled
to commence an enforcement action to recover environmental
remediation costs yet nothing in the record indicates that
IDOT has commenced an enforcement action. Consequently, permitting
IDOT to admit evidence of remediation costs in an eminent
domain proceeding would effectively allow IDOT to recover
these costs without adhering to the procedures established
to provide that remedy. We cannot allow IDOT to achieve such
a result.
"As stated previously, property owners against whom
remediation costs are sought have a right to require proof
of the existence of a violation. They also have a right to
bring third-party actions against prior owners of the property
and require such other parties to pay remediation costs if
the proper tribunal finds them to be responsible. The Eminent
Domain Act by itself neither allows for third party actions
nor addresses potential liability under the Environmental
Protection Act. The only established procedures for addressing
violations of the Environmental Protection Act and providing
remedies for such violations are found in the act itself and
the case law giving construction to the Act. For the reasons
given, we conclude that the admission of remediation costs
at an eminent domain proceeding violates the rights of property
owners to have their potential liability properly adjudicated
in a proceeding under the act with the attendant procedural
safeguards." (emphasis in original).
We suggest that this decision is substantially applicable
here in New York. We believe, for the reasons given by the
Illinois Court, that in view of the limited jurisdiction of
New York Courts that to, in effect, recover the costs of remediation
by deducting them from the value of the property in a condemnation
proceeding violates the due process rights of a condemnee.
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