54-30 43rd St., LLC v State of New York
Annotate this CaseDecided on November 29, 2012
Ct Cl
54-30 43rd Street, LLC, Claimant,
against
The State of New York, Defendant.
81524
For Claimant:
Goldstein, Rikon & Rikon, P.C.
By: Jonathan Houghton, Esq.
For Defendant:
Eric T. Schneiderman, Attorney General
By: Michelle M. Walls, AAG
Alan C. Marin, J.
The State of New York, as part of the Kosciusko Bridge project, appropriated petitioner's property at 54-30 43rd Street in Maspeth, Queens effective June 28, 2011. This special proceeding was initiated to determine potential conflicting claims arising therefrom. The Court had afforded any potential stakeholders notice of its hearing conducted May 24, 2012, at which it became apparent that the only genuine stakeholders were the petitioner and its mortgagee, U.S. Bank National Association (the bank).
A second hearing on June 5, 2012 prepared the way for the parties' stipulation of July 9, 2012 that portions of the State's advance payment of $2,846,675.00 were to be paid out as [*2]follows: $1,422,314.45 to the bank,[FN1] $1,074,360.55 to the petitioner, with the balance of $350,000 to "remain on deposit in Eminent Domain Account number W119660 . . . subject to a final order of distribution by the Honorable Alan C. Marin in Special Proceeding number 147."
The remaining issues are: i) the amount of interest on the advance payment; and ii) a number of items in dispute between petitioner and the bank.
I. Interest Payable by the State on its Advance Payment
The Department of Transportation, the affected State agency, acting pursuant to EDPL § 304 (A), on June 3, 2011, mailed to petitioner a written offer package, which included the amount being offered as advance payment with accompanying documents, one of which was defendant's preprinted form. The form, entitled "Agreement for Advance Payment," had the dollar amount and description of the property filled in (see exhibit 2 to the State Respondents' Verified Answer, dated May 9, 2012). Paragraph 2 of the printed form reads: " 2. The Claimant agrees, as a prerequisite to such advance payment, to execute and deliver or cause the execution and delivery to the Attorney General of all formal papers which the Attorney General deems necessary to authorize payment and to secure to the State a full release of all claims (other than the claim of Claimant) by reason of the aforementioned appropriation, including claims by reason of any estate or interest in the streams, lakes, drainage and irrigation ditches or channels, streets, roads, highways, or public or private rights-of-way, if any, adjacent to or abutting on the above-mentioned property required for the purposes of said project."
On June 17, 2011, petitioner responded with what its cover letter characterized as "four fully-executed . . . Agreements for Advance Payment . . . ." However, in paragraph 2 of the returned Agreement, with respect to the papers required, petitioner crossed out the words, "which the Attorney General deems necessary to authorize payment and to secure to the State a full release of all claims," and handwrote instead: "reasonably necessary to effect a valid transfer of title as acquired. See EDPL sec. 304(c)." At the end of such paragraph, it added, "Claimant will not provide releases by any tenants" (see exhibit 2 to the State Respondents' Verified Answer).
The Department, by letter dated June 29, 2011, wrote back that:
"[It] is requesting that you consider having the enclosed agreements signed as is'. . . Please inform the claimant that payment will not be made as changes were made to the agreement without our authorization. If the claimant will not sign the agreement as is' then we will be compelled to deposit the compensation."
(see exhibit F to Petitioner's Order to Show Cause). The advance payment was deposited in an eminent domain account on October 3, 2011.
Petitioner maintains that the State's form language was open-ended and went beyond what the EDPL requires: "This broad, unrestricted and unlimited power would permit the State to demand any and all documents it could think of, including those having nothing to do with effecting a valid transfer of title" (see ¶ 25 of the Verified Petition annexed to Petitioner's Order [*3]to Show Cause). Also, in a subsequent letter dated August 10, 2012, petitioner raised the issue that tenant releases, while requested by the State, were never required in the first place and that counsel for the State admitted that tenants had no right to any portion of the advance payment.
EDPL § 304 (A) (4) provides that "[t]he right of the condemnee to the advance payment shall not be conditioned on the waiver of any other right." Petitioner has advanced no precedent to demonstrate that the language of the form has or could be used to petitioner's detriment to trump the statute.[FN2] Accordingly, the Court concludes that petitioner is entitled to the interest accruing on eminent domain account W119660, and not the rate provided by State Finance Law § 16.
II. Mortgagee-Mortgagor Issues
The bank-mortgagee seeks "that amount necessary to pay all amounts owed to Mortgagee under the Loan Documents for non-default and default interest, the negative tax escrow balance, prepayment consideration, late charges and fees and costs, and to satisfy Mortgagee's first priority lien" (see p. 3, ¶ a of the Bank's Response dated August 20, 2012).
As for prepayment of the mortgage brought about by the appropriation, such is not a voluntary prepayment, a distinction made by the Third Department in Silverman v State of New York (48 AD2d413 [3d Dept 1975]), and accordingly, the bank is not entitled to any amount for prepayment.[FN3]
In view of the discussion in Part I, the rate of interest that the mortgagee-bank receives is the W119660 account rate for the relevant time period.[FN4] Its requested amounts of $107,414.72 and $75,650.00 for interest and default interest as of August 1, 2012 shall be recalculated to the extent the amounts are inconsistent with this Decision and the resulting figure will then be part of the additional payment to the bank from the remaining $350,000 (see ¶ 3.a and ¶ 3.b. of the Bank's Reply dated August 10, 2012).[FN5]
There is insufficient basis in the record to dispute the bank-mortgagee's request for payment of the negative tax escrow balance (to the extent that such relates to taxes due for the period preceding the date of taking), and late charges in the amount of $7,014.90 (see id., ¶ 3.c and ¶ 3.e). These will be part of the additional payment to the bank from the sum remaining.
Further, the bank seeks fees and costs of $65,609.74 (Id., ¶ 3.f) in connection with the condemnation procedure and litigation, relying on ¶ 6 of the mortgage security agreement (see ¶ 38 of the Bank's Reply dated August 10, 2012 and exhibit 2 to the Bank's Answer and Cross-Claim dated May 4, 2012). This is the agreement, and the bank not unreasonably requires such to redeem the value of its mortgage. With that said, the Court has not been supplied with [*4]additional detail on fees and costs, and therefore would request that the bank and petitioner confer on the lender's costs and reasonable attorneys' fees incurred in connection with the State's appropriation in an effort to agree on the amount. Said amount will then be part of the additional payment to the bank from the sum remaining.
***
This is the Decision and Order of the Court;[FN6] the parties are directed to prepare and submit to Chambers a proposed Order in accordance herewith within 45 days of the filing of the instant Decision and Order, containing the additional total payment to the bank from the sum remaining in the W119660 account, with the balance payable to petitioner 54-30 43rd Street, LLC.
New York, New York
November 29, 2012
ALAN C. MARIN
Judge of the Court of Claims
Footnotes
Footnote 1: Payable to Keycorp Real Estate Capital Markets, Inc., Loan Number 10050584.
Footnote 2: Compare Matter of County of Nassau, 87 Misc 2d 1004 (Sup Ct, Nassau County 1976).
Footnote 3: See EDPL § 702 (A) (2), which provides that the condemnor shall reimburse the condemnee for any penalty incurred for pre-payment of the existing mortgage.
Footnote 4: See Security Natl. Bank of Long Is. v Sabatelli, 38 Misc 2d 503 (Sup Ct, Suffolk County 1962).
Footnote 5: See ¶ 71 of Petitioner's Affirmation in Reply and in Opposition dated May 21, 2012.
Footnote 6: The following papers were reviewed. From Petitioner: Petitioner's Order to Show Cause signed February 1, 2012 with Verified Petition dated January 24, 2012 and exhibits A through F; Petitioner's Affirmation in Reply and in Opposition dated May 21, 2012 with exhibits A and B; Petitioner's letter dated August 10, 2012; and Petitioner's letter dated August 20, 2012 with exhibit A. From the State Respondents: State Respondents' Verified Answer dated May 9, 2012 with Affirmation dated May 9, 2012 and exhibits 1 and 2; State Respondents' Memorandum of Law dated August 9, 2012 with exhibits A through F; and State Respondents' letter dated August 20, 2012. From U.S. Bank National Association: Bank's Answer and Cross-Claim dated May 4, 2012 with Affidavit in Support notarized May 2, 2012 and exhibits 1 through 7; Bank's Reply dated August 10, 2012 with exhibits A and B; and Bank's Response dated August 20, 2012.
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