Eminent Domain Law

Remediation Costs Excluded from Valuation Proceeding

Matter of D'Onofrio v. Village of Port Chester

NYLJ 7/25/05, p. 21, col. 1

Supreme Ct., Westchester Cty

(Dickerson, J.)

In the village's condemnation proceeding, claimant landowner moved to have costs of environmental remediation excluded from evidence in valuing the condemned property. The court granted the motion, holding that the property should be valued as if remediated, and the proceeds retained in escrow pending a determination of claimant's liability for cleanup costs.

The village condemned the subject parcel, a small industrial property, as part of its Marina Urban Renewal Redevelopment Project. In the late 1800s, the property was the location of a manufactured gas plant (MGP) owned and operated by Con Edison's predecessors. Current claimant purchased the property in 1976 and 1977, allegedly unaware of any environmental contamination. In 2002, however, at the time of the condemnation, the village entered into an agreement with the state to undertake environmental remediation of the site, and later entered into an agreement with the a developer under the terms of which the developer agreed to assume the village's responsibilities for cleanup, and under the terms of which the developer and Con Ed agreed to pay most of the cleanup costs. Claimant landowner did not participate in any of these agreements. In the condemnation proceeding, however, the village sought to introduce evidence of remediation costs to reduce the value of the property. Claimant moved to exclude that evidence.

In holding that the evidence should be excluded, the court expressed concerns of possible double takings if condemnation value were reduced by cleanup costs, and the condemned landowner nevertheless remained liable for those costs. Moreover, the court noted that in the condemnation proceeding, claimant landowner in this case was not in a position to establish its rights with respect to Con Edison. As a result, the court concluded that evidence of remediation costs should be excluded in the condemnation proceeding, but the proceeds of the condemnation should remain in escrow pending determination of claimant landowner's liability for remediation costs.

COMMENT

In Matter of City of New York v Mobil Oil Corp., 12 A.D.3d 77, the court excluded evidence of environmental contamination in a condemnation valuation proceeding. There, the City of New York acquired property from Mobil Oil Corporation through condemnation. The city's appraisal reduced the property's value by the remediation costs associated with contaminated property. The condemnee moved to preclude evidence of contamination in the condemnation valuation proceeding. As this was an issue of first impression to the courts in New York, the court looked to outside jurisdictions and followed the New Jersey approach, finding that excluding contamination costs in a condemnation valuation proceeding would prevent a double taking. Because a condemnee may face liability for environmental damages under the Navigation Law, reducing the value of the property in a condemnation proceeding, and then later holding a condemnee liable for the clean up costs under the Navigation Law would subject the condemnee to potential double liability. The court therefore held that the condemned property should be valued as if it had been remediated, and ordered the condemnor to “hold in escrow any condemnation award pending the outcome of the Navigation Law proceeding.” Id. at 84.

In In Re City of Syracuse Indus. Dev. Agency, 2005 N.Y. App. Div. LEXIS 6312, the Fourth Department further noted that a condemnation hearing was not the appropriate forum to consider environmental contamination costs. Instead, admission of this type of evidence is more appropriate in a Navigation Law proceeding that allows the condemnee to make certain defenses and join third parties. D'Onofrio furnishes an example. Condemnee challenged its liability for remediation costs, citing negotiations in which the developer of the property as well as Con Edison, the property's prior owner, agreed to pay most of the cleanup costs. The court suggested that negotiations between the condemnor and third parties should be considered in determining whether or not the condemnee is ultimately liable for any remediation costs, but those negotiations could not be considered in a condemnation proceeding. Hence, the cost of remediation should be excluded from consideration in the condemnation proceeding, and considered instead in a Navigation Law proceeding.

Remediation Costs Excluded from Valuation Proceeding

Matter of D'Onofrio v. Village of Port Chester

NYLJ 7/25/05, p. 21, col. 1

Supreme Ct., Westchester Cty

(Dickerson, J.)

In the village's condemnation proceeding, claimant landowner moved to have costs of environmental remediation excluded from evidence in valuing the condemned property. The court granted the motion, holding that the property should be valued as if remediated, and the proceeds retained in escrow pending a determination of claimant's liability for cleanup costs.

The village condemned the subject parcel, a small industrial property, as part of its Marina Urban Renewal Redevelopment Project. In the late 1800s, the property was the location of a manufactured gas plant (MGP) owned and operated by Con Edison's predecessors. Current claimant purchased the property in 1976 and 1977, allegedly unaware of any environmental contamination. In 2002, however, at the time of the condemnation, the village entered into an agreement with the state to undertake environmental remediation of the site, and later entered into an agreement with the a developer under the terms of which the developer agreed to assume the village's responsibilities for cleanup, and under the terms of which the developer and Con Ed agreed to pay most of the cleanup costs. Claimant landowner did not participate in any of these agreements. In the condemnation proceeding, however, the village sought to introduce evidence of remediation costs to reduce the value of the property. Claimant moved to exclude that evidence.

In holding that the evidence should be excluded, the court expressed concerns of possible double takings if condemnation value were reduced by cleanup costs, and the condemned landowner nevertheless remained liable for those costs. Moreover, the court noted that in the condemnation proceeding, claimant landowner in this case was not in a position to establish its rights with respect to Con Edison. As a result, the court concluded that evidence of remediation costs should be excluded in the condemnation proceeding, but the proceeds of the condemnation should remain in escrow pending determination of claimant landowner's liability for remediation costs.

COMMENT

In Matter of City of New York v Mobil Oil Corp., 12 A.D.3d 77, the court excluded evidence of environmental contamination in a condemnation valuation proceeding. There, the City of New York acquired property from Mobil Oil Corporation through condemnation. The city's appraisal reduced the property's value by the remediation costs associated with contaminated property. The condemnee moved to preclude evidence of contamination in the condemnation valuation proceeding. As this was an issue of first impression to the courts in New York, the court looked to outside jurisdictions and followed the New Jersey approach, finding that excluding contamination costs in a condemnation valuation proceeding would prevent a double taking. Because a condemnee may face liability for environmental damages under the Navigation Law, reducing the value of the property in a condemnation proceeding, and then later holding a condemnee liable for the clean up costs under the Navigation Law would subject the condemnee to potential double liability. The court therefore held that the condemned property should be valued as if it had been remediated, and ordered the condemnor to “hold in escrow any condemnation award pending the outcome of the Navigation Law proceeding.” Id. at 84.

In In Re City of Syracuse Indus. Dev. Agency, 2005 N.Y. App. Div. LEXIS 6312, the Fourth Department further noted that a condemnation hearing was not the appropriate forum to consider environmental contamination costs. Instead, admission of this type of evidence is more appropriate in a Navigation Law proceeding that allows the condemnee to make certain defenses and join third parties. D'Onofrio furnishes an example. Condemnee challenged its liability for remediation costs, citing negotiations in which the developer of the property as well as Con Edison, the property's prior owner, agreed to pay most of the cleanup costs. The court suggested that negotiations between the condemnor and third parties should be considered in determining whether or not the condemnee is ultimately liable for any remediation costs, but those negotiations could not be considered in a condemnation proceeding. Hence, the cost of remediation should be excluded from consideration in the condemnation proceeding, and considered instead in a Navigation Law proceeding.