Eminent Domain

Woodworking Equipment Is Not Compensable Trade Fixture

Matter of City of New York (Melrose Commons Urban Renewal Area)

NYLJ 10/29/08, p. 26, col. 1

Court of Appeals

(Opinion by Kaye, Ch. J.)

In a condemnation proceeding, the city appealed from the Appellate Division's affirmance of the Supreme Court's determination concluding that woodworking equipment constituted compensable trade fixtures. The Court of Appeals reversed, holding that because the functional utility of the equipment would not be lost if removed from the premises, the equipment did not constitute compensable trade fixtures.

The city condemned property owned and occupied by a company that operated a woodworking shop on the premises. Landowner sought compensation for 147 items, including table saws and heavy-duty hand tools. Several of the machines required dedicated electrical wiring and installation of beams to support their weight. The equipment was all used in connection with the woodworking business, and landowner claimed that they would generate a substantial loss in value in the secondhand market. The city, by contrast, argued that the items could function with the same utility in another business, and were not, therefore, compensable trade fixtures. The Supreme Court held that the claimed items were compensable trade fixtures, and the Appellate Division, after excluding a few items, affirmed the Supreme Court's determination. The city appealed.

In reversing, the Court of Appeals noted that the law of fixtures originated in disputes between buyers and sellers about what equipment had become part of the realty and therefore passed to the buyer by the terms of the contract of sale. The court then noted that in a series of cases, courts had held that fixtures should be considered as part of the value of condemned property. In those cases, the courts had focused on the permanence of the installation, the injury that would result to the equipment or the machinery if it were removed, whether the building was specially designed to house the equipment, and whether the equipment would lose substantial value if removed. In this case, the court rejected landowner's argument that because he had placed the machines in an order that would maximize efficiency, the machinery should be treated as fixtures. Instead, the court noted that there would be no loss of functional utility if the items were removed from the shop. The fact that the items were worth less as secondhand goods than they were in his shop did not qualify the machines as compensable fixtures.

Landowner Has Inverse Condemnation Claim for Verizon's Failure to Remove Wires and Telephone Box

Corsello v. Verizon New York Inc.

NYLJ 11/5/08, p. 28, col. 3

Supreme Ct., Kings Cty

(Demarest, J.)

In an inverse condemnation action brought by landowner against Verizon for placing a terminal box on landowner's property without compensation, Verizon moved to dismiss. The court granted the motion as to two duplicative claims, but otherwise denied the motion, holding that under Loretto v. Teleprompter Manhattan CATV, 458 U.S. 419, landowner had stated a cause of action.

Verizon placed a terminal box on the rear of landowner's building, and installed connecting wires to and from the building in the late 1970s or early 1980s pursuant to '27 of the Transportation Corporations Law, which authorizes telephone companies to construct and maintain lines and equipment over private land subject to the right of the owners to full compensation. The statute further provides that if the parties cannot agree on compensation, compensation “shall be ascertained in the manner provided in the eminent domain procedure law.” Landowner brought this action, asserting a statutory and constitutional right to compensation. Verizon moved to dismiss, asserting that landowner had given it a license to install the equipment, and that the statute of limitations had expired on landowner's claim.

In denying Verizon's motion to dismiss, the court noted that any oral license was revocable at the will of the landowner, so that even if the license precluded landowner from obtaining damages until the revocation, the license would not preclude an inverse condemnation claim. The court also noted that Real Property Law '261 provides explicitly that with respect to wires or cables used for telephone purposes, “no lapse of time whatever shall raise a presumption of any grant of, or justify a prescription of any perpetual right to, such attachment or extension.” As a result, the court rejected Verizon's statute of limitations defense. The court therefore held that Loretto was dispositive, and that Verizon's installation of rear wall terminals and connecting wires constituted a permanent condemnation requiring compensation of the landowner.

COMMENT

Real Property Law '261 proscribes a telephone company from establishing a right by prescriptive easement when it places “wire or cable” on property, regardless of the length of time the “wire or cable” remains on the property. A telephone company may expressly acquire an easement to maintain its facilities, or else it runs the risk that the landowner might demand removal, requiring the company to condemn the disputed rights under Transportation Corporations Law '27. Although '261 makes no reference to equipment other than “wire or cable,” in O'Meara v. Postal Telegraph-Cable Co., 279 NY 282, the Court of Appeals held that '261 also includes equipment that supports wires and cables. In O'Meara, the Court awarded landowner a judgment declaring that the telephone company could not establish a prescriptive right to maintain telephone poles on property. Thus, the company either had to pursue a condemnation proceeding in order to obtain the right, or it had to remove its wires and telephone poles from the property. In light of O'Meara, the court had little difficulty applying '261 to the rear-wall terminal in Corsello.

Whether landowner can recover more than nominal compensation in Corsello remains unclear. In Loretto v. Teleprompter Manhattan CATV Corp., 58 N.Y.2d 141, the Court of Appeals upheld Executive Law '828, which entitled landowners to nominal compensation of one dollar where cable television companies installed two large boxes and cables on the side of landowner's building. Executive Law '828 prevented a landowner from interfering with the installation of cable equipment and from demanding more compensation than that determined to be reasonable by the State Commission on Cable Television (the “Commission”). Authorized by '828, the Commission determined all landowners were entitled to compensation of one dollar, based in part on its conclusion that the values of the properties would increase with the greater access to cable television. Once the Commission set compensation applicable to all landowners, the court limited its review to whether the Commission acted arbitrarily or capriciously. In Corsello, by contrast, the legislature created no administrative body akin to the cable television commission, so that a court, in the first instance, will determine compensation due to the landowner pursuant to Eminent Domain Procedure Law. Because the court will not be limited to arbitrary and capricious review, the court may find the landowner is entitled to more than mere nominal compensation.

Woodworking Equipment Is Not Compensable Trade Fixture

Matter of City of New York (Melrose Commons Urban Renewal Area)

NYLJ 10/29/08, p. 26, col. 1

Court of Appeals

(Opinion by Kaye, Ch. J.)

In a condemnation proceeding, the city appealed from the Appellate Division's affirmance of the Supreme Court's determination concluding that woodworking equipment constituted compensable trade fixtures. The Court of Appeals reversed, holding that because the functional utility of the equipment would not be lost if removed from the premises, the equipment did not constitute compensable trade fixtures.

The city condemned property owned and occupied by a company that operated a woodworking shop on the premises. Landowner sought compensation for 147 items, including table saws and heavy-duty hand tools. Several of the machines required dedicated electrical wiring and installation of beams to support their weight. The equipment was all used in connection with the woodworking business, and landowner claimed that they would generate a substantial loss in value in the secondhand market. The city, by contrast, argued that the items could function with the same utility in another business, and were not, therefore, compensable trade fixtures. The Supreme Court held that the claimed items were compensable trade fixtures, and the Appellate Division, after excluding a few items, affirmed the Supreme Court's determination. The city appealed.

In reversing, the Court of Appeals noted that the law of fixtures originated in disputes between buyers and sellers about what equipment had become part of the realty and therefore passed to the buyer by the terms of the contract of sale. The court then noted that in a series of cases, courts had held that fixtures should be considered as part of the value of condemned property. In those cases, the courts had focused on the permanence of the installation, the injury that would result to the equipment or the machinery if it were removed, whether the building was specially designed to house the equipment, and whether the equipment would lose substantial value if removed. In this case, the court rejected landowner's argument that because he had placed the machines in an order that would maximize efficiency, the machinery should be treated as fixtures. Instead, the court noted that there would be no loss of functional utility if the items were removed from the shop. The fact that the items were worth less as secondhand goods than they were in his shop did not qualify the machines as compensable fixtures.

Landowner Has Inverse Condemnation Claim for Verizon's Failure to Remove Wires and Telephone Box

Corsello v. Verizon New York Inc.

NYLJ 11/5/08, p. 28, col. 3

Supreme Ct., Kings Cty

(Demarest, J.)

In an inverse condemnation action brought by landowner against Verizon for placing a terminal box on landowner's property without compensation, Verizon moved to dismiss. The court granted the motion as to two duplicative claims, but otherwise denied the motion, holding that under Loretto v. Teleprompter Manhattan CATV , 458 U.S. 419, landowner had stated a cause of action.

Verizon placed a terminal box on the rear of landowner's building, and installed connecting wires to and from the building in the late 1970s or early 1980s pursuant to '27 of the Transportation Corporations Law, which authorizes telephone companies to construct and maintain lines and equipment over private land subject to the right of the owners to full compensation. The statute further provides that if the parties cannot agree on compensation, compensation “shall be ascertained in the manner provided in the eminent domain procedure law.” Landowner brought this action, asserting a statutory and constitutional right to compensation. Verizon moved to dismiss, asserting that landowner had given it a license to install the equipment, and that the statute of limitations had expired on landowner's claim.

In denying Verizon's motion to dismiss, the court noted that any oral license was revocable at the will of the landowner, so that even if the license precluded landowner from obtaining damages until the revocation, the license would not preclude an inverse condemnation claim. The court also noted that Real Property Law '261 provides explicitly that with respect to wires or cables used for telephone purposes, “no lapse of time whatever shall raise a presumption of any grant of, or justify a prescription of any perpetual right to, such attachment or extension.” As a result, the court rejected Verizon's statute of limitations defense. The court therefore held that Loretto was dispositive, and that Verizon's installation of rear wall terminals and connecting wires constituted a permanent condemnation requiring compensation of the landowner.

COMMENT

Real Property Law '261 proscribes a telephone company from establishing a right by prescriptive easement when it places “wire or cable” on property, regardless of the length of time the “wire or cable” remains on the property. A telephone company may expressly acquire an easement to maintain its facilities, or else it runs the risk that the landowner might demand removal, requiring the company to condemn the disputed rights under Transportation Corporations Law '27. Although '261 makes no reference to equipment other than “wire or cable,” in O'Meara v. Postal Telegraph-Cable Co., 279 NY 282, the Court of Appeals held that ' 261 also includes equipment that supports wires and cables. In O'Meara, the Court awarded landowner a judgment declaring that the telephone company could not establish a prescriptive right to maintain telephone poles on property. Thus, the company either had to pursue a condemnation proceeding in order to obtain the right, or it had to remove its wires and telephone poles from the property. In light of O'Meara, the court had little difficulty applying '261 to the rear-wall terminal in Corsello.

Whether landowner can recover more than nominal compensation in Corsello remains unclear. In Loretto v. Teleprompter Manhattan CATV Corp., 58 N.Y.2d 141, the Court of Appeals upheld Executive Law ' 828, which entitled landowners to nominal compensation of one dollar where cable television companies installed two large boxes and cables on the side of landowner's building. Executive Law '828 prevented a landowner from interfering with the installation of cable equipment and from demanding more compensation than that determined to be reasonable by the State Commission on Cable Television (the “Commission”). Authorized by '828, the Commission determined all landowners were entitled to compensation of one dollar, based in part on its conclusion that the values of the properties would increase with the greater access to cable television. Once the Commission set compensation applicable to all landowners, the court limited its review to whether the Commission acted arbitrarily or capriciously. In Corsello, by contrast, the legislature created no administrative body akin to the cable television commission, so that a court, in the first instance, will determine compensation due to the landowner pursuant to Eminent Domain Procedure Law. Because the court will not be limited to arbitrary and capricious review, the court may find the landowner is entitled to more than mere nominal compensation.