Cooney Bros. v. State — 24 N.Y.2d 387

Majority

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Cooney Brothers, Inc., Respondent-Appellant, v. State of New York, Appellant-Respondent.

(Claim No. 42437.)

Argued February 28, 1969;

decided April 16, 1969.

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Louis J. Lefkowitz, Attorney-General (Jean M. Coon and Ruth Kessler Toch of counsel), for appellant-respondent.

I. Since claimant voluntarily moved its processing plant from the leased land, after a portion of that land was appropriated by the State, the plant must be treated as personalty and claimant is entitled to only statutory moving expenses. (Matter of City of New York [Allen St.], 256 N. Y. 236 ; Marraro v. State of New York, 12 N Y 2d 285 .) II. Damages due to premature termination of a lease are a part of damage to the leasehold and are not recoverable by the tenant under a lease which reserves the condemnation award to the fee owner. (United States v. Petty Motor Co., 327 U. S. 372 ; United States v. Honolulu Plantation Co., 182 F. 2d 172 .) III. Claimant has no right to be compensated for damages attributable to the Schofield lease since there was no unity of title. IV. By removing the processing plant and treating it as personalty, claimant also abandoned the Schofield lease.

John T. DeGraff, Herman E. Gottfried and Margrethe R. Powers for respondent-appellant. I.

Claimant is entitled to recover the value of the machinery and equipment used in operating its plant as an integrated going concern. (City of Buffalo v. Michael, 16 N Y 2d 88 ; Marraro v. State of New York, 12 N Y 2d 285 ; Matter of City of New York [Allen St.], 256 N. Y. 236 ; United States v. Certain Prop., 344 F. 2d 142 .) II. Claimant is also entitled to damages which will reflect installation costs as well as the value of the McCully primary crusher. (Jackson v. State of New York, 213 N. Y. 34 ; Banner Milling Co. v. State of New York, 240 N. Y. 533 .) III. The fact that the primary crusher was located on the Schofield property should not bar recovery. (Queensboro Farm Prods, v. State of New York, 6 Misc 2d 445 , 5 A D 2d 967 , 5 N Y 2d 977 .) IV. Minor variances in stock ownership should not bar recovery. (Guptill Holding Corp. v. State of New York, 20 A D 2d 832 , 23 A D 2d 434 .) V. Claimant is entitled to damages for the loss of its

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lease on the Schofield property. (Matter of Mayor of New York, 168 N. Y. 254 ; Matter of City of New York [Allen St.], 256 N. Y. 236 ; Gristede Bros. v. State of New York, 11 A D 2d 580 ; Great Atlantic & Pacific Tea Co. v. State of New York, 22 N Y 2d 75 ; Matter of Trustees of N. Y. & Brooklyn Bridge, 137 Y. Y. 95; Matter of City of New York [Mott Haven Houses], 33 Misc 2d 808 , 16 A D 2d 637 , 13 N Y 2d 959 .)

Bernard L. Bermant, amicus curiae. I.

The machinery installed on both leased parcels was found to be fixtures. As the tenant of the two premises, used as a single entity, claimant was entitled to the same measure of compensation for the partial taking of its fixtures as it would have been entitled to if it had owned the fee simple of two contiguous parcels of land, operated by it as one entity. (Marraro v. State of New York, 12 N Y 2d 285 ; Matter of City of New York [Allen St.], 256 N. Y. 236 ; Matter of City of New York, 192 N. Y. 295 .) II. The usual before and after the taking measure of damages used in estimating both direct and consequential damages is just as applicable to this tenant’s leasehold and fixture claims as would be the case if it were the owner of the fee. (Harrington v. Harrington, 290 N. Y. 126 ; Matter of City of New York [Soundview Houses], 307 N. Y. 687 ; Matter of City of New York [Northern Blvd.], 281 N. Y. 48 ; Matter of City of New York [West 10th St.], 267 N. Y. 212 ; South Buffalo Ry. Co. v. Kirkover, 176 N. Y. 301 ; Great Atlantic & Pacific Tea Co. v. State of New York, 22 N Y 2d 75 ; Queensboro Farm Prods, v. State of New York, 6 Misc 2d 445 , 5 AD 2d 967 , 5 N Y 2d 977 ; Weber v. State of New York, 25 A D 2d 584 ; Wolfe v. State of New York, 22 N Y 2d 292 .) III. The affirmed finding that the fixtures would have become part of the real property if they had been installed permanently by the owner of the fee is immune to further review. (Matter of City of New York, 182 N. Y. 281 ; Craine Silo Co. v. Alden State Bank, 218 App. Div. 263 ; Harrington v. Harrington, 290 N. Y. 126 ; Matter of City of New York [Sound View Houses], 307 N. Y. 687 ; Matter of City of New York [Allen St.], 256 N. Y. 236 ; Matter of City of New York [Whitlock Ave.], 278 N. Y. 276 ; City of Buffalo v. Michael, 16 N Y 2d 88 ; Matter of City of New York [Lincoln Sq.], 24 Misc 2d 190 , 15 A D 2d 153 , 12 N Y 2d 1086 ; McRea v. Central Nat. Bank of Troy, 66 N. Y. 489 ; Potter v.

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Cromwell, 40 N. Y. 287 .) IV. Machinery, when permanently affixed by the owner of the fee, i.e., for habitual — permanent, not temporary use — becomes part of the realty and compensable to the fee owner. (Jackson v. State of New York, 213 N. Y. 34 ; Matter of City of New York [Allen St.], 256 N. Y. 236 ; Matter of Mayor, 39 App. Div. 589 ; Matter of City of New York [Lincoln Sq.], 24 Misc 2d 190 , 15 A D 2d 153 , 12 N Y 2d 1086 ; Herzog v. Marx, 202 N. Y. 1 ; Mott v. Palmer, 1 N. Y. 564 ; Marden v. Dorthy, 160 N. Y. 39 .) V. The courts below were correct in holding that claimant’s fixtures were to be appraised as part of the realty, both before and after the taking, and were also correct in their conclusion as to the measure of damages to be applied to the fixtures appropriated as well as those consequentially damaged. VI. Claimant was entitled to consequential damages. (United States v. General Motors Corp., 323 U. S. 373 ; Mayes Co. v. State of New York, 18 N Y 2d 549 ; Muncy v. State of New York, 11 Misc 2d 829 ; Rose v. State of New York, 29 A D 2d 1003 .) VII. Whether the removal of part of the conveyor system occurred at the request of the State or the act of removal, if ‘ ‘ voluntary ’ ’, was compelled by the necessities of the case, such removal properly gave rise to a claim for the mitigated damages suffered. (Banner Milling Co. v. State of New York, 240 N. Y. 533 ; City of Buffalo v. Michael, 16 N Y 2d 88 ; Glen & Mohawk Milk Assn. v. State of New York, 2 A D 2d 95 ; Rochester Poster Adv. Co. v. State of New York, 27 Misc 2d 99 , 15 A D 2d 632 , 11 N Y 2d 1036 ; Whitmier & Ferris Co. v. State of New York, 12 A D 2d 165 ; Norman’s Kill Farm Dairy Co. v. State of New York, 53 Misc 2d 578 ; Matter of City of New York [West Ave.-Field’s Baking Corp.], 27 A D 2d 539 ; Richards-Dowdle v. State of New York, 52 Misc 2d 416 ; St. Louis v. Railroad Co., 266 Mo. 694 ; Matter of Widening of Gratiot Ave., 294 Mich. 569 .) VIII. The State’s reliance on the Petty Motor case is misplaced. (United States v. Petty Motor Co., 327 U. S. 372 ; United States v. General Motors Corp., 323 U. S. 373 ; Matter of Widening of Gratiot Ave., 294 Mich. 569 .) IX. The award as made improperly does not include any of the $191,679 installation costs which gave value to, and made usable, the machinery in place. (Sprague Nat. Bank v. Erie R. R. Co., 22 App. Div. 526 ; Dubois v. Kelly, 10 Barb. 496 ; Vann Ness v. Pacard, 2 Pet. [27 U. S.] 137; Andrews v. D. B. Co., 132 N. Y. 348 ; Bedlows v.

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New York Floating Dry Dock Co., 112 N. Y. 263 .) X. Claimant is entitled to compensation for the McCauley primary crusher on the same basis as its other fixtures. (Guptill Holding Corp. v. State of New York, 20 A D 2d 832 , 23 A D 2d 434 .)

Cooney Brothers, Inc. (hereinafter Cooney), a gravel manufacturer, leased two adjacent parcels of land upon which it installed heavy equipment and engaged in the production of sand and gravel until the State, pursuant to section 30 of the Highway Law, appropriated approximately 26 acres from one of the leased parcels to construct an intrastate artery. As a result of this taking the claimant could not feasibly continue to use the leased property for gravel operations.

The 26 acres appropriated by the State ran in a continuous strip which divided the claimant’s property. The taking deprived the claimant of access from the part of the property used for mining purposes to the part used for manufacturing purposes.

The appropriation forced Cooney to remove its operations, including all its equipment, to a new location three miles away from the old plant site. The alleged cost of moving the fixtures was $451,000. The Court of Claims awarded $286,955 in damages for the value of all the fixtures owned by the claimant located on the property. No award was made, however, for a fixture leased by the claimant from a corporation in which it held a majority interest because this corporation was not a party to the action. In addition, the Court of Claims disallowed any claim for damage to the claimant’s leasehold interests.

On this appeal the State argues that the claimant’s recovery should be limited to $3,000, the statutory limitation for moving expenses provided by subdivision 13-b of section 30 of the Highway Law, because all the fixtures were removed to a new location after the appropriation. The claimant cross-appealed and seeks to recover for the fixture owned by the other corporation which was used in its operation and in which it held a majority interest and also for damages for loss of its leasehold interest. It is convenient to deal first with these last two issues.

Cooney contends that it should have received an award for a primary crusher located on an adjacent leasehold, no part of which was appropriated, because the machine was an integral part of its operations. It is clear, from Rose v. State of New

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York ( 24 N Y 2d 80 ), that, if Cooney did in fact own the primary crusher, an award for this item would have been proper. In fact, Cooney was only a majority stockholder in the corporation which owned the fixture, and that corporation was not a party to the condemnation proceeding. An award under these circumstances could not properly be made for the primary crusher. There is no authority to make an award in a condemnation proceeding to a stockholder of a corporation who does not own all the equity.

On appeal to this court Cooney abandoned its claim for damages to one of its leasehold interests because the lease contained a provision that the fee owner reserved any condemnation award for himself. Under our prior precedents, as the Appellate Division noted, the lessee cannot recover under these circumstances: “It is clear that where the agreement between the lessor and lessee provides for the reservation to the landlord of any condemnation award and terminates the lease in the event of condemnation, the lessee has no claim for injury to his leasehold interest (Matter of City of New York [Allen St.], 256 N. Y. 236 ; Matter of Mayor, etc., of City of N. Y., 168 N. Y. 254 ), and while the condemnation clauses in the instant leases provide only that the lessor is to receive the award, without also expressly terminating the lessee’s rights and obligations thereunder, the only reasonable interpretation to be placed on the agreement is that such rights and obligations were impliedly terminated (see Poillon v. Gerry, 179 N. Y. 14 ). Thus we find that the trial court correctly denied claimant any leasehold damages. ” ( 27 AD 2d 93 , 94-95; italics supplied.)

The claimant attempts to distinguish its second claim for leasehold damages from the first by claiming that, though the second lease had the same provision of reservation of condemnation damages to the fee owner, no part of the second leasehold was actually appropriated by the State, and, therefore, it argues that the lease provision is inapplicable to preclude it from recovering.

The claimant, under the rule announced in Rose (supra), is permitted to recover for the loss of value of its fixtures even though they are not located on the part of the property actually appropriated by the State. Compensation is proper because the fixtures’ economic utility is destroyed whether or not it is

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located on the appropriated property. Similarly, claimant is not in a position to argue that its loss of its interest in the second lease, caused by the removal of its manufacturing plant three miles away, should be considered any differently from its loss of value for the leasehold in which there had been an actual appropriation since both leased parcels were used in an integrated manufacturing process. As indicated in Rose (supra), the claimant should not be placed in a better position after the taking than it would have been if no taking occurred.

Having dealt with these two issues, we arrive at the principal question — the evaluation of the fixtures. Our recent decision in Rose v. State of New York (supra) is dispositive.

In Rose (supra), claimant was a lessee of a parcel of land which it used for a sand and gravel business. The claimant was forced to relocate its business because the State appropriated riparian rights incident to the leased property. Rose only removed two pieces of industrial equipment to his new plant site. We held that the award of the Court of Claims should be modified in order to reflect more accurately the actual injury to the claimant. The original award of the Court of Claims was based solely on the difference between reproduction cost less depreciation and salvage value for all the fixtures located at the old site. We considered that this award did not necessarily reflect the true damage to the claimant’s property. In Rose we established the following rule to determine the award for damages for the loss of value of fixtures if the claimant removed some items to a new site to continue his business: ‘ ‘ when a claimant removes his fixtures to a new location, they are not always properly valued by reference to a second-hand market in industrial equipment. The machinery, if removed or if it could be successfully removed, should be also valued by determining either the actual or contemplated cost of disassembling, trucking and reassembling the item at a new location. If the cost of removal is less than the difference between salvage value and present value in place, this is all the claimant is entitled to recover. The State is not required to place a claimant in a better position than he was before the taking by helping him to finance a new facility.” (24 N Y 2d, supra, p. 88.) The general discussion in Rose with respect to the treatment of fixtures is equally applicable here.

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The State’s argument that the claimant should he limited to the statutory $3,000 moving expenses was disposed of in the Rose decision. In Rose we remarked that: “It would be inequitable to limit a claimant to statutory moving expenses for personalty, where the items are without question fixtures, as determined at the time of the taking. The Highway Law (§ 40, subd. 13-b), in force at the time of the taking in this case, only provided for a maximum moving expense award of $3,000* which would be an inadequate amount to compensate this claimant for a move. The section, even as presently amended to provide for a $25,000 maximum, would frequently be insufficient to compensate a claimant for the moving of all his personalty and large trade fixtures. In such circumstances, any holding which would limit the recovery to the statutory amount would simply call for the claimant to abandon his property at his old site and never seek to salvage any part of the property for his own use.” (24 N Y 2d, supra, p. 89.)

The plaintiff at trial did not attempt to segregate the actual moving expenses for each fixture removed to the new property, but only itemized expenses with respect to labor, equipment rentals, etc. At the present time it cannot be determined from the record what was the actual and reasonable cost of removing the fixtures owned by Cooney to the new plant site for which recovery may be allowed. Included in Cooney’s total cost of moving is the cost of removal of the primary crusher. Since no recovery can be had for the primary crusher, and the reasonable cost of removing the other fixtures cannot be determined, the case must be remitted to the Court of Claims to determine the reasonable moving expenses of all the compensable fixtures removed.

Accordingly, the order of the Appellate Division should be modified and the matter remitted to the Court of Claims for further proceedings to determine the reasonable moving expenses of the fixtures. If the expenses of moving the machines to the new plant site are greater than the original award for compensation for the fixtures, the award should stand. If moving expenses are less, the claimant is only entitled to that amount.

Chief Judge Fuld and Judges Burke, Scilefpi, Bergan and Breitel concur with Judge Keating ; Judge Jasen dissents in

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part and votes to modify on the dissenting opinion at the Appellate Division.

Order modified in accordance with the opinion herein and, as so modified, affirmed, without costs.

Cases cited

In re the City of New York 256 N. Y. 236 N.Y. 1931-05-12 p. 388, p. 389, p. 390, p. 392
Marraro v. State 12 N Y 2d 285 N.Y. 1963-02-28 p. 388, p. 389
United States v. Petty Motor Co. 327 U. S. 372 SCOTUS 1946-02-25 p. 388, p. 390
City of Buffalo v. Michael 16 N Y 2d 88 N.Y. 1965-07-09 p. 388, p. 389, p. 390
Jackson v. State 213 N. Y. 34 N.Y. 1914-11-10 p. 388, p. 390
Banner Milling Co. v. State 240 N. Y. 533 N.Y. 1925-07-15 p. 388, p. 390
Queensboro Farm Products, Inc. v. State 5 N Y 2d 977 N.Y. 1959-02-26 p. 388, p. 389
Guptill Holding Corp. v. State 20 A D 2d 832 N.Y. App. Div. 1964-03-20 p. 388, p. 391
Guptill Holding Corp. v. State 23 A D 2d 434 N.Y. App. Div. 1965-07-13 p. 388, p. 391
In re Mayor of New York 168 N. Y. 254 N.Y. 1901-10-11 p. 389, p. 392
Great Atlantic & Pacific Tea Co. v. State 22 N Y 2d 75 N.Y. 1968-05-15 p. 389
In re the City of New York 33 Misc 2d 808 N.Y. Sup. Ct. 1960-11-15 p. 389
In re the City of New York 13 N Y 2d 959 N.Y. 1963-10-31 p. 389
Conron v. Glass 192 N. Y. 295 N.Y. 1908-06-02 p. 389
Harrington v. Harrington 290 N. Y. 126 N.Y. 1943-03-11 p. 389
In re the City of New York 307 N. Y. 687 N.Y. 1954-06-03 p. 389
In re City of New York 281 N. Y. 48 N.Y. 1939-07-11 p. 389
In re the City of New York 267 N. Y. 212 N.Y. 1935-04-17 p. 389
South Buffalo Railway Co. v. Kirkover 176 N. Y. 301 N.Y. 1903-10-30 p. 389
Weber v. State 25 A D 2d 584 N.Y. App. Div. 1966-02-11 p. 389
Wolfe v. State 22 N Y 2d 292 N.Y. 1968-06-06 p. 389
In re the City of New York 182 N. Y. 281 N.Y. 1905-06-13 p. 389
In re City of New York 278 N. Y. 276 N.Y. 1938-07-07 p. 389
In re the City of New York 24 Misc 2d 190 N.Y. Sup. Ct. 1959-12-17 p. 389, p. 390
In re City of New York 15 A D 2d 153 N.Y. App. Div. 1961-12-21 p. 389, p. 390
In re City of New York 12 N Y 2d 1086 N.Y. 1963-04-04 p. 389, p. 390
McRea v. Central National Bank of Troy 66 N. Y. 489 N.Y. 1876-09-19 p. 389
Potter v. Cromwell 40 N. Y. 287 N.Y. 1869-03-22 p. 390
In re Mayor 39 App. Div. 589 N.Y. App. Div. 1899-04-21 p. 390
Herzog v. Marx 202 N. Y. 1 N.Y. 1911-04-25 p. 390
Mott v. Palmer 1 N. Y. 564 N.Y. p. 390
Marden v. Dorthy 160 N. Y. 39 N.Y. 1899-10-03 p. 390
United States v. General Motors Corp. 323 U. S. 373 SCOTUS 1945-01-08 p. 390
Mayes Co. v. State 18 N Y 2d 549 N.Y. 1966-12-30 p. 390
Muncy v. State 11 Misc 2d 829 N.Y. Ct. Cl. 1958-05-22 p. 390
Rose v. State 29 A D 2d 1003 N.Y. App. Div. 1968-04-29 p. 390
Glen & Mohawk Milk Ass'n v. State 2 A D 2d 95 N.Y. App. Div. 1956-07-09 p. 390
Rochester Poster Advertising Co. v. State 27 Misc 2d 99 N.Y. Ct. Cl. 1961-03-27 p. 390
Rochester Poster Advertising Co. v. State 11 N Y 2d 1036 N.Y. 1962-06-12 p. 390
Whitmier & Ferris Co. v. State 12 A D 2d 165 N.Y. App. Div. 1961-01-05 p. 390
Norman's Kill Farm Dairy Co. v. State 53 Misc 2d 578 N.Y. Ct. Cl. 1967-04-21 p. 390
Richards-Dowdle, Inc. v. State 52 Misc 2d 416 N.Y. Ct. Cl. 1966-08-18 p. 390
Sprague National Bank v. Erie Railroad 22 App. Div. 526 N.Y. App. Div. 1897-11-30 p. 390
Dubois v. Kelly 10 Barb. 496 N.Y. Sup. Ct. p. 390
Andrews v. Day Button Co. 132 N. Y. 348 N.Y. 1892-04-19 p. 390
Bedlow v. New York Floating Dry Dock Co. 112 N. Y. 263 N.Y. 1889-01-22 p. 391
Rose v. State 24 N Y 2d 80 N.Y. 1969-02-20 p. 392
Poillon v. Gerry 179 N. Y. 14 N.Y. 1904-06-03 p. 392
Cooney Brothers, Inc. v. State 27 AD 2d 93 N.Y. App. Div. 1966-12-30 at 94-95 p. 392

Statutes and regulations cited

Highway Law p. 391, p. 394