Posted by: Patricia Salkin | November 1, 2008

New York Court of Appeals Holds That Tools Are Not Fixtures for Purposes of Condemnation Valuation

The New York Court of Appeals unanimously overturned the courts below in a case where a claimant, whose property had been taken by eminent domain, sought to be paid by the City for all the standard industrial tools that he used in the woodworking shop that he operated on the premises.  Under New York condemnation law, the government not only pays for the real property which it acquires, it also pays for those items used in business that the court defines, as noted, as fixtures.  Relying on a Court of Appeals decision from 1969, Rose v. State of New York, 24 NY2d 80, which stated that an item is a fixture if will “lose substantial value if removed,” the former owner argued that the City should pay for the tools and equipment he used in his woodworking business, such as saws, grinders and sanders, because their removal would cause substantial loss in value in the secondhand market. He placed the value of the tools at $577.000.

                                    
The City argued that loss of value means only that the items could not be used again if removed.  The City argued that the claimed items were not fixtures and should not be paid for, because they were of standard design and could be used in another business. The City valued the tools at $128,936.

 

The Court of Appeals held that the loss of “substantial value” does not mean the same thing as items selling for less if they were removed from a place of business and sold for less as used.  The Court said, “Under such analysis, virtually every machine used in a business would be a compensable fixture, obliterating the distinction between fixtures and personalty.”
 
 Matter of City of New York; Kaiser Woodcraft Corp. v. City of New York, 2008 WL  4701015 (NY 10/28/2008).

 

The opinion can be accessed at: http://www.nycourts.gov/ctapps/decisions/oct08/156opn08.pdf

 

Thanks to Lisa Bova-Hiatt, Esq. in the NYC Corporation Counsel’s Office for sending this case along.


Responses

  1. This is a lousy decision. In cases like that, the equipment may become worthless or nearly so once removed, whereas in place, it can be quite valuable. That’s what Justice Cardozo helf when he was on the NY Court of Appeals in Jackson v. State. Besides, unless the condemnee/owner can move to a new location (which is often impossible) those items may command only scrap value, or less.

    That is why Pennsylvania courts evolved the integrated industrial or economic unit doctrine. And in California by statute we use the concept of “equipment pertaining to the property,” which is compensable if its removal would cause “substantial economic loss.” Cal. Code Civ.
    Proc. Sec. 1263.205


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