In re the Town of Greenburgh

OPINION OF THE COURT Per Curiam. In a postcondemnation proceeding pursuant to former subdivision 2 of section 555 of the General Municipal Law, the appeal is by the condemnee from an order which denied her application to compel the Commissioner of Finance of Westchester County to turn over to her certain accrued interest on deposit. The question on this appeal is who is entitled to the sum of $11,294.59, generated as interest on a sum deposited as a condemnation fund to compensate for a taking of property. In June, 1975 the Town of Greenburgh condemned, for urban renewal purposes, a parcel of property owned by the appellant, Hazel Jolley, upon which a gasoline service station was located. Title to the property vested in the town when, in accordance with former subdivision 2 of section 555 of the General Municipal Law, it deposited the sum of $74,500 with the respondent Commissioner of Finance of Westchester County (the Commissioner). However, before Mrs. Jolley could apply to the court (as required by the statute) to withdraw the $74,500, Best Petro Chemical, Inc. (Best), the lessee of the property, intervened and, on the basis of its allegations of substantial financial interests in the condemned realty, obtained an order enjoining her from withdrawing the funds. Subsequent applications by Mrs. Jolley to withdraw part of the funds were denied. Following valuation hearings, the town, Mrs. Jolley and Best entered into a judicially approved stipulation of settlement dated July 24, 1978. The stipulation provided, inter alia, that the town would pay Mrs. Jolley the $74,500 on deposit "plus interest, if any” as well as an additional $35,500. During the intervening three years which followed the deposit, the $74,500 had earned $11,294.59 in interest, but the Commis [411] sioner paid Mrs. Jolley only the $74,500 and refused to turn over the interest. She then commenced this proceeding to compel payment of the interest but, based on the language of former subdivision 2 of section 555 of the General Municipal Law that "interest shall not be allowed on so much thereof as shall have been paid into court” and the authority of New-burgh Urban Renewal Agency v Stein (75 Misc 2d 156, affd 51 AD2d 1006, mot for lv to app den 39 NY2d 710), Special Term denied her application. This appeal followed. We believe that the proscription against payment of interest contained in former subdivision 2 of section 555 of the General Municipal Law is not applicable to the instant circumstances and, therefore, Special Term’s order must be reversed. Under former subdivision 2 the condemnor could file before judgment a "declaration * * * that the property described in the petition is being taken in connection with the carrying out of an urban renewal program * * *. Upon filing such declaration and the deposit, in the court in which the proceeding is pending, to the use of the persons entitled thereto, of the amount of the estimated compensation stated in such declaration, title in fee simple to such property shall vest in the [agency] and the right to just compensation shall vest in the persons entitled thereto * * * [I]nterest shall not be allowed on so much thereof as shall have been paid into court.” The foregoing language, inserted in 1972 (see L 1972, ch 357, § 2), replaced provisions under which title to the condemned property vested with the condemnor in the sole discretion of the trial court (see L 1962, ch 921, § 1), and it thus provided a mechanism for the automatic vesting of title in the condemnor. Review of the legislative history indicates that the change was occasioned by the passage of the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (US Code, tit 42, § 4601 et seq.), and that the "[failure to make the proposed statutory change will jeopardize the receipt of federal financial aid from HUD to New York municipalities and urban renewal agencies” (Memorandum of Executive Division: Division of Housing and Community Renewal, Legislative Bill Jacket). In mandating a "uniform policy on real property acquisition practices” among the States (US Code, tit 42, § 4651), the Federal statute incorporated by reference the repayment and deposit procedures of section 258a of title 40 of the United States Code. Examination of the latter statute reveals procedures virtually identical with the [412] General Municipal Law, including the critical language, "but interest shall not be allowed on so much thereof as shall have been paid into the court”. This Federal statute contemplates "a transfer of funds for the effectual withdrawal and use by the former owner of the property taken”, not merely an empty act of "delivering cash to some depository” (United States v Certain Lands in Suffolk County, State of N. Y., 270 F Supp 323, 326). Title to moneys deposited into court is vested with the County Treasurer (CPLR 2601, subd [c]), but this title is expressly "for the benefit of interested parties” (CPLR 2601, subd [c]) and has been held to be akin to the title a fiduciary possesses with respect to trust property (see Matter of Natelson v Portfolio, 291 NY 290, 294, citing Mills v Bluestein, 275 NY 317, 322; see, also, State Finance Law, §§ 182, 183; County Law, § 551; 2A Weinstein-Korn-Miller, NY Civ Prac, par 2601.15). The fiduciary is directed by statute to deposit the fund "with advantage to the parties interested” (see State Finance Law, § 182). It is difficult to discern how such a deposit could be to the "advantage” of a party interested if the income earned on the money is to be kept by the fiduciary for the benefit of the third-party municipality which employs the fiduciary. We believe that the purpose of the former statutory language of subdivision 2 of section 555 of the General Municipal Law was to cut off the condemnor’s obligation to pay interest to the condemnee to the extent of the amount deposited in court—but the provision was not intended to confer a gratuity upon the fiduciary with whom the deposit was made. Simply stated, the Commissioner’s contention is that the statute gives him the right to appropriate the condemnation litigant’s funds for the benefit of the depositary municipality. The practical result of that interpretation is to penalize a condemnee who has equitable title to the fund but is restrained from obtaining it. In this respect, we note that United States v 531/4 Va Acres of Land (176 F2d 255), cited by our dissenting brother, dealt with the condemnor’s obligation to pay interest to multiple condemnees after having made an unallocated deposit of the value of their properties. The case did not involve the depositary’s obligation to pay interest generated by the deposit itself. Here the condemnor asserts no claim to the interest generated by the deposit. The ambiguous language of former subdivision 2 of section [413] 555 has since been eliminated by the enactment of section 304 of the Eminent Domain Procedure Law (L 1977, ch 839, eff July 1, 1978) which provides that the interest on the deposit will be paid to the condemnee. We believe that the new legislation more clearly reflects the original intention of the Legislature which was inarticulately stated in the General Municipal Law. To the extent that Newburgh Urban Renewal Agency v Stein (75 Misc 2d 156, affd 51 AD2d 1006, mot for lv to app den 39 NY2d 710, supra) may be read as being inconsistent with our holding here, we now overrule it. Accordingly, the order of Special Term must be reversed and the application to compel payment of the interest to appellant granted.