In re the City of New York
1959 N.Y. Misc. LEXIS 2364, 201 N.Y.S.2d 443, 24 Misc. 2d 190 (1959)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
In an eminent domain proceeding, machinery installed by a property owner is considered a compensable fixture if it is actually annexed to the realty, adapted to the use of the property, and intended to be a permanent accession to the freehold, regardless of whether it can be removed without material injury to the item or the building.
Facts:
- American Ice Company owned a property in Manhattan containing two buildings constructed for use as an ice manufacturing plant.
- The company installed a substantial amount of specialized machinery and equipment throughout the buildings for the purpose of manufacturing ice.
- The machinery was integral to the plant's function and was intended by the owner to be a permanent installation for the business.
- At the time of the dispute, the plant was an efficiently functioning unit, serving a large market of local businesses including theatres, hotels, and steamships.
- The City of New York initiated the Lincoln Square Slum Clearance Project, an urban renewal effort that required the city to acquire American Ice Company's property through eminent domain.
Procedural Posture:
- The City of New York initiated an eminent domain proceeding in the Supreme Court of New York, New York County (a state trial court of first instance) to acquire title to real property for the Lincoln Square Slum Clearance Project.
- American Ice Company, as the owner of a parcel designated Damage Parcel 462, appeared in the proceeding to claim just compensation.
- The parties disputed whether the valuation of the property should include the value of the ice-making machinery and equipment located in the buildings.
- The court conducted a trial to determine the proper amount of the compensation award.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does machinery installed by a property owner, which is essential to the business conducted on the premises and intended for permanent use, constitute a compensable fixture in an eminent domain proceeding even if it can be removed without material injury to the machinery or the building?
Opinions:
Majority - William C. Hecht, Jr., J.
Yes, such machinery constitutes a compensable fixture. When an owner installs machinery in a building specifically adapted for that equipment with the intention that it be a permanent part of the business, the machinery is treated as part of the real property for condemnation purposes. The court reasoned that condemnation is an 'enforced sale,' where the government stands as a buyer to the owner's seller. In a normal sale, such integrated machinery would pass with the realty. The court distinguished this situation from that of a tenant, who is presumed to intend to remove trade fixtures. For an owner, the controlling factors are the intention of permanence and the adaptability of the machinery to the building's use, not the degree of physical attachment or the possibility of removal without damage. The court applied the three-part test from Potter v. Cromwell: 1) actual annexation to the realty, 2) application to the use of the realty, and 3) the intention to make a permanent accession to the freehold. Since the ice-making machinery met this test, it was deemed a compensable fixture.
Analysis:
This decision reinforces the principle that 'just compensation' in eminent domain for a business property includes the value of integrated machinery essential to its operation. It solidifies the distinction between the fixture rules for tenants and owners, providing greater protection for owners by focusing on intent and adaptability rather than mere physical removability. The case establishes that the government cannot simply take a specialized building and leave the owner with a collection of used machinery that has little value once severed from the plant. This precedent ensures that compensation reflects the true economic value of the property as a 'going concern,' thereby preventing the government from externalizing the cost of destroying an integrated business operation.
