Deduction of General and Special Benefits

By M. Robert Goldstein & Michael J. Goldstein

April 22, 1998

In the forty to fifty years that the two of us have been practicing in the area of condemnation law, we have learned that there are no easy cases. There are, of course, as with any area of law, some that are more difficult than others. Generally speaking, partial takings present more problems than total takings. The obvious reason is that all you have to deal with in a total appropriation is the value of the property taken, complicated, of course, by a myriad of legal guidelines. When there is a partial acquisition, however, we first deal with the value of the property as a whole, then with the value of the part taken and finally with the value of the part not acquired, both before and after the acquisition, i.e., consequential damages. Within the area of consequential damages, we must explore, not only the loss in value suffered by the remaining property, but the possible benefits to that remainder which are the result of the improvement for which the part taken was acquired. To further complicate things, the question arises, do we consider special benefits to the remainder as distinguished from general benefits. In this area, New York finds itself holding a minority view.

First, let us define what is meant by general benefits and special benefits. At least for the purposes of this discussion, general benefits are “… those benefits which result from the fulfillment of the public project which necessitated the taking and are common to all lands in the vicinity of the condemnee’s property. They are those benefits which accrue to the owners of property within the usable range of the public work.” (Nichols on Eminent Domain, Third Ed.,§8A.04[2] p. 38) Special benefits are those that “… arise from the peculiar relation of the land in question to the public improvement.” (Nichols on Eminent Domain, Third Ed., §8A.04[2] p. 39)

General benefits are not hard to figure out. Virtually all public improvements are supposed to have them or, at least in theory, there would be no public use which would justify the condemnation. A public school is a clear example. To the extent that residential values are enhanced because a school has been built in the district it serves, there is a general benefit to the properties sharing that enhanced value. Very often, a house will sell for more because it is near a school. It, however, shares that benefit with other houses that are near the school.

Special benefits are somewhat more difficult. Courts, in fact, have had difficulty in many cases in separating them from general benefits. One Court called the distinction, “shadowy at best.” (State Hwy. Comm’n v. Koziatek, 639 S.W.2d 86 (Mo. Ct. App. 1982)). Many states and many courts within states cannot agree on whether a particular benefit is special or general. However, we believe that the difficulties are overstated. Frankly, we suspect that some courts have difficulty because they are trying to justify calling general benefits, special. The reasons will be explained below. Reduced to simple terms, which it should be, if the benefit is shared by a group of properties, it is general. If it is peculiar, by its nature, to one property, it is special. An example of this is a taking for a new road. The road benefits all of the property in its area and to the extent that it provides access to those properties and the properties served by that road are thereby enhanced in value, there is a general benefit. If that road is built through a property and two new frontages are created on that property and the property is the type that benefits from having additional frontage (eg., commercial), that benefit is special to that property. In the first instance, the public, or a segment of it, shares in the benefit and it is general. In the second instance, only the one property benefits and it is special to that property.

The federal and state courts are divided as to what effect, if any, special and/or general benefits have on partial takings. In Chiesa v. State of New York, 36 N.Y.2d 21, 364 N.Y.S.2d 848, the key modern case on this subject in New York, the Court of Appeals cited 2Lewis, Eminent Domain (3rd ed.), §687, p. 1177 et. seq., a well regarded treatise, no longer printed or updated, in its listing of the five classes of applications: “… first, benefits cannot be considered at all; second, special benefits may be set off against damages to the remaining part, but not against the value of the part taken; third, benefits, both special and general, may be set off against damages to the remaining part, but not against the value of the part taken; fourth, special benefits may be set off against both damages to the remaining part and the

value of the part taken; and fifth, both general and special benefits may be set off against both damages to the remaining part and the value of the part taken.”

The majority of states have taken the second of Lewis’ positions. Most states will consider only special benefits and only as an offset against consequential damages to the remaining property. The federal courts have adopted Lewis’ fourth position. They also only consider special benefits, not general, but they not only set them off against consequential damages but, if the remainder is enhanced in value to the extent that it enjoys now, a greater value than it did before, the balance is set off against the value of the part taken.

As we stated above, New York has adopted the position held by a minority of the states. It has adopted Lewis’ third position. New York has not distinguished general from special benefits but it only sets them off against consequential damages, not against the value of the property taken.

At one time, before 1907, New York, or so it seemed, set off all benefits against consequential damages and the value of the property taken. The United States Supreme Court, in 1897, in Bauman v. Ross, 167 U.S. 548, 17 S.Ct. 966, cited those early New York decisions and said, “The just compensation required by the Constitution to be made to the owner is (at least) to be measured by the loss caused to him by the appropriation. He is entitled to receive the value of what he has been deprived of, and no more … when part only of a parcel of land is taken for a highway, the value of that part is not the sole measure of the compensation or damages to be paid to the owner, but the incidental injury or benefit to the part not taken is also to be included.”

In 1907, in Matter of City of New York (Consolidated Gas Co.), 190 N.Y. 350, the New York State Court of Appeals specifically rejected the rule in Bauman v. Ross, (supra). They pointed out that the earlier New York cases involved takings where the statute provided for an assessment against properties partially taken and wholly untaken, for the cost of the public project on the basis that they were benefitted by that project. (In Bauman v. Ross, supra, although not determinative of the case, there was also an assessment for benefit). The New York Court of Appeals, in Matter of City of New York (Cons. Gas Co.), supra, distinguished the earlier New York cases on the ground that they were concerned with statutes which authorized the concurrent exercise of the powers of eminent domain and taxation. As the case under review did not have a special assessment statute which would assess all benefitted properties regardless of whether there was a partial taking, the Court of Appeals held, in that circumstance, “that in no case should an award be made for less than the value of the property actually taken by condemnation.”

The Court based its decision on two reasons. First, there was no assurance that the use which conferred the benefit would be continued and, second, the municipality could not select, arbitrarily, only the owner whose property was partially taken to bear even a part of the cost of the public improvement while, exempting all of the other neighboring properties from bearing the cost when they benefitted to an even greater extent because they did not lose a part of their property.

In 1970, the State of New York appropriated 22 acres of land out of 193 owned by Catherine Chiesa in order to build a new interchange on the New York State Thruway. The appraisers for both sides agreed that the fact that the remainder of the property was near the new interchange enhanced its value. The Court of Claims made an award for the value of the property taken but made no award for severance because the enhancement offset whatever factors might have caused a consequential damage.

In a move that, to us, constitutes official chutzpah, the State appealed and argued that the enhancement should be set off against the award for the property taken to the extent that no award should have been made. In other words, they wanted to take 22 acres of land from an owner, against her will, not pay for it, and have the Court sanction it. The Court of Appeals, in Chiesa v. State of New York, supra, said:

“Applying the holding enunciated above to the case at bar, we recognize that it is unlikely that the New York State Thruway will be relocated in the near future; and, therefore, it is improbable that an owner whose property is partially taken will be unable to realize the benefit accruing to his remaining property by its proximity to the public improvement. However, we are also mindful of the fact that claimant’s adjoining and neighboring property owners have likewise been benefitted by the public improvement without having been compelled to contribute any of their property and without having been specially assessed for the public improvement. Thus, offsetting the general and special benefits to the claimant’s remainder against the value of the 22 acres actually taken from her would be, in effect, an arbitrary and discriminatory exercise of the State’s power of taxation such as was specifically proscribed in Matter of City of New York (Cons. Gas Co.), 190 N.Y. 350, 83 N.E. 299, Supra.”

“…. Since the State has acquired 22 acres which it did not formerly own, it seems to us that the State, and indirectly the public at large, should bear the burden of paying for the land taken for the public improvement … Moreover, we are skeptical of a rule of law that would enable the appropriating authority to simply urge that the public improvement will benefit an individual’s remaining property to such an extent that no compensation need be made for the property actually taken. Finally, … the rule of law established in Matter of City of New York (Cons. Gas Co.) (supra) fosters a more equitable result in instances in which the anticipated benefits to the remainder eventually prove to be illusory because it distributes the cost of the land actually taken upon the State’s entire population.”

We believe the Chiesa decision leaves one question unanswered. If it is unfair, and if it is “an arbitrary and discriminatory exercise of the State’s power of taxation” to, in effect, tax only a property owner whose property is taken by deducting the benefit to his/her remainder property from the value of the property taken, why is it fair and not an arbitrary and discriminatory exercise of the power of taxation to, in effect, tax only that same property owner by consequentially damaging his remainder property and not paying him for it because he benefitted, to the same extent, if not less, than his/her neighbors whose property was not partially taken? That, we believe, is what happened when the State of New York joined the minority of States that deduct general benefits from consequential damages.

Reprinted with permission from the April 22, 1998 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.