Sparkill Realty Corp. v. State

254 A.D. 78, 4 N.Y.S.2d 679, 1938 N.Y. App. Div. LEXIS 6343

• Court: Appellate Division of the Supreme Court of the State of New York
• Decided: April 27, 1938
• Docket: Claim No. 19587
• Status: Published

Opinions

Heffernan, J.

The State of New York is appealing from a judgment of the Court of Claims awarding respondents $1,333,209.62, together with interest of $630,830.35 and an additional sum of $5,000 for procuring an abstract of title, amounting in all to $1,969,039.97.

This cause has a colorful history. Respondents, domestic corporations, respectively, are owner and lessee of land located at Piermont, Rockland county, N. Y., on the bank of the Hudson river, about eighteen miles from the city of New York. The property comprises about 164 acres, of which 110 acres are upland, containing deposits of trap rock, and the remaining 54 acres are marsh lands, which from time to time are flooded by the river.

Respondents had begun the development of a stone quarry on the premises. For that purpose respondent tenant upon land of respondent owner had erected a plant which was substantially completed and which would have been ready for operation on March 15, 1929.

On October 11, 1928, the appellant, under the provisions of the Conservation Law, appropriated these lands for an extension of the limits of the Palisades Interstate Park.

Respondents filed a joint claim for damages. After a trial the Court of Claims on August 5, 1932, made an award in their favor of $1,650,000, together with the sum of $5,000 for an abstract of title (Sparkill Realty Corporation v. State of New York, 148 Misc. 626). Upon appeal this court, with two justices dissenting, reversed the judgment and ordered a new trial on the ground that an improper item of damages was included in the award (238 App. Div. 656). Upon a retrial the Court of Claims rendered a judgment for respondents in the identical amount awarded on the first trial. Upon appeal this court, with a single dissent, affirmed that judgment (242 App. Div. 862). The Court of Appeals, by a vote of four to three of its members in an opinion by Judge Loughran, reversed our determination and granted a new trial (268 N. Y. 192). The reversal in the Court of Appeals, as evidenced by the language of the opinion, was predicated upon error in allowing the hypothetical question put to respondents' witnesses on the question of value.

In discussing that subject Judge Loughran wrote:

“ The claimants submitted no proof of the market value of the land as such. Instead they offered evidence that above mean high-water mark on the property are 15,314,221 cubic yards of quarriable trap rock which would yield 27,365,997 cubic yards of broken stone of a quality up to standards prescribed for customary uses of trap rock, and evidence that by an additional expenditure of $503,471.30 the plant of the claimant lessee could have been equipped to quarry, crush, store and load on scows 750,000 cubic yards of crushed stone annually. These facts were then assumed in a hypothetical question put to each of four expert witnesses for the claimants. The further form of the hypothesis was as follows: ‘ Assume the stone could be quarried, crushed and loaded on scows at the quarry at an average cost of 70 cents and at an average freight cost of 40 cents per cubic yard, or a total of $1.10 per cubic yard, delivered in scows alongside docks in the Metropolitan New York and New Jersey district, which cost includes maintenance,- taxes, depreciation and depletion. Assume 750,000 cubic yards of broken stone at least from this quarry can be marketed in this district annually at an average price of $1.90 per cubic yard alongside docks in scows. What, in your opinion, was the market value of the property and existing improvements on the day of entry and appropriation, October 11, 1928, that is to say, the amount in cash which a willing purchaser would pay and a willing seller would take? ’ The testimony so elicited appraised the value of the property in figures ranging from $4,331,027.30 to $4,800,000. * * *

“ The hypothetical question, although in the end it called for testimony in the guise of opinions as to market value, could have been answered only on the fixed assumption that the property of the claimants was to have been operated for a generation at an annual profit of half a million dollars. * * *

“ The only other evidence of market value was that offered by the State. Tested by that evidence the award is grossly excessive. * * * It is apparent, we think, that this award was made upon a conclusion conjectured from data founded only in speculation.”

Thereafter, by stipulation of the parties, the issues were referred to a distinguished former chief judge of the Court of Appeals, and an experienced judicial officer, as official referee, to hear and report. He recommended the award now before us. His report was confirmed by a divided vote in the court below which made findings of fact and conclusions of law upon which judgment was entered. The State has again appealed.

Strange as it may appear although only a question of damage is involved almost a decade has elapsed since respondents were deprived of their property by the sovereign power in the exercise of the right of eminent domain and still they are journeying from court to court in an effort to obtain compensation to which they are rightfully entitled. The end of the litigious travail is not yet in sight.

The judgment under review should not be disturbed unless it clearly appears that it includes unlawful, or excludes lawful, elements of damage or unless it is tainted with unmistakable legal error. The value of property taken in condemnation proceedings is a question of fact. (Matter of City of New York [Fourth Ave.], 255 N. Y. 25.) It is settled beyond question that respondents are entitled to recover the fair market value of then* property based on the most advantageous use to which it could be put. In this case appellant occupies the status of a purchaser. (Jackson v. State of New York, 213 N. Y. 34.) In order to arrive at an estimate of the fair market value of the property in question all those things which would be considered by a buyer and seller, neither under compulsion, neither having an advantage over the other, must be taken into consideration by a witness competent to assemble, weigh and translate them into dollars and cents. All the facts and circumstances which a buyer and seller would consider in connection with the purchase and sale of a piece of property are relevant and material in arriving at a determination as to its market value. Exceptional circumstances exist in this case. The property which is the subject of this litigation — a quarry and an uncompleted plant — is not the subject of barter and sale in any general market and obviously its value is not to be determined upon evidence relevant in cases involving residence, business or similar property. Fair value in this instance, neither being under duress, is the sum of money a willing purchaser of such a plant and quarry would pay and a willing seller would accept. When the State deprives the citizen of his property for a public use he should have the right to prove every element that can fairly enter into the question of market value. (Matter of City of New York, 198 N. Y. 84.)

It is the contention of appellant that the value of the property does not exceed the sum of value of the land as a naked site and the value of the improvements. The proof of appellant is to the effect that the maximum value of the land alone is $120,000. It is not questioned that the value of the structures thereon was $445,709.62. Appellant, therefore, urges that the total of these figures, or $565,709.62, represents respondents’ damages. The referee held that respondents were entitled to recover the value of the structures and also the value of the land enhanced by the improvements which respondents had erected thereon.

The court below found upon sufficient evidence that respondents, at the time of the appropriation, had substantially completed their plant which conformed in design, material and arrangement to modern and efficient methods of stone crashing; that it was well designed, equipped and adequate; that it had a capacity for crushing, conveying, storing and loading approximately 750,000 cubic yards of trap rock from the quarry annually; that the 110 acres of upland contained 15,314,221 cubic yards of trap rock in place above sea level which when crushed would yield a minimum of 27,365,997 cubic yards of crushed stone, meeting standard specifications in New York and New Jersey and those generally prescribed for commercial purposes, readily and practically available for quarrying and crushing and transportable by water to the metropolitan district for a trifling cost; that at such time 10,800,000 cubic yards of coarse aggregates were sold annually in this district, of which between 4,000,000 and 5,000,000 cubic yards were crushed stone, at which time the demand was increasing and trap rock was desirable because of its toughness, hardness and wearing qualities; that there was a market in the metropolitan district in which stone from the appropriated property could be sold and marketed at a profit; it was also found that the actual cost of the plant and equipment had the same been completed and installed would have been $1,087,731.95.

Respondents swore three expert witnesses on the question of value. To discuss the evidence in detail would extend our views beyond reasonable limits. We shall, therefore, but briefly refer to the testimony. In response to a hypothetical question one of these witnesses fixed the value of respondents’ property at the time of appropriation at $1,946,528.70; another at $1,996,529, and the third at between $1,996,529 .and $2,496,529. Appellant criticizes this evidence and argues that it is based upon conjecture as to profits and that the data upon which the witnesses relied are speculative and conjectural and that consequently the responses of the witnesses are based upon an assumption of a fixed annual profit from the quarry operations. We cannot acquiesce in this view. Not only' did the witnesses deny that they took such an element into consideration but the question propounded to them specifically excluded such an assumption. We agree with the referee that the hypothetical question was free from the objections condemned by the Court of Appeals in the former appeal. As said by him, it “ included no element of good will and no assumption that the operation of this property would produce certain profits during a period of many years.” Respondents’ witnesses did take into consideration, and they were justified in so doing, the value of the trap rock and the profitable operation of the plant. Certainly a prospective purchaser and a seller would have in mind the possibility of profit to be derived from the operation of the plant. It was not an assumption of profitable operation but an assumption of a fixed profit over a period of years which the Court of Appeals rejected. Nowhere in the opinion of Judge Loughran is there any intimation that the court intended to exclude from consideration the possibility of profitable operation. The condemnation of the former judgment in the highest court was based not upon a profit but upon an invariable profit over “ decades to come.” The true value of property depends upon its development and arises out of it. Judge Loughran evidently had that in mind when he wrote: “ Before the taking, a willing buyer could have acquired at best an unfinished plant and the opportunity to operate it after completion. To the full market value of that privilege the claimants were entitled, but to nothing more.” It has been held again and again that in order to arrive at market value all those things must be taken into consideration which would be present in the minds of a buyer and seller. “ These are things which a seller and a purchaser would consider on a sale.” (Banner Milling Co. v. State of New York, 240 N. Y. 533.)

In eminent domain proceedings one who is deprived of his property should be permitted to prove all factors which are relevant in fixing its value. There is no well-considered case which holds that profits may never be considered as an element of value. Profits may be recognized as an important item and are only excluded in cases where the evidence is too speculative. “ Each case necessarily involves different facts and must be considered by itself. Only a few general rules apply on the question of valuation in condemnation proceedings, and even these may yield to exceptional circumstances.” (Banner Milling Co. v. State of New York, supra.) The usable value of the property for any suitable legitimate business is always relevant in fixing its market value. (Reisert v. City of New York, 174 N. Y. 196; Baumann v. City of New York, 227 id. 25.) The prospective use of the property and its potential value for such use may be considered. (Balshan v. State of New York, 230 App. Div. 142; affd., 255 N. Y. 596.) As was said by the court in Langdon v. Mayor, etc. (133 N. Y. 628): “ But it is the potentialities of a given piece of property, both developed and undeveloped, which constitute its chief element of value.” The value of the trap rock and the reasonable probabilities of the profit to be derived therefrom are elements which it may be assumed a prospective purchaser would take into account in fixing the value which he would be willing to give for the property. The value of the land and the cost of the structures thereon do not necessarily establish market value. (Banner Milling Co. v. State of New York, supra.)

The expert testimony received in this case while not competent for the purpose of showing the amount of profit, was properly received for the purpose of establishing that there could have been a profit. (Matter of Commissioners of Palisades Interstate Park [Nos. 1 & 2], 164 App. Div. 957.) In our opinion the referee committed no error either in the reception of evidence or in the construction which he placed upon it.

Much is made of the fact by appellant that the president of respondent owner purchased this property in 1909 for $18,000. This circumstance is not very impressive. Paraphrasing the language of the referee it may be said that at that time no structures had been erected on the property and so far as appears no plans had been perfected for turning this barren land into a trap rock quarry whereby its value might be greatly increased.

Appellant also stresses the claim that at various times during the years 1923 to 1925 respondent owner offered to sell the undeveloped property for $50,000, for $100,000 and for $150,000. The answer to that argument is that not only did the owner deny any offer to sell at the figures given but the court below has now twice refused to find that he made such offers. It was the function of that court to pass upon the credibility of the witnesses and the proof on that subject is not sufficient to warrant us in holding that the finding is against the weight of the evidence.

Appellant also urges that the land and improvements should have been separately valued by the expert witnesses and that the trial court should have made separate findings of value on land and structures respectively. The law does .not make such form of proof or findings obligatory. In fact in this case such proof would not be calculated to show the true value of the property. In his report bearing on the question of value we are impressed by the following statement taken from the referee’s report indicating his views on that subject: “ I think that many features, most of which have been referred to, made the Pierremont site for a trap rock quarry an available and valuable one and in considering this question, while of course I am not controlled by their [the witnesses’] views of value, I have naturally and properly studied with care what has been said by other courts and especially the last words spoken by the Court of Appeals in passing upon this valuation on prior hearings. There is no formula by which it can be mathematically demonstrated what this site with its improvements was worth. All that I can do is to exercise my best judgment on all of the evidence which has been presented to me and doing this, I think that the sum of $1,333,209.62 is a fair valuation for the land and improvements of claimants taken by the State and I so report.”

Finally it is urged that the court erred in allowing respondents $5,000 for a title search. This court is committed to the proposition that such an allowance is proper (238 App. Div. 656). It appears, however, that the amount of this item has been twice allowed by the court below. The court approved the award of $1,333,209.62 recommended by the referee. In addition it awarded $5,000 for the search. The item for the search had already been included by the referee in the amount expended for improvements. Concededly the amount expended for that item was $445,709.62. The referee states it to be $450,709.62. It is quite obvious that he added to the other items the amount expended for the search.

We believe that the judgment appealed from is correct and should be affirmed, with the exception that there should be deducted therefrom the item of $5,000, and as so modified, the judgment is affirmed, with costs.

Hill, P. J., and Rhodes, J., concur; McNamee, J., dissents, with an opinion in which Bliss, J., concurs; Bliss, J., dissents, with an opinion.