Appellate Division Affirms Award in AAA Electricians

The Appellate Division, Second Department recently affirmed the Supreme Court’s award in Village of Haverstraw v. AAA Electricians, Inc. The condemnor appealed the judgment of the Supreme Court, Rockland County, entered May 9, 2012, which awarded the condemnee $6,500,000 as just compensation for the taking of the condemnee’s real property.

The background of the case is as follows: The condemnor acquired the 18.9 acres for transfer to the Ginsberg Development Company which in turn constructed the “Harbors of Haverstraw” a townhouse development. The subject parcel was flat and level and enjoyed extensive river frontage with unlimited views on the widest portion of the Hudson River with the Tor Mountains at its back. The property was zoned for Waterfront Development at the time of the taking. The WD zoning designation permitted multi-family development by special permit, which Claimant used to value the subject property.

Terry Rice, Esq., a zoning expert on claimant’s behalf, testified that it was a virtual certainty that a special permit would be granted allowing residential condominium development as shown on the plan prepared by Brian A. Brooker, P.E., a civil engineer retained by Claimants. Claimant’s appraiser, Robert Von Ancken, MAI, used five vacant land sales to value the subject property.  The parcels were all residential development sites.  The sales were analyzed on the basis of yield of dwelling units, which is the appropriate way of valuing a residential development site. The indicated value of dwelling unit was then multiplied by 346 units, a calculation made by Brian A. Brooker, a professional engineer based on a study and concept plan.  Claimant’s real estate appraiser found a unit value and then multiplied the unit value by the number of units set forth by Mr. Brooker.

The condemnor acted in bad faith in this case. The Village made a pre-vesting offer of $3,480,000.  It then paid an advance payment of $2,596,150 claiming a miscalculation.  Incredibly, the Village then exchanged an appraisal prepared by Bob Sterling which found a highest and best use for the subject as industrial.  Mr. Sterling valued the land at $80,000 an acre for a total of $1,512,000 and then deducted $512,000 for alleged cleanup to present a total “just compensation” of $1,000,000. Even more egregiously, the Village sold the property to a developer for $3.5 million after it condemned the property.

The trial court (Hon. John R. LaCava), in rejecting the condemnor’s theory of valuation, concluded that,

Claimant presented extensive, expert proof on the feasibility of obtaining a special permit to allow a multi-dwelling residential project on the premises; expert testimony that the planned development was fully compliant with existing municipal bulk, parking, and other code requirements; and its appraiser’s opinion that, under all of the attendant circumstances, and in light of several similar and proximate comparable properties, there was a reasonable probability of sufficient sales of dwelling units as to render it economically feasible to build such a project on the subject property.  Consequently, the claimants met their initial burden of demonstrating that the highest and best use of the property was for residential development.

 In contrast, condemnor failed to present any expert proof that a special permit for the planned development was unlikely to be issued.  Further, although arguing that “light industrial” was the highest and best use, Sterling agreed when questioned that residential use would be more profitable for a developer than the industrial use he proposed, in fact, he actually made adjustments during his value calculations to account for residential use of the properties.  He also agreed that the subject property, by size and location, was unique, and that he was not aware of a single recent use of a waterfront property such as the subject for industrial purposes. (22)”

The Appellate Division, in its recent decision, affirmed the lower court’s award. While noting that a condemnee may not receive an enhanced value for its property where the enhancement is due to the property’s inclusion within a redevelopment plan. However, in contrast, the Court found that:

Here, the Supreme Court properly accepted the conclusion of the condemnee’s appraiser that the property’s highest and best use was for multi-family residential development. The condemnee’s appraiser sufficiently and credibly explained the basis for his selection of comparable properties and relevant adjustments made to the valuation of these properties. In contrast, the condemnor, the Village of Haverstraw, did not demonstrate that, absent the urban redevelopment plan, which encompassed the subject property, the property would have been suitable only for light industrial development (see Gyrodyne Co. of Am., Inc. v State of New York, 89 AD3d at 989;cf. Matter of City of New York [Broadway Cary Corp.], 34 NY2d 535, 536; Broadway Assoc. v State of New York,18 AD3d at 688). Contrary to the Village’s contention, the court’s decision does not indicate that it improperly incorporated the enhancement to the subject property’s value which resulted from the village’s urban redevelopment project (see Matter of Village of Port Chester [Bologna], 95 AD3d at 897; Matter of Queens W. Dev. Corp., 289 AD2d at 336).

Here the trial court and the Appellate Division correctly valued the property as allowing for waterfront development, and correctly rejected the condemnor’s theory of the case that the property should be valued as light industrial development. Under the laws of the state of New York, an owner whose property has been taken as a result of condemnation is entitled to just compensation (US Const 5th Amend; NY Const, art I, §7 [a]), which generally is calculated by reference to the fair market value of the property at its highest and best use at the time of appropriation. (Matter of City of New York [Franklin Record Ctr.], 59 NY2d 57; Matter of Town of Islip [Mascioli], 49 NY2d 354) That the subject property was undeveloped at the time of taking does not alter the general rule. Unimproved land must be valued in accordance with the highest and best use for which it is adaptable and available (see, Olson v United States, 292 US 246; Matter of Town of Islip [Mascioli], supra, at 360; Matter of City of New York [Shorefront High School-Rudnick], 25 NY2d 146; Chase Manhattan Bank v State of New York, 103 AD2d 211), provided that the condemnee establish as a reasonable probability that such use would have been made of the property in the near future (see, Matter of City of New York [Broadway Cary Corp.], 34 NY2d 535, 536, aff’d 40 AD2d 865; Matter of City of New York [Shorefront High School–Rudnick], supra, at 149; Triple Cities Shopping Ctr. v State of New York, 26 AD2d 744, aff’d 22 NY2d 683) and that such use was more than a speculative or hypothetical arrangement. (See, Matter of City of New York [Shorefront High School–Rudnick], supra, at 149.)

The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, regardless of whether the property is being put to such use at the time.  New York Central Lines v. State of New York, 101 AD3d 966 (2d Dept 2012); Gyrodyne Co. of Am. Inc. v. State of New York, 89 AD3d 988, 989 (2d Dept 2011); Matter of Board of Commissions of Great Neck Park (Kings Point Heights), 74 AD3d 804 (2d Dept 2010); Chester Industrial Park v. State of New York, 65 AD3d 513 (2d Dept 2009); Chemical Corp. v. Town of East Hampton, 298 AD2d 419 (2d Dept. 2002).