Prior Takings as Creating Collateral Estoppel – Not So Fast!

What happens when property was condemned and the condemnor raises its ugly head to condemn again at a later time?  It happened once upon a time in Queens.  In 1979, the Metropolitan Transit Authority (MTA) acquired an easement for the purpose of routing a New York City Subway tunnel through a portion of 26-29 Northern Boulevard, Long Island City.  The parcel was vacant land and consisted of 130,293 square feet.  The property was owned by Peerless Weighing and Vending Machine Corp.  Now, a separate blog can be written about Peerless.  Remember the scene in “Big” where Tom Hanks puts a penny in a scale for his fortune?  That was a Peerless machine.  The company was owned by the Chicago Company which bought Peerless for its patents.  Over the years, brokers would offer adjoining parcels to Peerless and it would add to its assemblage.  At title vesting, it was used as a parking lot.

Back to the case, so in 1979, the MTA acquires an easement.  Peerless at that time was represented by Robert Goldstein (our retired partner) who does a great job.  The trial court found that the severance (he said consequential) was severe because of the high cost of construction which proscribed the utilization of the remaining fee as a building site and effected a change in the highest and best use from a building site to a parking lot.

It should be noted that this large parcel was located in the vicinity of Queens Plaza and close to the Queensboro Bridge leading to Second Avenue and 59th Street in Manhattan.  Northern Boulevard which fronted on the parcel is one of Queens’ major highways.  Every subway had an entrance near the property.

In 1987, the MTA returned to condemn the entire parcel.  Peerless in its wisdom retained the author of this blog. I had not yet merged my firm with Bob’s at this time.

The Peerless parcel at title vesting was used for parking.  The property was zoned M1-3, which allowed an office building having an F.A.R. of 5.  We valued the property as an office building as its highest and best use.

The MTA screamed (actually) arguing that claimant is collaterally estopped from litigating the issue of highest and best use because this issue was litigated by the property owner in the prior proceeding involving the condemnation of the subsurface easement in 1979 and got paid for the lost potential.  But we argued in opposition that the requisite identity of issue for invoking estoppel was lacking.  It was our contention that the prior determination only concluded that the easement effected a change in use limited to the time of that taking.  It was based upon different propositions of highest and best use and was premised upon the fact that construction costs associated with building directly over the subsurface easement prevented industrial uses for the parcel that would have required utilization of the entire site.  Even assuming estoppel was applicable, we argued that the rapid appreciation in real estate values and increase in the demand for office space that occurred subsequent to the easement taking created a significant change in circumstances sufficient to bar application of the doctrine.

The Court, Hon. Edwin Kassoff, agreed.  He stated, “Evidence of the valuation of a parcel prior to the date of appropriation is not dispositive where intervening factors are shown to have substantially effected its value.  (See, Matter of New York Convention Ctr. Dev. Corp., 169 AD2d 43; Matter of Town of Esopus [Gordon], 162 AD2d 829).  Similarly, highest and best use is not a static concept, but one that fluctuates pursuant to changes in market value, demand, land use regulations, and available engineering techniques.  The MTA as the party seeking to invoke the doctrine of collateral estoppel, has the burden of showing that claimant is precluded from arguing that it is entitled to the fair market value of its property in 1987 pursuant to ‘its highest and best use on the date of taking.’  (Matter of City of New York [Franklin Record Ctr.], supra, at 61; see also, Matter of Town of Islip [Mascioli], supra at 360; Keator v State of New York, 23 NY2d 337, 339.)”

This court holds that the prior determination of damages attributable to the taking of the subsurface easement in 1979 does not collaterally estop defendant from litigating the issue of highest and best use for its property in the appropriation of defendant’s remaining fee interest in 1987.  The MTA has failed to establish the requisite identity of issue.  (See, Kaufman v Lilly & Co., supra.)

The court found that on the date of the full taking, the evidence established a demand to develop back office space in the outer boroughs with government incentives to promote such development.  It also found that claimant established by credible expert testimony that existence of the easement would not prevent the development of an office building on the site.  Nor was it unusual to construct an office building on property encumbered by a subsurface easement.  Metropolitan Transp. Auth. v Peerless Weighing & Vending Mach. Corp., 158 Misc2d 832 (Sup. Ct. Queens Co. 1993).

Posted in Collateral Estoppel, Highest and Best Use, Partial Takings
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