THE STANDARD OF REVIEW OF A VALUATION CASE ON APPEAL AND JUDICIAL BIAS

          On appeal of a condemnation or tax certiorari case what exactly is the Appellate Court standard of review?  The answer is not that simple.  Most decisions reviewing a valuation cause will state that since the matter before it was a bench trial, the Appellate Division may render the Judgment it finds warranted by the facts, taking into account the fact that the trial court had the advantage of seeing the witnesses.  Northern Westchester Professional Park Associates v Bedford, 60 NY2d 492 (1983).  Stated another way, where the trial court’s findings of fact rest in large measure on considerations relating to the credibility of witnesses, deference is owed to the trial court’s credibility determinations.  Gerard v Cahill, 194 AD3d 813, 815 (2d Dept. 2017).

          In one condemnation case which arose as a result of a taking for the Atlantic Yards project in Brooklyn, the trial court, Justice Wayne Saitta, heard the testimony of many expert witnesses including appraisers, zoning experts, cost estimators, hotel experts, and professional engineers, and determined that a vacant land parcel on Atlantic Avenue had a reasonable probability of rezoning with a highest and best use as a hotel.

          The Second Department affirmed and wrote,

Although “[i]n condemnation cases, the authority of this Court to review findings of fact after a nonjury trial is as broad as that of the trial court” and it “’may render the judgment it finds warranted by the facts, taking into account that in a close case the trial court had the advantage of seeing and hearing the witnesses’” (Matter of Mazur Bros., Inc. v State of New York, 97 AD3d 826, 828 [2012],  quoting BRK Props., Inc. v Wagner Ziv Plumbing & Heating Corp., 89 AD3d 883, 884, [2011]; see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499, 458 NE2d 809, 470 NYS2d 350 [1983]), “[w]here the trial court’s explanation of its award is supported by the evidence, it is entitled to deference and will not be disturbed on appeal” (Matter of Board of Commr. of Great Neck Park Dist. of Town of N. Hempstead v Kings Point Hgts., LLC, 74 AD3d 804, 806 [2010]; see Matter of Queens W. Dev. Corp. [Nixbot Realty Assoc.],139 AD3d 863, 33 NYS3d 274 [2016]; Chemical Corp. v Town of E. Hampton, 298 AD2d at 423).

Matter of 730 Equity Corp. v. New York State Urban Development Corp., 142 AD3d 1087, 1089 (2d Dept. 2016).

          But we think there is another reason for deference in a valuation case and that is the special expertise of the trial court.  In New York, all eminent domain and tax reduction cases are non-jury cases.  In most Judicial Departments, there is one part which is assigned to hear these cases.  In my experience, the Judges assigned to hear these unique cases became experts in the Law.  Most Courts will request and read the appraisals prior to the trial to better understand the issues. 

          In New York, condemnation and tax certiorari trials are limited by the information set forth in the parties’ appraisals.  After the exchange of appraisals, each side may file a rebuttal report within sixty days after receipt of the document sought to be rebutted.  The appraisal reports are required to contain a statement of the method of appraisal relied on and the conclusions as to value reached by the expert together with the facts, figures and calculations by which the conclusions were reached.  The appraisers are also required to provide specific information regarding their comparable sales, leases and photographs of the property under review. 

          Upon the trial, expert witnesses are limited in their proof of appraised value to information set forth in their reports.  Under the rules, the court has the ability to relieve any party of a default.  It should be noted that the rule only applies to expert witnesses who are offering opinions.  No report need be filed by a fact witness.  In fact, the Third Department held in Faulkner v State of New York, 247 AD2d 798 (3d Dept. 1998) that an expert may be permitted to testify without first submitting an expert report if the testimony is factual and does not constitute opinion evidence.  In Faulkner, the issues concerned the testimony of a surveyor who testified as to square footage of the area taken.

          So, this special knowledge and expertise of the trial court should also be a factor considered by the Appellate Court.

          Apparently, deference to the trial court has its limits.  A recent example is the decision by the Second Department in Matter of Town of Oyster Bay v 55 Motor Avenue Company, LLC, 156 AD3d 704, (December 13, 2017).  In that condemnation case, the trial court awarded Claimant $20,700,000 which was based on a highest and best use as retail.  The Court reversed and remanded for a determination based on the evidence offered by the Condemnor that the fair market value of the property was to be based on the use of light industrial development.  The Court stated,

Here, the claimants failed to establish that there was a reasonable probability that they would have been granted a special use permit to develop parcels 1 and 2 as a large-scale multi-tenant retail development in accordance with CP-1. To demonstrate a reasonable probability that they would have been granted a special use permit for a retail development at the maximum allowable density, the claimants proffered the testimony and report of their expert planner. The expert planner did not review the history of any special use permit applications to the Town Board, or reference any large-scale retail developments that were located on the vesting date in the immediate area of the subject property.

          But sometimes courts put too high a standard to be constitutional.  It is clear that many courts harbor a bias in favor of the condemnor.  An example is a decision from the Court of Claims where the following statement is found “… all considered with the understanding that the burden of proof is establishing an entitlement to substantial compensation rests with claimant (see Andrews v State of New York, 137 AD2d 952, 953 (3d Dept).”  Cardinal Development Properties, Ltd. v The State of New York, Claim No. 120333, Decision Filed December 18, 2018, J. Hudson.

          Why would a Court of Claims Judge believe that this is true in a de jure appropriation?  In other words, this is what the State believes the damages are, prove that it is wrong.  To me this indicates a fundamental failure of the Court to appreciate exactly what an eminent domain claim represents.  A condemnation or appropriation is not like private litigation.  A condemnation is the enforcement of a constitutional mandate that just compensation be paid.

          In New York, the burden of proof is on the court to assure that the award of the constitutional requirement of just compensation is attained.  As United States Supreme Court Justice Felix Frankfurter wrote, “[s]ince land and buildings are assumed to have some transferable value, when a claimant for just compensation for their taking proves that he was their owner, that proof is ipso facto proof that he is entitled to some compensation.”  Kimball Laundry Co. v United States, 338 US 1, 20 (1949).  Thus, to hold a claimant responsible for the burden of proof for the value of their property is contrary to well-established law that the court has the burden of proof.

          Any award of just compensation must be premised on valid appraisals of the property.  New York’s Appellate Division, Second Department, summarized the process as follows: “[If] the appraisals of both parties were defective, there should be a new trial to determine the proper theory of valuation.  A condemnation proceeding is not a private litigation.  There is a constitutional mandate upon the court to give just and fair compensation for any property taken.”

          This means “just” to the claimant and “just” to the people who are required to pay for it.  The rule is abundantly clear that property must be appraised at its highest and best use and paid for accordingly.  Where we find it is not…we must remit for retrial upon the proper theory…Accordingly, we remit this case for the taking of testimony and a new determination of an appropriate theory of valuation upon which the court may derive a value of the parcel… Yaphank Dev. Company v County of Suffolk, 609 NYS2d 346, 248 (NY App Div 1994).

          Not only that, but the Andrews case cited by Judge Hudson dealt with a specific issue, to wit, an argued highest and best use which differed from the actual use.  A claimant would have the burden of proof on this issue.  But not on establishing an entitlement to substantial compensation.  Finally, Andrews relies on Heyert v Orange & Rockland Utilities, Inc., 17 NY2d 352 (1966).  Heyert was not a de jure taking, it was an inverse condemnation claim dealing with an easement in a street.  But even here, the Heyert court stated that “the owner is not to be foreclosed of opportunity to prove his damages are substantial.

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