In re Rochester Urban Renewal Agency — 45 N.Y.2d 1

Majority

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In the Matter of the Rochester Urban Renewal Agency, Appellant, Relative to Acquiring Title to Real Property for the Southeast Loop Urban Renewal Project in the City of Rochester. Patchen Post, Inc., Respondent. In the Matter of Village of Newark Urban Renewal Agency, Appellant, Relative to Acquiring Title to Real Property for an Urban Renewal Project Known as Newark Midtown Project in the Village of Newark. Newark Grange, No. 366 et al., Respondents.

Argued April 26, 1978;

decided June 13, 1978

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POINTS OF COUNSEL

Donald J. Corbett, Louis N. Kash, Corporation Counsel, and Charles Capobianco for appellant in the first above-entitled proceeding.

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428 ; Evans v State of New York, 31 AD2d 565 .) III. The land value arrived at by the trial court was excessive. IV. Were the courts below correct in their interpretation of the decision of the Court of Appeals in Keator v State of New York ( 23 NY2d 337 )? V. There appears to be a conflict or at the least confusion between the decisions of the courts below in defining specialty properties. (Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 ; Matter of Rochester Urban Renewal Agency [Patchen Post], 55 AD2d 1029 .)

John F. Redmond for respondent in the first above-entitled proceeding.

I. The courts below placed proper reliance on the Court of Appeals decision in Keator v State of New York ( 23 NY2d 337 ) among others and were correct in determining that the specially designed and constructed veteran’s clubhouse properly qualified for the "specialty” designation, thereby entitled to be valued according to the judicially approved method of "reproduction cost less depreciation.” (Matter of City of New York [Kramer Realty Corp.], 16 AD2d 148 , 12 NY2d 1094 ; Matter of the City of Glen Cove [Cecil Ave. Renewal Project], 64 Misc 2d 712 ; Keator v State of New York, 23 NY2d 337 ; Albany Country Club v State of New York, 37 Misc 2d 134 , 19 AD2d 199 , 13 NY2d 1085 ; Matter of County of Suffolk, 70 Misc 2d 232 ; Matter of County of Nassau [Colony Beach Club of Lido], 43 AD2d 45 ; City of Glen Cove v Switzer Contr. Co., 47 AD2d 917 .) II. Respondent’s comparables were properly found to be of greatest probative weight in determining a fair and reasonable land value of the subject property, thereby completely justifying the opinion as to land value arrived at by the courts below. (Geffen Motors v State of New York, 33 AD2d 980 ; New York State Elec. & Gas Corp. v Goff, 55 AD2d 733 ; Innamorato v State of New York, 65 Misc 2d 440 ; Azzolini v State of New York, 63 Misc 2d 631 ; Fredenburgh v State of New York, 26 AD2d 966 ; Spano v State of New York, 22 AD2d 757 .) III. The "income” approach to value in part relied upon by appellant’s appraiser in valuing this non-income-producing, tax exempt clubhouse does not merit judicial consideration and should be stricken. (St. Agnes Cemetery v State of New York, 3 NY2d 37 ; Matter of City of New York [Shorefront High School — Rudnick], 25 NY2d 146 , 26 NY2d 748 ; Matter of Daly v Smith, 18 App Div 194 ; City of Binghamton v Rosefsky, 29 AD2d 820 ; Matter of City of New York [Chestnut Props. Co.], 39 AD2d 573 ; Matter of Port of N. Y. Auth. [Lincoln Tunnel — 450 W. 34th St.

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Corp.], 2 NY2d 296 ; Mattydale Shopping Center v State of New York, 303 NY 974 ; Stiriz v State of New York, 26 AD2d 964 .)

Donald J. Corbett for appellant in the second above-entitled proceeding.

I. The court’s determination that the improvement qualified as a "specialty” and valuing it solely by this method was contrary to the evidence and to established principles of law. (Matter of County of Nassau [Colony Beach Club of Lido], 43 AD2d 45 ; City of Glen Cove v Switzer Contr. Co., 47 AD2d 917 ; City of Mechanicville v Fort, 43 AD2d 645 ; Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 ; Samuelson v Salamanca Urban Renewal Agency, 34 AD2d 369 ; City of Buffalo v Clement Co., 41 AD2d 41 ; Rochester Smelting & Refining Co. v State of New York, 38 AD2d 674 ; Evans v State of New York, 31 AD2d 565 ; Kingsbury v State of New York, 27 AD2d 893 ; Matter of City of New York [Lincoln Sq. Slum Clearance Project], 15 AD2d 153 .) II. Respondent failed to sustain its burden of proving that the building on the subject property was a specialty. (Matter of Village of Penn Yan Renewal Agency v Pen Yan Realty Corp., 57 Misc 2d 1033 ; McDonald v State of New York, 52 AD2d 721 ; Samuelson v Salamanca Urban Renewal Agency, 34 AD2d 369 ; City of Buffalo v Clement Co., 41 AD2d 41 ; Matter of City of New York [Lincoln Sq. Slum Clearance Project], 15 AD2d 153 , 12 NY2d 1086 ; Matter of City of New York [First Elephant Estates — La Hermosa Church], 17 AD2d 317 ; Matter of City of New York [De Nigris Realty], 20 AD2d 42 ; Wackerman v Town of Penfield, 47 AD2d 988 ; Matter of Forrest v Evershed, 7 NY2d 256 .) III. The commissioners were in error in completely ignoring the income approach to valuation used by plaintiif-appellant. (Great Atlantic & Pacific Tea Co. v Kiernan, 42 NY2d 236 .) IV. The Commissioners of Appraisal and the courts below were in error in their determination of the land value of the subject premises. V. The commissioners and the courts below were in error in giving two highest and best uses for the building on the subject property. (Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 .) VI. There appears to be conflicts between the decisions of the courts below defining specialty properties. (City of Binghamton v Rosefsky, 29 AD2d 820 ; Kingston Urban Renewal Agency v Strand Props., 33 AD2d 594 ; Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 ; Matter of Servstation Realty Co. v Board

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of Assessors of Nassau County, 56 AD2d 890 ; Matter of Rochester Urban Renewal Agency [Patchen Post], 55 AD2d 1029 ; Matter of Village of Newark Urban Renewal Agency v Newark Grange, No. 366, 57 AD2d 1065 .)

Samuel C. Shoolman for Newark Grange, No. 366, respondent in the second above-entitled proceeding.

I. The record supports the finding of the appraisal commission and lower courts that the Newark Grange Hall was a specialty (and therefore required to be valued by the cost approach). (Keator v State of New York, 23 NY2d 337 ; Matter of Great Atlantic & Pacific Tea Co. v Kiernan, 42 NY2d 236 ; Matter of City of New York [Lincoln Sq. Slum Clearance Project], 15 AD2d 153 , 12 NY2d 1086 ; Matter of County of Nassau [Colony Beach Club of Lido], 43 AD2d 45 , 39 NY2d 958 ; Dormitory Auth. of State of N. Y. v 59th St. & 10th Ave. Realty Corp., 41 NY2d 1037 ; McDonald v State of New York, 42 NY2d 900 ; City of Binghamton v Rosefsky, 29 AB2d 820; Kingston Urban Renewal Agency v Strand Props., 33 AD2d 594 ; Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 .) II. The commission’s assessment of land value is within the range of credible evidence and not grossly excessive. (Sparks v State of New York, 48 AD2d 236 , 39 NY2d 884 .) III. The power of the courts to review the commissioners’ award is strictly limited. (Matter of Prospect Park & Coney Is. R. R, 85 NY 489 .)

OPINION OF THE COURT

The issue at the heart of both these condemnation proceedings is whether a building owned and operated by each of the respondent nonprofit organizations was properly classified as a specialty and was therefore correctly evaluated in accordance with the cost of reproduction less depreciation method. In each instance, the building in its present form had been specially constructed for the organization at its clubhouse and had been so used ever since.

In Matter of Rochester Urban Renewal Agency (Patchen Post) the structure was a fraternal meeting hall owned by a post of the Veterans of Foreign Wars. Though used primarily by and for its members, the facilities were made available without charge to other VFW posts, to their auxiliaries, and to other service groups. Respondent’s expert, on the assump

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tion that the property was a specialty despite the described use by others, supported the employment of the reproduction cost less depreciation basis. Petitioner’s expert, proceeding on the expressed premise that there is a "market for every product”, arrived at the conclusion that the building could be sold for income-producing use and that its price should therefore be fixed at "market value”. Trial Term, adopting respondent’s approach, rendered a total award of $223,471.50 plus interest. The Appellate Division affirmed ( 55 AD2d 1029 ).

In Matter of Village of Newark Urban Renewal Agency (Newark Grange), the property consisted of a two-story plus basement brick structure used by respondent for its meetings and for public functions to which its primary facilities had been tailored at the time of construction. Additionally, however, these facilities were at times rented for temporary use by other civic organizations, while other portions of the building were leased to community-related tenants such as the local government and the area newspaper. Notwithstanding these collateral income-producing uses, Commissioners of Appraisal (see Condemnation Law, §§ 4, 13, repealed by L 1977, ch 839, § 2, eff July 1, 1978), after hearing the testimony adduced by each side, found that the property was a specialty and that the cost of reproduction less depreciation method was applicable. Measuring the value by that yardstick, their report, confirmed by the Wayne County Court, recommended an award of $160,627. The Appellate Division affirmed the judgment entered thereon ( 57 AD2d 1065 ).

At the threshold, we note that our scope of review is narrow. In the present procedural posture of these cases, coming to us as they do with affirmed findings, we have no power to weigh the evidence or review the findings of fact (St. Agnes Cemetery v State of New York, 3 NY2d 37 , 40; Matter of City of New York [Sound View Houses], 307 NY 687 ; Cohen and Karger, Powers of the New York Court of Appeals, § 119). Essentially, we must confine ourselves to the question of whether a proper evaluation technique was utilized (Acme Theatres v State of New York, 26 NY2d 385 , 388; Matter of City of New York [Exterior St.], 285 NY 455 , 458). Though the award in the Newark case, based as it is upon a report of the commissioners, whose findings are deemed entitled to the benefit of "every favorable intendment” ab initio (Auburn Renewal Agency v Schwartz Sons, 41 NY2d 1026 , affg 53 AD2d 1051 ; Matter of Huie [Fletcher — City of New York], 2

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NY2d 168 ), may, if anything, reinforce the limitation on our review of factual matters, our power to set aside an award that rests upon erroneous appraisal principles nevertheless applies (Matter of City of New York [Atlantic Improvement Corp.], 28 NY2d 465 , 472; Latham Holding Co. v State of New York, 16 NY2d 41 , 44-45; Kingston Urban Renewal Agency v Strand Props., 33 AD2d 594 [Cooke, J.]).

Turning at once to those principles, we note that, though an owner is guaranteed "just compensation” when private property is taken for public use under the power of eminent domain (US Const, 5th Arndt; NY Const, art I, § 7, subd [a]), there is no inflexible formula or set of inexorable rules by which that term is to be realized in dollars and cents (see United States v Fuller, 409 US 488 , 490; Matter of City of New York [School of Ind. Arts], 2 Misc 2d 403 ). It is only the goal which is fixed, i.e., a reasonable and adequate award — the fair equivalent of the actual loss sustained (County of Erie v Fridenberg, 221 NY 389 , 393; cf. Matter of Board of Water Supply, 189 App Div 20 ).

That loss ordinarily is represented by what it can reasonably be anticipated a prudent buyer would be willing to pay in an open market. Generally, this is based on the highest and best use to which the property may be put rather than the more limited use to which a particular owner may happen to be putting it at the time of its appropriation (Matter of County of Suffolk [Firester], 37 NY2d 649 , 652; St. Agnes Cemetery v State of New York, 3 NY2d 37 , 41 supra).

In ascertaining the highest and best use, courts give recognition to the fact that, in most cases, the "market value”, as that term itself implies, is not only capable of determination, but represents "just compensation” since it corresponds, though perhaps roughly, to the value of the property to the owner (1 Orgel, Valuation under Eminent Domain [2d ed], § 15). There is, moreover, another sense in which it may serve as a complete indemnity. Since this method of valuation is premised on the existence of a viable market for the property, the presence of that market and the obtaining of such an award presumably puts it within the owner’s power, to the extent that it is possible to do so with a commodity as idiosyncratic as real estate, actually to replace it, if he so desires.

But when the property is of a kind seldom traded, it lacks a "market price” and there must accordingly be recourse to

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some other method of evaluation (see, e.g., Kimball Laundry Co. v United States, 338 US 1 , 6). Churches, hospitals, clubhouses and like structures held by nonprofit agencies as centers for community service commonly fall within this category (Keator v State of New York, 23 NY2d 337 , 339; Matter of Simmons, 127 NYS 940 ; 1 Orgel, Valuation under Eminent Domain [2d ed], § 40). A particular building may be regarded by the organization that owns and utilizes it as worth everything it cost to construct and more, yet it may not be "marketable” because no similar group would have sufficient need for the property to be willing to purchase it even at its reproduction value (see Keator v State of New York, supra, pp 339-340; cf. Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 ).

Although such properties are sometimes sold, the purpose of the acquisition usually is conversion to another use; hence such sales offer little, if any, guidance to an appraiser (see 4 Nichols, Eminent Domain, § 12.32, subd [1]). Evaluation under such circumstances will, at best, tend to be impermissibly speculative. Therefore, the quest for an objective criterion must not be so relentless that the special value of the property to its owner is ignored in deciding whether another method of evaluation is appropriate. For an owner of property like that of each of the respondents here "is entitled to be made whole, and making it whole means more than forcing it to abandon its non-profit community use and accept what it could obtain in the marketplace from a profit motivated purchaser” (United States v 564.54 Acres of Land, 506 F2d 796 , 800).

Thus, we have recognized that properties of this character can be unique and have permitted them, once it has been established that market value is an unworkable tool, to be valued as specialties on the basis of reproduction cost less depreciation (see Keator v State of New York supra; cf. Matter of City of New York [Salvation Army], 43 NY2d 512 , 517, where we approved this approach voluntarily followed). When this method is employed, it has no relationship to market value as such; indeed, it reflects the need, under the prevailing circumstances, to resort to an entirely different technique for determining what is "just compensation” (see United States v 564.54 Acres of Land, supra).

Applying these principles to each of the two cases now before us, the records contain sufficient proof to support the

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determinations that the uses to which their owners were devoting the properties at the time when each was taken were in accord with their highest and best use and that "just compensation” could only be achieved through a specialty approach. In neither can we say that that evaluation technique was erroneously applied as a matter of law.

Both buildings were found to have been specially designed with unique structural features for which there was no recognizable market value. Neither the fact that the VFW extended its hospitality by making its clubhouse’s facilities available to other service organizations, nor that the Newark Grange property produced some rental income used to offset its operating expenses, required the Supreme Court in the one case, or the commissioners in the other, to find that either was not a specialty. These were no more than factual considerations to be taken into account in arriving at a determination of the use and character of each building and the availability, if any, of a market. Over all, there was evidence from which it could be found that at no time was each designed for, nor readily adaptable to, nor directed in its use towards, ends which were primarily commercial (cf. Amsterdam Urban Renewal Agency v Masonic Assn. of Amsterdam, 39 AD2d 617 , supra).

Accordingly, the orders appealed from should be affirmed.

Chief Judge Breitel and Judges Jasen, Gabrielli, Jones, Wachtler and Cooke concur.

In each case: Order affirmed, with costs.

Cases cited

In re the County of Nassau 43 AD2d 45 N.Y. App. Div. 1973-11-26 p. 3, p. 4, p. 5, p. 6
Amsterdam Urban Renewal Agency v. Masonic Ass'n of Amsterdam, Inc. 39 AD2d 617 N.Y. App. Div. 1972-04-27 p. 3, p. 4, p. 5, p. 6, p. 9, p. 10
Samuelson v. Salamanca Urban Renewal Agency 34 AD2d 369 N.Y. App. Div. 1970-06-25 p. 3, p. 5
City of Buffalo v. J. W. Clement Co. 41 AD2d 41 N.Y. App. Div. 1973-02-23 p. 3, p. 5
Rochester Smelting & Refining Co. v. State 38 AD2d 674 N.Y. App. Div. 1971-12-02 p. 3, p. 5
Evans v. State 31 AD2d 565 N.Y. App. Div. 1968-11-04 p. 3, p. 4, p. 5
In re City of New York 15 AD2d 153 N.Y. App. Div. 1961-12-21 p. 3, p. 5, p. 6
Keator v. State 23 NY2d 337 N.Y. 1968-12-12 at 339 p. 4, p. 6, p. 9
In re the Rochester Urban Renewal Agency 55 AD2d 1029 N.Y. App. Div. 1977-01-21 p. 4, p. 6, p. 7
In re the City of New York 16 AD2d 148 N.Y. App. Div. 1962-04-03 p. 4
In re City of New York 12 NY2d 1094 N.Y. 1963-04-04 p. 4
In re the City of Glen Cove 64 Misc 2d 712 N.Y. Sup. Ct. 1970-08-27 p. 4
Albany Country Club v. State 37 Misc 2d 134 N.Y. Ct. Cl. 1962-11-21 p. 4
Albany Country Club v. State 19 AD2d 199 N.Y. App. Div. 1963-07-15 p. 4
Albany Country Club v. State 13 NY2d 1085 N.Y. 1963-12-30 p. 4
In re the County of Suffolk 70 Misc 2d 232 N.Y. Sup. Ct. 1972-03-30 p. 4
Innamorato v. State 65 Misc 2d 440 N.Y. Ct. Cl. 1971-01-25 p. 4
Azzolini v. State 63 Misc 2d 631 N.Y. Ct. Cl. 1970-07-27 p. 4
St. Agnes Cemetery v. State 3 NY2d 37 N.Y. 1957-05-23 at 40, at 41 p. 4, p. 7, p. 8
In re the City of New York 25 NY2d 146 N.Y. 1969-07-02 p. 4
In re Daly 18 App Div 194 N.Y. App. Div. 1897-06-08 p. 4
In re Port of New York Authority 2 NY2d 296 N.Y. 1957-01-24 p. 5
Mattydale Shopping Center, Inc. v. State 303 NY 974 N.Y. 1952-04-17 p. 5
Village of Penn Yan Urban Renewal Agency v. Penn Yan Realty Corp. 57 Misc 2d 1033 Yates Cty. Ct. 1968-10-09 p. 5
In re City of New York 12 NY2d 1086 N.Y. 1963-04-04 p. 5, p. 6
In re the City of New York 17 AD2d 317 N.Y. App. Div. 1962-12-04 p. 5
In re the City of New York 20 AD2d 42 N.Y. App. Div. 1963-12-12 p. 5
Forrest v. Evershed 7 NY2d 256 N.Y. 1959-12-30 p. 5
Great Atlantic & Pacific Tea Co. v. Kiernan 42 NY2d 236 N.Y. 1977-07-05 p. 5, p. 6
Village of Newark Urban Renewal Agency v. Newark Grange, No. 366 57 AD2d 1065 N.Y. App. Div. 1977-05-27 p. 6, p. 7
In re the County of Nassau 39 NY2d 958 N.Y. 1976-07-01 p. 6
McDonald v. State 42 NY2d 900 N.Y. 1977-06-16 p. 6
Sparks v. State 48 AD2d 236 N.Y. App. Div. 1975-05-30 p. 6
Sparks v. State 39 NY2d 884 N.Y. 1976-06-03 p. 6
In re Prospect Park & Coney Island Railroad 85 NY 489 N.Y. 1881-06-14 p. 6
In re the City of New York 307 NY 687 N.Y. 1954-06-03 p. 7
Acme Theatres, Inc. v. State 26 NY2d 385 N.Y. 1970-04-23 at 388 p. 7
In re City of New York 285 NY 455 N.Y. 1941-05-29 at 458 p. 7
Auburn Urban Renewal Agency v. Samuel Schwartz Sons, Inc. 53 AD2d 1051 N.Y. App. Div. 1976-07-12 p. 7
In re City of New York 28 NY2d 465 N.Y. 1971-06-09 at 472 p. 8
Latham Holding Co. v. State 16 NY2d 41 N.Y. 1965-07-09 at 44-45 p. 8
United States v. Fuller 409 US 488 SCOTUS 1973-01-16 at 490 p. 8
In re the City of New York 2 Misc 2d 403 N.Y. Sup. Ct. 1956-06-05 p. 8
County of Erie v. Fridenberg 221 NY 389 N.Y. 1917-10-23 at 393 p. 8
In re County of Suffolk 37 NY2d 649 N.Y. 1975-10-30 at 652 p. 8
Kimball Laundry Co. v. United States 338 US 1 SCOTUS 1949-06-27 at 6 p. 9
In re Simmons 127 NYS 940 N.Y. Sup. Ct. p. 9
In re the City of New York 43 NY2d 512 N.Y. 1978-02-09 at 517 p. 9