City of New York v. Atlantic Terminal Renewal--Stage 1

• Decision Date: 10 November 1972
• Docket Number: RENEWAL--STAGE
• Citation: 338 N.Y.S.2d 504,72 Misc.2d 171
• Parties: Application of the CITY OF NEW YORK v. ATLANTIC TERMINAL1.
• Court: New York Supreme Court

Page 504

338 N.Y.S.2d 504

72 Misc.2d 171

Application of the CITY OF NEW YORK v. ATLANTIC TERMINAL RENEWAL--STAGE 1.

Supreme Court, Special Term, Kings County, Part IV.

Nov. 10, 1972.

J. Lee Rankin, New York City, Corporation Counsel (Jules Levy, New York City, of counsel) for the City of New York.

Goldstein, Goldstein & Tobin, New York City (Robert Tobin, New York City, of counsel), for claimant Peerless Tree Lite Co.

MEMORANDUM

JAMES S. BROWN, Justice.

Among the parcels acquired by the City in this condemnation proceeding was Damage Parcel No. 47 consisting of a concrete floored, high ceilinged, fireproof loft building at 749 Atlantic Avenue, Brooklyn. When title vested on May 15, 1969, it was rented out to various tenants, including one Peerless Tree Lite Co., whose fixture claim is the subject of this decision.

On title vesting date, this company, which had been a tenant for twenty-one years under a series of leases, occupied some 50,000 square feet on several floors (SM 739). The business was forty-five years old and had been owned and operated for some time by a corporation owned by two individuals, a father and son-in-law. The father, the president, died during the course of this trial. The son-in-law, Ira Ehrensall, the secretary-treasurer and plant manager, testified at great length during the trial as to the function of the various machines, their construction and ages, manner of annexation to the real estate, and other details in the set-up of the plant and the running of the business.

The copies of the claimant's income tax returns for the twelve years immediately preceding the condemnation, that is, 1958 through 1969 (City's Exh. 12), show that the gross annual business averaged over $1,600,000 and the annual net profit after substantial compensation to each of the two principals was large. For example, for the fiscal year ending July 31, 1969, when the gross business was $1,531,109 and the salaries of the two principals were $70,373, there was a taxable profit of $23,207; and for the following year, the fiscal year ending July 31, 1970, when the gross business was $1,643,724 and the salaries of the two principals were $89,800, there was still a taxable profit of $164,060.

About 80% Of the company products consisted of Christmas tree light outfits. The bulbs were all purchased from outside, 90% From Japan. The wire strings were cut to size. The sockets (husks), cap-on plugs and add-on plugs of each string were molded in the plant from bakelite powder bought in carload lots. These strings were in different sizes to accommodate 7, 15 or 25 lights, some for indoor use and others for outdoors.

Several machines, most of which were devised and custom made right in the plant, were used in the manufacturing process. Some were very sensitive and delicate, with tolerances up to sixteen one-thousandths of an inch (SM 1372), and were conceded by the City machinery expert to be 'unique.'

It was obviously an active, integrated plant, with some machines operating 24 hours a day, 7 days a week. Approximately 15,000,000 light sockets were turned out annually. In addition to Christmas tree lights, there were other miscellaneous products including 'candeliers,' cellophane Christmas wreaths, etc. The year-round number of employees averaged between 100 and 110 persons.

THE APPRAISALS

This claim originally covered 72 items but two, Nos. 26 and 27, were withdrawn at the time of trial.

The claimant's appraiser, Morris Jacks, made an amended appraisal, dated May 12, 1972 (Exh. C29), which, he testified, followed the format required by Rose v. State of New York, 24 N.Y.2d 80, 298 N.Y.S.2d 968, 246 N.E.2d 735, and wherein he added 10% For an engineering fee (SM 1158) and allocated a separate depreciation to each item. He then deducted from the total the valuations he had given to the omitted items, Nos. 26 and 27. The net sound value of all the items remaining totalled $286,833.

An appraisal for the City by Gilbert J. Wright (City Exh. 2A) lists the following values under Schedule A for 'compensable items not capable of being removed'; replacement cost $19,139; sound value $16,961. These items consist of piping an wiring referred to below whereby the machinery and equipment were annexed to the real estate.

Under his Schedule C, he lists the rest of the items on an 'if compensable' basis. The totals of his six columns are:

                (1)  Replacement cost                   $242,850
                                                        --------
                (2)  Sound value                         162,478
                (3)  Salvage value                        77,195
                                                        --------
                (4)  Sound value less salvage value       85,283
                (5)  Cost of disassembly, trucking and
                       reassembly                          6,595
                (6)  Lower of column (4) or (5)            6,282  (sic)
                

However, since the claimant has elected to abandon all the items, the last four columns numbered (3), (4), (5) and (6) become irrelevant for the purpose of valuation.

With regard to total sound value, Mr. Wright admitted (SM 1384--85) that he might have overlooked one mold with a sound value of $8,667 and if that were added to his appraisal, this total sound value would be increased from $162,478 to $171,145.

The City has also submitted two separate appraisals of 'FIXTURES' by Richard Cohen (Exhs. 1A and 1B). The first lists on an 'if compensable' basis ten items (numbered 13, 14, 15, 16, 17, 18, 19, 20, 22 and 23) to which he gives a sound value of $1,123. He also lists separately as compensable five other items (numbered 21, 35, 38, 39 and 43) to which he gives a sound value of $2,633. The second appraisal, which he calls a 'Supplemental' appraisal, lists some additions to item 35, and increases the sound value of his five items of compensables from $2,633 to $3,056.

In short, the sound values placed upon all the items by the City's appraisers, Wright and Cohen, whether categorized as compensable, or 'if compensable,' or personal property may be summarized:

                Wright's appraisal - originally           $162,478
                Added mold (Sm 1385)                         8,667
                                                          ---------
                                                          $171,145
                Cohen's- if compensables         $1,123.
                  " - compensables                2,633.
                  " - added compensables            423.     4,179.
                                                 -------  ---------
                                                          $175,324.
                

This also includes $24,000 allowed by Wright as the sound value of the Printing Plates (item 71) labeled by him as 'Personal Property.'

AS TO THE LAW ON FIXTURES

On the question of compensability, the City adopts the same attitude it has assumed on all fixture claims and that is, that an item of machinery or equipment which can be moved without substantial damage to it or the freehold is personal property and not compensable.

That is not the law of New York and never was. As far back as McRea v. Central National Bank, 66 N.Y. 489 the New York courts have held to the contrary. In that 1876 case the court pointed out (p. 496) that the criterion of a fixture is

'The union of three requisites. First. Actual annexation to the realty or something appurtenant thereto. Second. Application to the use or purpose to which this part of the realty with which it is connected is appropriated. Third. The intention of the party making the annexation to make a permanent accession to the freehold.'

and added at page 498:

'* * * the slightest fastening will be sufficient to constitute annexation';

if the second of the above requisites is present.

Time and again it has been held that the force of annexation relates only to the question of intention of permanence, absent any other proof or presumption of intention of permanence. In Rose v. State (supra) it was also pointed out that the force of annexation was but one test, a specifically designed building being another, and a loss of substantial value to the fixture on removal being another.

In Jackson v. State of New York, 213 N.Y. 34, 35--36, 106 N.E. 758 (1914, Cardozo, J.) the court said:

'It is intolerable that the state, after condemning a factory or warehouse, should surrender to the owner a stock of secondhand machinery and in so doing discharge the full measure of its duty.

Severed from the building, such machinery commands only the price of secondhand articles; attached to a going plant, it may produce an enhancement of value as great as it did when new. The law gives no sanction to so obvious an injustice as would result if the owner were held to forfeit all these elements of value.'

In United States of America v. Certain Property etc., 344 F.2d 142, 150 (2 Cir. 1965), the court stated:

'But, just as 'it is intolerable that the state, after condemning a factory or warehouse, should surrender to the owner a stock of secondhand machinery and in so doing discharge the full measure of its duty,' Jackson v. State, supra, 213 N.Y. at 35, 106 N.E. at 758, it would be nearly as intolerable that the Government should foist on tenants a portion of machinery which had been specially constructed or purchased for use in the premises taken and will lose a large measure of its value if removed for use elsewhere.'

In the first of two decisions by the Appellate Division, Second Department, in the Fields Baking Corp. case 27 A.D.2d 539, 540, 275 N.Y.S.2d 119, 121, the court said:

'* * * the fact that the machines and fixtures can in fact be removed does not of itself affect their permanence for compensation purposes, so long as the test for classifying them as compensable fixtures is otherwise satisfied. Some of the twine factory machines in the McRea case were removable, as was almost all of the equipment in Jackson v. State of New York, 213 N.Y. 34, 106 N.E. 758.'

As to what is or what is not a fixture, the decision in Rose v. State of New York, 24 N.Y.2d 80 summarizes the applicable law, at page 85--87, 298 N.Y.S.2d...