Fifth Ave. Coach Lines, Inc., In re
| Decision Date | 14 August 1964 |
| Docket Number | No. 4,No. 2,No. 5,No. 3,No. 1,1,4,5,2,3 |
| Citation | 259 N.Y.S.2d 313,46 Misc.2d 14 |
| Parties | In re FIFTH AVENUE COACH LINES, INC. (three cases). Application of the City of New York relative to acquiring title to certain real property designated as Lot 10 in Block 439, etc. (5 parcels, Manhattan)--Fifth Avenue Coach Lines, Inc. Proceeding Application of the City of New York relative to acquiring title to a leasehold interest, etc. (76-02 Northern Boulevard, Queens)--Fifth Avenue Coach Lines, Inc. Proceeding Application of the City of New York relative to acquiring title to certain real property designated as Lot 6 in Block 1997, etc. (2 parcels, Manhattan)--Fifth Avenue Coach Lines, Inc. Proceeding In re SURFACE TRANSIT, INC. Application of the City of New York relative to acquiring title to certain real property designated as Lot 1 in Block 1803, etc. (3 parcels, Manhattan; 3 parcels, Bronx)--Surface Transit, Inc. Proceeding In re FIFTH AVENUE COACH LINES, INC., et al. Application of the City of New York relative to acquiring title to a leasehold interest, etc. (116-120 W. 32nd Street, Manhattan)--Fifth Avenue Coach Lines, Inc. and Surface Transit, Inc. Proceeding |
| Court | New York Supreme Court |
Willkie, Farr, Gallagher, Walton & FitzGibbon, New York City, for claimants.
Leo A. Larkin, Corp. Counsel, for City of New York.
This trial has been brought on by five proceedings in which the City of New York condemned properties of Fifth Avenue Coach Lines, Inc. (hereafter referred to as 'Fifth') and Surface Transit, Inc. (hereafter referred to as 'Surface') pursuant to resolutions of the Board of Estimate of the City of New York under authority conferred by the New York State Legislature in Chapter 161, Laws of 1962 (amdg. General City Law, § 20, subd. 2). The validity of the statute was upheld in Fifth Avenue Coach Lines, Inc. v. City of New York, 11 N.Y.2d 342, 229 N.Y.S.2d 400, 183 N.E.2d 684.
Claimants contend that the fair value of Fifth as of the date of condemnation was $48,000,000 and that the fair value of Surface as of the same time was $44,500,000, a total of $92,500,000. The City urges that the fair value of both companies does not exceed $20,700,000.
The respective valuation figures of the tangible assets are tabulated below and are compared with the book value as of December 31, 1961, as reported by the two companies to the Public Service Commission:
In addition, claimants assert claims for consequential damages which they sustained by reason of the taking, in the following amounts:
Item Fifth Surface
____ ........................... _____ _______
Pensions ........................................... $ 2,734,107 $ 6,707,617
Workmen's Compensation
a) Administration .................................... 78,125 32,875
b) Liabilities in excess of reserve ................. 376,889 148,425
Tort claim administration ............................ 2,193,000 2,107,000
Cost of insuring liability to N.Y. City and third
persons arising from presence of street
railway tracks ...................................... ... 3,500,000
Cost of repair of street railroad area ................. ... 1,680,000
----------- -----------
Total ....................... $ 5,382,121 $14,174,917
Grand Total .............................. $19,557,038
The total amount claimed is $112,057,038.
Claimants argue that 'the difference between the value of the tangible assets above listed and the respective values of the claimants as a whole represents the value assigned by claimants' expert witness to the fact that claimants were, when taken, going concerns performing a necessary public service and capable of profitable operations' (italics supplied). This argument underlies not only the claim of approximately $9.4 millions and $14.4 millions for the alleged 'going concern value' of Fifth and Surface respectively, but also claimants' method of valuing the tangible assets.
The City recognizes the principle that 'the owner is to be put in as good position pecuniarily as he would have occupied if his property had not been taken' (United States v. Miller, 317 U.S. 369, 373, 63 S.Ct. 276, 279, 87 L.Ed. 336). Its argument is: 'Inasmuch as claimants had no capacity for profitable operations, exchange value of the property, as a non-operating transit system ($20,700,000), places claimants in the pecuniary position they would have occupied had their property not been taken, and represents the highest measure of just compensation' (italics supplied). That argument underlies the City's contention that no allowance should be made for going concern value and also accounts for the City's method of valuing the tangible assets.
After a complete review of the evidence and study of the able and comprehensive briefs submitted by both sides, the Court is unable to accept the italicized portions of either of the foregoing arguments. In view of the vigor with which they were presented, the large amounts involved, and the wide disparity in the valuations (caused in large part by these fundamental differences in the respective legal philosophies), it was deemed desirable to have both sides put in all of their proof. This should avoid the necessity for a retrial if the appellate courts disagree with any of my conclusions.
The trial took over a year. The transcript comes to 20,752 pages. There are 981 exhibits, many of them quite voluminous.
It is necessary at the outset to define the term 'going-concern value' as it will be used in this opinion, in order to avoid semantic pitfalls. "Going-concern value' * * * is a portmanteau phrase that needs unpacking' (Kimball Laundry Co. v. United States, 338 U.S. 1, 9, 69 S.Ct. 1434, 1439, 93 L.Ed. 1765), particularly since it represents the crux of the divergence of valuations here.
'That there is an element of value in an assembled and established plant, [a] doing business and [b] earning money, over one not thus advanced, is self-evident' (Des Moines Gas Co. v. City of Des Moines, 238 U.S. 153, 165, 35 S.Ct. 811, 815, 59 L.Ed. 1244 []). But items [a] and [b] must be kept separate and distinct.
'Apparently some confusion has arisen in the use of the words 'going concern value' and 'good will.' In its brief the appellant at times uses these words interchangeably. In dealing with the subject of good will, the reports and text books use the words 'going concern value,' and the one generally includes the other to some extent. In considering the present point made by the appellant, we must be careful to exclude the 'good will' meaning of the words 'going concern value." (Banner Milling Co. v. State of New York, 240 N.Y. 533, 543, 148 N.E. 668, 671, 41 A.L.R. 1019).
'GOOD WILL'
The 'good will' meaning of the words 'going concern value' in Banner referred to the earnings of claimant (240 N.Y. 533, at p. 539, 148 N.E. 668, at p. 670).
'There is no more important element in the valuation of commercial properties than earnings' (Ecker v. Western Pacific R. Co., 318 U.S. 448, 483, 63 S.Ct. 692, 712, 87 L.Ed. 892). (Kimball Laundry Co. v. United States, 338 U.S. 1, 16, 69 S.Ct. 1434, 1443; footnote omitted).
For 1961, Fifth had a deficit of $300,000 after taxes, and Surface had a net income of $90,000 after taxes. For the last three years, the average net income after taxes was $27,000 for Fifth and $552,000 for Surface.
The average net operating income for the last ten years for the two companies combined was $3.2 millions. Since this figure is before income taxes and other adjustments (which were not stated in the exhibits), the average net income for the period for both companies would be substantially less.
'It is usually said that market value is what a willing buyer would pay in cash to a willing seller' (United States v. Miller, supra, 317 U.S. 369, at p. 374, 63 S.Ct. 276, at p. 280). Obviously, no willing buyer would pay $92.5 millions for an enterprise with such an earnings history.
In an effort to escape from this inexorable fact, claimants contend that they are 'capable of profitable operation,' and their entire valuation structure rests on this foundation. In describing their proof, claimants argue that 'the principle is the same as that applied in other...
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Fifth Ave. Coach Lines, Inc., In re
...into account. In point of fact, it so indicated when, in the portion of its opinion devoted to 'Going Concern Values' (46 Misc.2d 14, 25, 259 N.Y.S.2d 313, 327 et seq.), it declared 'No allowance may be made for Surface's operating rights and permits nor for Fifth's perpetual franchises for......
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Port Authority Trans-Hudson Corp. v. Hudson & Manhattan Corp.
... ... , and improvement and extensions of the rail transit lines of said railway to permit transfer of its passengers to and ... Matter of City of New York (5th Ave. Coach Lines), 18 N.Y.2d[27 A.D.2d 41] 212, 273 N.Y.S.2d ... HRT, Inter alia, cites Matter of City of New York (Fifth Ave. Coach Lines), 18 N.Y.2d 212, 273 N.Y.S.2d 52, 219 ... Seaway, Inc., 46 N.J. 376, 217 A.2d 313). Both urge, however, that the ... ...
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Port Authority Trans-Hudson Corp., Application of
...(Matter of City of New York [Fifth Avenue Coach Lines, Inc.], 23 A.D.2d 463, 261 N.Y.S.2d 784 [1st Dept., 1965], affg. 46 Misc.2d 14, 259 N.Y.S.2d 313 [Sup.Ct., 1964]). It is an important decision to consider. The trial judge, Mr. Justice William C. Hecht, an experienced and highly respecte......
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Fifth Ave. Coach Lines, Inc., In re
...Special Term applied two conflicting rules and yet reached the same conclusion in determining claimants' going concern value. (46 Misc.2d 14, 259 N.Y.S.2d 313.) At one point, citing Banner Milling Co. v. State of New York, 240 N.Y. 533, 148 N.E. 668, 41 A.L.R. 1019, 1 it was held that, in a......