In re Auth.

Decision Date21 July 2011
Citation86 A.D.3d 314,2011 N.Y. Slip Op. 05986,927 N.Y.S.2d 67
PartiesIn re METROPOLITAN TRANSIT AUTHORITY, etc.,Collegiate Church Corporation, etc., Claimant–Respondent,v.Metropolitan Transit Authority, Condemnor–Appellant.200 Broadway Joint Venture Co., LLC, etc., Claimant–Respondent,v.Metropolitan Transit Authority, Condemnor–Appellant.In re Metropolitan Transit Authority, etc.,DLR Properties, LLC, etc., Claimant–Respondent,v.Metropolitan Transit Authority, Condemnor–Appellant.In re Metropolitan Transit Authority, etc.,DLR Properties, LLC, etc., Claimant–Respondent,v.Metropolitan Transportation Authority, Condemnor–Appellant.
CourtNew York Supreme Court — Appellate Division

OPINION TEXT STARTS HERE

Berger & Webb, LLP, New York (Charles S. Webb III, Kenneth J. Applebaum, Judith Z. Katz and Adam H. Brodsky of counsel), for appellant.Goldstein, Rikon & Rikon, P.C., New York (M. Robert Goldstein of counsel), for Collegiate Church Corporation, respondent.

Kramer Levin Naftalis & Frankel LLP, New York (James G. Greilsheimer of counsel), for 200 Broadway Joint Venture Co. LLC, respondent.Rosenberg & Estis, P.C., New York (Michael E. Feinstein of counsel), for DLR Properties, LLC, respondent.PETER TOM, J.P., JOHN W. SWEENY, JR., HELEN E. FREEDMAN, ROSALYN H. RICHTER, SHEILA ABDUS–SALAAM, JJ.RICHTER, J.

On March 29, 2006 (the vesting date), condemnor-appellant Metropolitan Transportation Authority (the MTA) acquired five properties in lower Manhattan through eminent domain. The properties, which make up the entire block front on the east side of Broadway between Fulton and John Streets, were acquired in connection with the construction of the Fulton Street Transit Center Project, a new public transit facility currently under construction. On the vesting date, the properties were owned by the three claimants-respondents: DLR Properties, LLC (Riese), Collegiate Church Corporation (Collegiate), the real estate owning entity of the Minister, Elders and Deacons of the Reformed Protestant Dutch Church of the City of New York, and 200 Broadway Joint Venture Co. LLC (Joint Venture), an entity in which Collegiate had a 49.9% interest and nonparty Brookfield Properties Corporation (Brookfield) had a 50.1% interest.

The northernmost property, 204 Broadway, a two-story retail and office building, was owned by Collegiate. The next property south, 200 Broadway, was a one-story retail building owned by Joint Venture. The property below that, 198 Broadway, a 12–story office building, was owned by Collegiate. The next property south, 194 Broadway, a three-story retail building, was owned by Riese. Finally, the southernmost property, 192 Broadway, was a nine-story office building owned by Collegiate.

After the condemnation, in accordance with the Eminent Domain Procedural Law (EDPL), the MTA made advance payments to Collegiate/Joint Venture and Riese. Claimants filed notices of claim and a joint trial was held to determine whether they were entitled to any additional compensation. Prior to trial, the MTA and Collegiate reached a settlement as to the value of the building at 192 Broadway. However, the settlement left open for trial the issue of whether 192 Broadway's unused development rights, totaling approximately 25,000 square feet, had additional value.

Unused development rights, also known as air rights, represent the difference between the maximum permissible floor area and the actual built floor area on a zoning lot (Department of City Planning, Zoning Handbook, at 146 [2011] ). With certain exceptions not applicable here, unused development rights may be sold or transferred as-of-right from one lot to an adjacent lot through a zoning lot merger, which is the joining of two or more adjacent zoning lots into one new zoning lot ( id.).

At trial, the parties introduced appraisal evidence of the value of the properties on the vesting date. The MTA argued that each of the properties should be valued separately. The MTA appraiser valued the Collegiate properties at $37,000,000 (204 Broadway) and $15,500,000 (198 Broadway), and the Joint Venture Property (200 Broadway) at $21,950,000, for a total of $74,450,000. He also concluded that the air rights to Collegiate's 192 Broadway could not be transferred because, as of the vesting date, there was no zoning lot merger between the Riese property (194 Broadway) and the Collegiate/Joint Venture properties. In contrast, Collegiate and Joint Venture maintained that the highest and best use for their properties was a residential condominium building to be constructed on an assemblage consisting of the three northern properties (198, 200 and 204 Broadway) along with the air rights from 192 and 194 Broadway. The Collegiate/Joint Venture appraiser found that Collegiate/Joint Venture's interest in that assemblage had a value of $112,000,000 as of the vesting date.

As for the Riese property (194 Broadway), the MTA appraiser found that the highest and best use was to demolish the building and construct a mixed-use retail and residential building on the site; he set the property's value on the vesting date at $27,440,000. Riese's appraiser, on the other hand, assumed that the building would remain and that the air rights could be sold to a neighboring property. He determined that the total value of the building plus its air rights was $60,630,000.

In a decision dated September 11, 2009, the trial court found that the three northern properties were, for all intents and purposes, under common ownership and control, and there was a reasonable probability that Collegiate and Joint Venture would have assembled these properties. The court further found that it was reasonably probable that Collegiate/Joint Venture would have acquired Riese's property as part of the assemblage, which would then allow through a zoning lot merger for the inclusion of 192 Broadway's air rights. Using the comparable sales approach, and adjusting for various factors, the court determined that the unit price for the assemblage was $311.35 per square foot. Applying this figure to the total square footage of the three northern properties and 192 Broadway's air rights and adjusting for the cost of demolition, the court concluded that Collegiate/Joint Venture's properties had a value of $106,510,521.80. Using the same formula, the court found that Riese's property had a value of $35,224,396.25. Because both of these amounts were higher than the advance payments already made, the court entered judgments directing the MTA to pay claimants the difference along with interest at 9%. The MTA now appeals from those judgments.

It is well settled that the measure of damages in a condemnation case is the fair market value of the condemned property in its highest and best use on the date of taking ( Matter of City of New York [Franklin Record Ctr.], 59 N.Y.2d 57, 61, 463 N.Y.S.2d 168, 449 N.E.2d 1246 [1983] ). This is true even though the owner may not have been utilizing the property to its fullest potential at the time of condemnation ( Matter of Town of Islip [Mascioli], 49 N.Y.2d 354, 360, 426 N.Y.S.2d 220, 402 N.E.2d 1123 [1980] ). Although an owner is not required to show either that the property had been used at its projected highest and best use, or that there had been an ante litem plan for such use, the owner must establish that there is a reasonable probability that the asserted use “could or would have been made within the reasonably near future” ( Matter of City of New York [Broadway Cary Corp.], 34 N.Y.2d 535, 536, 354 N.Y.S.2d 100, 309 N.E.2d 870 [1974] ).

“The fact that the most profitable use of a parcel can be made only in combination with other lands does not necessarily exclude that use from consideration if the possibility of combination is reasonably sufficient to affect market value” ( Olson v. United States, 292 U.S. 246, 256, 54 S.Ct. 704, 78 L.Ed. 1236 [1934] ). Thus, a claimant is entitled to the fair market value of its property for its highest and best available use even though that use is in connection with adjoining properties, provided there is a reasonable probability that the condemned property would be combined with other tracts in the reasonably near future ( United States ex rel. TVA v. Powelson, 319 U.S. 266, 275–276, 63 S.Ct. 1047, 87 L.Ed. 1390 [1943]; see also Commissioner of Transp. v. Towpath Assoc., 255 Conn. 529, 540, 767 A.2d 1169, 1177 [2001]; 4–13 Nichols on Eminent Domain § 13.01[20] [2010] ). Contrary to the MTA's contention, courts in New York have recognized that the reasonable probability standard applies to potential assemblages ( see e.g. Yaphank Dev. Co. v. County of Suffolk, 203 A.D.2d 280, 281–282, 609 N.Y.S.2d 346 [1994]; New York State Urban Dev. Corp. v. Wanger, 58 A.D.2d 955, 956, 397 N.Y.S.2d 440 [1977]; Matter of City of Rochester v. Iman, 51 A.D.2d 651, 652, 378 N.Y.S.2d 203 [1976] ).

Whether there was a reasonable probability of an assemblage is a question of fact ( see Rodman v. State of New York, 109 A.D.2d 737, 737, 485 N.Y.S.2d 842 [1985]; see also Matter of Consolidated Edison Co. of N.Y., Inc. v. City of New York, 8 N.Y.3d 591, 595–596, 838 N.Y.S.2d 458, 869 N.E.2d 634 [2007] [valuation of property presents a question of fact] ). On appellate review of a nonjury trial, “the findings of fact should be viewed in a light most favorable to sustain the judgment, due deference should be accorded Trial Term in matters of credibility, and the findings of fact should not be disturbed unless such determination could not have been reached under any fair interpretation of the evidence” ( Richstone v. Q–Med, Inc., 186 A.D.2d 354, 354, 588 N.Y.S.2d 772 [1992]; see Thoreson v. Penthouse Intl., 80 N.Y.2d 490, 495, 591 N.Y.S.2d 978, 606 N.E.2d 1369 [1992]; Horsford v. Bacott, 32 A.D.3d 310, 312, 820 N.Y.S.2d 554 [2006] ). These standards are applicable to condemnation cases ( see e.g. Matter of Board of Commr. of Great Neck Park Dist. of Town of N. Hempstead v. Kings...

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