New York Telephone Co. v. Wadle

• Citation: 111 A.D.2d 791,490 N.Y.S.2d 540
• Parties: NEW YORK TELEPHONE COMPANY, Appellant, v. Gilbert WADLE, et al., Respondents, et al., Defendants.
• Decision Date: 10 June 1985
• Court: New York Supreme Court Appellate Division

Page 540

490 N.Y.S.2d 540

111 A.D.2d 791

NEW YORK TELEPHONE COMPANY, Appellant, v. Gilbert WADLE, et al., Respondents, et al., Defendants.

Supreme Court, Appellate Division Second Department.

June 10, 1985.

Ober, Kaler, Grimes & Shriver, New York City (Gerard A. Dupuis, New York City, of counsel), for appellant.

Raymond M. Maguire, Patterson, for respondents.

Before LAZER, J.P., and BRACKEN, WEINSTEIN and NIEHOFF, JJ.

MEMORANDUM BY THE COURT.

In a condemnation proceeding, the condemnor, the New York Telephone Company, appeals (1) from an order of the Supreme Court, Westchester County, dated August 18, 1982, which granted defendants Wadles' motion to confirm the report of the Commissioners of Appraisal (filed with the County Clerk on March 12, 1982), confirmed that report, and directed that the County Clerk enter judgment in favor of the defendants Wadle and against the New York Telephone Company, in the principal sum of $150,000, plus an additional award of $7,500 representing 5% of the $150,000 award pursuant to Condemnation Law § 16, and (2) from a judgment of the same court, dated September 2, 1982, entered thereon.

Appeal from the order dismissed, without costs or disbursements (see Matter of Aho, 39 N.Y.2d 241, 248, 383 N.Y.S.2d 285, 347 N.E.2d 647).

Judgment reversed, on the law, without costs or disbursements, order vacated, motion of defendants Wadle to confirm denied, report set aside, and matter remitted to the Supreme Court, Westchester County, for appointment of and remittitur to new Commissioners of Appraisal to ascertain de novo the compensation to be made to the defendants Wadle, the owners of the property taken herein.

The subject proceeding arose out of the need for petitioner New York Telephone Company to erect a newer and more modern central office facility in Patterson, New York. The Wadles' 35,000-square-foot Patterson, New York property was improved with an approximately 90-year-old multiple-family frame dwelling, in poor condition, a detached barn, a two-car garage, a detached one-car garage and a frame outhouse. The property was continguous to petitioner New York Telephone Company's existing Patterson, New York central office facility.

The condemnation petition dated June 20, 1977 alleges and the record establishes the following: Since 1973 petitioner sought to purchase the property. In or about November 1973, claimant Gilbert Wadle indicated he would be willing to sell for $75,000. In March 1974, petitioner caused the property to be appraised. The appraiser reported that the property was worth $35,000. On April 1, 1974, the petitioner offered that amount to claimant Gilbert Wadle. On April 8, 1974 Gilbert Wadle gave petitioner a figure of $65,000 "but not less".

In view of claimants' position, the petitioner abandoned consideration of claimants' property and gave consideration to alternative sites, which proved to be unfeasible. In November 1976, claimants' attorney stated that his clients would sell for $75,000, and in December 1976, submitted a proposed contract of sale with a stated price of $75,000. On January 18, 1977 claimants' attorney advised, however that the offer of $75,000 "is no longer applicable". Petitioner then had the property appraised again; the appraiser reported that it was worth not more than $40,000. This amount was offered to claimants but in May 1977 the offer was rejected.

By notice of motion for immediate possession dated June 20, 1977, petitioner commenced this proceeding.

The condemnation petition revealed certain information concerning petitioner's cost studies, including the following:

"Alternative plans have been considered by plaintiff but would require sites substantially removed from the present central office and would involve large and unnecessary expense of approximately $375,000 for, among other things, the rerouting of telephone cables from the present site to any alternate."

The $375,000 cost savings revelation did not escape the notice of the claimants' appraiser, of course. Thus, in the course of the proceedings, he filed an appraisal in which he cited the $375,000 cost savings revealed in the condemnation petition and supporting papers and he concluded that the highest and best use of the subject multiple family property was "for improvement with a new facility expanding the central office building of the New York Telephone Company". He further reported, however, that:

"Were it not to satisfy the urgent needs of the Condemnor and reduce the costs mandated by that need, the alternate Highest and Best Use is found to be as it is currently employed with the potential of converting and enlarging the existing structure to accommodate professional offices."

Using an income capitalization approach in which he also found rental value for the then-vacant three unfurnished rooms in the attic of the house, the claimants' appraiser valued the property at $87,966. He found a value of $88,500 under a market approach based on two whole-to-whole comparables, but stated that the market approach "has limited value due to the fact that there were only two comparable sales--one of which was not truly comparable". He found a value of $90,576 under the cost approach, but rejected that approach, and used it only as a check on the reasonableness of his conclusion as to value. He concluded that the value of the property under the "alternate highest and best use concept" was $88,000. However, he then added an increment of $187,500 to the $88,000 to derive a total value of $275,500. He justified the increment for the following reasons:

"VALUE BASED ON HIGHEST AND BEST USE

"With consideration to the fact that the Highest and Best Use of this property is for improvement with a central office building for the New York Telephone Company as a result of the ideal location adjacent to the existing utility building, it is the opinion of the Appraisers that an increment must be added to the value found for the alternate Highest and Best Use. This increment in value reflects the effect of value of the substantial cost savings the utility would enjoy by selecting this property as the site for their [sic ] new facility as opposed to another location.

"It also reflects on the amount that a buyer, armed with the knowledge of the full capabilities of this property, would pay to acquire title to it. It cannot be 100%, for at that price the utility might change the focal point of their [sic ] operations in this community with no additional cost.

"At 75% of the cost of relocation to a different site, the utility might still switch to another location, which might be a more suitable focal point than the present one in view of changing population trends and demands. Further, the Appraisers believe that another prospective buyer would not pay such an increment due to the degree of risk involved.

"Twenty-five percent of the cost, in the opinion of the Appraisers, would not adequately compensate the owner for the full value of his property although it is believed that another prospective buyer would happily pay that amount.

"The Appraisers conclude that an increment amounting to 50% of the cost of relocation is justified, for at that price a prospective buyer would be interested and the utility would still be saving $187,500.

"The Appraisers therefore conclude that the Fair and Reasonable Value of this property is $275,500".

The petitioner condemnor's expert reported that the income approach produced the highest estimate of value and he valued the property at $36,000.

The Commissioners of Appraisal concluded that the fair market value of the subject property based solely upon its availability for use as a multiple-family dwelling was $75,000 but that a 100% increment ($75,000) should be added "based on its unique proximity to the existing property of plaintiff". Accordingly, the commissioners reported that $150,000 should be awarded.

On motion of the defendants Wadle, the Supreme Court confirmed the Report of the Commissioners of Appraisal. The petitioner-condemnor appealed.

We find that, notwithstanding the verbal clothing of the increment award, the increment was based not upon evidence of market value but upon speculation as to a what a speculator would pay for the property based on the cost savings to the condemnor which were first revealed by the condemnor in the condemnation petition and supporting papers, and which manifestly reflected its internal cost studies. This was a fundamental and prejudicial legal error (Fonda, Johnstown & Gloversville R.R. Co. v. State of New York, 29...