NORTHEAST CT. ECON. ALLIANCE v. ATC P'SHIP

• Decision Date: 14 December 2004
• Docket Number: No. 17083.,17083.
• Citation: 861 A.2d 473,272 Conn. 14
• Court: Connecticut Supreme Court
• Parties: NORTHEAST CT. ECONOMIC ALLIANCE, INC. et al. v. ATC PARTNERSHIP et al.

861 A.2d 473

272 Conn. 14

NORTHEAST CT. ECONOMIC ALLIANCE, INC. et al. v.ATC PARTNERSHIP et al.

No. 17083.

Supreme Court of Connecticut.

Argued September 24, 2004.

Decided December 14, 2004.

Richard S. Cody, with whom, were Jon B. Chase and Lisa Silvestri, for the appellants-appellees(plaintiffs).

Richard P. Weinstein, with whom was Nathan A. Schatz, West Hartford, for the appellee-appellant(named defendant).

NORCOTT, PALMER, VERTEFEUILLE, ZARELLA and LANGENBACH, Js.

NORCOTT, J.

In this latest chapter of the "protracted and contentious" dispute arising from the development of the Windham Mills property in Willimantic,¹the plaintiffs, the town of Windham(town), and its implementing agency, Northeast Ct. Economic Alliance, Inc.(Northeast), appeal and the named defendant, ATC Partnership,² cross appeals from a judgment rendered after a court trial held pursuant to this court's remand order in Northeast Ct. Economic Alliance, Inc. v. ATC Partnership,256 Conn. 813, 776 A.2d 1068(2001)(Northeast I).³The trial court awarded the defendant damages of $1,752,365 plus interest and costs as compensation for condemnation of its real property, namely, the Windham Mills complex (property), located in the former city of Willimantic.The plaintiffs' primary claims in this appeal are that in determining the market value of the property, the trial court improperly considered: (1) the likelihood of the plaintiffs receiving $3 million in state economic development grant funds; and (2) the impact of state and federal environmental laws in determining who would bear financial responsibility for the environmental remediation of the property.The defendant cross appeals, arguing that the trial court improperly failed: (1) to incorporate in its compensation award the impact of the two separate funding sources, namely, the available state grant and the proceeds from potential environmental litigation against the American Thread Company(American Thread), the former owner and operator of the property; and (2) to give effect to the highest and best use of the property by ascribing a negative value to the Mill 4 parcel of the property, rather than severing that parcel.We affirm the judgment of the trial court.

The record and the trial court's thoughtful and comprehensive memoranda of decision reveal the following relevant facts and procedural history.The property consists of approximately forty acres of land with two dams and approximately twenty-one industrial buildings located on both sides of the Willimantic River in the former city of Willimantic, in the town of Windham.⁴Most of the buildings are on parcels located on the north side of the river; the parcel containing Mill 4 is on the south side.A variety of companies, culminating with American Thread, used the property from 1854 until 1985 for the manufacture of textiles, including thread, yarn and string.By 1985, American Thread had moved all of its production operations out of Connecticut, and in 1986, it sold the property to Eastern Connecticut Industrial Park Associates (Eastern).⁵Thereafter, Eastern sold the property to the defendant.

Local authorities considered a number of redevelopment plans for the property, which has not been used for manufacturing activity since the early 1980s.Among the rejected proposals were plans to use it for housing or mixed use retail.Thereafter, in 1991, a portion of the property was designated as the Windham Heritage State Park in recognition of the historic and educational importance of the property; it was the first component of the state's heritage park system.

In 1993, a multidisciplinary team of architectural, economic and environmental consultants, with substantial input by the community and the defendant, prepared for the town a master action plan for the redevelopment of the park and the property (plan).The plan considered light industry with ancillary offices to be the highest and best use for the property.The plan divided the property into three large parcels, which consisted of: (1) a parcel of 10.4 acres between Main Street and the river, which contained the main complex of buildings; (2) a second parcel of approximately 22 acres located across the river to the south, which contained Mill 4;⁶ and (3) a third parcel of approximately 5.1 vacant acres located to the east of the main parcel.The plan's environmental analysis noted that the property had environmental problems, including the presence of asbestos, lead paint, polychlorinated biphenyls (PCBs), and other chemical contaminants that would need to be abated prior to demolition or rehabilitation, but it did not consider these conditions "unusual."The plan, which was completed in December, 1993, estimated the total costs of a complete environmental investigation and remediation of the property to range from a low of $2.42 million to a high of $4.04 million.⁷

In the early 1990s, the parties had discussed the sale of the property from the defendant to the plaintiffs.Indeed, they jointly had engaged in efforts to obtain government funding for the redevelopment and rehabilitation of the property.These sale negotiations, however, were unsuccessful.Thereafter, in August, 1994, the plaintiffs filed with the trial court a statement of compensation in the amount of $1, followed by a certificate of taking on September 9, 1994.The defendant then applied to the trial court for review of the statement of compensation pursuant to General Statutes § 8-132.⁸

At the first trial, the court, Hon. Harry Hammer, judge trial referee, considered the opinions of three appraisers, two called by the parties and one appointed by the court as an independent valuation expert, and rendered judgment awarding the defendant $1,675,000 as just compensation for the taking of the property.Northeast I,supra, 256 Conn. at 825,776 A.2d 1068.In rendering its judgment, the trial court granted the defendant's motion in limine and excluded as a matter of law evidence of environmental contamination and remediation costs.Id., at 815, 776 A.2d 1068.The plaintiffs appealed from that judgment, and this court concluded that "evidence of environmental contamination and remediation costs may not be excluded, as a matter of law, from a condemnation proceeding";id., at 816-17, 776 A.2d 1068; because that exclusion results in the misapplication of "the usual standard established for calculating just compensation, namely, fair market value."⁹Id., at 827, 776 A.2d 1068.Accordingly, this court reversed the judgment of the trial court in Northeast I and remanded the matter for a new trial.Id., at 843, 776 A.2d 1068.

At trial after remand, the trial court, McLachlan, J., heard testimony from Dean Amadon and Robert Nocera, appraisers for the plaintiffs and the defendant, respectively.It was undisputed that the highest and best use for the property was light industrial use with ancillary office support.The trial court utilized the comparable sales approach of comparing the property to the actual sales of similar land and structures, and making necessary adjustments for factors such as contamination in order to calculate the property's fair market value.¹⁰The court rejected the comparables proffered by Amadon, and concluded that Nocera's analysis was more persuasive.The court, relying heavily on the plan, concluded that there was 412,802 square feet of building space to be preserved on the property, with a "clean" value of $20 per square foot, for a gross value of $8,256,040.The court's value of $20 per square foot reflected a "conservative" 20 percent reduction of Nocera's estimate as to value, and did not include any allowance for costs offset by the recycling of materials from the demolished buildings.

After calculating the "clean" value of the property, the court then deducted the "substantial expenses" that would be incurred to clean and stabilize the property to arrive at a net fair market value of $1,752,365.In calculating these costs, the court made assumptions and findings of fact, including "[a] potential buyer would seek all sources of funds to reimburse or defray the environmental costs including investigation or remediation."Among these funding sources were: (1) $3 million approved for the project by the state bond commission on October 22, 1993 — $60,000 of which already had been expended on environmental investigation prior to the 1994 taking; (2) American Thread's assumption of liability for the environmental cleanup to the extent required by Form III of the state department of environmental protection,¹¹ as well as the fact that its successor company was solvent and profitable; and (3) pursuant to Public Acts 1993, No. 93-382, the defendant"and any other for-profit partnership, proprietorship or corporation would be permitted to seek state financial assistance for the `construction or rehabilitation of commercial, industrial and mixed use structures.'"Allowing deductions for legal and administrative costs, the trial court assumed specifically that 80 percent of the environmental remediation costs could be recouped from the $3 million grant and "from other potential sources, including American Thread."The trial court ultimately found that just compensation for the defendant at the time of the taking in September, 1994, was $1,752,365, and that the defendant was entitled to an award of interest at the statutory rate of 10 percent;seeGeneral Statutes § 37-3c; and costs pursuant to § 8-133.Thereafter, costs were taxed by the court, Quinn, J., and this appeal and cross appeal followed.Additional facts and procedural history will be set forth as necessary in the context of the parties' claims on appeal.

On appeal, the plaintiffs ask us to modify the judgment of the trial court.They claim that the trial court improperly: (1)"awarded"the defendant the $3 million in state grant funds; (2) concluded, without factual or legal foundation under the Comprehensive...