Torromeo Indus. v. State
| Decision Date | 13 March 2020 |
| Docket Number | No. 2019-0121,2019-0121 |
| Citation | 238 A.3d 1077,173 N.H. 168 |
| Parties | TORROMEO INDUSTRIES v. STATE of New Hampshire |
| Court | New Hampshire Supreme Court |
Sumner F. Kalman Attorney at Law, PC, of Plaistow (Sumner F. Kalman on the brief and orally), for the petitioner.
Gordon J. MacDonald, attorney general (Emily C. Goering, assistant attorney general, on the brief and orally), for the State.
The State appeals an order of the Superior Court (Schulman, J.) on a petition filed by Torromeo Industries (Torromeo) for the reassessment of eminent domain damages. See RSA 498-A:27 (2010). The court awarded Torromeo $70,800 in condemnation damages. We vacate and remand.
The trial court found, or the record establishes, the following relevant facts. Torromeo owns several acres of land in Plaistow on which there is a 4,000 square foot light industrial building and a 1,500 square foot single-family residence. The property is located in the town's "Industrial I" zone. Lots in that zone must have 80,000 square feet (equivalent to 1.84 acres) and 150 feet of road frontage.
Before the taking at issue, Torromeo's lot consisted of 11.88 acres with approximately 149 feet of frontage. Of those 11.88 acres, the residence occupied approximately .36 acres and the light industrial use occupied approximately 2 acres, leaving approximately 9.52 acres for potential development. The residence rented for $1,500 monthly, net of utilities, and the .36-acre portion of the lot on which it sat had approximately 100 feet of the entire lot's 149 feet of frontage. Before the taking, the property could be accessed by vehicle only by way of a private driveway.
Although the property's 149 feet of frontage did not comply with the zoning ordinance, according to the State's appraiser and not disputed by Torromeo's appraiser, it "was approved by the Planning Board in 1989 and is considered to be a legally permitted pre-existing use." Moreover, although residential uses are not allowed in the Industrial I zone, approximately .36 acres of Torromeo's property have been continuously used as such for approximately 70 years, and the residential use is deemed a lawful, preexisting, nonconforming use.
In 2015, the State took approximately 1.9 acres of Torromeo's land by eminent domain to construct a two-lane, paved service road. To complete the project, the State also took approximately 30,000 square feet for permanent and temporary easements. As a result of the taking, Torromeo's property became three independent parcels: (1) a .36-acre lot on which the residence sits; (2) an approximately 10-acre site on which the light industrial building sits and of which approximately 6.55-to-8 acres are considered to be surplus land; and (3) a .28-acre "gore" or uneconomic remnant.
The State offered Torromeo $500 as just compensation for the taking. Torromeo declined the offer and sought a determination of condemnation damages from the New Hampshire Board of Tax and Land Appeals (BTLA). See RSA 498-A:24 - :26 (2010). Thereafter, the State offered, consistent with the view of its appraiser, and the BTLA ordered, $35,000 in just compensation. Torromeo petitioned the superior court for de novo review of the BTLA award. See RSA 498-A:27.
Both parties submitted appraisal reports from their experts, who were the only witnesses at the bench trial. The State's expert opined that the property's highest and best use before the taking was as improved by the single-family residence and light industrial building, with the surplus land being held for future development. The expert explained that, although the property could be further developed, such as by converting it "to condominium ownership," which would involve the creation of "a private road ... to allow development of the remainder of the lot," doing so might not be financially feasible given the market.
The State's expert opined that the property's highest and best use after the taking was to hold the surplus land for future development and to continue to use .36 acres of the property for the residential use and the remaining land for the light industrial use. However, the expert further opined that the highest and best use of the property was as a "de facto subdivision." He explained that the service road, to be constructed as part of the taking, will separate the residential lot from the remaining land. He testified that, although the residential lot had not yet become "a lot of record," it could easily become one simply by filing a deed and a survey with the registry of deeds. He stated that "according to the Code Enforcement Officer for the Town, making the site a lot does not require a subdivision or variance due to the ‘de facto’ subdivision of the site resulting from the construction of the service road, separating the .36 site from the parent lot." Rather, "[t]he lot would be created and recognized by the Town by filing a survey and deed, with a legal description." Moreover, he explained that, according to the zoning ordinance, "[i]f a lot of record ... has ... a portion ... taken by eminent domain for a public good, then if it becomes ... nonconforming, it is an allowable lot."1 Thus, he opined, after the taking, the residential lot "could be separately transferred ..., something that would not have been possible in the ‘Before’ scenario due to the dimensional requirements imposed by zoning, unless relief [was] granted from the applicable ordinances."
The State's expert further testified that he did not assume that, before the taking, the lot would have received the necessary relief from zoning requirements because town officials had informed him that it "was unlikely if not impossible" that such relief would have been granted. The expert also testified that, generally, when he performs an appraisal, he does not assume that a variance will be granted; rather, he appraises property "as is based on current zoning and the information from the code officer and the planning director." Nor did the State's expert assume that, before the taking, the residential lot would have received subdivision approval. The State's expert testified that "the code enforcement officer and the planning director" told him that the possibility of subdividing the residential lot from the remaining land, before the taking, "was remote."
Relying upon the residential portion of the property's rental value and using the income capitalization approach to value, the State's expert opined that, before the taking, the residential portion was worth $155,000. To obtain this value, the expert used the current rental rate for the property ($1,500/month), applied a 5% vacancy and collection loss, deducted the projected operating costs, and estimated that the net income derived from the rental is $11,600. Using a capitalization rate of 7.5%, the expert divided the projected net operating income by the selected capitalization rate.
The State's expert did not use the income approach to value the residential lot after the taking because he assumed that, after the taking, the residence "would be sold," and, therefore, he used the sales comparison approach to estimate its selling price. Under that approach, the residential lot's value after the taking was $190,000. Ultimately, the State's expert opined that the surplus land sustained approximately $70,000 in damages, which was offset by the approximately $35,000 that the value of the residential lot increased as a result of becoming a separate, saleable lot after the taking.
Torromeo's expert opined that the highest and best use of the property both before and after the taking was as a subdivision, with the residential lot being separated from the remaining land. He testified that, before the taking, "you could do exactly the same thing as you could accomplish" after the taking "by isolating the residence and the [light] industrial [use] through condominiumization." In his opinion, whether variances could have been obtained, before the taking, to allow this to occur "is almost irrelevant." The expert noted that "[c]ondominium ownership is subject to the subdivision regulations," but did not discuss the probability that subdividing the property through "condominiumization" would have been approved under those regulations before the taking.
Using the sales comparison approach, Torromeo's expert opined that the residential part of the property (including the dwelling) was worth $237,500 before the taking, and $112,500 after the taking. Using the cost approach to value, Torromeo's expert opined that the "before taking" value of the residential lot was $184,000, and its "after taking" value was $70,000.
Although Torromeo's expert also calculated the value of the property under the income capitalization approach to value, he did not provide separate values for the residential and industrial lots, and gave no weight to that approach in his final calculations.
At the bench trial, the court expressed skepticism that Torromeo's land could not have been subdivided before the taking:
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