Allboro Equip. Co. v Hill
Annotate this CaseDecided on November 15, 2004
Civil Court of the City of New York, Kings County
ALLBORO EQUIPMENT COMPANY, Plaintiff
against
RONALD HILL dba SUGAR HILL CUTS BARBER SHOP, Defendant
56473/01
Eileen N. Nadelson, J.
This action was commenced as a plenary proceeding to recover rents from a former commercial tenant who had been evicted from the subject premises in August of 2001. During the bench trial the parties, after lengthy tabulations, stipulated that the amount of unpaid rent was $8000. The parties further agreed that Defendant's security deposit of $3300 was not deducted from this sum still owing. (Plaintiff attempted to claim over $800 for repairs to the premises, but the bill submitted was for repairs made two years after Defendant vacated and subsequent to another tenant having occupied the premises). Lastly, Defendant claimed that he was not permitted to remove his belongings from the premises, and that he should receive a credit for the property he could not remove.
The issue now before the court is the value to be placed on the property Defendant was not permitted to remove. Defendant attempted to introduce various receipts for the property he allegedly had on the premises, but except for one bill the others were overruled as not being originals or not indicating the purchaser. The receipt that was admitted was for $3959.00, for equipment that was purchased on June 9, 1995, shortly before Defendant took possession of the subject premises.
The rule in New York for valuing business property is its cost or replacement value, less depreciation. New York State Electric & Gas Corporation v. Fischer, 24 AD2d 683, 261 N.Y.S.2d 310 (3d Dept, 1965), see generally, Universal Empire Industries, Inc. v. State of New York, 149 Misc 2d 773, 566 N.Y.S.2d 442 (Court of Claims 1990). Even if a party's proof representing the cost of the items for which he is seeking damages or reimbursement is not contradicted, the injured party must still account for such factors as age, use, wear and tear, deterioration and depreciation. Mullen v. Sinclair Refining Company, 32 AD2d 1000, 301 N.Y.S.2d 716 (3d Dept. 1969). [*2]
In the instant case, Defendant's proof regarding the cost of his business equipment is not disputed; however, Defendant introduced no evidence with respect to depreciation. When queried by the court as to whether the items were depreciated on his tax returns, Defendant stated that he did not know.
If the court were to award Defendant the full purchase value of the equipment, he would be unjustly enriched to the extent such value exceeded the depreciated value of the property. Therefore, the court must attempt to determine the value of the equipment at the date Defendant was forever denied its use.
In 1981, Congress enacted the Accelerated Cost Recovery System (ACRS) which was codified as section 168 of the Internal Revenue Code, 26 U.S.C. sec. 1 et seq. Pursuant to this statute, all business property is subject to certain depreciation tables for the purposes of deducting depreciation to compute federal income tax liability. See generally, Liddle v. Commissioner of the Internal Revenue Service, 65 F.3d 329, 76 A.F.T.R. 2d (RIA) 6255 (3d Cir. 1995). The Internal Revenue Code generally divides all property into four classes, determined by the nature of the property and its expected useful life. According to these tax tables, Defendant's business property, barber chairs, would fall into the class of property that is to be depreciated over a five-year period. Such property is defined as all section 1245 property (capital property used in a trade or business) that is not used in research and development nor which has an expected useful life of less than four years. 26 U.S.C. sec. 168 ( c).
Defendant purchased the property in June of 1995, and was evicted in July of 2001, more than five years after the purchase date of the equipment. Using the Internal Revenue Code tables, at that point the equipment would have been fully depreciated, meaning that it had no value left, unless any scrap value could be evidenced. Without any other evidence for the court to use to determine the depreciated value of the property in question, the court feels that using these tax tables would prevent a result that would be unfair to either party.
Therefore, the court concludes that at the date of his eviction, Defendant's property had fully depreciated according to federal income tax depreciation tables, and consequently had no monetary value.
Based on the foregoing, the court awards judgement to Plaintiff in the amount of $4700 for the balance of the rent due, plus interest from August 1, 2001, plus costs and disbursements.
Dated: November 15, 2004
__________________________
EILEEN N. NADELSON, J.C.C.
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