Matter of City of New York

[*1] Matter of City of New York 2008 NY Slip Op 52253(U) [21 Misc 3d 1127(A)] Decided on November 3, 2008 Supreme Court, Kings County Gerges, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 3, 2008
Supreme Court, Kings County

In the Matter of the Application of the City of New York relative to acquiring title in fee simple, where not heretofore acquired for the Sanitation Garage Brooklyn District 3 and 3a



37905/03



The attorneys are as follows:

Corporation Counsel

100 Church Street

New York, NY 10007

Fred Kolikoff, Esq.

For the claimant:

Snitow Kanfer Holtzer & Millus

575 Lexington Avenue

New York, NY 10022

Stewart J. Epstein, Esq.

Goldberg Rimberg & Friedlander

115 Broadway

New York, NY 10006

Robert Rimberg, Esq.

Bruce Levinson, PC

747 3rd Avenue

New York, NY 10017

Greg Brown, Esq.

Abraham G. Gerges, J.

Upon the foregoing papers, in this eminent domain proceeding, the City of New York (the City) moves for an order precluding claimant 60 Nostrand LLC (Nostrand) from offering [*2]into evidence the appraisal report dated September 12, 2005 and prepared by Jerome Haims Realty (the Appraisal Report).[FN1] Nostrand cross-moves for an order allowing it to file a new appraisal report in the event that the court grants the City's motion.

Facts and Procedural Background

Title to the subject property, Block 1718, Lot 1, vested in the City on December 8, 2004. The property consists of 59,550 square feet and is located in the South Williamsburg section of Brooklyn. As of the date of vesting, the property was owned by Nostrand and was occupied by five tenants. The site was improved with a two-story, 28,400 square foot building, with parking, built in 1999, which claimant describes as a "comprehensive bus garage."

By First Separate and Partial Final Decree dated November 20, 2007, the City settled the fixture claims filed by four of the tenants, i.e., Abraham, & Abraham Assoc., Inc.; Millenium Floors, Inc.; Worldwide Tours, Ltd.; and New York Merchants, Inc. The fifth tenant, Monroe Bus Corporation (Monroe), filed a fixture claim including over 600 items; an appraisal report dated May 19, 2005 and prepared by Sencer Appraisal Associates, values its claim at $2,348,000. Nostrand and Monroe are closely related companies and are owned and managed by the same people.

The Appraisal Report filed by Nostrand values the property at $15,119,700, using the cost approach. More specifically, claimant's appraiser values the land at $9,000,000, based upon the review of five comparable sales, which amount is then added to the "depreciated reproduction value new," which was determined by Nasco Construction Corporation to be $6,119,700.

By report dated September 12, 2005, the City's appraiser, Jacques O. Tuchler & Associates, values the property at $5,204,000, in reliance upon four comparable sales. The City's appraiser also values the property at $5,185,000, utilizing the income capitalization approach, after reviewing seven rental properties, but gave the greatest weight to the value reached in reliance upon the sales comparison approach.

The Parties' Contentions

The City

In support of its motion, the City argues that Nostrand justifies its use of the cost approach as follows:

"Considering that the subject property was constructed for a special purpose with design features inherent in the construction and unique to a specific use, we have used the Cost Approach exclusively in valuing the property according to its highest and best use as [*3]improved."

The City argues that the cost approach is disfavored and that both the sales comparison and income capitalization approaches are available to value the property. The City also contends that Nostrand's Appraisal Report is insufficient in that it does not identify the particular design features that claimant relies upon to support its conclusion that the property should be valued as a specialty.

In addition, the City avers that "Nostrand cannot meet its burden of proof because the rationale for valuing the subject property as a specialty, contained in its fee appraisal, is contraindicated by the fixture appraisal submitted by the same individuals, operating under a different corporate name." In this regard, the City contends that Monroe's fixture claim includes many of the same items that Nostrand argues compels the conclusion that the property should be valued as a specialty. More specifically, the fixtures for which Monroe seeks compensation include concrete walls, aprons and pits; drainage troughs; underground diesel tanks; alarms; exhaust fans and system; and piles.

Nostrand

In opposition to the motion, Nostrand argues that its property is properly valued as a specialty, using the cost approach, because it was constructed with special features including a foundation that can accommodate unusually heavy loads; a bay system that allows the buses to be serviced; a system that allows for the drainage and separation of oil and water; an exhaust system; fire retardant walls; 25 foot ceilings; a buried 10,000 gallon oil tank; four fuel pumps; and a second floor housing offices. Nostrand further avers that the property is so unique and is so seldom traded that market value is not an adequate basis for compensation. In this regard, Haims submits an affidavit in which he alleges that no properties comparable to that in issue herein were sold or rented.

Nostrand also argues that Monroe's fixture claims should be viewed as separate from the issue of whether the property should be characterized as a specialty, since a landlord has the right to retain fixtures that have become an integral part of the property and which cannot be removed, while a tenant retains the right to be compensated for the additions made to the property that he would have the right to remove at the end of the lease, but for the condemnation.

Sufficiency of Claimant's Appraisal Report

In the recent case of In re City of New York [Jones Woods Park Addition] (20 Misc 3d 1143(A), 2008 NY Slip Op 51839U, 2008 NY Misc LEXIS 5962, 2008 WL 4193123 [2008]), this court denied a similar motion made by the City, i.e., a motion seeking to preclude the introduction of an appraisal report at trial on the ground that it was based on the false assumption that a claimant had a vested right to develop the subject property in accordance with plans previously approved by the City. For the reasons fully discussed therein, the court finds that claimant's Appraisal Report adequately sets forth the data upon which its valuation is based and sufficiently articulates the basis for the proposed value, as [*4]required by 22 NYCRR 202.61 (id. at 5-6). Thus,"any inadequacies in the appraisal report disclosed during the valuation hearing go to the weight to be given to the report, not its admissibility" (National Fuel Gas Supply v Goodremote, 13 AD3d 1134, 1135 [2004], citing Champlain Natl. Bank v Brignola, 249 AD2d 656, 657 [1998]). Accordingly, claimant will not be precluded from introducing the report at trial.

In so holding, the court emphasizes, as was held in In re City of New York [Jones Woods Park Addition], that "the City points to no rule or case law precedent that requires claimant to lay bare its evidentiary proof in its appraisal report" (In re City of New York [Jones Woods Park Addition], 2008 NY Slip Op 51839U at 6). In this regard, it is further noted that " it is well established that "a condemnation proceeding [is] a special proceeding', not an action', that . . . had been specially created by the Legislature for the condemnation of real property . . .'" (id. at 7, quoting Central Hudson Gas & Electric v Newman, 35 AD2d 989, 990 [1970], quoting Erie R. R. Co. v Steward, 59 AppDiv 187, 188 [1902]). Pursuant to CPLR 408, which controls disclosure in special proceedings, "[l]eave of court shall be required for disclosure except for a notice under section 3123."[FN2] Hence, inasmuch as the City is not entitled to any discovery as of right, it follows that it is not entitled to make a demand for any evidentiary material prior to trial, but for the information provided in the Appraisal Report.

Moreover, as was also discussed in In re City of New York [Jones Woods Park Addition], in arguing that Nostrand should be precluded from introducing the Appraisal Report at trial on the ground that claimant fails to sustain its burden of proving that the cost approach is the proper methodology to be utilized in valuing the property, "the City's motion is more properly characterized as one seeking summary judgment, not one seeking to preclude admission of the [Appraisal] Report" (id. at 7). It is therefore necessary to determine if the City has made a prima facie showing that claimant cannot value the property in reliance upon the cost approach as a matter of law.

[*5]Valuation of the Property

The Law

In charactering the City's motion as one seeking summary judgment, it must be recognized that "[s]ummary judgment is a drastic remedy that deprives a litigant of his or her day in court, and it should only be employed when there is no doubt as to the absence of triable issues" (see e.g. Kolivas v Kirchoff, 14 AD3d 493, 493 [2005], quoting Andre v Pomeroy, 35 NY2d 361, 364 [1974]). A proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from the case (see e.g. Winegrad v New York Univ. Med. Ctr., 64 NY2d 851, 853 [1985]). Hence, to be entitled to summary judgment, the City has to make a prima facie showing that the subject property is not a specialty that may properly be valued utilizing the cost approach. The City cannot, therefore, sustain its burden by merely pointing to gaps in claimant's proof, arguing that claimant has not met its burden of proof, rather than by affirmatively demonstrating the merit of its claim (see e.g. In re City of New York [Jones Woods Park Addition], 2008 NY Slip Op 51839U at 8, citing Vittorio v U-Haul Co., 52 AD3d 823 [2008]; Gonzalez v Beacon Term. Assoc., 48 AD3d 518, 519 [2008]; Velasquez v Gomez, 44 AD3d 649, 650-651 [2007]). Further, "[t]he function of the court on a motion for summary judgment is not to resolve issues of fact or determine matters of credibility, but merely to determine whether such issues exist" (see e.g. Kolivas, 14 AD3d at 393-394; Doize v Holiday Inn Ronkonkoma, 6 AD3d 573, 573-574 [2004]).

As is also relevant herein, "[t]he constitutional requirement of just compensation requires that the property owner be indemnified so that he may be put in the same relative position, insofar as this is possible, as if the taking had not occurred" (Buffalo v Clement Co., 28 NY2d 241, 258 [1971], citing Rose v State of New York, 24 NY2d 80, 87 [1969]; Marraro v State of New York, 12 NY2d 285, 292-293 [1963]; Banner Milling Co. v State of New York, 240 NY 533 [1925]; Matter of Board of Water Supply, 277 NY 452 [1938]; New York, Ontario & Western Ry. Co. v Livingston, 238 NY 300 [1924]; accord 520 E. 81st St. Assocs. v State, 99 NY2d 43, 47 [2002] [both the state and federal Constitutions require that owners receive just compensation when private property is taken for public use]).

"[T]he courts have traditionally valued property by one of three methods: comparable sales, capitalization of income or reproduction cost less depreciation (Matter of Great Atl. & Pac. Tea Co. v Kiernan, 42 NY2d 236, 237-238; see generally, Lee and LeForestier, Review and Reduction of Real Property Assessments in New York, ch 1 [3d ed]).

"Evidence of comparable sales is generally the preferred measure of a property's value for assessment, but where there is insufficient relevant data, value may be determined by other methods (Matter of General Elec. Co. v Town of Salina, 69 NY2d 730, 731; Matter of Great Atl. & Pac. Tea Co. v Kiernan, supra, at 242; Matter of Merrick Holding Corp. v Board of Assessors, 45 NY2d 538, 541)." [*6]

(Matter of Allied Corp. v Town of Camillus, 80 NY2d 351, 356 [1992], rearg denied 81 NY2d 784 [1993]; accord FMC v Unmack, 92 NY2d 179, 189 [1998] [the best evidence of value is a recent sale of the subject property between a seller under no compulsion to sell and a buyer under no compulsion to buy]).

Where the comparable sales method of valuation is not available, "courts prefer the income capitalization method of valuation for determining the value of income-producing property; this method entails the accumulation of such data as the actual income and operating expenses of the subject property" (In re Poe Ctr., 250 AD2d 304, 306-307 [1998], citing 41 Kew Gardens Rd. Assocs. v Tyburski, 70 NY2d 325, 331 [1987]). Hence, it must also be recognized that "[w]hen the highest and best use is the one the property presently serves and that use is income-producing, then the capitalization of income is a proper method of valuation" (In re New York, 42 NY2d 948, 949 [1977], citing Matter of City of New York [First Elephant Estates-La Hermosa Church], 17 AD2d 317, 320 [1962]; People ex rel. Gale v Tax Comm., 17 AD2d 225 [1962]; 4 Nichols, Eminent Domain [2d ed], §185; accord Niagara Falls Urban Renewal Agency v Alps Motor Inn & Restaurant, 41 NY2d 817, 817-818 [1977] [the appraisers for both parties and the courts below properly utilized the capitalization of income method of valuation by capitalizing the net economic rent attributable to the subject premises]; In re New York, 39 NY2d 453, 456 [1976] [in the case of income producing property, capitalization of income is generally a valid method of determining valuation]; Matter of Bradhurst Urban Renewal Area (Stage 1), 40 AD3d 218 [2007], rearg denied 2007 NY AppDiv LEXIS 8478 [2007] [the court properly applied the income capitalization approach to value property which was generating income from its commercial tenants]). Accordingly, in valuing a public garage, it was held that the court properly considered the purchase price of the property, the rental received pursuant to the lease and the term remaining on the lease (see e.g. In re City of New York, 15 AD2d at 173). Similarly, it has been held that the court erred in adopting a reproduction cost valuation for a building where the evidence clearly showed that, far from being unique, it was an income producing building (Dormitory Authority of New York v 59th St. & 10th Ave. Realty, 51 AD2d 953 [1976], affd 41 NY2d 1037 [1977], rearg denied 42 NY2d 974 [1977]).

It is well settled, however, that:

"[W]hen the property is of a kind seldom traded, it lacks a market price' and there must accordingly be recourse to some other method of evaluation (see, e.g., Kimball Laundry Co. v United States, 338 US 1, 6). Churches, hospitals, clubhouses and like structures held by nonprofit agencies as centers for community service commonly fall within this category (Keator v State of New York, 23 NY2d 337, 339; Matter of Simmons, 127 NYS 940; 1 Orgel, Valuation under Eminent Domain [2d ed], § 40). A particular building may be regarded by the organization that owns and utilizes it as worth everything it cost to construct and more, yet it may not be marketable' because no similar group would have sufficient need for the property to be willing to purchase it even at its reproduction value (see Keator v State of New York, supra, pp 339-340; cf. Amsterdam Urban Renewal Agency v Masonic Assn. of [*7]Amsterdam, 39 AD2d 617)."

(In re Rochester Urban Renewal Agency, 45 NY2d 1, 8-9 [1978]). Hence, "where a property is so unique as to constitute a specialty, the owner must be compensated by adding to its land value the replacement cost of the property and subtracting from that sum depreciation (In re County of Suffolk, 47 NY2d 507, 511 [1979], citing In re Rochester Urban Renewal Agency, id.).

Further, "[w]hile admissible in evidence as one factor to be considered, the cost approach is an inappropriate method of estimating the market value of real property where the property does not qualify as a specialty and another method is available" (Niagara Falls Urban Renewal Agency v Gorge Terminal Realty Co., 92 AD2d 719 [1983] [citations omitted]). In explaining the reasoning behind this rule, the court has stated that:

"Recognizing . . . that the reproduction cost method of valuation may result in serious overvaluation of the property due to rising construction costs and its failure to adequately account for factors such as functional obsolescence and physical deterioration' (Matter of Great Atl. & Pac. Tea Co. v Kiernan, 42 NY2d 236, 242, supra), we have concluded that it should be utilized only in those limited instances in which no other method of valuation will yield a legally and economically realistic value for the property' (id.)."

(Niagara Mohawk Power v Assessor of Geddes, 92 NY2d 192, 197 [1998]).

As is also relevant herein, a specialty may be "best defined as a structure which is uniquely adapted to the business conducted upon it or use made of it and cannot be converted to other uses without the expenditure of substantial sums of money" (Great Atlantic & Pacific Tea Co., 42 NY2d at 240, citing People ex rel. Hotel Paramount v Chambers, 298 NY 372, 375 [1949]; Matter of Sperry Rand v Board of Assessors of County of Nassau, 10 AD2d 720 [1960]). Nonetheless, the court must also recognize that property containing special features is not a speciality in all instances (see e.g. Niagara Mohawk Power, 92 NY2d at 197, citing Matter of Great Atl. & Pac. Tea Co., 42 NY2d at 240):

"[S]pecialty status will not be automatically accorded to such property; rather, property must meet four criteria in order to qualify. These criteria, as articulated in Matter of County of Nassau (Colony Beach Club) (43 AD2d 45, 49, affd 39 NY2d 958) are

" (a) The improvement must be unique and must be specially built for the specific purpose for which it is designed;

" (b) There must be a special use for which the improvement is designed and the improvement must be so specially used;

" (c) There must be no market for the type of property . . . and no sales of property for such use; and [*8]

" (d) The improvement must be an appropriate improvement at the time of the taking and its use must be economically feasible and reasonably expected to be replaced.'"

(In re Poe Ctr., 250 AD2d at 307 [emphasis in original]).

It must be noted, however, that "if no great expense would be entailed in converting the property from the present owner's use to other business and industrial uses and if a market value may be ascertained, property should not be valued as a specialty merely because it contains such features as interior railroad sidings, truck loading docks or other amenities and fixtures which are not truly unique to the owner's business" (Great Atlantic & Pacific Tea Co., 42 NY2d at 240, citing McDonald v State of New York, 52 AD2d 721, 722 [1976], affd 42 NY2d 900 [1977]; Dormitory Auth. of New York, 51 AD2d 953; Matter of City of New York [Lincoln Sq. Slum Clearance Project], 15 AD2d 153, 170-171 [1961]). It is also significant to note that it has been held that property utilized as a bus transportation facility in conjunction with its business of providing bus transportation to the public was properly treated as specialty (United Traction Co. v State, 33 AD2d 1063 [1970], lv denied 26 NY2d 613 [1970]). Similarly, it has been held that the court found that property used for garages, maintenance buildings, storage and a parking area for claimant's fleet of 61 trucks constituted specialty property and was properly appraised by claimant's experts on the basis of reconstruction cost less depreciation (Tobin Packing Co. v State, 26 AD2d 986, 987 [1966]).

"Since fair market value is presumptively the correct method for assessing damages in condemnation cases, a condemnee who would have the court apply a different method must bear the burden of demonstrating that the value of his property cannot reasonably be measured by the fair market value approach" (In re Rochester Urban Renewal Agency, 48 NY2d at 696, citing Matter of Penn Yan Urban Renewal Agency v Penn Yan Realty, 57 Misc 2d 1033 [1968]).

Discussion

In arguing that claimant's Appraisal Report is fatally flawed, the City erroneously relies upon its contention that Nostrand does not meet its burden of proving that the property is a specialty, and hence should be valued utilizing the cost approach. As discussed above, however, in seeking judgment as a matter of law, the burden is on the City to establish that the property is not a speciality, which burden cannot be sustained by pointing to alleged inadequacies in claimant's case. In addition, the City's reliance upon an affirmation by counsel in which he alleges that the Appraisal Report does not properly value the property because it is not unique and because it would not be costly to convert it to another use is a conclusory statement that is without probative value, since the City makes no showing that counsel is an expert who is qualified to offer such an opinion (see generally City of Troy v Town of Pittstown, 306 AD2d 718, 719 [2003], lv denied 1 NY3d 505 [2003] [the record amply supported the court's conclusion that a licensed engineer with experience in the construction, operation and valuation of hydroelectric facilities had sufficient expertise to qualify him to testify as an engineering expert witness and render an opinion regarding [*9]reproduction cost and depreciation]; Langer v Miller, 305 AD2d 270, 271 [2003], lv denied 1 NY3d 503 [2003] [a licensed appraiser with 16 years' experience, among other qualifications, was properly qualified as an expert]).

Hence, the court notes that the City fails to make a prima facie showing that the improvements made to the property are not unique and designed for a special use; that there is a market for the property, as designed; and that the property could be converted to other uses without the expenditure of a substantial sum of money. The City's assertion that the fact that Monroe filed a fixture claim that seeks compensation for what the City alleges are the same improvements upon which Nostrand relies in claiming that the property is a specialty is also found to be irrelevant to the issue of whether the property should be valued as a specialty, as is more fully discussed hereinafter. Nonetheless, the City is correct in arguing that claimant's Appraisal Report improperly values the property in reliance upon the cost approach as a matter of law.

In so holding, the court recognizes that upon the facts herein, the City establishes that claimant cannot demonstrate that it is economically feasible and reasonably expected that it will replace the bus garage. In so arguing, the City relies upon a lease entered into between Nostrand and Monroe, dated August 1, 2001, pursuant to which Monroe rented the building located at 60 Nostrand Street for use as a parking garage and offices for a ten-year period for monthly rents ranging from $14,000 to $21,718.60.[FN3] Hence, the City avers that although Monroe may be owned by the same individuals who own Nostrand, each company maintains a separate existence. Further, the City already paid fixture claims to four of Nostrand's tenants. In addition, when the City alleged that Nostrand rented the top floor to other tenants during oral argument, counsel admitted that a portion of the building was rented out, although its Appraisal Report states that the building was 100% owner occupied and utilized as a bus depot. Accordingly, the City concludes that the subject property is held by Nostrand as income producing rental property and as such, cannot be valued as a specialty. The court [*10]agrees.

In reaching this conclusion, the court is bound by the reasoning set forth in In re Poe (250 AD2d 304). Therein, it was held that property owned by claimant real estate company and rented to the New York City Board of Education for use as a school was not properly valued as a specialty, since claimant could not reasonably be expected to replace the school. As is relevant herein, the court explained that:

"[C]laimant is not the Board of Education and has not been placed in the position of replacing the school but rather has used the property solely for commercial ends that the failure to meet the fourth criterion is indeed fatal to claimant's position.

"The Court of Appeals has made clear that, while this fourth criterion may not require a literal reading' in tax assessment cases because nothing is being taken and thus nothing is in need of replacement, the issue of reproduction or replacement in eminent domain proceedings is not merely speculative or hypothetical (Matter of Allied Corp. v Town of Camillus, 80 NY2d, at 359; see also, Matter of County of Suffolk [C. J. Van Bourgondien, Inc.]), 47 NY2d 507). In Allied Corp., where the Court once again reiterated the need for cautious use of the reproduction cost method, it stated that courts are interested in making certain that governments are not forced to pay the high valuations typically produced by the reproduction cost less depreciation method' where the owner would likely discontinue the use on his own in the absence of the taking' (80 NY2d, at 359-360). In the instant case, claimant has lost the ability to receive the rental income produced from the now-condemned property; it has not been deprived of its ability to operate a school, something it never did or intended to do. Indeed, while the mere fact that property produces rental income does not preclude consideration as a specialty (see, e.g., Matter of City of New York [Coogan], 20 NY2d 618), property designed or used primarily for commercial ends may not merit specialty treatment (Matter of Rochester Urban Renewal Agency [Patchen Post], 45 NY2d 1, 10; Amsterdam Urban Renewal Agency v Masonic Assn., 39 AD2d 617, 618). The subject property here was acquired for and altered solely for commercial ends . . ."

(In re Poe Ctr., 250 AD2d at 308).

The same rationale applies to the facts of this case. Nostrand did not operate a bus company, but instead leased the subject property to Monroe and four other tenants. From this is follows that Nostrand is not being deprived of its ability to operate a bus company, since it never did so, in view of the fact that it owned and operated the property solely for commercial ends, as income producing rental property. Accordingly, it follows that Nostrand's contention that the property should be valued as a specialty is lacking in merit for the reasons articulated in In re Poe (id.).[FN4] [*11]

Nostrand's claim that it may well have to replace the bus garage because of its relationship with Monroe is held to be legally insufficient to alter this conclusion. In this regard, having made the decision to operate Nostrand and Monroe as separate corporate entities, Nostrand presents no evidence to support a finding that the two entities should be treated as one for the purpose of this condemnation proceeding. Indeed, in the case of Joseph Kali Corp. v Goldner, Inc. (49 AD3d 397 [2008]), the court declined to pierce the corporate veil under circumstances where one individual was the sole shareholder and principal of two corporations, one of which acted solely as a leaseholder, reasoning that:

"[Here, one corporation] proposes to pierce the corporate veil between the two companies on the ground that they have the same principal who is the owner of both. Even though the motive may be to prevent fraud or achieve equity, [t]hose seeking to pierce a corporate veil . . . bear a heavy burden of showing that the corporation was dominated as to the transaction attacked and that such domination was the instrument of fraud or otherwise resulted in wrongful or inequitable consequences' (TNS Holdings v MKI Sec. Corp., 92 NY2d 335, 339 [1998])."

(id. at 397).

It has also been held that:

"[A] bare claim that the corporation was completely dominated by the owners, or conclusory assertions that the corporation acted as their alter ego,' will not give rise to piercing the corporate veil (see e.g., Goldman v Chapman, 44 AD3d 938, 939 [2007]). In other words, domination, standing alone, is insufficient; there must also be some proof of wrongdoing or injustice done to the plaintiff (see Wm. Passalacqua Bldrs., 933 F2d at 138). The very heavy burden of establishing complete domination and that such domination resulted in a wrong against the plaintiff is on those seeking to pierce the corporate veil (see TNS Holdings, 92 NY2d at 339)."

(Fantazia Intl. v CPL Furs NY, 20 Misc 3d 1113A, 6-7 [2008]).

The court thus concludes that "since claimant [cannot] establish that its property met . . . the criteria for specialty' status, and, accordingly, failed to demonstrate grounds warranting resort to the reproduction cost method of valuation," it may not be valued solely in reliance the cost approach method (see e.g. In re New York State Urban Dev. Corp., 308 AD2d 414, 415 [2003], lv denied 2 NY3d 701 [2004], citing Matter of Poe Ctr., 250 AD2d [*12]at 306-307). From this it follows that claimant is precluded from introducing its Appraisal Report at trial, since the report values the property exclusively in reliance upon this methodology.

Claimant's Request to Amend its Appraisal Report

The Parties' Contentions

In its cross motion, claimant seeks leave to amend its Appraisal Report in the event that the court grants the City's motion to preclude it from introducing the Report at trial.

In its reply affirmation, the City argues that in the event that this court grants claimant's cross motion, interest on any compensation awarded should be tolled from January 29, 2007, the date on which the parties exchanged their respective appraisal reports, until the date on which the City receives the amended report. The City contends that such relief is appropriate because if the cross motion is granted, Nostrand will be responsible for the delay in resolving this matter and because the statutory rate of interest of 6% that the City is presumptively obligated to pay on condemnation awards is above the current market rate of 3 to 5%.

The Law

As is relevant herein, 22 NYCRR 202.61(a)(3) provides that:

"Upon application of any party upon such notice as the court in which the proceeding is pending shall direct, the court may, upon good cause shown, relieve a party of a default in filing a report, extend the time for filing reports, or allow an amended or supplemental report to be filed upon such conditions as the court may direct."

Although the rule does not define good cause:

"It has been held that inadvertence or oversight is not good cause (Matter of Consolidated Edison Co. v State Bd. of Equalization & Assessment, 83 AD2d 355, affd 58 NY2d 710), nor is the mere desire to introduce a new theory or new evidence (see Matter of City of Troy v Board of Assessors, 53 AD2d 794; Home Gas Co. v Miles, 40 AD2d 896). Finally, dissatisfaction with an attorney and the appraisal report, without proof of undue hardship, does not constitute good cause (Laken Realty Corp. v State of New York, 37 AD2d 885)."

(Niagara Mohawk Power v Peryea, 102 AD2d 986, 986 [1987]; accord Salesian Soc. v Village of Ellenville, 98 AD2d 927 [1983], citing Matter of Consolidated Edison Co., 83 AD2d 355; Binghamton Urban Renewal Agency v Levene, 34 AD2d 241 [1970]). Similarly, leave to file a supplemental appraisal report has been denied under circumstances where "no convincing reason is given why the appraisal could not also have included therein whatever additional factual support' or greater detail' that [a party] now seeks to proffer by way of a supplemental appraisal" (Matter of Acquisition of Country Knolls Water Works, 229 AD2d 859, 860 [1996]).

In disposing of the cross motion, it must also be recognized that a more liberal rule [*13]has been applied where an extension of time in which to file an initial report is sought because of "the obvious and severe hardship that accrues to the offering party as a result of rejection of that report namely, preclusion of the introduction of any appraisal testimony on value'" (Matter of Acquisition of Real Property by Town of Guilderland, 244 AD2d 604, 605 [1997], citing 22 NYCRR 202.61[e]; Matter of G.T.I. Co. v Assessor & Assessment Bd. of Review of City of Kingston, 88 Misc 2d 806, 809 [1976]; see also In re Honess 52, 295 AD2d 429 [2002]).

Discussion

Inasmuch as claimant will be precluded from introducing any evidence with regard to the value of the improvements erected on the property if its Appraisal Report is precluded, Nostrand's cross motion is granted to the prevent undue hardship that would result. In so holding, it must be recognized, as a threshold issue, that:

"A condemnation proceeding is not a private litigation. There is a constitutional mandate upon the court to give just and fair compensation for any property taken. This means just' to the claimant and just' to the people who are required to pay for it. The rule is abundantly clear that property must be appraised at its highest and best use and paid for accordingly."

(Yaphank Dev. Co. v County of Suffolk, 203 AD2d 280, 282 [1994]). Herein, denial of the request to amend the Report would have the effect of depriving claimant of the opportunity to offer any evidence whatsoever with regard to the value of the building that was erected on the property. In view of the constitutional mandate to award just compensation, the court finds that it would be inequitable to deprive claimant of its right to file an amended appraisal report.

Further, it must be noted that the decision to preclude claimant from introducing its Appraisal Report at trial is not the result of inadvertence or oversight on claimant's part, but instead is the result of this court's decision to reject the method of valuation utilized therein. In granting this relief, the court also notes that a trial date has not yet been scheduled, so that allowing claimant to expeditiously file its amended report will not unduly prejudice the City. In this regard, the court also notes that although the City and Nostrand exchanged Appraisal Reports on January 29, 2007, the City did not serve its motion seeking preclusion until June 17, 2008, so that the delay between the date of the exchange and the date of the motion is due to the City's delay in making the instant motion. Similarly, nothing in the papers now before the court indicates that claimant was on notice that the City sought to preclude it from introducing its Appraisal Report on the ground that the method of valuation employed was erroneous as a matter of law.

Finally, the court finds that the amount of interest to be awarded to claimant on any compensation awarded to it is more appropriately addressed at the time of entry of a final judgment.

[*14]Conclusion

The City's motion for an order precluding claimant from introducing its Appraisal Report at trial is granted. Nostrand's cross motion for an order permitting it to serve an amended report is granted on the condition that such report is served upon the City within 60 days of service upon it of a copy of this decision with notice of entry.

The foregoing constitutes the decision and order of the court.

E N T E R,

J. S. C. Footnotes

Footnote 1:The City also makes a companion motion seeking to preclude another claimant, Congregation Adas Yereim, from offering its appraisal report at trial on similar grounds. While many of the issues raised in the two motions are identical, so that portions of the two decisions are the same, the court is entering two separate decisions so that the record with regard to each claimant is clear.

Footnote 2:Although not at issue herein, the court notes that either party is entitled to take a deposition of the other pursuant to New York City Administrative Code §5-311 (see generally Matter of City of New York [Bushwick Inlet Phase II], 21 Misc 3d 355 [2008]; Matter of City of New York {Jones Woods Park Addiiton], 2008 NY Slip Op 51839U).

Footnote 3: The court notes that the lease contains a provision that states that:

"If the whole or any part of the demised premises shall be acquired or condemned by Eminent Domain for any public or quasi public use or purpose, then and in that event, the term of this lease shall cease and terminate from the date of title vesting in such proceeding and Tenant shall have no claim for the value of any unexpired term of said lease. Tenant shall have the right to make an independent claim to the condemning authority for the value of Tenant's moving expenses and personal property, trade fixtures and equipment, provided Tenant is entitled pursuant to the terms of the lease to remove such property, trade fixtures and equipment at the end of the term and provided further such claim does not reduce Owner's award."

The issue of the allocation of any compensation award received as between Nostrand and Monroe, however, is not before the court on the instant motion.

Footnote 4: Although claimant may be able to persuade the court that the rule of reproduction cost less depreciation could be properly utilized to determine the value if the City is continuing to use the property in the same manner, i.e., as a storage and repair facility for its sanitation trucks, making use of the oil tanks, service pits, bays, exhaust and drainage system, etc., (see e.g. Matter of City of New York [5th Ave. Coach Lines], 46 Misc 2d 14 [1964], affd 23 AD2d 463 [1965], mod 18 NY2d 212 [1966], mod 18 NY2d 741 [1966], appeal dismissed 386 US 778 [1967]), neither party offers any evidence regarding the present use of the property.