Matter of City of New York

[*1] Matter of City of New York 2010 NY Slip Op 50802(U) [27 Misc 3d 1219(A)] Decided on May 6, 2010 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 This opinion is uncorrected and will not be published in the printed Official Reports.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 May 6, 2010
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 West Bushwick Urban Renewal Area, Phase 2



35057/04



Corporation Counsel

Holly Gerstenfeld, ACC

100 Church Street

New York, NY 10007

Goldstein,Rikon & Rikon

John Houghton, Esq.

80 Pine Street

New York, NY 10005

Abraham G. Gerges, J.

This condemnation proceeding was tried on November 4 and 5, 2009. The court conducted an inspection of the property on December 3, 2009.

On February 28, 2005, the condemnor, the City of New York (the City), acquired title to Block 3137, Lots 1 and 6, and Block 3137, Lot 9, in connection with its West Bushwick Urban Renewal Project, Phase 2. At issue herein is the just compensation to be awarded to claimants 534 Bushwick Avenue Corporation, as the former owner of Lots 1 and 6, and Sound and Security Solutions, Inc., as the former owner of Lot 9. Both corporations were owned and controlled by Benny Shirazi and his two brothers, Behzad and Farhad, at the time of the taking.

It is not disputed that the subject property is located in the Bushwick section of Brooklyn, is fronted by Bushwick Avenue and Beaver Street, encompasses a total area of 10,360 square feet, is roughly triangular in shape and has a floor area ratio (FAR) of 3.44. Both the City and claimants agree that the property should be valued utilizing the comparable sales approach and that the highest and best use was for mixed residential and commercial development.

[*2]The Parties' Appraisal Reports

Claimant's appraiser, Daniel Sciannameo of Albert Valuation Associates, Inc. (hereinafter collectively referred to as Mr. Sciannameo), relied upon 18 comparable sales having adjusted values of between $45 and $140 per square foot to value the subject property at $100 per developable square foot. Multiplied by the total number of developable square feet, or 35,638 (total area of property, 10,360 square feet, multiplied by the FAR, 3.44), Mr. Sciannameo valued the property at $3,563,800 (35,368 multiplied by $100). After deducting demolition costs in the amount of $10 dollars per square foot, Mr. Sciannameo determined that the fair market value of the subject property, as of the date of vesting, was $3,560,000.

The City's appraiser, Michael Haberman of Michael Haberman Associates, Inc. (hereinafter collectively referred to as Mr. Haberman), prepared two appraisals, believing that the properties were owned by two separate corporations. In reliance upon seven comparable sales having adjusted values of between $21 and $71, Mr. Haberman valued Lots 1 and 6 at $50 per square foot of lot area, for a total of $375,000. In reliance upon the same seven comparable sales having adjusted values of between $28 and $93, Mr. Haberman valued Lot 9 at $65 per square foot of lot area, for a total of $185,900. Mr. Haberman accordingly determined that the value of the two parcels was $560,900.

Discussion

After a careful review of the appraisal reports and trial testimony, the court agrees with claimants' contention that the City's appraisals are so "replete with substantial errors, glaring omissions [and] poor judgment" as to be totally lacking in merit for the reasons fully developed during the cross examination of Mr. Haberman. Most significantly, Mr. Haberman's valuation is fundamentally flawed in that he failed to value the three lots as a single entity, given the unity of ownership and use (see Johnson v State, 10 AD3d 596, 597-598 [2004], citing Erly Realty Dev. v State of New York, 43 AD2d 301, 303-304 [1974]; Guptill Holding v State of New York, 20 AD2d 832, 833 [1964]). He also failed to adequately address the issue of how the subject property could be valued at its highest and best use for development in view of his lease fee analysis, in which he determined that the property was more valuable as presently leased to a used car dealership (see generally In re Real Property of Manhattan, 19 AD2d 44, 45-46 [1963]).

Mr. Haberman's choice of comparable sales also serves to undermine the reliability of his valuation. More particularly, unlike the subject property, six of the seven comparable sales were either adjacent to or close to an elevated subway line; two were substandard in size, so that only a one- or two-family residence could be constructed; there was a subsequent sale of another comparable that Mr. Haberman did not include in his report; and another was purchased in a tax foreclosure proceeding, so that the sales price does not represent fair market value. In addition, the court finds Mr. Haberman's decision to value the property on the basis of the total area of the lots, without consideration of the FAR, and hence the number of square feet that could be developed, [*3]to be questionable, since he did not sufficiently adjust the comparable sales to take into account that the developable area of the subject property was from 42% to 70% higher than the developable area on some of his comparable sales.

Accordingly, the court finds that the City's appraisal is totally lacking in probative value and must be disregarded in its entirety (see generally County of Suffolk v Kalimnios, 275 AD2d 455, 456 [2000]). In so holding, the court also notes that although some of these flaws were brought to the City's attention when the appraisal reports were exchanged, such as the fact that the properties were owned by the same people and that claimants valued the property based upon the FAR and not the area of the lots, the City declined to file a rebuttal report to address these issues. Finally, the court notes that the City's attempt to extrapolate a value based upon claimants' comparable sales illustrates its recognition of the fact that the reliability of its findings had been seriously undermined.

The court similarly finds that claimants' appraisal report and trial testimony is legally insufficient to allow the court to properly value the subject property. In this regard, it is well settled that the highest and best use of property is the legal use of vacant land that is physically possible, appropriately supported, financially feasible and results in the highest value (see The Appraisal of Real Estate, 12th ed., Appraisal Institute, p 305). While Mr. Sciannameo values the subject property based upon a dollar value per square foot of developable area, this valuation is predicated upon his conclusion that the zoning regulations allow for a FAR of 3.44.

In a condemnation proceeding, the burden of proof is on the claimant (see e.g. Heyert v Orange & Rockland Utilities, 17 NY2d 352, 364 [1966]; Chase Manhattan Bank v State, 103 AD2d 211, 221 [1984]; accord Andrew v State, 137 AD2d 952, 953 [1988] [the burden of proof with regard to the amount of just compensation to which it is entitled rests upon claimant]). It is also well established that in making an award of just compensation, an "appraisal should be based on the highest and best use of the property even though the owner may not have been utilizing the property to its fullest potential when it was taken by the public authority" (Matter of Town of Islip, 49 NY2d 354, 360 [1980], citing Matter of County of Suffolk [Firester], 37 NY2d 649, 652 [1975]; Keator v State of New York, 23 NY2d 337, 339 [1968]; accord Chemical v Town of E. Hampton, 298 AD2d 419, 420 [2002]; 627 Smith St. v Bureau of Waste Disposal, 289 AD2d 472, 473 [2001], appeal dismissed 98 NY2d 646 [2002], lv denied 98 NY2d 611 [2002]). In addition, it has been recognized that:

"While it is not essential to demonstrate either that the property had been used as its projected highest and best use or that there had been an ante litem plan for such use (Keator v State of New York, 23 N Y 2d 337, 339), it is, of course, necessary to show that there is a reasonable probability that its asserted use could or would have been made within the reasonably near future (Matter of City of New York [Wilson], 21 AD2d 652, 653, affd 16 NY2d 814)." [*4]

(New York v Broadway Cary, 34 NY2d 535, 536 [1974], rehearing denied 34 NY2d 916 [1974]).

Thus, "[a] use which is no more than a speculative or hypothetical arrangement in the mind of the claimant may not be accepted as the basis for an award" (Matter of City of New York [Shorefront High School-Rudnick], 25 NY2d 146, 149 [1969]), unless it is so imminent that it would have a bearing upon the appropriate market (see, 51 NY Jur 2d, Eminent Domain, § 171, at 250)" (Matter of County of Clinton, 204 AD2d 898, 899 [1994]; accord Matter of City of New York v Jamaica Arms Hotel, 14 AD3d 699, 700 [2005]). Accordingly, if property is valued based upon a potential use, the proposed development must be both legally and economically feasible (see e.g. In re County of Suffolk, 109 AD2d 155, 156 [1985]; Berwick v State, 107 AD2d 79, 83 [1985]). In fact, it has been held that a proposed use must be "both physically possible and maximally profitable" (In re City of Syracuse Indus. Dev. Agency, 20 AD3d 168, 170 [2005]).

In this case, however, claimants fail to offer any evidence whatsoever to establish that it would be possible to construct a building that fully utilized the available FAR at the site, particularly in view of the configuration of the subject property, i.e., triangular in shape, having a width of approximately 10 feet at its apex. Claimants similarly fail to offer any proof that if such development was physically possible, it was also economically feasible. This failure of proof is underscored by the absence of any proposed building plan or blueprint, or any testimony by an engineer, architect or other expert. In reaching this conclusion, it must also be noted that Mr. Haberman testified, in reliance upon his 30 years of experience, that he chose to appraise the properties based upon the area of the lots because it was not likely that a FAR of 3.44 could be achieved on the subject property, given its irregular configuration. Thus, since claimants' proposed use is purely hypothetical, claimants' appraisal cannot support a finding of highest and best use (see generally Broadway Assocs. v State, 18 AD3d 687, 688 [2005], lv denied 5 NY3d 710 [2005] [the court properly rejected claimant's contention that the highest and best use of the subject property was for a high-density multi-family residential development since the residential development proposed by the claimant was purely hypothetical and based solely upon physical possibility, rather than economic feasibility]; Consolidated Edison Co. v Neptune Assocs., 190 AD2d 669 [1993] [the court properly rejected claimant's contention that the highest and best use of the property was for a regional shopping center, since the determination of highest and best use must be based upon evidence of a use which could or would be made of the property in the near future and the use proposed by the claimant was purely hypothetical, based solely upon physical possibility, rather than economic feasibility]). From this it follows that claimants' appraisal is also without probative value and cannot be relied upon in determining the just compensation to be awarded to them for the taking of the subject property.

In so holding, the court notes that although claimants could arguably rely upon the comparable sales analyzed in their appraisal report to arrive at a value for the subject [*5]property based upon the total square feet in the lots, the comparable sales were adjusted to value the property taken on the basis of the FAR. There is therefore no evidence before the court that would allow it to determine just compensation based upon the total square feet of the property taken as valued by Mr. Sciannameo (see generally Geffen Motors v State, 33 AD2d 980 [1970] [the failure of an expert to give a dollar and cents adjustment in any instance between the comparable and the subject land or the failure to give a breakdown or to state the factors which entered into the valuation affords no basis for review and it is insufficient to justify an award]).

Thus, having rejected the valuations reached by both parties' appraisers, the record is insufficient to permit the court to render a determination as to the value of the subject property, so that a new trial is required (see Chester Indus. Park Assoc v State of New York, 65 AD3d 513, 515 [2009], citing Matter of County of Suffolk, 275 AD2d at 456-457; Yaphank Dev. Co. v County of Suffolk, 203 AD2d 280, 282 [1994]]; accord Bell v Village of Poland, 281 AD2d 878 [2001]; In re Acquisition of Real Prop. by Iroquois Gas Transmission Sys., 227 AD2d 713, 715 [1996]).

Conclusion

Having found that the appraisers of both the City and claimant are without probative value, a new trial at which the parties shall be allowed to submit further evidence to assist in the determination of just compensation is ordered. The parties are directed to appear in Part 74, Room 17.21, at 320 Jay Street at 10:00am on May 14, 2010 for the purpose of establishing a schedule for the exchange of supplement appraisal reports, if deemed necessary, and/or to schedule a date for trial.

The foregoing constitutes the order and decision of this court.

E N T E R,

J. S. C..