New York State Court of Claims

New York State Court of Claims
BENDERSON, et al v. THE STATE OF NEW YORK, # 2010-037-503, Claim No. 111874

Synopsis

Case information

UID: 2010-037-503
Claimant(s): RONALD BENDERSON AND DAVID H.
BALDAUF, AS TRUSTEES UNDER A TRUST AGREEMENT DATED SEPTEMBER 22, 1993, KNOWN AS THE RANDALL BENDERSON 1993-1 TRUST, AND RB-3 ASSOCIATES
8441 Cooper Creek Boulevard
University Park, Florida 34201
Claimant short name: BENDERSON, et al
Footnote (claimant name) :
Defendant(s): THE STATE OF NEW YORK
Footnote (defendant name) :
Third-party claimant(s):
Third-party defendant(s):
Claim number(s): 111874
Motion number(s):
Cross-motion number(s):
Judge: JEREMIAH J. MORIARTY III
Claimant's attorney: Harold M. Halpern, Esq.
Defendant's attorney: Hon. Andrew M. Cuomo
New York State Attorney General
By: William D. Lonergan
Assistant Attorney General
Third-party defendant's attorney:
Signature date: April 1, 2010
City: Buffalo
Comments:
Official citation:
Appellate results:
See also (multicaptioned case) 2010-037-504

Decision

This decision addresses two claims which were joined for trial, and sequentially tried pursuant to a Decision and Order of this Court dated May 19, 2009. Both claims arise out of the partial appropriation by the State of New York of Claimants'(1) properties pursuant to the Eminent Domain Procedure Law and Section 30 of the Highway Law in a proceeding entitled "Gardenville-Williamsville, Part 2, S.H. No. 1626, Erie County." The appropriation map, with description, for Claim No. 111874 is Map No. 155, Parcel No. 175 and the appropriation map, with description, for Claim No. 111876 is Map No. 152, Parcel No. 172, both of which were filed in the Erie County Clerk's Office on October 30, 2003, which the Court finds to be the date of taking. Said maps and the property descriptions set forth therein are adopted by the Court and incorporated herein by reference. The Claims were filed with the Clerk of the Court on January 23, 2006 and they have not been assigned or submitted to any other court, tribunal or officer for audit or determination. The Court has viewed the properties pursuant to Section 12 (4) of the Court of Claims Act and Section 510 of the Eminent Domain Procedure Law.

The subject properties are located at the intersection of Union Road (NY Route 277) and Galleria Drive in the Town of Cheektowaga, Erie County, less than one-half mile east of Walden Galleria Mall in one of the prime areas for commercial development in the Buffalo region of western New York. Union Road is a heavily traveled north-south thoroughfare and the area surrounding its intersection with Galleria Drive, the access road to the Mall, has experienced extraordinary commercial development since the Mall opened in 1989. The property in Claim No. 111874 is located in a "CM" General Commercial District and the property in Claim No. 111876 is located in a "C" Retail Business District under the Town of Cheektowaga zoning law which permits the development of restaurants, stores, shopping centers and related commercial entities, all of which have been developed in the immediate area of the subject properties. Both appraisers concurred that the highest and best use of the properties was for retail commercial development, consistent with the zoning, "as vacant" and for continued use as a bank, restaurant and retail stores "as improved," and the Court so finds the same to be the highest and best use in both the before and after situations.

Claimants are entitled to "just compensation" when the State exercises its power of eminent domain and the amount is generally determined by reference to the fair market value of the property according to its highest and best use (Matter of Town of Islip [Mascioli], 49 NY2d 354 [1980]). Where the State takes part of a condemnees' property and leaves a remainder, just compensation includes not only the value of the portion taken but, where adequately proven, any impairment of value to the remainder, expressed as either consequential damages (damage resulting from the use to which the appropriated portion is put; see e.g. Matter of City of New York (Metro Inv. & Credit Corp.), 288 NY 75 [1942]; Dennison v State of New York, 48 Misc 2d 778 [1965], affd 28 AD2d 28 [1967], affd 22 NY2d 409 [1968]) or severance damages (damage resulting from the effects of the loss of the taken portion; see e.g. Coldiron Fuel Ctr., Ltd. v State of New York, 8 AD3d 779 [2004]). The measure of indirect damages in the case of a partial taking is the difference between the fair market value of the property before the appropriation and its fair market value after the taking (McDonald v State of New York, 42 NY2d 900 [1977]; Acme Theatres v State of New York, 26 NY2d 385 [1970]; Diocese of Buffalo v State of New York, 24 NY2d 320 [1969]).

Claim No. 111874

The subject property consists of two adjoining parcels located on the northwest corner of Union Road and Galleria Drive which are addressed as 3760 Union Road and 3770 Union Road and are designated on the Town of Cheektowaga tax map as lots 102.02-1-9.131 and 102.02-1-9.132, respectively. Ownership was not contested and both appraisers valued the property on the basis of Claimants' ownership of a fee interest in the subject premises. Thus, the Court concludes that Claimants have established title to and were the owners of the property at the time of the appropriation.

Prior to the taking, the parcels contained a total of 3.987± acres (173,673 square feet),(2) and were generally rectangular in shape, level and at grade. The appraisers concur that the subject property, as improved, consisted of a bank parcel (3760 Union Road) and a vacant retail building (3770 Union Road), and appraised each separately in order to determine the value of the entire parcel. The bank parcel at the corner of Union Road and Galleria Drive contained 26,038 square feet of land improved with a 3,720 square foot bank building owned by the lessee and the remaining 147,635 square feet (3770 Union Road) was improved with a 51,472 square foot vacant, unfinished shell building owned by Claimants. The fee taking consisted of a narrow strip of frontage along Union Road and Galleria Drive containing a total of 3,090 square feet (0.071± acre) of which 2,004 square feet was taken from 3760 Union Road and 1,086 square feet was taken from 3770 Union Road. Also included in the taking were site improvements consisting of asphalt paving, landscaping, concrete curbing and signage.

Since both appraisers agree that the taking had no measurable impact on the remainder of the property or improvements, we are only concerned in this matter with determining direct damages for the property appropriated. The appraisers utilized different methods for evaluating damages, including the sales comparison (market data) approach, the income approach and the cost approach.

Howard P. Schultz (Schultz) testified for Claimants and identified his appraisal report (Exhibit 1) and a supplemental report (Exhibit 1A). Using the market data approach and six comparable sales of vacant land to determine the land value of both parcels as vacant, Schultz, following adjustments, arrived at a before taking range of value from $28.22 per square foot to $52.37 per square foot with an adjusted mean value of $35.68 per square foot. Considering the location, size and shape of the subject, Schultz adopted a unit value of $30.00 per square foot for the entire parcel, giving most weight to Sales No. 1 through No. 5, resulting in a before land value of $5,210,000.(3)

Likewise, Schultz used the market data approach and three comparable sales to determine the before taking value of 3770 Union Road, as improved, resulting in a range of values, following adjustments, of $55.90 per square foot to $93.31 per square foot. The adjusted median price is $74.60 per square foot and the mean price is $77.49 per square foot. Schultz initially adopted a value of $75.00 per square foot of building area, including land, and then noted that the parcel was sold on October 29, 2004 for a final sales price of $3,743,463 which, when adjusted to include the value of the property and improvements, equates to a unit value of $73.35 per square foot of building area which he adopted resulting in a total before value of $3,770,000 of which $3,720,000 ($25.00 per square foot) is attributable to the land and $50,000 to improvements.

Schultz utilized the income approach to determine the value of 3760 Union Road as improved in the before situation, deeming this to be the better valuation approach for income producing property. To do so, he analyzed eight ground leases which were deemed to be comparable to the subject lease resulting in a range of values from $23.15 per square foot to $47.11 per square foot of building area with a mean unit value of $34.27 per square foot of building area ( Exhibit 1A). At the time of taking, the subject had an average annual ground lease rent of $35.09 per square foot of building area which Schultz considered to be at market value given the building size and location and concluded the before improved land value to be $1,490,000 ( $57.00 per square foot). Schultz did not assign any value to the site improvements reasoning that the bank building had a limited useful life due to the fact that at the end of the lease term the lessee had the option to demolish the building and clear the site or the building would revert to the lessor and, at the time of the appraisal, the bank was closed.

Based upon the foregoing, Schultz set the appraised market value of both parcels in the before situation at $5,260,000, of which $5,210,000 was attributable to the land ($30.00 per square foot). In the after situation, Schultz determined the subject parcels were not damaged by the taking thereby retaining the $57.00 per square foot and $25.00 per square foot values as in the before situation. Based upon the foregoing, Claimants' expert allocated damages as follows: $114,000 for the taking of 3760 Union Road (2,004± square feet @ $57.00 per square foot); $27,000 for the taking of 3770 Union Road (1,086± square feet @ $25.00 per square foot), plus site improvements of $15,000,(4) for total damages of $156,000.

Roger P. Pigeon (Pigeon) of Emminger, Hyatt, Newton & Pigeon, Inc., licensed real estate appraisers, testified for Defendant and his appraisal was admitted as Exhibit A. Pigeon testified that the highest and best use of the subject parcels in both situations was its current use for retail commercial development "as vacant" and for use as a bank and retail building "as improved." He arrived at an opinion of market value by considering three approaches to value, namely, sales comparison (market data) approach, the cost approach and the income approach. Beginning with the sales comparison approach Pigeon considered three comparable sales and, following adjustments, arrived at a before taking range of value from $15.72 per square foot to $19.87 per square foot and assigned a value of $18.00 per square foot to the subject as vacant, resulting in a before market value of $3,133,900.

Likewise Pigeon used the sales comparison approach and three comparable sales to determine the value of 3760 Union Road, as improved, resulting in a range of values, following adjustments, of $203.50 per square foot to $305.22 per square foot of gross building area including land. Due to the location of the subject, a unit value of $250.00 per square foot was adopted resulting in a before value of $930,000. Pigeon also used the sales comparison approach and three comparable sales to determine the before taking value of 3770 Union Road, as improved, resulting in a range of values, following adjustments, of $64.27 per square foot to $72.92 per square foot. Pigeon adopted a unit value of $70.00 per square foot of gross building area including land resulting in a before value of $3,600,000, which when combined with the value of 3760 Union Road results in an overall market value of $4,500,000, as improved.

In contrast to Schultz, Pigeon utilized the cost approach to value both parcels "as improved" arriving at a total before value of $4,905,000. Pigeon testified that he did not rely upon the cost approach in fixing the value of the subject property and, since the Court does not find this property to be a speciality, the cost less depreciation analysis will not be considered in arriving at the overall value of the subject (Matter of Saratoga Harness Racing v Williams, 91 NY2d 639, 645-6 [1998]).

Pigeon also utilized the income approach to value the subject in the before situation, giving more weight to this approach than the sales comparison approach. To do so, Pigeon examined the retail space as a branch bank and, not finding rentals of shell buildings similar to 3770 Union Road, as a finished retail building with adjustments for finish and mechanicals, concluding the before value to be $3,765,000. Pigeon then set the appraised market value of the subject in the before situation at $4,300,000, with $3,133,900 attributable to the land ($18.00 per square foot). In the after situation, Pigeon determined that the site was not damaged by the taking thereby retaining the $18.00 per square foot value as in the before situation. Pigeon found the total damages to be $70,600, allocated as follows: direct damages of $55,600 (3,090 square feet @ $18.00 per square foot) for the land taken, plus site improvements of $15,000.

Given the relatively minor difference between the square foot valuations arrived at by the two appraisers using the aforementioned valuation processes, the Court finds it unnecessary to engage in an exhaustive discussion of the opinions offered by the appraisers. Overall, based upon a preponderance of the evidence before the Court and the Court's consideration of the exhibits and testimony of each expert, the Court elects to adopt a mean value of $24.00 per square foot for the vacant land value before the taking resulting in a total before value of $4,168,152 for 173,673 square feet of land area. Therefore, with respect to direct damages, the taking consisted of 3,090 square feet of land area and the Court has assigned a value of $24.00 per square foot to the land resulting in direct damage of $74,160, plus improvements of $15,000, for total damages of $89,160.

Claim No. 111876

The subject property consists of a free standing Taco Bell fast food restaurant and a retail plaza located on the southwest corner of Union Road and Galleria Drive which are addressed as 3730 Union Road and 145 Galleria Drive and are designated on the Town of Cheektowaga tax map as lots 102.02-1-9.141/A and 102.02-1-9.141, respectively. Ownership was not contested and both appraisers valued the property on the basis of Claimants' ownership of a fee interest in the subject premises. Thus, the Court concludes that Claimants have established title to and were the owners of the property at the time of the appropriation.

Prior to the taking the parcel contained 1.718 acres± (74,836 square feet),(5) and is generally rectangular in shape, level and at grade. The appraisers concur that the subject property, as improved, consisted of a Taco Bell restaurant (3730 Union Road) and a retail plaza (145 Galleria Drive), and appraised each separately in order to determine the value of the entire parcel. The Taco Bell parcel contained 38,700 square feet of leased land improved with a 2,150 square foot restaurant building owned by the lessee and the remaining 36,136 square feet was improved with a 16,119 square foot three unit retail building owned by Claimants. The fee taking consisted of a narrow irregular shaped strip of frontage along Galleria Drive extending from the westerly property line easterly to Union Road containing a total of 5,731± square feet (0.132± acre) of which 3,409 square feet was from 3730 Union Road and 2,322 square feet was from 145 Galleria Drive. Also included in the taking were site improvements consisting of landscaping, asphalt pavement, concrete curbing and lawn area.

Both appraisers utilized the same methods and values to determine damages as were used in Claim No. 111874. Using the market data approach to determine the land value of both parcels as vacant, Schultz arrived at a before taking range of value from $28.22 per square foot to $52.37 per square foot with an adjusted mean value of $35.68 per square foot and again adopted a unit value of $30.00 per square foot for the entire parcel resulting in a before land value of $2,245,000.

Schultz used the market data approach and three comparable sales to determine the before taking value of 145 Galleria Drive, as improved, resulting in a range of values, following adjustments, of $70.90 per square foot to $99.31 per square foot with a mean value of $89.49 per square foot. He adopted a value of $90.00 per square foot of building area, including land, resulting in a total before value of $1,450,000 (16,119 square feet of building area @ $90.00 per square foot).

Schultz also used the income approach to determine the value of 145 Galleria Drive as improved in the before situation since it is income producing property. To do so, he analyzed sixteen rentals from a commercial development located across the road from the subject which he deemed to be comparable to the subject lease resulting in a range of values from $10.75 per square foot to $20.00 per square foot, net of structural. At the time of taking, two of three units in the subject building were leased at $19.50 and $17.00 per square foot of building area which Schultz considered to be at market value and concluded the before improved land value to be $1,700,000. Considering both valuation methods, Schultz set the appraised market value of 145 Galleria Drive in the before situation at $1,600,000.

Schultz utilized the income approach to determine the value of 3730 Union Road as improved in the before situation since it is also income producing property. In this instance he analyzed eight ground leases which he deemed to be comparable to the subject lease resulting in a range of values from $14.02 per square foot to $35.09 per square foot of building area. At the time of taking, the subject had an average annual ground lease rent of $40.61 per square foot of building area which Schultz considered to be at market value given the building size and location and concluded the before improved land value to be $1,350,000.

Schultz set the appraised market value of both parcels in the before situation at $2,950,000, of which $2,245,000 was attributable to the land ($30.00 per square foot). In the after situation, Schultz determined that the 145 Galleria Drive parcel was not damaged by the taking thereby retaining the $30.00 per square foot value as in the before situation. However, he determined there was severance or indirect damage to the 3730 Union Road parcel by reason of the fact that under the lease agreement rent for the remainder of the term is to be reduced in the same proportion that the square footage of the premises is reduced by the appropriation. He calculated that the amount of land area appropriated from this site was 3,409 square feet or 8.81% based on the total site area of 38,700 square feet set forth in the lease. Schultz concludes that the building improvements were not affected by the taking and the indirect damage attributable to the lease is $16,600 (Exhibit 1A, p.73). Based upon the foregoing, Claimants' appraiser allocated damages as follows: $172,000 in direct damages for the taking (5,731 square feet @ $30.00 per square foot); $16,600 for indirect damages; and $15,000 for site improvements for total damages of $203,600.

Pigeon testified for Defendant and his appraisal was admitted as Exhibit A. Pigeon agreed with Schultz that the highest and best use of the subject in both situations was its current use for retail commercial development "as vacant" and for continued use as a retail operation and fast food restaurant "as improved." He arrived at an opinion of market value by considering three approaches to value, namely, sales comparison (market data), cost and income. To determine the land value as vacant, Pigeon utilized the sales comparison approach considering three comparable sales and, following adjustments, arrived at a before taking range of value from $16.47 to $21.18 per square foot and reached an opinion of unit value at $18.00 per square foot, resulting in a before market value as vacant of $1,349,100.

Pigeon used all three approaches to determine the value of the subject as improved, beginning with the cost approach arriving at a total before value of $2,770,000. Although he considered all three approaches in fixing value, Pigeon relied primarily upon the income and sales comparison approaches and, since the Court does not find this property to be a speciality, the cost approach will not be considered in arriving at the overall value of the subject (Matter of Saratoga Harness Racing v Williams, supra).

Pigeon next considered the sales comparison approach using three comparable sales to determine the value of 3730 Union Road (Taco Bell) as improved resulting in a range of values, following adjustments, of $302.64 to $419.03 per square foot of gross building area including land. He stated that the wide range is due to the limited data involving sales of fast food restaurants in high profile locations. Due to the location of the subject, a unit value of $400 per square foot was adopted resulting in a before value as improved of $860,000. He also used the sales comparison approach and three comparable sales to determine the before taking value of 145 Galleria Drive, as improved, resulting in a range of values, following adjustments, of $108.47 to $113.30 per square foot. Pigeon adopted a unit value of $110 per square foot of gross building area including land resulting in a before value of $1,773,000, which when combined with the value of 3730 Union Road results in an overall market value of $2,625,000, as improved.

Pigeon also utilized the income approach to value the subject in the before situation, giving more weight to this approach than the sales comparison approach. To do so, he examined the leases in place at the time of taking and analyzed market rents, expenses and interest rates to formulate a before market value of $2,640,000, with $1,349,100 attributable to land at $18.00 per square foot, $90,000 to improvements and $1,200,900 to building improvements. In the after situation, Pigeon determined that the site was not damaged by the taking thereby retaining the $18.00 per square foot value as in the before situation. Pigeon found the total damages to be $107,200, allocated as follows: direct damages of $103,200 (5,731 square feet @ $18.00 per square foot) for land taken, plus site improvements of $4,000.

Given the relatively minor difference between the square foot valuations arrived at by the two appraisers, the Court finds it unnecessary to engage in an exhaustive discussion of the opinions offered by the appraisers. Overall, based upon a preponderance of the evidence before the Court and the Court's consideration of the exhibits and the testimony of each expert, the Court elects to adopt a mean value of $24.00 per square foot for the vacant land value before the taking resulting in a total before value of $1,796,064 for 74,836 square feet of land area. Therefore, with respect to direct damages, the taking consisted of 5,731 square feet of land area and the Court has assigned a value of $24.00 per square foot to the land resulting in direct damages of $137,544.

In this claim, the appraisers did not agree on the amount of damage to the improvements and since Claimants did not provide any itemization of the before value of the site improvements, the Court is constrained to credit Defendant's calculations of $4,000.

In addition to direct damages, the Court must determine if there was any consequential or indirect damage to the remainder of Claimants' property as a result of the partial taking and, if so, at what valuation. As noted there is a difference of opinion between the appraisers in this regard with Claimants asserting indirect damages and Defendant contending that Claimants suffered no indirect damages. The Court finds that the reduction in rent resulting from the appropriation is sufficient to generate a measurable amount of severance damage and is compensable. Schultz determined that the market value of the leased fee for 3730 Union Road is $1,350,000 or $34.88 per square foot based on the size of the leased parcel of 38,700 square feet. Based upon his conclusion that the land value is $30.00 per square foot, the $4.88 per square foot difference is attributed to the value of the lease which results in severance damage of $16,600 for the 3,409 square feet appropriated from this site which the Court adopts.

Accordingly, the Court finds that Claimants sustained damages in the total sum of $158,144, allocated as follows: $137,544 in direct damages for the loss of the land; $16,600 in indirect damages and $4,000 for loss of site improvements.

During the trial, counsel for the parties challenged the validity of the filed appraisal reports and these issues were briefed by each in post trial memoranda of law which have been read and considered by the Court. Claimants' counsel urges that Defendant's appraisal is defective for not taking into consideration the ground leases for the bank and Taco Bell parcels. Counsel for Defendant argues that Claimants' appraisal is defective for not separately setting forth in detail the after value findings as opposed to restating the before value determinations in summary form. Although inadequate in some respects, both appraisals, taken as a whole, substantially satisfy the requirements of 22 NYCRR § 206.21 (b) (see Welch Foods v Town of Westfield, 222 AD2d 1053 [1995]; Matter of Broadway-Saranac Lake Corp. v Board of Assessors of Saranac Lake, 43 AD2d 649 [1973]). Whatever insufficiencies there may be in the appraisal reports does not hamper the Court's ability to determine values. Therefore, Defendant's motions to strike Claimants' appraisals, upon which decision was reserved at trial, are denied.

Therefore, the Court awards Claimants $89,160 for Claim No. 111874 and $158,144 for Claim No. 111876, together with statutory interest thereon from the vesting date of October 30, 2003 to the date of this decision and thereafter to the date of entry of judgment.(6)

The award to Claimants herein is exclusive of the claims, if any, of persons other than the owners of the appropriated properties, their tenants, mortgagees or lienors having any right or interest in any stream, lake, drainage, irrigation ditch or channel, street, road, highway or public or private right-of-way, or bed thereof, within the limits of the appropriated properties, or contiguous thereto, and is exclusive also of claims, if any, for the value of or damage to easements or appurtenant facilities for the construction, operation or maintenance of publicly owned or public service electric, telephone, telegraph, pipe, water, sewer or railroad lines.

To the extent that Claimants have paid filing fees, they may be recovered pursuant to Court of Claims Act § 11-a (2).

All motions not previously ruled upon or upon which decision was reserved are hereby denied.

LET JUDGMENTS BE ENTERED ACCORDINGLY.

April 1, 2010

Buffalo, New York

JEREMIAH J. MORIARTY III

Judge of the Court of Claims


1. For ease of reference, unless otherwise specified, the term "Claimants" shall refer collectively to the various Benderson ownership interests identified in the record.

2. There are some discrepancies as to the total acreage of the property and the square footage of the improvements thereon. The Court adopts the figures used by Claimants' appraiser, Howard P. Schultz (Exhibit 1).

3. Both appraisers rounded off final values in their reports.

4. Both appraisers agreed on the value of the site improvements taken by the appropriation.

5. There is a minor discrepancy as to the total acreage and square footage of the property and the Court adopts the figures used by Claimants' appraiser, Howard P. Schultz (Exhibit 1).

6. Since there is no evidence on the record establishing the date of personal service of the notice of appropriation, prejudgment interest shall not be suspended pursuant to EDPL 514 (B) (see Sokol v State of New York, 272 AD2d 604 [2000]).