Opinion
# 2020-051-503 Claim No. 130902
06-15-2020
WEST GATES CIP, LLC v. STATE OF NEW YORK
BIERSDORF & ASSOCIATES, P.A. BY: DAN BIERSDORF, ESQ. HON. LETITIA JAMES New York State Attorney General BY: TAMARA B. CHRISTIE, ESQ. Assistant Attorney General
Synopsis
Case information
| UID: | 2020-051-503 |
| Claimant(s): | WEST GATES CIP, LLC |
| Claimant short name: | WEST GATES CIP |
| Footnote (claimant name) : | |
| Defendant(s): | STATE OF NEW YORK |
| Footnote (defendant name) : | |
| Third-party claimant(s): | |
| Third-party defendant(s): | |
| Claim number(s): | 130902 |
| Motion number(s): | |
| Cross-motion number(s): | |
| Judge: | DEBRA A. MARTIN |
| Claimant's attorney: | BIERSDORF & ASSOCIATES, P.A. BY: DAN BIERSDORF, ESQ. |
| Defendant's attorney: | HON. LETITIA JAMES New York State Attorney General BY: TAMARA B. CHRISTIE, ESQ. Assistant Attorney General |
| Third-party defendant's attorney: | |
| Signature date: | June 15, 2020 |
| City: | Rochester |
| Comments: | |
| Official citation: | |
| Appellate results: | |
| See also (multicaptioned case) |
Decision
This is a timely filed claim for a partial taking of property owned by claimant West Gates CIP, LLC brought against defendant pursuant to Highway Law § 30 and the Eminent Domain Procedure Law. The Notice of Appropriation, with the maps and description of the appropriated property, were filed with the Monroe County Clerk on or about November 22, 2013
Map No. 100, Parcel Nos. 65 [Fee], 66 [Permanent Easement] and 67 [Permanent Easement] and Map No. 114, Parcel Nos. 84 [Temporary Easement] and 85 [Temporary Easement]. The Court adopts these maps and descriptions, and incorporates them by reference.
and the Claim was timely filed on January 26, 2018, following the granting of claimant's motion to late file. The property was viewed by the Court on September 24, 2019 and the trial was conducted September 25-26, 2019 before the undersigned. This claim has not been assigned or submitted to any other court or tribunal for audit or determination.
Decision
1. Jurisdictional defect
Defendant's first argument was that the claim should be dismissed on jurisdictional grounds because the verification of the claim was defective. Since this is a dispositive issue, the Court must deal with it first.
Despite claimant's suggestion to the contrary, all claims filed in the Court of Claims must be verified. Court of Claims Act § 11 (b) provides that "[t]he claim and notice of intention to file a claim shall be verified in the same manner as a complaint in an action in the supreme court." This reference to verification of a complaint in supreme court means that CPLR 3020, entitled "Verification", CPLR 3021, entitled "Form of affidavit of verification", and CPLR 3022, entitled "Remedy for defective verification", apply to claims in the Court of Claims. (Lepkowski v State of New York, 1 NY3d 201, 210 [2003]). Furthermore, "Lepkowski made clear that all of the requirements in section 11 (b) are 'substantive conditions upon the State's waiver of sovereign immunity.' The failure to satisfy any of the conditions is a jurisdictional defect." (Kolnacki v State of New York, 8 NY3d 277, 280-81 [2007] citing Lepkowski, id. at 207).
CPLR 3020 (d) describes who may verify, which, in the case of a domestic corporation, is an officer. In this case, the verification was made by David H. Baldauf, who stated in his affidavit that he was an "authorized agent" and who claimant asserted in its reply, was one of claimant's attorneys authorized to sign documents on behalf of the corporation. In that case, CPLR 3021 provides:
The Court takes judicial notice of claimant's corporate status as a domestic corporation on the NYS Department of State website, https://appext20.dos.ny.gov/corp_public/corpsearch.entity_search_entry.
"The affidavit of verification must be to the effect that the pleading is true to the knowledge of the deponent, except as to the matters therein stated to be alleged on information and belief, and that as to those matters he believes it to be true. If it is made by a person other than the party, he must set forth in the affidavit the grounds of his belief as to all matters not stated upon his knowledge and the reason why it is not made by the party" (emphasis added).
As the attorney for the claimant, the affiant was required to provide the additional information, which he did not. Therefore, this verification was defective and could have been treated as a nullity, provided the mandates of CPLR 3022 were met:
"A defectively verified pleading shall be treated as an unverified pleading. Where a pleading is served without a sufficient verification in a case where the adverse party is entitled to a verified pleading, he may treat it as a nullity, provided he gives notice with due diligence to the attorney of the adverse party that he elects so to do."
Courts reviewing allegedly defective verifications, included in the "due diligence" requirement that the notice of rejection provide "the reason(s) for deeming the verification defective." (Matter of Miller v Board of Assessors, 91 NY2d 82, 86 [1997]; Gaffey v Shah, 131 AD3d 1006 [2d Dept 2015]). Further,
"It is well settled that a notice accompanying [a pleading] returned for improper verification, or lack of verification must state the defects relied upon specifically, and that a general statement is not enough. This is so because the party whose pleading is returned is entitled to a reasonable opportunity after notice and return to cure the defect or supply the omission. Where an insufficient notice is given the situation is exactly as if the pleading had not been returned at all."
(Westchester Life v Westchester Mag. Co., 85 NYS2d 34, 34 [Sup Ct, NY County 1948], cited in Matter of O'Neil v Kasler, 53 AD2d 310, 315 [4th Dept 1976]). Court of Claims Act § 11 (c) mirrors this notice requirement, stating that any objection to the verification must be raised "with particularity" in a pre-answer motion to dismiss or in the answer.
Analyzing the rejection notice sent by defendant upon receipt of the claim, the Court finds that it lacked the required specificity and was contradictory, leaving claimant with insufficient information about how to cure the defect. The notice was a checklist of six possible defects and an "other" category. The first reason checked was "it is unverified", which is patently untrue. The second reason, "the verification is not signed by the party", was not checked, but should have been; the affiant was not a party because he was not an officer of the claimant. The third and fourth reasons dealt with the notarization and they were correctly unchecked. The fifth reason, "the verification does not contain the language required by CPLR 3021" was checked but was only partially correct because all information in the claim were based on the affiant's knowledge but he did not state why the verification was not made by a party. However, that defect, "the verification does not state why it is not being made by the party; as required by CPLR 3020" was also the sixth reason, which was unchecked. The defective verification was also raised as an affirmative defense with reference to CPLR 3020, 3021 and 3022, but without particularity.
The Court recognizes that defendant was required to reject the claim very soon after receipt when it may have been difficult to give specific reasons for the rejection but "[p]leaders insisting upon strict compliance with the rules of practice must follow the same themselves." (Treen Motors Corp., Inc. v Van Pelt, 106 Misc 357, 361 Ct 1919 ). Since the rejection notice was deficient, defendant's request to dismiss the claim as unverified is denied. Given this ruling, there is no need to address the other issues raised by claimant regarding the verification.
2. The Appropriation
Claimant seeks compensation for a partial taking along the northern border of the subject property ("the property") at 2345 State Route 33 (Buffalo Road) in the Town of Gates, Monroe County. Specifically, the taking consisted of, in fee simple, a 0.382-acre narrow strip of the landscaped buffer between the property and Buffalo Road, two irregularly shaped permanent easements at both northern corners of the property for reconstruction of the entrances to the property from Buffalo Road, and two temporary easements for re-establishing driveways and a construction work area. The stated purpose of the taking was to widen Buffalo Road to ease congestion, rehabilitate pavement and traffic control devices, and resolve drainage issues.
The property consisted of 10.04
Proof of the actual size of the parcel was not well established. The purchase of the property by claimant in May 2012 was of 8.55 acres and Mr. Bruckner, claimant's appraiser, stated that two strips of adjacent property were purchased in August 2012, bringing the total acreage to 10.04. (Ex. 12, pg 15). There was no survey to confirm that and defendant's expert used 8.55 acres in his analysis.
acres improved with a one-story, multi-tenant retail plaza known as "West Gates Shopping Center" and, by locals, as the Tops Plaza because Tops grocery is the anchor store. As of the vesting, there were seven potential tenancies, including Tops, with one of them vacant and one under lease for future tenancy by Dollar Tree. The southern-most end of the plaza was vacant and scheduled for demolition, which occurred after vesting. There was also a separate convenience store with gas pumps operated by but not physically connected to Tops. The stores were in a strip, perpendicular to Buffalo Road. Pixley Road ran along the east side of the property, with access driveways. There was considerable parking in front of the stores.
As the owner of property taken by appropriation, claimant is entitled to "just compensation" based on the property fair market value in its highest and best use at the time of the appropriation. (Tehan's Catalog Showrooms, Inc. v State of New York, UID No. 2012-040-052 [Ct Cl, McCarthy, J., July 16, 2012] affd118 AD3d 1497 [4th Dept 2014]). Further,
"The measure of 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... Any award made should indicate, moreover, the amounts of damage attributable to the direct appropriation and those resulting from indirect damage to the remainder, as well as the basis for such award."
(id.)(internal citations omitted).
Both appraisers agreed that the highest and best use of the property both before and after the appropriation was as currently improved as a shopping center and the Court concurs. The point of dispute is whether the partial taking prevented the claimant from developing the northern end of the plaza, with the resulting indirect damages.
3. Indirect Damages
Kevin Bruckner, claimant's appraiser, opined that the widening of Buffalo Road took a portion of the landscaped buffer between the road and the north end of the plaza, eliminating any future expansion of that "end cap" because the 100 ft. front setback from Buffalo Road required by the zoning code could not be met. Mr. Bruckner opined that prior to the taking, a 4,410 sq. ft. retail end cap could have been built adjacent to the Tops store, most economically on a ground lease, resulting in $623,600 in indirect damages. Defendant did not calculate any indirect damages and did not rebut claimant's calculation in its expert's appraisal. Although the defendant's appraiser, Roger Pigeon, did respond to the Court's question about the absence of any consideration by him of the end cap potential, the Court did not consider his testimony about it and grants claimant's motion to strike his response.
Ex. 12, pg 6.
Prior to the taking, Mr. Bruckner claimed the site was approximately 10.04 acres and irregularly shaped. After the taking, the site was reduced to 9.66 acres, with a loss of a long narrow strip along Buffalo Road of approximately 0.38 acres. The dimensions of this strip are not given by Mr. Bruckner and are not discernable by reviewing the maps, although the State's expert described it as extending along the 366 ft. frontage of Buffalo Road and varying in depth between 14 ft. on the west side and 32 ft. on the east side. (Ex. DD, pg 129). Claimant had no definitive plan to develop the property on the north end of the plaza prior to the taking, so no certified architectural or engineering plans were prepared. A drawing of the potential development of an end cap with associated parking was prepared in 2017 by claimant and relied upon by Mr. Bruckner in support of his opinion, but that is also without surveyed dimensions. In short, the claimant's proof lacked the basic measurements of the setback before and after the taking to support Mr. Bruckner's speculation that the taking prevented future development. Also missing was any discussion about the infeasibility of getting a variance for any setback deficiency.
In addition, Mr. Bruckner's damages calculation was based solely on claimant's hypothetical end cap plan (Ex. 12, pgs 30, 58) but there was little evidence presented at trial about it. The legend on the plan indicated it was created in 2017 for illustration purposes, but claimant offered no evidence of how, for example, the dimensions of this hypothetical building were determined, leaving the question of whether a slightly smaller end cap could have met the alleged setback restrictions, thereby reducing claimant's damages. There was no indication that this illustration was prepared by an engineer or architect to certify its conformance with building and regulatory standards. Further, since it was offered as a hypothetical, it is only speculation that the Town would have approved it given the obvious alteration of the traffic flow around the north side of the building, the changes in the green space and access road, and the additional parking.
Since there were no real plans to build this end cap, claimant had not solicited any tenants for it. Claimant's vice president of the development and leasing team, Mr. Recoon, testified that claimant acquired the plaza in May 2012 and the first priority was to secure a long-term lease with the anchor store, Tops, a tenant for which claimant had been a preferred developer for decades. This new lease required several major changes to the plaza, including the demolition of the south end cap of the plaza in order to improve the connection between the property with other shopping areas behind it so people could access major destinations such as Home Depot from the Tops plaza. This demolition occurred through early 2014.
Mr. Recoon is employed by Benderson Development Company which manages the claimant's property.
Mr. Recoon testified that there were some internal meetings at which development of the northern end cap were discussed but he did not provide any details. He described the potential northern end cap as an "ocean front", more desirable for potential tenants because of its visibility from Buffalo Road, hence more valuable to claimant for development than other locations on the property. He also discounted the comparable value of the long-vacant southern end cap that claimant agreed to demolish at Tops request prior to the taking. He had not seen the hypothetical 2017 plan upon which Mr. Bruckner had based his appraisal, could not say how that plan was developed or why these building dimensions were chosen, and knew of no other earlier plans for development of the northern end cap. He introduced plans of eight of claimant's other properties at which end caps were constructed to prove the economic value of such construction, but this evidence was not persuasive; only one was in the Rochester area (Ex. 8, Henrietta), all were in significantly larger shopping centers with a variety of name-brand tenants, and only three had end caps that provided exposure to an exterior road (Exs.4,5,10), which contradicted Mr. Recoon's assertion that the northern end cap's position near Buffalo Road was preferable to the southern end cap for development.
Mr. Recoon testified that the end cap construction could be done by claimant with no identified tenant or on a ground lease whereby the tenant would rent the land and build the building to its own specifications. He indicated that there is a slight preference for the ground lease approach because it was less risky and he had considerable experience with ground leasing.
Mr. Recoon was generally aware of the presence of a sewer line easement in the location of the proposed end cap building but indicated it was common in development to relocate utilities. Claimant had not explored the feasibility or cost of moving it before the taking occurred and, in any case, the cost would be incurred by the tenant on a ground lease.
Following this development strategy, Mr. Bruckner testified that the highest and best use of the property before the taking was to extend the existing building with a 4,410 sq. ft. end cap on the north side, which was legally permissible, physically possible and financially feasible. However, his recitation of this standard for highest and best use is not proof thereof, and his proof was lacking.
Mr. Bruckner accepted the 2017 illustration of the 4,410 sq. ft. addition without foundation as to how that size and shape were determined and whether it met architectural and engineering requirements. He acknowledged the existence of various sewer and water mains that would have to be relocated for this construction and assumed that could be done, although the cost was not calculated. He also speculated that the mains could be moved because it appeared there has been some relocation in the past, but he is not an engineer and could not offer an opinion on the feasibility of that. As to the financial feasibility, he used the income approach as the most accurate because it measured the income stream of the potential building that would motivate investors. Following Mr. Recoon's preference for a ground lease arrangement, Mr. Bruckner calculated the income potential for that option, while admitting that ground lease comparables were "tough to come by." (Tr., pg 105). Despite Mr. Recoon's statement that end caps were so desirable, Mr. Bruckner stated that they are rare in the Rochester area, so his comparable properties were all freestanding buildings with drive-thru window potential, which he did not think could be accommodated with this end cap.
On the basis of one anecdotal experience, he discounted the subject property by 25% due to the absence of a drive-thru. (Ex. 12, pg 84).
The Court recognizes that claimant owned the property less than two years before the taking and during that time it focused on securing the Tops tenancy and making the structural changes required to do that, so consideration and planning of the development of the end cap had not progressed beyond the initial conversations; there was no proposed tenant, no engineering plans, no consultation with the Town for approvals, no architectural plans, and, therefore, no realistic legal and economic feasibility calculation. Although it would not be possible to identify a tenant or provide Town approvals since the hypothetical project had not progressed that far by the time of the taking, claimant's burden of proof required engineering and/or architectural expert testimony that the end cap of the dimensions illustrated was possible given the utility easements, setbacks, traffic flow, and plaza ingress/egress considerations. Furthermore, even if the cost would be borne by the tenant in a ground lease situation, no tenant would enter into such an arrangement without consideration of the cost of moving numerous utility mains.
Claimant bears the burden of proof of the consequential damages and "to furnish a basis upon which a reasonable estimate of those damages can be made." (Niagara Mohawk Power Corp. v Olin, 138 AD2d 940, 940 [4th Dept 1988]). The measure of damages must reflect the fair market value of the property in its highest and best use on the date of the taking, whether or not the property is being put to such use at that time. (Gyrodyne Co. of Am., Inc. v State of New York, 89 AD3d 988 [2d Dept 2011]). As has been held:
"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 litemplan for such use (citation omitted), 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 (citation omitted) and 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'. We noted in Shorefront High School--Rudnick (at p. 149) that it 'is likely that the expert would consider the availability of financing, costs of construction, taxes, possible profits and the like in arriving at his conclusion concerning the highest and best use of the land, and its probable market price.' Claimants' evidence fell far short of the usual criteria."
(Matter of City of New York (Broadway Cary Corp.), 34 NY2d 535, 536 [1974] [internal citations omitted]). Furthermore, "[t]he highest and best use of the property is defined as the reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value." (Koronowski v State of New York, UID No. 2001-018-077 [Ct Cl, Fitzpatrick, J., Mar. 31, 2001]). In the Court's opinion, claimant failed to meet all aspects of proving the alleged highest and best use of the property as improved by the end cap addition. Furthermore, the economic feasibility of the income stream proposed by Mr. Bruckner, based on a rare ground lease, was speculative and inflated. (see DiGiacomo v State of New York, 182 AD3d 977 [3d Dept 2020]; Tehan's Catalog Showrooms, Inc. v State of New York, UID No. 2012-040-052 [Ct Cl, McCarthy, J., July 16, 2012] affd 118 AD3d 1497 [4th Dept 2014]; J.W. Mays, Inc. v State of New York, 300 AD2d 545, 547 [2d Dept 2002]). The Court makes no award for indirect damages.
4. Direct Damages
Both appraisers agreed that the Sales Comparison Approach was appropriate for calculating the direct damages, although defendant's appraiser also performed an Income Capitalization calculation. The Court adopts the defendant's conclusion that the $125,000 per acre value of the property was the same before and after the appropriation. The Claimant's appraiser opined that the recoverable direct damages for the loss of 0.382 acres and site improvements taken in fee, the land and site improvements taken in permanent easements, and the rental value and site improvements of the temporary easements totaled $66,400. Defendant's appraiser valued the same categories of damages at $109,800. The Court agrees with the valuations used by the defendant and awards claimant $109,800 in direct damages, summarized as follows:
Direct Damages:
Land: $58,900 (0.382 ac. x $125,000/ac.= $47,750
0.061 ac. x $125,000/ac. x 90% = $6,875
0.038 ac. x $125,000/ac. x 90% = $4,275)
Improvements: $42,350
Total Direct Damages: $101,250
Indirect Damages: No award
Temporary Easements: $8,550 (0.342 ac. x $125,000/ac. x 10% x 2 yrs)
Total Damages awarded: $109,800
Claimant is entitled to prejudgment interest at the statutory rate of 9% per year, calculated as set forth in Eminent Domain Procedure Law § 514 (B):"[U]nless a condemnee files and serves his claim against the condemnor for damages arising from the acquisition of his property, within six months after accrual of such claim, or within six months after personal service of the notice of acquisition upon the condemnee, whichever is later, interest shall be suspended; interest so suspended shall thereafter again commence to accrue upon the date of the filing of such claim."
In this case, the acquisition map was filed on November 22, 2013 and the Notice of Acquisition was then personally served upon claimant on December 23, 2013 (see claim ¶ 8). Claimant was required to file its claim no later than June 23, 2014 to avoid a suspension of interest, but the filing did not occur until January 26, 2018. Claimant is, therefore, entitled to interest from the date of vesting, November 22, 2013, to June 23, 2014, and again from the date of filing, January 26, 2018, to the date of this decision and thereafter to the date of entry of judgment. EDPL § 514 (B); CPLR §§ 5001, 5002, 5004. Claimant is also entitled to recover its initial filing fee under Court of Claims Act § 11-a (2).
All motions and cross-motions, if any, upon which the Court previously reserved decision are hereby denied. All objections, if any, upon which the Court reserved determination during trial and which were not decided above are now overruled.
The award to claimant 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 the 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.
The Chief Clerk is directed to enter judgment accordingly.
June 15, 2020
Rochester, New York
DEBRA A. MARTIN
Judge of the Court of Claims