Case Name: In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and Queens. Fifth Avenue Coach Lines, Inc., Appellant-Respondent. (Four Proceedings.); In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and The Bronx. Surface Transit, Inc., Appellant-Respondent. (Two Proceedings.)
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1965-07-22
Citations: 23 A.D.2d 463
Docket Number: 
Parties: In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and Queens. Fifth Avenue Coach Lines, Inc., Appellant-Respondent. (Four Proceedings.) In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and The Bronx. Surface Transit, Inc., Appellant-Respondent. (Two Proceedings.)
Judges: 
Reporter: Appellate Division Reports
Volume: 23
Pages: 463–471

Head Matter:
In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and Queens. Fifth Avenue Coach Lines, Inc., Appellant-Respondent. (Four Proceedings.) In the Matter of the City of New York, Respondent-Appellant, Relative to Acquiring Title to Property in the Boroughs of Manhattan and The Bronx. Surface Transit, Inc., Appellant-Respondent. (Two Proceedings.)
First Department,
July 22, 1965.
Morris Handel of counsel (Milton H. Harris and Morris Einhorn with him on the brief; Leo A. Larkin, Corporation Counsel), for respondent-appellant.
Milton S. Gould of counsel (Boy M. Cohn, Michael Leschnitser, Stephen Hochhauser, Frank S. Polestino and William N. Binderman with him on the brief; Saxe Bacon <& Bolán and Shea Gallop Climenko & Gould, attorneys), for appellants-respondents.

Opinion:
Per Curiam.
In these consolidated condemnation proceedings appeals have been taken from the third and fourth separate and partial final decrees, by Fifth Avenue Coach Lines, Inc. and Surface Transit, Inc., respectively, and by the City of New York. We affirm in substantial reliance on the comprehensive and forward-looking opinion of Mr. Justice Hecht at Special Term.
Various and complex problems of valuation are indigenous to eminent domain proceedings, and seldom can they be resolved with mathematical precision. The judicial endeavor has been " to find working rules that will do substantial justice ", and we have been authoritatively cautioned to be " careful not to reduce the concept of ' just compensation' to a formula" (United States v. Cors, 337 U. S. 325, 332). The caution is especially apt in the instant case, involving as it does the condemnation of two metropolitan bus transportation systems, because "valuation of utility properties in eminent domain presents unique problems " (Onondaga County Water Auth. v. New York Water Serv. Corp., 285 App. Div. 655, 661). Special Term, it seems to us, has explored the problems before it with thoroughness and achieved an essentially fair result. We find no reason to disturb its decrees, and limit ourselves to a brief discussion of its opinion.
What, if any, compensation should be allowed for "going concern value " has proved to bo the central issue.
Special Term convincingly marshalled the evidence showing the meagre earnings of the companies in recent years and, more significant, their still more dismal prospects for the future. It concluded that claimants' bus properties have not been operating profitably and are not capable of profitable operation. The finding has full support in the evidence. As to the poor historical record there can be no room for debate, and with regard to future earnings the court's analysis seems to us irrebuttable. As it pointedly noted (46 Misc 2d 14, 21) " Sixty-eight per cent of. Fifth's revenues and 62% of Surface's revenues are derived from routes which are highly competitive with the city's rapid transit system. As long as that system charges only 15 cents, it is unrealistic to expect that passengers on the competitive bus lines will pay a higher fare ". And, as Special Term further noted, no findings as to future profits could be premised on claimants' wishful hope that the city would increase the fares on its own transit system. A letter from claimants to the Board of Estimate in February, 1962 confirms Special Term's gloomy prognosis. Claimants, it states, " are in a serious and critical financial condition. Petitioners in 1961 had a loss of $721,410. The loss for January of 1962 is approximately $500,000. Based upon results thus far this year, Petitioners estimate that they will have a loss in 1962, in excess of six million dollars ".
The existence of the city's transit system and its fare structure and the city's long-standing fare policies are economic realities of which claimants were always well aware. They have in no sense been misled. Claimants are contending in effect that the terms of the franchises were binding only as long as their operations were profitable; and if unprofitable, the contracts became a nullity and in their place was substituted some undefined, nebulous, paternalistic obligation on the part of the city somehow to make the operations profitable. But the city never undertook to guarantee the profitability of claimants' operations, either by pumping enormous additional subsidies into their coffers or by permitting them to increase their fares, or by increasing the fares on its own transit system; and, with Special Term, we find no valid basis for determining any issue in this proceeding as if such an undertaking had been given.
There is no contention here that the city had withheld additional subsidies or refused to raise the fares on its own system for the purpose of depressing the value of claimants' properties in contemplated condemnation proceedings. It is undisputed that whether wise or unwise, statesmanlike or unstatesmanlike, the city had made a bona fide governmental and political decision to maintain its fares at a 15-cent rate. We must assume that this decision was animated by the city government's desire to serve its community best; and in that setting, of course, any holding by any court tending to disturb fundamentally such a decision would be an unwarranted usurpation of the legislative function.
The city argues that the finding' that the properties have not been operating profitably and - are not capable of profitable operation negatives the existence of a going concern value, and it contends that the basis of a proper award should be market value of the physical assets appraised as unconnected units of property. Special Term rejected the contention, stating that the claimants' property " must be valued as property in use; the city cannot urge that the property should be valued ' as a non-operating transit system'5' (p. 26).
We are in .accord with the standard thus expressed. These claimants were not yet industrial wrecks; their properties still composed viable, active transportation systems. The companies were operated as co-ordinated transit organizations, with methods, routes, records, garage and shop layouts, personnel and know-how, all reflecting the actual operating experience of several decades. Since their properties were integrated, and so functioning, they should not be appraised as though unintegrated and dismembered. They are worth" something more, although to be sure, not entitled to the same increment of value they would enjoy were they operating profitably or with the capacity for future profitable operation.
A possible interpretation of Banner Milling Co. v. State of New York (240 N. Y. 533), and one strongly urged by the city, is that a going concern value may not exist in the absence of earning's or potentiality for earnings. But the implications of the opinion in that case, as in most cases presenting knotty and elusive issues, cannot be compacted that easily into one rigid and inflexible formula. Banner was not concerned with the unique valuation problem presented by a public utility system condemned as an entirety but which was in active though unprofitable use. Where such a system, because it is operationally viable, is seen to have an element of value not reflected in break-up market value, justice requires that this element be recognized — though it may not fit within a conventional nomenclature distilled from different fact situations. And, indeed, if Special Term has perhaps extended the frontiers of Banner and of other decisions dealing with going concern value, to the end of giving' appropriate relief in this unique condemnation proceeding, it has done so in pursuance of the fundamental philosophy of such decisions and in our opinion justifiably.
But while we are in agreement with the general concept which Special Term has enunciated, we are divided on certain aspects of the manner of its application. • Some of us believe that the trial court may have been overgenerous in evaluating the buildings on the basis of reproduction cost new minus depreciation and in following a hybrid sound value norm as to the revenue vehicles and other personalty items. But while those Justices may entertain reservations as to the amounts of the separate valuations in such categories, they believe that the over-all awards are fair and justified under the general principles applied by Special Term, with which, as we have stated, we are in accord.
As the foregoing indicates, we are not persuaded by claimants' contention that they are entitled, in addition to the all-embracing liberal awards made by Special Term, to separate allowances for what they denominate "going concern assets" — such as the establishment of coach routes, operating schedules, operating systems records and procedures, training of personnel, etc. In avowedly bottoming its award on the premise that claimants' properties must be evaluated as properties "in use," Special Term made ample provision for intangibles of such nature, although without specific itemization. To adopt the language of Mr. Justice Cakdozo in Columbus Gas Co. v. Comm. (292 U. S. 398, 411), they were reflected " in the appraisal of the physical assets as part of an assembled whole." (Cf. Denver Stock Yard Co. v. United States, 304 U. S. 470, 479; Matter of Yonkers R. R. Co. v. Maltbie, 251 App. Div. 204, 209; 2 Orgel, Valuation under Eminent Domain [2d ed.], pp. 138-140.) The break-up or " bare bones " value of the physical assets, except perhaps for the real estate, would have been greatly less than the amount fixed by Special Term. Had claimants voluntarily discontinued operations and sought to sell their real estate and personalty, they would have been fortunate to realize the amount which the city on its cross appeals asserts should have been awarded — namely, two thirds of the award. A study of the record convinces us that Special Term compensated claimants very generously for all systems, programs, procedures, records, etc., established and maintained over a period of years, and important to the continuity of the operation of the bus lines.
At the same time, we must add, the utterly fantastic figures sought by claimants • for "going concern assets" are so incredibly exaggerated that they amount to no evidence at all, and in effect resulted in a failure of proof. For that reason, and also because at best the increments for such intangibles would be quite moderate, we do not believe, even if Special Term had not made provision for them in its awards, that claimants should be given the opportunity to reopen the proceeding and introduce additional proof in this regard.
After weighing all factors, therefore, and notwithstanding the reservations some of us entertain as to the excessiveness of certain valuations, we reach the over-all conclusion that the amount fixed for each claimant at Special Term represents an equitable balance — and that the decrees under appeal accomplish the substantial justice to which the parties are entitled.
The decrees should be affirmed, without costs or disbursements to any party.