Court Opinion

ID: 5761672
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:15:36.783104+00
Date Added: 2024-06-11T08:41:34.215137
License: Public Domain

Steuer, J. (dissenting in part).
I agree with the majority in affirming Trial Term’s award for Damage Parcels 32 and 56. As to the other parcels, I cannot agree.
Damage Parcel 29. The property was a gas station. All parties agree that the proper method of appraisal was by capitalization of income. At the time of taking, July 1, 1964, the property was under lease to So cony Mobil Oil Co. The lease was for 15 years at an annual rental of $13,500, beginning in 1955, with options for renewal for two additional five-year terms. The evidence is undisputed that the tenant found this lease unprofitable and in 1962 subleased the property to an operator for three years at $10,200 for the first year and with successive increases of $300 for each of the succeeding years. In the last year the rent was $10,800.
The court found that the reasonable rental value was $13,500, the expenses $2,700, leaving a net of $10,800 which, capitalized at 8%, is $135,000. Except for the capitalization rate, I can find no justification for the figures adopted.
It is elementary that, in determining value by the capitalization method, the income figure is the reasonable rental value of the property rather than the actual rental, though the latter is very often a potent factor in arriving at the former. Here, the experience of the property shows that, for some years *813before the taking, an experienced tenant could not operate the property at the rental stipulated in the lease. Not only does the evidence of the sublease appear but the uncontradicted evidence shows a steady decline in the amount of gasoline sold starting in 1959, and amounting in 1964 to 12%. The real criterion of value would, accordingly, be the sublease. As to the expenses, even the claimant admitted a higher expense figure, namely, $2,969. Taking a rounded figure of $7,900 for the net return and using the same capitalization rate, the result would be $98,750. This, however, would not provide any benefit to the fee owner for the benefit of the lease which he actually had (Matter of Port of N. Y. Auth., 2 N Y 2d 296). The accepted method of calculating this factor is by use of the Inwood Table. For the balance of the lease period this would amount to $15,074, which, added to the' capitalized income, would give a rounded value of $114,000.
Claimant’s brief does not put any of the above in serious dispute. No real effort is made to sustain Trial Term’s findings. Instead, it is argued that the award can be sustained by two adjustments of the figures here employed. The first is by calculating the increment on the basis of the extension options in the lease. This would be proper if there were a reasonable expectation that the options would be exercised. The expectation that a tenant who finds a lease increasingly unprofitable and has sought to cut his losses will renew is not reasonable. The second is adding a gallonage factor. The record shows that gallonage is a sum paid by the gasoline company-supplying the station, based on the amount of gasoline sold, and really represents a brokerage or finder’s fee to the person who procures the outlet. It may be paid to the operator as a rebate or to the fee owner or an intermediate tenant,, as the ease may be. It also shows that where the supplying gas company is itself the tenant, no gallonage is paid.
Damage Parcels 20, 22, 24, 25 and 26. The property was an iron works. Only fixtures are involved in this appeal. The parties stipulated as to the value of the items in place and after severance. The only issue therefore is whether the items are in fact fixtures to the real estate. Twenty-one sizeable items are involved, and a number of small items, lumped together as miscellaneous. The court was largely influenced in finding all these items to be fixtures by two considerations: first, that the total value of the items in place was $47,722 and, when removed from the building, was $9,350; second, that many of these items were heavy machines resting on or fastened to concrete bases, and removal would involve some damage to the building and possibly to the machine.
Fixtures are properly accretions to the real estate which, in eminent domain, are compensated for apart from the realty itself for convenience in appraisal. This is because left in situ they would not add to the rental value and, in fact, might even detract from it.
The real test of what constitutes a fixture, easy to state but often difficult to apply, is whether the article is installed in or ón the premises with the intention that it become a permanent part of the realty (McRea v. Central Nat. Bank of Troy, 66 N. Y. 489). It should be pointed out, however, that the fact that the article may have been put in the premises with the intent that it stay there indefinitely, with no thought of its being moved, is not the test. A manufacturer equipping a plant generally intends that the machinery which he installs will remain there indefinitely, but that does not make the machinery a fixture. Nor does physical affixation by bolting or the like (Matter of City of New York [Whitlock Ave.], 278 N. Y. 276). It would, of course, be otherwise if removal could only be effected by removal of a wall or some comparable disturbance of the building. If a building is built *814around a machine so that it really is only the housing, as in some power plants, the machine is not a fixture, it is the improvement to the realty itself and, hence, compensable. Also compensable is machinery which operates the building, such as that which provides power for elevators, light, or the like — though such is usually, though not invariably, compensated in the award for the improvement.
Nor is difference between the value of the article installed and its value when removed a determining factor. Many machines, though regular articles of commerce, do not move with frequency in the market, and transactions are limited to those with a specialized interest. Such articles cannot be readily sold except at a substantial sacrifice. Nor can they be moved without considerable expense. These factors may reduce their detached value in the hands of the claimant to practically nothing and, at the same time, they could have considerable value in the hands of a dealer who is equipped to seek out a buyer and is prepared to store the machine until he does.
A careful reading of the record discloses that some of the items found as fixtures can be so described while others, consisting almost wholly of commercial machines used in the claimant’s business, cannot. Of the award of $47,722, items totalling $25,627 fall in the latter category, and this amount should be deducted and the award should be reduced to $22,095.
An award was also made for two additional items, of altogether different character. These were installed in the space in the building used as an office and consisted of wood paneling for walls and what is called “ decking,” being a false ceiling installed to improve the acoustics. Such addenda to the structure do become part of the improvement but their value lies in what they add to the rental value of the premises (see Matter of City of New York [Maxwell], 15 A D 2d 153, 170 et seq.). However, the claimant points out that the court did not award any extra value for these features in fixing the value of the building and, consequently, was correct in compensating for them as fixtures. This does not follow. If they did not add to the rental value, they were valueless (Matter of City of New York [Maxwell], supra).
The decree should be modified accordingly.
Eager, J. P., Capozzoli, Tilzer and Staley, Jr., JJ., concur in memorandum by the court; Steuer, J., dissents in part in opinion.
Second separate and partial final decree, insofar as it is appealed from, affirmed, with $50 costs and disbursements to each of the claimants-respondents, etc.