Court Opinion

ID: 5760470
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:13:40.309896+00
Date Added: 2024-06-11T08:41:32.397205
License: Public Domain

Rabin, J. (dissenting in part).
The petitioner, the Port Authority Trans-Hudson Corporation (hereinafter referred to as PATH) took, through condemnation, an active going essential transit facility for continued use as such and yet the majority of this court has come to the conclusion that the claimant, Hudson Rapid Tubes Corporation (hereinafter referred to as *55HRT), from whom such property was taken, may only get “ liquidation value ” which, in effect is salvage value, by way of compensation.
I dissent because I think there is no justification for such conclusion, and also because I believe that the amount awarded does not fulfiill the constitutional requirement of just compensation for what was taken.
That the property taken was and is an active going transit facility is obvious. It was condemned for continued use as such and is now being so operated. That it is an essential facility can hardly be disputed. The Legislatures of the State of New York and the State of New Jersey, in authorizing the acquisition of this railroad found, among other things,
“ (2) that in order to preserve the northern New Jersey-New York metropolitan area from economic deterioration, adequate facilities for the transportation of commuters must be provided, preserved and maintained and that rail services are and will remain of extreme importance to commuter travel;
“ (3) that the Hudson and Manhattan railroad [the property condemned] ,is an essential railroad facility serving the northern New Jersey-New York metropolitan area”. (L. 1961, ch. 312, § 1)
Special Term properly found that in 1961, the year just prior to the taking, the railroad was responsible for the transportation during peak hours of 24% of all commuter traffic between New Jersey and New York. There is nothing in the record to indicate how that commuter traffic would or could be taken care of if this railroad were liquidated. Moreover, there is nothing in the record to indicate that there is any present substitute for the essential service performed by the Hudson tubes, or that any substitute for the tubes is being planned for use in the foreseeable future. Regardless of what might be said about the declining use of the facility, and regardless of the extremely questionable predictions with respect to the declining population of the counties served by this railroad, at the time it was taken it was an essential facility and it is now. There is no proof to the contrary, and the legislative authorization to condemn the tubes is based upon such a premise.
I might also add that the tubes’ essentiality is indicated by its continued use by PATH. I would assume that if it were not an essential facility, PATH would not continue to maintain it if, as we are told, it could not be maintained on a profitable basis.
Why then should the condemnee be given only liquidation value for this most essential and active going transit facility?
*56The majority refers to the testimony of the expert for PATH as follows: “ There was testimony by PATH’S expert that the highest and best use of the railroad as of September 1, 1962, was to liquidate the property. His opinion was based upon the conclusion that continued operation as a private enterprise would result in continued monetary loss.”
I would not want to believe that the majority, or even the condemnor, agrees with the conclusion of that expert that the “ highest and best use of the railroad as of September 1, 1962, was to liquidate the property.” The continued use by the condemnor of this property as a railroad demonstrates to the contrary.
However, it is urged that liquidation, or scrap value, is the proper standard to apply because the condemnee was operating, not at a profit, but rather at a loss, and that the railroad could not be operated by it at a profit in the foreseeable future. Accordingly, it is reasoned that inasmuch as, eventually, the condemnee must lose its property, it has lost nothing but scrap value by the taking. Special Term rejected this position and I believe rightly so. To begin with, at the time of condemnation the property was not yet lost by the condemnee. At that time it was still operating the railroad as" a going concern. It is as of the time of condemnation that we determine the value. At that time it was a useful and valuable property and giving merely liquidation value is not justified by saying that the company might lose it sometime in the future. PATH took an operating and running railroad and not scrap. What it took is what the condemnee lost, and the condemnee should be paid for an operating railroad and not for scrap.
We are told that PATH had no duty to take over this railroad. That is quite immaterial. Whether it took it because of duty or choice, it must pay for yrhat it took. If the taking was simply by choice, it seems that it did so for good and valuable consideration, i.e., the right to condemn 13 square blocks of valuable property in the City of New York.
I do not think that the argument advanced with respect of the failure of the condemnee "to operate on a profitable basis is controlling in the circumstances. We must be realistic. We must accept what is generally known to be the fact, that rapid transit facilities in the main cannot be operated profitably for a fare that the Authorities would permit the operator to charge. We must realize that there is now general acceptance of the fact that the furnishing of transit facilities is a matter of governmental concern and can almost be deemed to be a gov*57ernmental function. The very Act that enabled PATH to condemn this property is a recognition of that fact. It is also generally recognized that the operation of these mass rapid transit facilities can only be continued by way of public subsidies. The court could take judicial notice that the Staten Island Ferry cannot be operated profitably on a 5-cent fare, but is subsidized by the City of New York. The Fifth Avenue Coach Company received subsidies; the subway system and the present city bus system cannot operate unless subsidies are given; the State stepped in to make possible the continued operation of the Long Island Railroad and the States involved are deeply concerned with the continued operation of the New Haven Railroad — tax assistance and other subsidies being furnished to assure continued operation of all of the above.
In this case it seems that not only was no subsidy of any consequence granted to the condemnee, but in effect the condemnee has been subsidizing the public in the performance of what is recognized as a governmental function. And now the Government, as represented by PATH, seeks to penalize this company for having done so. That is inequitable.
Nor do I think that the price at which the stock is selling at the market is here controlling, for such price it not necessarily equated with value of physical assets — especially so in this case where there are a multitude of factors that affect stock value. The law calls for the payment of just compensation for the property taken from the condemnee without reference to how the stockholders are affected.
What would be fair compensation in the circumstances of this easel The Port Authority takes the position that in condemnation, the condemnee can only receive market value of the property taken, i.e., what a willing purchaser would pay to a willing seller. Of course, that standard does not apply in this case because there is no market for the tubes; there is no known willing purchaser. I agree with the majority that we cannot apply this standard.
I likewise agree with the majority that reproduction value less depreciation is not the proper standard to be applied. We must come to that conclusion inasmuch as, while the tubes at present are a necessary transportation facility, it is clear that they would not presently be reproduced if new transportation were to be provided. That is not to say that they have outlived their usefulness, as is best proven by the fact that they were taken over for continued use and will be continued in use for the foreseeable future.
*58Perhaps it would be proper to limit the award to what substitute facilities would now cost. However, there is nothing in the record to determine what this would be, nor is there anything to indicate whether it would be practical to construct substitute facilities. On this point, it should be noted that the Legislature has already determined that the present facility be continued. Indeed, it was to effectuate that determination that PATH was given the power to condemn.
The suggested alternative to these standards is liquidation or scrap value.' I think that such standard would not meet the constitutional requirement of just compensation for the reasons given above. Moreover, liquidation value is not the proper standard because PATH took a valuable railroad property that was not to be scrapped and cannot be scrapped for the simple reason that it is an essential facility which must be maintained for the convenience of the public.
What then would be a fair standard to use? It seems to me that the most equitable and just standard of compensation would be to pay the condemnee its cost of the facilities taken. That is the minimum that it lost by the taking. That cost, as appears from the record, is $61,874,440.01. In allowing that sum I do not give the condemnee the benefit of the vastly increased worth of these properties if we were to consider the increased cost trend. Present day reproduction cost minus depreciation would be seven times the original cost. It should be noted, that included in this figure is the original cost of passenger cars. No .reduction should be made of this item. Recently, $1,700,000 was expended for new car's which, together with the -other cars on hand at the time of condemnation, should easily reach the amount originally expended. • It certainly would if we were to apply present day values.
In addition to payment of the physical properties, I believe the condemnee should receive a reasonable amount to represent going concern value because the condemnor did take and the condemnee did lose a going railroad. Physical properties in and of itself do not make a railroad (see Matter of City of New York [5th Ave. Coach Lines], 46 Misc 2d 14, affd. 23 A D 2d 463, mod. 18 N Y 2d 212). Special Term did add 10% of its valuation to cover going concern value but I think the matter should be sent back for additional testimony to either support that figure of 10% or for the substitution of some other amount as may be indicated by the testimony.
I would allow interest at 6% with respect to that portion of the property located in New Jersey. New York limits interest at 4% in a proceeding of this kind, but there is no such limitation in *59New Jersey. In the circumstances, and considering the present day money market, I think 6% would he more appropriate and more equitable than 4%.
In arriving at my conclusion I have accepted and depended upon, to a large extent, the excellent and carefully considered opinion of Special Term. I concur wholeheartedly in the findings made. They are thoroughly supported by the evidence presented. I appreciate the court’s statement that “ [n]o one can hope to find here the factors necessary for reaching some degree of mathematical exactitude in the ascertainment of just compensation.” Nevertheless, I do believe that the higher amount representing the original cost furnishes a more sound basis for arriving at an equitable and just result.
Accordingly, I would modify the. final decree to award to the petitioner the sum of $61,874,440.01, together with interest at the rate of 4% for that portion of the property located in New York, and 6% for the portion located in New Jersey. In addition, I would remand the case for further testimony to determine and award to the petitioner an amount representing going concern value.