Court Opinion

ID: 5753017
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:00:28.791377+00
Date Added: 2024-06-11T08:41:20.236038
License: Public Domain

Eabiit, J.
(dissenting). I dissent in part and vote to remand this proceeding for further consideration in accordance with the views expressed herein.
That this proceeding encompasses much more than the mere acquisition of physical assets was recognized by the learned Judge below who stated (46 Misc 2d 14, 26): “In the case at bar, the claimants’ property is being continued in the public service. Therefore it must be valued as property in use; the city cannot urge that the property should be valued ‘ as a non-operating transit system.’ ” Indeed, not only were physical assets seized, but in fact a going business was taken. This condemnation proceeding was instituted for but one purpose — to maintain the services theretofore provided by the claimants. And that purpose was fulfilled. The buses did not stop, not even momentarily. Therefore, “ ‘ The claimant is entitled to compensation, not merely for so much land, so much brick, lumber, materials and machinery considered separately, but if they had been combined, adjusted, synchronized and perfected into an efficient functioning unit of property, then it must be paid for that unit, so combined, adjusted, synchronized and perfected, as it existed at the moment of appropriation. In that limited sense, it is entitled to the ‘ going value ’ — if such a term is permissible — of its physical property.’” (Banner Milling Co. v. State of New York, 240 N. Y. 533, 544.) It is well to state now that ‘ ‘ going value ’ ’ is separate and distinct from “ good will ” value.
As indicated, Special Term did decide to evaluate the properties condemned as “ property in use ” and the majority states that “We are in accord with the standard thus expressed.” I agree with that determination of Special Term and concur in the comment of the majority with respect thereto. However, Special Term, though enunciating the principle of compensating claimants for “ going value” did not, in my opinion, fully hew to such principle. While, in an attempt to reflect ‘ ‘ going value ’ ’, the epurt appraised the *469real property, buses and other personal property on the basis of a depreciated reproduction cost rather than a “ break-up ” market value, to my mind that does not fully reflect “ going value ”. And I see no reason why the valuation should be so limited. The city’s only expert witness on the subject of going . value — Mr. Edward A. Roberts- — ■ authored a book entitled “Pair Value, doing Value, et al. of a Bus Utility.” In this work he clearly indicates that giving “reproduction cost new less depreciation ” does not constitute compensation for “ going value He calls such compensation an award for merely the “bare bones value of a business property”. I accept and agree with that statement of the city’s expert.
It should be noted that Mr. Roberts did not refer to “ breakup ” value as being “bare bones” value. He was referring to value arrived at through the “ reproduction costs new less depreciation” method as being “bare bones” value. And that is all that Special Term gave. And that is exactly what the city’s expert said does not constitute going value.
In what manner then should claimants have been compensated to reflect such ‘ ‘ going value ”? I believe that claimants must be compensated for everything of value taken without which continuity of service could not have been maintained. Special Term did not award claimants- such compensation. And the chief reason for my dissent is because it failed to do so. Some of the items of value taken which were necessary for the continued operation of the buses — call them tangibles or intangibles as you will — for which claimants were not compensated are: coach routes, operating systems, operating records, systems and procedures, trained personnel and layout of bus garages and shops. Nor may the city now be heard to assert that these items were not necessary to maintain continuity of service. The city did in fact condemn these items and, moreover, is making use of them. If it was of the view that these items were not necessary for the operation of the property why were they -seized ? And inasmuch as they were seized why should not claimants be compensated for them?
I agree with the majority that perhaps the value placed by claimants on these uncompensated properties was much too high, but that is no reason to deny them any compensation at all. However, inasmuch as the city failed to introduce evidence of the value of these properties, I would remand this proceeding to determine a fair amount to be fixed therefor.
However, it is urged that compensation for those additional items of value, só necessary for the uninterrupted and con-*470tinned operation of the bus line, may not be given because it is claimed that the operation of the buses has not been a profitable one and that it is not capable of being so operated. Indeed, it has been urged that .even “going value” in the limited sense adopted by Special Term may not be given for the same reason. The majority states that -Special Term’s, finding of unprofitable operation “ has full support in the evidence ”, I cannot agree with the majority in that respect. On the contrary, it has been established that these lines can be operated profitably. It would be unfair to judge the financial potential by merely considering one or even a few years of its operation rather than its over-all financial history of profitable operation.
And, even if a-finding could be made that the operation was an unprofitable one, without a potential for profit, the city should be precluded from resting on such finding. It should not be heard to urge that full compensation should not be given for value taken because the operation is not a profitable one. It was the city that controlled the earnings of the claimants. Had the city by design depressed the earnings in order to seize the property at less than full 1 ‘ going value ’ ’ we certainly would not permit it to accomplish such purpose. It makes little difference if we allow the city to get the benefit of such depressed earnings merely because it was not done with that design. - For it was the' city and the city alone that kept these earnings depressed. So far as the claimants are concerned the result is the same. In the circumstances, and considering the city’s control of claimants’ income, the claimants should not at the condemnor’s instance be penalized for results created by the failure or the refusal of the condemnor to allow a rate that would permit of a reasonable operating profit.
Of course, this is not a rate-fixing proceeding, and I do not propose that we try to arrive at “ good will” value — as distinguished from “ going concern” value — by first fixing a reasonable rate and then capitalizing the net income that would have been earned had such rate been fixed. Perhaps that should be done. The city certainly had the right — whether acting fairly or not — -to refuse to increase the rate of fare to a point where it becomes a reasonable one. However, it should not now be permitted to make capital of that refusal. I might add that there is no controversy at all over the fact that the city recognized that claimants were not receiving sufficient income to fairly compensate for the cost of operation. Indeed, the city tried to assist in that respect. Through no fault of the *471claimants that assistance proved ineffective, but it does not detract in the slightest from the city’s acknowledgment that increased income was justifiable. In the light of the foregoing, I would say it would be improper to deny these claimants what would be justly due them had they operated at a rate "which would have enabled them to earn a fair and reasonable profit.
I need not, in view of the fact that this is a minority opinion, consider in depth claimants’ contention that they are entitled to an award to cover their pension commitments. It may well be that such commitments are to pay for a “ thing of value ” of which the city is the beneficiary, having taken over not only the properties but the personnel as well.
Nor shall I discuss the valuation placed on the real or personal property, with the exception that I must observe that there is no support for the deduction of a sum in excess of $1,000,000 for what was termed functional obsolescence over and above a sum for depreciation. Of course, there is a distinction between the two, and in proper circumstances there could be a deduction for both. But I do not think that the evidence supports the propriety of a functional obsolescence deduction. Here, unlike the situation in the Maxwell case (15 A D 2d 153), full use was being made of the real properties by the claimants.
In the decision supporting its tentative decree, Special Term stated that it “ did not consider [functional obsolescence] as a separate element of valuation.” Not having so considered it, I fail to see how separate deductions should have been made for it. In any event the court did say in its decision that “It is true that there may be some duplication between the two ’ ’ i.e., depreciation and functional obsolescence. There should be some evidence upon which to base a finding of depreciation as distinguished from functional obsolescence, if indeed there by any, inasmuch as the award makes a separate deduction for each.
Accordingly, I think this proceeding should be remanded for further consideration and, if necessary, for the taking of further testimony in accordance with the views hereinabove expressed.
Botein, P. J., Várente, Stevens and Eager, JJ., concur in Per Curiam opinion; Rabin, J., dissents in opinion.
Decrees so far as appealed from affirmed, without costs and without disbursements.