Opinion
FSTCV145014223
06-14-2017
Commissioner of Transportation v. 323 Main Avenue, LLC
UNPUBLISHED OPINION
MEMORANDUM OF DECISION AFTER TRIAL
TAGGART D. ADAMS, JUDGE
I. Background
This case arose on March 20, 2014 when the Connecticut Department of Transportation (DOT) filed a Notice of Condemnation and Assessment of Damages in Superior Court announcing that, pursuant to General Statutes § 13a-73, the State of Connecticut was acquiring two easements over property owned by 323 Main Avenue LLC (323 Main) in Norwalk, Connecticut and assessed damages payable to the owner in the amount of $46,636. Dkt. Entry 100.30; Ex. 1 (same). 323 Main filed an application for reassessment of damages authorized by General Statutes § 13a-76 claiming that DOT's assessment was inadequate to provide just compensation. Dkt. Entries 103.00, 105.00.
The trial of this matter occurred over two days, January 18 and 26, 2017. Subsequently, the court and counsel visited the site at 323 Main Avenue, Norwalk on January 30. Post-trial briefs on behalf of the parties were received on March 23 and April 12, 2017.
II. Facts
According to the defendants, and generally confirmed by the exhibits in the court record, the subject property consists of 16, 117 square feet (0.37 acres) located along 83.61 feet of the west side of Main Avenue in Norwalk, bounded on the north side by 191.80 feet of Perry Avenue and on the west side by State of Connecticut property where the Norwalk to Danbury railroad line is located. See Exhibit T, p. 15 and Exhibit 3, p. 15. There is an entrance to the property for vehicles and pedestrians from Main Avenue through a 45-foot mechanical gate. 323 Main acquired the subject property in 2010 from Julius J. Balasa, Sr., who had operated a business there for over half a century known as Parkway Auto Body. Ex. I. 323 Main has four members: Julius Balasa, Sr., his sons Julius Balasa, Jr. and Jeffrey Balasa and Edna Balasa. Ex. J. The business of Parkway Auto Body also became an LLC in 2010 with same four members. Ex. K.
DOT acquired two easements: (1) a " defined easement for highway purposes and appurtances" consisting of 626 square feet of property owned by 323 Main immediately to the south of Perry Avenue near or at its junction with Main Avenue in Norwalk; and (2) a temporary work area easement covering approximately 2329 square feet to construct a retaining wall and allow staging and storage of equipment in connection with repair of a railroad bridge on Perry Avenue for the Norwalk-Danbury railroad line. Attached to the Notice of Assessment was a map delineating the location of the easements. Ex. 2. The defined easement area is a sliver of property running west from Main Street along the southern right-of-way of Perry Avenue, gradually widening to about seven feet at a point about 160 feet west of Main Avenue, and more abruptly widening to nineteen feet at the westerly end of 323 Main's property. The proposed temporary work area easement covered approximately the northern seventeen feet of 323 Main's property, a significant portion of 323 Main's parking area. Exhs. 2 and D. There was no stated duration of the " temporary" easement, except that it was to terminate " upon completion" of a retaining wall and installation of a " metal beam rail." Ex. 1; Ex. 2. The evidence at trial showed that the work on the Perry Avenue bridge took place between September and December 2016, and the fence atop a retaining wall on the north side of the 323 Main's property was finished in January of this year. Tr. I, 7, 54.
References to " Tr. Followed by a Roman Numeral are to the trial transcript; " Tr. 1" refers to the January 18, 2017 transcript and " Tr. II" to that of January 26. The arabic numeral denotes the page or pages referenced.
The business operated by Parkway Auto Body (Parkway) at the subject property involves automobile body repair, vehicle towing and storage. Parkway is licensed by the state to provide towing services from the Merritt Parkway, Interstate 95 and other major highways as well as providing such services for Norwalk, Westport and other area towns. The subject site has an auto repair building of 3062 square feet, containing a work area, spray painting facilities, frame equipment and a small office. Outside there is a hydraulic lift, two large storage containers, and a parking area for towed and damaged vehicles, all surrounded by protective fencing. Ex. T, p. 15; Tr. I, 20-21. A small portion of land that was inside the 323 Main fence along Perry Avenue before the taking on March 20, 2014 had historically been used for Parkway's towing and repair business, but is now recognized as actually part of the municipal right-of-way for Perry Avenue. Tr. I, 60-61; Ex. T, p. 15. This area amounts to a little over 1, 000 square feet of land.
Exhibit 7 best delineates the different areas and structures at the north side of the subject property. A solid redline denotes boundaries of 323 Main Avenue; the green area denotes the temporary work area easement; the pink area denotes the defined easement and the orange colored area is land once inside Parkway's fence, but not actually part of 323 Main's property.
There are a number of photographs of the subject property in the court record that are helpful to understand some of the issues in this case. Exhibits N1 through N17 were taken in January 2014 by either Julius Balasa, Jr., or Jeffrey Balasa. N1, N6-N8 and N12 show the building and parking lot on the premises as well as some of the equipment used for towing. Exhibits O-1 and O-5 show a red storage container that had to be relocated because of the taking of the defined easement. Tr. I, 36. Exhibit P-2 depicts a Mack Truck owned by Parkway to move the container around the subject property, and Exhibit P-4 shows the container on the Mack Truck. These pictures were taken in May 2014. Exhibit Q contains photographs taken in September 2016 when the DOT work on Perry Avenue had commenced. Tr. I, 39. Exhibits Q1-Q6 show the reduction in the 323 Main parking area as a result of the temporary work easement; the dirt area and temporary fencing show the extent of the temporary easement. Exhibits Q-4, Q-5 and Q-6 are photographs taken facing south from Perry Avenue. Exhibits R-1 through R-19 are photographs taken recently of the new retaining wall and fence constructed by DOT along the north side of 323 Main's property facing Perry Avenue. Tr. I, 48-50.
There was credible testimony that while the temporary easement was in effect, Parkway was required to store a number of vehicles normally parked on site at 323 Main property at another location about a mile away on Glover Avenue, also in Norwalk. Tr. I, 42.
III. Discussion
" The Property of no person shall be taken for public use, without just compensation therefore." Connecticut Constitution Art. I, § 11; Branford v. Santa Barbara, 294 Conn. 785, 795, 988 A.2d 209 (2010). " [What] constitutes just compensation is the market value of the condemned property when put to its highest and best use at the time of the taking." Branford, supra, [quoting Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, 256 Conn. 813, 828, 776 A.2d 1068 (2001)].
Generally speaking, market value is the price that would in all probability--the probability being based on the evidence in the case -result from fair negotiations where the seller is willing to sell and the buyer desires to buy.Id., [quoting Budney v. Ives, 156 Conn. 83, 88, 239 A.2d 482 (1968)]. Highest and best use is a concept employed by real estate appraisers to determine which use of the property will produce the highest market value, the greatest financial return, or the most profit. Northeast Ct. Economic Alliance, Inc. v. ATC Partnership, supra, 256 Conn. 829.
The Connecticut Supreme Court has recognized that in condemnation cases the Superior Court or judge trial referee is " more than just a trier of fact or an arbiter" of different professional opinions; he is not limited to the value placed on the property by the taking authority, and based on the required " independent determination of value and fair compensation" the court or referee may arrive at a higher or lower figure. Birnbaum v. Ives, 163 Conn. 12, 21-22, 301 A.2d 262 (1972).
The evidence at trial included the testimony of Jeffrey and Julius Balasa, Jr. about the business of Parkway Auto Body and its requirements, the property at issue, and the effect of the easements on their business. Among other things, there was testimony that the defined easement and the temporary easement reduced parking spaces and storage area available on the subject property, and the difficulties and costs associated with the necessity to park some vehicles off-site at a location about a mile away on Glover Avenue. Tr. I, 35-36, 97-98. The Connecticut Department of Motor Vehicles has issued regulations concerning the release of towed vehicles and emergency access to stored vehicles. The regulations required detailed information about the type of protections afforded the towed vehicles by Parkway and other licensed towing operations. See Regs., Conn. State Agencies § 14-63-35; Ex. L. These types of protections had to be installed by Parkway when it began to store vehicles at the Glover Avenue site. There was additional testimony about deficiencies of the fence on top of the new retaining wall along the Perry Avenue property line, until barbed wire was added, a dip in the parking area where it was re-paved after the end of the temporary easement, in a manner that made it difficult to move stored vehicles. Tr. I, 59-60. However, there was evidence that DOT compensated 323 Main for some or all of these expenses.
The evidence at trial also included testimony and written reports by appraisers retained by both parties. DOT's appraiser, Stephen MacCormack, has been a commercial real estate appraiser for eighteen years and has acted as an expert witness for the State of Connecticut, as well as private and municipal clients. His report prepared on June 2, 2014, after the taking, assessed the damages to 323 Main from the condemnation as of March 20, 2014 at $41,477. Ex. 3; Tr. II, 11-12, 19-20. This amount consisted of $26,000 associated with the permanent taking of 626 square feet of land for the defined easement and $15,477 associated with the temporary easement. Ex. 3, p. 5. MacCormack used the comparable sales approach in arriving at 323 Main's property value and determined that the " highest and best use" of the subject property was its current use as an autobody shop. Ex. 3, pp. 17, 19; Tr. II, 33. The three comparable sales were located in Norwalk respectively at (1) 180 Main Avenue (a little north of the subject property) (2) 185 East Avenue and (3) 57 Van Zant Street. Making adjustments to increase comparability, MacCormack appraised a total land and improvements value of the subject property to be $965,000 as of the date of condemnation, March 20, 2014. Ex. 3, pp. 32, 34.
MacCormack also valued the property after the condemnation at $939,000, a downward adjustment of $26,000 or about 2.7%, due to the loss of 626 square feet to the defined easement. Id., 37, 39. The court notes that MacCormack thought the comparable sales data was " below average" due to the limited number of commercial building sales in the area. Id., 39. He also commented that the temporary work easement would cause some parking on the subject property to be " relocated" and considered this in calculating the damages. Id., 34. It is not readily apparent to the court how, and to what extent, this was reflected in MacCormack's valuation. In fact, at trial, MacCormack testified that during the construction period there was " no" impact on Parkway's ability to continue its business. Tr. II, 65. MacCormack appraised the damages arising from the temporary easement at $15,477. This calculation was based on the assumption that the temporary easement would last 18 months. Ex. 3, 40.
Also in evidence at the trial was Exhibit Y which MacCormack testified was his " first appraisal" of condemnation damages in this case as of July 15, 2013 and completed August 1, 2013. Tr. II 70-71. The difference between the two MacCormack appraisals are found at pages 40 of Exhibits 3 and Y where the temporary taking is valued at $15,477 in the former and $20,636 in the latter, with the difference being in Exhibit Y MacCormack used a period of two years to arrive at a compensation amount. Id., 74. When asked what the compensatory loss would be if a three year was used, the answer was $32,000. Id., 74-76.
Michael Gold, an experienced appraiser, testified for 323 Main and submitted a report which concluded that the damages to 323 Main arising from the condemnation of the defined easement area were $48,000 and from the temporary work area easement were $84,000. Exhibit T, p. 29; Tr. I, 120. Gold did not use the comparable sales approach, but instead used the cost approach to valuing the effect of the defined easement on the subject property, stating the comparable sales approach was " difficult" to develop for automotive use properties, where the building is not the primary value element. Ex. T, p. 19; (difficult to find comparable sales). Gold did use comparable sales for land evaluation purposes. Gold agreed with MacCormack that auto repair use was the highest and best use of the property. Id., 18. Unlike MacCormack, Gold saw no residual value in 323 Main's retaining actual ownership of that portion of the property affected by the defined easement. Gold considered the defined easement as a full taking " because it effectively encompasses the entire bundle of rights with respect to property ownership with any residual to the owner being more of a liability than a benefit" and estimated damages on that basis. Id., 16; Tr. 1, 123-24 (" In fact, I believe it's a liability that the property owner retains title . . . because the only thing remaining for the property owner is liability.") see also Tr. I, 148. In valuing the loss arising from the temporary easement, Gold used the rental value of the affected property. Ex. T., 28; Tr. I, 128-29. This analysis arrived at a figure of $84,000 for a three-year period, although the actual temporary taking lasted less than a year. Gold was of the opinion that the property was " significantly impacted" for its auto repair use by the temporary taking of 2329 square feet and concluded that the rental value of $50 per square foot should be reduced by 25% to $37.50 per square foot, and computed the reduction in value of the subject property to be $84,000. According to Gold, the temporary easement caused consequential damages to the property and had a far more significant impact than the defined easement because it reduced the ability to maneuver large vehicles; he further testified the temporary easement had a " very severe" impact on the utility of the 323 Main property. Tr. I, 125-26, 150.
The parties have taken seriously different approaches in contending what is just compensation with respect to the role played by the easements' effects on the business of Parkway. 323 Main contends that, " [i]n addition to just compensation for the reduction in the market value of the real of the [subject property] there are other consequential damages to be considered . . . in a partial taking situation, there are other items to be considered in addition to the market value of the real estate, before and after." Def. Memorandum (Dkt. Entry 121.00) pp. 11-12. 323 Main cite to Alemany v. Commissioner of Transportation, 215 Conn. 437, 444-45, 576 A.2d 503 (1990) (a case in which the landowner-condemnee was represented by 323 Main's present counsel) which held that:
We have consistently departed from the fair market value measure of damages in cases of partial takings. When only a portion of a party's property is taken, the landowner is entitled not only to compensation for the value of the property taken, but also to severance damages for the diminution in the value of the landowner's remaining property that the severance of a portion of the property causes.
* * *
To ensure that severance damages are included in the trial court's assessment, damages should be calculated by the 'before and after rule, ' under which [t]he proper measure of damages is the difference between the market value of 'the whole tract' as it lay before the taking and the market value of what remained of it thereafter.'
Contrary to the apparent position of 323 Main, this court finds the language of Alemany to be fully supportive of the before and after valuation approach. 323 Main also to Bowen v. Ives, 171 Conn. 231, 238, 368 A.2d 82 (1976), which held that the use of the land taken (i.e. construction thereon) might lower the value of the land remaining with the landowner.
Essentially 323 Main contends that the damage to Parkway's business activities consisting of (1) loss of parking area for damaged and towed vehicles, and (2) the inconvenience of working in an area diminished not only by the temporary work easement but by the defined easement as well which, at its westerly end, cuts sharply into the area that had formerly been occupied by a storage trailer. 323 Main recognizes that DOT has already compensated 323 Main for certain costs relating to the relocation of parking vehicles to the Glover Avenue site. The record shows that DOT paid at least $48,000 to reimburse expenses of this nature. Ex. 5. 323 Main also concedes that there is a general rule recognized by the Connecticut Supreme Court that loss of business conducted on a condemned site is not compensable, citing Wronowski v. Redevelopment Agency of New London, 180 Conn. 579, 584-85, 430 A.2d 1284 (1980), but emphasizes the language in that case creating a significant exception to the general rule:
When real property is condemned the general rule is that nothing should be included in the award in the way of compensation for the loss of a business conducted thereon unless specifically authorized by statute; however, where an ongoing profitable business is conducted on the land, such a use should be considered if the use is a factor in establishing market value because a willing buyer might offer more for the property since such a business use would indicate the suitability of the location for a similar enterprise.In Seferi v. Ives, 155 Conn. 580, 583, 236 A.2d 83 (1967), the Connecticut Supreme Court held that the value of a business on the property should be taken into consideration if the business is a " factor" in establishing market value, i.e. the use of the property for that business enhances the property value. This position was reaffirmed in Commissioner of Transportation v. Rocky Mountain, LLC, 277 Conn. 696, 731, 894 A.2d 259 (2000).
In contrast DOT contends, correctly, that Parkway is not a party to this case and has no ownership interest in the condemned property, and therefore its interests are not compensable. DOT also notes that while counsel for 323 Main adds the name " Parkway Auto Body, LLC" to the caption of this case on all papers filed by 323 Main, there has been no appearance filed on behalf of Parkway.
The court finds this to be the proverbial tempest in a teapot. It seems undeniable that Parkway's business located on 323 Main's property enhances the value of that property and that conclusion is supported by both appraisers' findings that Parkway's business is the " highest and best" use of the property. Nevertheless, in condemnation cases it is the value of the property taken by the condemning authority that is at issue. That proposition is made clear by the language quote above in Alemany and Wronowski . If a business injury is suffered because of condemnation, that specific injury is not compensable. However, if the loss of land causes the remaining property to be less valuable than it was earlier when combined with the taken position, that is a compensable loss.
As set forth above, the court is to use its " independent determination of value and fair compensation." Like any other judicial determination this decision must be based on the evidence presented and in the record, and the evidence in this case includes facts and opinions delivered by professional and experienced appraisers who differed in their valuation of the fair market value of the condemned property by a total of between $86,000 and $91,000.
The court finds the Gold appraisal more persuasive in several respects. By necessity, MacCormack's appraisal was based on information gathered before the date of condemnation--March 20, 2014. MacCormack's most thorough inspection of the subject property took place in October 2012, seventeen months prior to condemnation. The Gold appraisal was done almost nine months after condemnation, and therefore, had a greater ability to rely on actual information rather than predictions. Second, the court finds Gold's assessment of the value of 323 Main's continued legal ownership of the defined easement area as a detriment rather than a benefit to be more persuasive. Third, the Gold appraisal takes into account more appropriately the effect of the defined easement, especially the larger encroachment of that easement at its westerly end, that effectively eliminated the area used for at least one of Parkway's storage containers. Ex. T, p.16. Fourth, MacCormack used comparable sales in his analysis despite finding them below average in quality whereas Gold limited his reliance on such data because it was difficult to develop that information in this case. Fifth, the court finds the evidence in the record strongly supports Gold's conclusion that the temporary easement negatively impacted the value of the subject property and fails to support MacCormack's view that it had no impact on the business. Gold also noted, correctly in this court's view, that whereas MacCormack assessed damages for the temporary taking of an easement area on the basis of the rental value of that specific area, Gold opined that this approach did not take fully into account the " reduced . . . utility" of the entire 323 Main site resulting from a smaller maneuvering area. Id., 17.
Gold's valuation of the temporary easement area is based on a taking period of three years. His report observes that as of March 24, 2014 a two-year construction period for the Perry Avenue bridge project was envisioned. Later developments postponed the project and when it occurred its duration was far shorter. In fact, the bridge project, when it finally started in September 2016, lasted about three months with a final few items being completed in February 2017. Tr. I, 90. At trial, Gold testified that DOT had the right to do the work at any time after October 2014, and he was appraising the loss of 323 Main's rights as of that date. Therefore, he concluded his three-year projection was " fairly accurate." Tr. I, 127. The court finds, however, the three year period is not justified by the circumstances as known in 2014 or by subsequent developments. There is no evidence to support a hypothesis that the temporary easement area would be unavailable to 323 Main for a period of three years. Therefore, the court determines that a two-year period, such as employed by MacCormack, is more appropriate. On that basis, and using Gold's numbers from his report (Ex. T, p. 28) the court calculates the damages for the temporary taking at $56,000 (arrived at as follows: 15, 491 s.f. x $50 x 10% x 2 years = $154,910 less 13, 162 s.f. x $37.50 x 10% x 2 years = 98, 715 = $56,195).
IV Conclusion
Based on the discussion and considerations above, the court determines that the appropriate compensation payable to 324 Main should be:
1) $48,000 for the defined easement area.
2) $56,000 for the temporary easement area.
The court awards five percent interest per annum on the amount $57,364 that is the difference between this court's finding of $104,000 and the amount paid into court by DOT. That interest shall be calculated from March 20, 2014 to the date of this decision.
The court also awards to the defendant $5,000 as a reasonable appraisal fee pursuant to General Statutes § 13-76 and court costs pursuant to General Statutes § 13a-77.