Opinion
# 2011-032-032 Claim No. 110284
12-13-2011
SMILEY v. PALISADES INTERSTATE PARK COMMISSION and THE STATE OF NEW YORK
Synopsis
Case information
UID: 2011-032-032 Claimant(s): ALFRED BRENNAN SMILEY, ALFRED RUSSELL SMILEY, GREGORY WILLIAM SMILEY and BRIAN FREDERIC SMILEY Claimant short name: SMILEY Footnote (claimant name) : Defendant(s): PALISADES INTERSTATE PARK COMMISSION and THE STATE OF NEW YORK Footnote (defendant name) : Third-party claimant (s): Third-party defendant(s): Claim number(s): 110284 Motion number(s): Cross-motion number (s): Judge: JUDITH A. HARD Blatchly & Simonson, PC By: Jon A. Simonson, Esq. Claimant's attorney: Montgomery, Kolodny, Amatuzio & Dusbabek, LLP By: Kimberly A. Smiley, Esq. Hon. Eric T. Schneiderman, NYS Attorney General Defendant's attorney: By: J. Gardner Ryan, Assistant Attorney General, Of Counsel Third-party defendant's attorney: Signature date: December 13, 2011 City: Albany Comments: Official citation: Appellate results: See also (multicaptioned case) Decision
The underlying facts of this claim have been subject to litigation for nearly 20 years, the details of which are more fully set forth in the Court's decision on liability (Smiley v State of New York & ano., UID # 2010-032-505, dated July 1, 2010).This decision addresses the damages attributable to defendants' breach of a 1999 Stipulation of Settlement and Discontinuance (Stipulation) (Exhibit 46). Under the Stipulation, claimants are entitled to the remainder of their 99-year leasehold interest in Wildmere Cottage (Wildmere), a 5,212 square foot house located within Lake Minnewaska State Park, including 24/7 free access to the park. This Court previously found defendants liable to claimants for breach of contract based upon the uninhabitable state of Wildmere due to defendants' failed efforts to install a safe, functional septic system and to provide electricity from November 17, 2002 to April 2006. The failure to provide these basic requirements for habitation, as required under the Stipulation, rendered Wildmere useless for such purpose. The issues presented herein are the size and cost of the septic system necessary to render Wildmere habitable, the replacement cost for a bluestone patio defendants demolished, and the amount of compensation to be paid by defendants for claimants' inability to live at Wildmere since 1999. For the reasons stated herein, the Court finds that defendants are liable to claimants in the amount of $582,714.23 with statutory interest. FACTS
This and other unreported decisions of the Court of Claims may be found on the Court's website at www.nyscourtofclaims.state.ny.us.
I. The Septic System
Roger Gjone, a professional engineer and expert in the design of septic systems, testified on behalf of claimants. Mr. Gjone designed a septic system for a nine bedroom house because under the 1999 Stipulation, the Smileys had the right to lease the entire Wildmere Cottage. The 1999 Stipulation ¶2 provides: "Defendants will let as an additional lease parcel, identified on Exhibit 5 attached hereto, the Defendants' portion of the Wildmere Cottage together with an area of land for Claimants to operate and maintain at their own expense a septic system to support Wildmere Cottage and its appurtenances..." The 1999 Stipulation ¶ 3 provides: "Defendants have partially constructed a septic system upon the Wildmere Parcel designed to be suitable for the private residential use of Wildmere Cottage as a four bedroom single family unit. Defendants will pay for the cost of completing the septic system in an amount not to exceed $7,000..." (Exhibit 46).
The State previously installed two septic systems which were inoperable. The $7,000.00 was an estimate based upon an expert's opinion that such amount would be required to fix the State's second attempt to install a septic system. It is the third attempt that is at issue in the instant action.
Mr. Gjone designed a new raised septic system that would exceed code requirements because of Wildmere's location and public heath concerns (T:24, 33, 47, 59). Each bedroom of the house requires a daily design flow of 110 gallons per day, so he designed a system with the capacity of 990 gallons per day (T:49-50). He worked with the existing plumbing in the house which has two discharge points. Each discharge point is connected to a 1500-gallon septic tank which settles the solid material. Gray water then flows out of the tank to a 1500-gallon treatment plant. The discharge from the treatment plant goes into a code-required dual siphon dosing chamber which empties the chamber when the discharge reaches a certain level (T:38-39). The discharge then flows into the first four of eight 70 feet long perforated pipes in a field. When the second dosing occurs, the discharge goes into the next four pipes (T:41). He created a berm that would be two feet high and slopes six feet. Since the native soil had been previously determined as unsuitable, a large quantity of suitable soil would be brought in to create the berm. He then would extend the base fill of the berm 20 feet beyond the toe of the berm (T:56) and would cover the entire design with six inches of top soil, seed and mulch. Finally, he would install a French drain to catch the rain and ground water and discharge it around the system (T:59).
John Sloboda, who has a license to install septic systems from Westchester County, and who has installed a few thousand septic systems over the past 45 years (T:107), testified on behalf of claimants. Exhibit 2 is a document he prepared containing a cost estimate for the installation of the septic system designed by Mr. Gjone. Installation and cost of materials would entail five phases, and as designed for a nine bedroom house, would cost $125,151.00 ($115,746.00 plus 8.125% sales tax). Defendants did not present any testimony to contradict Mr. Sloboda's testimony.
Mr. Gjone was recalled as a witness by claimants. He testified that if the septic system was built for a four bedroom house, installation and cost of materials would cost $101,514.23 ($93,886.00 plus 8.125% sales tax) (T:149-156). Upon cross-examination, Mr. Gjone testified that he did not investigate whether any part of the systems defendants installed could be fixed because they were installed in an incompetent manner. He had a "high degree of skepticism on the integrity of that system" (T:165). He would not approve the reuse of pipes that had been laying in the ground for ten years (T:167). He opined that since Wildmere Cottage is near public property, the waste water treatment system must be safe.
Defendants called Edward Dunnigan to testify regarding the installation of the last septic system by the State. Although he testified that he was an engineer for the New York State Office of Parks, Recreation & Historic Preservation and an engineer-in-charge of construction projects, he is not a New York State licensed engineer and has never been authorized by any licensing body to design septic systems (T:633-634). Despite this lack of credentials, in 2000-2001 he was the engineer-in-charge of the construction project for the installation of a 10,000-gallon septic tank, manholes and pipe between the 10,000-gallon tank and the manholes, as well as the pipes connecting the existing 2,000-gallon tank and one of the manholes. This project was to serve the sewer discharge from Wildmere and a future comfort station at Lake Minnewaska. In the Spring of 2004, Dunnigan was informed that water had infiltrated the 10,000-gallon tank. Employees of the New York State Office of Parks, Recreation & Historic Preservation excavated and replaced the line that ran between Wildmere Cottage and the 2,000-gallon septic tank. They filled the tank with water and monitored it for leakage, coated the exterior of the tank with tar bitumen, and inspected the lines between the manholes and the tanks. The coating did not stop the leakage into the 2,000-gallon tank. He went into the 10,000-gallon tank in July 2004 and found hairline cracks on the top of the interior of the tank. Water was still infiltrating the tank.
Upon cross-examination, Mr. Dunnigan testified that the Smiley front yard, including the blue stone patio, was excavated to dig up the pipe that ran from Wildmere to the 2,000-gallon tank. He stated that the break in the line from Wildmere Cottage to the 2000-gallon tank existed from the day it was installed until discovered in 2004 and if septic waste from Wildmere had been introduced into the system, it would have been released into the environment. He admitted that since the effluent could have escaped into the environment, the State-installed system did not meet code requirements (T:662). Mr. Dunnigan did not provide any testimony regarding the septic system designed by Mr. Gjone nor commented upon whether the State-installed system could be retrofitted. II. The Patio
Gerard Swarthout, a stone mason, testified about his estimate (Exhibit 4) to replace the bluestone patio with a wrought iron railing and stairs to the house which were destroyed by the State while attempting to install a septic system in 2004. These items were never replaced by defendants. His estimate is based upon his visit to the site and his discussion with claimant Alfred Smiley while at the site. His overall estimate was $19,200.00 for time (25 days) and materials. No remains are useable. The components of his estimate are as follows: (1) $3,000.00 for the demolition and removal of the destroyed patio; (2) $5,000.00 for the repair of the stone entrance to the house, 240 feet of the patio and pour concrete footings; (3) $7,200.00 to stone veneer the concrete; (4) $1,500.00 to rebuild the stone steps to the house; and (5) $2,500.00 to repair 12 feet of metal railing. Defendants did not present any testimony to refute that defendants caused this damage or any estimates contrary to those provided by Mr. Swarthout. III. Valuation of the Loss of Use of Wildmere Cottage
A. Claimants' Expert Witness: Joan Davies
Ms. Davies is a certified real estate residential appraiser and licensed real estate broker in New York State. She is a member of the Board of Realtors for six counties (Orange, Ulster, Sullivan, Dutchess, Westchester and Putnam) and the New York State Board of Realtors. She has been involved with this industry since 1975 and has been the owner of an appraisal business since 1985.
Ms. Davies testified that Wildmere is a duplex with 5,212 square feet and, in her estimate, seven bedrooms. She determined the highest and best use of Wildmere to be forest recreation land and accommodations related to recreational use (Exhibit 6/B-6). She utilized three methods of valuation for this property (Exhibit 6). Her first valuation (hereinafter the $1 million appraisal), a rental replacement analysis analyzing 36 properties from 1999-2010, resulted in an appraised value of $1,075,500.00 (Exhibit 6/B-49). Her second valuation (hereinafter the $1.3 million appraisal) focused on four of the 36 properties, which she proposed had similar attributes to Wildmere, and resulted in an appraised value of $1,321,000.00 (Exhibit 6/B-50). Davies' third approach relied upon daily and weekly rentals of cottages at Mohonk House, the sister property to Minnewaska State Park, and resulted in an appraised value of $4,311,500.00 (Exhibit 6/B-51-52). Davies ultimately did not rely on the third methodology, concluding that the value suggested was not realistic in today's market.
Davies' $1 million appraisal relied upon 12 years of rental data from which she identified 36 one-year leases. She calculated an average cost per square foot of $.93. She then added a "location adjustment" of 53.4% or $.5039, determined by using a "paired sales" analysis, and multiplied the adjusted per square foot total by the square footage of Wildmere. She concluded that the rental value of Wildmere is $7,500.00 (R) per month, which she multiplied by 143 months (the period between the 1999 Stipulation and December 31, 2010), for a total of $1,075,500.00.Alternatively, Davies calculated an annual rental for each individual year between 1999 and 2010, and totaled the annual rentals to reach a value of $1,067,000.00.
Davies' location adjustment is misstated as $.5039, which is 54%, rather than 53.4%, of the $.9332 average per square foot of the comparables. A typographical error in the square footage of Wildmere (5,221 square feet rather than 5,212 square feet) further slightly affected Davies' final valuation. Using the correct figures, the monthly rent would be $7,461.00(R) for a total of $1,066,923.00 (R) for 143 months.
For her second valuation, Davies selected four of the 36 properties she considered most comparable to Wildmere due to their settings. She used the same mathematical formula and the location adjustment derived from her paired sales analysis: cost per square foot plus the 53.4% location adjustment, multiplied by the square footage of Wildmere (Exhibit 6/B-50; T:382,383). The adjusted values ranged from $1,236,950.00 to $1,430,000.00 for 143 months.
The paired sales analysis was central to both of Davies' conclusions as to value. According to her testimony, Davies selected two properties on the Hudson "similar in overall utility, appeal and location with views of the Hudson River" (Exhibit 6/B-45), isolated a difference between the two properties, and determined the effect of that difference on the properties' values (T:321). In her appraisal, Davies characterized the first property, 70 Floyd Ackert Road (Floyd Ackert), as 2,691 square feet with a promontory and beach. She reported the rental rate as $5,000.00 per month or $1.858 per square foot. Davies described the second property, 135 River Road (River Road), as 2,555 square feet with a rental rate of $2,200.00 per month, or $.8611 per square foot. She calculated the difference between the two per square foot rents as $.9969 ($1.858 - .8611), which she attributed one half to the fact that Floyd Ackert is furnished and the remainder, $.4984 per square foot, to its direct boating access to the Hudson River. The water access premium she derived from her calculations and applied in both appraisal methodologies was 53.4%.
On cross-examination, however, Davies acknowledged that Floyd Ackert's rental price was actually $4,800.00, or $1.78 per square foot, and that the rental rate was without furniture. She further acknowledged the rent for River Road was $2,400.00 rather than $2,200.00 and that the square footage could be described as either 1,785 or 2,555 depending on whether certain lower level square footage was included. She testified that the per square foot rental of River Road, therefore, was either $1.34 (T:378) or $.86(T:408) per square foot. Under questioning on cross-examination, she concluded that using 1,785 square feet and assuming the higher rental rate at Floyd Ackert was not due even in part to furniture, the differential purportedly attributable to Floyd Ackert's direct boating access to the Hudson River was 25% ($.44).
Davies calculated $2,400.00 divided by 2,555 square feet as $.86 per square foot which appears to be a computation error. The correct figure would be $.94 per square foot, for a differential of $.84.
Davies further conceded on cross-examination that both Floyd Ackert and River Road have direct access to the Hudson River. She qualified the distinction as a matter of "the quality of access" to the water (T:354), with Floyd Ackert Road having a private beach and promontory while River Road has a path leading to a "waterfront play area" (Exhibit 6/B-47). As for Wildmere, she testified that although access cannot be considered private because the land between the house and the lake is publically owned, the tenants can walk down to the lake. She initially testified that Wildmere has a view of Awosting Lake, however she wavered on that point on cross-examination (T:344, T:353).Although Davies stated that her location adjustment was attributed to the claimants' loss of amenities for not being able to live in Minnewaska State Park for 11 years (T:236), she acknowledged that claimants were not deprived of the amenities, since they were still allowed to use the park in its entirety during that time.
Although Ms. Davies testified that the view was of Awosting Lake, Wildmere is near Lake Minnewaska (Exhibit 19).
Further, when Alfred R. (Russell) Smiley was questioned about whether one could see the lake from the cottage, he testified "I think you can see it - if you look through the trees and pine needles, I think you can see it down there from the front lawn or from the front steps. I would assume that you can see it from upstairs. To be honest, I can't say for certainty that I can see it through the trees upstairs, but in principle, you should be able to see it" (T:446).
B. Defendants' Expert Witness: Kenneth Golub
Kenneth Golubtestified that the highest and best use of Wildmere is its current use as a house (Exhibit A, p 23). Mr. Golub rejected using comparable rentals as a method to value this property because the Smiley's right to occupy the house is different than a typical rental. Although claimants have the right to use Wildmere and Minnewaska Lake State Park for 99 years, it is entirely at their own expense. Claimants are liable for repairs and maintenance, fire and liability insurance and utilities (T:672,673). Mr. Golub further opined that comparing rentals is not as accurate because house rentals are not very common, the length of the leases vary, and some rentals include services and utilities.
Mr. Golub has been a real estate appraiser since 1968 and started his own business in 1972. He has been a member of the Appraisal Institute since 1970. He has experience appraising residential, commercial, investment and institutional properties.
Mr. Golub instead chose to apply a return on investment method in which he appraised Wildmere as if it were being sold in fee and calculated market rent by applying a 12% return on investment. He testified that this method is appropriate for valuing Wildmere because it isolates the value of the use of the property alone, without adding any value for landlord responsibilities or other costs such as real estate taxes, insurance and property management (T:674).
Valuing Wildmere in fee using the sales comparison approach, Golub surveyed five houses in the Town of Rochester in Ulster County sold near his valuation datewhich were, in his opinion, reasonably similar to Wildmere. The factors he considered in the selection of these five properties were: location of property, size of the land, size of the house, number of rooms and condition of the house. He characterized Wildmere as a "fixer upper" (T:675) located at the gateway to an exquisite park (T:676). He noted that the overlook from the front of the house, however, is a parking lot for visitors and most of the traffic into Minnewaska comes through the lot as many trail heads start there.
In his first appraisal submitted to defendants in December 2005 (Exhibit A), Mr. Golub used a valuation date of November 17, 2002, the date electric service to Wildmere was severed. Golub noted the electric power had not been restored and, therefore, the "new" septic system which "supposedly resolved" the issues could not be tested. He valued the entire leasehold interest by calculating the rent advantage over the term of the lease (market rent minus the actual rent payable under the lease) discounted to the date of valuation. In a 2010 update to the appraisal (Exhibit B), in which he responded to defendants' request that he value the temporary loss of utilities, he relied upon the same calculation of market rent for a habitable residence.
Mr. Golub made adjustments to value based on location, setting, water, land, building use, building size, building condition, and garage (Exhibit A, p 39). He testified at trial that he divided his typical "location" adjustment into two considerations to reflect the positive nature of Wildmere's setting and the negatives attributable to its distance from services and conveniences. He also made a positive adjustment of 10% to 20% in recognition that Wildmere is only a short walk from Lake Minnewaska. He described Wildmere's location as "a front row seat in an unspoiled resort setting" (Exhibit A, p 17). As for the building condition category, he believed Wildmere was on par with four of the fives sales, so he did not adjust the value for those sales. However, he thought one house was in better condition so he made a negative adjustment of 10%. His adjusted comparables ranged in value from $110,500.00 to $161,120.00. He placed a greater degree of emphasis on the sales he believed were more comparable, and concluded that Wildmere's market value, if sold in fee, was $125,000.00.
According to Mr. Golub, because the lease of Wildmere was for a 99-year term and included no services, the measure of the leasehold interest is equivalent to the rate of return an investor would demand for owning the property (T:777). Mr. Golub determined that if a buyer had invested $125,000.00 and wanted a 12% rate of return on that money ($15,000.00 per year), then the market rent would be $1,250.00 per month (T:694). He further estimated that the house was worth at least $100.00 per month without utilities for use as storage space and, therefore, the loss of value to the Smiley's was $1,150.00 per month during the period the house was not habitable (T: 698).Upon redirect examination, Mr. Golub testified that Wildmere does not fall within a range of values from $250,000.00 to $1 million because its appeal is "too specialized" and because a buyer with $1 million to spend would be more likely to select a property in a more "upscale" area such as Woodstock, the Berkshires or Long Island (T:789). ANALYSIS
In his initial appraisal, Mr. Golub made a further adjustment to his estimate of the loss of value suffered by the Smiley's to reflect his belief that Wildmere had some value as storage. In his supplemental report (Exhibit B), he found the value of Wildmere without septic or utilities as zero. In any event, the Court finds that the value of Wildmere as it is now is negligible and makes no offset.
Loss of Use
The measure of damages for a breach of contract based upon a lease where the tenant remains in possession is the difference in the value of the premises as they were meant to be and the value as they are (West Broadway Glass Co. v I.T.M. Bar, 245 AD2d 232 [1st Dept 1997]; City of New York v Pike Realty Corp., 247 NY 245 [1928]; McBean v Peaster, 25 Misc 2d 400 [1960]). Here, defendants' failure to provide a working septic system and electricity rendered the property uninhabitable. Therefore, the proper measure of damages is the cost to replace the tenant's loss of use, in other words, the replacement rental value or "market" rent of the property.
The Court acknowledges the difficulty of appraising Wildmere Cottage and valuing 12 years' loss of use of the property. The cottage sits on 2.25 acres of property but includes the use of 13,000 acres of "exceptionally beautiful mountain woodlands, punctuated by cliffs, streams, waterfalls and pure mountain lakes" (Exhibit A, p 16). Wildmere's location is a double-edged sword, however. The property is accessible only by a steep switchback road up the mountain and is 15 miles from the services and conveniences of the nearest village (Exhibit A, p 16). Consequently, while the appraisers agreed the highest and best use of the property is as a residence, Davies' more specific characterization of the cottage as a residence in furtherance of recreational use is more accurate.
Golub's characterization of Wildmere as a traditional "residence" clearly affected his valuation of the fee simple interest. He selected comparables that bore little resemblance to Wildmere in setting, and he offset any positive setting adjustment by a negative adjustment to reflect the cottage's inconvenient location. As a weekend retreat or vacation property or even as a retirement home, the distance to services, places of employment and schools is not as significant as Mr. Golub's location adjustment suggests. The corollary is also true: compared to the properties reviewed by Mr. Golub, most of which were located on, and in some cases quite close to, well-traveled public roadways, Wildmere's setting and unfettered access to 13,000 acres of unspoiled parkland requires a greater positive adjustment.
Golub's selection was further affected by his assessment of Wildmere as a fixer-upper suffering from deferred maintenance. As of 2005 when Golub submitted his first appraisal, the Smiley family had been unable to occupy Wildmere for one reason or another for almost two decades. Therefore, Wildmere's deferred maintenance is likely attributable to the State's failure to place the Smiley's back in possession as required by the lease and 1999 Stipulation. Even considering the actual condition of the cottage, the properties Golub relied upon were not similar, as evidenced by the descriptions reflected in the property listings. The houses were characterized, variously, as "in need of repairs" and "[g]reat opportunity for a handy person" (Sale #1), "in need of renovation, and extreme caution should be used when entering" (Sale #2), subject to a recent fire (Sale #4),and "in need of restoration[,] being sold as is" with "considerable mold * * * visible" (Sale #5) (Exhibit 7; T:715-732).
Golub conceded he viewed Sale # 4 only after the purchase and some renovation by the new owners, so he was unable to speak to the extent of any fire damage and its effect on the sale price.
The best comparables are those that are the most similar to the subject and require the smallest adjustments to bring them in line with the subject. When comparables required extensive adjustment, their evidentiary value is diminished (Matter of Bialystock & Bloom v Gleason, 290 AD2d 607, 610 [3d Dept 2002]). Here, Golub's own adjustments were substantial (50%, 30%, 45%, 45% and 60%) and, nevertheless, failed to bring the properties in line with Wildmere. The necessary adjustments would be well over 50% and, in some cases, would approach 100%. Consequently, their probative value in assessing the worth of Wildmere is minimal (See 7A Nichols on Eminent Domain § G13.04, pp 13-23).
Further, the Court does not find Golub's return on investment model particularly useful in the valuing of Wildmere. The concept of a reasonable return on investment measures the lessor's pecuniary interest in the lease, not the tenant's interest. Thus, while it may be a reliable indicator of the loss suffered by an owner whose ability to rent property has been interrupted, it does not measure the market value of the rental, i.e., the amount a tenant would be expected to pay for the use of the property. For example, the value of Wildmere to the Smiley's or any other prospective tenant is not diminished by the fact that the State, as the owner, has no tax liability or management costs that a landlord would ordinarily pass on to a tenant in the form of increased rent or as tenant expenses.
In light of the deficiency in Golub's return on investment approach to value and his reliance on comparables that are markedly dissimilar in location and condition to the subject, the Court gives little weight to Golub's overall appraisal.
Turning to Ms. Davies' valuations, the Court finds her second appraisal method more reliable than her first in that it is based upon properties she considered "more comparable" to Wildmere because they possessed similar location-related attributes (see Matter of Bialystock & Bloom v Gleason, 290 AD2d 607, 610 [3d Dept 2002] Matter of Bertelsmann Prop., Inc. v Tax Commn. of City of N.Y., 17 Misc 3d 1133(A) ["the weight of good appraisal practice places reliance on the most similar properties requiring the least adjustment"]). The Multiple Listing Service (MLS) data contained in her appraisal and Davies' testimony further support the conclusion that the four properties are comparable to Wildmere. However, Davies' ultimate conclusion as to value of the $1.3 million appraisal is improperly inflated in three fundamental respects: the location adjustment derived from the paired sales analysis, the failure to make an appropriate size adjustment, and the failure to account for the special terms of the Wildmere lease. According to Davies' testimony, a "paired sales" analysis requires two properties that are alike but for a special characteristic, such that the difference in value may be attributed to that characteristic. She gave as an example a pair of houses, one with electric heat and one with oil heat, in which the difference in market price could be attributed conclusively to the type of heat (T:219). In her appraisal and direct testimony, Davies indicated that the difference between Floyd Ackert and River Road properties was Floyd Ackert's direct access to the Hudson River (T:219). However, she conceded on cross-examination that both properties are directly on the Hudson River and had access to the water (T:328-329). Notwithstanding her attempt to clarify that the difference is a matter of "quality" of access, with Floyd Ackert having "a lot more aesthetic beauty and use and view than the other" (T:337), the Court finds the paired sales analysis inapplicable to the instant action.
Davies' opinion that Floyd Ackert is one-and-a-half times as valuable as River Road is not supported by an adequate description of the similarity between the properties sufficient to persuade the Court that a single factor, be it direct access to the water or the more nebulous "quality" of access, explains the difference in rental rates. Moreover, even assuming the utility of water access and the water view at Floyd Ackert is the sole explanation for its higher rental rate, the positive adjustment derived from the paired sales adjustment is not appropriate in reference to Wildmere. Wildmere does not have a beach or promontory, "breathtaking 180-degree views of the Hudson and the Vanderbilt Mansion across the river," or "[e]asy launch for kayak and day sailor" (T:335; MLS, Exhibit F). Its lake access is over public land shared with park users and, if there is a water view from the cottage, it clearly is not qualitatively similar to that enjoyed by Floyd Ackert.
Although Wildmere's special location characteristics should be considered in comparing it to other properties, the four properties Davies relied upon in her $1.3 million appraisal were selected precisely because of the similarity of their settings to Wildmere, and the inherent value of those settings is presumably reflected in the four properties' significantly higher rents than the 36-property average gleaned from Davies' more general sample.
The average rent for the four properties is $1.15 per square foot, which is 24% ($.22) higher than the $.93 per square foot average rent for the 36 properties.
Adding the same location adjustment to those four properties amounts to double-counting and results in a significant overvaluation of Wildmere. Having reviewed the data and considered Davies' testimony as to the four properties, the Court finds that a +10% location adjustment is appropriate for the properties at 291 Hull Avenue, 63 Orchard Street and 166 Hurds Road and makes no location adjustment vis-a-vis the 135-acre site at 2207 Route 32.
Davies' application to Wildmere of a per square foot value derived from far smaller properties, without any adjustment for size, further undermines her conclusion. Although the Court rejected Golub's selection of comparables and thus his valuation as a whole, the Court credits the testimony of Mr. Golub that price per square foot is "very, very rarely used with houses" and "[c]ertainly not in a market like this" (T:691). As Golub explained, a prospective purchaser or tenant is not likely to pay twice as much for a house that is twice the size (T:692). Particularly with a house as large as Wildmere, pricing by the square foot can lead to a "silly answer" (T:692). In other words, while a larger house is worth more than a smaller house, the concept that a smaller house sells or rents at a higher price per square foot than a larger house must be taken into account. Golub did so by making a positive adjustment to the overall adjusted sale price of each comparable to reflect the larger size of Wildmere, but his adjustments were not directly proportional to the difference in size between the two properties. For example, in assessing the sale price of his comparables, he made positive 25% adjustments for properties of 1,568 and 1,616 square feet, 15% adjustments for properties of 2,556 and 3,132 square feet.
Given that three of the four properties relied upon by Davies are approximately one quarter the size of Wildmere and the fourth property is half the size, using the actual rentals without any size adjustment is unreasonable. The Court finds that positive adjustments of 50% for 291 Hull Avenue (1,340 square feet), 63 Orchard Street (1,350 square feet) and 166 Hurds Road (1,320 square feet) and 35% for 2207 Route 32 (2,376 square feet) are appropriate. The adjusted values are, therefore, $2,320.00, $2,400.00, $2,640.00 and $3,780.00, respectively. Of the comparables, the Court concludes that 2207 Route 32, with its "135 acres of meadows and forest with ponds and babbling streams" (Exhibit 6, p 41; T:300), is more comparable to Wildmere than the other three properties.
Although Davies inadvertently failed to include River Road among the properties in her $1.3 million appraisal (T:311), it is clear from her appraisal and testimony that the property is significantly comparable to Wildmere (T:407) and, indeed, given its water access, appears to be the most comparable. Consequently, the Court will also consider River Road's rent as an indicator of value. The Court accepts the square footage of 2,555 as set forth in Davies' appraisal and, after a 35% positive adjustment for size, finds the adjusted rent to be $3,240.00.
Considering all the comparables, with River Road and 2207 Route 32 weighted more heavily, and recognizing that the lease of Wildmere makes the tenants responsible for all maintenance and utilities, the Court finds a market rent for Wildmere of $3,000.00 per month.
Claimants are entitled to recover as damages $3,000.00 per month for 154 months--from February 9, 1999, the date of the so-ordered Stipulation, to the date of this decision-for a total of $462,000.00.
Ordinarily, claimants would be entitled to loss of use damages until such time as they are restored to use. However, as more fully set forth below, they have demanded and are being awarded the cost to cure the condition that renders the property uninhabitable. Both elements of damages compensate for the same injury, one retrospectively and one prospectively. The Court has chosen the date certain of this damages decision as the demarcation between the two measures of damage.
Claimants were deprived of the use and enjoyment of property and are entitled to pre-decision interest pursuant to CPLR 5001(a). Given that claimants' damages were incurred over the course of nearly 13 years, the Court will compute interest from a "single reasonable intermediate date," July 9, 2005, the approximate midpoint between the date of the stipulation and the date of this decision (CPLR 5001[b]; see Sam & Mary Hous. Corp. v Jo/Sal Mkt. Corp., 100 AD2d 901 [2d Dept 1984], affd on opn below, 64 NY2d 1107 [1985]; Delulio v 320-57 Corp., 99 AD2d 253 [1st Dept 1984]; see also Pozament Corp. v AES Westover, LLC, 51 AD3d 1080 [3d Dept 2008]).
Under the circumstances, no suspension of interest under CCA §19 is appropriate.
Septic System and Patio
Regarding an award of damages for the faulty installation of a septic system and the demolition of the patio, the Court determines that, although its primary jurisdiction is limited to actions seeking monetary damages against the State in appropriation, contract, or tort action (CCA §9 [2]; Ozanam Hall of Queens Nursing Home v State of New York, 241 AD2d 670 [3rd Dept 1997], citing Psaty v Duryea, 306 NY 413 [1954]; Sidoti v State of New York, 115 AD2d 202 [3rd Dept 1985]), it may apply equitable considerations and grant equitable relief (Ozanam Hall of Queens Nursing Home v State of New York, supra; Psaty v Duryea, supra). The question is whether the essential nature of the claim is to recover money or whether monetary relief is incidental to the claim (Matter of Gross v Perales, 72 NY2d 231 [1988]). Here, the essential nature of the claim is to recover money. Claimants would be entitled to seek damages for the loss of use of Wildmere continually until an adequate septic system is in place. Rather than subject claimants and the Court to repeated actions for damages, therefore, the Court will award damages for the specific purposes of installing a septic system and a patio.
This is distinguishable from defendants' request that the Court rescind or reform the contract, which are strict equitable remedies, instead of awarding monetary relief. Pursuant to CCA §9 [2], the Court does not have jurisdiction to do so.
The Court credits the unrefuted testimony of Roger Gjone that his design for the septic system would be the safest and most efficient system for the disposal of waste from Wildmere Cottage. The Court credits the testimony of Mr. Dunnigan that the State-installed system did not meet code requirements because effluent could have escaped into the environment. The Court, however, believes that the 1999 Stipulation anticipated defendant would build a septic system suitable for the private residential use of Wildmere as a four bedroom family unit and not a nine bedroom home. If claimants had anticipated such use, they should have negotiated a different settlement. Therefore, the Court awards claimants $101,514.23, Mr. Gjone's unrefuted estimate for the installation of a septic system for a four bedroom family unit. The Court also awards claimants $19,200.00 for the replacement of the bluestone patio, wrought iron railings and concrete stairs based upon Mr. Swarthout's uncontroverted testimony. The award for the cost of the septic system is in the nature of a cost to cure and is prospective in nature. Therefore, pre-judgment interest on the award of $101,514.23 will run from the date of this decision. During the period of time when the property was uninhabitable, claimants suffered no damage as a result of the destruction of the bluestone patio. Interest on the award of $19,200.00 will likewise run from the date of this decision.
CONCLUSION
Upon review of all the trial evidence, including listening to the witnesses testify and observing their demeanor as they did so, the Court awards the following damages with statutory interest as set forth above:
LOSS OF USE $462,000.00 (with interest from July 9, 2005)
SEPTIC SYSTEM $101,514.23 (with interest from December 13, 2011)
PATIO $ 19,200.00 (with interest from December 13, 2011)
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TOTAL $582,714.23
The Court declines to award attorneys' fees and consequential damages. All motions not previously ruled upon are hereby denied.
To the extent claimants have paid their filing fee, it may be recovered pursuant to Court of Claims Act § 11-a(2).
Let judgment be entered accordingly.
December 13, 2011
Albany, New York
JUDITH A. HARD
Judge of the Court of Claims