In Re Acquiring Title by City of New York

Werner, J. A single question is presented by this appeal, and that is whether an owner whose lands are taken in invitum may give evidence as to the structural value of buildings thereon, for the purpose of establishing his total damages. This question, although extremely simple in theory, has proven difficult of practical application to the multiform circumstances in which it arises, and it is, therefore, not strange that the courts have at various times given divergent decisions upon it. In the case at bar the city of Mew York instituted proceedings to acquire certain lands needed for the approaches to Blackwell’s Island Bridge. These included the-lands of the appellants situate on East 59th street and Avenue A, or Sutton Place. Upon these lands there were the usual *86 tenement houses, four and five stories high, constructed of brick and stone, and concededly suitable to the locality. Upon the original hearings the commissioners of estimate and appraisal permitted the appellants to give testimony of the cost of reproduction or structural value of these buildings. The report of the commissioners was confirmed at Special Term, and the city took an appeal, assigning the admission of this evidence as one of the grounds of substantial error. The Appellate Division reversed the order of the Special Term and held that evidence of structural value is not competent in condemnation proceedings.' (Matter of City of New York — Blackwell's Island Bridge, 118 App. Div. 272.) Upon the re-hearing before the commissioners, the appellants herein again offered evidence of the structural value of the buildings on their land, and this time the evidence was excluded in obedience to the direction of the Appellate Division on the former appeal. Then the commissioners made their second report which was confirmed at Special Term and on appeal affirmed at the Appellate Division. From that decision the landowners have appealed to this court upon the single question whether the evidence offered by them as to the structural value of their buildings was properly excluded or not. The learned Appellate Division has laid down the rule that, in condemnation proceedings, evidence of the structural value of buildings should not be received, and that the landowner •must be confined to proof of the value of his land as enhanced by the value of the structures thereon. This is doubtless the rule applicable to certain cases, but we think it is not, and should not be, a rule of universal application. All proceedings prosecuted under the right of eminent domain are based upon two fundamental facts. The first is that the owner’s land is taken from him theoretically against his will, and the second is that the owner is not permitted to fix his own price, but must be content with just compensation. The latter is a burden to which the owner must,-submit, but it is also a right which he may enforce. What is just compensation % In *87 some cases the value of expensive structures may not enhance the value of the land at all. An extremely valuable piece of land may have upon it cheap structures which are a detriment rather than an improvement. A man may build an expensive mansion upon a barren waste, and, in such a case, the costly building may add little or nothing to the total value. In the greater number of cases, however, when the character of the structures is well adapted to the kind of land upon which they are erected, the value of the buildings does enhance the value of the land. In such cases it is true that the value of the land as enhanced by the value of the structures is the total value which must be the measure of the owner’s just compensation when his property is condemned for public use. As to that general proposition there can be no disagreement. But how is the enhancement of the land by the structures which it bears to be proven ? If all buildings were alike, the rule laid down by the Appellate Division would be one of convenient and universal application. It is common knowledge, however, that buildings not only differ from each other in design, arrangement and structure, but that many which are externally similar and are situate upon adjoining lands, are essentially different in the quality and finish of the materials used and in the character of the workmanship employed upon them. It must follow that such differences contribute in varying degrees to the enhancement in the value of the land, and we can think of no way in which they can be legally proved except by resort to testimony of structural value, which is but another name for cost of reproduction, after making proper deductions for wear and tear. This may lie by no means a conclusive test as to the market value of premises condemned for public use. But that is not the question at issue. The question is whether evidence of structural value is competent to show market value, when the buildings are suitable to the land. There are instances, of course, when precisely similar buildings upon identical paleéis of land may have the same potential market value just as the price of commodities like cotton, flour or potatoes is *88 regulated by the law of supply and demand without reference to cost of production in particular cases. When that is true, the market value may be the value of the land as enhanced hy the value of the buildings, without reference to structural value. But when a building has an intrinsic value, which must be added to the value of the land in order to ascertain the value of the whole, the owner may not be able to establish liis just compensation unless he is permitted to ¡wove the value of his land as land and the value of his buildings as structures. By adding to each other these two quantities the result is really the value of the land as enhanced by the buildings thereon. In valuing real estate for purposes of taxation the state resorts to the cost of improvements for the purpose of ascertaining the value of the land. (People ex rel. Cons. Gas Co. v. Wells, 54 Misc. Rep. 322; affd., 126 App. Div. 944 and 193 N. Y. 614; People ex rel. Powers v. Kalbfleisch, 25 App. Div. 432; affd., 156 N. Y. 678; People ex rel. N. Y. Clearing House Bldg. Co. v. Barker, 31 App. Div. 315; affd., 158 N. Y. 709.) By analogy it would seem that when the state compels a man to give up his land for public use, and permits him to recover, not what he thinks it is worth, but only its fair market value, he should at least have the right to prove every element that can fairly enter into the question of market value. The court helow cites our decision in Village of St. Johnsville v. Smith (184 N. Y. 341) in support of the rule that in condemnation cases evidence of structural value of buildings is not admissible, and it quotes from the concluding passage of Judge Willard Bartlett’s opinion, in which he said : “In holding, as we do, that the appellant is entitled to have the improvements made upon his land by the respondent while a trespasser taken into consideration in ascertaining his compensation, it must be distinctly understood that the measure of such compensation is neither the cost of the improvements nor their value or the value of their use to the village. The true inquiry is how much do the improvements placed upon the property enhance the value of the appellant’sdand.” (p. 350.) *89 The language used by this court in that case has no application to the question here under consideration. The statement therein made, that the measure of compensation to which the village was entitled was neither the cost of the improvements nor their value or the value of their use to the village, but that the true inquiry was how much did the improvements enhance the value of the laud, involved no intimation as to the character of the evidence which should be received in order to ascertain the extent of such enhancement. There was nothing in our opinion in that case which affirmed or dis-affirmed the admissibility of evidence as to the cost or structural value of the buildings. That the learned court below further misapprehended the scope of our decision in the St. Johnsville case becomes more evident by the statement of a few additional facts. The village of St. Johnsvile had wrongfully trespassed upon the lands of Smith, and had constructed thereon a reservoir and laid pipes for the purpose of obtaining a supply of water for village purposes. After this had been done the village instituted condemnation proceedings, and the commissioners made an award to Smith which excluded from consideration the structures thus 'wrongfully placed on Smith’s land. Upon Smith’s appeal the Appellate Division affirmed the order made upon the report of the commissioners. When the case came to this court, it was held that Smith was entitled to recover the value of his land as it was when the condemnation proceedings were instituted. That, of course, included the structures which had theretofore been wrongfully erected thereon by the village. But the structures were of a peculiar kind. They consisted of a reservoir and water pipes. The cost of these was obviously much greater than any sum which they could possibly add to the value of Smith’s land, if indeed they could be said to enhance it at all. These were the conditions which doubtless led Judge Willard Bartlett to qualify his statement of the general rule, and to limit its application to the peculiar facts of the case. The general rule to which he referred is, that when a naked trespasser makes improvements *90 upon the lands of another, such improvements become the property of the owner of the land, and this is true even where the trespasser subsequently seeks to acquire the land by condemnation. In such a case the owner is entitled to the value of the land with the improvements. But in Smith’s case the cost of the structures built upon his land by the village would have been much more than just compensation, for it was largely in excess of any value which it added to the farm. The distinction between the St. Johnsville case and the case at bar is plain. In that case the structures were not adapted to the land or the locality. They were elaborate and costly, but they added nothing, or at least very little, to the value of the Smith land as a farm. The cost of building a reservoir and laying conduits was one thing. The value which they added to the farm was quite another thing. In the case at bar the houses were concededly suitable to the land and the locality. The laud and the houses had a natural and appropriate relation to each other for the purpose of ascertaining the value of the whole. The actual value of the houses was a constituent element of the total value, and for that reason evidence of structural value should have been received. VWhen the dissenting opinion of our brother Chase is closely analyzed, it will be seen that the very procedure for which we contend may be indirectly pursued under the rule which he advocates. lie admits that an expert may, upon cross-examination, be interrogated as to his qualifications, and that, by this means, the value'of the structures and the value of the land may be separately proven in order to test the accuracy of the witness in stating the value of the land as enhanced by tiie structures. Why may not such testimony be controverted by the direct testimony of other witnesses who arrive at different conclusions as to the separate values of the land and the structures upon it? We know of no rule which forbids such procedure. In condemnation proceedings the question of value is not a collateral issue, but is usually the main issue. If that may be done, it is obvious that the direct result for which we contend may always be accom *91 plislied by indirection. It may be well to repeat, therefore, that the difference between us is fanciful rather than real. We all agree that the ultimate question is, what is the value of the land as enhanced by the value of the structures upon it? We disagree simply as to the method by which that question shall be solved. Our contention is that the expert who testifies to the value of the whole may also give his views as to the separate values of the constituent parts. Our brother Chase argues that this may not be done directly, but he admits that the same end may reached by cross-examination. With all deference, we submit that this is a highly technical refinement which is more calculated to produce confusion than justice in condemnation proceedings^ Matter of Simmons (195 N. Y. 573) is cited as holding that in condemnation proceedings evidence of structural value is inadmissible. There were two distinct proceedings under that title affecting separate parcels of land and two appeals from separate orders. Upon the hearings before.the commissioners in those cases evidence of structural value was admitted in one case under objection and exception and in the other the same kind of evidence was excluded. The lands there in question were farms, with buildings of small value, and in both cases witnesses were permitted to testify that the buildings upon the lands enhanced their value in different degrees. The cases were decided at Special Term at the same time with many others of like character. In this court the two appeals were argued as one, although separate briefs were submitted. The main contention, and practically the only one made by the appellants, was that the commissioners should have received testimony tending to establish the value of the lands for reservoir purposes, which was vastly greater than their value for farm purposes. We affirmed the orders of the court below without opinion. It is the well-established rule that courts of review will not disturb the determination of commissioners in condemnation proceedings for mere errors in the admission or exclusion of evidence, unless the commissioners have proceeded upon a wrong theory to the prejudice of one *92 of the parties. The commissioners view the premises, and in coming to a conclusion as to value they may take into consideration the knowledge thus acquired in connection with the oral evidence produced before them. That the courts in the Simmons cases acted upon this rule is shown by the fact that, although there were diametrically contrary rulings upon the same kind of evidence, they did not consider the matter of sufficient importance to reverse either of the determinations there involved. In the proceeding at bar, however, the situation is different. The land involved is improved city property of considerable value. Upon the appeal from the first award the Appellate Division reversed, and one of the grounds of reversal was the admission of evidence of structural value. Upon the second hearing such evidence was excluded and the award of the commissioners has been sustained. The claimants have now appealed for the sole purpose of obtaining a decision upon this question whether evidence of structural value is admissible in proceedings of this character. We think the courts below erred in excluding the evidence. Ordinarily we would not reverse for such an error, but as this appeal was taken for the express purpose of settling this question, upon which the courts have long been at variance, we deem it necessary to reverse the orders herein, so that the rule may he finally and definitely settled. We refrain from discussing the decisions in other jurisdictions because they are not uniform, and it would serve no useful purpose to dwell upon them at length. We conclude that reason and principle alike support the admissibility of such testimony as was excluded in the case at bar. The orders of the Appellate Division and Special Term should be reversed and the matter remitted to.the latter court for further proceedings before the same or new commissioners, with costs to the appellants.