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Burden Of Proof
By M. Robert Goldstein & Michael J. Goldstein
Some time ago, in the course of a trial,
we were asked, by the judge, who had the burden of proof on
the issue of value? The judge showed considerable surprise
and disbelief when we answered, "no one". Despite this, our
answer was correct and our authority is the United States
Supreme Court. The case is Kimball Laundry Co. v. United States
338 U.S.1 (1949), Frankfurter, J.
The case involved the temporary wartime takeover
of a commercial laundry in Omaha, Nebraska, for the purpose
of using its facilities for the army. Although the central
issue was whether the business had been taken over and whether,
therefore, the government had to pay for intangible business
assets such as trade routes and going concern value, the court
did get into burden of proof. Its statement on the subject
was short and simple. Justice Franfurter, writing for the
majority, said, "Since land and buildings are assumed to have
some transferable value, when a claimant for just compensation
for their taking proves that he was their owner, that proof
is ipso facto proof that he is entitled to some compensation"
(emphasis in the original). In the usual litigation, if the
plaintiff fails in his burden of proof, he is nonsuited and
gets no recovery. That can not happen in a condemnation proceeding.
The worst that happens is that he or she receives the amount
proved by the condemnor. Thus, there is no burden of proof,
although there may be a burden of going forward with the evidence.
One must bear in mind that the burden of
proof is not evidence nor does it take the place of evidence.
Once it is met, it disappears. For that reason, on the sole
issue of value, as a practical matter in condemnation proceedings,
who has the burden of proof is not quite so important, for
it is difficult to conceive of a condemnation trial where
both sides have not submitted appraisals. Assuming the appraisals
are done with a reasonable amount of competence, had a burden
of proof existed, it would have been met and disappeared.
But not all trials in condemnation are simply
a question of competing opinions of value. To be sure, most
are, but often, other issues creep in and it is not uncommon
for these issues to be the focal point of the trial. The Kimball
Laundry case (supra) is a good example. The central issue
there, as we stated above, was whether the business had been
taken over and therefore, whether the government had to pay
for intangible business assets such as trade routes and going
concern value. Once the court determined that the business
had been taken, it then held that the burden of proof of its
value fell on the claimant, reasoning that "even though evidence
in one or more of these categories may tend to establish the
value of petitioner's trade routes, the consequence of its
inadequacy may require complete denial of compensation where
that would not be the result in the case of its tangible property.
The reason is this: evidence which is needed only to fix the
amount of the value of the tangible property is required to
establish the very existence of an intangible value as well
as its amount".
Two very important New York cases on the
question of burden of proof dealt with vacant land and its
highest and best use. In both cases, vacant land in Staten
Island was taken and claimants projected a shopping center
as the highest and best use. Both cases went to the Court
of Appeals.
In the first case, Matter of the City of
New York (Broadway Cary Corp.), 34 N.Y.2d 535, the property
was situated in an area zoned for light manufacturing. Claimant's
evidence related to the physical feasibility of a shopping
center but made no reference to its economic feasibility.
The Court of Appeals said,
"While it is not essential to demonstrate
either that the property had been used as its projected
highest and best use or that there had been an ante litem
plan for such use..., it is, of course, necessary to show
that there is a reasonable probability that its asserted
use could or would have been made within the reasonably
near future...; and a use which is not more than a speculative
or hypothetical arrangement in the mind of the claimant
may not be accepted as the basis for an award (citing
case)."
The condemnor's appraiser did nothing more
than submit comparable sales of industrially zoned property
and it was that appraisal that was the basis of the award
because claimant, not meeting its burden, had its appraisal
ignored.
Compare that to Matter of City of New York
(Jomar Real Estate Corp.) 94 A.D.2d 724, 462 N.Y.S.2d 260,
aff'd., 61 N.Y.2d 843, 473, N.Y.S.2d 963 where the Appellate
Division, affirmed by the Court of Appeals, for the reasons
stated by the Appellate Division, reversed the trial court
which had, in effect, held that claimant had not met its burden
of proof. The Appellate Division said, at p. 261:
"The claimant has established upon its
proof that the highest and best use thereof is for a neighborhood
shopping center, a commercial use. Commencing at a time
several years prior to vesting date, the claimant began
to improve its property towards the goal of constructing
a neighborhood shopping center. Thereupon, the land was
graded and levelled, it was cleared of an existing building
and an abutting street was paved, sewers were installed
with a number of connections sufficient to service the
proposed shopping center. Plans for the shopping center
were drawn but were refused filing and approval by reason
of the impending condemnation. Though no formal feasibility
study was done, claimants expert testified to his familiarity
with the area in general to his experience with appraisals
and valuing commercial properties, including shopping
centers, and, based upon his experience, stated that he
believed the subject property would well support a local
shopping center."
Again, as in Broadway Cary, the condemnor's
appraiser submitted "comparable sales" reflecting a value
for industrial purposes. This time, the Appellate Division,
found a value based on the claimant's appraisal.
Highest and best use is, even more pointedly,
the claimant's burden to prove when the property is, in fact,
being used otherwise. In Matter of City of New York 601, N.Y.S.2d,
620, claimant owned a building not far from JFK airport. It
was designed and used for a sanitation garage but claimant
felt it could be converted into an air cargo facility giving
it a much higher value. The court, affirmed by the Appellate
Division, held that he did not meet his burden.
Interestingly enough, the burden of overcoming
the presumption of the statutory six percent rate of interest
was also involved. (General Municipal Law, Sec. 3-a [2]).
The trial court awarded seven percent but the Appellate Division
reversed and held that the statutory rate was presumptively
reasonable and claimant did not meet the burden of demonstrating
that the rate was so low as to constitute unjust compensation.
Something that comes up occasionally is the
condemnor's charge to an occupant of acquired property for
use and occupancy between the date of acquisition and the
termination of the occupancy. It came up in a very interesting
way in State of New York v. Chapman, 136 A.D.2d 75, 525, N.Y.S.2d
944.
Claimants operated a driving range on leased
land that was partially appropriated by the State. Claimants'
improvements were on the part acquired. They were forced to
leave about ten months later. The State sent a bill for use
and occupancy and claimants contested the amount. Claimants
then filed a claim in the Court of Claims for the appropriation
of their leasehold interest. The award was made and the State
moved to have interest accrue from the date the property was
vacated rather than from title vesting date. The Court of
Claims denied the motion. The State then commenced an action
to recover the fair and reasonable value of claimants' use
and occupancy. The court dismissed the action on the grounds
of res judicata, in that the issue had already been litigated
in the Court of Claims. In effect, by asking for interest
to start when claimants vacated the property, they were equating
the amount of interest with the value of use and occupancy.
The Appellate Division, affirming, said, "Where the condemnor
seeks to abate interest, it has the burden of demonstrating
that the interest owed is offset by the value of the condemnee's
use of the property and, to do so, it must prove the fair
rental value of the property during the period of the condemnee's
use."
Occasionally, claimants ask the court to
find that there is a reasonable probability that the appropriated
property would have been rezoned but for the condemnation.
Often this is done by showing a pattern of variances being
granted for properties similarly situated or that the area
is zoned in a way that the property could not economically
be used. In those instances, the burden is on the claimant
asserting the probability of rezoning. (County of Westchester
v. State of New York, 127 A.D.2d 556, 511, N.Y.S.2d 538, Rodman
v. State of New York 109 A.D.2d 737, 485, N.Y.S.2d 842). There
is a case, however, involving probability of rezoning and
the burden of proving it that has a slightly different twist.
Claimant owned a parcel fronting on a large
commercial street. The front of the property was zoned commercial
and was valued that way by both sides. The rear part of the
property, however, was zoned residential and had no access
to the street other than over the commercial part, requiring
dedicating a piece of valuable commercial property to access
for the less valuable residential property. When the loss
of commercial property was added to the cost of building the
access road, it came, in claimant's appraiser's opinion, to
more than the value of the residential property with the access.
It making no economic sense, then, to improve the rear portion
residentially, claimant submitted an appraisal claiming a
reasonable probability that the rear portion would be rezoned
to commercial use.
When appraisals were exchanged, claimants
found that the condemnor's appraiser had come to the same
conclusion and also considered that there was a probability
of rezoning. The trial court, however, held that claimants
had not met their burden of proving the probability, and declined
to so hold. Claimants appealed and asked the appellate courts
if it has the burden if the other side agrees and there is
no contested issue. The Court of Appeals, in Matter of County
of Suffolk (Griffith), 41 N.Y.2d 1058, answered,
"On the appeal by the County, we observe
that both the County and the claimants and their respective
appraisers presented proof of valuation of the rear portion
of the condemned premises, then zoned residential, on
the predicate that there was a probability of a zoning
change from residential to commercial. In this circumstance,
it was an error on the part of the trial court, independently
and on its own initiative, to depart from that hypothesis
and to fix the value of the rear portion on the basis
of residential zoning without increment for probable rezoning."
Although we stated earlier that there is
no burden of proof on the pure issue of value, such is not
the case when there has been a partial taking. As to the part
taken, there is, as we said, no burden of proof but, if there
is a claim that the untaken portion has lost value, it is
almost universally held that the burden of proving consequential
damages is on the claimant. As was said in Niagara Mohawk
Power Corporation v. Duane C. Olin, et al, 138 A.D.2d 940,
526, N.Y.S.2d 578, "The burden is upon the owner to prove
the consequential damages and to furnish a basis upon which
a reasonable estimate of those damages can be made."
Finally, we call attention to the cases involving
wetlands and in particular, to the statement by the Appellate
Division in Chase Manhattan Bank v. State of New York, 103
A.D.2d 211, 479 N.Y.S.2d 983:
"... a wetlands CPLR article 78 review
proceeding is not identical to a wetlands condemnation
proceeding. In the former, the State's posture is far
more defensive, amounting essentially to providing rebuttal
of the petitioner's prima facie proof of confiscation...
In a condemnation proceeding, the burden of proof remains
upon the claimant (Heyert v. Orange & Rockland Utilities,
17 N.Y.2d 352, 271 N.Y.S.2d 201, 218 N.E.2d 263) but the
State has an independent obligation to pay just compensation
and, in connection therewith, to present its own appraisal
of the property's highest use and value (EDPL 303, 508).
Thus, in understandably seeking to establish a lower market
value than that proffered by the claimant, the State necessarily
runs the risk of proving for the claimant at least one
aspect of a claim of confiscation. Then too, the critical
issue in wetlands cases is probably not whether development
of the property is legally feasible but, instead, whether
it is economically feasible. On the latter issue the State
is entirely free to counter the claimant's evidence without
prejudice to its own case."
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