State of Connecticut Commissioner of Transportation v. LLC (2011)

MEMORANDUM OF DECISION

This appeal, taken by application for a reassessment of damages, filed by the defendant, Selina's Family, LLC for the taking, by the Commissioner of Transportation, State of Connecticut (“State”), by eminent domain of the entirety of the real property located at 142–44 Willard Avenue, Newington.   The owner, Selina's Family, LLC (“Owner”), appealed the valuation as determined by the State.

Thus, the main issue before the Court is the value of the real property taken, as of the date of taking, June 25, 2010.

Three appraisers testified:  Howard Russ for the State, John LoMonte for the Owner, and Charles Liberti, also for the Owner.

The Court finds the following facts.

By Notice of Condemnation and Assessment of Damages dated and filed June 25, 2010, the State took the entirety of the real property known as 142–44 Willard Avenue, Newington, Connecticut (the “Property”).   The Property was taken pursuant to the authority of Connecticut General Statutes § 13b–36(a), which provides, inter alia, that such takings “shall be in the manner prescribed in subsection (b) of [Conn. Gen.Stat.] 13a–73 for the taking of land for State highways.”   The State deposited with the Court $430,000.

By Application for Reassessment of Damages in Highway Condemnation Case filed July 15, 2010, the Owner appealed.

The Property was an out-of-business gas station, whose prior use had included motor vehicle repairs.   Exhibit 3 shows that the Retail Gas License previously in effect for the Property was not renewed as of October 31, 2006, the station was closed, and the building and gas dispensers were covered with plywood.   Exhibit 3 also establishes that as of February 14, 2007, the business was “inactive/out of business.”

In the summer of 2007, the Town of Newington amended its zoning regulations, specifically by deleting Section 3.11.3, effective as of August 15, 2007, removing previously “auto related uses.”   Thus, as of that date, auto related uses were no longer permitted in the zone in which the Property was located (B Business Zone).

Appellant Owner purchased the Property as of November 24, 2008 (Russ Appraisal, Addendum Page Q, part of Exhibit 1) for the sum of $425,000 on that date.

Subsequently, Owner made no use of the property for a year and a half.   Then on January 13, 2010, Mr. Russ, the State's appraiser, met the Owner's representative, Mr. Nurul Alam, at the Property for the purpose of inspecting the Property for the planned taking.  (See page 1 of Exhibit 1, Mr. Russ' Appraisal Report:  “Date Property owner accompanied inspection:  January 13, 2010.”)   As of that date, Mr. Alam became aware that the State was going to take the Property.

No later than April 2010, Owner hired Mr. LoMonte to appraise the Property.   Mr. LoMonte's appraisal, Exhibit D, indicates that his appraised value is as of the last date he inspected the Property, April 29, 2010.

About May 8, 2010, the Owner obtained a proposal from HI Tech Industries, LLC for work to be performed costing $350,000.

The State took the Property on June 25, 2010.   Mr. LoMonte's transmittal letter to the Owner is dated June 23, 2010.   The Owner then hired Mr. Liberti, who came in with a value substantially higher.

At page 25 from Mr. Russ' appraisal (Exhibit 1) is a chart showing that from the peak in mid–2007, by the time of the purchase herein, values of retail property had declined 20% to 30% and, to the time of the taking by the State, values had declined about 40% from the peak.   All this in just three years.

In his appraisal, Mr. Russ appraised the Property “as is,” and found other properties in the same condition.   He found other no longer functioning gas stations and compared them to the Property herein.

In Mr. LoMonte's and Mr. Liberti's appraisals, however, no such real comparables were considered.   Rather, both appraisers compared the boarded-up Property with existing successful business of a type which had never existed on the herein Property.

Further, Mr. LoMonte estimated a value based on “projected” income.   First, he bases this in large part on gas sales.   The problem with this approach, however, is that it is pure speculation.   Presumably Exxon Mobil, which previously owned the Property, had records showing gas sales.   No such actual records were utilized by Mr. LoMonte.   Presumably Exxon Mobil, in the business of selling gas, would not have closed a productive location for the sale of gas.   However, the Property was a closed, out-of-business location as of October 2006, two years before Owner purchased in November 2008.   To suggest that this location would be a successful location for a gas station, in light of its failure as a gas station, is not based on fact.

Mr. Liberti and Mr. LoMonte also compared the boarded-up Property, unused since before October 2006, with up and running successful businesses, each engaged in a type of activity which never before occurred on the Property.

The State, when taking property by eminent domain, must pay to the owner the “fair market value” of the real property taken.  “Because fair market value has been defined simply to mean that price that a willing seller and a willing buyer would agree upon following fair negotiations;  see Lynch v. West Hartford, 167 Conn. 67, 73, (1994);  Uniform Eminent Domain Code § 1004(a);  27 Am.Jur.2d. Eminent Domain § 267;  an appraisal of fair market value should take into consideration that use of the property that would provide a prudent investor the greatest financial return.  Connecticut Printers, Inc. v. Redevelopment Agency, 159 Conn. 407, 411 (1970;  4 Nichols, Eminent Domain (3d Ed.) § 12.314.” Tandent v. Urban Redevelopment Commission, 179 Conn. 293, 299 (1979).

“The owner of land taken by condemnation is entitled to be paid just compensation ․ Minicucci v. Commissioner of Transportation, 211 Conn. 382, 384 (1989);  constitution of Connecticut, article first, § 11.   The amount that 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.  Minicucci v. Commissioner of Transportation, supra;  Cappiello v. Commissioner of Transportation, 203 Conn. 675, 681 (1987);  Budney v. Ives, 156 Conn. 83, 88, 239 A.2de 482 (1968).   In determining market value, “It is proper to consider all those elements which an owner or a prospective purchaser could reasonably urge as affecting the fair price of the land ․” Budney v. Ives, supra.   Because a change in zoning restrictions obviously could affect the price of real property, “where such a change is reasonably probable and not merely a remote or speculative possibility, the probability may properly be considered in the determination of the fair value” of the property.  Id., Transportation Plaza Associates v. Powers, 203 Conn. 364, 375 (1987).   “[T]he true issue is not the value of the property for the use which would be permitted if a change in zone was made, but the value of the property as zoned at the time of the taking as it is affected by the probability of a change.”   Budney v. Ives, supra, 89.

Further, “[i]t is the duty of the State, in the conduct of the inquest by which the compensation is ascertained, to see that it is just, not merely to the individual whose property is taken, but to the public which is to pay for it.”  Sean v. School District No. 2, Lake County, 133 U.S. 553, 562, 10 S.Ct. 374, 33 L.Ed. 740.  Textron, Inc. v. Commissioner of Transportation, 176 Conn. 264, 268 (1978).

Mr. Russ, in his appraisal, considered the value of the land and building for the cost approach, resulting in an estimated value of $400,000, and sales comparison method resulting in a value, as of the date of taking, of $415,000.   His final estimate, after reconciling the two methods, was $415,000.

His sales comparables were all essentially identical to the Property.   As he wrote at page 51 of his appraisal.  (Exhibit 1).

The greatest emphasis is placed on analysis of four sales of similar closed service stations with all sales having the pumps and tanks removed with environmental land use restrictions put in place limiting the reuse potential of the buildings.   All sales are identical in this regard to the subject.   Other sales of service stations were researched and inspected and not utilized in my analysis.   These other service stations that are not included in my analysis had the storage tanks and pumps on the ground and operational, and were able to be utilized at the sale date as active retail gas sites.

The Owner presents its Exhibit B, a proposal/contract for new construction work from HI Tech Industries, LLC as a showing that it was seriously proceeding with renovating the property and that it would become a valuable, profitable business.

However, this proposal/contract was dated May 8, 2010, immediately preceding the taking of the property by the State and months after Mr. Alam, representing the Owner, met on the Property on January 12, 2010 with Mr. Russ, the State's appraiser, and became aware that the State was taking the Property.

Further, the proposal/contract was not accepted by the Owner and no other renovation proposal was presented.

This proposal from HI Tech Industries, LLC appears to be based upon the Owner planning to reopen the defunct gas station and auto repair property with a renovated gas station, which would include a new convenience section.   Both of the Owner's appraisers, John LoMonte and Charles Liberti, base their individual appraisal valuations using comparable sales of gas stations having convenience sections that had been operating in conjunction with the gasoline sales successfully at the time of their sale.

The present property, however, is not comparable, since it was not an actively operating business with an established clientele at the time of taking, but an obviously failed business venture based upon gasoline sales and some automotive repairs.   See Exhibit 3.

Further, the appraisals for the Owner are to a great extent based upon the ability and business acumen of the Owner to successfully turn a failed gasoline station, operated by a large, well-known oil company that closed down and sold the gas station, into a successful business.

This method of appraising is speculation of the highest order and is not the basis for determining the value of business property that has failed and closed down.  Budney v. Ives, supra.

The fair market value of the herein property is to be determined by considering all those elements which an owner or a prospective purchaser could reasonably urge as affecting the fair price of the land.  Budney v. Ives, 156 Conn. 83, 88–89.

Further, the valuation date is to be the time of the taking of the property by the Commissioner of Transportation, i.e. June 25, 2010.

The parties having appeared and the court having heard the parties finds that the damages resulting to the Owner, Selina's Family, LLC, by said taking by the Commissioner of Transportation amounted to $430,000 and those damages are to be assessed accordingly.

The court further finds that the sum of $430,000 was deposited by the commissioner with the clerk of this court for the use of the persons entitled thereto on account of the damages to be awarded and that the fair value of the property, as found by this court, and the amount so deposited by the commissioner is $430,000, which amount shall include all claims for interest, costs, appraisal fees, as well as all claims for relocation and moving expenses.

Whereupon, it is adjudged that the damages suffered by the Selina's Family, LLC are assessed in the sum of $430,000.

This sum is the sum as previously assessed and paid by the commissioner as the damages determined and assessed by this court.   This sum is the final amount due to the defendant, Selina's Family, LLC, without further payment of interest, appraisal fees, costs, as well as court costs.

Kremski, J.T.R.

Kremski, Julius J., J.T.R.