| Matter of Central Hudson Gas & Elec. Corp. v Assessor of Town ofNewburgh |
| 2010 NY Slip Op 04381 [73 AD3d 1046] |
| May 18, 2010 |
| Appellate Division, Second Department |
| In the Matter of Central Hudson Gas & Electric Corporation,Respondent-Appellant, v Assessor of Town of Newburgh et al.,Appellants-Respondents. |
—[*1] Hiscock & Barclay, LLP, Albany, N.Y. (Mark D. Lansing and Lawrence A. Zimmerman ofcounsel), for respondent-appellant.
In proceedings pursuant to Real Property Tax Law article 7 to review real property taxassessments for the tax years 2001 through 2004, the Assessor of the Town of Newburgh, theBoard of Assessment Review of the Town of Newburgh, and the Town of Newburgh appeal, aslimited by their brief, from (1) so much of an order of the Supreme Court, Orange County(LaCava, J.), dated March 2, 2007, as, in effect, granted the petitioner's motion to strike thatportion of the trial appraisal report of the Assessor of the Town of Newburgh, the Board ofAssessment Review of the Town of Newburgh, and the Town of Newburgh, concerning certaineasements held by it, and (2) so much of a judgment of the same court dated December 23, 2008,which, after a nonjury trial, granted the petitions to the extent of awarding a reduction in the taxassessments for the years 2001 through 2004, and directed that the assessment rolls be correctedand any tax overpayments be refunded with interest, and the petitioner cross-appeals from thesame order and the same judgment.
Ordered that the cross appeals are dismissed as abandoned; and it is further,
Ordered that the appeal from the order is dismissed; and it is further,
Ordered that the judgment is reversed, on the law, the petitioner's motion to strike thatportion of the trial appraisal report of the Assessor of the Town of Newburgh, the Board ofAssessment Review of the Town of Newburgh, and the Town of Newburgh, concerning certaineasements held by it is denied, the order is modified accordingly, and the matter is remitted forfurther proceedings in accordance herewith, and thereafter for a new determination on thepetitions; and it is further,
Ordered that one bill of costs is awarded to the Assessor of the Town of Newburgh, theBoard of Assessment Review of the Town of Newburgh, and the Town of Newburgh.[*2]
The appeal from the intermediate order must bedismissed because the right of direct appeal therefrom terminated with the entry of judgment inthe action (see Matter of Aho, 39 NY2d 241, 248 [1976]). The issues raised on theappeal from the order are brought up for review and have been considered on the appeal from thejudgment (see CPLR 5501 [a] [1]).
The petitioner, Central Hudson Gas and Electric Corporation (hereinafter CHGE),commenced these proceedings pursuant to Real Property Tax Law article 7 against the Assessorof the Town of Newburgh, the Board of Assessment Review of the Town of Newburgh, and theTown of Newburgh (hereinafter collectively the Town), to review real property tax assessmentsfor the years 2001 through 2004 of, inter alia, tax parcels consisting of gas and electrictransmission lines, three substations, and a switching station. The petitions alleged that theTown's assessments of its properties were illegal, unequal, and unconstitutional, resulting inovervaluation of its properties. A nonjury trial was held, after which the Supreme Court, havingfound that the properties were overvalued, directed that the assessment rolls be amended inaccordance with the fair market values it had calculated based on the evidence at trial, and thatany overpayments of taxes be refunded with interest. The Town appeals from this judgment aswell as from a pre-trial order striking the portion of its trial appraisal report concerning certaineasements held by CHGE.
While a locality's tax assessment is presumptively valid, it may be overcome by a petitioner'ssubmission of substantial evidence demonstrating overvaluation (see Matter of NiagaraMohawk Power Corp. v Assessor of Town of Geddes, 92 NY2d 192, 196 [1998]; Matterof FMC Corp. [Peroxygen Chems. Div.] v Unmack, 92 NY2d 179, 187 [1998]). Substantialevidence "will most often consist of a detailed, competent appraisal based on standard, acceptedappraisal techniques and prepared by a qualified appraiser" (Matter of Niagara MohawkPower Corp. v Assessor of Town of Geddes, 92 NY2d at 196). "[I]n answering the questionwhether substantial evidence exists, a court should simply determine whether the documentaryand testimonial evidence proffered by petitioner is based on 'sound theory and objective data'rather than on mere wishful thinking" (Matter of FMC Corp. [Peroxygen Chems. Div.] vUnmack, 92 NY2d at 188 [citation omitted], quoting Matter of Commerce Holding Corp.v Board of Assessors of Town of Babylon, 88 NY2d 724, 732 [1996]).
On appeal, the Town argues that CHGE failed to rebut the presumption of validity of thesubject tax assessments. In support of that argument, it asserts that CHGE's expert appraisal ofthe depreciation of the subject properties employed flawed methodology. The opinion of CHGE'sexpert appraiser as to depreciation was reached by (1) applying the age-life approach usingaverage service lives independently calculated after review of regional and national depreciationstatistics databases, CHGE own reported average services lives contained in submissions to theFederal Energy Regulatory Commission, and the opinion of an expert professional engineer whoinspected the subject properties as to the useful lives of the subject properties, and (2) deductingfor negative net salvage. This is a "recognized appraisal method" (Matter of Century Realty, Inc. vCommissioner of Fin., 15 AD3d 652, 653 [2005]; see Matter of Niagara Mohawk Power Corp. v Town of MoreauAssessor, 46 AD3d 1147 [2007]; Matter of Niagara Mohawk Power Corp. v City ofCohoes Bd. of Assessors, 280 AD2d 724 [2001]), based upon "sound theory" that wasemployed using "objective data" (Matter of FMC Corp. [Peroxygen Chems. Div.] vUnmack, 92 NY2d at 188 [internal quotation marks omitted]) and, thus, yielded substantialevidence of overvaluation (see Matterof Niagara Mohawk Power Corp. v Town of Moreau Assessor, 46 AD3d 1147 [2007];Matter of Niagara Mohawk Power Corp. v City of Cohoes Bd. of Assessors, 280 AD2d724 [2001]; see also Matter of Century Realty, Inc. v Commissioner of Fin., 15 AD3d at653).
Further, contrary to the Town's contention, CHGE did present qualified expert testimony torebut the presumption of validity. While the Town is correct that a working knowledge ofconstruction costs and methods is essential to calculating reproduction cost (see Matter ofTennessee Gas Pipeline Co. v Town of Sharon Bd. of Assessors, 298 AD2d 758, 759 [2002];Matter of Guilderland Ctr. Nursing Home v Town of Guilderland Bd. of AssessmentReview, 195 AD2d 902, 903 [1993]; Matter of Northville Indus. Corp. v Board ofAssessors of Town of Riverhead, 143 AD2d 135, 137 [1988]), the testimony of CHGE'sexpert, Charles Jerominski, whose qualifications the Town challenges, was not relied upon bythe Supreme Court with respect to analyzing reproduction cost. As to that analysis, CHGEpresented the testimony of a professional engineer who, it is undisputed, possessed the requisiteknowledge.[*3]
The Supreme Court erred, however, in granting CHGE'spretrial motion to strike the portion of the Town's trial appraisal report concerning easementsCHGE possessed in the land in which the subject transmission lines were placed. The easementsare not defined as real property (see RPTL 102 [12]; cf. Matter of Niagara MohawkPower Corp. v Cutler, 109 AD2d 403 [1985], affd 67 NY2d 812 [1986]; Matterof City of New York v Schwartz, 36 AD2d 402 [1971]) and, thus, are not separatelyassessable for tax purposes (see Matter of Manhattan Cable TV Servs., Div. of Sterling Info.Servs. v Freyberg, 49 NY2d 868, 869 [1980]; Matter of Crystal v City of Syracuse, Dept.of Assessment, 47 AD2d 29, 30 [1975], affd 38 NY2d 883 [1976]; Matter ofNiagara Mohawk Power Corp. v Cutler, 109 AD2d 403 [1985]; Matter of City of NewYork v Schwartz, 36 AD2d 402 [1971]). Nonetheless, the parties agreed that the appropriatemethod of valuation of the subject transmission lines was the reproduction cost less depreciationmethod. Application of the cost approach to valuation requires "the inclusion not only ofpayments for material, equipment, labor and other obvious physical ingredients which godirectly into construction, but also of those charges which may be termed indirect or less direct,such as . . . [the] cost of procuring necessary licenses and the miscellany of other essentialoverhead or incidental expenses" (Matter of City of New York [Salvation Army], 43NY2d 512, 516 [1978]). This is because "a fair and realistic appraisal of reproduction costs mustembrace in its reckoning all expenditures that reasonably and necessarily are to be expected inthe re-creation of a structure so idiosyncratic as to leave no alternative method by which tomeasure fair compensation" (id. at 516). Thus, while the easements are not subject to taxas real property, the costs of acquiring the easements, which are costs undeniably necessary tore-creation of functioning transmission lines, are properly considered in calculating thereproduction cost of the subject transmission lines (see Matter of Onondago County WaterDist. v Board of Assessors of Town of Volney, 67 Misc 2d 797, 801-802 [1971], revd onother grounds 45 AD2d 258 [1974], and 47 AD2d 707 [1975], revd 39NY2d 601 [1976]; cf. Matter of City of New York [Salvation Army], 43 NY2d at 516).
Accordingly, while we reject the Town's challenge to the Supreme Court's calculation ofdepreciation, and its contention that the petitions should have been dismissed, the judgment mustbe reversed insofar as appealed from and the case remitted to the Supreme Court, OrangeCounty, for consideration of evidence of the cost of acquiring any easements necessary to thereproduction of the subject transmission lines and, in light of any such evidence, reconsiderationof the calculation of reproduction cost relative to the assessed transmission lines, and thereafterfor a new determination of the petitions.
In addition, the Town correctly argues that the Supreme Court erred in assessing tax parcels646-9999-107.700-1012, 646-9999-107.700-1071, and 72-8-2, for tax years 2001 through 2004,at a value less than that requested in the petition, in violation of RPTL 720 (1) (b). We rejectCHGE's argument that the provision of RPTL 720 (1) (b) providing that "an assessment may notbe ordered reduced to an amount less than that requested by the petitioner in a petition" isunconstitutional on its face because it violates the mandate of the NY Constitution, article XVI,§ 2, that "[a]ssessments shall in no case exceed full value." The challenged provision ofRPTL 720 (1) (b) does not affirmatively allow a municipality to tax a property at an amountgreater than full value (cf. Matter of Commerce Holding Corp. v Board of Assessors of Townof Babylon, 88 NY2d at 729). Rather, it places a "condition[ ]" upon "the procedure bywhich aggrieved taxpayers obtain . . . judicial relief" (Matter of Sterling Estatesv Board of Assessors of County of Nassau, 66 NY2d 122, 125 [1985]), by essentiallyprecluding a petitioner from proving a value lower than that pleaded in the petition (see W.T.Grant Co. v Srogi, 52 NY2d 496, 513 [1981] [describing operation of the rule nowexpressed by RPTL 720 (1) (b) as a "pleading technicality"]). Thus, like other proceduresrequired by RPTL article 7 to obtain judicial relief for tax overvaluations (see e.g. RPTL702 [statute of limitations]), the challenged provision of RPTL 720 (1) (b) was properly enactedin satisfaction of the Legislature's responsibility to provide for "review . . . ofassessments for purposes of taxation" (NY Const, art XVI, § 2).
Therefore, if, upon remittal, the Supreme Court recalculates the value of the subjectproperties based upon a reconsideration of reproduction cost, the new valuations should not beless than those requested in the petitions (see RPTL 720 [1] [b]). In the event that suchrecalculation is not shown to be warranted, the Supreme Court should modify the valuations oftax parcels 646-9999-107.700-1012, 646-9999-107.700-1071, and 72-8-2, to the amounts setforth in the petitions relative to these tax parcels for the tax years 2001 through 2004.[*4]
The parties' remaining contentions with respect to theTown's appeal are without merit.
The cross appeals must be dismissed as abandoned, as the petitioner did not raise anyarguments relating to the order or the judgment in its brief (see Matter of West Bushwick Urban Renewal Area Phase 2, 50 AD3d695, 696 [2008]; M & W Registry,Inc. v Shah, 46 AD3d 771 [2007]; see also 22 NYCRR 670.10-c). Skelos, J.P.,Austin, Roman and Sgroi, JJ., concur.
Motion by the Assessor of the Town of Newburgh, the Board of Assessment Review of theTown of Newburgh, and the Town of Newburgh on appeals and cross appeals from an order anda judgment of the Supreme Court, Orange County, dated March 2, 2007, and December 23,2008, respectively, to dismiss the cross appeals, in effect, as abandoned, and to strike the replybrief of Central Hudson Gas and Electric Corporation as constituting an unauthorized surreply.By decision and order on motion of this Court dated February 25, 2010, the motion was held inabeyance and referred to the panel of Justices hearing the appeals and cross appeals fordetermination upon the argument or submission thereof.
Upon the papers filed in support of the motion and the papers filed in opposition thereto, andupon the argument of the appeals and cross appeals, it is
Ordered that the branch of the motion which was to dismiss the cross appeals from the orderand the judgment, in effect, as abandoned is denied as academic in light of our determination onthe appeals and cross appeals; and it is further,
Ordered that the branch of the motion which was to strike the reply brief of Central HudsonGas and Electric Corporation is granted, and the reply brief of Central Hudson Gas and ElectricCorporation is stricken and has not been considered on the appeal. Skelos, J.P., Austin, Romanand Sgroi, JJ., concur.