App. Div. 451] First Department, April, 1921. Franklin street of eighty-four and fifty-four one-hundredths feet and extending in depth at right angles to Franklin street eighty-four feet, but being of the width of only forty-four and eighty-one one-hundredths feet in the rear, on which was erected a six-story loft building. From the easterly side of this parcel an irregular piece was taken containing five thousand, five hundred and fifty square feet, leaving an irregular remainder on the west having a frontage on Franklin street of twenty-four and one-half feet and containing two thousand and thirty square feet. It was conceded that the taking worked a total destruction of the building. The award, therefore, was for the value of the land taken and of the building and the damage to the remainder of the parcel. The entire property was leased to the tenant on the 3d of September, 1907, for a term of nine years and seven months ending May 1, 1917. The unexpired period of the lease when title vested in the city was three years and eight months. The rent reserved per annum divided by the number of square feet of flooring space in the building gives the rental per square foot of twenty-two and seven-tenths cents. On the original hearing an expert for the executors testified that the reasonable market value of the property as a whole when title to part of it vested in the city was $193,113, and that the value of the land alone was $112,813, and that the value of the building was $80,300, and the value of the land not taken was $31,240, giving the total damages as $161,873. He valued the land without the building at $16 per square foot. On the total valuation of the parcel as given by him the rent reserved in the lease was only four and one-half per cent. An expert builder called by the executors testified that the value of the building less machinery and elevators was $74,012.28. A machinery expert called by them testified, in substance, that the damage to the machinery was $5,678. An expert for the tenant testified, in substance, that the market value of the lease for the unexpired term over and above the rent reserved was $15,000, and that the fair annual rental value was $13,500 per annum. It appeared on his cross-examination that he arrived at his opinion with respect. to the annual rental value by estimating the total value of the property at $192,000, the land at $98,568 and the building First Department, April, 1921. [Vol. 196 at $93,000, and by calculating that the property should return to the landlord a rental of seven per cent on the valuation. Plainly that was very theoretical and of but little probative force save as it was supported presumably by his knowledge of the adaptibility of the premises and their availability and the demand therefor and the probability with respect to the continuance thereof. An expert called by the city gave as his opinion that the market value of the parcel as a whole including the building was $113,700; and he estimated the value of the land as $77,700 and of improvements as at $36,000 and the value of the land remaining as $25,578. According to his opinion, the total damages were $88,122 which was made up of $52,122 for the land taken and the damages to the remainder and $36,000 for improvements. He took as a unit of valuation $14 per square foot of the land, thus differing $2 per square foot from the expert called by the executors. He was of opinion that the land alone was worth $14 per square foot and on that basis by computation he ascertained the value of the land without the improvements; but in order to ascertain the value of the improvements he went through a theoretical process of reasoning which manifestly would not be applicable to all cases. He considered that the property should yield a gross rental of eight per cent on its valuation and he assumed that the rent reserved was the reasonable rental and, therefore, capitalized it on an eight per cent basis and concluded that the result thus attained would show the market value of the premises as a whole, and from that he deducted what he considered to be the market value of the land at $14 per square foot and concluded that the remainder thus obtained showed the value of the improvements. It is manifest that the correctness of that process of reasoning depends primarily on whether the rent reserved should net a landlord eight per cent on the value of the premises and whether it is and will be the fair annual rental value for the use of the premises, not only for the time being but for a considerable time to come. The fact that a tenant has agreed to pay a specified annual rental for a short period, as here, does not prove this. It would seem that evidence based on general rentals of similar property in the neighborhood would App. Div. 451] First Department, April, 1921. be more cogent evidence of the actual rental value and as to that there was no evidence before the commissioners reopened the hearing. An expert on the value of machinery called by the city testified, in substance, that the market value of the machinery taken was only $3,497.20. It appears that the commissioners personally inspected and viewed the property many times. It was the duty of the commissioners first to determine the market value of the property taken at the time title thereto vested in the city and the damages to the remainder of the parcel in consequence of being separated from the parcel as a whole; and the total of the awards made for the parcel could in no event exceed the two amounts thus to be ascerrained. (Matter of City of New York [Delancey Street], supra.) Were it not for the lease this would have ended the duties of the commissioners with respect to awards for this parcel; but proof having been made that this lease was outstanding and evidence having been offered with respect to the value of the lease for the unexpired term, it became the duty of the commissioners to determine its value and to deduct the amount thereof from the total of the awards for the parcel as a whole and to award it to the tenant. (Matter of City of New York [Delancey Street], supra.) Whether for some unexplained reason they failed to do this originally, or whether they were of opinion that the lease had no value over and above the rent reserved, does not appear. But when objection in that regard was interposed to their tentative report they reopened the hearing and this they were authorized to do (Greater N. Y. Charter [Laws of 1901, chap. 466], §§ 981, 984, as amd. by Laws of 1906, chap. 658, and Laws of 1909, chap. 394; now §§ 1011, 1013, as added by Laws of 1915, chap. 606);* and after hearing the further testimony offered and counsel for the respective parties they made the new awards as already stated. On the rehearing the tenant called a witness not sworn on the original hearing. He testified that the fair rental value was $11,500 per annum and the fair market value of the lease for the unexpired period was $9,000 and that seven per cent gross rental would be a *See Laws of 1915, chap. 606, §§ 1, 3.- [REP. First Department, April, 1921. [Vol. 196 reasonable income for the property. He was cross-examined by the city but not in behalf of the executors, although the attention of their counsel was specifically drawn by the commissioners to this point at the time and an opportunity for such cross-examination was afforded. The witness showed familiarity with the prevailing rate of rentals for similar property in the neighborhood and his opinion to the effect that the rental value of this property was thus considerably greater than the rent reserved in the lease was largely predicated thereon. The record shows that some of the witnesses indulged in theories with respect to determining the market value of the land and of the buildings and of the lease for the unexpired period which would have rendered their testimony incompetent as direct evidence but which might properly have been drawn out on cross-examination to ascertain the basis on which their opinions were predicated and to test the value thereof; but the record is barren of any evidence tending to show that the commissioners proceeded on any erroneous theory or principle or on any principle other than those correctly laid down in Matter of City of New York (Delancey Street) (supra). It is to be inferred that after taking this additional evidence and hearing further arguments, the commissioners determined and allowed their determination to become known, to award the tenant $5,000 and to reduce the award originally made to the executors by $2,000, and evidently as a matter of precaution they issued an order to the executors to show cause why that should not be done. On the return of the order to show cause all parties in interest appeared. It was asserted at the outset by counsel for the executors that the commissioners had determined the total valuation as $124,285 and that they had "capitalized" this at seven per cent, making a rental value of $8,700, by which was doubtless meant that an income of seven per cent on that valuation would require a rental of $8,700, and that his understanding was that the rent reserved being greater than that amount, no award was made to the lessee and that as a result of the rehearing the commissioners had increased the total value of the property to the extent of $3,000. One of the commissioners expressed disagreement with part of this statement and none of them acquiesced in any of it; and App. Div. 451] First Department, April, 1921. the chairman answered it by stating that the commissioners had met and considered the objections interposed by the tenant to their failure to make an award to it and had heard and considered the additional evidence offered in behalf of the tenant and based their final award to the tenant thereon. Counsel for the executors in discussing the matter with the commissioners indulged in the assumption that the awards had been arrived at as the result of calculations based on the capitalization of rentals and claimed that in the case of the award to the executors, the capitalization was on the rent reserved and in the case of the award to the tenant, it was on an assumed rental value per annum of $10,050. It was not required that the original award should be separated so as to show separately the award made for the land and for the improvements and for the damages to the remainder; and presumably it did not so show; but on the rehearing counsel for the executors asserted that the commissioners ascertained that the valuation of the parcel as a whole was $124,285. To this one of the commissioners replied as follows: "I do not know about the $285. I haven't any such figure. I figure that the land in the original was $88,800 and I figure that the building was $36,000," and said that his memorandum showed that they considered that the total value was $124,800. At this point counsel for the executors asserted that the commissioners found that the annual rental value was $8,700 and that they had capitalized that at seven per cent and thus arrived at said total valuation, but the same commissioner thereupon remarked, "I haven't any notice of that," and the other commissioners said nothing. Counsel for the executors further stated that the effect of the new finding by the commissioners that the total value was $3,000 more than that originally found by them was to increase the annual rental by about $200 per annum, which would make it $8,900 per annum or $150 per annum more than the rent reserved which would give the value of the unexpired term of the lease as about $550. He did not so state, but evidently his theory was that a fair return on the additional valuation of $3,000 would have added to the rental valuation about $200 and on that theory he asked how, therefore, could the tenant be awarded $5,000. Thereupon the chairman of the com |