Diocese of Buffalo v. State of New York, 18 N.Y.2d 41 (1966)

In eminent domain cases involving cemetery land, the fair market value should be determined considering its highest and best use (cemetery purposes), discounting future revenues using an Inwood factor that reflects investment risk, and accounting for development, sales, and maintenance costs.

Summary

The Diocese of Buffalo sought compensation for land appropriated by the State of New York and the Power Authority of the State of New York for highway and power project purposes. The appropriated land was part of the Gate of Heaven Cemetery. The Court of Claims determined the value of the land based on its use for cemetery purposes, projecting future revenues from grave sales and discounting them to present value. The Appellate Division modified the award by adjusting the Inwood factor, reflecting a 6% rate of return. The Court of Appeals affirmed, holding that the valuation was reasonable and supported by the evidence, with the Inwood factor appropriately determined by the court, not solely by expert testimony.

Facts

The Diocese of Buffalo operated the Gate of Heaven Cemetery since 1942. The State and the Power Authority appropriated portions of the cemetery land bordering Military Road. The appropriated area was undeveloped but intended for future grave sites. The cemetery was bordered by Holy Trinity Cemetery to the north and Riverdale Cemetery to the south. The key factual dispute revolved around the timing of the land’s development for cemetery use and the appropriate discount rate to apply to future revenues.

Procedural History

The Diocese of Buffalo filed claims in the Court of Claims seeking compensation. The Court of Claims awarded damages based on projected cemetery use. The Appellate Division modified the award by increasing the Inwood factor from 4% to 6%, thereby reducing the compensation. Both the Diocese and the State/Power Authority appealed to the Court of Appeals.

Issue(s)

1. Whether the highest and best use of the appropriated land should be considered residential instead of cemetery purposes.
2. Whether the Court of Claims erred in estimating the period for selling graves and computing net income.
3. Whether the Appellate Division erred in using a 6% Inwood factor instead of a higher rate of return.
4. Whether the claimant is entitled to consequential damages for the loss of access to Military Road.

Holding

1. No, because the surrounding land was primarily used for cemetery purposes, making residential use unlikely.
2. No, because the Court of Claims’ findings regarding the sales period and net income calculation were supported by evidence.
3. No, because the Appellate Division has the discretion to determine the appropriate Inwood factor based on evidence, and 6% was a reasonable rate of return.
4. The Court upheld the award of consequential damages for loss of access.

Court’s Reasoning

The Court of Appeals affirmed the Appellate Division’s decision, finding that the valuation was supported by evidence and that no errors of law were made. The court emphasized the factual nature of the disputes, particularly regarding the timing of land development and the appropriate discount rate. The court deferred to the Appellate Division’s judgment on the Inwood factor, stating that the determination of a sufficient rate to arrive at a full and fair damage award is for the trial court or the Appellate Division, not solely for expert witnesses. The court noted that the Appellate Division reasonably concluded that the claimant could prudently invest at 6%. The court also rejected the argument that the cemetery’s non-profit status warranted a lower discount rate, stating, “In the quest for the ‘highest and best use’ value there is merit in the argument that, where property of a well-established cemetery with steady patronage has been appropriated, the loss is in fact greater than that in the case of a new cemetery and the cemetery owners are to be compensated accordingly.”