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City of Hartford v. CBV Parking Hartford, LLC

Court of Appeals of Connecticut

September 11, 2018

CITY OF HARTFORD
v.
CBV PARKING HARTFORD, LLC, ET AL.

          Argued April 4, 2018

         Procedural History

         Appeal from the statement of compensation filed by the plaintiff in connection with its taking by eminent domain of certain real property owned by the named defendant et al., brought to the Superior Court in the judicial district of Hartford and tried to the court, Hon. Constance L. Epstein, judge trial referee, who, exercising the powers of the Superior Court, rendered judgment increasing the amount of compensation, from which the plaintiff appealed; thereafter, the court granted the revised motion for an award of interest and for offer of compromise interest filed by the named defendant et al., and the plaintiff filed an amended appeal. Reversed in part; further proceedings.

          Daniel J. Krisch, with whom was Michael C. Collins, for the appellant (plaintiff).

          Daniel J. Klau with whom was R. Bartley Halloran, for the appellees (named defendant et al.).

          Palmer, McDonald, Robinson, D'Auria, Mullins and Kahn, Js. [*]

          OPINION

          McDONALD, J.

         The plaintiff, the city of Hartford, exercised its power of eminent domain to take certain property owned by three defendants[1] to advance the city's redevelopment plan that included the construction of a minor league baseball stadium in close proximity to the defendants' property. The defendants, believing that the compensation offered by the city did not account for the increased value and prospects for their property due to the planned ballpark, appealed from the statement of compensation filed by the city. The trial court sustained the appeal, increasing the amount of compensation by approximately $3 million and ordering the city to pay interest at the rate of 7.22 percent. The city appeals from that judgment, claiming that the trial court (1) improperly valued the property on the basis of an unreasonable assumption that the defendants would assemble their parcels with adjoining properties owned by the city for commercial development, and (2) exceeded its authority under General Statutes § 37-3c in its award of interest. We disagree with the city's first claim but agree with its second claim.

         The record reveals the following facts, found by the trial court or otherwise undisputed. The property is located in an area north of the downtown area of the city (north downtown) and is comprised of fourteen tax lots that form three distinct parcels, each of irregular shape and covering only part of a city block (collectively, property). For purposes of this case, the property has been designated as Parcels A, B, and C.[2] Parcel A is located directly across from the Dunkin Donuts Park minor league baseball stadium (ballpark) on Main Street, constructed after the taking at issue. Parcel B is located two blocks south of the ballpark on the corner of Ann Uccello and Chapel Streets. Parcel C is located diagonally across from the ballpark on the corner of Main and Pleasant Streets. Collectively, the property is 2.89 acres. Prior to the taking, the three parcels were being used as parking lots. The parcels are situated in areas of north downtown that were zoned as either B-1 or B-2, the most permissive zoning categories in the city, permitting commercial and multifamily uses.

         North downtown, due to its separation from the core downtown area by Interstate 84 (I-84), has historically become a separate entity from the downtown. It largely did not benefit from increased commercial development that took place starting in the late 1990s that transformed and reenergized the core downtown. Prior to and continuing through the time of the taking, north downtown contained many rundown and/or abandoned buildings and lots, as well as large, disintegrating parking areas leased by businesses on the south side of I-84 for their employees' use.

         Starting in 2003, the city undertook a series of efforts aimed at changing the fortunes of north downtown. In 2003 and 2004, it constructed or renovated several buildings in that area, including a Public Safety Complex, the Hartford police headquarters, and the Capitol Preparatory Magnet School. By early 2009, city officials approved a 2008 redevelopment plan with the stated goal of creating an opportunity for educational, commercial, and residential development in north downtown. The property was included in the area designated for such development. The plan called for the acquisition of properties by purchase, or eminent domain if necessary, to accomplish its development goals. In furtherance of these goals, in 2010, the city acquired a parcel of land adjoining one side of Parcel A and demolished an eyesore building on it commonly known as the ‘‘Butt Ugly'' building (Ugly lot). The city acquired other properties in the area, but definitive redevelopment plans had not yet materialized.

         In July, 2012, a financially distressed seller sold the property under a single deed for approximately $374, 000 to the defendant CBV Parking Hartford, LLC, a subsidiary of CBV Parking Holding, LLC (CBV). The sale was not an arm's-length transaction, and the sale price was well under the city's valuation for purposes of property tax assessment.

         Pennock J. Yeatman, the sole owner of CBV, is an experienced investor and developer of real estate. Prior to the purchase of the property, Yeatman had reviewed the city's 2008 plan and researched any impediment to redevelopment of the property. After he obtained the property, Yeatman took several steps to facilitate the sale or redevelopment of the property. He divided the property into three parcels to make the option of individual sales readily available, executing conveyances so that each of the three defendant subsidiaries of CBV held one. See footnote 1 of this opinion. He also negotiated the elimination of ‘‘gangway'' rights or easements, [3]which he viewed as a potential obstacle to assemblage of the property with adjoining properties. CBV's business plan identified the city as ‘‘the logical buyer'' for Parcel A, viewing the asset as a ‘‘long-term assemblage'' with adjoining properties owned by the city for a single lot for redevelopment.

         By late 2012, the city had become the owner of both of the two smaller properties that adjoined Parcel A: a LAZ parking lot on one side of Parcel A that the city had purchased in October, 2012, for $1, 280, 000, and the Ugly lot on the other side of Parcel A that it previously had acquired and razed for a total cost of $1, 225, 000.

         In May, 2013, the city offered to buy Parcels A, B, and C for $1, 170, 000. CBV rejected the offer, indicating that the property was considerably more valuable and that CBV had no financial or other pressures requiring immediate sale. Negotiations continued with offers and counteroffers.

         In the meantime and unbeknownst to CBV, the city had decided that the construction of a ballpark could be the catalyst for further redevelopment in north downtown. On July 1, 2014, the city solicited proposals for a public/private partnership for both the construction of the ballpark and the mixed-use development of its environs, including the property.

         By the close of the August 1, 2014 deadline for submissions, the city had received three proposals. It selected the one prepared by DoNo Hartford, LLC (DoNo), in collaboration with two other entities. DoNo's proposal presented a concept plan for a ‘‘ ‘dynamic new neighborhood' '' for north downtown that included the ballpark, retail businesses, restaurants, and 600 residential units. Under the proposal, Parcels A, B, and C were to be assembled with adjoining properties for mixed-use development. The proposal indicated that DoNo had secured letters of interest for the construction of a grocery store and a brewery with a rooftop beer garden. DoNo supported its proposal with a market study, which concluded: ‘‘ ‘Given the current dynamics between employment, the state of housing opportunities in outlying areas of Hartford, and the tremendous opportunity for placemaking around the ballpark, the necessary conditions are in place to redefine what it means to live downtown. . . . The subject site represents an opportunity to develop and deliver a [mixed-use] neighborhood at the exact inflection pointof downtown redevelopment.' ''

         Neither CBV nor Yeatman submitted a proposal, and the city did not solicit one from either. Yeatman claimed to have learned about the ballpark proposal from a Hartford Courant newspaper article published in July, 2014, and the request for development proposals sometime thereafter. According to Yeatman, the one month submission deadline was unusually short by industry standards, and he had inadequate time to complete a proper proposal for submission.[4]

         In August, 2014, the city's Court of Common Council approved a resolution authorizing the purchase of the property for $2.5 million, a price to which the parties had previously tentatively agreed. However, in light of the changing landscape, Yeatman countered with a proposal to sell only Parcel A to the city, which would allow the city to assemble the entire block immediately across the street from the ballpark but would allow Yeatman to develop Parcels B and C himself. The city rejected this offer.

         In November, 2014, the city exercised its power of eminent domain to take the entire property, filing a statement of compensation of $1, 980, 000 for the taking. The defendants appealed to the Superior Court, claiming that the amount of compensation was ‘‘inadequate.'' In a trial to the court, both the city and the defendants each presented two appraisals and supporting expert testimony; all of the appraisals were based on a comparable sales methodology.

         The city's appraisals valued the property at the time of the taking at $1, 900, 000 and $2, 010, 000, respectively. Both appraisals assumed continuation of the property's present use as parking lots. The court concluded that both appraisals suffered from the same ‘‘astounding shortcoming''; neither took into account the ‘‘major change'' of the announced ballpark and expectations for surrounding development.

         The defendants' appraisals, prepared by Michaud Company (Michaud) and J.F. Mulready Company, LLC (Mulready), valued the property at $4, 810, 000 and $5, 220, 000, respectively. The court rejected the higher Mulready appraisal, which was premised on research related to the effect that new minor league ballparks had on surrounding land values in three other cities, two in North Carolina and one in Indiana. The court found that Mulready's assumption that the positive effects of those developments would similarly follow in Hartford, despite current difficulties remaining in Hartford, was ‘‘much too enthusiastic . . . .'' It also concluded that ‘‘the research . . . does not support the singularly successful picture'' reflected in Mulready's valuation.

         The court found the Michaud appraisal of $4, 810, 000 the ‘‘most persuasive.'' The court set forth the following reasons. That appraisal rejected the ‘‘as is'' approach of the city's appraisals because they did not reflect the highest and best use of the property. The Michaud appraisal also took into account the ‘‘ ‘cloud' '' of the city's eminent domain power, which could dissuade competitive buyers and in turn depress value. Significantly, with regard to highest and best use, the court noted: ‘‘The Michaud report relies on the concept of ‘assemblage, '[5] contemplating that the LAZ property and the Ugly [lot] would be joined with the Main Street exposure of the . . . property. Indeed, that is exactly the basis on which DoNo premised its proposal. CBV could have made this assemblage, but was not afforded the opportunity to do so. The Michaud analysis concludes that it was reasonably probable that the property would be assembled, and if the city did not take the parcel, the market would respond. CBV could have developed this property. CBV could have developed Parcels B and C, with the city obtaining [Parcel] A. CBV could have purchased the LAZ and Ugly lots. One of the things that the Mulready findings underscore is that this scenario is exactly what occurred in the three cities studied by Mulready.'' Finally, the court pointed to the per square foot price that the city had paid for the two lots adjacent to Parcel A before the ballpark was announced, which, if applied to the property, would have yielded a valuation of $3, 245, 298 or $5, 339, 933.[6] In conclusion, the court sustained the defendants' appeal, holding that the fair market value of the property at the time of the taking was $4, 810, 000.

         Approximately two weeks after the court issued its decision, upon the defendants' motion, the court awarded interest at a rate of 7.22 percent. The city appealed from the trial court's judgment to the Appellate Court, and we thereafter transferred the appeal to this court. See General Statutes § 51-199 (c); Practice Book § 65-1. On appeal, the city challenges both the amount of compensation and the rate at which the trial court awarded interest.

         I

         The city claims that the court improperly valued the property on the basis of an unreasonable assumption that the defendants would assemble the property with adjoining properties owned by the city for commercial development. In response, the defendants contend that the city's appeal is moot because it challenges only one of two independent grounds that support the trial court's fair market value determination. Alternatively, they contend that, if the ...


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