BACKES, V. C.
Bill by the Lehigh Valley Railroad Company against John E. Andrus. On final hearing. Matters determined.
Collins & Corbin, of Jersey City, for complainant.
Pitney, Hardin & Skinner, of Newark, for defendant.
BACKES, V. C. On June 5, 1889, John E. Andrus, the defendant, leased to the mediate assignor of the Lehigh Valley Railroad Company, the complainant, his 45-acre tract of waterfront and tidewater land on New York Harbor, at Constable Hook, Bayonne, for the term of 60 years. The rent reserved for the first 20 years was $4,250 per annum, payable quarter-yearly in advance. The rent for each 20-year period thereafter was to be fixed by arbitrators to be selected in manner provided by the lease. In 1909 the periods were reduced to 10 years. In 1919 the arbitration failed, and the complainant filed" this bill to have the rent determined for the 10-year period beginning June 5, 1919. The jurisdiction of the court to settle the rent, in substitution of the arbitration, has been decided. Lehigh Valley Railroad Co. v. Andrus, 112 Atl. 307. The premises were waste lands at the time the lease was made, and the intent of the parties was that the rent, to be fixed by arbitration, from time to time, was to be on that basis. It is agreed that the measure of rentals of unimproved land is a percentage on the valuation of the land. It was contemplated that the railroad company would erect piers and cribbing, and it has; and it was therefore provided in the lease that
"In fixing said rentals the arbitrators shall consider the rental value of the premises excluding the cribbing, piers, and structures or buildings on the piers."
Much expert testimony, as to the value of the land, was given by gentlemen well qualified to testify, who, as usual, differed widely in their opinions and stood loyally by their cause. I find little comfort in what they have said—they are so far apart. One side says the value was not more than $617,331, while the other is just as confident that the value is not less than $1,238,737. Their divergent opinions unbalance the scales woefully. If the verdict were confined to their irreconcilable views, it would be a mere guess of an amount somewhere between the two extremes. Happily I am not put to that, for, pending this litigation, the defendant, Andrus, the owner, sold the demised premises to the Standard Oil Comany for $1,126,125— at the rate of $25,000 per acre—subject to the complainant's lease, and I infer, from the testimony and statements of counsel, that the railroad company was an interested party in the negotiations, as it, at the same time, sold its lease to the Standard Oil Company, and re-leased the land from it for a term of years, and contemporaneous with the negotiations it sold its 145-acre tract, adjoining the demised premises, to the Standard Oil Company for $2,821,448—approximately $19,000 per acre. Here, then, there was a sale to a willing purchaser by willing sellers—an ideal test of value. Budd v. Van Orden, 33 N. J. Eq. 143; Butler Rubber Co. v. Newark, 61 N. J. Law, 32, 40 Atl. 224.
The tract of the railroad company adjoining the demised premises is in its virgin state. The demised premises has the advantage in location, in that it is nearer to deep water—an important factor in the relative values of shore lands—and this to some extent accounts for the difference in price per acre for the two tracts. I adopt the price paid for the demised premises as the value of the land, and as the basis for my calculation of the rental. The improvements referred to in the lease, and which were not to be considered by the arbitrators in their determination, did not enter into the purchase price. The sale was subject to the lease, and the lease provided that upon its expiration the landlord was to take over the piers and cribbing at a price to be fixed by arbitrators.
There were, however, two other improvements which figured in the price, and which the experts on both sides included in their estimates. The railroad company, during its tenancy, extended the upland into the water by filling with earth, and dredged a 30-foot deep channel from the docks on the premises to deep water, permitting direct ocean travel. The extent to which these improvements contributed towards raising the sales price must be considered. The fill amounted to within a fraction of 10 acres, at a cost of approximately $9,000 per acre. The complainant's experts estimate the value of the upland and filled land at $12,000 per acre, and the land under water at $3,000 per acre, and I take it that the cost of the fill is the difference. It is not denied that the premises were enhanced in value to the extent of this outlay. The channel was dug at an expense of $283,705.15, and I assume that the enhancement in the value of the demised premises equaled the cost. That was, also, not disputed on the argument However, in arriving at the price for the Andrus tract, the channel was not looked upon by the Standard Oil Company as alone beneficial to the demised premises. The Andrus property and the Lehigh tract adjoining were bought by it as a unit; the channel would give an outlet to the sea to both. The purchases were interdependent, and the higher price was given for the Andrus property because of the increased utility of the channel to the common ownership of the two tracts. The value of the channel figured as an item in the gross outlay, and consequently the cost must be apportioned to the two tracts per acre (Andrus tract, 45 acres; Lehigh Valley tract, 145 acres), and thus dividing the cost of $283,705.15 by the total acreage results in a fraction less than $1,500 per acre, and the total applicable to the Andrus tract of $67,500. This, and the $90,000 cost of the fill, deducted from the purchase price of $1,126,125, leaves $968,625, and this sum divided by 45 (the Andrus tract acreage) gives the price per acre, $21,525. I think 5 per cent. of the valuation of unimproved realty a fair, if not a generous, return. Counsel will make the exact calculation.
Counsel for the railroad company urged that the prices paid by the Standard Oil Company were higher than the market value, because of the special availability of the tracts to its adjoining plant, and that this element should figure in the reckoning. The Standard Oil Company was undoubtedly the most likely, but by no means the only possible or probable purchaser. Each tract was, of and in itself, ample in area to invite industries commonly carried on in the locality. The negotations were initiated at a time when the Standard Oil Company's business called for an expansion of its plant, but the emergency had passed and the scheme of enlargement had been dropped before the purchases were made. There was no pressing necessity for then acquiring either tract. The Standard Oil Company simply took time by the forelock, and in my opinion, paid no more than any other corporation, having use for and desiring the lands, would have given.