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The Use of Prior Appraisals in Condemnation
and Tax Certiorari Cases
By Michael Rikon
The Nature of an Appraisal
In the course of any dealing with real property, a fundamental
question for consideration by all parties is the valuation
of the subject. 1
An appraisal of value is an estimate. It's an opinion
and nothing more. It requires professional expertise, as well
as an understanding of the application of certain methods
and techniques, the reliability of which depends upon the
basic competence and integrity of the appraiser, and upon
the soundness and skill with which the appraiser processes
pertinent data.
Appraisal is defined as the act or process of estimating
value. Appraisers perform analysis and render opinions or
conclusions relating to the nature, quality, value or utility
of specified interest in, or aspects of, identified real estate.
Real estate appraisal involves selective research in appropriate
market areas; the assemblage of pertinent data; the use of
appropriate analytical techniques; and, the application of
knowledge, experience and professional judgment to develop
an appropriate solution to an appraisal problem. 2
The goal of an appraisal is to establish value.3
Value is the sum that the average purchaser is justified in
paying for all the future benefits arising from ownership.4
The appraiser, we are told,
is not expected to estimate the exact value of any given
property on any particular date, since no one is capable of
such a feat or could prove the absolute accuracy of his estimate
if the thought himself so capable. His value conclusion is,
however, expected to be consistent with the probable value
of the property, and this probable value must be supported
by facts and a logical analysis of these facts.5
A discussion of the various approaches used in valuing real
property is outside the scope of this article; nevertheless,
it should be mentioned that, "great strides have been
made in perfecting the art of property valuation. . . ."6
An Admission
An admission has been defined by Dean Prince, in a leading
treatise on evidence, as "an act or declaration of a
party, or his representative or predecessor in interest, which
constitutes evidence against the party at trial. As a general
rule, any declaration or conduct of a party which is inconsistent
with his position on trial may be given in evidence against
him as an admission."7
An admission has been defined as including ". . . any
statement of fact made by a party which is against his interest
or unfavorable to the conclusion which he contends or is inconsistent
with the facts alleged by him."8
Can an admission, then, be in the form of an opinion? Although
an admission in the form of an opinion is sometimes admissible
when made by a party9, the better rule
is that a pure opinion is not admissible as an admission.
An opinion which consists of merely surmise or suspicion has
been held not competent.10 Clearly,
an admission must consist of a material fact made by a party.
The cases which allow opinions as admissions rely on statements
which are not really opinions but exclamations of fact.11
Here lies the critical distinction: An opinion is a belief
that is not based on certainty. Anyone who has worked with
experts, whether they be appraisers or engineers, should know
that an opinion may well be far from fact; and opinions vary
from expert to expert.
Even if an opinion may be said to be an admission, the rules
of evidence require that it be made by a party to the action,
or be made by one who is in privity with, or an agent of,
a party. There is one other possible exception, which is adoption
of the alleged admission by the party to the litigation.12
This last exception is the only possible vehicle for reception
of an appraisal as an admission.
The appraiser, it is apparent, is never a party to the litigation.
He or she is an expert, rendering an opinion of value for
a fee. The expert must render professional services without
advocacy for the client's interests or the accommodation
of the appraiser's own interests.13This is
not to say that subjective opinions in the guise of objectivity
are still not made by appraisers in the employ of both sides.
The courts have commented on this unwise practice more than
once.14
The appraiser's opinion of value is not factual. Certainly,
the conclusion should be premised on facts. Indeed, rare is
the appraisal that does not provide detailed information and
graphic representation of the thought process of the expert
which leads to the ultimate conclusion of value. Each jurisdiction
may have separate rules which require the presentation of
more or less detailed factual information to support the appraisal.
One thing is certain, however. The expert testimony or opinion
of the valuation expert is never conclusive and must be tested
by cross-examination. There is no rule of law which requires
controlling effect or influence to be given to the opinion
testimony of expert witnesses, nor which requires the Court
and jury to accept it in the place of their own judgments,
merely because of the special knowledge of the witnesses concerning
the matters on which they give their testimony.15
It is interesting to note the Uniform Eminent Domain Code
Rule which provides, "[a] valuation witness qualified
under Section 1103(a) may consider as the basis for his opinion
of value any nonconjectural matters ordinarily relied on by
experts in forming opinions as to the fair market value of
property, whether or not they are admissible in evidence."
16
Whatever governmental agency is the condemning authority,
one thing is certain: The property which has been condemned
has been studied prior to the exercise of the sovereign's
power of eminent domain. The study, in 95 to 100 percent of
the cases, will include appraisal of the individual parcels
about to be assembled. The primary purpose of this prior appraisal
is for budge allocation and, more importantly, commitment
and eventual reimbursement from a higher sovereignty for the
monies expended in the acquisition. There is also the possibility
that a parcel has been appraised at one stage or another by
different agencies of the condemnor. Also to be considered
is that in all federally financed takings, the Department
of Housing and Urban Development will require two appraisals
to be made by competent, independent appraisers; and then
the condemnor will be required to attempt to purchase the
properties prior to taking them by eminent domain.
For litigation purposes, there will be one appraiser selected;
usually he or she will be on of the two who made pre-vesting
appraisals.17 It is rare when there are no changes made in the
trial appraisal. Real estate values change, and there is sometimes
a time gap of five years from the pre-vesting to vesting appraisals.18
Once the appraisal is submitted for litigation, it is often
reviewed in light of appraisal theory to check on its fundamental
soundness. The appraisal is also reviewed by the trial attorney,
who may give legal instructions which will totally change
the values found.
The problem of prior appraisals in condemnation claims is
not exclusively within the domain of the government. The claimant
or petitioner may have several appraisals prepared by different
appraisers or by the same appraiser.
Judicial Treatment of Appraisals
An appraisal has been described by the United States Supreme
Court as an "informed guess,"19 which becomes evidence
only when it is offered from the stand and is subjected to
the clarifying processes of direct and cross-examination.20
If the appraisal is properly exchanged, the foundation laid,
and the appraisal is received in evidence, is still a must
meet certain fundamental tests by the Court.21 Also to be considered
is that an erroneous theory of valuation presents a question
of law.22 Case law has consistently held that the trial court's
award must be within the range of competent expert testimony.
Likewise, the various components of an award must be based
on the appraisal, or otherwise supported by independent evidence
and satisfactorily explained.23 While a court may not make an
independent appraisal unsupported by the record,24 it does,
however, find value as opposed to the appraiser who estimates
value; and if this is the case, how can an appraisal be an
admission when it undergoes this judicial metamorphosis?25
The Present Posture of the Courts
In New York, if an appraisal is prepared solely for litigation,
it is usually not obtainable in any way by the opponents except
by and exchange of appraisal reports by the parties. Such
an exchange is provided for in the rules adopted by the New
York Appellate Divisions, or by filing with the Clerk in the
Court of Claims in litigation against the State.26
If an appraisal is prepared for establishing recommended
prices for settlements or purchase by the condemnor of any
of the subjects of the taking, it is generally not admissible
under statutory and case law.27 There is also the well-established
general rule that an offer of settlement or purchase is not
admissible to show market value.28 And, if an appraisal is prepared
for purposes of making an advance payment, it is not admissible.29
When an appraisal is made and submitted, for example, to
the federal government for commitment of funds, it is said
that the condemnor has adopted it. "Such appraisals,
vouched for by the City . . . should be admissible in evidence
to the extent that any appraised value therein of a particular
damage parcel constitutes and admission . . . with respect
to the corresponding appraised value testified to by the expert
witness offered by the City."30
The obligation to pay "just compensation" is found
in the United States Constitution,31 and often again in the
State Constitution,32 but it also is often statutorily required
as well by the applicable State Law.33 If there is any federal
funding involved, the condemnor must comply with the Uniform
Relocation Assistance and Real Property Acquisition Action
of 1970.34
The act requires that the condemnor establish an amount which
it believes to represent just compensation, and then offer
to acquire the property for no less than this appraised fair
market value. In addition, the statute states that the owners
should be provided with a written statement of, and summary
of the basis for, the amount established as just compensation.35
Adopted appraisals need not be prepared by the same expert
who is testifying, but they are admissible in evidence as
bearing upon the weight to be given to the appraisal being
offered by the condemnor on the trial of the proceeding.36 The
expert testifying may not be cross-examined with respect to
any appraisal that was not made by him.37
Any other appraisals prepared by the expert who is on the
stand may be used to impeach his credibility if they are relevant
and pertinent to the proceeding. This is done by showing that
he made a prior statement inconsistent with his testimony
on the trial.
On cross-examination, the rules of evidence allow a party
to impeach the credibility of his adversary's witness
through the use of prior inconsistent statements. CPLR 4514
"Once a proper foundation is laid, a party may show that
an adversary's witness has, on another occasion, made
oral or written statements which are inconsistent with some
material part of the trial testimony, for the purpose of impeaching
the credibility and thereby discrediting the testimony of
the witness."38 Thus, it is well established law in the
State of New York that prior appraisal prepared by an expert
witness testifying at trial may always be introduced into
evidence to impeach the credibility of that witness'
testimony.39
1 "Property valuation may rightfully be designated as
the heart of all real estate activity. In fact, valuation
is the heart of all economic activity." Ring, The
Valuation of Real Estate (Prentice-Hall, Inc., 2d ed.,
1970).
2 The Appraisal of Real Estate (American Institute
f Real Estate Appraiser, 11th ed., 1996).
3 McMichael's Appraising Manual (Prentice-Hall,
Inc., 4th ed., 1951).
4 Kniskern, Real Estate Appraisal and Valuation.
5 Allison, "A New Look at Appraisal Theory and Practice,"
Encyclopedia of Real Estate Appraising (Prentice-Hall,
Inc., revised ed., 1968).
6 A cursory examination of any recent issue of The Appraisal
Journal published by the prestigious American Institute
of Real Estate Appraisers would lead one to believe that appraisal
can be quite a complicated task employing risk simulation
and game theory.
7 Prince, Richardson on Evidence (11th ed.). Care should
be taken not to confuse admissions and declarations against
interest. The two are often improperly joined together as
"admissions against interest." Id. Sec. 8-203, p.
511.
8 32 C.J.S., Sec. 364.
9 N.Y.S. 2d 688 (1939).
10 Aschenbach v. Keene, 46 Misc. 600, 92 N.Y. Supp.
764 (App. T. 1905); Sachs v. American Cent. Ins. Co.,
33 Misc. 2d 816, 227 N.Y.S. 2d 873 (Sup. Ct. 1962).
11 Reed v. McCor, 160 N.Y. 330, 54 N.E. 737 (1899);
also see Wolfe v. Madison Ave. Coach Co., where
the court, quoting from Judson v. Fielding, 171 Misc.
707, 13 N.Y.S. 2d 741 (1st Dep't 1939) 227 App. Div.,
430, 237 N.Y.S. 2d 348 (1st Dep't 1929) aff'd 253
N.Y. 596 (1930) stated: "Whilst a general opinion of
a witness on the merits may be properly excluded, distinction
is to be made where the opinion is closely related to the
facts and is inconsistent with the testimony of the witness."
171 Misc. 707, 712.
12 Prince, Richardson on Evidence, (11th Ed.) Sec.
8-208, note 8 supra.
13 Ethics provision, Uniform Standards of Professional
Appraisal Practice (1997 ed.) at p. 2; Canon 2.2, Code
of Ethics, American Institute of Real Estate Appraisers of
the National Association of Real Estate Boards.
14 See Sullivan v. State of New York, 57 Misc. 2d 308,
292 N.Y.S. 2d 244 (Ct. Cl. 1968); Murphy v. State of New
York, 41 Misc. 2d 906, 247 N.Y.S. 2d 453 (Ct. Cl 1964).
15 31A AM Jur 2d Sec. 134.
16 Model Uniform Eminent Domain Code, Sec. 1106.
17 Matter of City of New York (Brooklyn Bridge Southwest
Urban Renewal), 50 Misc. 2d 478, 270 N.Y.S. 2d 703 (Sup.
Ct. 1966), there was prior appraisals by four appraisers;
only two were used on trial.
18 Consider the difficulties in appraising an apartment building
in the City of New York in the past three years, with rent
control, decontrol, and recontrol and most recently partial
decontrol. The problem is further confused by the change in
the cost of money and the concomitant problem of selecting
a capitalization-of-income rate.
19 United States v. Miller, 317 U.S. 369 (1943).
20 United States v. Certain Parcels of Land, 15 F.R.D.
224, 233 (S.D. Cal. 1954).
21 Fonda, Johnstown & Gloverville R.R. v. State of
New York, 29 A.D. 2d 240, 287 N.Y.S. 2d 134 (3d Dep't
1968).
22 Fonda, Johnstown & Gloverville R.R. v. State
of New York, 29 A.D. 2d 240, 287 N.Y.S. 2d 134 (3d Dep't
1968).
23 Ridgeway Associates, Inc. v. State of New York,
32 A.D. 2d 851, 300 N.Y.S. 2d 944 (3d Dep't 1969); Milsap
v. State of New York, 32 A.D. 2d 586, 299 N.Y.S. 2d 56 (3d
Dep't 1969); Askin v. State of New York, 25 A.D.
2d 922, 270 N.Y.S. 2d 71 (3d Dept' 1966).
24 Ridgeway Associates, Inc. v. State of New York¸ 32
A.D. 2d 851, 300 N.Y.S. 2d 944 (3d Dep't 1969); Milsap
v. State of New York, 32 A.D. 2d 586, 299 N.Y.S. 2d 56 (3d
Dep't 1969); Askin v. State of New York 25 A.D. 2d 922,
270 N.Y.S. 2d 71 (3d Dept' 1966).
25 For an excellent discussion on the metamorphosis, see Levy,
"The Appraisal Process," N.Y. St. B.J. (Feb. 1969).
26 Swartout v. State of New York, 44 A.D. 2d 766, 354
N.Y.S. 2d 254 (4th Dep't 1974); Matter of Town of
Hempstead (Inwood Urban Renewal), 55 Misc. 2d 806; 286
N.Y.S. 2d 360 (Sup. Ct. 1968); C.P.L.R. Sec. 3140 pertains
to disclosure of appraisals and requires the adoption of rules
governing exchange of appraisal reports. C.P.L.R. Secs. 3101(c)
and (d) would protect from disclosure the work product of
an attorney or any opinion of an expert prepared for litigation.
27 Matter of City of New York (Brooklyn Bridge Southwest
Urban Renewal) 50 Misc. 2d 478, 270 N.Y.S. 2d 703 (Sup.
Ct. 1966).
28 Sweet v. Henry, 175 N.Y. 268, 67 N.E. 574 (1903);
White v. Old Dominion Steamship Co., 102 N.Y. 660,
6 N.E. 289 (1886).
29 Murphy v. State of New York, 29 A.D. 2d 81, 285
N.Y.S. 2d 907 (3d Dep't 1967); Lieberthal v. State
of New York, 22 A.D. 2d 831, 253 N.Y.S. 2d 788 (3d Dept'
1964) aff'd without opinion 16 N.Y. 2d 1012, 265
N.Y.S. 2d 898 (1965).
30 Matter of City of New York (Brooklyn Bridge Southwest),
supra at 482; Erie Lackawana Ry. Co. v. State of New York
54 A.D. 2d 1089, 388 N.Y.S. 2d 743 (4th Dep't 1976);
Niagara Falls Urban Renewal Agency v. Clifton Holding,
Inc., 43 A.D. 2d 900, 351 N.Y.S. 2d 239 (4th Dep't
1974). However, if the report was never sent or submitted
to the Federal Government, the prior appraisal does not lose
its immunity from disclosures. Schad v. State of New York,
____ A.D. 2d ____, 659 N.Y.S. 2d 765 (1997); First Nat.
City Bank v. State of New York, 72 A.D. 2d 762, 421 N.Y.S.
2d 381 (2nd Dep't. 1979); Backer v. State of New York,
60 A.D. 2d 996, 401 N.Y.S. 2d 656 (4th Dep't 1978).
31 U.S. Const. 5th and 14th Amends.
32 New York State's Constitution for example provides:
"Private property shall not be taken for public use without
just compensation." N.Y. Const. Art. 1, Sec. 7(a).
33 "It is the purpose of this law to provide the exclusive
procedure by which property shall be acquired by exercise
of the power of eminent domain in New York State; to assure
that just compensation shall be paid to those persons whose
property rights are acquired by the exercise of the power
of eminent domain; . . ." [New York State Eminent Domain
Procedure Law, Sec. 101). The condemnor must make an advance
payment which is 100% of its highest approved appraisal. EDPL
Sec. 303.
34 In a particularly egregious fact pattern, Florida land
owners had their property valued at less than the pre-vesting
offers in a condemnation case brought by the Federal Government
for the Big Cypress Federal Park. The Fifth Circuit held that
the pre-vesting offers could be introduced in evidence, noting
"[a]s the law of admissions is really the law of agency,
not evidence, one can hardly imagine a statement more fitting
the definition than this – a statement made by one acting
within his authority asserting a position contrary to the
one asserted at trial." U.S. v. 320.0 Acres of Lane,
605 F.2d 762, 825 (5th Circuit 1979).
35 42 U.S.C. Sec. 4651.
36 Matter of Town of Oyster Bay, 54 A.D. 2d 762, 387
N.Y.S. 2d 881 (2nd Dep't 1976); Sullivan v. State
of New York, 57 Misc. 2d 308, 292 N.Y.S. 2d 244 (Ct. Cl
1968).
37 The law is well established that an expert witness who
is not a party may not be compelled to give his opinion. If
he chooses, he may decline to accept a fee and refuse to testify.
People ex rel. Kraushaar Bros. Co. v. Thorpe, 296 N.Y.
223, 72 N.E. 2d 165 (1947); People v. Raizen, 221 App.
Div. 446, 461 208 N.Y. Supp. 185, 199 (2nd Dep't 1925);
also see Gugliano v. Levi, 24 A.D. 2d 591, 262 N.Y.S.
2d 372 (2d Dep't 1965).
38 Sec. 6-411, Price Richardson on Evidence, (11th
Ed.) citing People v. Duncan, 46 N.Y. 2d 74, 80 412
N.Y.S. 2d 833, cert den 442 U.S. 910, rearg dsmd 56
N.Y. 2d 646; Larkin v. Nassau Electric R.R., 205 N.Y.
267, 98 N.E. 465.
39 Hicksville Properties, Inc. v. Board of Assessors,
116 A.D. 2d 717, 718 498 N.Y.S. 2d 24 ("where an unfiled
appraisal report was prepared by a party's trial expert
and is inconsistent with his trial testimony, the unfiled
report may be introduced into evidence for impeachment purposes
and used to cross-examine the witness") citing Swartout
v. State of New York, 44 A.D. 2d 766, 354 N.Y.S. 2d 254;
Matter of City of New York (Brooklyn Bridge Southwest Urban
Renewal Project), 50 Misc. 2d 478, 480, 270 N.Y.S. 2d
703. The court in Brooklyn Bridge Southwest, supra,
held that "there is no question regarding the use of
any other appraisals made by the witness himself relevant
and pertinent to the proceeding to impeach his credibility
by showing that he made a prior statement inconsistent with
his testimony on the trial. They are required to be produced
for the purposed and to be used to that limited extent on
the witness' cross-examination, which will afford him
the opportunity to explain any apparent inconsistency."
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