Filing Reports Other Than Appraisal Reports in a Condemnation Case. And, an Inverse Condemnation Case

By M. Robert Goldstein & Michael Rikon

October 26, 2010

We have previously written on New York’s “Appraisal Rule.”i We noted that what makes discovery in a condemnation case particularly unnecessary is the fact that there are supposed to be no surprises at trial. This is because of the requirement to first exchange a written appraisal or other expert report. 22 NYCRR §202.61. See Osborn Memorial Home Associates v Assessor of the City of Rye, 2004 NY Slip op 50793 U (Westchester Sup Ct, 2004) where Justice Thomas A. Dickerson provides a remarkable history of the appraisal rules in New York.

In New York, condemnation trials are limited by the information set forth in the parties’ appraisals. After the exchange of appraisals, each side may file a rebuttal report within sixty days after receipt of the document sought to be rebutted. The appraisal reports are required to contain a statement of the method of appraisal relied on and the conclusions as to value reached by the expert together with the facts, figures and calculations by which the conclusions were reached. The appraisers are also required to provide specific information regarding their comparable sales, leases and photographs of the property under review.

Upon the trial, expert witnesses are limited in their proof of appraised value to information set forth in their reports. Under the rules, the court has the ability to relieve any party of a default. It should be noted that the rule only applies to expert witnesses who are offering opinions. No report need be filed by a fact witness. In fact, the Third Department held in Faulkner v State of New York, 247 AD2d 798 (3rd Dept, 1998) that an expert may be permitted to testify without first submitting an expert report if the testimony is factual and does not constitute opinion evidence. In Faulkner, the issues concerned the testimony of a surveyor who testified as to square footage of the area taken.

The Appraisal Rule allows the parties to prepare for trial with knowledge of each other’s valuations and the foundations and justifications thereof. Parisi v State, 62 Misc2d 378, 382 (Ct Cls, 1979). As the Fourth Department stated in Novickis v State of New York, 44 AD2d 508, 512 (4th Dept, 1974), “[s]imply expressed, the Rule attempts to require full disclosure, to take the game aspect out of the case, to prevent surprises, to permit the court to determine just compensation based solely upon the facts unhindered by gamesmanship.” In Matter of White Plains Properties Corp v Tax Assessor of City of White Plains, 58 AD2d 871 (2d Dept, 1977), aff’d 44 NY2d 971 (1978), the Second Department affirmed the trial court’s preclusion of expert testimony when no report was exchanged.

We often hear the argument that only appraisals need be exchanged and filed. But this is not true at all as Matter of White Plains Properties Corp. makes clear. The Appraisal Rule is not limited to just appraisal reports but extends to other experts as well such as a professional engineer, which was viewed in White Plains Properties Corp. as an attempt to introduce expert testimony as to value since the valuation depended on that report and the failure to exchange the report upon which testimony was based precluded the use of such evidence.

The Appraisal Rule finds its basis in Section 508 of the Eminent Domain Procedure Law which is titled, “Filing of Appraisals; Reports of Other Expert Witnesses.” The text of the rule clearly indicates that in addition to appraisals, there must also be filed “all other reports of expected witnesses, intended to be relied upon at the trial, other than the valuation experts.” EDPL Section 508 also provides that each judicial department and the Court of Claims shall adopt rules requiring at a reasonable time prior to trial, the filing and exchange of written appraisal and other expert reports. ii

The Uniform Rules of the trial courts provide for the exchange and filing of appraisal reports no later than nine months after service of the claim unless extended by the court or stipulation. 22 NYCRR Section 202.61 (a)(1). While the court rules use the more inclusive term of appraisal reports, it is clear that “reports” is not limited to appraisals. In the next subparagraph dealing with rebuttal reports, the court rule provides that rebuttal reports shall be filed within sixty days after receipt of the document sought to be rebutted, here the language is more inclusive, “if a party intends to offer at trial expert evidence in rebuttal to any report, an expert’s report shall be filed…”22 NYCRR Section 202.61 (2). Clearly, all experts intended to prove value must have a report which is exchanged.

The appraisal rules as set forth in the Court of Claims rules provide specifically that “where an expert other than a valuation expert is intended to be relied upon a trial, an original and three copies of expert reports shall be filed…” 24 NYCRR Section 206.21 (e).

It is clear that if one intends to call a witness as an expert to give opinion evidence, there must first be filed a report. The report must set forth the sum and substance of the witnesses’ testimony.

If the witness is an appraiser, the report must include a statement of the method of appraisal relied on and the conclusion as to value reached by the expert, together with the facts, figures, and calculations by which the conclusions were reached. If sales, leases, or other transactions involving comparable properties are to be relied on, they shall be set forth with sufficient particularity as to permit the transaction to be readily identified, and the report shall contain a clear and concise statement of every fact that a party will seek to prove in relation to those comparables. The appraisal is also to contain photographs of the subject and comparables. 24 NYCRR Section 202.60 (g).

Thus, a non-appraiser expert must provide the basis for the expert’s opinions with a narration of the facts which support the conclusions made.

But it should be again noted that the rules have as its primary reason for requiring the disclosure on the facts and source materials on which the appraisal is based is to allow opposing counsel to effectively prepare for cross-examination. In that regard, the rule does not require that an appraisal report contain a detailed narrative explaining each of the adjustments made in the report. Bialystock & Bloom v Gleason, 290 AD2d 607 (3rd Dept. 2002).

It is important to note that the requirement of filing an expert report is to enable a party to adequately and intelligently prepare for trial of the issues. There are no surprises at a condemnation trial. Since in most instances the trial of a condemnation claim takes place within a special proceeding, discovery is very limited. Indeed, discovery flies in the face of the purpose and policy of the Eminent Domain Procedure Law which is to reduce litigation and expedite payment to property owners.  EDPL Sections 101 and 301.

The rule requiring the filing and exchange of other expert reports allows an attorney to prepare for cross-examination so that the trial will proceed quickly and efficiently. While the expert report is absolutely required for opinion evidence, it is not in and of itself designed to take the place of evidence, but rather to supplement evidence given by a person under whose direction it is prepared.Homer v State of New York, 36 AD3d 333 (3rd Dept, 1971).

In other words, the report should be utilized as a tool which, by adequate examination of its author, helps fully explain to the court the theory of the party introducing the report so the trier of the facts is fully cognizant of the issues involved in the case. In addition, testimony will allow a reviewing court to delve into aspects underlying the report so as to make an intelligent review of the trial court’s decision.

It is clear that any expert witness who is to testify as to an opinion must prepare and have filed an expert report. Further, that report must be signed and the witness’s C.V. must be attached to the report pursuant to CPLR 3101.

And, An Inverse Condemnation Case

We all remember Loretto v Teleprompter Manhattan CATV Corp., 458 U.S. 419 (1982). Loretto stands for the proposition that any physical invasion of property no matter how small constitutes a taking. The United States Supreme Court had reversed New York’s Court of Appeals which sustained a regulation allowing cable companies to place their equipment on buildings without compensation.

On September 14, 2010, the Appellate Division, Second Department decided Corsello v Verizon New York, Inc., ________ AD3d __________.  In Corsello, plaintiff complained about Verizon placing a rear “wall terminal” and “outside plant” on their property. Additionally, it was also complained about the manner in which the terminal and the cable servicing were anchored to the brick masonry of the building as well as the number of cables. In a scholarly decision, the Appellate Division distinguished inverse condemnation, or de facto appropriation from trespass.

It stated:

Inverse condemnation, or de facto appropriation, is based on a showing that an entity possessing the power of condemnation has intruded onto a landowner’s property and interfered with his or her property rights to such a degree that the conduct amounts to a constitutional taking, requiring the entity to purchase the property from the owner. (citations omitted). In contrast, a trespass is an intentional physical entry onto the property of another without justification or permission (citations omitted). While a trespass and a de facto taking are similar in that both require a physical entry, a trespass is temporary in nature, while a de facto taking is permanent (citations omitted). In other words, “a de facto appropriation differs from a trespass by the extent of its egregiousness and permanence” (citations omitted). Thus, “an entry onto the property of another cannot be both a trespass and a taking.” (citations omitted).

The court continued:

Here, as in Loretto, the installation of the rear-wall terminal involved a direct physical attachment of a box and wires.  According to the plaintiffs, the installation of this equipment deprived them of the physical use, possession, and enjoyment of that portion of their property. (citations omitted).  Indeed, the plaintiffs alleged that a metal conduit running from the terminal along the building wall had been used by a burglar to enter one of their apartments. Further, according to the amended complaint, the installation was meant to be permanent as it has been attached to the wall for several years.

Verizon responds that there can be no permanent physical occupation of the plaintiffs’ property where it has offered to remove the equipment servicing other buildings. As a procedural matter, it would be inappropriate to consider Verizon’s offer, which was tendered only after the action was commenced.

The court found that plaintiff stated a cause of action to recover damages for inverse condemnation. But the victory was short lived. The court went on to hold that with respect to Verizon’s alleged conduct in attaching additional cables to plaintiff’s building in 2004 or 2005, even if we afford a liberal construction, the plaintiffs failed to allege that said conduct constituted another de facto taking so as to trigger a limitations period for a claim of inverse condemnation.

In any event, as the Appellate Division noted, viewing the allegations in the light most favorable to the plaintiffs, the initial attachment of the terminal and wiring was a discreet, well-defined taking of property, and the mere addition of cable did not afford the plaintiffs a new limitations period. Inverse condemnation or de facto appropriation is governed by a three-year statute of limitations which begins to accrue at the time of the taking. The court did not leave plaintiffs without recourse.  It stated that plaintiffs may still pursue their causes of action to recover for unjust enrichment, trespass, and violations of the General Business Law.

i. Discovery in Condemnation and ‘The Appraisal Rule’ N.Y.L.J., April 26, 2005.
ii. This is consistent with CPLR Section 3140.

Reprinted with permission from the October 26, 2010 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.