The Prior Appraisal

By M. Robert Goldstein & Michael Rikon

April 27, 2007

Appraisers typically send a draft of their appraisal report to attorneys for prior review or comment before finalizing the report. This review can be extremely helpful to ascertain if there is something missing or inaccurate in the appraisal. The law may require a certain formula in the assay of damages. An example is the appraisal of a partial taking. New York law requires a two step appraisal, the before and after method which involves two calculations made by identical methods. Diocese of Buffalo v State of New York,24NY2d 320 (1969). Many appraisers, incorrectly, will simply calculate direct damages and calculate the remainder. There may also be factual information which is inaccurate. The appraiser may not be aware that the property should be valued as part of a larger holding. Consequential damages to the remainder may have resulted from the use that the property taken has been devoted. A change in access to the highway may have created consequential damages if it changed the highest and best use of the remainder property. There is also a very good rationale for having the appraisal reviewed for accuracy and completeness in terms of the comparable sales or comparable leases used by the appraiser. In short, it is a good idea to review a report before it is finalized if only to check the math. The danger is that the reviewer may totally revise a report so as to put the appraiser’s credibility in question. It becomes increasingly difficulty for any expert to continue to provide meaningful reliable testimony when it is shown that the appraiser drastically changed his or her opinion of value after the submission of a draft appraisal.

Prior appraisals can be used to impeach an appraiser on cross-examination. But before we focus this, one should also be aware of The Appraisal Foundation’s requirements regarding appraisal report retention. The Appraisal Standards Board has adopted Uniform Standards of Professional Appraisal Practice (USPAP). USPAP was adopted to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. USPAP addresses the ethical and performance obligations of appraisers through definitions, rules, standards, standards rules and statements. USPAP also provides advisory opinions.

USPAP requires an appraiser to maintain a work file for each appraisal. The work file must contain the name of the client and related information; true copies of any written reports, documented on any type of media; summaries of oral reports or testimony, or a transcript of testimony; and all other data, information, and documentation necessary to support the appraiser’s opinions and conclusions.

The appraiser must retain the work file for a period of at least five (5) years after preparation or at least two (2) years after final disposition of any judicial proceeding in which the appraiser provided testimony related to the assignment, whichever period expires last. This is a mandatory part of USPAP’s ethics rule. Thus, the failure to maintain copies of prior reports can be shown to violate the appraiser’s ethics rule which alone may result in substantial impeachment.

Once it has been determined that a prior opinion of value exists it must be produced for use on cross-examination. It doesn’t matter what label has been put on the prior report, “draft”, “attorney’s work product”, “confidential”, etc. If prepared by the witness, it qualifies as a prior appraisal.

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. “Once a proper foundation is laid, a party may show that an adversary’s witness has, on another occasion, made oral and written statements which are inconsistent with some material part of the testimony, for the purpose of impeaching the credibility and thereby discrediting the testimony of the witness.” §6-411, Prince Richardson on Evidence, Eleventh Edition citing People v Duncan, 46 NY2d 74, 80, 412 NYS2d 833, cert den 442 US 910, rearg dsms 56 NY2d 646; Larkin v Nassau Electric R.R., 205 NY 267, 98 NE 465).

Allowing a prior appraisal to be produced provides counsel with a fair opportunity for effective cross-examination, consistent with a party’s constitutional right of confrontation and with Rule 4514 of the New York Civil Practice Law and Rules.

It is well established law in New York that a prior appraisal prepared by an expert witness testifying at trial may be introduced into evidence to impeach the credibility of that witness’s testimony. Hicksville v Properties, Inc. v Board of Assessors, 116AD2d 717, 718 (1968) (“where an unfilled appraisal report was prepared by a party’s trial expert and is consistent with his trial testimony, the unfilled report may be introduced into evidence for impeachment purposes and used to cross-examine the witness”) citing Swartout v State of New York, 44 AD2d 766, 354 NYS2d 254; Matter of City of New York (Brooklyn Bridge Southwest Urban Renewal Project), 50 Misc 2d 478, 480, 270 NYS2d 703.

The court in Brooklyn Bridge Southwest, supra, held that “there is no question regarding the use of any other appraisals made by 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 that purpose and to be used to that limited extent on the witness’s cross-examination, which will afford him the opportunity to explain any apparent inconsistency.”

Recently, the First Department held in CMRC Ltd. v State of New York, 270 AD2d 27 (2000) ,

“The motion court improvidently exercised its discretion when it ordered the State to turn over an appraisal report dated November 22, 1995. The report, which was prepared in contemplation of the settlement of an eminent domain proceeding, “enjoy[s] the conditional immunity from disclosure which is conferred on material prepared by litigation by CPLR 3101(d)” (Schad v State of New York, 240 AD2d 483, 484). To the extent that the report might become relevant and discoverable for the purpose of impeaching the State’s appraisal expert at trial, disclosure at this juncture is premature. We note that if the State chooses to call the expert to testify, a reasonable adjournment will sufficiently protect Claimant’s right to cross-examination, but we also note the possibility that the State may choose not to call the expert as a witness. In sum, we cannot agree with the dissent that the cloak of immunity protecting the State’s appraisal report may presently be removed merely because, at some point in the future, the material sought may become discoverable.”

In Sullivan v. State of New York, 57 Misc 2d 308, 309 (Ct. Cls., 1968) Judge Lengyel stated “all prior appraisals prepared by an expert witness called to testify or by the appraisal firm by whom that appraiser is employed must be produced upon proper demand. Such appraisals are admissible, if relevant and germane to the proceeding, when utilized to impeach said witness’s credibility by developing prior statements inconsistent with his testimony at trial.”

In Wettlaufer v State of New York, 66AD2d 991 (4th Dept., 1978), it was noted, “the trial court erred in refusing to direct production of the prior appraisal of the subject property made by the expert witness called by the State to testify an in refusing to permit inquiry into an appraisal made of neighboring land by the State appraiser.”

Citing CMRC, Ltd. v State of New York, supra, as authority, the Third Department recently held in Matter of Niagara Mohawk Power v Town of Moreau, 8 AD3d 779(2004), “while it is true that materials prepared for litigation by an appraiser who is not called as a witness are protected from disclosure as attorney work product (See, Xerox Corp. v Town of Webster, 206 AD2d 935 (1994); See also CPLR 3101 (d), here Petitioners established that Lagassa’s prior appraisal relied upon and incorporated information contained in Thompson’s prior appraisals of the subject hydroelectric power facilities. As such, these prior appraisals are relevant for the purpose of impeaching Lagassa on cross-examination and, thus, are subject to disclosure (See CMRC, Ltd. v State of New York, 270 AD2d 27 (2000).”

In another recent case, Erie County Industrial Development Agency v Muszynski, the Supreme Court, Erie County, 165 Misc2d 362, held:

“The rule in New York is that an appraisal prepared by an expert who is not called as a witness and which was intended to be used solely for litigation, or for negotiation in an effort to accomplish a settlement prior to trial, or to establish a basis for a pre-taking advance payment is not admissible at trial, as the appraisal enjoys a conditional immunity from disclosure as material prepared for litigation per CPLR 3101 (d). Swartout v State, 44 AD2d 766, 354 NYS2d 254 (4th Dept., 1974), and Sullivan v State, 57 Misc2d 308, 292 NYS2d 244 (1968). The one exception to that rule is that all appraisals prepared by an expert witness who is called to testify must be produced as such are admissible when used to impeach said witness’s credibility by developing prior statements inconsistent with his testimony at trial. See Sullivan, supra.”

It is also stated:

“Because earlier Courts have relied so heavily on the concept of allowing, for impeachment purposes, the discovery of prior inconsistent statement by the opposing party, this Court must conclude that statement made prior to the within litigation by the litigation appraiser relative to the value of the contested properties may form the basis to permit discovery thereof. See Sullivan, supra, and Carriage House Motor Inn v City of Watertown, 136 AD2d 895, 524 NYS2d 930 (4th Dept., 1988).”

Thus, it can be shown that prior appraisals must be maintained by the appraiser. And once that appraiser has testified, any conditional immunity a prior report had disappeared. An appraiser can be substantially impeached by the prior appraisal. See Gerosa v State of New York, 180 AD2d 552 (1st Dept., 1992).

Reprinted with permission from the April 27, 2007 edition of the New York Law Journal © 2010 Incisive Media Properties, Inc. All rights reserved. Further duplication without permission is prohibited.