In Central New York Oil & Gas, LLC v Porto Bagle, Inc. (decided May 2, 2013), the Third Department rejected Petitioner’s appraisal report because both the report and the appraiser’s testimony failed to provide the “facts, figures or calculations” used to determine the value of the Property. The CNYOG decision forces us to review what’s appropriate under 22 NYCRR 202.59…again…
In CNYOG, Petitioner sought to condemn a permanent pipeline easement and two temporary construction easements. At trial, the Supreme Court found an advance payment of $13,100 adequately compensated the landowner for the permanent easement. On appeal, however, the Respondent landowner moved to strike Petitioner’s appraisal, alleging that Petitioner’s appraisal failed to provide a “clear and concise statement of every fact that [Petitioner sought] to prove in relation to those comparable properties” as required by law because it failed to set forth the comparable sales relied upon “with sufficient particularity” to identify the transactions. (See, 22 NYCRR 202.59(g); 22 NYCRR 202.61).
According to the decision, Petitioner’s appraiser used a multi-step methodology to value the easements, which included: (i) reviewing comparable sales of the tracts at issue; (ii) reviewing comparable sales of properties encumbered by utility easements (of which there was a noted shortage); and (iii) determining hypothetical values of encumbered comparable properties as if they were not encumbered. However, at trial, Petitioner’s appraiser was unable to elaborate on the comparable sales considered or the method used to derive the hypothetical unencumbered values.
The Third Department concluded that while the underlying methodology may be acceptable in theory, the hypothetical values derived from information not included in the report – nor revealed in testimony – were not. The Court held that an appraiser must offer details in a report or during testimony specific enough to enable opposing counsel to capably cross-examine the appraiser as to the facts underlying his or her conclusions. Because Petitioner’s appraiser failed on both counts, the Court rejected Petitioner’s appraisal in full.
While this is certainly not a “new” rule of law, it ensures that ”we get it.” It re-emphasizes what we should have always known -that both a trial-ready appraisal and the trial record must provide factual support for the determinations that form the basis of an appraisal. But - of course – what constitutes “adequate” factual support is still uncertain and may come down to the attorney’s judgment made on a case-by-case basis. This case is just another reminder that all valuations set forth in a trial-ready appraisal must be thoroughly explained by specific procedures, facts, figures, or calculations to be admissible.