Opinion
2006-1653.
Decided March 8, 2010.
HINMAN, HOWARD KATTELL, LLP, By:Paul T. Sheppard, Esq., Attorneys for Petitioner, Binghamton, New York.
POPE SCHRADER, LLP, By:Alan J. Pope, Esq., Attorneys for Respondents, Binghamton, New York.
In these tax certiorari proceedings, respondents move, pursuant to Uniform Rules for Trial Cts (22 NYCRR) § 202.59(h), for leave to file an amended appraisal. Petitioner cross-moves, pursuant to RPTL §§ 301 and 302, and Uniform Rules for Trial Cts (22 NYCRR) § 202.59, for an order striking the appraisal filed by respondents.
RESPONDENTS' MOTION TO AMEND THEIR APPRAISAL REPORT
Respondents' appraisal was prepared by William B. Meredith, who delivered his completed report to respondents' attorney on January 29, 2010 — the deadline established for filing and exchange of appraisals by the parties. Respondents' attorney filed the appraisal with the court immediately upon receipt from Meredith. Approximately one hour after delivery of the report to respondents' attorney, Meredith discovered that seven pages included in the report, specifically pages 46 through 52, were from a previous draft, and were not the final versions of those pages that had been prepared by his firm. He immediately notified respondents' attorney of his error in an attempt to correct it, only to learn that the appraisal report had already been filed with the court.
On February 3, 2010 — the third business day following filing of the appraisals — respondents' attorney notified petitioner's attorney of the administrative error, provided him with corrected pages, and requested that they be accepted. By letter dated February 10, 2010, petitioner's attorney advised of his objection to any modification of the appraisal report following the filing deadline.
Significantly, the changes reflected in the proposed amendment relate to compilation of the data relied upon by the appraiser; there is no change in either the valuation method utilized or the appraiser's final estimate of value. The change with the most potential significance is the addition of an entirely new section on page 47, entitled "Expense [E]stimates," which confirms that the expense estimates are based on the 2006 — 2007 historic expenses for the facility submitted to the appraiser, and explains adjustments made thereto. Inasmuch as the appraisal originally filed explained that "expenses reported from the subject operation [were used] to establish market income estimates" (Appraisal by William B. Meredith dated January 29, 2010 [Meredith Appraisal], p. 31; see also p. 4), the court finds that the addition of the Expense Estimates section does not constitute a material change in the information presented, or otherwise prejudice petitioner, particularly in light of petitioner's admission that it provided respondents with extensive information regarding its business operations (Affirmation of Paul T. Sheppard, Esq., dated February 23, 2010, ¶¶ 3, 7, and 9).
The other changes are modest. The changes shown on pages 46, 48, and 49 do not change the gross income figure utilized. The changes shown on pages 50 and 51 do not change either the capitalization rate or the consolidated tax rates utilized. The additional comments added to the Final Reconciliation section on page 52 are either irrelevant or immaterial. The addition to paragraph one and the proposed new third paragraph are irrelevant, as they relate to use of the cost approach — an improper method of valuing the property at issue, infra, and the addition to the second paragraph does not affect the estimate of value.
Rule 202.59(h) permits the court to allow filing of an amended report "upon good cause shown." Although the rule does not define good cause, petitioner cites a number of cases for the proposition that it does not include inadvertence or oversight; however, in each of the following cases, the proposed amendments would add new appraisal theories or substantially change the appraiser's final estimate of value ( see Matter of Consolidated Edison Co. of NY v State Board of Equalization Assessment, 83 AD2d 355, affd on other grounds 58 NY2d 710 [the failure to adopt all possible appraisal theories is not sufficient cause to allow filing of a supplemental report based on an entirely different appraisal methodology]; Matter of Niagara Mohawk Power Corp. v Peryea, 102 AD2d 986 [failure of appraiser to utilize information known to party since inception of the proceeding is not sufficient good cause to permit filing of a supplemental appraisal report]; Matter of City of New York, 23 Misc 3d 1134[A], 2009 NY Slip Op 51102[U] [leave to amend denied where amended appraisal significantly changed the estimated valuation by assuming that the property could lawfully be more intensively developed]; Matter of City of New York, 12 Misc 3d 1177[A], 2006 NY Slip Op 51268[U] [leave to amend denied where amended appraisal changed a basic premise, thereby significantly increasing the estimated value]).
See also Salesian Socy. v Village of Ellenville, 98 AD2d 927 (1983) (three year delay in seeking leave to file a supplemental appraisal report unreasonable).
Here, the proposed amendments merely correct an admitted administrative error which the appraiser and respondents' attorney promptly attempted to remedy upon discovery; they do not add new appraisal theories, change Meredith's estimate of value, or incorporate information that would surprise or prejudice petitioner. In that regard, they are similar to mere mathematical errors ( see Matter of City of New York, 12 Misc 3d 1177[A], 2006 NY Slip Op 51268[U], at *3 [in denying amendment on the basis that claimant was seeking to introduce a new theory, upon which the appraisal was based, that dramatically increased the estimated value on the eve of trial, the court noted the distinction between introducing a new theory and correcting a mathematical error]). Respondents' motion for leave to file an amended appraisal is, therefore, granted, to the extent that they are authorized to replace pages 46 — 52 with those attached as Exhibit A to the affidavit of William B. Meredith, sworn to February 17, 2010. Respondents shall file and serve an amended appraisal which incorporates the amended pages on or before March 15, 2010 .
PETITIONER'S MOTION TO STRIKE RESPONDENTS' APPRAISAL
Petitioner correctly notes that the reproduction cost approach to valuation is permitted only for "specialty" properties ( Matter of Saratoga Harness Racing v Williams, 91 NY2d 639, 645). For a property to be considered a specialty, there must be no market for the type of property and no sales of property for such use ( id., at 645 — 646). Significantly, respondents' appraiser notes that a similar domed facility, located in the Town of Parma, near Rochester, New York, was sold in arm's length transactions in January 2007 and in August 2009 (Meredith Appraisal, p. 32). He also notes the existence of numerous similar facilities in New York State (id., pp. 57 — 64). On that basis, the property is not a specialty property for which reproduction cost less depreciation is an appropriate appraisal methodology; therefore, the court will preclude evidence at trial regarding any estimate of value based upon a reproduction cost approach to valuation.
Having determined that no evidence of valuation based on reproduction cost will be received, the court need not decide petitioner's other challenges to Meredith's replacement cost valuation estimate ( see Sweeney Affirmation, ¶¶ 22 — 24).
Petitioner argues that the estimate of value reached by Meredith's use of the income capitalization approach is not sufficiently documented by the "facts, figures and calculations by which [his] conclusions were reached" (Uniform Rules for Trial Cts [ 22 NYCRR] § 202.59[g][2]). The primary reason for the rule requiring the disclosure of the facts and source materials on which an appraisal is based is to allow opposing counsel to effectively prepare for cross-examination ( Matter of Bialystock Bloom v Gleason, 290 AD2d 607, 608; Matter of Golub Corporation/Price Chopper Operating Co. v Assessor of Town of Queensbury, 282 AD2d 962, 963; Blumberg v Sherman, 185 Misc 2d 402, 403). 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 ( Matter of Bialystock Bloom, 290 AD2d at 609). Accordingly, an appraisal report is admissible unless "virtually every fact, figure and calculation necessary for an understanding of the complex report and conclusion [is] absent from the report" ( Blumberg, 185 Misc 2d at 403 — 404, quoting Matter of State of New York v Town of Thurman, 183 AD2d 264, 268 [an appraisal report lacking typical demographic, geographic and photographic data, characterized by the court as a "bare bones appraisal at best" was admitted]).
Petitioner's motion to strike the Meredith Appraisal will not be granted on the basis that it fails to comply with Rule 202.59(g)(2), inasmuch as it meets the minimal standard of containing sufficient information to show the basis for Meredith's conclusions with respect to the challenged categories of income and expenses, thereby permitting preparation for cross-examination. With respect to income, the report provides facts which identify the facilities used as comparables and their charges to the public for use of facilities similar to those located at the property ( see Meredith Appraisal, pp. 4, 9, 31, 45, 57 — 64) and explains Meredith's adjustment to the average data ( id., p. 46) ( see Matter of Golub/Price Chopper Operating Co., 282 AD2d at 963; Matter of Bialystock Bloom, 290 AD2d at 608 — 609; cf. Matter of United Parcel Serv. v Assessor of Town of Colonie , 42 AD3d 835 [appraiser failed to provide sufficient information to allow a determination that the comparison leases were arm's length]).
The appraisal report likewise shows that Meredith's expense estimates were based on historical expenses from the subject property provided by petitioner (Meredith Appraisal, p. 31, amended p. 47), and sets forth the procedure by which he utilized that data to produce his expense estimates; specifically, he determined the percentage of revenue historically represented by each expense, and then applied the same, or a higher, percentage to the estimated gross income to determine the estimated expenses on which the opinion of value was based ( id., amended p. 47).
Petitioner also argues that respondents' appraisal is inadmissible because it values the property on January 1, 2006 and January 1, 2007, and not the correct valuation dates of July 1, 2005 and July 1, 2006 ( see RPTL § 301). Respondents' appraisal is imprecise with respect to specifying the relevant valuation dates. While stating dates of value of January 1, 2006 and January 1, 2007 (Meredith Appraisal, p. 4), it also implies that the correct dates were considered by noting that the appraisal was prepared for use in assessment litigation regarding the assessed value of the property for years 2006 and 2007 ( id., pp. 1 and 5). Significantly, it is clear that Meredith opines that the property has a constant value through the relevant time period based on its actual use and condition, not on the basis of some use contemplated in the future ( see Matter of General Motors Corp. Cent. Foundry Div. v Assessor of Town of Massena, 146 AD2d 851, 852, lv denied 74 NY2d 604; Matter of Adirondack Mtn. Reserve v Board of Assessors of Town of N. Hudson, 99 AD2d 600, 601, affd 64 NY2d 727; see also Matter of Golub/Price Chopper Operating Co., 282 AD2d at 963 [appraisal which offered one value for the time period from 1993 through 1997 admitted]; cf. Matter of SKM Enters. v Town of Monroe, 2 Misc 3d 1004[A], 2004 NY Slip Op 50138[U] ["recycled" appraisal — which provided only an estimate of the value as of the valuation date for the year preceding the year at issue — was inadmissible]). Accordingly, the appraisal will not be excluded for failure to value the property on the relevant valuation dates.
Finally, the court notes that this decision and order will not deprive petitioner of the opportunity to highlight the notable shortcomings of the Meredith Appraisal at trial, and to argue that it should be afforded little weight as a result.
Petitioner's cross-motion is granted, to the extent that the court will preclude evidence at trial regarding any estimate of value based upon a reproduction cost approach to valuation, and is otherwise denied.
This decision constitutes the order of the court. The mailing of copies of this decision and order by the court shall not constitute notice of entry.