Michael Rikon

The Appellate Division, Second Department decided Matter of Klein v. County of Suffolk, __ A.D.3d __, 2010 NY Slip Op 01413 on Feb. 27, 2019. Klein concerned a claimant's request to obtain all appraisals that the County may have had prepared for the subject property. The order appealed from directed the County to produce “all appraisals, and not limited only to those submitted.” The County acquired an easement over a portion of the claimant's property located on Fire Island as part of a federally funded construction project to reduce hurricane and storm damage to the Fire Island Inlet. The County's experts developed certain appraisals relating to the acquired property, which were submitted by the State to the federal government for the purpose of reimbursing the County the amount actually paid for the real estate interest it acquired.

The discovery request was made by claimant's service on the County of interrogatories and demand for production of documents including disclosure of all appraisals submitted by the County to the federal government. The Appellate Division held that the trial court should not have sua sponte directed the County to produce all appraisals, rather than only those appraisals which were submitted to the federal government in connection with the subject property. It was not a surprising decision as the law regarding prior appraisals is well established.

Prior appraisals can be used to impeach an appraiser on cross-examination. But before we focus on 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 years after preparation or at least two 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. Courts have made negative inferences when an appraiser fails to comply with the USPAP obligations. See Matter of Rockland Sewer Dist. No. 1, 37 Misc3d 1222(A) (Sup. Ct. Rock 2012) aff'd 120 A.D.3d 703 (2d Dept 2013), lv. den. 24 N.Y.3d 917 (2015).

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 N.Y.2d 74, 80, cert. den. 442 U.S. 910, re-argument dismissed, 56 N.Y.2d 646; Larkin v. Nassau Electric R.R., 205 N.Y. 267, 98 N.E. 465).

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 v. Board of Assessors, 116 A.D.2d 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 A.D.2d 766; Matter of City of New York (Brooklyn Bridge Southwest Urban Renewal Project), 50 Misc.2d 478, 480).

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 A.D.2d 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 A.D.2d 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 Wettlaufer v. State of New York, 66 A.D.2d 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 A.D.3d 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 A.D.2d 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 A.D.2d 27 (2000).

In another recent case, Erie County Industrial Development Agency v. Muszynski, 165 Misc.2d 362, the Supreme Court, Erie County, 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 A.D.2d 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.

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 A.D.2d 552 (1st Dept. 1992).

Michael Rikon is a partner of Goldstein, Rikon, Rikon & Houghton.