The Second Higher Appraisal: Stop the Games and Produce it

A recent, unanimous decision of the Virginia Supreme Court held that a prior appraisal used for the payment of an advance payment should have been admitted in evidence as an admission. Ramsey v Commissioner of Highways, __ Va. ___ (Record number 140929). The  full decision of the Court can be read here.

The facts were fairly simple. The Ramseys owned a parcel of land in the City of Virginia Beach. The Highway Department took a portion of the land for Route 264. Prior to the taking, the Condemnor valued the property at $500,000 and the damages at $246,292.

The property owners rejected the Commissioner’s attempted purchase. Condemnation proceedings were commenced. The $246,292 was deposited and withdrawn by the owners. The Condemnor filed a Petition to Condemn and retained a new appraiser; the old one apparently retired. The new appraiser valued the property at half the original appraised value and found damages at $92,127. Remember, the Condemnee received an advance payment of $248,707.

At trial, the landowners sought to have the prior appraisal admitted into evidence. The offer was denied. Yet, it was established that the appraisal was given to them before an offer was made to purchase. The Condemnor claimed that the prior appraisal was not admissible since it was used for purposes of settlement.

Thankfully, the jury came back with a verdict of $234,032, just a little short of the advance payment. Nevertheless, the Claimants were ordered to repay $14,675 plus interest.

On appeal, the Virginia Supreme Court reversed and remanded for a new trial. The Court held that the prior appraisal was prepared before the initiation of negotiations. Here is the subtle distinction drawn by the Virginia Court: offers made by condemning authorities are in the nature of an attempt to settle and are inadmissible. But a pre-settlement appraisal of a property’s fair market value is admissible as an admission which the government is free to explain at trial.

Not that helpful. The Court ended by stating that its “holding is limited to the issue of whether the eminent domain statutes forbid admission of otherwise admissible evidence of value like the evidence proffered in this case.”

In New York, we frequently see Condemnors file and exchange lower appraisals than the one used to pay an advance payment. EDPL Sec. 303 requires that an offer based on 100% of the highest approved appraisal. But then a second lower appraisal is filed and exchanged.

It is extremely frustrating to observe this bad faith conduct by government. The State of New York does this consistently even after paying an advance payment based on the higher other appraisal. We submit that this conduct is in violation of the law. Uniform Relocation Act of 1970, 42 USCA Sec. 61 provides that the primary purpose of the subchapter is to establish fair and equitable treatment of persons displaced in a federally assisted project. The statute prohibits any action coercive in nature in order to compel agreement on the price to be paid for the property. 42 USCA Section 4651. A substantially lower appraisal exposes the former owner to jeopardy of the entry of a judgment against it in favor of the Condemnor with interest. EDPL 304(h). Think about it, most money paid on an advance payment goes to the mortgagee. If a deficiency judgment is entered, a condemnee not only lost his property, but not owes the State money. This was the situation in the Virginia case reported above. It almost happened in Matter of State of New York (KKS Props, LLC), 119 AD3d 1033 (3d Dept 2014), but the Third Department corrected the injustice.

Condemnors, especially the Attorney General, do not want judges to know the amount of the advance payment. They will argue that the other higher appraisal was prepared for settlement and is immune from discovery. But this is not true. The higher appraisal was adopted when it was used to make payment. The higher appraisal was also used to apply for Federal funds and a copy of the report is kept in the files of the agency in case of an audit. The higher appraisal was prepared because it was required by statute.

Few New York cases support the right to have the higher appraisal offered into evidence. Cronk v State of New York, 100 Misc2d 680 (Ct Cls. 1979), is the leading authority that the other report is an admission. Nunes v State of New York, 91 AD2d 1135 (3d Dept 1983) is another.

We are not talking about higher appraisals by the same appraiser. In that situation, all prior appraisals may be used for impeachment purposes. CMRC v State of New York, 270 AD2d 27 (1st Dept 2000).

The Richmond Times-Dispatch recently published an article criticizing the Virginia DOT for spending $140,000 on legal fees during the course of this litigation; an amount that could have settled the case years ago. To quote from the article:

Lawyers for local and state governments will tell you states should drive hard bargains with property owners because they need to protect the financial interests of the taxpayer. That excuse doesn’t hold much water when they spend more for lawyers than they would for the land itself.

All states should adopt a rule that prevents the lowering of appraised damages. once a Condemnor makes an offer of just compensation, it should be the minimum amount of damages. Once a condemnor makes an offer of just compensation, it should be the minimum amount of damages. It is time to stop the games. it is unseemly that government attempts this bad behavior when its citizens have a constitutional right to just compensation.

Posted in Advance Payments, Eminent Domain, Eminent Domain Abuse, Offer & Compensation, Recent cases, Sandbagging
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