Software Relied on by Appraisal Experts in Tax Appeals Must be Shown to be Reliable

Palisadium Managemen Corp. v. Borough of Cliffside Park, 456 N.J. Super. 293 (App. Div. 2018).  This opinion by Judge Accurso involved an appeal from decisions of the Tax Court that rejected plaintiff’s challenge to tax assessments on its properties.  There was a cross-appeal by the defendant Borough, which related to the Tax Court’s rejection of the Borough’s cost approach for valuing the property.  The Tax Court did not accept plaintiff’s reliance on a cost approach either.  Furthermore, the Tax Court “found such flaws in [plaintiff’s] expert’s adjustments to comparable sales, including those relying on a ‘paired sales’ analysis, that it rejected his opinion of value based on a comparable sales approach.”  There was thus no evidence in the record on which the Tax Court could independently determine value, so the court affirmed the assessments.

Judge Accurso’s opinion affirmed the Tax Court substantially for the reasons that that court gave.  She noted the “special expertise” of the Tax Court, and observed that Tax Court “findings will not be disturbed unless they are plainly arbitrary or there is a lack of substantial evidence to support them.”  That was not so with regard to the expert testimony issues here, especially since decisions as to expert testimony are to be reviewed for abuse of discretion only.

The most significant aspect of today’s opinion was Judge Accurso’s discussion of the use by the Borough’s appraiser of an automated valuation software, the Marshall and Swift Valuation Service computer program, to generate replacement costs.  That expert had merely plugged figures into the program, without verifying “their accuracy vis-a-vis the Marshall & Swift hand calculations historically accepted by the court.”  Because the Tax Court was not given any scientific  basis to determine whether the results generated by the software were reasonable and accurate, that court did not accept the Borough’s appraiser’s figures.

Judge Accurso observed that this was not the first time that the Tax Court had “expressed concern about the reliability of improvement costs estimated through the use of software and an expert’s inability to explain or corroborate at trial the calculations produced by the software on which the expert relied to produce the valuation report.”  She cited a 2016 Tax Court opinion that the Appellate Division had affirmed, in an unpublished ruling, earlier this year.  Because the Tax Court had “reasonably rejected both parties’ reliance on the cost approach to valuation,” it was not necessary to opine about the validity of the software, so the panel did not reach that issue.  But this published opinion is fair warning to attorneys and experts that if software is relied upon, it must be shown to be reliable.

One other thing about this opinion, which is the first published opinion of the new Term, may stand out to regular readers of New Jersey state court appellate decisions.  The Appellate Division has changed the font in which it issues its opinions from what appeared to be Courier to what appears to be Times New Roman.  Those who follow the Appellate Division’s unpublished opinions will have noticed that this change seems to have taken effect as of September 10.  Since this blog carefully covers all of the most important developments in New Jersey appellate practice, it was necessary to point this out.  This does not mean, however, that Appellate Division briefs may now be filed using Times New Roman, as some would prefer.  Rule 2:6-10 has not changed in this regard.