Goldmann, Freund and Conford. The opinion of the court was delivered by Conford, J.A.D.
[35 NJSuper Page 88] The question before us is whether the Chancery Division correctly determined the "fair market value" of the operating machinery and equipment of a clothing manufacturing partnership, hereinafter designated as the "Arrow" company, as of October 1, 1950. The plaintiff's decedent, Alexander Sorokach, died that day one of six equal partners in the business and there ensued litigation over the settlement and evaluation of the interest of his estate in the partnership assets. On a prior appeal from a determination in the Chancery Division in the matter it was held by the Supreme Court, inter alia , that the "fair market value" of the machinery and equipment as of the date of death should be determined by the trial court as the basis for distribution in so far as that class of the assets was concerned, rather than "book value," as had been held by the Appellate Division.
Sorokach v. Trusewich , 13 N.J. 363 (1953). The case was remanded for the making of that determination.
On the basis of testimony adduced at the first trial and supplemented at the trial on the remand, the Chancery Division has determined the fair market value of the designated assets to be the sum of $26,450. Appellant maintains that the figure is erroneously low and that on the basis of the only testimony adduced at the trial assertedly consonant with the standard fixed by the Supreme Court the valuation should be set at $64,945.
"Fair market value" is a familiar concept in the law of property valuation. In New Jersey it is the formulaic criterion both of the "true value" according to which property is to be assessed for taxation, Hackensack Water Co. v. Division of Tax Appeals , 2 N.J. 157, 162 (1949), and of the basis upon which an owner is entitled to be compensated for property taken in eminent domain proceedings, Curley v. Jersey City , 83 N.J.L. 760, 761 (E. & A. 1912). The concept has been more particularly expressed in terms of "the price which * * * could be obtained for the property, in money, at a fair sale, * * * between a willing seller and a willing buyer; that is, one not obliged to sell dealing with one not obliged to buy," New Jersey Bell Telephone Co. v. City of Newark , 118 N.J.L. 490, 494 (Sup. Ct. 1937), affirmed 124 N.J.L. 451 (E. & A. 1940). A variant of the same idea is "what a willing purchaser would pay and a willing seller would take for the property under circumstances reasonably calculated to produce a fair sale." Curley v. Jersey City, supra (83 N.J.L. , at page 761). Perhaps in recognition of the reality that such transactions are as rare as the bargaining equilibrium postulated is perfect it has been observed that the criterion "is a hypothetical sale; hence the buyers therein referred to are hypothetical buyers, not actual and existing purchasers." Turnley v. City of Elizabeth , 76 N.J.L. 42, 44 (Sup. Ct. 1908). As was noted in the Curley case, supra (Id.) ,
"almost all sales * * * are necessarily influenced on one side or the other by considerations outside of the fair market value of
the property. Either the seller is influenced by the circumstances of his affairs, which make it desirable for him to sell even at some sacrifice, or else he thinks he is getting more for his property than its real worth; and, on the other hand, the purchaser has some special need or use for the property which makes it more valuable to him than to others not having such need, or else he thinks he is buying at less than the property is really worth."
For a consideration of the effect of the urgent necessities of the buyer upon sales prices as indicia of value see East Ridgelawn Cemetery v. Winne , 11 N.J. 459, 470 (1953); Delaware, Lackawanna & Western R. Co. v. City of Hoboken , 16 N.J. Super. 543, 567, 568 (App. Div. 1951), reversed on other grounds, 10 N.J. 418 (1952); compare the reverse effect where there appear to be advantages to the seller beyond the sales price, noted in the Hoboken case, supra (16 N.J. Super. , at page 566).
Yet in every issue such as this the tribunal charged with its resolution must, no matter how difficult, attempt to set down in dollars the price which would pass between bargainers in assumedly perfect bargaining balance. See East Ridgelawn Cemetery v. Winne, supra (11 N.J. , at pages 469-470). If in the present case the effort failed it was solely for lack of competent proof.
In the determination of the fair market value of machinery and equipment in place and in use in a going concern there should be reflected the valuation element appertaining to that use. Hackensack Water Co. v. State Board of Tax Appeals , 129 N.J.L. 535, 537 (Sup. Ct. 1943), affirmed sub nom. Hackensack Water Co. v. Township of North Bergen , 130 N.J.L. 483, 486 (E. & A. 1943); Central R. Co. of New Jersey v. Thayer-Martin , 114 N.J.L. 69, 75, 78 (Sup. Ct. 1934). No competent evidence bearing on that feature of the value of the property here in question found its way into the record before the trial court. Five expert witnesses testified, all of them qualified solely as dealers in used machinery, two for plaintiff and three for the defendants. With minor variations in approach they offered appraisals as to what the machinery and equipment at the Arrow plant, dismantled and removed from the premises,
would bring if auctioned or wholesaled to a market of used machinery dealers. This is plainly liquidation value, not going value. There is reflected not at all "the value to the owner" but only "the value to the acquirer," here an acquirer for whose purposes the property is worth much less than to one proposing to carry on the same operation as the existing owner with the machinery. Cf. East Ridgelawn Cemetery v. Winne, supra (11 N.J. , at page 469); General Motors Corp. v. State Board of Tax Appeals , 125 N.J.L. 574, 577, 578 (E. & A. 1940). Dealers who buy machinery being disposed of by its owner from a plant under disassembly have not negotiated with the uncompelled ...