PALISADIUM MANAGEMENT CORP., Plaintiff-Appellant/ Cross-Respondent,
BOROUGH OF CLIFFSIDE PARK, Defendant-Respondent/ Cross-Appellant. CARLTON CORP., Plaintiff-Appellant/ Cross-Respondent,
BOROUGH OF CLIFFSIDE PARK, Defendant-Respondent/ Cross-Appellant.
Submitted October 23, 2017
appeal from the Tax Court of New Jersey, Docket Nos.
5633-2011, 10266-2012 and 8940-2013, whose opinion is
reported at 29 N.J. Tax 245 (Tax 2016).
Michael A. Paff, attorney for appellants/cross-respondents.
Gillen, PC, attorneys for respondent/cross-appellant
(Christos J. Diktas and Crystal G. Calabrese, on the briefs).
Judges Accurso, O'Connor and Vernoia.
Palisadium Management Corp. and Carlton Corp., owners of two
adjacent tax lots on the site of the former Palisades
Amusement Park in Cliffside Park, appeal from six May 13,
2016 Tax Court judgments affirming the 2011-2013 tax
assessments on the properties. The Tax Court denied the
Borough's K 4:37-2(b) motion, finding plaintiffs had
overcome the presumption of the validity of the assessments;
rejected the Borough's cost approach for valuing the
property, finding it not unique or special purpose; rejected
the reliability of improvement costs generated by computer
software; accepted plaintiffs' expert's hybrid
approach to valuation but found the appraiser lacked adequate
objective evidence to support his adjustments; and determined
there was not sufficient competent evidence in the record to
permit the court to make an independent finding of true
value, resulting in the assessments being affirmed.
appeal, arguing their expert "provided solid evidence of
value based on reliable market data which was adequate to
determine value," and the Tax Court should have applied
its expertise to the substantial evidence in the record to
determine true value and fix the assessment for the years in
question. The Borough cross-appeals, arguing the Tax Court
should have adopted its "cost approach as the
appropriate method of valuation" and that the cost data
relied on by its appraiser "was admissible, reliable,
relevant and persuasive." We reject those arguments and
affirm, substantially for the reasons expressed by Judge
Fiamingo in her written opinion, which is reported at 29 N.J.
Tax 245 (Tax 2016).
facts are fully set forth in the Tax Court opinion. We note
only the properties, commonly known as the Palisadium,
consist of the unusual combination of a banquet hall and
fitness center in one building located along the edge of one
of the cliffs of the Palisades and a detached four-story
parking garage. The combined area of the two lots is over
four acres. The property has unobstructed views of the Hudson
River and the New York City skyline. Its total assessed value
for each year in question was $17, 251, 000, with equalized
values of $17, 251, 000 in 2011, $19, 285, 634 in 2012 and
$18, 692, 166 in 2013.
Court rejected the Borough's cost approach to value,
finding none of the reasons typically supporting such an
approach applied. Palisadium, 29 N.J. Tax at 260-64.
Specifically, the court noted the property was not new,
having been built over thirty years ago, see
Worden-Hoidal Funeral Homes, Inc. v. Red Bank
Borough, 21 N.J. Tax 336, 338 (2004), and could not be
said to be so special purpose or unique as to have no market,
see Dworman v. Borough of Tinton Falls, 1 N.J. Tax
445, 452 (1980), affd, 180 N.J.Super. 366 (App. Div.
1981). Palisadium, 29 N.J. Tax at 260-61.
Court was also critical of the Borough's expert's use
of an automated valuation software, the Marshall and Swift
Valuation Service computer program, to generate replacement
costs. Id. at 263-64. The court noted
"the Borough's expert indicated that he 'plugged
in' the numbers into the program and did not
independently check any of the resulting calculations to
determine their accuracy vis-a-vis the Marshall & Swift
hand calculations historically accepted by the court."
Id. at 263. Noting "[i]n order for a new
technology to be deemed reliable, there must be
'sufficient scientific basis to produce uniform and
reasonably reliable results, '" State v.
Hurd, 86 N.J. 525, 536 (1981) (quoting State v.
Cary, 49 N.J. 343, 352 (1967)), the court ruled it
lacked "any basis to determine whether the estimates
produced by the software and utilized by the appraisal expert
were accurate or reasonable." Palisadium, 29
N.J. Tax at 263-64.
not the first occasion on which the Tax Court has 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. See Forsgate Ventures IX, LLC v. Twp.
of S. Hackensack, 29 N.J. Tax 28, 45 (2016), afPd,
Forsgate Ventures IX LLC v. Twp. of S. Hackensack,
No. A-2943-15 (App. Div. Apr. 6, 2018). Because the Tax Court
reasonably rejected both parties' reliance on the cost
approach to valuation, we are not required to resolve the
reliability of the software here, and the record is not such
that we could do so with confidence.
only that "[t]he net opinion rule . . . mandates that
experts 'be able to identify the factual bases for their
conclusions, explain their methodology, and demonstrate that
both the factual bases and the methodology are
reliable.'" Townsend v. Pierre, 221 N.J.
36, 55 (2015) (quoting Landriganv. Celotex Corp.,
127 N.J. 404, 417 (1992)). As the Court has recently
reminded, we review a trial court's decision "to
exclude expert testimony on unreliability grounds" only
for abuse of discretion. In re Accutane Litig., ___
N.J. ___, ___ (2018) (slip op. at 70). Real estate appraisers
testifying in the Tax Court should be guided accordingly.
expert employed a hybrid approach to value the property,
employing a sales comparison approach to value the banquet
hall and an income capitalization approach to value the
health center. Palisadium, 29 N. J. Tax at 259. He
used the cost approach only to confirm his results.
Ibid. Although accepting plaintiffs' hybrid
approach as sound given the unusual combination of uses,
see Aliottav. Twp. of Belleville, 27 N.J. Tax 419,
464-65 (2013), Livingston Mall Corp. v. Livingston
Twp., 15 N.J. Tax 505, 522 (1996), the court found such
serious flaws in the 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. Palisadium, 29 N.J. Tax
at 266-73 (explaining rejection of plaintiffs'
expert's time/market adjustment as well as adjustments
for location, parking and views). ...