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Passarella v. Township of Wall

2004 WL 2480752 (App. Div. 2004)

TAXATION; VALUATION—The price established by an arms-length sale of a property is probative of its fair market value; indeed, the sale price of a property may be the best indicator of its true value in some circumstances.

The Tax Court rejected evidence testimony presented by a property owner in a tax appeal. The property owner appealed further. The owner’s primary witness was a certified real estate appraiser. The witness testified that the unapproved lot measured only three acres in an area where ten acres was required for development. The appraiser “expressed the opinion that in view of the zoning, the property’s location and extensive wetlands, it [was] ‘undevelopable for commercial use.’” The appraiser also valued the property at the same price that the owner paid for it even though two years had passed. This is because the appraiser believed, and testified, that the best indicator of the property’s value is what [its owner] paid for it.” The property had been listed with three different real estate brokers for more than three years before it was sold. The sale was an arms-length transaction. The appraiser also testified that although the value of real estate generally increased between the time of the purchase and the time of the valuation, “this increase had no effect on the value of [the subject] property because it [was] undevelopable.” The Tax Court rejected the appraiser’s testimony because the appraiser presented no evidence that there was no change in the value between the time of the taxpayer’s purchase of the lot and the time of its valuation for tax purposes. It also felt that the appraiser should have given alternate valuation methods. For those reasons, the Tax Court dismissed the tax appeal and closed the property owner’s case.

On appeal, the Appellate Division believed that the Tax Court should not have dismissed the case at the close of the taxpayer’s argument because if there was any evidence, beyond a scintilla, the lower court was obligated to perform a mechanical, judicial function based only upon the existence of evidence and viewing that evidence most favorably to the party opposing the motion to dismiss. Accordingly, when the Appellate Division viewed the taxpayer’s proofs “most favorably to her, she showed that she purchased the subject property in an arms-length transaction ... [after] the property [had been] on the market for three years. She also showed that the property [was] undevelopable and for that reason sales of other properties that [were] suitable for development [were] not useful guides to the valuation of her property.” According to the Court, “[i]t is well established that the price established by an arms-length sale of a property is probative of its fair market value. Indeed, the sale price of a property may be the best indicator of its true value in some circumstances.” Consequently, the Court reversed the Tax Court’s final judgment and remanded the case to the court below.


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