Real Estate Appraisal Expert's Opinion on Tree Replacement Costs Excluded

Plaintiffs Jessie and James Perkins ("the Perkins" or "Plaintiffs") brought fraud claims against Defendants Compass DMV, LLC ("Compass") and Marc Fleisher (collectively, "Compass Defendants") and a negligence claim against Defendant District Title, A Corp. ("District Title"), arising from a 2020 sale of real property.

The Compass Defendants sought to preclude or limit testimony of the Perkins' expert witness, Michael J. Chicorelli, with respect to tree damage and insurance.

Real Estate Appraisal Expert Witness

Michael J. Chicorelli is a graduate of Towson University, where he earned a Bachelor’s Degree in Biology, with a Chemistry minor. He obtained a Master’s degree in Environmental Science from Johns Hopkins University. Prior to joining Lipman Frizzell & Mitchell LLC, Chicorelli worked as an environmental engineer and consultant. He holds certified general real estate appraiser licenses in the State of Maryland, the Commonwealth of Virginia, and the District of Columbia.

Chicorelli joined Lipman Frizzell & Mitchell LLC in August 2005 and in March 2019 became a Principal with the firm.

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Discussion by the Court

Chicorelli stated that his report was prepared "in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) of the Appraisal Foundation" and other professional guidelines. To reach a valuation of the underlying land, Chicorelli employed a "sales comparison approach," in which he compared Lot 40 to similar properties, "adjusting for differences between the subject property and the comparable properties." The Compass Defendants did not challenge this aspect of his testimony. For portions of the property impacted by the easement, Chicorelli employed a "cost approach," which works on the principle "that a prudent purchaser would not pay more for a property than the amount required to purchase a similar site and construct similar improvements without undue delay, producing a property of equal desirability and utility." Apparently pursuant to the cost approach, Chicorelli deducted from the overall property valuation the cost of removing and replacing trees impacted by the easement and the cost of additional insurance.

Chicorelli's report proceeded under the assumption that "the reports and findings of other professionals relied on for purposes of our appraisal report are accurate." Chicorelli stated in his deposition that it is a reliable method to rely on the estimates and reports of other experts and professionals, and he had done so "many times in the past". Accordingly, his valuation of Lot 40 under the cost approach relied in part on (1) an estimate from Ruppert Companies ("Ruppert") calculating the replacement value of the damaged trees as $307,500; (2) quotes from two tree removal companies for the cost of removing four and nine trees, respectively; and (3) a quote from an insurance company for the cost of additional insurance due to the easement. The Compass Defendants argued that the use of these estimates and quotes is unreliable and must be excluded.

A. Reliability of Chicorelli's Opinions on Tree Replacement

The Compass Defendants challenged Chicorelli's reliance on an email from Ruppert estimating the cost of installing thirty-two large trees. Working from a list of trees provided by Perkins, Ruppert estimated that each tree would cost between $4,000 and $10,500 to install, for a total of $307,500. Chicorelli deducted this $307,500 cost from his valuation of Lot 40.

Chicorelli's report treats the Ruppert estimate as a professional determination that there are thirty-two trees on Lot 40 that need to be replaced. However, the Ruppert estimate makes no such determination. The estimate appears to be a response to an email from Perkins, in which she provided a description of thirty-two trees and asked how much it would cost to replace them. The author of the Ruppert estimate expressly states that she has not been to the property, and at no point states an opinion that any of the thirty-two trees were in fact injured or needed to be replaced.

Other than the Ruppert estimate, Chicorelli provided no basis for concluding that thirty-two trees need to be replaced. At his deposition, he suggested that the conclusion traces back to information from the Perkins. Chicorelli's determination that the property suffered a $307,500 diminution in value is thus unmoored from any professional or expert reports.

Accordingly, Chicorelli's opinion that Lot 40 suffered a $307,500 diminution in value due to the cost of tree replacement is not based on sufficient data or facts to be reliable. His opinion assumes facts not in the record. Alternatively, it could be said that Chicorelli failed to apply his stated methodology because the facts on which he relied did not come from a professional source. Regardless of the framing, Rule 702 is ultimately concerned with reliability, and Chicorelli's conclusion as to tree replacement is not reliable.

In their opposition, the Perkins largely made the same error as Chicorelli, arguing that the report properly relied on the Ruppert estimate as a factual input. The Perkins also point to "independent evidence" that trees were damaged: Perkins' testimony that two or three trees had fallen and that an unspecified number of trees "exhibited decline" and the two quotes identifying four and nine trees, respectively, for removal. These sources of evidence, however, fall well short of demonstrating that thirty-two trees were damaged to the point of requiring replacement and were not referenced by Chicorelli in his report as a basis for reaching the $307,500 amount.

For the foregoing reasons, Chicorelli will not be permitted to testify as to the cost of tree replacement or its impact on the property's valuation.

B. Tree Removal and Insurance Costs

The Compass Defendants also challenged Chicorelli's use of quotes from tree removal companies and an insurance company in his land valuation. They raise arguments under Rule 702 similar to those about the Ruppert estimate. Furthermore, the Compass Defendants argued that Chicorelli failed to explain why the cost of removing trees or additional insurance would lead to an equivalent drop in the value of the property. This argument has force because Chicorelli, while invoking the "cost approach," did not explain why it would be appropriate here. His own definition states that the cost approach is most applicable to new or proposed "improvements" to property, or "when the improvements are so specialized that there is little or no sales data from comparable properties." Beyond this general definition, Chicorelli did not explain why he applied the cost approach to tree removal or insurance costs.

These deficiencies arise from the same problem: tree removal and insurance costs are monetary damages that would be more easily and directly established through lay witness testimony. Perkins may testify as to tree removal and insurance costs she has incurred or will incur because of the easement. It is not necessary to have an expert provide that evidence. Accordingly, Chicorelli may not testify as to these costs.

Held

The Court granted the motion to preclude the testimony of Michael Chicorelli with respect to tree damage and insurance.

Key Takeaway

An opinion that supplies through assumption the very facts the record omits is not based on sufficient facts or data.

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