Ashwin J. Babaria and Bharti A. Babaria v. City of Southlake, Texas ( 2016 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00068-CV
ASHWIN J. BABARIA AND BHARTI APPELLANTS
A. BABARIA
V.
CITY OF SOUTHLAKE, TEXAS APPELLEE
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FROM COUNTY COURT AT LAW NO. 3 OF TARRANT COUNTY
TRIAL COURT NO. 2011-006149-3
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MEMORANDUM OPINION 1
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This is an appeal from a judgment in a condemnation case. The City of
Southlake instituted an eminent domain action to condemn property owned by
Ashwin and Bharti A. Babaria. The Babarias objected to the $97,000 award of
the special commissioners, and Southlake deposited that amount into the registry
1
See Tex. R. App. P. 47.4.
of the court. The Babarias withdrew the money, and the issue of compensation
was tried to the jury. Based on the jury’s verdict, the trial court signed a
judgment awarding Southlake $7,000, the difference between the amount the
Babarias had withdrawn from the court’s registry and the amount of
compensation awarded to the Babarias by the jury.
In five issues, the Babarias challenge the trial court’s admission of the
testimony of Southlake engineer Cheryl Taylor and of appraisal expert Charles
Stearman and the trial court’s denial of their motion to disregard jury findings and
for judgment notwithstanding the verdict. Because we hold that Taylor’s
testimony was admissible, that Stearman’s testimony was also admissible, and
that the trial court did not err by overruling the Babarias’ postjudgment motions,
we affirm the trial court’s judgment.
1. Background
Southlake planned to convert the road that runs in front of the Babarias’
property from a two-lane road into a four-lane divided road with underground
storm water drainage, a landscaped median, and extended sanitary sewer
service. To do so, Southlake planned to condemn 0.185 acre of the Babarias’
approximately eight-acre property (roughly thirty feet on the front of the property)
to widen the road and another 0.067 acre part (approximately ten feet along the
front of the property) for a drainage easement.
In the eminent domain proceeding, the special commissioners assessed
damages of $97,000 the right-of-way, the permanent drainage easement, and a
2
temporary construction easement. The Babarias objected to the special
commissioners’ award, and Southlake deposited the amount of the award into
the registry of the trial court on January 19, 2012. On the Babarias’ motion, the
trial court allowed them to withdraw the money before trial. The parties then tried
the issue of damages to a jury.
At trial, Robert Hawkins, an appraiser testifying for the Babarias, asserted
that the value for the property taken plus the damages to the Babarias’ remainder
property totaled $162,500.00. Hawkins testified that the property being
condemned did not constitute its own economic unit, and thus his valuation
testimony for the part taken was based on a 44,029 square-foot (just over one-
acre) parcel of undeveloped land at the front of the Babarias’ property. He
testified that the parcel could be sold for a single-family residential lot, which
Hawkins concluded was the highest and best use of the property. Hawkins
opined that the parcel had a value of $7.00 per square foot based on a
comparable sales analysis that compared the undeveloped parcel he had used
as an economic unit to other unimproved properties. Based on this valuation, he
stated that the value of the taken property was $87,500, plus $15,000 for fencing
and gates on the property.
In testifying about damages to the remainder property, Hawkins stated that
Southlake has a minimum one-acre lot size requirement for residential
development and that prior to the taking, the Babarias’ property included a full
unencumbered acre that could be sold as a single family residential lot. After the
3
taking, however, the Babarias would only have a full acre to sell if they included a
thirty-foot strip on the property that was already burdened with a utility easement
and power line. He testified that including this thirty-foot strip and taking into
account Southlake’s setback requirements would limit the size home that could
be built on the lot and decrease the amount a buyer would pay for it. Hawkins
concluded that the remainder damages were $60,000.
Southlake called city engineer Cheryl Taylor and appraisal expert Charles
Stearman to testify. When Southlake’s attorney asked Taylor if she was familiar
with the application of Southlake’s subdivision ordinance to proposed replats 2 of
property, the Babarias’ attorney objected, “[H]e’s launching into questions to lay
the basis as an expert. He’s asking her as an expert her opinion about the plans
and the effects on this property.” Their attorney objected to Taylor “talking about
the ordinance or how it applies to this property because that is an interpretation
of law[,] . . . and that is an expert opinion.” She further objected that Taylor had
not been designated as an expert witness.
After hearing an offer of proof outside the jury’s presence, the trial court
sustained the objection in part and overruled the objection in part. The court
ruled that Taylor could testify that a portion of the property had previously been
dedicated under a requirement of the subdivision ordinance. The court further
ruled that Taylor could not testify about whether the subdivision ordinance would
2
The reporter’s record states that the attorney asked about “three plats,”
but from the context we assume it should read “replats.”
4
require a platting of the economic unit proposed by Hawkins and, if so, whether
the subdivision ordinance would require a dedication of a portion of the Babarias’
property in that platting.
Stearman’s report—on which his testimony was based—was dated
October 7, 2011, not the January 19, 2012 date of taking. When Stearman
began to testify about his valuation opinion, the Babarias objected to his
testimony on the ground that his report was not evidence of value as of the
January 19, 2012 date of taking, 3 he had never supplemented his report, and
Southlake had never supplemented its discovery responses to support a
valuation as of the date of taking. Thus, they argued, his testimony about market
value should be excluded. The trial court allowed Southlake to question
Stearman about whether there was any need for him to do further analysis (he
answered no) and whether his October 2011 opinion was equally applicable to
the January 2012 date of taking (he answered yes).
The Babarias’ attorney objected that Stearman had done no analysis from
which he could draw the conclusion that the market had not changed between
October 2011 and January 2012. She characterized Stearman’s testimony as
“saying the date of condemnation doesn’t matter.”
3
See Tex. Prop. Code Ann. § 21.021 (West 2014) (stating that the
condemnor may take possession of condemned property pending the results of
further litigation if the condemnor deposits with the court the amount of money
awarded by the special commissioners as damages).
5
After some discussion of case law outside the presence of the jury, when
the Babarias’ attorney interrupted the trial court, the court ruled, “Okay. Well, if
y’all don’t care what I have to say, then I’ll overrule your objections and
[Southlake’s attorney] can continue.” The Babarias’ attorney asked whether she
should make the rest of her objections before the jury was brought back in, and
the trial court responded, “You’re welcome to do so, although I guess you’re not
going to want to listen to what I have to say. But I will say you’re overruled
without providing the rationale.”
The Babarias’ attorney apologized for interrupting the trial court and then
objected that Stearman had not used a valid appraisal methodology because he
had used sales of unimproved properties to determine a value for the part taken,
even though he used the Babarias’ entire property as the basis for comparison
and the Babarias’ property is improved. The trial court overruled the objections.
Stearman then testified about his valuation opinion. Because the property
taken was too small to constitute its own economic unit, Stearman used the
Babarias’ entire property as an economic unit. He then found comparable sales
of vacant land in the area to come up with a per-square-foot value for the vacant
land taken. Stearman testified that his opinion of the value of all the land rights
to be acquired plus the value of any site improvements located on the land
acquired was $75,740, plus $1,830 for a temporary construction easement, for a
total of $77,370.
6
The jury rendered a verdict finding $90,000 as the fair market value of the
part taken and finding no damages to the remainder property. The Babarias filed
a motion to disregard the jury’s verdict and for judgment notwithstanding the
verdict (JNOV), requesting that the trial court render a judgment in their favor for
$162,500. The trial court denied the motion and signed a judgment on the
verdict. Because the Babarias had already withdrawn the $97,000 deposited in
the court’s registry, the trial court ordered that Southlake recover $7,000 from the
Babarias.
The Babarias filed a motion for new trial and a notice of appeal. The trial
court subsequently rendered an amended final judgment (noting that property
lienholders had been nonsuited) to address concerns raised by this court about
whether the prior judgment disposed of all parties. The motion for new trial was
overruled by operation of law, and the Babarias now appeal.
2. Discussion
2.1. Civil procedure rule 193.6 did not require the exclusion of Stearman’s
testimony
In their first issue, the Babarias assert that the trial court erred by not
excluding Stearman’s opinion testimony under civil procedure rule 193.6. 4
Civil procedure rule 193.6 requires the exclusion of evidence or information
that was not timely disclosed in an initial, amended, or supplemental discovery
4
Tex. R. Civ. P. 193.6.
7
response. 5 Exclusion is not required, however, if the trial court finds that there
was good cause for the failure to disclose or that the failure to disclose will not
unfairly surprise or unfairly prejudice the other parties. 6 The Babarias argue that
Southlake never disclosed Stearman’s opinion of market value as of January 19,
2012 and did not show either good cause for the failure to disclose or that they
would not be prejudiced by the testimony.
The basis for the Babarias’ argument under this issue is a statement in
Stearman’s report that the value opinion within it was reliable only as of October
7, 2011. At trial, the Babarias’ attorney objected that “there’s been no showing
that [Stearman] supplemented anything showing that he did any analysis of the
market between October and January,” and that if he had done such an analysis,
Southlake “did not supplement and provide it to us.”
The trial court allowed Stearman to testify to address “those foundational
issues,” with a warning that the objection would be sustained “if the connection is
not made.” Stearman then testified that the appraisal report and his opinions in
the report were equally applicable to both the date of his original valuation and
the later date of taking, so no additional analysis was necessary.
Outside the presence of the jury, the trial court asked Southlake what it
had disclosed to the Babarias in discovery about Stearman’s testimony.
5
Id.
6
Id.
8
Southlake’s attorney read out the disclosure, which notified the Babarias that
Stearman would testify about the fair market value of the property rights acquired
by Southlake and about a lack of any damage to the remainder property after
those property rights were acquired.
This response disclosed to the Babarias that Stearman would be testifying
about the fair market value of the part taken and about how the taking affected
the value of the remainder. The basis of Stearman’s expected testimony—his
appraisal report and his appraisal summary—were attached to the disclosure.
Thus, this response, along with Stearman’s report, disclosed the subject matter
of Stearman’s testimony, the general substance of his mental impressions and
opinions, and a summary of their basis. Although his report is not in the record,
the parties agree that his testimony at trial was consistent with his report.
Nothing about Stearman’s expected testimony that needed to be disclosed under
civil procedure rule 194.2(f) 7 changed between the date of the report and the
date of trial.
Disclosure rules “require that opposing parties have sufficient information
about an expert’s opinion to prepare a rebuttal with their own experts and cross-
examination, and that they be promptly and fully advised when further
8
developments have rendered past information incorrect or misleading.”
7
Tex. R. Civ. P. 194.2(f) (setting out requirements for disclosures with
respect to expert testimony).
8
Exxon Corp. v. W. Tex. Gathering Co., 868 S.W.2d 299, 304 (Tex. 1993).
9
Stearman’s testimony about the value of the property on January 19, 2012 was
based on information included in his report, and Southlake disclosed the report to
the Babarias. Nothing in the record shows that there were any further
developments that rendered the past information disclosed by Stearman
incorrect or misleading. Therefore, Southlake had no duty to supplement. 9 And
because the basis of Stearman’s testimony was disclosed to the Babarias, the
purpose of the rule was satisfied by Southlake’s disclosure. 10 Regardless of
whether the testimony should have been excluded on some other basis, we
cannot say the trial court abused its discretion 11 by overruling the Babarias’ rule
193.6 objection. We overrule the Babarias’ first issue.
2.2. The date on Stearman’s report did not make his testimony
inadmissible under Texas eminent domain law
In their second issue, the Babarias again challenge Stearman’s testimony
based on the date of his report, this time on the basis that the date of the report
9
See Tex. R. Civ. P. 193.5 (requiring an amended or supplemental
responses to written discovery when a party learns that a previously-made
response is no longer complete and correct).
10
See Tex. Mun. League Intergovernmental Risk Pool v. Burns, 209
S.W.3d 806, 817 (Tex. App.—Fort Worth 2006, no pet.) (stating that the purpose
of the rule “is to require complete responses to discovery so as to promote
responsible assessment of settlement and prevent trial by ambush”) (footnote
and quotation marks omitted); see also Tex. R. App. P. 44.1 (setting out the
standard for reversible error on appeals).
11
See $27,877.00 Current Money of U.S. v. State, 331 S.W.3d 110, 120–
21 (Tex. App.—Fort Worth 2010, pet. denied) (reviewing a trial court’s ruling on a
rule 193.6 objection for abuse of discretion).
10
made his trial testimony unreliable. They argue that because Stearman’s
valuation in the report was rendered as of a date other than the date of taking,
and he provided no analysis at trial to explain why that valuation was also valid
for the date of taking, his testimony was unreliable and therefore inadmissible.
Expert testimony must be relevant to be admissible. 12 To be relevant,
expert testimony must assist the jury in determining an issue or in understanding
other evidence. 13 Expert testimony is not relevant if it is unreliable. 14 If expert
testimony is based on an unreliable foundation or flawed methodology, it is not
reliable and therefore not relevant. 15
At trial, when Stearman was asked about his opinion on market value, the
Babarias’ attorney objected that Stearman’s own appraisal stated that “use of this
appraisal for any date other than October 7[, 2011] makes it unreliable.”
Although Stearman’s report does not appear in the record, Stearman agreed that
the report stated that the market value opinion included within it was only reliable
on October 7, 2011.
12
TXI Transp. Co. v. Hughes, 306 S.W.3d 230, 234 (Tex. 2010).
13
Id.
14
Id.
15
Id.
11
As a general rule, sales occurring within five years before the taking are
not too remote to be admissible as evidence of fair market value. 16 Thus, the
fact that Stearman used comparable sales that occurred before the taking did not
make his opinion testimony based on those sales unreliable. The Babarias direct
us to no evidence in the record, from their expert or anyone else, that there were
significant changes in the marketplace occurring in the three-month period
between October 2011 and January 2012. The Babarias make no complaint
about the dates of the sales used by Stearman or about the fact that Stearman
used those sales to develop an opinion on market value. Their complaint is
based entirely on the statement Stearman included in his report that his opinion
expressed therein was only reliable as of October 7, 2011.
Stearman explained at trial that he puts a statement in all of his appraisal
reports restricting the report’s applicability to dates other than the date of the
report. He explained that he does this
[a]s an appraisal matter, to place a limit, if you will, on someone[‘s]
using the report for some purpose other than its intended use. To
16
See Holiday Inns, Inc. v. State, 931 S.W.2d 614, 623 (Tex. App.—
Amarillo 1996, writ denied) (“Generally, however, the admission of evidence of
sales occurring within five years of the date of taking of the subject property may
be appropriate.”); Bd. of Regents of Univ. of Tex. Sys. v. Puett, 519 S.W.2d 667,
672 (Tex. Civ. App.—Austin 1975, writ ref’d n.r.e.) (upholding admission of
comparable sales four and a half years before the taking); Hays v. State, 342
S.W.2d 167, 171–72 (Tex. Civ. App.—Dallas 1960, writ ref’d n.r.e.) (citing cases
involving comparable sales occurring three to five years before the taking and
holding that, absent evidence of a material change in the real estate market
between the date of the sales and the date of the taking, sales of three years’
difference between sale and taking were acceptable).
12
me, if I say the effective date is today, then I don’t want you to use
that value for either a retrospective date or a prospective date
without [my] saying so.
It appears, then, that the statement was intended as a method to prevent
unauthorized use of the report. 17 It was not an assertion that the market was in
flux and thus that the opinions within the report would necessarily be invalid any
other day.
We agree with the Babarias that the date of taking in this case was
January 19, 2012. We also agree that the fair market value of property in
condemnation cases is generally determined by “measuring the difference in the
value of the land immediately before and immediately after the taking.” 18 But we
disagree that Stearman’s testimony should have been excluded because of the
statement about the October 2011 date in his report.
The case that the Babarias primarily rely on is Topletz v. State, 19 an
unpublished opinion of no precedential value from a sister court of appeals.
17
See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d
913, 922 (Tex. 2010) (discussing Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co.,
51 S.W.3d 573, 575 (Tex. 2001), and when statements in a report, when relied
on by a third party, may support a claim for fraud); see also Restatement
(Second) of Torts § 552 & cmts. (1977) (discussing negligence claims based on
information negligently supplied for the guidance of others and listing cases in
which appraisers had been sued by third parties for negligent misrepresentation
based on statements in appraisals).
18
Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 627 (Tex. 2002).
19
No. 05-93-00815-CV, 1994 WL 384411 (Tex. App.—Dallas July 25,
1994, writ denied) (not designated for publication).
13
Given the case’s status, we do not place as much importance on it as the
Babarias do. To the extent we would be inclined to assign the case any weight, it
is distinguishable.
In that case, the Dallas court of appeals addressed the trial court’s
exclusion of testimony by Topletz’s four valuation experts. 20 None of the experts’
reports were dated the date of the taking. 21 The State asked the trial court to
limit each expert’s testimony to the opinions expressed in Topletz’s discovery
responses, which contained the reports. 22 After the trial court granted the State’s
request, the State then objected to the testimony of each of Topletz’s experts as
irrelevant because the dates of the experts’ reports were different from the date
of the taking. 23 The trial court granted the objections. 24
The Dallas court of appeals held that three of the experts should have
been allowed to testify. 25 In the reports of those three experts, despite having
report dates different from the date of the taking, the experts had included
statements that they had developed opinions of the value of the property as of
20
Id. at *4.
21
Id. at *1.
22
Id.
23
Id.
24
Id.
25
Id. at *3.
14
the date of taking. 26 The fourth expert did not state in his report that his purpose
was to form an opinion of the value of the property at the time of the taking and
the damages to the remainder resulting from the taking; the report simply
estimated a fair market value of the property as of April 2, 1990, nineteen months
before the taking. 27 The court of appeals upheld the trial court’s exclusion of the
fourth expert’s testimony as irrelevant.
In this case, as noted above, Southlake stated in its discovery disclosures
that Stearman “will testify as to the fair market value of the property right sought
to be acquired by this action, as well as the lack of damage to the property of the
landowners remaining after the acquisition of the property right sought in this
case.” Thus, unlike in Topletz, Southlake’s discovery response indicated that
Stearman’s testimony would include testimony about market value after the date
of the taking, making his testimony relevant.
And, as stated, we do not have Stearman’s report in the record, nor do we
have the summary of his report. We cannot tell whether, from the rest of his
report, he indicated an opinion of market value as of the future date of the taking.
We do have Stearman’s explanation at trial for the statement about the reliability
of the value on a date other than in October 2011.
26
Id.
27
Id. at *4.
15
Although the Babarias’ attorney attempted at trial to characterize
Stearman’s testimony as saying that “the date of condemnation doesn’t matter,”
that was not Stearman’s position. Stearman never alluded to or expressed a
belief that the date of the taking was irrelevant. Instead, he explained that there
was no need to do another analysis three months later for him to know that his
opinion of the property’s fair market value in October 2011 was also true as of
January 19, 2012.
As an expert, Stearman was qualified to know if market conditions had
shifted. The Babarias argue that Stearman’s “ipse dixit claim that the valuations
and opinion he originally reported to be reliable only as of October 7, 2011, were
likewise just as valid for a valuation measured as of the date of the take”
rendered his testimony no evidence at all. We disagree. If nothing had
happened in the market in the three-month period between the date he wrote the
report and the date that Southlake deposited the funds into the court’s registry,
Stearman was not required to conduct an entirely new analysis and update his
report.
The record indicates that Stearman understood when he needed to look at
new sales data. Stearman testified at trial that he had done an initial report in
February 2011, and when he updated his report in October 2011, he replaced an
older sale he had used with a more recent sale. This is the same kind of
expertise—knowing whether there has been shift in the marketplace or whether
16
new sales data should be looked at—that allows an expert to use sales even
years before the date of taking to establish a value on the date of the taking. 28
Stearman testified to a per-square-foot and total value of the entire
property before the date of taking and a per-square-foot and total value of the
taken piece, which would be subtracted from the total as of the date of taking; he
also testified that the value of the remainder property would not change as a
result of the taking. He based his opinion on an appraisal report that he had last
updated three months before the date of taking, but he nevertheless opined that
the sales figures in the appraisal report were still applicable as of the date of
taking. This is no different from any other expert’s testimony at trial based upon
a report completed before trial. The issue, then, is whether the three-month gap
between the report and date of taking made the basis of Stearman’s conclusion
in the report too remote; we hold that––in the absence of any evidence indicating
that the market had changed significantly during that three-month period––the
trial court did not abuse its discretion by determining that it was not. We have
found no case law indicating that an expert’s appraisal forming his or her opinion
of the value of property as of the date of taking must be performed on the date of
the taking itself to be valid.
Stearman’s testimony was relevant because it expressed an opinion of
market value as of the date of taking. His testimony was not unreliable simply
28
Cf. Hays, 342 S.W.2d at 171–72.
17
because his report had been written after Southlake had initiated condemnation
proceedings but three months before Southlake deposited the funds into the
registry. We cannot say that the single statement in Stearman’s report pointed
out by the Babarias made Stearman’s testimony irrelevant and thus unreliable,
and we therefore cannot say that the trial court abused its discretion by admitting
his testimony. We overrule the Babarias’ second issue.
2.3. Stearman’s appraisal methodology was permissible
In their third issue, the Babarias contend that the trial court abused its
discretion by permitting Stearman to testify because he used an improper
methodology to value the condemned property. 29 In a partial taking, there are
two methods for submitting the issue of compensation to the jury—the Carpenter
approach and the Uselton approach. 30 “The trial court has discretion to
determine whether the Carpenter or Uselton approach should be used, given the
circumstances of the particular case.” 31 Under the Carpenter approach, two
questions should be submitted, asking the jury to find “first, the market value of
the part taken, considered as severed land, and second, damages to the
29
See State v. Chana, 464 S.W.3d 769, 786 (Tex. App.—Houston [1st
Dist.] 2015, no pet.) (observing that appellate courts review a trial court’s
decision to admit or exclude evidence for an abuse of discretion).
30
Westgate, Ltd. v. State, 843 S.W.2d 448, 456–67 (Tex. 1992) (describing
the methods for jury submission set out in State v. Carpenter, 89 S.W.2d 194
(Tex. 1936), and Uselton v. State, 499 S.W.2d 92 (Tex. 1973)).
31
Id. at 457.
18
remainder, accompanied by an instruction that such damages should be
determined by considering the difference between the remainder’s pre-and post-
taking value.” 32 In this case, the trial court submitted the Carpenter questions.
The Babarias’ complaint under this issue is that Stearman was allowed to
testify based on a methodology that failed to value their property as it existed
before and after the taking. 33 Specifically, they take issue with the fact that
Stearman determined a value of the vacant land taken by using comparable
sales of unimproved property but, in determining the price per square foot, used
the Babarias’ entire property, which is not vacant, as an economic unit.
The record raises the possibility that Stearman did include at least one
property with a house on it in his appraisal. The Babarias’ attorney asked
Stearman if he had considered in his analysis a sale of a significantly smaller
property close to the Babarias’ property. Stearman testified that he thought he
had, but he could not remember if he had valued the house or just the land, and
he would need to look at his report to refresh his memory. The Babarias’
attorney moved on to other questions without giving the report to Stearman to
look at; therefore, the question of whether that property was including in
Stearman’s analysis was not resolved. We will assume for our analysis that this
property sale was not included.
32
Id.
33
See TXI Transp. Co., 306 S.W.3d at 234.
19
When condemned property cannot be considered an independent
economic unit, “the market value [of the part taken] must necessarily be
determined by considering some portion or all of the remainder in order to
construct an economic unit.” 34 In this case, both sides agreed that the part taken
by Southlake did not constitute its own economic unit. To find a value for the part
taken, Stearman used the Babarias’ entire eight-acre property as an economic
unit. Using the entire property as an economic unit is an accepted method of
determining the value of the land condemned in a partial taking. 35
Stearman concluded that the highest and best use of the property 36 was
the use it currently had at the time of the taking—as a mansion estate.
Stearman’s conclusion to that effect was not only permissible, it was in
accordance with the legal presumption that a property’s current use at the time of
condemnation is its highest and best use. 37
34
State v. Windham, 837 S.W.2d 73, 76 (Tex. 1992).
35
See id.
36
See City of Sugar Land v. Home & Hearth Sugarland, L.P., 215 S.W.3d
503, 511 (Tex. App.—Eastland 2007, pet. denied) (defining “highest and best
use” of a property as “[t]he reasonably probable and legal use of vacant land or
an improved property, which is physically possible, appropriately supported,
financially feasible, and that results in the highest value”) (citation and internal
quotation marks omitted).
37
See Enbridge Pipelines (E. Tex.) L.P. v. Avinger Timber, LLC, 386
S.W.3d 256, 261 (Tex. 2012) (stating that in a takings case, “[t]here is a
presumption that the highest and best use of the land is the existing use of the
land”).
20
It is undisputed that the Babarias’ residence was not located on the part
taken. Both sides agreed that the house—which was over 840 feet from the
condemned strip of land—was totally unaffected by the taking.
There was no testimony that the condemnation caused damages to the
remainder because of the type of project for which the taking was instituted. 38
The difference in opinion between the experts as to damages to the remainder
came from Hawkins’s belief that before the taking, an unimproved section of the
Babarias’ property could be sold as a lot, but after the taking it could not.
In sum, it was uncontroverted that the house was not on the part taken,
that the house was more than 800 feet from the part taken, that the value of the
house was unaffected by the taking, and that both experts appraised the value of
vacant land to reach their opinions of the amount of damages.
Stearman further concluded that, not only was there no damage to the
value of the home, there was no damage to the remainder property at all—
meaning no reduction in the fair market value of the Babarias’ remaining land. 39
Thus, the only value for Stearman to determine was the fair market value of the
38
See, e.g., Heddin v. Delhi Gas Pipeline Co., 522 S.W.2d 886, 887 (Tex.
1975) (addressing landowners’ claim that the market value of their property was
decreased substantially by reason of fear of pipelines in the minds of the buying
public and discussing when fear in the mind of the buying public is relevant).
39
See DeSanders v. Texoma Pipe Line Co., 538 S.W.2d 663, 666 (Tex.
Civ. App.—Texarkana 1976, no writ) (noting repeated refusal of Texas courts to
hold that the taking of a portion of a tract of land diminishes as a matter of law
the market value of the remainder).
21
vacant land taken by Southlake. To find that value, he used comparable sales of
vacant tracts of land to determine a square-foot value for similar vacant land in
the area, which he then applied to the land taken to estimate its value. This
decision is the focus of the Babarias’ issue.
Generally, improvements situated on the part taken have no market value
separate from the land, but their value should be reflected in the value of the land
taken. 40 The improvements are not considered for their own market value, but
only so far as they affect the value of the land itself. 41 Stearman testified that
even if he had appraised the entire property as improved (rather than looking
only for the value of the land), his opinion of the value of the land itself would not
have changed.
Because improvements commonly have some effect on the value of the
land on which they are located, 42 as the Babarias point out, if the property taken
is improved and the comparable sales method is used to find its value, then sales
40
State v. Carpenter, 89 S.W.2d 979, 980–81 (Tex. 1936) (op. on reh’g).
41
See id.; see also Stewart v. State, 453 S.W.2d 524, 528 (Tex. Civ.
App.—Beaumont 1970, writ ref’d n.r.e.) (stating that in determining the value of
the land taken when the taken land contains improvements, “the ultimate
question is the market value of the land so taken” and that value ordinarily is—
but may not be—enhanced by the presence of buildings on the land); cf.
Emeryville Redevelopment v. Harcros Pigments, Inc., 125 Cal. Rptr. 2d 12, 31–
32 (2002) (stating that rule that improvements must be taken into account in
determining compensation includes taking into account when improvements
decrease the value of the property below its unimproved condition).
42
See Stewart, 453 S.W.2d at 528.
22
of similarly-improved property should be used to find the condemned property’s
value. 43 If the property taken is unimproved, the sales of unimproved property
should be used. 44 Here, the part taken was unimproved, and Stearman used
sales of unimproved property to find the value of that land.
It is true that the Babarias’ remainder property is improved. Had Stearman
used the objected-to comparable sales to support testimony about the market
value of the Babarias’ remainder property after the taking, he would have needed
to use sales of improved property. 45 But Stearman did not use the comparable
sales to find the market value of the remainder. Stearman used the sales to find
the value of the Babarias’ land and thus the value of the vacant part taken by
Southlake. 46
43
See City of Austin v. Cannizzo, 267 S.W.2d 808, 816 (1954); Chaney v.
Coleman, 13 S.W. 850, 851 (1890) (stating that in showing the value of an
improved farm, “[b]efore a value can be given to it by proving the average value
of farms in that vicinity, it should be proved that the improvements, and other
things to be considered in estimating its value, correspond with like things and
the farms with which it is classed”).
44
Cannizzo, 267 S.W.2d at 816.
45
See id.
46
Utley v. LCRA Transmission Servs. Corp., No. 04-05-00023-CV, 2006
WL 3017127, at *4 (Tex. App.—San Antonio Oct. 25, 2006, no pet.) (mem. op.)
(considering expert’s appraisal opinion rendered on the value of the appellant’s
property as unimproved because, in the expert’s opinion, the partial taking had
no effect on the improvements located on the remainder over 4,000 feet away
from the power line placed on the taken property and holding that, under the
facts of that case, the trial court did not abuse its discretion by admitting the
expert’s testimony); cf. Harris Cty. Appraisal Dist. v. Houston 8th Wonder Prop.,
L.P., 395 S.W.3d 245, 255–56 (Tex. App.—Houston [1st Dist.] 2012, pet. denied)
23
Because the value per square foot of land can be affected by the size of
the property (Hawkins agreed that as a general proposition, the smaller the land,
the higher the value per square foot), 47 Stearman needed to find the value of
property similar to the Babarias’ property to give him an idea of the value per
square foot of the strip taken by Southlake. And that is what he did. The
Babarias do not challenge Stearman’s qualifications as an expert to evaluate
other tracts of vacant property and determine if they were similar enough to the
Babarias’ land for the other tracts to accurately indicate a value for the Babarias’
land.
We note that in order for an expert appraiser to be able to determine how
much improvements affect the value of the land, the expert should be able to first
find the value of the land itself. 48 That is, if an expert can determine how much
(holding, in a case involving the valuation used in a tax appraisal, that the trial
court did not abuse its discretion by permitting the appraisal expert to testify
based on the comparable values he used in his analysis even though the
properties he used were improved and the subject property was vacant).
47
See, e.g., Williams v. State, 406 S.W.3d 273, 288 n.6 (Tex. App.—San
Antonio 2013, pet. denied) (quoting an expert’s opinion that “[s]maller tracts
generally sell for more per square foot than do larger tracts”); Waterways on
Intercoastal, Ltd. v. State, 283 S.W.3d 36, 40 (Tex. App.—Houston [14th Dist.]
2009, no pet.) (noting expert testimony that smaller tracts have a higher price per
acre).
48
See State v. Adams, 489 S.W.2d 398, 401 (Tex. Civ. App.—San Antonio
1972, writ ref’d n.r.e.) (“[I]f the question of the value of land and improvements
may properly be determined by adding to the value of the land the extent, if any,
to which the improvements enhance the value of the land, it necessarily follows
that separate evidence concerning the value of the land alone is admissible.”).
24
improvements increase or decrease the value of land, the expert must also be
able to determine the value of the land—the expert must have a base value to
adjust up or down to reflect the effect of the improvements. 49
Other than the question of improvements, the Babarias do not argue that
the comparisons were so attenuated that Stearman could not make adjustments
for the differences between the Babarias’ property and those compared. 50 The
Babarias do not challenge the sales Stearman used as being of land too
dissimilar to the Babarias’ land aside from the issue of improvements—they do
not, for example, argue that the sales were of property too far away from their
own to be comparable or were for differently-zoned properties. 51 They only
argue that because there is a house located on their remainder property, in
calculating the value of the vacant land taken by Southlake, Stearman could not
use sales of vacant land. 52 We hold that it was not improper for him to do so,
49
See id.
50
See City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 182 (Tex.
2001) (holding that with respect to the admission of comparable sales evidence,
if the comparison is so weak that that the appraiser and fact-finder cannot make
valid adjustments for the differences between the comparison sale property and
the condemned property, the trial court should refuse to admit the sale as
comparable).
51
See Collin Cty. v. Hixon Family P’ship, Ltd., 365 S.W.3d 860, 870 (Tex.
App.—Dallas 2012, pet. denied) (discussing requirements for comparable sales).
52
But see Westmoreland v. Beaumont ISD., 524 S.W.2d 323, 325 (Tex.
Civ. App.—Beaumont 1975, writ ref’d n.r.e.) (citing State v. Chavers, 454 S.W.2d
395, 397 (Tex. 1970), for the proposition that an expert may consider sales of
improved land as a part of his mental processes in arriving at his opinion as to
25
and, accordingly, that the trial court did not abuse its discretion by admitting
Stearman’s testimony.
The Babarias argue that like the expert in Zwahr, 53 Stearman “determined
the value of the [taking] to [Southlake], not the value of the loss” to the Babarias.
The Babarias do not elaborate on this argument, and we find the case
distinguishable. Zwahr’s expert used the area condemned by Exxon for a
pipeline project as an economic unit, determined that the unit’s highest and best
use was as a pipeline easement, and improperly included in his valuation the
enhancement to the property’s value that would result from the pipeline project. 54
The expert’s “final opinion reflected enhancement in the land’s value that
occurred only because of the Exxon project itself.” 55 The Supreme Court of
Texas held that the expert had determined the value of the easement to Exxon,
not the value of the loss to the Zwahrs, and that this was improper. 56 In this
case, however, Stearman did not use the condemnation itself to establish a
separate economic unit or to assign a value to the taken property. The Babarias’
reliance on Zwahr is misplaced. We overrule the Babarias’ third issue.
the market value of unimproved property taken, but he cannot testify on direct
examination about the facts of such sales).
53
Zwahr, 88 S.W.3d at 631.
54
Id. at 630–31.
55
Id. at 630.
56
Id. at 631.
26
2.4. Permitting the testimony of Southlake’s engineer was not error
In their fourth issue, the Babarias argue that the trial court erred by
permitting Southlake to present opinion testimony through its city engineer
without disclosing the witness as an expert or providing any of the required
disclosures regarding that testimony. We disagree.
At trial, the trial court overruled the Babarias’ objection to Taylor’s
testimony about how Southlake’s subdivision ordinance had affected the
Babarias’ property in the past. Taylor then testified, explaining that an area
designated in red on a map shown to the jury indicated the right-of-way property
that Southlake needed to complete its road expansion. Taylor stated that at the
very northern end of the property was a small section that Southlake did need to
purchase from the Babarias because it had already been dedicated to Southlake
when the lot had been originally platted. She further explained that the
dedication had occurred because Southlake’s subdivision ordinance “requires
dedication on city thoroughfares.”
Taylor then read to the jury parts of the subdivision ordinance requiring plat
applicants to dedicate to Southlake property necessary for the development of
streets and thoroughfares. The ordinance clearly states that certain dedications
are required for plat approval. Plats of property to be subdivided require
dedication “of such property as is necessary for the orderly development of
streets, roadways, [and] thoroughfares.” Applications for plats of property as a
27
single lot and replats also have dedication requirements as necessary for the
development of thoroughfares.
On cross-examination, Taylor testified that the Babarias’ plat
acknowledged the dedication, but she could not say from looking at the plat
whether the dedication had been required or was done voluntarily, and she could
not remember how the dedication had happened.
The objected-to parts of Taylor’s testimony—that Southlake’s subdivision
ordinance required certain dedications in a plat and that such a dedication was
made by the Babarias when they originally platted their property—were
statements of fact, not expert opinions. Taylor did not testify about how that
ordinance would affect any future plat of the Babarias’ property. Taylor did not
testify that any future plat of the Babarias’ property would require the Babarias to
simply give part of their property to Southlake with no compensation. It was not
expert opinion testimony to say that the Babarias had dedicated part of their
property when they platted their property; it was a statement about an actual
event that occurred and that could be refuted. 57
The Babarias further argue that allowing Taylor to testify that they had
previously been required to dedicate a portion of their property when they filed
their plat application to construct their home was erroneous because “the
testimony only served to ‘back door’ the prohibited expert testimony regarding
57
See Fact, Black’s Law Dictionary (9th ed. 2009) (defining “fact” as “[a]n
actual or alleged event or circumstance”).
28
application of the Ordinance to the property at issue.” They argue that “counsel
for Southlake used the testimony regarding the Subdivision Ordinance to argue
in his closing that its application to a new plat request by [the Babarias] would
have required exclusion of certain property from any compensation analysis
since it would have had to be simply given to [Southlake].”
There are several flaws with the Babarias’ argument. First, Taylor’s
testimony about a past event was permissible. Taylor’s testimony on that point
was not an opinion about how the ordinance might hypothetically apply in the
future, it was an assertion of fact about something that had already happened.
She did not testify that the Babarias would have to dedicate a portion of the
condemned property without compensation in order to receive approval for a
requested future plat.
Second, the jury was read the subdivision ordinance in question, and it
was that ordinance that served as the basis of the unobjected-to closing
argument, not Taylor’s opinion of it. The only part that Taylor’s testimony played
in the closing arguments was an implication or reference based on the part of the
subdivision ordinance she read aloud during her testimony, when Southlake’s
counsel stated that Ashwin Babaria had to be aware of the effect of the
ordinance because he dedicated a portion of his property when he platted it. But
that argument reflects Taylor’s testimony about what happened in the past, not
any testimony by Taylor about what would happen with any future plat. And
Hawkins, the Babarias’ expert, also testified about the effect of the subdivision
29
ordinance and possible scenarios in which a dedication would not be required.
We overrule the Babarias’ fourth issue.
2.5. The trial court did not err by denying the Babarias’ motions for JNOV
and to disregard findings
In their fifth issue, the Babarias argue that the trial court erred by denying
their motion for JNOV and motion to disregard jury findings and that the trial court
“should have rendered judgment based on the only legally competent testimony
presented at trial regarding the just compensation due to the Babarias.”
Alternatively, they argue that this court should reverse and remand for a new trial
on the issue of compensation. Their argument under this issue is based on their
contention that Stearman’s and Taylor’s testimony should have been excluded,
leaving Hawkins’s testimony the only evidence of market value. Having
overruled their challenges to Stearman’s and Taylor’s testimony, we overrule this
issue as well.
3. Conclusion
Having overruled the Babarias’ issues, we affirm the trial court’s judgment.
/s/ Lee Ann Dauphinot
LEE ANN DAUPHINOT
JUSTICE
PANEL: DAUPHINOT, GARDNER, and GABRIEL, JJ.
DELIVERED: January 14, 2016
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