Harris County Flood Control District v. H. Ben Taub, Kitchco Realty, LTD., Metco Realty, LTD., and Texan Land and Cattle II, LTD

Affirmed and Opinion filed August 25, 2016.
In The
Fourteenth Court of Appeals
NO. 14-15-00077-CV
HARRIS COUNTY FLOOD CONTROL DISTRICT, Appellant
V.
H. BEN TAUB, KITCHCO REALTY, LTD., METCO REALTY, LTD., AND
TEXAN LAND AND CATTLE II, LTD, Appellees
On Appeal from the County Civil Court at Law No. 2
Harris County, Texas
Trial Court Cause No. 955392
OPINION
In this condemnation case, Harris County Flood Control District (“the
District”) appeals the judgment rendered on the jury’s finding valuing the subject
property at $11,636,238.00 on the date of the taking. According to the District, the
trial court abused its discretion in admitting comparable-sales evidence of five
other property transactions and in rendering judgment on the jury’s verdict, which
tracked expert testimony relying on some or all of those transactions. We conclude
that the trial court abused its discretion in admitting evidence of an option contract
and of a sale to a school district having the power to condemn property. Because
other comparable-sales evidence supported the expert testimony and the verdict,
we conclude that these errors were harmless, and we affirm the trial court’s
judgment.
I. BACKGROUND
H. Ben Taub and three entities associated with the Taub family owned a
heavily wooded tract of about 99 acres in Deer Park, Harris County, Texas.1 A
drainage easement divided the property into a northern section of about 42 acres
and a southern section of about 56 acres.2 The District condemned the 42-acre
tract, and the special commissioners determined that the property’s value was $9
million. The District paid this amount into the registry of the court on July 28,
2010, thus establishing that as the date of the taking. The District’s appeal to the
county civil court at law was by trial de novo.
The District contends that the trial court erred in admitting comparable-sales
evidence of five real-estate transactions. Taub was a party to three of those
transactions, and the remaining transactions were sales of two properties, each of
which served as the site for a hotel. We describe the transactions below.
1
The three entities are Kitchco Realty, Ltd., Metco Realty Ltd., and Texan Land & Cattle
II, Ltd. Those companies are Taub’s co-appellees, but because their interests are aligned with
Taub’s, we refer to Taub as though he were the sole appellee. Taub died shortly before trial and
a scire facias was issued to the co-executors of his estate, but the record contains neither a return
of service nor the co-executors’ answer, and the judgment names Taub among the prevailing
parties. Thus, just as the parties have done, we will ignore the distinction between the deceased
defendant and his estate or its co-executors.
2
The northern section’s size was stated differently in different documents. The original
“Frantz” sales contract, discussed infra, describes this section as being 42.7299 acres. The first
amendment to that contract, the jury charge, and many of the witnesses referred to it as a 42.741-
acre tract. The petition in condemnation and the judgment characterize it as a 42.8203-acre tract.
2
A. The Frantz Contract
In September 2007, Taub executed an agreement to sell both his 42-acre lot
and his 56-acre lot to John E. Frantz.3 They agreed that Frantz would pay $3.00
per square foot for the property conveyed.4 They also agreed that Frantz would
have until the end of the year to investigate the property, and that if he terminated
the contract in writing before the end of that period, then his $50,000.00 earnest-
money payment would be refunded. The contract stated that the sale was to close
on January 30, 2008.
In early December 2007, Frantz went to Deer Park’s office of public works
to investigate the utilities available to the site. After he left, Deer Park’s city
manager called and invited him to a meeting on December 11, 2007. Deer Park’s
mayor, its city manager, two or three people from the District, Frantz, and Frantz’s
son attended. The group told the Frantzes that the District wanted to acquire part
of Taub’s property as a site for a detention pond. There is conflicting evidence
about whether the District told Frantz at that time that it wanted the 42-acre
section.
On December 17, 2007, Frantz and Taub amended their contract; we refer to
the first amended contract as the “Frantz contract.” In the amendment, Frantz and
Taub agreed that Frantz would pay $3.00 per square foot for the 56-acre tract and
$6.00 per square foot for the 42-acre tract. They also pushed back the property-
investigation deadline and the closing date by two months. The contract was
amended seven more times to extend deadlines while the parties waited to see
3
Although terms such as “tract,” “section,” “lot” and the like may be used in legal
descriptions of property, we use the terms in their ordinary sense.
4
Taub had the right to retain up to ten acres from the conveyance, but the parties agreed
that if Taub did so, then that amount would be excluded from the calculation of the purchase
price.
3
whether the District would condemn the 42-acre section of the property, but the
price remained the same.
B. The Kinder Morgan Contract
During this time, Taub executed an option agreement with Kinder Morgan
Texas Pipeline, LLC (“the Kinder Morgan contract”). Kinder Morgan owned the
property that separated the 42-acre tract from East Boulevard in Deer Park. Taub
sought a 60-foot-wide strip of land to provide access from East Boulevard to the
42-acre tract. Under the terms of that contract, Taub paid $53,280.00 for a one-
year option to buy the strip of land for $532,800.00—the equivalent of $6.44 per
square foot—and the option was renewable for one year at the same price. Kinder
Morgan agreed that if Taub exercised the option, then all of the money he paid for
the option would be applied to the sale. The original contract was executed in
December 2008, and although Taub renewed the option, he did not ultimately buy
the land.
C. The School Sale
Also during this time, Taub negotiated to sell the 56-acre section of the
property to Deer Park Independent School District for $4.50 per square foot (“the
School sale”). To allow that sale to go through, Frantz and Taub agreed to
terminate their sales contract. The School sale agreement was executed in March
2010 and closed the same month.
D. The Hotel Sales
The jury also heard evidence about two properties sold for development as
hotels. The site of the future Candlewood Suites hotel was approximately 2.2 acres
and sold for $7.42 per square foot. The site of the La Quinta hotel was about the
same size, and was sold for $5.00 per square foot.
4
E. The Expert Testimony
Taub retained three experts to testify regarding the property’s market value,
but called only two of them—Mark Sikes and Wayne Baer—to testify at trial.
Both experts used the comparable-sales method, with Sikes relying on ten and Baer
relying on eight transactions. Sikes and Baer each relied on the Frantz contract,
the Kinder Morgan contract, the School sale, and the Candlewood Suites sale;
neither of them relied on the La Quinta sale as a comparable sale. Sikes and Baer
instead described the La Quinta sale as a sale on which the School’s consultant
relied in determining the purchase price for the 56 acres that were the subject of the
School sale.
Sikes opined that, after determining whether each of the properties he used
as a comparable sale was superior or inferior to the subject property and adjusting
the sales accordingly, the subject property’s market value on the date of the taking
was $6.25 per square foot, for a total of $11,636,238.00. Baer opined that the
subject property’s market value was $6.00 per square foot, for a total of
$11,170,000.00. The District’s expert Alan Dominy used nine comparable sales
ranging from $1.34 to $3.67 per square foot, and opined that the market value of
the 42-acre tract was $2,580,506.00.
Although Taub did not call his third expert Clinton Bogart as a witness at
trial, the District did. The District elicited Bogart’s testimony that he used the La
Quinta sale as a comparable sale when calculating the value of the 42-acre tract,
but Bogart did not testify to his opinion of the subject property’s value.
F. The Verdict
The trial court instructed the jury on the meanings of “market value” and on
the project-influence rule. In answer to the only question asked, the jury found that
5
the property’s market value on the date of the taking was $11,636,238.00, that is,
the amount to which Sikes testified. The trial court denied the District’s motion for
new trial and rendered judgment on the jury’s verdict.
On appeal, the District contends that the trial court reversibly erred in
admitting as comparable-sales evidence Sikes’s and Baer’s testimony and exhibits
concerning the Frantz contract, the Kinder Morgan contract, the School sale, and
the sales of the sites of the Candlewood Suites and La Quinta hotels. In its
appellate brief, the District addresses Sikes’s testimony and evidence, but states
that its arguments about Sikes apply equally to Baer. Our discussion of the
District’s evidentiary complaints similarly applies to both Sikes’s and Baer’s
testimony and to evidence introduced through either of them.
II. WAIVER
Before reaching the merits of the District’s arguments, we must address
Taub’s contention that the District has waived its complaints about the admission
of Sikes and Baer’s evidence regarding the Frantz contract, the School sale, the
Candlewood Suites sale, and the La Quinta sale.
A. Waiver by Introducing the Same or Similar Evidence at Trial
According to Taub, the District waived its complaints about Sikes and
Baer’s testimony and evidence about the Frantz contract, the School sale, the
Candlewood Suites sale, and the La Quinta sale because the District introduced the
same comparable-sales evidence through Clinton Bogart. On appeal, a party may
not complain that the opposing side’s evidence was improperly admitted if the
party introduced the same or similar evidence. Sw. Elec. Power Co. v. Burlington
N. R.R. Co., 966 S.W.2d 467, 473 (Tex. 1998). But, if the opposing side refers to
the contested evidence first, then the opposing side has “opened the door” to the
6
evidence, and the party may “defend itself by explaining, rebutting, or
demonstrating the untruthfulness” of the evidence without waiving its objection.
Scurlock Oil Co. v. Smithwick, 724 S.W.2d 1, 4 (Tex. 1986) (op. on reh’g); see
also Fleming v. Kinney ex rel. Shelton, 395 S.W.3d 917, 932 (Tex. App.—Houston
[14th Dist.] 2013, pet. denied) (“Fleming was entitled to counter Hardwick’s
testimony after it had been admitted over his objection . . . ; he was not required to
give up at trial in order to preserve his complaint for appeal.”).
Because Taub already had introduced Sikes’s and Baer’s comparable-sales
evidence of the Frantz contract, the School sale, and the sale of the Candlewood
Suites site, the District did not waive its complaints about the admission of that
evidence by eliciting the same evidence from Bogart in an attempt to discredit the
testimony of Taub’s witnesses. The District elicited Bogart’s testimony that the
people involved in each of these transactions included Taub, the School’s
consultant Bobby Grisham, or both. The District further elicited Bogart’s
admission that he met with Grisham to question him about the sales, and that the
meeting also was attended by Baer and by Taub’s trial attorneys. The District’s
apparent purpose in introducing this testimony was to cast doubt on the credibility
of Taub’s witnesses by implying that Taub’s attorneys coordinated the appraisals
that were represented as being independent, or even that Taub’s attorney’s coached
the witnesses who attended the meeting so that each witness’s testimony would be
consistent with the others.
On the other hand, Bogart was the only witness to use the La Quinta sale as
comparable-sales evidence in valuing the 42-acre tract at issue. Having introduced
Bogart’s testimony at trial, the District does not, and could not, complain on appeal
that his testimony was erroneously admitted. See Halim v. Ramchandani, 203
S.W.3d 482, 492–93 (Tex. App.—Houston [14th Dist.] 2006, no pet.) (“Although
7
Halim obtained a pre-trial ruling and a running objection at the beginning of trial,
he waived his objection to Weber’s testimony that the endotracheal tube was the
cause or the most likely cause of Halim’s injury by being the only party to
introduce this evidence.”). Although Sikes and Baer also testified about the La
Quinta sale, they did not use it as comparable-sales evidence in valuing the subject
property. They instead stated that the La Quinta sale was used by Grisham in
determining the price at which the school district would buy the 56-acre tract in the
School sale. Grisham testified to this as well, and the District does not complain of
his testimony on appeal.
We therefore conclude that by introducing Bogart’s testimony, the District
did not waive its complaints about the use of the Frantz contract, the School sale,
or the Candlewood Suites sale as comparable-sales evidence, but did waive its
similar complaint about the use of the La Quinta sale.
B. Waiver Through Admission by Adoption
Taub additionally contends that the District waived its complaint that the
School sale is dissimilar to the subject property, because at the special
commissioners’ hearing, the District’s valuation expert Tom Edmonds also used
that transaction as a comparable sale. Relying on Reid Road Municipal Utility
District No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 857–58 (Tex.
2011), Taub argues that “[the District’s] sponsoring of Edmonds’[s] appraisal
constitutes an adoptive admission of Edmonds’[s] opinion that the [School]
Sale . . . was an acceptable comparable sale.” Neither that case nor the Rule of
Evidence on which it relies is applicable here.
At the special commissioners’ hearing in Speedy Stop, the municipal utility
district introduced appraiser David Ambrose’s testimony and written appraisal,
8
opining that Speedy Stop’s damages were $9,342.00. Id. at 848. Speedy Stop
objected to the award, and in the civil action de novo, it did not designate a
damages expert. Id. The municipal utility district moved for summary judgment,
arguing there was no evidence of damages. Speedy Stop attached to its summary-
judgment response Ambrose’s report and a transcript of his testimony before the
special commissioners, arguing that these were admissions by the municipal utility
district. Id. at 848–49. The municipal utility district objected to the report and
transcript on the grounds that “(1) testimony at an administrative hearing is not
admissible as proof of facts in the de novo trial proceeding; (2) Ambrose was not
designated as an expert; and (3) Ambrose’s testimony was hearsay and not an
admission by the District because he was not an agent of the District.” Id. at 849.
The trial court sustained the objections and granted the summary judgment, and the
intermediate appellate court did not reach the complaint about the evidentiary
ruling. See id.
Relying on Texas Rule of Evidence 801(e)(2)(B), the Texas Supreme Court
reversed the trial court’s ruling. Under this rule, an opposing party’s statement is
not hearsay if the statement (i) “is offered against an opposing party,” and (ii) “is
one the party manifested that it adopted or believed to be true.” See TEX. R. EVID.
801(e)(2)(B). The court explained that “[w]here a party has used a document made
by a third party in such way as amounts to an approval of its contents, such
statement may be received against him as an admission by adoption.” Speedy Stop,
337 S.W.3d at 856 (quoting Tex. Reciprocal Ins. Ass’n v. Stadler, 140 Tex. 96,
104, 166 S.W.2d 121, 125 (1942)).
Speedy Stop and Rule 801(e)(2)(B) provide that a statement adopted by a
party is not excludable as hearsay, but instead can be used against that party. As
applied here, the District adopted Edmonds’s statements from the special
9
commissioners’ hearing, so if Taub had offered evidence of Edmonds’s statements
during the proceedings in the court below and the District had raised a hearsay
objection, then the trial court would not have abused its discretion in overruling the
objection.
But that did not happen here. To the contrary, the District asked a witness
about Edmonds, and Taub objected “to any evidence regarding Tom Edmonds.”
No one complains on appeal that the trial court erred in overruling a hearsay
objection to the introduction of Edmonds’s testimony from the special
commissioners’ hearing; the District’s complaint is that the trial court erred in
overruling a non-hearsay objection to the testimony of Taub’s experts Sikes and
Baer. Neither Speedy Stop nor Rule 801(e)(2)(B), however, provides that a party
who has adopted its own witness’s statement waives its non-hearsay objections to
similar statements by the opposing party’s witness.5 We accordingly conclude that
the District has not waived its complaint that the trial court abused its discretion in
admitting Sikes’s and Baer’s comparable-sales evidence concerning the School
sale over the District’s objection that such evidence is inadmissible in a takings
case.
5
Taub seems to imply that Edmonds’s testimony before the special commissioners
constitutes a binding judicial admission or that the District is judicially estopped from denying
that the School sale is a comparable sale. Neither argument is correct. Edmonds’s testimony is
not a judicial admission and the District is free to contradict his opinion. See, e.g., Mendoza v.
Fid. & Guar. Ins. Underwriters, Inc., 606 S.W.2d 692, 694–95 (Tex. 1980) (explaining that a
“true judicial admission . . . is a formal waiver of proof usually found in pleadings or the
stipulations of the parties”); Tex-Wis Co. v. Johnson, 534 S.W.2d 895, 903 (Tex. 1976) (“As a
general rule, the testimonial declarations of a party will not be given the force and effect of a
judicial admission.”); Graves v. Tomlinson, 329 S.W.3d 128, 138 (Tex. App.—Houston [14th
Dist.] 2010, pet. denied) (“An appeal in the same case is not a ‘subsequent action’ to which
judicial estoppel applies.”); cf. Gevinson v. Manhattan Constr. Co. of Okla., 449 S.W.2d 458,
466 (Tex. 1969) (“In analogy to the rule that a party may prove the truth of particular facts in
direct contradiction of the testimony of his witness, he may also disprove factual recitals in a
document introduced by him.”).
10
III. ADMISSION OF COMPARABLE-SALES EVIDENCE
We now reach the merits of the District’s complaints that the trial court
erroneously admitted Sikes’s and Baer’s comparable-sales testimony and evidence
regarding the Frantz contract, the Kinder Morgan contract, the School sale, and the
Candlewood Suites sale. We review the trial court’s admission of evidence for
abuse of discretion. See Brookshire Bros., Ltd. v. Aldridge, 438 S.W.3d 9, 27
(Tex. 2014). A trial court abuses its discretion by acting arbitrarily, unreasonably,
or without regard to guiding legal principles.” Bocquet v. Herring, 972 S.W.2d 19,
21 (Tex. 1998).
B. Unconsummated Sales or Option Contracts
The District first argues that the trial court erred in admitting evidence of the
Frantz and Kinder Morgan contracts because those transactions were
unconsummated. According to the District, evidence of unconsummated sales are
inadmissible in a condemnation proceeding. Taub responds by pointing to
testimony that both sales would have been completed if not for the condemnation.
Both sides have misinterpreted the governing rule. The admissibility of
evidence of a comparable real estate transaction does not depend on whether the
sale was consummated. See Carlton Energy Group, LLC v. Phillips, 369 S.W.3d
433, 450 n.6 (Tex. App.—Houston [1st Dist.] 2012), aff’d in part, rev’d in part,
475 S.W.3d 625 (Tex. 2015). Instead, the rule in condemnation cases is that
unaccepted offers to buy or sell are not competent evidence of a property’s value.
See State v. Clevenger, 384 S.W.2d 207, 209 (Tex. Civ. App.—Houston 1964, writ
ref’d n.r.e.). Evidence that a sales contract was not performed goes to its weight
rather than its admissibility. See Robards v. State, 285 S.W.2d 247, 248-49 (Tex.
Civ. App.—Austin 1955, writ ref’d n.r.e.).
11
To determine whether an offer was accepted, we do not rely on the parties’
testimony about whether they would have completed the transaction absent the
condemnation; we determine whether there was a binding contract of sale. See
Clevenger, 384 S.W.2d at 209–10. An option contract does not meet this test
because an option does not become a binding sales contract until the option is
exercised. See id. at 210 (explaining that an option is “a mere right of election
acquired by one under a contract to accept or reject a present offer within the time
therein fixed”); see also Faucette v. Chantos, 322 S.W.3d 901, 908 (Tex. App.—
Houston [14th Dist.] 2010, no pet.) (“An option contract has two components:
(1) an underlying contract that is not binding until accepted and (2) a covenant to
hold open to the optionee the opportunity to accept.”).
The District contends that the comparable-sales evidence of the Frantz and
Kinder Morgan contracts was inadmissible because those transactions were
unconsummated sales and were mere option contracts. Taub maintains that both
agreements were binding contracts of sale. We conclude that the each side is
partially correct: the Frantz contract was a binding sales contract and was
admissible, and the Kinder Morgan contract was an unexercised option contract
and was not admissible.
1. The Frantz Contract
The trial court did not abuse its discretion in admitting the Frantz contract as
comparable-sales evidence of the subject property’s value because Frantz and Taub
had a binding contract of sale. In contrast to an option contract which requires a
buyer to exercise the option to make the sales contract binding, the Frantz contract
was binding, and it required the buyer to provide timely written notice of
termination to make the contract non-binding.
12
The District argues that the contract was an option contract because it
contained a liquidated-damages clause: if Frantz did not terminate the contract, but
did not complete the purchase, then Frantz would merely forfeit the earnest money
he had paid, and Taub could not compel Frantz to buy the property. But, a
liquidated-damages provision does not transform a sales contract into an option
contract. See Clevenger, 384 S.W.2d at 209 (“It was an enforceable contract in
that the seller could be compelled to deed the property and the buyer could be
compelled to forfeit the $5,000.00 as liquidated damages if he refused to put up the
balance of the cash purchase money and consummate the sale”).
2. The Kinder Morgan Contract
The Kinder Morgan contract is inadmissible as valuation evidence because it
is an option contract. It recites that Taub paid a non-refundable “Option Fee” of
$53,280.00 for the right to purchase the tract for $532,800.00 within one year, and
that Taub could extend the option for an additional year by paying an additional
$53,280.00. Because the option was never exercised, this contract remained an
unaccepted offer. See Faucette, 322 S.W.3d at 907–08.
Taub likens the Kinder Morgan contract to a binding contract of sale with a
liquidated-damages clause because if Taub bought the land, then the money he
paid would be paid toward the sale price, and if he did not buy the land, then
Kinder Morgan would keep the money that Taub had paid for the option. But, the
contract is not a binding contract sale, because the amount that Taub paid for the
option was to be credited against the sale only if he exercised the option. He did
not. Taub was not damaged by the loss of the money he paid for the option,
because he received exactly what he paid for: the offer to sell the property for a
stated price was held open, and Taub had the right to accept the offer within that
13
time. Because he did not do so, so the contract never became a binding contract of
sale, but remained an unaccepted offer.
Evidence of unaccepted offers of sale are inadmissible as comparable-sales
evidence in condemnation proceedings. See Hanks v. Gulf, Colo. & Santa Fe Ry.
Co., 159 Tex. 311, 315, 320 S.W.2d 333, 336 (1959). We therefore conclude that
the trial court abused its discretion in admitting as comparable-sales evidence
Sikes’s and Baer’s testimony and documents concerning the Kinder Morgan
contract.
C. Sale to an Entity with Condemning Authority
The District contends that the School sale was inadmissible because the
school had condemning authority. As a matter of long-established state law,
evidence of the price for which comparable property was sold to an entity with the
power of eminent domain is not competent evidence of the value of the condemned
property. See, e.g., City of Austin v. Capitol Livestock Auction Co., 453 S.W.2d
461, 465 (Tex. 1970); Gomez Leon v. State, 426 S.W.2d 562, 565 (Tex. 1968);
State v. Frost, 456 S.W.2d 245, 257 (Tex. Civ. App.—Houston [14th Dist.] 1970,
writ ref’d n.r.e.).
Taub argues that the School sale falls within an exception to this rule for
sales that are voluntary and not made under threat of condemnation. Taub cites the
Fifth Circuit case of Transwestern Pipeline Co. v. O’Brien, 418 F.2d 15, 18–19
(5th Cir. 1969), for this exception. This exception has not been adopted by the
Texas Supreme Court or by this court and we decline to do so now.
Texas courts exclude evidence of a sale to an entity with the power of
eminent domain even when testimony is offered that the sale was voluntary. See
City of Abilene v. Blackburn, 447 S.W.2d 474, 477 (Tex. Civ. App.—Eastland
14
1969, writ ref’d n.r.e.) (trial court erred in admitting, over objection, witness’s
testimony that a representative of the City asked the property owner “what he
wanted for the property” and that when the property owner named a price, “the
City drew up the papers and paid him in cash and did not argue with him about the
price”); Hodges v. State, 437 S.W.2d 447, 448 (Tex. Civ. App.—Texarkana 1969,
writ ref’d n.r.e.) (trial court properly excluded testimony that four sales to a
cemetery association with the power of eminent domain were “the result of free
and open sales transactions between a willing buyer and a willing seller of land in
the immediate locality” of the condemned property); Menchaca v. San Antonio
Indep. Sch. Dist., 297 S.W.2d 363, 365 (Tex. Civ. App.—Waco 1956, writ dism’d)
(trial court did not err in excluding evidence of a comparable sale to a school
district, despite the proffered testimony that the sale was voluntary).
In arguing that such an exception has been accepted by Texas courts, Taub
relies on State v. Vick, 376 S.W.2d 89, 90 (Tex. Civ. App.—Houston 1964, no
writ) and Marsh v. State, 276 S.W.2d 852, 854 (Tex. Civ. App.—San Antonio
1955, no writ). But neither case supports the exception..
In State v. Vick, the jury found that the condemned property’s market value
was more than twice the amount of the highest value supported by the evidence.
See Vick, 376 S.W.2d at 89–90. After suggesting remittitur, the reviewing court
addressed the appellant’s argument that the trial court erred in admitting evidence
of the property owner’s sale of another tract of land to the same state agency
because the sale was made under threat of condemnation. Id. at 90. The Vick court
stated,
In view of the condition of the record, we are unable to say that the
admission of such evidence was error. In view however, of the
likelihood of another trial, it is pointed out that our courts have
uniformly held that prices paid for property by a condemning
15
authority are not admissible to establish market value of the property
being condemned because such sales are not free and voluntary.
Id. The court was correct both in its statement of the rule and in its view of the
likelihood of a second trial: because the appellee rejected the reviewing court’s
suggestion of remittitur, the case was reversed and remanded for retrial. Id. at 90
(supp. op.).
The court that authored Marsh v. State also did not adopt an exception for
voluntary sales. In that case, the appellants objected at trial that evidence of a sale
to the same state agency for right-of-way purposes was “irrelevant, immaterial and
highly prejudicial.” Marsh, 276 S.W.2d at 853. The reviewing court held that
“[t]he evidence was not irrelevant and immaterial and it was no more prejudicial
than is any other testimony that is unfavorable to a party.” Id. at 854. The court
explained that “[o]rdinarily, in passing on the correctness of a trial court’s ruling in
admitting evidence, the appellate court will consider the ruling in the light of the
objection made in the trial court, and the complaining party will not be heard to
present reasons for excluding the evidence other than those made in the trial
court.” Id. The court noted, however, that the appellants argued for the first time
on appeal that the evidence was inadmissible because it concerned a compromise
sale made under the threat of condemnation proceedings. See id. The court stated,
“If we consider this reason, . . . we would still find that the trial court did not
commit reversible error in admitting the testimony, because the record shows that
the sale was not made to avoid condemnation proceedings nor the threat thereof,
but was made freely and voluntarily.” (emphasis added).
The statement about what the court “would” do “if” it considered the
complaint is an advisory statement and not, as Taub contends, an alternative
holding. See Tex. Natural Resource Conservation Comm’n v. White, 46 S.W.3d
16
864, 868 (Tex. 2001) (explaining that alternative holdings exist where the court
makes multiple holdings and the court could have relied on any of them to reach
the same conclusion). In any event, a decision by the Fourth Court of Appeals is
not binding on this court. See Penrod Drilling Corp. v. Williams, 868 S.W.2d 294,
296 (Tex. 1993) (per curiam) (stating that “Texas courts . . . are obligated to follow
only higher Texas courts and the United States Supreme Court”).
Taub additionally argues that the rule for excluding evidence of sales to
entities with condemning authority does not apply here because the school district
only needed 16–20 acres for the elementary school it planned to build, and
therefore could not have condemned the entire 56-acre tract. No case has created
such an exception.
The rule looks at whether the entity has the power of eminent domain, not
whether the entity could have condemned the entire tract it purchased. See, e.g.,
Capitol Livestock Auction Co., 453 S.W.2d at 465 (evidence about the amount the
telephone company paid for a site “was improperly admitted since the telephone
company is a corporation which has the power of eminent domain”); Gomez Leon,
426 S.W.2d at 565 (“Our courts have consistently held that proof of sales of
property to a corporation or a governmental agency having power of eminent
domain is not admissible in a condemnation suit.”); Frost, 456 S.W.2d at 257
(same). Stated differently, the rule focuses on the status of the buyer and the seller,
not of the size of the sale. Cf. Menchaca, 297 S.W.2d at 365 (“[S]uch sales are not
free and voluntary under our rule as to what constitutes a willing seller and a
willing buyer.” (cited with approval in Frost, 456 S.W.2d at 257)). The facts of
this case illustrate why this is so. Shortly before the taking in this case, the District
approached the school district about buying part of the 56 acres that the school
district had acquired in the School sale, but the school district rejected the offer
17
because it had not decided where the school would be placed. In other words, the
school district had decided that the 20-acre building site would be somewhere
within this 56-acre tract, but had not decided where, within the tract, the building
site would be located. Because the school district could have been chosen to build
a school anywhere on the tract, and could have condemned the land necessary to
do so, there was no part of the tract that was free of the implied threat of
condemnation.
Second, just because the school district would not have needed to condemn
more than twenty acres for a school does not mean it could not have condemned
the land for other purposes. For example, the superintendent of the school district
was asked at trial, “What was the purpose for the school district buying that
additional acreage?” He responded, “At the time there was discussion about
possibly moving our current Department of Transportation to that facility.” The
school district can condemn property for this purpose just as it can condemn
property on which to build a school. See, e.g., TEX. EDUC. CODE ANN. § 11.155(a)
(West 2012) (“An independent school district may, by the exercise of the right of
eminent domain, acquire the fee simple title to real property on which to construct
school buildings or for any other public use necessary for the district.”); Circle X
Land & Cattle Co. v. Mumford Indep. Sch. Dist., 325 S.W.3d 859, 866 (Tex.
App.—Houston [14th Dist.] 2010, pet. denied) (sub. op. on reh’g) (holding that the
evidence established that a school district condemned thirty acres for a public
purpose where there was an immediate need for sports facilities, but the district
also intended to build a new school in the future, and “[e]ither purpose would be
legitimate”). Although the school district did not pursue that option and nothing
was planned for the excess acreage at the time of trial, this does not mean that the
implied threat of condemnation did not exist at the time of the sale.
18
We decline to adopt either of the exceptions argued by Taub and therefore
conclude that the trial court abused its discretion in admitting comparable-sales
evidence of the School sale.
D. The Candlewood Suites Sale
In making the fact-intensive determination whether a sale concerns a
property sufficiently similar to the condemned property to be comparable and thus
admissible, the trial court has considerable discretion; the degree of comparability
goes to the weight of the evidence. See Galveston Cent. Appraisal Dist. v. Valero
Ref.-Tex. L.P., 463 S.W.3d 177, 189 & n.12 (Tex. App.—Houston [14th Dist.]
2015, pet. pending). As a result, “[c]omparable sales are generally admissible
unless it appears that reasonable minds cannot differ from the conclusion that the
evidence of the other sales lack probative force because of their dissimilarity to the
condemned property.” Williams v. State, 406 S.W.3d 273, 285 (Tex. App.—San
Antonio 2013, pet. denied). In most cases, once an appraiser provides foundational
evidence showing that the sales were of comparable property, he or she can make
adjustments in the price of comparable sales up or down and explain how those
adjustments account for differences in the property. See Hou. Unlimited, Inc.
Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820, 835, 837 (Tex. 2014); City
of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 182 (Tex. 2001). The
District has not explained why such an adjustment is not possible here.
The subject property consists of approximately 42 wooded acres not
currently served by an existing street. At the time of the taking, the property was
unimproved but was served by water and sewer lines and bounded on one side by
railroad lines. The District emphasizes the following differences between this tract
and the Candlewood Suites site.
19
1. Improvements
The District argues in its brief as if the hotel existed when the property was
sold, asserting that “[t]he two hotel property sales involved roughly two-acre tracts
with hotels on them. In contrast, the subject property is a 42-acre vacant tract.”6 If
this were correct, then the evidence plainly would be inadmissible. See City of
Austin v. Cannizzo, 153 Tex. 324, 335, 267 S.W.2d 808, 816 (1954) (“The property
is unimproved. Prices paid for improved lots and the value assigned to improved
lots in recent sales is not admissible because not meeting the test of similarity.”).
The record, however, indicates that the hotel was built after the sale. Sikes
testified that the sale occurred in January 2008; that the site “was purchased for a
hotel”; and that the hotel had “been there three-plus years” at the time of the 2014
trial, that is, since at least 2011. Sikes further agreed that he “used a sales
comparison approach as to raw land.” Even in its motion to exclude the evidence
of this transaction, the District referred to the Candlewood Suites sale as “a sale
that would house a future hotel complex.”7 The record therefore does not support
the District’s argument that assumes that the sale of this property included the sale
of an existing hotel.
2. Size
The hotel property is less than 1/19th the size of the condemned property, 8
but courts have found properties to be comparable despite far larger size
differences. For example, in Joyce v. Dallas County, the reviewing court held that
the trial court did not abuse its discretion in admitting evidence of a sale of an
6
The other sale to which the District refers is the sale of the site of the La Quinta hotel.
As previously explained, however, the District has waived its complaint about the La Quinta
sale.
7
Emphasis added.
8
Sikes identifies the size of the Candlewood Suites lot as 2.231 acres.
20
85.5-acre tract as evidence of the value of a 2.63-acre tract. See Joyce v. Dallas
County, 141 S.W.2d 745, 745, 746 (Tex. Civ. App.—Beaumont 1940, no writ).
The Texas Supreme Court has cited Joyce with approval for the proposition that
“[e]vidence of recent sales of other property . . . meeting the test of similarity,
should be admitted.” Cannizzo, 153 Tex. at 335, 267 S.W.2d at 815.9
3. Zoning
The Candlewood Suites site is zoned for highway services, whereas the
condemned property is zoned partly for “industrial park” uses and partly for
“general industrial” use.10 Quoting Collin County v. Hixon Family Partnership,
Ltd., 365 S.W.3d 860, 871 (Tex. App.—Dallas 2012, pet. denied), the District
argues that the difference in zoning makes the sale of the Candlewood Suites site
impermissibly dissimilar because “comparable sales must have the same highest
and best use as the condemned properties on the date of taking or within a
reasonable time.”
The language on which the District relies is not the court’s statement of the
test of comparability; it is part of the authoring court’s description of an expert
witness’s testimony. See id. In determining whether a property is comparable, we
look to whether the subject property “can be put to relatively the same uses as
9
There are limits. See, e.g., Barshop v. City of Houston, 442 S.W.2d 682, 683, 686 (Tex.
1969) (holding, in a case involving the condemnation of a 52.66-acre tract, that the trial court
erred in admitting comparable-sales evidence of a one-acre tract, because “there was a disparity
in the size of the two properties under comparison”). But, because appellate courts review
evidentiary rulings for abuse of discretion, the trial court’s determination of where to draw that
line is more likely to be affirmed than reversed. See, e.g., Morgan v. State, 343 S.W.2d 738, 740
(Tex. Civ. App.—El Paso 1961, writ ref’d n.r.e.) (holding that the trial court did not abuse its
discretion in excluding comparable-sales evidence of tracts of less than one acre where the
subject property to be valued was 6.79 acres).
10
There is some testimony that the Candlewood Suites site was not originally zoned for
this use, and that the City either rezoned the property or granted a variance. It is not clear
whether the City rezoned the property or granted the variance before or after the sale.
21
those for which the comparable properties were used, or are capable of being
used.” Urban Renewal Agency of City of Austin v. Georgetown Sav. & Loan
Ass’n, 509 S.W.2d 419, 421–22 (Tex. Civ. App.—Austin 1974, writ ref’d n.r.e.)
(emphasis added). Sikes testified that the highest and best use for the subject
property would be an office park, which is consistent with the property’s current
zoning. According to Sikes, both a hotel and an office building are “commercial”
uses, which he defined as “a use that generates income that’s really non-
industrial.” While these may be “relatively the same uses,” Sikes and Baer
nevertheless testified that the Candlewood Suites site was superior, and both
valued the subject property at a lower price per square foot ($6.00 to $6.25) than
the sales price per square foot of the Candlewood Suites site ($7.42).
4. Access
The hotel property is located at a signalized intersection where two major
thoroughfares meet. Sikes testified that “there’s no physical access” to the
condemned property at issue, and he agreed that a new developer would have to
spend approximately $1.6 million “to get to the subject property.” But again, both
Sikes and Baer opined that the Candlewood Suites site’s location was superior to
the subject property, and both valued the subject property at a lower price per
square foot than the Candlewood Suites site.
While there are significant differences between the subject property and the
Candlewood Suites site, the trial court reasonably could conclude on this record
that the differences are not great enough to render evidence of the Candlewood
Suites sale inadmissible. In the cases in which the reviewing court found that the
trial court abused its discretion in admitting evidence of a comparable sale, the
dissimilarities are more extreme than those presented here. See, e.g., Guadalupe-
Blanco River Auth. v. Kraft, 77 S.W.3d 805, 808 (Tex. 2002) (appraiser selected
22
comparable sales for their similarity to a hypothetical lot rather than to the property
condemned); Sharboneau, 48 S.W.3d at 185 (appraiser compared condemned
undivided land to sales of “ready-to-build lots in successfully completed
subdivisions”); State v. Chavers, 454 S.W.2d 395, 396–97 (Tex. 1970) (appraiser
compared sale of land containing a house to the condemned, unimproved land);
State v. Taylor, 721 S.W.2d 541, 549, 550–51 (Tex. App.—Tyler 1986, writ ref’d
n.r.e.) (comparable sales included three properties on major highways and were
adaptable to commercial and business uses; condemned property was located on a
graveled county road and its highest and best use was for rural homesites); Urban
Renewal Agency, 509 S.W.2d at 421–22 (comparables were on paved and guttered
streets south or west of the State Capitol; condemned property was a creekbed in a
less developed area northeast of the Capitol); State v. Cherry, 517 S.W.2d 337, 343
(Tex. Civ. App.—Dallas 1974, writ ref’d n.r.e.) (unlike the condemned property,
the comparable was not located in a floodplain and had prominent street frontage);
Joyce, 462 S.W.2d at 87–88 (comparable sales included corner tracts at the
intersection of paved streets in developed areas zoned for commercial or apartment
purposes; condemned land was a vacant unimproved lot traversed by a railroad and
a creek, not served by an existing street, and zoned for single family residences).
On the whole—including the recency of the Candlewood Suites site’s sale11
and its location a quarter mile from the condemned property—we cannot say that
the trial court abused its discretion in failing to exclude this comparable-sales
evidence.
11
The Candlewood Suites site was sold on January 7, 2008; the date of the taking was
July 28, 2010.
23
E. The Project-Influence Rule
In a reply argument directed only to the First Amendment to the Frantz
contract, the District contends that even if admission of the original Frantz contract
($3.00 per square foot) was proper, the trial court’s admission of the amendment to
the contract ($6.00 per square foot for the subject portion of the property) violated
the project-influence rule.
Because an impending condemnation can inflate or deflate property values,
the project-influence rule has evolved to eliminate the project’s effect when
determining the amount that a willing buyer would pay, and a willing seller would
accept, for the subject property under market conditions. See Caffe Ribs, Inc. v.
State, 487 S.W.3d 137, 142–43 (Tex. 2015). The project-influence rule applies as
of the date “that the condemnor manifests a definite purpose to take the particular
land,” and “[t]he manifestation or announcement must be done or made publicly.”
City of Fort Worth v. Corbin, 504 S.W.2d 828, 831 (Tex. 1974). The
determination of this date “must be made by the court and not by the jury.” Id.
Even if the trial court has determined the date when the condemnor publicly
manifested a definite purpose to take the subject property, it does not follow that
evidence of the property’s value after that date is necessarily excluded. See Caffe
Ribs, 487 S.W.3d at 143 (“[A]n evidentiary exclusion is not an essential
component of the project-influence rule.”). Instead, “the preferable course [is] to
admit evidence, under proper instruction, to permit the jury to eliminate the
distorting effect of the project.” Id. But cf. Exxon Pipeline Co. v. Zwahr, 88
S.W.3d 623, 630 (Tex. 2002) (holding that trial court abused its discretion in
admitting expert testimony for which the expert “relied on [the] condemnation in
establishing a separate economic unit and in assigning a value to that unit”).
24
Here, the trial court did not determine the date when the project-influence
rule was triggered, and instead instructed the jury on the project-influence rule
without identifying the date on which it applied. On appeal, the District does not
complain of charge error, and affirmatively states that “the instruction given
correctly states the law.” Nevertheless, the District asserts that the project-
influence rule was triggered either (1) when the District allegedly approved the
detention-pond project on November 6, 2007,12 or (2) when Frantz spoke with the
District on December 11, 2007 about its intention to acquire the property. The
District maintains that the Frantz contract’s amendment on and after December 17,
2007 therefore reflects the distorting effect of the project’s influence.13
Based on this premise, the District complained in its reply brief that Sikes’s
“[r]eliance on the first amendment to the [Frantz] contract should have been barred
from consideration” by the project-influence rule. In a post-submission letter brief,
however, the District stated that its “complaint is that the expert opinion and jury
verdict were based on evidence barred by the [jury] instruction given,” which is as
follows:
In determining the value of the Owner’s 42.741 acres property
as of July 28, 2010, you shall not consider any influence on the
market value of the Owner’s property that resulted from Harris
County Flood Control District’s detention project for which the
property was taken.
12
The document that the District cites as support for this date is an Interlocal Agreement
between the District and the City of Deer Park, dated July 8, 2008; however, the document was
excluded from evidence at trial, and on appeal, the District does not challenge that evidentiary
ruling.
13
The District also disputes Taub’s argument that other evidence supports the increase in
the contract price from $3 to $6, arguing the record does not show that Taub’s representations
about securing access from the property to East Boulevard were the reason for the increase.
Given our disposition of the District’s argument regarding the project-influence rule, we do not
reach this issue.
25
You shall determine its market value as of July 28, 2010, as if
there was no Harris County Flood Control District’s detention project
or any likelihood of such detention project.
Whether the District’s project-influence-rule complaint is that the evidence
should have been excluded from the jury’s consideration (presumably by an
evidentiary ruling) or that the evidence actually was excluded from the jury’s
consideration by the instruction given, the flaw in the District’s argument is the
same: the date on which the project-influence rule was triggered was a matter for
the trial court to determine, but the District does not complain on appeal of the trial
court’s failure to decide that question.14 Having waived any challenge to the trial
court’s refusal to determine the date on which the project-influence rule was
triggered, the District cannot be heard to complain about the consequences that
should have followed from a trial court decision that was never made.
IV. HARM ANALYSIS
We have concluded that the trial court abused its discretion in overruling the
District’s objections to the admission of comparable-sales evidence of the Kinder
Morgan option contract and of the School sale; however, the erroneous admission
of evidence is reversible only if it “probably caused the rendition of an improper
judgment.” See TEX. R. APP. P. 44.1(a)(1); Brookshire Bros., Ltd., 438 S.W.3d at
29. To determine whether the erroneously admitted evidence probably had such an
effect,“[w]e review the entire record, and require the complaining party to
demonstrate that the judgment turns on the particular evidence admitted.” Kia
Motors Corp. v. Ruiz, 432 S.W.3d 865, 883 (Tex. 2014) (quoting Nissan Motor Co.
v. Armstrong, 145 S.W.3d 131, 144 (Tex. 2004)).
14
Although the District objected at trial to the trial court’s refusal to submit an instruction
that would have informed the jury that the District “manifested a definite purpose to take the
particular land on November 6, 2007,” it has not challenged that refusal on appeal, and it did not
ask for an instruction that the project-influence rule was triggered on December 17, 2007.
26
The District initially argued that it was harmed because evidence of five of
the ten comparable sales on which Taub’s expert Sikes relied were inadmissible
and provided an unreliable foundation for Sikes’s opinion that the property’s fair
market value was $6.25 per square foot as of the date of the taking. In its reply
brief, the District conceded that one of the five sales to which it had objected was
admissible, so that it then complained that Sikes’s opinion was unreliable because
four of the ten comparable sales on which he relied were inadmissible. In a post-
submission brief, the District argues that even if the evidence concerning the
Kinder Morgan contract and the Candlewood Suites sale were the only
comparable-sales evidence erroneously admitted, the District would have been
harmed because none of the remaining eight properties had a value-per-square-foot
as high as that impliedly found by the jury.
The District has not identified how it was harmed given that, as we have
found, the trial court abused its discretion in admitting comparable-sales evidence
only of the Kinder Morgan contract (at $6.44 per square foot) and the School sale
(at $4.50 per square foot), but did not abuse its discretion in admitting comparable-
sales evidence concerning the amendment to the Frantz contract (at $6.00 per
square foot for the subject property) or the Candlewood Suites sale (at $7.42 per
square foot). Indeed, Sikes testified that the Frantz contract’s sales price of $6.00
per square foot for the same property is itself sufficient to support the value of
$6.25 per square foot, because the additional $0.25 per square foot is accounted for
by the slight rise in the market between the date of the Frantz contract and the date
of the taking.
We cannot say that the trial court’s error in admitting evidence of the Kinder
Morgan contract and the School sale probably caused the rendition of an improper
verdict because the evidence of the remaining comparable sales supports Sikes’s
27
testimony and the jury’s verdict. See, e.g., Tex. Pipe Line Co. v. Hunt, 149 Tex.
33, 441, 228 S.W.2d 151, 156 (1950) (explaining that an expert opinion on the
market value of real property “does not cease to have probative force when
impropriety attaches only to some, rather than all, of its underlying reasons”);
compare State v. Schaefer, 530 S.W.2d 813, 817 (Tex. 1975) (erroneous admission
of evidence was harmful where it “put before the jury the only possible basis for
the award that was made”) with State v. Chana, 464 S.W.3d 769, 785–87 (Tex.
App.—Houston [1st Dist.] 2015, no pet.) (assuming that evidence of five of the ten
comparable sales relied upon were inadmissible, but holding that the error was
harmless because the five remaining comparable sales, ranging from $7.70 per
square foot to $19.50 per square foot, supported the jury’s finding in accordance
with the expert’s opinion of $9.50 per square foot).
V. CONCLUSION
Of the District’s complaints about several transactions used as comparable-
sales evidence, we conclude that the complaints about two transactions are
meritorious. Because the remaining evidence supports the verdict, the errors in
admitting comparable-sales evidence of an option contract and of a sale to a school
district with the power to condemn property were harmless. We therefore affirm
the trial court’s judgment.
/s/ Tracy Christopher
Justice
Panel consists of Justices Christopher, McCally, and Busby.
28