Enbridge Pipeline (east Tex.) L.P. v. Timber
| Decision Date | 27 October 2010 |
| Docket Number | No. 06-09-00046-CV.,06-09-00046-CV. |
| Parties | ENBRIDGE PIPELINE (EAST TEXAS) L.P., Appellant, v. AVINGER TIMBER, L.L.C., Appellee. |
| Court | Texas Court of Appeals |
Thomas E. Sheffield, Kemah, for appellant.
Glenn A. Sodd, W. Jason Sodd, Jody Sodd McSpadden, Dawson, Sodd, Ellis & Hodge, LLP, Corsicana, Christopher S. Johns, Dawson, Sodd, Ellis & Hodge, LLP, Austin, John R. Mercy, Mercy * Carter * Tidwell, LLP, Texarkana, for appellee.
Before MORRISS, C.J., CARTER and MOSELEY, JJ.
Is the value of a bare and undeveloped tract of rural real estate equivalent to the value of rural real estate that (1) has been leased by the owner to several gas companies for over thirty years as a gas processing plant, (2) has more than fifteen pipelines entering the property, and (3) has all the proper permits for use as a gas processing plant? The condemnor, Enbridge Pipeline, argues yes. We disagree. We do not believe the bare real estate tract is equivalent to the tract involved here. From that conclusion, we find the appraiser for the landowner was properly allowed to testify, and the appraiser for the gas company was properly excluded. We will affirm the judgment of the trial court.
Enbridge Pipeline, L.P. (Pipeline) appeals a jury's $20,955,000.00 condemnation award to Avinger Timber, L.L.C. (AV). Pipeline alleges the trial court erred in: (1) denying its Daubert/Robinson 1 motion against AV's valuation expert, David Bolton; (2) striking its expert, Albert Allen; (3) denying its motion for directed verdict and motion for judgment notwithstanding the verdict; and (4) failing to submit its proposed jury instructions. We determine the trial court was within its discretion in admitting Bolton's testimony regarding fair market value of the condemned property, while excluding Allen's testimony for his use of improper methodology. Due to our determination of these dispositive issues, and Pipeline's failure to preserve any alleged error in the jury charge, we affirm the trial court's judgment.
The main issue in this case is the fair market value of AV's land on the date it was condemned by Pipeline. The history of this land is essential in understanding the experts' valuations. The condemned land has been owned by the Simpson family and their company, AV, since the mid-1950s. In 1973, Roland Simpson leased 23.79 acres out of his 418-acre property to Tonkawa Gas Processing Company 2 for the purpose of building and operating gas processing facilities. The first lease "was a 10-year lease with a renewal after every 10 years for another 10 years" as a continuing option, which indefinitely postponed AV's right of reversion. Annual rent for the land was $500.00.3 Tonkawa built a large natural gas processing plant atop the land in 1973.4 Fifteen or sixteen separate natural gas pipelines owned by various companies were connected to the plant over the years, and the site became a known processing hub.
Tonkawa renewed the lease in 1984, for fifteen years, on the same terms, except that rent was increased to $4,000.00 per year. Evidence was presented that the Simpsons did not have a complete understanding of what the land was worth at this time.5 Tonkawa sold the plant to Koch Midstream Processing,6 successor of Tonkawa's lease interest, and AV took Roland's place as successor lessor.
In 1998, these parties renewed the 1984 lease, but on different terms. First, the lease became a short, three-year term, with the first term ending April 2, 2001, with another three-year option. The annual rent increased to $22,265.00. A major difference from the earlier leases was that Koch's right of never-ending lease renewals was removed, giving AV a valuable reversionary interest in the land. According to industry expert Donald W. Niemiec, this major concession was made with the understanding that "[i]f [the amount of rent] went to arbitration ... the rent would be quite high," approximately $2.5million per year. He characterized the lease as Upon expiration of the three-year lease, the lessee had the option of renewing the lease, buying the land, or selling the lease and/or removing the plant. The lease was renewed in 2001 with an April 2, 2004, expiration date. Enbridge Processing (Processing) became the natural gas plant operator and successor to Koch's interest in November 2001.7
With the lease expiration date looming,8 Pipeline (not Processing) sent a March 10, 2004, $35,685.00 offer to AV for purchase of the fee interest. The letter informed AV it had until 4:00 p.m. on March 12, 2004, to agree to the purchase price or face condemnation proceedings. On March 11, 2004, Processing merged with Pipeline, a public utility company, and secured the right to acquire the property through eminent domain. A petition for condemnation by Pipeline was filed on March 18, 2004. Commissioners awarded AV $47,580.00 for the condemnation after AV failed to appear at the valuation hearing. AV objected to the commissioners' default award and went to trial on one issue—the fair market value of the condemned acreage.9
Daubert/Robinson challenges were made to both parties' experts, with the main question being whether the expert was entitled to consider the gas processing plant in valuing the land underneath it. The trial court answered the question in the affirmative. Because Pipeline's expert valued the land as vacant rural residential property, the trial court struck his testimony, finding his opinion unreliable and based upon improper methodology. The court also denied Pipeline's motion to strike AV's expert and allowed him to testify because he considered all existing factors in determining the land's fair market value. After hearing AV's expert testimony, the jury found the surface interest of the condemned land was worth $20,955,000.00.
We first consider the trial court's Daubert/Robinson rulings.
"[I]t is not permissible for the jury to consider mere speculative contingencies nor is testimony which ascends to the realm of speculations and fancies that may occur to the minds of optimistic witnesses concerning the future prospects of [condemned] property and its value admissible." McChristy v. Hall County, 140 S.W.2d 576, 578 (Tex.Civ.App.-Amarillo 1940, no writ). The trial court must act as evidentiary gatekeeper to screen irrelevant and unreliable expert evidence. Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 629 (Tex.2002). It has broad discretion with respect to this function. Id.; Gen. Elec. Co. v. Joiner, 522 U.S. 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997); In re Estate of Trawick, 170 S.W.3d 871, 874 (Tex.App.-Texarkana 2005, no pet.). In determining whether an abuse of discretion occurred in the inclusion of Bolton's testimony and the exclusion of Allen's, we look to see whether the trial court acted without reference to guiding principles or rules.Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985). We cannot conclude that a trial court abused its discretion merely because we would have ruled differently. Id. at 242; Purina Mills, Inc. v. Odell, 948 S.W.2d 927, 932 (Tex.App.-Texarkana 1997, writ denied).
In addition to demonstrating that an expert witness is qualified, the expert's testimony must be relevant to the issues in the case and based upon a reliable foundation. Tex.R. Evid. 401; Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d 797, 800 (Tex.2006); Zwahr, 88 S.W.3d at 628; Robinson, 923 S.W.2d at 556 (citing Daubert, 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469). The parties do not dispute the qualifications of either witness. Thus, we look to relevance and reliability.
Rule 702 of the Texas Rules of Evidence states that if "technical, or other specialized knowledge will assist the trier of fact to understand the evidence to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the form of an opinion or otherwise." Tex.R. Evid. 702. In Kumho Tire Co. v. Carmichael, the United States Supreme Court suggested that the Daubert standard is flexible and that the trial court should "make certain that an expert, whether basing testimony upon professional studies or personal experience, employs in the courtroom the same level of intellectual rigor that characterizes the practice of an expert in the relevant field." 526 U.S. 137, 152, 119 S.Ct. 1167, 143 L.Ed.2d 238 (1999). Expert testimony is unreliable if it is not grounded in "the methods and procedures of science," and is no more than "subjective belief or unsupported speculation," or there is too great an "analytical gap" between the data and the expert opinion offered. Robinson, 923 S.W.2d at 557; Zwahr, 88 S.W.3d at 629; see Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 712 (Tex.1997). In reviewing the reliability of expert testimony, a trial court does not determine whether the expert's conclusions are correct; rather, the court should determine only whether the analysis used to reach those conclusions is reliable. Zwahr, 88 S.W.3d at 629; City of Sugar Land v. Home & Hearth Sugarland, L.P., 215 S.W.3d 503, 510-11 (Tex.App.-Eastland 2007, pet. denied).
"Reliability is determined by looking at numerous factors including those set forth in Robinson and Daubert." Havner, 953 S.W.2d at 712. These include:
(1) the extent to which the theory has been or can be tested; (2) the extent to which the technique relies upon the subjective interpretation of the expert; (3) whether the theory has been subjected to peer review and publication; (4) the technique's potential rate of error; (5) whether the underlying theory or technique has been generally accepted as valid by the relevant scientific community; and (6) the non-judicial uses that...
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