Reid Rd. Mun. Util. Dist. No. 2 v. Stores

• Decision Date: 10 June 2011
• Docket Number: No. 09–0396.,09–0396.
• Parties: REID ROAD MUNICIPAL UTILITY DISTRICT NO. 2, Petitioner,v.SPEEDY STOP FOOD STORES, LTD., Respondent.
• Court: Texas Supreme Court

337 S.W.3d 846

54 Tex. Sup. Ct. J. 658

REID ROAD MUNICIPAL UTILITY DISTRICT NO. 2, Petitioner,

v.SPEEDY STOP FOOD STORES, LTD., Respondent.

No. 09–0396.

Supreme Court of Texas.

Argued Oct. 12, 2010.Decided March 11, 2011.Rehearing Denied June 10, 2011.

J. Mark Breeding, C. Charles Dippel, Mark Lynn Merrell, Andrews Kurth LLP, Houston, TX, for Petitioner.Bill W. Russell, Bill W. Russell, P.C., Victoria, TX, for Respondent.Justice JOHNSON delivered the opinion of the Court.

In this case we address two evidentiary questions. The first is whether an employee of the corporate general partner of a limited partnership qualifies to testify about the fair market value of partnership property under either the Property Owner Rule or Texas Rule of Evidence 701. The second is whether the condemning authority in a condemnation proceeding adopted the damages opinion of an appraiser by presenting the appraiser's testimony and written appraisal in the special commissioners' hearing.

Under the record before us, we answer the first question “No,” the second question “Yes,” and affirm the judgment of the court of appeals.

I. Background

Speedy Stop Food Stores, Ltd. is a Texas limited partnership that owns and operates convenience stores in Texas. Reid Road Municipal Utility District sought to acquire a waterline easement across land in Harris County owned by Speedy Stop (the Property).¹ The District and Speedy Stop were unable to agree on compensation for the easement, so the District initiated condemnation proceedings. See Tex. Prop.Code § 21.012(a). At the special commissioners' hearing the District introduced testimony of, and a written appraisal by, David Ambrose. Ambrose, a state-certified appraiser, evaluated Speedy Stop's damages at $9,342. Speedy Stop did not appear at the hearing so Ambrose's testimony and appraisal were the only evidence presented. The commissioners awarded Speedy Stop $9,342.

Speedy Stop timely objected to the commissioners' award, transforming the matter from an administrative proceeding to a civil suit. See id. § 21.018(b); Denton County v. Brammer, 361 S.W.2d 198, 200 (Tex.1962). The trial court granted partial summary judgment in favor of the District on the taking predicates, leaving the amount of compensation as the only contested issue. After the deadline to designate experts passed without Speedy Stop having designated a damages expert, the District filed a motion for summary judgment as to damages pursuant to Texas Rule of Civil Procedure 166a(i). See Tex.R. Civ. P. 166a(i).

In response to the District's motion, Speedy Stop filed the affidavit of Carlton LaBeff. LaBeff is the vice president of C.L. Thomas, Inc., the corporate general partner of Speedy Stop. Speedy Stop timely identified LaBeff as a person with knowledge of relevant facts but did not designate him as an expert. In his affidavit LaBeff averred, among other matters, that he (1) had been involved with the acquisition and sale of all Speedy Stop convenience stores since 1982; (2) “for several years” had been in charge of all real estate acquisitions and sales for Speedy Stop; (3) was responsible for dealing with easement issues at all Speedy Stop convenience stores and fast food restaurants; (4) maintained familiarity with realty values in Harris County through various means in order to fulfill his job duties; (5) was aware of how a utility easement can affect the value of commercial property such as the tract at issue; and (6) was “making this affidavit on behalf of the owner, as the owner's representative and as the owner.” In the affidavit, LaBeff did not set out facts showing that he had personal knowledge of the Property, nor did he say that he had personal knowledge of or familiarity with it. LaBeff did not give an opinion of the Property's value before or after the easement was taken. Instead, he set out his conclusion that the easement reduced the fair market value of the Property by $62,000.

In its written response to the motion for summary judgment, Speedy Stop attached Ambrose's written appraisal and a transcript of his testimony before the commissioners to LaBeff's affidavit, claiming that Ambrose's appraisal and testimony were admissions by the District. The District objected to LaBeff's affidavit and Ambrose's appraisal and testimony. As to LaBeff's affidavit the District argued that: (1) the time for designating experts had expired and Speedy Stop had not designated LaBeff as an expert witness; (2) LaBeff was not qualified to render an opinion on the property's value because he was not a licensed real-estate appraiser; and (3) LaBeff's methodology did not satisfy the reliability requirement for valuing the easement. The District argued that Ambrose's appraisal and testimony were not admissible because: (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.

The trial court sustained the District's objections to both LaBeff's affidavit and Ambrose's testimony and appraisal. It then granted the District's motion for summary judgment and entered judgment awarding Speedy Stop damages of one dollar. See State v. Jackson, 388 S.W.2d 924, 926 (Tex.1965) (holding that because the property owner adduced no evidence relating to the issue of value in the condemnation proceeding, “the trial court was necessarily constrained to instruct the jury to return a verdict for nominal damages”).

The court of appeals reversed, holding that the Property Owner Rule applies to corporate entities. 282 S.W.3d 652, 657–58. Applying the Property Owner Rule, the court of appeals held that LaBeff was a designated agent familiar with the market value of the Property and the trial court abused its discretion by striking his affidavit. The court of appeals did not reach Speedy Stop's assertion that Ambrose's opinion and appraisal constituted an admission by the District as to damages. We granted the District's petition for review. 53 Tex.Sup.Ct.J. 569 (April 12, 2010).

We agree with Speedy Stop in part as to the Property Owner Rule, and in whole as to its contention that Ambrose's testimony and appraisal constitute an admission by the District. As to LaBeff's damages opinion, we believe the better rule is to treat organizations the same as natural persons for purposes of the Property Owner Rule, with certain restrictions on whose testimony can be considered as that of the property owner. We hold that the Property Owner Rule is limited to those witnesses who are officers of the entity in managerial positions with duties related to the property, or employees of the entity with substantially equivalent positions and duties. Further, the Property Owner Rule falls within the ambit of Texas Rule of Evidence 701 and therefore does not relieve the owner of the requirement that a witness must be personally familiar with the property and its fair market value, but the Property Owner Rule creates a presumption as to both.

LaBeff, however, was not an employee or officer of Speedy Stop. Nor did his affidavit set out facts showing he was personally familiar with the Property and its value and that his opinion was not substantively an expert opinion based on specialized knowledge, skill, experience, training, or education. Thus, the trial court did not abuse its discretion by excluding his opinion as to the Property's diminution in value. On the other hand, the District's actions before the special commissioners evidenced its belief in the truth of Ambrose's opinion and appraisal as to Speedy Stop's damages. Thus, Ambrose's damages opinion and his appraisal were admissible as adoptive admissions by the District under Texas Rule of Evidence 801(e)(2)(B) and they were some evidence of Speedy Stop's damages.

II. Analysis

A. LaBeff's Affidavit

The District asserts that the trial court properly excluded LaBeff's affidavit and the court of appeals erred by holding that it was admissible under the Property Owner Rule. The District urges that corporate employees cannot be treated as “owners” for purposes of testifying about the value of corporate property, and even if they can be, LaBeff was not an employee of the Property's owner. The District also argues that allowing everyone familiar with property to testify to its value under Texas Rule of Evidence 701 will negate the protections provided by rules and procedures requiring timely disclosure of experts and their opinions.

Speedy Stop first argues that regardless of the Property Owner Rule, LaBeff's affidavit was improperly excluded because Rule 701 allows admission of his testimony. It next argues that the court of appeals was correct: LaBeff's affidavit was improperly excluded because he was designated as an agent for the owner of the Property and his affidavit was admissible because of the Property Owner Rule.

We agree with the District that the trial court did not abuse its discretion by excluding LaBeff's affidavit. We first address the issue of whether LaBeff's affidavit was admissible under Rule 701 even though he was not designated as an expert witness.

1. Rules 701 and 702

Rule 702 states:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or 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 contrast, Rule 701 provides:

If the witness is not testifying as an expert, the witness' testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue.

Tex.R. Evid. 701. We...