State v. State St. Bank & Trust Co.

• Decision Date: 07 February 2012
• Docket Number: No. 05–10–00306–CV.,05–10–00306–CV.
• Parties: The STATE of Texas, Appellant, v. STATE STREET BANK AND TRUST COMPANY and Brinker International Payroll Company, L.P., Appellees.
• Court: Texas Court of Appeals

359 S.W.3d 375

The STATE of Texas, Appellant,

v.STATE STREET BANK AND TRUST COMPANY and Brinker International Payroll Company, L.P., Appellees.

No. 05–10–00306–CV.

Court of Appeals of Texas, Dallas.

Feb. 7, 2012.

Clint Alfred Harbour, Asst. Atty's Gen., Darby Venza, Office of Atty. Gen., Austin, for Appellant.

Clinton Schumacher, Matthew Michiel Hurt, Locke Lord Bissell & Liddell LLP, William Scott Hastings, Locke, Liddell & Sapp, L.L.P., Dallas, for Appellees.

Before Justices MORRIS, O'NEILL, and FILLMORE.

OPINION

Opinion By Justice MORRIS.

This is an appeal from the trial court's judgment rendered after the jury's award of condemnation damages to State Street Bank and Trust Company and Brinker International Payroll Company, L.P. The State of Texas asserts three issues generally contending that the trial court erred in admitting improper evidence of damages and the evidence was insufficient to support the amount of damages awarded. Concluding there is no reversible error shown, we affirm the trial court's judgment.

I.

As part of an expansion plan for a portion of I–635 in north Dallas, the State of Texas condemned a 14,741 square foot strip of land along the north side of Brinker International Payroll Company, L.P.'s corporate headquarters.¹ The trial court appointed a panel of special commissioners to assess the damages caused by the condemnation. Following a hearing, the commission awarded damages to appellees in the amount of $1,748,000. The State filed objections to the award and demanded a jury trial.

At trial, the central issue was the damage caused to the remainder of appellees' property. Both sides presented testimony about the effect of the taking on the value of the corporate campus abutting the condemned strip. The State conceded the condemnation would cause slight damage to the remainder of the property and that there would be costs associated with curing or mitigating the parking and traffic circulation problems created by the taking. The State's expert witness estimated the total damages to the remainder caused by the taking was either $847,857 or $1,114,576 depending upon what method of valuation was used.

Appellees presented the testimony of several witnesses who opined on the cost to cure the parking and traffic flow problems as well as the effect of the taking on the value of the remainder. Appellees' evidence included testimony showing that the cost to cure was $1,004,745 and the total damages incurred by appellees would exceed $4 million. After hearing the evidence, the jury returned a verdict awarding appellees $385,424 for the value of the land taken and $3,229,745 as compensation for the damages to the remainder of the property caused by the condemnation. The trial court signed a judgment in accordance with the jury's verdict awarding appellees $3,747,651.27 including prejudgment interest. The State brought this appeal.

II.

The State asserts three issues challenging the trial court's judgment. In its first two issues, the State contends the trial court erred in admitting evidence of noncompensable damages as well as evidence of damages determined by an inappropriate methodology. In both issues, the State focuses entirely on the testimony of appellees' expert witness, Michael Massey. Even assuming the State's arguments in its first two issues have merit and Massey's testimony was inadmissible, appellees contend the testimony of the other witnesses at trial was sufficient to support the amount of damages awarded. We agree. Accordingly, without reviewing the State's complaints about the evidence provided by Massey, we address the State's third issue challenging the general sufficiency of the evidence to support the damages awarded.

In its third issue, the State contends there is no evidence or insufficient evidence to support the jury's award of $3,229,745 for damages caused to the remainder of appellees' property.² The test of legal sufficiency is whether the evidence would enable reasonable and fair-minded people to reach the verdict under review. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005). We may sustain a no- evidence point only if the record reveals the complete absence of a vital fact, the evidence conclusively proves the opposite of a vital fact, or if the only evidence of a vital fact is barred from consideration or is no more than a scintilla. See id. at 810. When reviewing the factual sufficiency of the evidence, we consider and weigh all of the evidence. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986) (op. on reh'g). We may set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Id.

The Texas Constitution requires the State to compensate landowners when it takes property for public use. See County of Bexar v. Santikos, 144 S.W.3d 455, 459 (Tex.2004). If the State condemns only part of a tract of land, the State must not only compensate the landowner for the part of the property taken but must also pay for any resulting damage to the remainder. Id. Damages to the remainder of the property are calculated by ascertaining the market value of the remainder immediately before and immediately after the condemnation, taking into consideration the nature of any improvements and the use of the land taken. See Interstate Northborough P'ship v. State, 66 S.W.3d 213, 218 (Tex.2001). The three traditional approaches to determining market value are the comparable sales method, the cost method, and the income method. See City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 182 (Tex.2001). The income approach to value is appropriate when the property would, in the open market, be priced according to the income it generates. Id. at 183. The present value of an income-producing property is calculated by estimating the property's future income and applying a capitalization rate. Id.³ In addition, the State must pay for special repairs and mitigation costs that are not reflected in the lost market value. See Santikos, 144 S.W.3d at 459.

At trial, the parties generally agreed that the value of the strip of land taken by the State was $385,524. The parties also agreed that appellees would incur costs related to the parking and traffic flow problems created by the State's taking. Appellees presented evidence that the cost to cure the issues created by the taking would be $1,004,745 and the State does not challenge this evidence on appeal.

The focus of the State's challenge is on the evidence presented to show the market value of the remainder of the property after the taking. Because the property at issue was used as a corporate campus with leased office space, one of the methods used to calculate the property's market value was the income method. The State's expert witness, Bryon Hinton, testified that the value of the entire property based on the income method before the taking was $21,947,831. Hinton further testified that the impact of the taking would be slight and the value of the entire property based on the income method after the taking would be $20,714,550. After subtracting the value of the land taken by the State, $385,424, the damage to the income value of the remainder, according to Hinton's calculations, would be $847,857.

The decrease in value under Hinton's calculations was based on the costs associated with curing or mitigating the problems caused by the taking and a .25% increase in the income capitalization rate. Hinton testified that he increased the capitalization rate because the property would be slightly less desirable after the taking and, therefore, constitute a riskier investment. Although Hinton conceded the property would be slightly less desirable, he stated that he did not believe the lease rate for the property would decrease.

In contrast to Hinton's testimony, appellees presented the testimony of Jerry Averyt who stated that he believed the lease rate of the property would be reduced by 20%. According to Averyt, appellees' property before the taking was unique in the area because of its park-like setting and natural “buffer zone” of trees and...