No CV IN THE COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS AT DALLAS, TEXAS COLLIN COUNTY, TEXAS, Appellant, VS.

Transcription

1 ORAL ARGUMENT REQUESTED No CV N THE COURT OF APPEALS FOR THE FFTH DSTRCT OF TEXAS AT DALLAS, TEXAS COLLN COUNTY, TEXAS, Appellant, VS. HXON FAMLY LMTED PARTNERSHP, LTD., Appellee. Appealed from the County Court at Law # 3 Collin County, Texas Trial Court Nos and The Honorable John Barry COLLN COUNTY S COMBNED APPELLANT S REPLY BREF AND CROSS APPELLEE S RESPONSE BREF Baxter W. Banowsky State Bar No BANOWSKY & LEVNE, P.C N. Central Expressway Suite 1700 Dallas, Texas (214) (telephone) (214) (facsimile) ATTORNEYS FOR APPELLANT

2 TABLE OF CONTENTS NDEX OF AUTHORTES... iv CASES... iv STATUTES AND RULES... iv APPELLANT S REPLY...1. ARGUMENT OF AUTHORTES...1 A. The Landowner Wrongfully Maintained a Suit Against The County The Partnership was not Governed by the Texas Business Organizations Code The Partnership Was Not Defending an Action The Plea to the Jurisdiction Does Not Deprive the Partnership of any Constitutional Rights...5 a. Adequate Compensation...6 b. The Partnership Received Adequate Due Process...6 c. The Partnership Was Not Denied its Right to Trial By Jury...8 B. Clemo Larry Ray s Testimony Should Have Been Stricken The County Sufficiently Raised all of its Appellate Points to the Trial Court Ray s Opinions Were Unreliable and His Testimony Should Have Been Excluded...11 a. Ray Relied on Non-comparable Sales...11 b. Ray Used Unreliable Paired Sales Data...11 c. Ray Refused to Consider Traffic Count, Exposure and the Like...13 CROSS APPELLEE S RESPONSE STATEMENT OF FACTS SUMMARY OF THE ARGUMENT...23 A. Testimony of Charles Stearman...23 B. Proffered Testimony of Donald Hixon...24 ii

3 . ARGUMENT AND AUTHORTES...25 A. The Trial Court Properly Allowed Stearman s Testimony...25 B. The Trial Court Properly Excluded Hixon s Testimony...26 CONCLUSON...30 CERTFCATE OF SERVCE...31 APPENDX...32 iii

4 NDEX OF AUTHORTES CASES Amason v. Natural Gas Pipeline Co., 682 S.W.2nd 240 (Tex. 1984)...2, 4 City of Austin v. Cannizzo, 267 S.W.2d 808 (Tex. 1954)...14, 25 City of Harlingen v. Sharboneau, 48 S.W.3d, 177, 44 Tex. Sup. J. 747 (2001)...11 E.. Du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1996)...11, 15 Federal Crude Oil Co. V. Yount-Lee Oil Co., 122 Tex. 21 (1932)...7, 8 Mobil Oil Corporation v. City of Wichita Falls, 489 S.W.2d 148 (Tex. App. Fort Worth 1972)...28 Pape v. Guadalupe-Blanco River Authority, 48 S.W.3d 908 (Tex. App.- Austin, 2001)...11 Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, 2011 Tex. LEXS 190 (Tex. Mar. 11, 2011)...28, 29 State v. Beever Farms, nc., 549 S.W.2d 223 (Tex. App.-San Antonio, 1977)...4 State v. Garland, 963 S.W.2d 95 (Tex. App.-Austin, 1998)...3 State v. Schmitt, 867 S.W.2d 769 (Tex. 1994) , 23, 25 Stuart v. Harris County Florida Control Dist, 537 S.W.2d 352 (Tex. App. - Houston [14 th Dist.] 1976)...4, 8 STATUTES AND RULES Constitution of the State of Texas, Article Tex. Bus. Org. Code Tex. Bus. Org. Code Tex. Prop. Code Chapter , 7 Tex. Prop. Code (b)...3 iv

5 Tex. R. Civ. P Texas Revised Limited Partnership Act Constitution of the State of Texas, Article Tex. Bus. Org. Code Tex. Bus. Org. Code Tex. Prop. Code Chapter , 8 Tex. Prop. Code (b)...4 Tex. R. Civ. P Texas Revised Limited Partnership Act v

6 APPELLANT S REPLY. ARGUMENT OF AUTHORTES A. The Landowner Wrongfully Maintained a Suit Against The County 1. The Partnership was not Governed by the Texas Business Organizations Code. The Partnership argues that it was merely a Defendant in the underlying action and, as such, it was allowed to defend itself pursuant to the applicable portions of the Texas Business Organizations Code. As a preliminary matter, the Partnership s reliance on of the Texas Business Organizations Code is misplaced. The Partnership was not organized pursuant to the Texas Business Organization Code. Rather, the Partnership was organized pursuant to the Texas Revised Limited Partnership Act. 1 At all times relevant to the existence of the Partnership, it was governed by the Texas Revised Limited Partnership Act. 2 The statutes cited by the Partnership refer to a limited partnership s right to transact business in the state being forfeited for its failure to file a report pursuant to Tex. Bus. Org. Code However, the Partnership s right to transact business in this state was not forfeited as a result of its failure to file a report pursuant Rather, its right to transact business in the state was forfeited on January 20, 2006, because it failed to file the periodic reports required by the Texas Revised Limited Partnership Act. 3 1 C.R.8 at pp C.R.8 at pp C.R.8 at p

7 Moreover, the Partnership not only forfeited the right to transact business in the State of Texas, its certificate of registration was cancelled as well. 4 n this regard, on May 24, 2006, because the failure to comply with the reporting requirements of the Texas Revised Limited Partnership Act remained uncomplied with, the Secretary of State ordered the Partnership s registration of limited partnership canceled pursuant to of the Texas Revised Limited Partnership Act. 5 Accordingly, the Partnership s reliance on the Texas Business Organizations Code is misplaced. 2. The Partnership Was Not Defending an Action. Even if this Court determines that the Partnership nevertheless retained the right to defend itself in litigation, the underlying action, and this resulting appeal, are simply not the result of any such defense. The Partnership points to the fact that the County filed a petition in condemnation as dispositive of the issue. The Partnership s logic is woefully simplistic and misleading. n fact, the argument simply misses the mark altogether. The filing of a condemnation action in Texas does not constitute the commencement of a lawsuit. The law in Texas is abundantly clear that the filing of a condemnation petition initiates a purely administrative proceeding. Amason v. Natural Gas Pipeline Co., 682 S.W.2nd 240, (Tex. 1984). As a result of the filing of a condemnation petition, no citation is issued and no answer or other appearance is required of the landowner. d. n fact, contrary to the 4 d. 5 d. at C.R.8 at p

8 Partnership s arguments herein, in its initial filing, the parties are not even referred to as Plaintiff and Defendant, but are referred to as Condemnor and Condemnee. 6 As a result of the filing of the Condemnation Petition, three Special Commissioners were appointed. 7 Thereafter, the Special Commissioners scheduled a hearing to determine the value of the subject property as well as damages, if any, to the remainder. 8 The Partnership was given notice of the hearing and elected not to attend. 9 As a result of the Special Commissioners hearing, an award of Special Commissioners was rendered. 10 Thereafter, the Partnership filed its objection to the award of Special Commissioners. 11 Under Texas law, the filing by a party of an objection to the Award of Special Commissioners has the effect of initiating a judicial proceeding. State v. Garland, 963 S.W.2d 95, 98 (Tex. App.-Austin, 1998). Prior to such objection, the process is entirely administrative, therefore, non-judicial. d. t is only after the filing of an objection to the Award of Special Commissioners that citation is issued. Tex. Prop. Code (b). Furthermore, under Texas law, the burden of issuing citation and obtaining service of process is not on the party who files the petition in condemnation, but rather it is on whichever party files the objection to the Award 6 C.R. 1 at p C.R. 1 at p C.R. 1 at pp d. 10 d. 11 C.R 1 at pp

9 of Special Commissioners. Amasson v. Natural Gas Pipeline, Co., 682 S.W.2d 240, 243 (Tex. 1984); State v. Beever Farms, nc., 549 S.W.2d 223, (Tex. App.-San Antonio, 1977). n this case, the Partnership initiated the underlying judicial action by filing the objection to the Award of Special Commissioners. Additionally, on November 25, 2009, the County deposited the funds awarded by the Special Commissioners into the Registry of the Court and, on November 5, 2010, the Partnership withdrew such funds from the Registry of the court. 12 As a result of that action, the Partnership consented to the taking thereby waiving any objection as it relates to the County s right to condemn the subject property. Stuart v. Harris County Florida Control Dist, 537 S.W.2d 352, 354 (Tex. App. - Houston [14 th Dist.] 1976) (withdrawal of Special Commissioners award from registry of court shifts the burden of proof on the whole case to the condemnee). By withdrawing the funds awarded by the Special Commissioners from the registry of the court, the Partnership took on itself all of the indicia of Plaintiff in this case. d. As a further result, the only issue remaining in the case after January 5, 2010 was the market value of the property taken by the County. 13 On this single issue, the Partnership bore entirely the burden of proof. d. Because it bore the burden of proof, despite that the County s name appears first on the trial court s style, the Partnership first addressed the potential jurors in voir dire, the Partnership first made its opening statement to the jury; the Partnership first presented its case in chief; the Partnership first presented its closing argument; and the Partnership was allowed the 12 C.R. Vol. 4 at p , The Partnership conceded that its remainder property was enhanced by the taking such that no issue of remainder damages was presented at trial. 4

10 last word in its rebuttal argument to the jury. 14 n fact, the Partnership not only presented its case in chief first, it was the only party in the action with a case in chief. 15 The County sought no relief from the Partnership other than that to which it was already lawfully entitled as a result of the voluntary withdrawal of funds from the court s registry by the Partnership, i.e., judgment for possession of the property. Although the Partnership seems to be unaware that it was the Plaintiff in the underlying action, the trial court understood clearly that the Partnership was the Plaintiff. 16 Likewise, the Reporter s Record refers consistently to the Partnership as the Plaintiff. 17 n every way that a party could be considered a Plaintiff in a lawsuit, the Partnership was the Plaintiff in the action below. 3. The Plea to the Jurisdiction Does Not Deprive the Partnership of any Constitutional Rights. The Partnership also asserts that granting the plea to the jurisdiction would deny it of its rights, under the Texas Constitution, to be adequately compensated for its land, to due process and to the right by trial by jury. These arguments are spurious. 14 R.R. 4 at p. 44, 57-58; R.R 5 at PP. 11, 26, d. 16 R.R. 3 at p. 43:8-10. n the section of the Reporter s Record, the trial court instructed the jury that in just a few moments, the landowner-the Plaintiff as we well refer to that party will have the opportunity to present its statement. 17 See the index to each volume of the Reporter s Record which refers to the Partnership as Plaintiff. 5

11 a. Adequate Compensation. n this case, the requirements of Article 1 17 of the Texas Constitution are met by virtue of the Special Commissioners hearing and award. This is the constitutionally recognized procedure by which the value for private property is measured. Tex. Prop. Code Chapter 21. The suggestion that the award of the Special Commissioners, and the Partnership s subsequent withdrawal of the award from the court s registry, does not satisfy Article 1 17, is analogous to the argument that Article 1 17 is violated anytime a jury comes in too low. The fact that the jury in this case awarded nominally more for the subject property than did the Special Commissioners does not render the award of the Special Commissioners otherwise unconstitutional for violating Article 1 17 of the Texas Constitution, as the Partnership seems to suggest. b. The Partnership Received Adequate Due Process. Next, the Partnership argues that requiring it to comply with the Texas Statutes under which it was created and which governed its very existence somehow deprives it of its right to due process under the Texas Constitution. First, the Partnership exists as a creature of statute. The Constitutional provision cited by the Partnership provides that the state must proceed in due course of the law. Here, the record makes clear that the Secretary of State of Texas notified the Partnership of its failure to comply with its periodic reporting requirements. When the Partnership failed to remedy this deficiency, the Secretary of State discharged its statutory obligations and ordered the Certificate of Formation of the Partnership canceled. The Partnership was likewise notified of the cancellation. Certainly, the Partnership had adequate due process in connection with the cancellation of its Certificate of Formation. 6

12 The Partnership is not a natural person, it is a statutory entity which exists only pursuant to and in accordance with the statutory laws of the State of Texas. ts right to maintain an action in the Court s of Texas is likewise a statutory right dependent on its observance of its statutory obligations. n essence, the Partnership is arguing that its due process rights extend to protect it from its own intentional refusal to comply with its obligations under the very statutory scheme through which it was created. The Texas Constitution does not require such an absurd result. Federal Crude Oil Co. V. Yount-Lee Oil Co., 122 Tex. 21 (1932) ( in no way can the denial of the right of a corporation to sue, as such, be considered a denial of a constitutional right, when such denial is made to depend upon the corporation s own delinquency. ) Furthermore, the Partnership received adequate due process by virtue of the Special Commissioners hearing. t is undisputed that the trial court appointed three Special Commissioners, that the Special Commissioners convened a hearing to determine the value of the Partnership s property, that the Partnership received actual notice of the hearing, and that the Partnership intentionally opted not to appear. The Partnership had the opportunity to appear and present evidence at the Special Commissioners hearing. t elected not to participate therein. ts election not to participate does not constitute a denial or a deprivation of its due process rights. Rather, the Partnership simply chose not to exercise the due process rights afforded it under Chapter 21 of the Texas Property Code. Likewise, the Partnership had the ability to resurrect its existence in accordance with the provisions of the Texas Revised Limited Partnership Act. Had it done so, it would have revived its right to pursue a claim in the courts of the State of Texas. That the Partnership intentionally elected not to take the statutory actions required of it to allow it to proceed as a Plaintiff in the 7

13 underlying litigation, does not constitute a deprivation of the Partnership s right to due process. Federal Crude Oil Co., 121 Tex. 21. c. The Partnership Was Not Denied its Right to Trial By Jury. For the reasons set forth above, the Partnership s right to trial by jury is utterly dependent on its right to proceed on a claim in the courts of the State of Texas. Additionally, the Partnership was, in no way, actually deprived of any such right. n this case, the Partnership elected to withdraw the award of the Special Commissioners from the registry of the Court. The effect of such action was a consent to the taking. Stuart, 537 S.W.2d at 354. Had the Partnership not consented to the taking of its property, it would have, in fact, remained a Defendant in the litigation. d. The County would have had the obligation to plead and prove its right to take the subject property by eminent domain. d. The Partnership could have defended this case and could have done so through the process of a jury trial. But in this case, the Partnership chose not to be a Defendant. Rather, the Partnership chose to be a Plaintiff. The Partnership elected, strategically, to have the privilege of opening and closing the evidence and the argument. However, the Partnership had no right to so act. Accordingly, the denial of the Partnership of the right to proceed in the underlying litigation, as a Plaintiff, in no way constitutes a deprivation of its right to a trial by jury. n fact, if the Partnership is correct in its assertion, then the statutory requirements depriving a Texas entity of the right to be a Plaintiff in litigation is wholly unconstitutional because any denial of the right to a trial would also, consequently, deny such entity a right to present its case to a jury. Again, the Texas Constitution does not require such an absurd result. Federal Crude Oil Co., 121 Tex

14 B. Clemo Larry Ray s Testimony Should Have Been Stricken. 1. The County Sufficiently Raised all of its Appellate Points to the Trial Court. Before addressing the merit of the County s second point of error, the Partnership argues that certain of its points were not sufficiently raised with the trial court and are, therefore, waived. The Partnership is incorrect. First, the Partnership complains about the County s position, stated on pages 19 and 20 of its Brief, that Ray s testimony was unreliable because the properties he used in his comparable sales analysis were simply not comparable properties. On page 16 of its Motion to Exclude Expert Testimony filed with the trial court, the County complained that Ray s reliance on a noncomparable property renders his opinion unreliable. 18 Specifically, in its Motion to Exclude Expert Testimony, filed with the trial court, the County complained of Ray s use of the Melissa Land Partners sale because, according to the County, the Melissa Land Partners property is not comparable to the subject property. 19 n this appeal, the only property the County is complaining of, as it relates to whether such property is a comparable property, is again the Melissa Land Partners property. This issue was clearly raised with the trial court and the trial court clearly overruled the County s objections C.R. 6 at C.R. 6 at R.R. 2 at 222:23-24 ( Now, the Motion to Strike the Testimony of Clemo Ray is Denied ). n addition to raising this issue in the Motion to Exclude filed prior to the commencement of trial, the County also objected to Ray s reliance on the Melissa Land Partners sale at the conclusion of Ray s testimony at which time the County renewed its objections and again requested the Court to strike the testimony and instruct the jury to disregard the testimony. The trial court overruled the County s objection. R.R.4 at 94:22-95:19. 9

15 Next, the Partnership complains that the County waived its complaint that Ray intentionally excluded necessary adjustments for traffic count, visibility and convenience of route by failing to raise those issues with the trial court. Again, the Partnership is simply mistaken. While the issue of Ray s failure to make appropriate adjustments for such things as traffic count, visibility and convenience of route, was not raised in the County s initial motion to exclude Ray s testimony, the objection was raised in the County s Supplement to Motion to Exclude Expert Testimony. 21 The objection was also clearly lodged on the record with the trial court and the trial court clearly overruled the objection. n this regard, at the conclusion of Ray s testimony, counsel for the County stated as follows:...we move, Your Honor, to strike the testimony, the opinion testimony, of Mr. Ray with respect to his opinions, and request an instruction to the jury not to consider them because Mr. Ray testified that he refused to consider elements such as traffic count in doing his Comparable Sales Data Analysis in this case even though he testified that he would do that in any other appraisal for real people in the real world....so we believe that his opinions should be stricken, the jury should be so instructed, and as a result the County is entitled to a directed verdict for which we move now. 22 The trial court overruled the objection, denied the request for an instruction to the jury and denied the motion for directed verdict on the record. 23 The foregoing makes clear that the issues complained about herein were raised with the trial court, the trial court had an opportunity to rule on the objections, and the trial court overruled the objections on the record. 21 C.R. 9 at R.R. 4 at 94:22-95: R.R 4 at 95:

16 2. Ray s Opinions Were Unreliable and His Testimony Should Have Been Excluded. a. Ray Relied on Non-comparable Sales. t is undisputed that one of the comparable sales relied upon by Ray in forming his opinions is the Melissa Land Partners sale. t is also undisputed that the Melissa Land Partners sale involved a fully entitled planned development wherein the seller undertook the continuing obligations for capital improvements totaling millions of dollars. The law in Texas is clear that a real estate appraiser in a condemnation action may not compare sales from an entitled subdivision to raw, undeveloped land. City of Harlingen v. Sharboneau, 48 S.W.3d, 177, 44 Tex. Sup. J. 747, 750 (2001) ( Texas law recognizes that sales of subdivided lots do not meet the test of similarity when compared to an undivided tract of land ); Pape v. Guadalupe-Blanco River Authority, 48 S.W.3d 908, 916 (Tex. App.- Austin, 2001) ( the rule that land in a subdivision, which often will have infrastructure either in place or planned, should not be compared to raw, undeveloped land with no subdivision plans in place, is still valid. ) Here, Ray s reliance on the Melissa Land Partners sale renders his methodology unreliable and not in accordance with Texas Law and further renders his opinions inadmissible under E.. Du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1996). b. Ray Used Unreliable Paired Sales Data. The County objected to Ray s use of paired sales data on two grounds. First, the paired sales data relied upon by Ray involved data collected wholly in and around the City of Waco, not in the Dallas Fort Worth Metroplex area. Ray offered no evidence to support the proposition that the paired sales data he used had any validity outside the general market area in which it was collected. Basically, the paired sales data relied upon by Ray was meant to quantify an 11

17 adjustment between otherwise comparable properties when one property is located on a major highway and another on a minor road. The County does not object, generally, to the notion that paired sales analysis is a recognized real estate appraisal technique. However, the County does contend that any such paired sales analysis must first be demonstrated to be relevant. The proponent of any such paired sales analysis must establish that the paired sales data is representative of the differences that are at issue in the current litigation. Here, since Ray presented no testimony that the Waco data would, for some reason, be reliable in the DFW Metroplex, there was simply no basis for Ray s reliance on such data to make the adjustments set forth in his appraisal. The County s second ground for objection is much more damning than the first. The County s second ground for objection is the inconsistent use Ray made of his paired sales data. The entire purpose of the paired sales analysis is to adjust the sales price of a property sold on a major highway, like US 75, to a comparable property on a minor road. The data, if reliable, should be used in all such situations. However, Ray used two comparable properties on US 75. Logic would dictate that his paired sales analysis would be utilized on both sales since both sales front the same highway and the sole purpose for the paired sales analysis is to remove the affect of the highway on the sales price. However, Ray only applied his paired sales analysis to one of the properties on US 75. According to Ray, a paired sales adjustment was not necessary to remove the effect of the proximity to US 75 from the second sale because, according to Ray, the sales price of the second sale was already low enough. Of course, Ray s analysis puts the cart squarely before the horse and renders his methodology entirely subjective and wholly unreliable. t was error for the trial court to admit this testimony. 12

18 c. Ray Refused to Consider Traffic Count, Exposure and the Like. At the heart of the differences in methodology between the landowner s appraiser and the County s appraiser, is the question of traffic count, exposure, access and the like. On these issues, the County s appraiser, Charles Stearman, and Ray, are diametrically opposed. n performing his appraisal, Stearman adjusted comparable properties based on characteristics such as traffic count, exposure, convenience of route, and so forth. Ray, on the other hand, intentionally excluded the consideration of all such factors from his analysis. The County contends that the question of whether these characteristics of property are properly considered in determining the market value of land taken in condemnation is a question of law for this Court to decide. Additionally, the County contends that, since Stearman and Ray stake out opposite positions on this legal question, only one of their opinions is in compliance with the applicable law. Accordingly, the County contends that one of these two experts must have gotten the law wrong and, of course, that expert was Ray. Ray clearly testified that, in the real world, the factors considered by Stearman are, in fact, factors which bear on the actual market value of the property subject to condemnation, and, in the real world, Ray would have considered those factors. Ray testified that he did not consider factors such as traffic count, visibility and the like, because he believes the law required him to exclude such considerations from his analysis. Here, Ray simply got the law wrong. Ray based his decision to exclude these important characteristics of the property on the Texas Supreme Court s holding in State v. Schmitt, 867 S.W.2d 769 (Tex. 1994). However, Schmitt did not involve the question of the market value of the property taken by eminent domain. Rather, Schmitt involved the question of how to quantify damages recoverable by the landowner 13

19 as a result of the diminution in the market value of the remainder tract due to a diversion of traffic, increase circuity of travel, lesson visibility and the like. Schmitt 867 S.W.2d at 770. Ray compared the subject property to two properties on US 75 with the understanding that the properties on US 75 enjoy much higher traffic counts, much greater visibility, and much better access to surrounding areas than is enjoyed by the subject property. According to Ray, the owners of the property on U.S. 75 do not have a property right in the superior exposure and access they enjoy. Because Ray determined that the owners of the properties on 75 have no property right in that superior traffic count, visibility and so forth, Ray does not adjust for it. As a result, Ray s analysis leads to inflated property values for the condemned property. Obviously, Texas law does not condone such a ridiculous exercise. Rather, Texas law requires a condemning authority to compensate a landowner for property taken through eminent domain by paying the property owner the market value of the property taken. City of Austin v. Cannizzo, 267 S.W.2d 808, (Tex. 1954). The only pertinent question is at what price would a willing buyer and a willing seller meet and consummate a sale of the subject property. d. Upon that question, the law in Texas requires the Court to consider all factors which would reasonably be given weight in negotiations between the buyer and seller. d. Certainly, if one is buying or selling a piece of real estate, he will consider the volume of traffic, visibility, exposure and convenience of route. This remains true whether the property commercial or residential, though the effect on value may not be the same. The question of property rights in traffic count, visibility and ease of access arises only in the context of inverse condemnation or in the context of a partial condemnation where the property owner alleges that his remaining property is damaged as a result of the taking. The latter 14

20 is the context in which Schmitt was decided. Of course, in this case, the Partnership stipulated that its remaining property was enhanced in value by the taking. 24 Accordingly, Ray s refusal to consider important characteristics of his comparable sales when comparing them to the subject property renders his opinions unreliable and inadmissable under Robinson. 24 R.R. 3 at 48:

21 CROSS APPELLEE S RESPONSE. STATEMENT OF FACTS n its statement of facts, the Partnership sets forth certain facts as they relate to the testimony of the County s appraiser, Charles Stearman ( Stearman ). These facts relate, generally, to the Partnership s first point of error complaining that the trial court should have excluded Stearman s testimony. However, the Partnership s statement of facts does not include the recitation of any facts related to its second point of error. n its second point of error, the Partnership complains of the trial court s exclusion of the testimony of Donald Hixon ( Hixon ). The following is a brief restation of facts relevant to the trial court s exclusion of Hixon s testimony. The Partnership s property consists of two tracts, referred to during the trial as the eastern tract and the western tract. Hixon lives on the western tract. 25 Prior to trial, Hixon was deposed on two occasions by the County. The first deposition took place in October, At the time of the first deposition in October, 2009, Hixon had no opinion as to the value of the eastern tract. 27 n his deposition, Hixon was asked whether he would be providing testimony regarding the market value of the property in this matter and he testified as follows: Q. Well, let me ask you this question, sir. Do you have the experience or the expertise which would enable you to prepare a market valuation for a piece of property? A. do not. 25 R.R. 2 at 51: Appendix at Ex d. at 67:3-68:11. 16

22 Q. Do you intend and m going to ask you this because its going to mean, this will bear on how continue proceeding today. Do you intend, at the trial of this mater, to offer an opinion of the market value of your property? A. Not at this time. The partnership has retained a real estate appraiser expert. m going to rely on his expert valuation. Q. Do you have the ability to render such an opinion if he did not? A. Do have the ability? Q. Yes. A. Well, think all of us in this room has the ability. No, do we have the expertise to do it? don t know. Q. guess that would be my question to you, sir, is and the reason why m asking is, is if it s your intention at trial to use these other sales to say that these sales are comparable to your property, and indeed this is how they compare, and therefore, ve come up with a market value, then need to ask you about all that. f that s outside the area of your expertise, then can leave that to your appraiser and can deal with him on that. Do you see what m asking? A. Sure. And that s what you should do, because the partnership has retained an expert real estate appraiser. Q. But need to, as the attorney for the County, ask you if you have the ability to make those comparisons and analyses such that you would be offering yourself as an expert on the value of your property at trial? A. am certainly not an expert in real estate valuation. Q. f we assume well, let me ask you with respect to this eastern tract. The highest and best use of the property, it s not agricultural, is it?... 17

23 A. would not think so. We re talking always you have to define when the highest and best use is determined. f you determine it right now here today it s it currently is agricultural use is what you can use it for today. But if you go and when will the road, even the first part of the roadway be built, it might change. That whole thing is guess that whole area has changed considerably as the developments come along. Q. Well, let me ask you today before the County puts in the outer loop. Today is the highest and best use of your eastern tract here agricultural? A. think you always have to think it s a question for the expert real estate appraiser. Q. Okay. A. t is currently used as agricultural, obviously. Now, is that the highest and best use, don t know. Q. And your answer to me and think you got to it right there at the end. Your answer to me might be, don t know. t s outside the area of my expertise. And that s fair; was just asking you if you knew. A. Yes. And the answer is don t know, and we re relying on the expert real estate appraiser. Q. So if wanted to ask you about the highest and best use of your property before or after the construction of the outer loop, that would be something you would tell me is outside the area of your expertise and something you would prefer that ask your appraiser? A. Right. He certainly is in a position to give the expert answer and m not. 28 n fact, the first time Hixon formed an opinion of the market value of the eastern tract was sometime after Thanksgiving Prior to Thanksgiving of 2009, Hixon had no opinion, as 28 Appendix at Ex R.R. 2 at 53:

24 the general partner of the Partnership, of the market value of either the eastern or the western tract. 30 n its initial disclosure responses, the Partnership identified a single testifying expert witness, Clemo Larry Ray ( Ray ), and identified its damage calculation by referring the County to its retained real estate appraiser. 31 Those initial disclosures were served on September 17, 2009, prior to Hixon s first deposition. 32 Pursuant to the agreed scheduling order entered by the Court, this case was set for trial on February 8, 2010 and the deadline to complete and/or supplement discovery was January 8, On the last day to supplement discovery, and 31 days before trial, the Partnership served its first amended responses to the County s request for disclosure. 34 n the first amended disclosures, the Partnership identified Hixon as a witness who would be providing testimony related to the market value of the eastern tract. 35 Attached to the first amended disclosures is a document entitled Summary of Donald Ray Hixon s Opinion. 36 The summary of Hixon s 30 R.R. 2 at 53: Appendix at Ex. 3. The parties requested the County s Motion to Exclude Opinion Testimony of Donald Hixon to be included in the Clerk s Record. Apparently, it was inadvertently omitted. The County has requested the preparation of a Supplemental Clerk s Record to include this motion. A copy of that request is in the Appendix of this brief. Selected attachments to the motion are also included in the Appendix. 32 d. 33 Appendix at Ex C.R. 7 at d. 36 C.R. 7 at

25 opinions identified the basis of Hixon s opinions as two market transactions identified in the summary. 37 The County also propounded an interrogatory, nterrogatory No. 18, to the Partnership. 38 nterrogatory No. 18 asks: Does Hixon Family Partnership, Ltd. have an opinion on the Market Value of the Property nterest? f so, please set forth the opinion and the basis for such opinion. 39 The Partnership answered nterrogatory No. 18 No. 40 This was the Partnership s answer to nterrogatory No. 18 at all times during the course of the underlying litigation. Despite that Hixon lived on the western tract, as opposed to the eastern tract, Hixon did not offer an opinion of the value of the western tract and, in fact, testified that he had no opinion of the market value of the tract on which he lives. 41 Hixon has never lived on the eastern tract. 42 During a pretrial hearing, Hixon testified that the opinion he formed after Thanksgiving, 2009, was in fact based on these two market sales and that, but for those sales, he would have had no opinion as to the market value of the eastern tract d. 38 Appendix at Ex d. 40 d. 41 R.R. 2 at 50:24-51:25; 70: R.R. 2 at 52: R.R. 2 at 54:2-55:22. 20

26 Hixon s deposition was reconvened on January 18, Less than 30 days before trial, Hixon testified that he did not have an opinion of the market value of the eastern tract as that term is defined by Texas law. 45 He also testified that he was relying solely on the two sales he had previously disclosed as the basis for his opinion of market value. 46 On the morning of trial, however, he testified that he was, as of that point and time, not relying on any sales. 47 n fact, on the morning of trial, Hixon notified the County that his opinions would be based solely on his knowledge of the market. 48 Despite the change in the basis of his opinion, the actual calculation of his value opinion did not change at all. 49 Additionally, during his second deposition he testified that he was, at that time, only relying on one comparable sale which was one of the two previously disclosed. However, on the morning of trial, in the pretrial hearing, Hixon testified that, at the time of his deposition he had also been relying on other sales which had not been disclosed prior to the first day of trial. 50 Hixon could offer no explanation for his failure to disclose these other sales during the course of his deposition R.R 2 at 54:16-55:1; C.R. 7 at R.R. 62:6-63:2. Hixon was read the definition of market value from the Cannizzo case in his deposition and he specifically testified that his opinion of the value of the eastern tract was not based on the Cannizzo definition of market value. 46 R.R. 65:22-69: d. 48 d. 49 d. 50 R.R. 2 78:4-79:5. 51 d. 21

27 However, neither of the disclosed sales relied upon by Hixon was an arm s length transaction. 52 n fact, when the seller refused to buy back one of the subject properties, the buyer filed a lawsuit against the seller alleging fraud and further alleging that the sales were not arm s length transactions and did not represent market conditions. 53 The arguments made to the trial court, for the exclusion of Hixon s testimony, included the following grounds: 1. Hixon was not testifying as an owner but rather purported to conduct a comparable sales appraisal which he was not competent to do. 2. Although unqualified, Hixon was testifying as an expert witness, and the Partnership had failed to timely designate him as such and disclose his opinions. 3. The Partnership failed to timely supplement its discovery responses to identify Hixon as a trial witness. 4. The Partnership never supplemented its interrogatory answer in which it stated that the Partnership had no opinion of the market value of the subject property. Supporting these grounds, the County established that (1) prior to November, 2009, Hixon had no opinion as to the market value of the eastern tract; (2) in his second deposition, Hixon testified that he undertook a comparable sales analysis, which is what a real estate appraiser does, and which Hixon admits he is not competent to do; (3) Hixon s opinion in the second deposition was based solely on his comparable sales analysis; (4) Hixon was not qualified to first form an opinion approximately 60 days before trial based on a comparable sales analysis; (5) Hixon s 52 R.R. 2 at 56:10-58:20; 111:2-5; 112: R.R. 2 at 58:21-60:6; 112:25-118:21; Defendant s pretrial exhibit 6 and 7. 22

28 opinion was based on faulty assumptions including that the sales that he was relying on were market based arm s length transactions; (6) none of the opinions proffered by Hixon had been properly disclosed in response to requests for disclosure or interrogatories. 54 Based on the foregoing objections and the evidence presented during the pretrial hearing, the trial court excluded Hixon s opinion testimony.. SUMMARY OF THE ARGUMENT A. Testimony of Charles Stearman. The Partnership Relies on State v. Schmitt, 867 S.W.2d 769 (Tex. 1994) for the proposition that, in a condemnation case, characteristics of properties such as traffic count, visibility and convenience of route are noncompensable. Accordingly, the Partnership argues that the trial court erred in allowing the County s appraiser to render an opinion as to the market value of the subject property which took into account these characteristics of the subject property as compared to the comparable properties used in his appraisal analysis. The Partnership has misconstrued the holding in Schmitt and, in so doing, has caused its own appraiser, Clemo Larry Ray ( Ray ), to render opinions which are wholly inconsistent with the governing law. Specifically, the holding in Schmitt is limited to the assessment of damages to a landowner s remainder property after condemnation. n the context of a partial condemnation, the question of damages to the remainder tract as a result of the condemnation arises. n some cases, the value of the remainder tract is not affected by the condemnation. n some cases, the remainder tract is actually enhanced by the condemnation. n some cases, the remainder tract is 54 R.R. 2 at 95:14-104:7. 23

29 damaged as a result of the condemnation. t is this last category of cases to which Schmitt is directed. When assessing the damages recoverable by a property owner pursuant to Article 1 17 of the Texas Constitution, the Court must first determine the property rights interfered with by the State as a result of the condemnation. The Texas Supreme Court has determined that not all damages to the remainder tract are compensable in a condemnation proceeding, rather, only those damages which impact upon a property right owned by the condemnee. n this case, the Partnership stipulated that the remainder tracts were not damaged as a result of the taking. 55 n fact, Ray testified in his deposition that the remainder tracts were, in fact, enhanced as a result of the taking. Accordingly, the analysis in Schmitt is simply inapposite. B. Proffered Testimony of Donald Hixon. The Partnership fails to address its second point of error in its summary of the argument. Nevertheless, the County contends that the trial Court was correct in excluding Hixon from testifying about the market value of the subject property. First, Hixon was not testifying as a landowner. Hixon had no opinion as to the market value of the subject property at all prior to the commencement of these proceedings. Rather, Hixon purported to perform a comparable sales analysis prior to trial in order to form such an opinion. The trial court was justified in excluding Hixon s testimony for at least three reasons, all well within its discretion: (1) Hixon is not qualified to perform a comparable sales appraisal; (2) Hixon s methodology in performing his comparable sales analysis was hopelessly flawed; and (3) the Partnership failed to make timely discovery responses disclosing Hixon s testimony. 55 R.R 3 at 48:

30 . ARGUMENT AND AUTHORTES. A. The Trial Court Properly Allowed Stearman s Testimony. At the heart of this case, as it relates to the expert witnesses, are two Texas Supreme Court cases: City of Austin v. Cannizzo, 153 Tex. 324, 267 S.W.2d 808 (Tex. 1954) and State v. Schmitt, 867 S.W.2d 769 (Tex. 1994). n Cannizzo, the Texas Supreme Court reiterated the willing seller-willing buyer definition of market value and further held that in the willing seller-willing buyer test of market value, all factors should be considered which would reasonably be given weight in negotiations between a seller and a buyer. d. at 814. n Schmitt, on the other hand, the Texas Supreme Court held that, in the context of a partial taking, the property owner is not entitled to compensation for any diminution in the value of the remainder property due to diversion of traffic, and increase circuity of travel to the property, a lessened visibility to passers by, and the inconvenience of construction activities. Schmitt, 867 S.W.2d at 770. The Texas Supreme Court founded its holding in Schmitt on the proposition that the condemning authority is not obligated to compensate the property owner for all damages which result from the act of condemnation, only those damages which are legally compensable. n this regard, the Texas Supreme Court held that damages to the remainder property relating to lessened traffic count and visibility and increased circuity of travel to the remainder property, while actually suffered by the landowner, are simply not compensable. Schmitt s holding has no application whatsoever to the principles involved in this case, namely, that the basic measure of compensation in a condemnation case is the actual market value of the property taken based on the willing buyer-willing seller test. n the willing buyer-willing 25

31 seller test, the theoretical parties to the transaction always include value attributed to such things as visibility, traffic count and convenience of access and routes of access to the property. Ray acknowledged as much in his testimony indicating that, in the real world, he always includes such adjustments in his appraisal work. He testified that the reason he excluded these otherwise proper adjustments from his appraisal work in this case was because he believed that Texas law on condemnation precluded such consideration. Of course, Ray was incorrect in his analysis of the law. Stearman was correct and the trial court acted properly in admitting Stearman s testimony. B. The Trial Court Properly Excluded Hixon s Testimony. n its brief, the Partnership only addresses the familiar proposition that a property owner is generally competent to provide an opinion as to the value of his own property. The County does not take issue with that general proposition of Texas law. However, underlying that proposition is the notion that a property owner, by virtue of his own familiarity with his own property, may have become aware of the market value of his property during the time he has owned it. However, that is not the case with respect to Hixon. Hixon was first deposed in October, 2009, just a few short months before trial. At that time, he testified that he did not have an opinion as to the market value of his property even though he had owned it, directly or indirectly, for forty years. n fact, at the time of trial, Hixon testified that he still did not have an opinion of the market value of that portion of his property, the western tract, upon which he actually lives. Rather, he only proffered an opinion of the value of the eastern tract, which is raw agricultural land. This is not a case where a property owner came into court and proffered an opinion of the market value of his property based on the notion that he is simply familiar with the market value. 26

32 As of October, 2009, Hixon had no such familiarity. Rather, Hixon endeavored to undertake a comparable sales analysis, something he is not qualified to do, in order to form an opinion based on two sales which, as it turns out, were not arm s length transactions. Accordingly, at the time of his second deposition, shortly after disclosing for the first time that he had any opinions at all, Hixon proudly referred to these two sales as the basis for his newly formed opinion of value of the eastern tract. Prior to trial, however, the County was able to determine that the sales relied upon by Hixon were not market sales at all, were part of a 1031 exchange, were induced by fraud, and had resulted in litigation. Hixon s reliance on these two sales was clearly misplaced. Accordingly, on the eve of trial, Hixon abandoned all of his previous testimony in its entirety and attempted to testify, for the first time, that his opinion of market value of the eastern tract was based simply on his knowledge of his property, along with an undetermined number of undisclosed comparable sales. However, Hixon continued to confirm that he had apparently no knowledge of the value of the western tract, upon which he actually lives. The trial Court properly excluded Hixon s testimony for three reasons. First, Hixon s pretrial testimony made clear that his testimony was not based on his knowledge of the market value of the subject property as a result of owning it. Rather, his pretrial testimony made clear that he had attempted to perform a comparable sales analysis, that Hixon was not competent to perform such an analysis; the County had throughly discredited the comparable sales upon which he relied, and so, in order to repair the foundation for his opinion, he simply retreated to the familiar but incredible proposition that he was basing his opinion on his previously absent 27

33 knowledge of the property from the perspective of owner. t is clear that Hixon was attempting to present expert testimony and the trial court property excluded it. Second, Hixon is not the owner of the subject property. The property is owned by the Partnership. n Mobil Oil Corporation v. City of Wichita Falls, 489 S.W.2d 148 (Tex. App. Fort Worth 1972), the Fort Worth Court of Appeals held that, in the context of a corporation, the property owner rule did not permit a corporation to designate a person to testify on its behalf as to fair market value without qualifying as an expert. Likewise, a partnership is a legal entity separate and distinct from its partners. However, just days before the filing of this brief, the Texas Supreme Court issued its opinion in Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, 2011 Tex. LEXS 190 (Tex. Mar. 11, 2011). n Speedy Stop, the Texas Supreme Court held that the property owner rule applies to organizations, with certain important limitations. The Court stated: 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. Here, Hixon is a general partner of the Partnership and, presumably would be allowed to render an opinion as to value. However, the presumption that Hixon was personally familiar with the property and its fair market value was entirely rebutted. Just 90 days before trial, Hixon had no such knowledge despite that he had owned the property for the preceding forty (40) years. All 28