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2017 Issue One

Texas Court Weighs in on Admissibility of Comparable-Sales Evidence in Condemnation Cases

By: Neal Suit

The fundamental issue in a condemnation dispute typically revolves around, of course, the value of the property at issue. Valuation is typically a battle waged by experts, and a substantial portion of the time the heart of the conflict is a dispute about which comparable-sales the court should examine in order to formulate an appropriate valuation.

Recently, the 14th District Court of Appeals out of Houston, Texas issued an opinion that provided an in-depth, substantive analysis of what constitutes admissible evidence of comparable-sales in eminent domain cases. Accordingly, this case, Harris Cnty. Flood Control Dist. v. Taub, No. 14-15-00077-CV, 2016 Tex. App. LEXIS 9326 (Tex. App—Houston [14th Dist.] Aug. 25, 2016, pet. filed), can serve as a useful guide for practitioners and experts alike in determining what comparable-sales can be used in forming a valuation, as well as insight into framing admissibility arguments.

In Taub, the trial court awarded a little over $11.6 million to the property owner, Taub, for the taking of a large tract in Deer Park, Texas. The Harris County Flood Control District appealed. The Houston court of appeals affirmed because, while some of the evidence was deemed inadmissible, there was enough comparable-sales evidence to support the expert testimony and the underlying verdict.

Some of the key take-aways from the appellate court’s opinion are:

  • An executed sales contract can be admissible even if the contract was never actually performed. Evidence that a sales contract was not performed goes to the weight of the evidence rather than its admissibility.
  • Option contracts are not admissible unless and until the option is exercised.  This is because there is no binding sales contract on the parties until the option is exercised.
  • Evidence of sales to an entity with eminent domain power, in this case a school district, are also not admissible, even if there was a voluntary sale to the entity with condemning power.
  • Additionally, even if the entity with condemning authority states it only needs a portion of the tract for its stated purpose (such as a school in this instance), the entire tract is under the implied threat of condemnation because the school could have been placed anywhere on the tract and the school district could have ultimately elected to use the rest of the tract for other legitimate and condemnable purposes, such as administrative buildings, sports facilities, etc.
  • Finally, the Court determined a Candlewood suites property was “sufficiently similar” to be admissible evidence of a comparable sale. The Court reached this conclusion despite the fact that the relevant condemned property was 42 acres, while the Candlewood property was only 2.2 acres.  Additionally, the condemned property was zoned for “industrial park,” while the Candlewood property was zoned for “highway services.” Despite these differences, the appellate court said “[w]hile there are significant differences [between the properties], the trial court could reasonably conclude on this record that the differences are not great enough to render evidence of the Candlewood Suites sale inadmissible.”
  • The appellate court’s ruling makes it evident there is a clear preference for finding comparable-sales evidence admissible if the expert can provide a very basic foundation for comparability.
  • In this instance, the fact that the Candlewood sale was close-in-time to the condemning of the property at issue and the two properties were within a quarter mile of each other was critical to the Court’s opinion. Moreover, it was important that the expert acknowledged that there were clear differences in the two properties, and he claimed that he accounted for those differences in the valuation.
  • The bottom line is that using the Taub court’s approach and applying the abuse of discretion standard, once the trial court admits comparable-sales evidence it will be incredibly difficult to get the appellate court to reverse the trial court’s evidentiary finding.

Note: A petition for review to the Texas Supreme Court was filed by the Harris County Flood Control District on October 17, 2016.  As of the writing of this article, no determination has been made by the Supreme Court regarding the petition for review.  Accordingly, it remains to be seen whether the highest Texas court will take this case.