The fundamental question in a condemnation dispute—what is the fair market value (FMV) of the property taken—boils down to a classic battle of the experts. In a substantial portion of condemnation cases, the heart of the conflict concerns the right comparable sales to examine in order to reach the correct FMV. Irrespective of jurisdiction, a key question that has to be answered by the lawyers, experts, and courts involves what comparable-sales evidence will be deemed admissible and submitted to the jury.
A recent Texas court opinion provides an in-depth analysis of what constitutes admissible evidence of comparable-sales in eminent domain cases. That decision, 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), serves as a useful guide for practitioners and experts alike in determining what sales can be used in forming an opinion of value at trial and provides insight into framing admissibility arguments.
In Taub, the jury awarded over $11.6 million to the property owner for a large tract in Harris County, Texas. The Harris County Flood Control District appealed that award. The court of appeals affirmed because, while some of the evidence was admitted in error, there was enough properly admitted comparable-sales evidence to support Taub’s experts’ opinion of value and the underlying verdict adopting the same.
The following are some takeaways from this case:
1. An executed purchase and sale contract is admissible, even if the contract was never performed, as evidence that it was not performed goes to the weight of the evidence rather than its admissibility.
2. Option contracts are not admissible unless the option is exercised. Likewise, unaccepted offers to purchase are not admissible evidence of value.
3. A sale to an entity with eminent domain power is also not admissible, even if the sale was voluntary, because the threat of condemnation renders such a sale involuntary as a matter of law. This rule applies even if the condemning entity claims it needs only a portion of the tract because the entire tract remains under the implied threat of condemnation.
4. A transaction can be considered “sufficiently similar” to be admissible, even where there are significant differences between the property taken and the comparable-sale property. 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, and the two properties were zoned differently.
5.Taub demonstrates jurisprudential preference for finding comparable-sale evidence admissible, if an expert can provide even a basic foundation of comparability. For instance, the conveyance of the comparable sale was close-in-time to the taken property, and the two properties were located within a quarter-mile of each other. These factors were sufficient to sustain the admissibility of the sale. Importantly, Taub’s expert acknowledged the differences between the properties, and accounted for those differences in the valuation.
6. Applying the Taub court’s approach and the abuse of discretion standard, once the comparable-sales evidence is admitted by the trial court, it will be difficult to get an appellate court to reverse the trial court’s evidentiary ruling. In sum, Taub reaffirms the paramount importance of wining the evidentiary rulings battles on the trial level in condemnation cases.
A final note: The county has appealed this case to the Texas Supreme Court. It remains to be seen whether the highest Texas court will take it.