Reid Road MUD No. 2. v. Speedy Stop Food Stores, Ltd., No. 09-0396 337 S.W.3d 846
(2011)(Tex. Mar. 11, 2011)(Johnson)(eminent domain, determining value of condemned property, the property
owner rule)
REID ROAD MUNICIPAL UTILITY DISTRICT NO. 2 v. SPEEDY STOP FOOD STORES, LTD., Tex: Supreme Court
2011
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.
The trial court did not abuse its discretion by excluding the damages opinion LaBeff expressed in his
affidavit. However, the court erred by excluding Ambrose’s testimony and appraisal as to Speedy Stop’
s damages.
We affirm the court of appeals’ judgment reversing the judgment of the trial court and remanding the
case for further proceedings.
REID ROAD MUNICIPAL UTILITY DISTRICT NO. 2 v. SPEEDY STOP FOOD STORES, LTD.; from Harris County; 14th district (14-07-
00225-CV, 282 SW3d 652, 02-03-09)
The Court affirms the court of appeals' judgment.
Justice Phil Johnson delivered the opinion of the Court. [pdf]
Justice Willett delivered a concurring opinion, in which Justice Lehrmann joined. [pdf]
(Justice Guzman not sitting)
View Electronic Briefs 09-0396
REID ROAD MUNICIPAL UTILITY DIST. NO. 2 v. SPEEDY STOP FOOD STORES, LTD.
══════════════════════════════════════════════════════════════════════
Reid Road Municipal Utility District No. 2. v. Speedy Stop Food Stores, Ltd., 337 S.
W.3d 846 (Tex. 2011)(per curiam)
══════════════════════════════════════════════════════════════════════
Argued October 12, 2010.
Opinion delivered: March 11, 2011.
Justice Johnson delivered the opinion of the Court.
Justice Willett filed a concurring opinion, in which Justice Lehrmann joined.
Justice Guzman did not participate in the decision.
PHIL JOHNSON, Justice.
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 will discuss each rule in turn.
a. Rule 702
For purposes of Rule 702, a witness is testifying as an expert witness when the witness's testimony, in substance, is based on
special knowledge, skill, experience, training, or education in a particular subject. See, e.g., Seale v. Winn Exploration Co., Inc., 732
S.W.2d 667, 669 (Tex. App.-Corpus Christi 1987, writ denied); Perry v. Tex. Mun. Power Agency, 667 S.W.2d 259, 264 (Tex. App.-
Houston [1st Dist.] 1984, writ ref'd n.r.e.); Montgomery Ward & Co. v. Levy, 136 S.W.2d 663, 669 (Tex. Civ. App.-Fort Worth 1940, writ
dism'd).
But not all witnesses who are experts necessarily testify as experts. A witness may have special knowledge, skill, experience,
training, or education in a particular subject, but testify only to matters based on personal perception and opinions. See generally
John F. Sutton, Jr. & Cathleen C. Herasimchuk, Article VII: Opinions and Expert Testimony, 30 HOUS. L. REV. 797, 826-27 (1993)
(explaining that "[a] witness with specialized training or experience is not limited to giving opinion testimony as a Rule 702 `expert'"
and that "[i]f his opinion rests on firsthand knowledge . . . then testimony under Rule 701 is also permissible"). If so, the witness's
testimony is not expert testimony for purposes of Rule 702, and the witness need not be designated or identified as such. See id.
at 827 (noting that a witness's "potential qualifications as an expert did not prevent him from testifying within the narrower confines
of Rule 701"). But generally a witness testifying to the fair market value of property—even a hired expert with no knowledge of the
property apart from that gained because of the controversy involved in the litigation—will be testifying based on some degree of
familiarity with the property. If the witness has been hired as an expert, the familiarity will most frequently have been gained during
the process of formulating the witness's opinion.
The line between who is a Rule 702 expert witness and who is a Rule 701 witness is not always bright. But when the main
substance of the witness's testimony is based on application of the witness's specialized knowledge, skill, experience, training, or
education to his familiarity with the property, then the testimony will generally be expert testimony within the scope of Rule 702.[2] A
witness giving such testimony must be properly disclosed and designated as an expert and the witness's testimony is subject to
scrutiny under rules regarding experts and expert opinion. See Seale, 732 S.W.2d at 669; Perry, 667 S.W.2d at 264; see also
Asplundh Mfg. Div. v. Benton Harbor Eng'g, 57 F.3d 1190 (3d Cir. 1995). Any other principle would allow parties to conceal expert
testimony by claiming the witness is one whose opinions are merely for the purpose of explaining the witness's perceptions and
testimony. See generally Gregory P. Joseph, Emerging Expert Issues Under the 1993 Disclosure Amendments to the Federal
Rules of Civil Procedure, 164 F.R.D. 97, 108 (1996) (noting that "there is no good reason to allow what is essentially surprise
expert testimony," and that courts "should be vigilant to preclude manipulative conduct designed to thwart the expert disclosure
and discovery process").
Accordingly, we do not categorically agree with Speedy Stop's contention that all persons with personal knowledge of real property
can give opinion testimony as to the market value of that property without the testimony being considered and identified as expert
testimony. Such a holding would allow circumvention of discovery and disclosure rules that allow parties to prepare for trial and
protect themselves from trial by ambush. Instead, we hold that subject to the provisions of Rule 701, as we discuss below, a
witness who will be giving opinion evidence about a property's fair market value must be disclosed and designated as an expert
pursuant to discovery and other applicable rules.[3] See TEX. R. EVID. 702; TEX. R. CIV. P. 195.1-.4.
b. Rule 701
Speedy Stop argues that Rule 701 permits any person to testify regarding the value of real property so long as the witness is
familiar with its value, and LaBeff was such a witness. We do not completely agree with this argument, but agree that one key to
admissibility of LaBeff's affidavit under Rule 701 is his personal familiarity with both the property and its value. And we further
believe that Rule 701 encompasses the Property Owner Rule, which is based on the presumption that a property owner is familiar
with her property and its value. We need not address Rule 701 apart from the Property Owner Rule in depth, however, because
while LaBeff's affidavit demonstrates his expertise in real estate matters and general familiarity with Speedy Stop's property, it
does not set out facts demonstrating that he was personally familiar with the Property and its fair market value, nor does it
demonstrate that his opinion is not substantively based on his specialized knowledge, experience, training, and expertise. See
TEX. R. EVID. 702.
LaBeff did not specify in his affidavit that he was familiar with the Property, nor did he state that he was familiar with its value. His
affidavit was dedicated to detailing his experience, knowledge, and expertise in real estate and real estate values, including
easements, and his general familiarity with Speedy Stop's business. His valuation opinion, taken from a two-page, single spaced
affidavit that set out his experience, education, and general knowledge of real estate values was succinct and clear about the
basis of his opinion:
It is my opinion based upon my knowledge, background, education and experience that the difference in the fair market value of the
property in question (which is the subject matter of the lawsuit) immediately before and immediately after the condemnation of this
easement, was $62,000. Further, it is my opinion as the owner of the property in question that the difference in value, immediately
before and immediately after the condemnation, was $62,000, all because of the condemnation and the easement which resulted
from the condemnation (emphasis added).[4]
LaBeff's affidavit shows that his damages opinion, in substance, was based on his expertise—his "knowledge, background,
education and experience"—not his personal familiarity with the Property. As such, and because he was not timely disclosed as
an expert, the trial court did not abuse its discretion in excluding his opinion of damages under Rule 701.
We next consider Speedy Stop's argument that if Rule 701 did not allow the trial court to consider LaBeff's affidavit, the Property
Owner Rule did. We conclude that it did not.
2. The Property Owner Rule
a. General Rule
Generally, a property owner is qualified to testify to the value of her property even if she is not an expert and would not be qualified
to testify to the value of other property. See Porras, 675 S.W.2d at 504. The rule is based on the presumption that an owner will be
familiar with her own property and know its value. See id.
A business organization has the power "to take action necessary or convenient to carry out its business and affairs," including the
power to own and hold property. Tex. Bus. Orgs. Code § 2.101. An organization takes action through its agents. See Bennett v.
Reynolds, 315 S.W.3d 867, 883 (Tex. 2010); Hammerly Oaks, Inc. v. Edwards, 958 S.W.2d 387, 391 (Tex. 1997). An agent's act on
behalf of the organization is the act of the organization itself. Hammerly, 958 S.W.2d at 391. Therefore, when an entity's agent
testifies to the market value of the organization's property, the legal effect is that the actual owner of the property is testifying. See id.
In support of its position, the District cites Mobil Oil Corp. v. City of Wichita Falls, 489 S.W.2d 148 (Tex. Civ. App.-Fort Worth 1972,
writ ref'd n.r.e.). In Mobil Oil Corp., the court stated that the parties "failed to cite any authority to the effect that a designated agent of
a corporation is an `owner.'" Id. at 150. The court then concluded, citing case law from other states, that a "designated agent of a
corporation cannot testify as to the value of the property of such corporation unless he first qualifies as an expert." Id. Speedy Stop
argues that the witness in Mobil Oil Corp. was an independent appraiser as opposed to an agent of the corporation and the court's
statements discussing the Property Owner Rule were dicta. But regardless of the witness's relation to the corporation, to the extent
that Mobil Oil Corp. holds contrary to the rule we express today, we disapprove of it.
Through their employees, entities are as capable of knowing the market value of their property as are individuals. Many entities
may have more knowledge of the fair market value of their property than would an individual because organizations frequently have
employees whose duties require that they not only be personally acquainted with the entity's properties, but also require the
employees to obtain and maintain current valuations of the entity's property for business reasons. LaBeff's affidavit demonstrates
such a situation. Although his affidavit did not show he had personal knowledge of the Property, it showed that his job duties
required him to remain aware of general market conditions for real estate and convenience stores, and that he dealt with
easement issues relating to Speedy Stop's property. Thus, we see no good reason to conclude that business organizations are
any less familiar with the value of their property than are individual property owners, or to preclude them from coming within the
Property Owner Rule and its presumption that a property owner is familiar with its property and the property's value. See Libhart v.
Copeland, 949 S.W.2d 783, 798 (Tex. App.-Waco 1997, no writ); Taiwan Shrimp Farm Village Ass'n, Inc. v. U.S.A. Shrimp Farm
Dev., Inc., 915 S.W.2d 61, 71 (Tex. App.-Corpus Christi 1996, writ denied).
However, we recognize that an entity necessarily testifies through its agents and representatives and that applying the Property
Owner Rule and its presumptions to every employee or representative of an entity could result in abuse of the rule.
b. An Entity's Testimony Under the Property Owner Rule
There must be some limit on who is permitted to testify on an entity's behalf under the Property Owner Rule. Otherwise, as the
District points out, an entity might identify various employees and other persons in discovery as having knowledge of relevant facts,
then after discovery has closed, pick a person who has not been deposed to testify to the value of the property at issue. Such a
situation could allow trial by ambush by allowing circumvention of the means by which witnesses and opinions are to be timely
disclosed, such as requirements of discovery rules and scheduling orders.
Some jurisdictions extend the Property Owner Rule to corporations, but permit only an officer or director of the corporation to testify
on the corporation's behalf on the theory that the representative of the property owner must be someone who controls and
manages the corporation. Weber v. W. Seattle Land & Improvement Co., 63 P.2d 418, 420-21 (Wash. 1936); see also Tennessee
v. Livingston Limestone Co., 547 S.W.2d 942, 943-44 (Tenn. 1977); M.A. Realty Co. v. State Rds. Comm'n, 233 A.2d 793, 796 (Md.
1967). However, there may be instances where officers or directors, especially of larger corporations or business entities, have
limited or no knowledge about specific company property and its value. Those circumstances do not seem to warrant the blanket
application of a presumption that an officer or director has knowledge of an entity's property and its market value.
Other jurisdictions allow shareholders to testify to fair market value on behalf of a corporate property owner. See Tokles & Son, Inc.
v. Midwestern Indem. Co., 605 N.E.2d 936, 941 (Ohio 1992). But shareholders of a corporation are not owners of corporate assets.
See Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 645 (Tex. 1996) (citing McClory v. Schneider, 51 S.W.2d 738, 741 (Tex. Civ.
App.-Amarillo 1932, writ dism'd)). Nor are shareholders generally considered to be agents of the corporation absent some basis
other than their shareholder status. See Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex. 2002) (noting that an
agency is the consensual relationship between two parties where one, the agent, acts on behalf of the other, the principal, and is
subject to the principal's control). And for the same reasons we discuss above regarding officers and directors of entities,
application of a blanket presumption that shareholders have knowledge of all a corporation's property and its value is
unwarranted. In some instances allowing shareholders to testify to the value of a corporation's property may be appropriate; in
some instances it may not. For example, in Maxey v. Texas Commerce Bank of Lubbock the sole shareholder, who was also the
president of a closely held corporation, was allowed to testify as to the value of the corporation's property. 571 S.W.2d 39, 46 (Tex.
Civ. App.-Amarillo 1978, writ ref'd n.r.e.).
We believe the better approach is to look both to the position of the witness and to the substance of the witness's duties instead of
looking only at the witness's title or status. Limiting the class of employees qualified to testify under the Property Owner Rule
accommodates the interests of both the entity and parties opposing the entity. The entity can prove the value of its property through
certain categories of employees whose positions and duties warrant applying a presumption that they are familiar with the entity's
property and its value, but the adverse party is not disadvantaged by having to depose, investigate and prepare for multiple
witnesses whose knowledge and testimony may not be relevant on the value issue.
A reasonable balance as to who may testify under the Property Owner Rule on behalf of an entity is struck by allowing such
testimony only from an officer in a management position with duties that at least in some part relate to the property at issue, or an
employee of the entity in a substantially equivalent position. See Redman Homes, Inc., 920 S.W.2d at 669; Porras, 675 S.W.2d at
504.
c. Application to LaBeff
LaBeff was not an employee of Speedy Stop; he was an officer for Speedy Stop's general partner, C.L. Thomas, Inc. C.L. Thomas
was not the owner of Speedy Stop's property. See TEX. BUS. & ORGS. CODE § 152.101 ("Partnership property is not property of
the partners."); § 153.003(a) (stating that rules governing general partnerships also apply to limited partnerships absent conflict);
see also Stanley v. Reef Sec., Inc., 314 S.W.3d 659, 664 (Tex. App.-Dallas, 2010 no pet.); Siller v. LPP Mortg., Ltd., 264 S.W.3d 324,
329 (Tex. App.-San Antonio, 2008 no pet.). Even though LaBeff had general knowledge of Speedy Stop's property, he did not fall
into the category of entity representatives to whom the Property Owner Rule applies. He did not qualify to testify to the value of the
Property under the Property Owner Rule, and the trial court did not abuse its discretion by excluding his affidavit to the extent it
offered his opinion as to Speedy Stop's damages.
B. Ambroses's Appraisal Testimony and Affidavit
Speedy Stop also offered Ambrose's appraisal and testimony that the District introduced before the special commissioners.
Speedy Stop contended that this evidence, although comprising out-of-court statements offered for their truth, was nevertheless
admissible as an admission by the District. See TEX. R. EVID. 801(e)(2). The District objected, arguing the trial court should
exclude this evidence because the testimony of witnesses in an administrative proceeding is not admissible in a de novo appeal
to the trial court; neither party timely designated Ambrose as an expert; and his testimony was not an admission by the District
because Ambrose was not an agent of the District. The trial court sustained the District's objections and excluded Ambrose's
testimony and appraisal from evidence.
Speedy Stop argues that Ambrose's opinions before the commissioners are admissions by the District, and as such are
admissible as non-hearsay. The court of appeals did not address this issue, but rather than remanding to the court of appeals for
it to do so, we address it in the interest of judicial economy. See Tex. R. App. P. 53.4; Nat'l Union Fire Ins. Co. of Pittsburgh, PA v.
CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (addressing and deciding an issue not addressed by the court of appeals); see
also Little v. Tex. Dep't of Criminal Justice, 148 S.W.3d 374, 384 (Tex. 2004) (recognizing the Court's authority to consider an issue
not decided by the court of appeals).
Ambrose was hired by the District to estimate the amount of compensation due to Speedy Stop and provide a written appraisal of
the Property. In the hearing before the special commissioners he was called as a witness by the District and the substance of his
testimony was that Speedy Stop's damages were $9,342 for the taking. The District also referred the commissioners to Ambrose's
written appraisal, which was to the same effect.
Certain out-of-court statements offered for their truth are not hearsay. See Tex. R. Evid. 801(e). Among those are admissions by a
party-opponent, which include:
(A) the party's own statement in either an individual or representative capacity;
(B) a statement of which the party has manifested an adoption or belief in its truth;
(C) a statement by a person authorized by the party to make a statement concerning the subject;
(D) a statement by the party's agent or servant concerning a matter within the scope of the agency or employment, made during the
existence of the relationship; or
(E) a statement by a co-conspirator of a party during the course and in furtherance of the conspiracy.
TEX. R. EVID. 801(e)(2).
The District argues that Ambrose's testimony is not an admission under the agency prong of Rule 801(e)(2)(D) because there is
no proof that Ambrose was the District's agent or employee. We agree there is no evidence Ambrose was the District's employee.
But even assuming there was no evidence of an agency relationship either,[5] Rule 801(e)(2)(B) allows for admissions by a party-
opponent when the party-opponent has manifested an adoption or belief in the statement's truth. TEX. R. EVID. 801(e)(2)(B).
It has long been the rule that "[w]here a party has used a document made by a third party in such way as amounts to an approval of
its contents, such statement may be received against him as an admission by adoption." See Tex. Reciprocal Ins. Ass'n v. Stadler,
166 S.W.2d 121, 125 (Tex. 1942) (citing Thornell v. Mo. State Life Ins. Co., 249 S.W. 203 (Tex. Comm'n App. 1923, judgm't
adopted)). The court in East Tennessee Natural Gas Co. v. 2.67 Acres in Smyth County, Va., No. 4:02-CV-00220, 2006 WL
1171943 (W.D. Va. Apr. 28, 2006), addressed a situation similar to that which we consider. In that case the plaintiff, East
Tennessee Natural Gas Company, hired an appraiser to determine the value of land prior to the hearing before a special
commission. Id. at *2. Ultimately the gas company did not introduce the appraisal at the hearing because it did not agree with the
appraiser's value. Id. The property owner sought to introduce the appraisal against the gas company, but the gas company
objected on hearsay grounds. Id. at *11. The gas company argued that the appraisal could not be an admission by party-opponent
pursuant to Federal Rule of Evidence 801(e)(2)[6] because the appraiser was not an agent of the gas company and the gas
company never authenticated or adopted the appraisal. Id. The court held that the gas company did not adopt the appraisal,
reasoning that because the gas company "chose not to offer it before the Commission, then it seems logical that the [gas
company] did not want to adopt or authenticate the appraisal." Id. And "without the [gas company's] adoption or authentication, the
appraisal amounts to an out of court statement which the [property owners] were offering to prove its truth." Id.
Although the court in East Tennessee Natural Gas Co. excluded the appraisal, the court's reasoning suggests that had the gas
company sought to offer the appraisal before the commission, the court would have concluded that the gas company adopted the
appraiser's valuation as true. See id. That is the situation before us in this case. The District presented both Ambrose's testimony
and his appraisal to the commissioners as evidence of Speedy Stop's damages.
Speedy Stop cites Yarbrough's Dirt Pit, Inc. v. Turner, 65 S.W.3d 210 (Tex. App.-Beaumont 2001, no pet.), in support of its
contention that Ambrose's appraisal was an admission by the District. There the court of appeals considered the effect of
deposition testimony of a witness hired and designated by Yarbrough as an expert witness on the subject matter involved in the
suit:
Based on his designation by Yarbrough as an expert witness and the tenor of the deposition questions submitted to him, Nalle
was specifically authorized to speak on behalf of Yarbrough about the fault of the parties. We hold that a conclusion of an expert
witness hired by an opposing party to speak on the subject matter on behalf of the party opponent is admissible against the party
opponent, and the conclusion may be relied on in a motion for summary judgment even if the opposing expert witness does not
disclose the bases for the conclusion adverse to the expert's client.
Id. at 214. The circumstances in Yarbrough's are different from those before us, and we need not decide whether the conclusion of
an expert hired and designated by a party is always admissible against that party. But we agree with Speedy Stop that in this case
the District manifested its belief in and approval of Ambrose's opinion as to Speedy Stop's damages: it called him as a witness to
testify to the special commissioners regarding that opinion and proffered his written appraisal to them in support of his testimony.
See TEX. R. EVID. 801(e)(2)(B). Thus, the appraisal is admissible against the District as an admission by adoption. See TEX. R.
EVID. 801(e)(2)(B); see also Stadler, 166 S.W.2d at 125. Our conclusion is also supported by other cases in a variety of different
contexts. See Fox v. Taylor Diving & Salvage Co., 694 F.2d 1349, 1355 (5th Cir. 1983) (holding that because the plaintiff's expert
witness based his opinions regarding lost wages upon the assumption that the plaintiff was not a "Jones Act seaman," the plaintiff
was precluded from presenting a theory of recovery resting on the Jones Act); Buckley v. Airshield Corp., 116 F. Supp. 2d 658, 664
(D. Md. 2000) (holding that party adopted documents as true by submitting them as exhibits in a separate case); Harris v. United
States, 834 A.2d 106, 117 (D.C. 2003) ("Submission of documents to a court also suggests adoption of the documents."); see
also KENNETH S. BROWN ET AL., MCCORMICK ON EVIDENCE § 261, at 211 (6th ed. 2006) ("When a party offers in evidence a
deposition or an affidavit to prove the matters stated therein, the party knows or should know the contents of the writing so offered .
. . . Accordingly, it is reasonable to conclude that the writing so introduced may be used against the party as an adoptive admission
in another suit.").
Rule 801(e)(2) provides that admissions of a party-opponent are admissible non-hearsay. TEX. R. EVID. 801(e)(2). And because
the evidence was an admission by the District, as opposed to testimony by a witness called by Speedy Stop, Speedy Stop was not
required to identify Ambrose as an expert before his opinion could be admitted. See Bay Area Healthcare Grp., Ltd. v. McShane,
239 S.W.3d 231, 235 (Tex. 2007) ("[A]ny statement by a party-opponent is admissible against that party."). Further, admissions by a
party opponent can occur outside a judicial proceeding and are not inadmissible simply because they occur in an administrative
hearing such as was involved here. See TEX. R. EVID. 801(e)(2) (permitting as evidence statements made out of court); Bay Area
Healthcare Grp., Ltd., 239 S.W.3d at 235. The trial court erred by excluding Ambrose's affidavit and appraisal.
Ambrose's testimony as to damages and his written appraisal comprised some evidence of damages. The trial court erred by
excluding them and thus it erred by granting the District's motion for summary judgment.
III. Conclusion
The trial court did not abuse its discretion by excluding the damages opinion LaBeff expressed in his affidavit. However, the court
erred by excluding Ambrose's testimony and appraisal as to Speedy Stop's damages.
We affirm the court of appeals' judgment reversing the judgment of the trial court and remanding the case for further proceedings.
Justice WILLETT, joined by Justice Lehrmann, concurring.
The Court addresses application of Texas Rule of Evidence 701 and the Property Owner Rule when a business organization owns
the property condemned by the government. It holds that when a business entity owns the property, a natural person can testify as
to its value under the Property Owner Rule if the person is "an officer in a management position with duties that at least in some
part relate to the property at issue, or an employee of the entity in a substantially equivalent position."[1] The Court concludes that
the Property Owner Rule does not apply because LaBeff was not an officer or employee of the limited partnership that owned the
property; rather, he was an officer of the corporation serving as the general partner of the limited partnership.
The Court further holds that one key to whether LaBeff's affidavit was admissible under Rule 701 was "his personal familiarity with
both the property and its value."[2] The Court notes the lack of proof in this regard. The opinion, as I read it, leaves open the
question whether LaBeff's affidavit would have been admissible under Rule 701 (but not the Property Owner Rule) if he had such
personal knowledge, even though he was not an officer of the limited partnership that owned the property.
Limited partnerships, including real-estate limited partnerships, are popular investment vehicles.[3] They commonly consist of
passive limited partners[4] and a general partner that is a corporation.[5] Since limited partnerships are managed by the general
partner or partners,[6] there is no particular reason for a limited partnership to have any managerial employees—or indeed any
employees at all. Therefore, the Court's treatment of the Property Owner Rule means that many, if not most, limited partnerships
could never proffer a witness on the value of their real estate holdings under the Property Owner Rule.
Yet the Court does contemplate application of the Property Owner Rule to a managing officer of the entity owning the property or an
employee of the entity in a "substantially equivalent" position. In the case of a limited partnership, I would hold that a managing
officer of the corporate general partner with duties relating to the property may testify as to the value of partnership property without
being qualified as a expert witness, provided the officer is familiar with the specific property in issue and its value. Such a rule
would provide some parity of treatment of limited partnerships and corporations in condemnation proceedings. I do not think it
matters whether this rule is seen as an application of the Property Owner Rule or Rule 701 or both. Regardless, in this case
LaBeff did not meet the personal knowledge requirement and his affidavit was properly excluded, as the Court holds.
[1] Chevron USA, Inc., was initially named as a party to the proceedings, but was dismissed after it filed a disclaimer of interest in
the Property.
[2] Prior to a 2000 amendment to the Federal Rules of Evidence, Rules 701 and 702 of the Texas and Federal Rules of Evidence
were almost identical. Federal Rule 701, however, was amended to prohibit lay opinion testimony "based on scientific, technical,
or other specialized knowledge within the scope of Rule 702." FED. R. EVID. 701 (amended Dec. 1, 2000). The Advisory
Committee Note explains that the change was made "to eliminate the risk that the reliability requirements set forth in Rule 702 will
be evaded through the simple expedient of proffering an expert in lay witness clothing." Fed. R. Evid. 701 advisory committee's
notes. Texas Rule of Evidence 701 has not been similarly amended, but the same concern—that expert testimony will be offered
as evidence without meeting the reliability requirements of Rule 702—underlies our opinion.
[3] We do not address the District's contention that LaBeff would not have qualified as an expert because he was not licensed as
an appraiser, except to state that Rule 702 does not require a witness to have any particular license to qualify as an expert.
[4] The District argues that LaBeff's testimony was conclusory and he did not properly arrive at his damages estimate. We need not
address the argument in light of our determination that the trial court did not abuse its discretion by excluding his affidavit.
[5] Of course, had an agency relationship been established, Ambrose's affidavit would be admissible under Rule of Evidence 801
(e)(2)(D). See, e.g., Tex. Comm'n on Human Rights v. Kinnear, 986 S.W.2d 828, 833-34 (Tex. App.-Beaumont 1999) (upholding a
decision to exclude expert testimony where the expert was not shown to be an agent), rev'd in part on other grounds, 14 S.W.3d
299 (Tex. 2000); Handel v. Long Trusts, 757 S.W.2d 848, 850-51 (Tex. App.-Texarkana 1988, no writ) (refusing to admit testimony
as an admission by party-opponent where the record did not show the extent of an agency relationship); see also Collins v. Wayne
Corp., 621 F.2d 777, 782 (5th Cir. 1980) (holding expert's accident report was admissible under Federal Rule of Evidence 801(d)(2)
(C) where it determined the expert to be an agent of the party), superseded on other grounds by rule as stated in Mathis v. Exxon
Corp., 302 F.3d 448 (5th Cir. 2002).
[6] Texas Rule of Evidence 801 is almost identical to its Federal counterpart. The federal rule provides that admissions by party-
opponents are not hearsay if:
The statement is offered against a party and is
(A) the party's own statement, in either an individual or a representative capacity, or
(B) a statement of which the party has manifested an adoption or belief in its truth, or
(C) a statement by a person authorized by the party to make a statement concerning the subject, or
(D) a statement by the party's agent or servant concerning a matter within the scope of the agency or employment, made during the
existence of the relationship, or
(E) a statement by a coconspirator of a party during the course and in furtherance of the conspiracy.
FED. R. EVID. 801(e)(2). Where the Federal Rules of Evidence are similar, we may look to federal case law for guidance in
interpreting the Texas evidentiary rules. See E.I. du Pont de Nemours & Co., Inc. v. Robinson, 923 S.W.2d 549, 555-57 (Tex. 1995)
(consulting federal case law when interpreting Texas Rule of Evidence 702); Bradley v. State ex rel. White, 990 S.W.2d 245, 248-49
(Tex. 1999) (discussing Federal Advisory Committee Notes and federal case law when interpreting Texas Rule of Evidence 605
because it "is identical to its federal counterpart").
[1] ___ S.W.3d at ___.
[2] Id. at ___.
[3] See 19 Robert W. Hamilton et al., Business Organizations § 13.2 (Tex. Practice 2004) ("The limited partnership offers certain
advantages that may make it an attractive choice of business entity. . . . [P]artnership tax treatment for federal income tax purposes
may provide significant tax savings when compared with the tax treatment of either a C corporation or an S corporation.").
[4] Id. § 13.1 ("Limited partners are, at least in the statutory default mode, passive investors whose liability is limited to their capital
contributions.").
[5] Id. §§ 1.8 ("In practice today, most limited partnerships have only a single general partner and that partner is usually a nominally
capitalized limited liability entity such as a corporation or limited liability company."); 13.2 ("The principal disadvantage of the
limited partnership form as compared with a corporation or a limited liability company relates to the liability of the owners. The
general partners of a limited partnership are personally liable for partnership obligations. To minimize this disadvantage, limited
partnerships are often formed with a corporate or limited liability company general partner . . . ."); 14.7 ("Corporate or limited liability
("LLC") general partners are frequently used to avoid exposing individuals or other entities to liability as general partners [of a
limited partnership].").
[6] Id. § 13.1 ("General partners of a limited partnership, like partners of a general partnership, have managerial rights . . . ."); TEX.
BUS. ORG. CODE §§ 153.102, . 152.
Also see: Texas Causes of Action | 2011 Texas Supreme Court Opinions | 2011 Tex Sup Ct Per Curiams