law-appraisal-of-market-value-of-property | condemnation |
TEXAS SUPREME COURT DECISIONS
ON APPRAISAL OF VALUE OF REAL PROPERTY
Reid Road MUD No. 2. v. Speedy Stop Food Stores, Ltd., No. 09-0396 (Tex. Mar. 11, 2011)(Johnson)(eminent
domain, determining value of condemned property)
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
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
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 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.
APPRAISAL OF MARKET VALUE OF REAL ESTATE, REAL PROPERTY
Texas recognizes three approaches to determining the market value of condemned property: the comparable
sales method, the cost method, and the income method. City of Harlingen v. Estate of Sharboneau, 48 S.W.3d
177, 182 (Tex. 2001). The comparable sales method is the favored approach, but when comparable sales
figures are not available, courts will accept testimony based on the other two methods. Id. at 182–83. The cost
approach looks to the cost of replacing the condemned property minus depreciation. Id. at 183 (citing
Religious of the Sacred Heart v. City of Houston, 836 S.W.2d 606, 615–16 (Tex. 1992)). The income approach
is appropriate when the property would be priced according to the rental income it generates. Sharboneau, 48
S.W.3d at 183 (citing Polk County v. Tenneco, Inc., 554 S.W.2d 918, 921 (Tex. 1977)). All three methods are
designed to approximate the amount a willing buyer would pay a willing seller for the property. Id. Texas law
allows income from a business operated on the property to be considered in a condemnation proceeding in
two situations: (1) when the taking, damaging, or destruction of property causes a material and substantial
interference with access to one’s property, see City of Austin v. The Avenue Corp., 704 S.W.2d 11, 13 (Tex.
1986); and (2) when only a part of the land has been taken, so that lost profits may demonstrate the effect on
the market value of the remaining land and improvements, see City of Dallas v. Priolo, 242 S.W.2d 176, 179
(Tex. 1951). Absent one of these two situations, income from a business operated on the property is not
recoverable and should not be included in a condemnation award. Courts have applied this rule for two
reasons: first, because profits from a business are speculative and often depend more upon the capital
invested, general market conditions, and the business skill of the person conducting it than it does on the
business’s location; and second, because only the real estate and not the business has been taken and the
owner can presumably continue to operate the business at another location. Herndon, 261 S.W.2d at 223.
State of Texas v. Central Expressway Sign Associates, No. 08-0061 (Tex. Nov. 20, 2009)(Subst. Op. by
O'Neill) (condemnation, proper method for determining market value, admissibility of expert testimony, methods
to appraise market value of condemned property)
THE STATE OF TEXAS v. CENTRAL EXPRESSWAY SIGN ASSOCIATES, ET AL.; from Dallas County;
5th district (05 06 00003 CV, 238 SW3d 800, 08 31 07)
motion for rehearing denied
The Court's opinion of June 26, 2009 is withdrawn and the opinion of this date is issued.
The Court reverses the court of appeals' judgment and remands the case to the trial court.
Justice O'Neill delivered the opinion of the Court.
(Justice Guzman not sitting)
Texas courts have refused to consider business income in making condemnation awards even when there is
evidence that the business’s location is crucial to its success. See, e.g., State v. Rogers, 772 S.W.2d 559,
561–62 (Tex. App.—Amarillo 1989, writ denied) (refusing consideration of “going concern” and “goodwill”
values of auto parts store that caters to and depends upon nearby businesses); City of Austin v. Casiraghi,
656 S.W.2d 576, 579–80 (Tex. App.—Austin 1983, no writ) (refusing to consider business income of well-
located restaurant); State v. Villareal, 319 S.W.2d 408, 410 (Tex. Civ. App.—San Antonio 1958, writ ref’d n.r.
e.) (upholding exclusion of evidence of income generated by grocery store); Marshall v. City of Amarillo, 302 S.
W.2d 943, 945 (Tex. Civ. App.—Amarillo 1957, no writ) (refusing to consider income generated by pawn shop).