law-property-owner-rule | admissibility of evidence on value of property at issue in litigation | lay and expert
witnesses |
PROPERTY OWNER RULE - CASELAW SNIPPETS
PROPERTY OWNER RULE (testimony as to value of property owned by the witness)
A property owner is qualified to testify to the market value of his property. Redman Homes v. Ivy, 920
S.W.2d 664, 669 (Tex. 1996). This evidence is probative if it is based on the owner's estimate of market
value and not some intrinsic or other value such as replacement cost. Id.
SOURCE: DALLAS COURT OF APPEALS - 05-10-00173-CV - 12/15/11
The Property Owner Rule does not require the property owner to qualify as an expert. Speedy Stop, 337
S.W.3d at 852-53 ("Generally, a property owner is qualified to testify to the value of her property even if
she is not an expert . . ."). In contrast to the affidavit in Speedy Stop, Corniello was the "sole member" of
the LLC and testified he was familiar with the value of real estate in Sherman and Bonham. He did not
state directly that he was personally familiar with the specific property at issue,[2] but as the "sole member"
of the LLC, the court may presume that Corniello as owner of the property is familiar with the property and
its value. See id. at 852 ("[T]he Property Owner Rule . . . is based on the presumption that a property
owner is familiar with her property and its value.").
Under the "Property Owner Rule," a property owner is generally qualified to testify as to the value of his or
her property even if he or she is not an expert and would not be qualified to testify as to the value of other
property. Reid Road Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 852-53
(Tex. 2011); see Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984). This rule is based on the presumption
that an owner will be familiar with his or her own property and know its value. Reid Road Mun. Util. Dist. No.
2, 337 S.W.3d at 853. This presumption does not extend to the reasonable cost of repairing the owner's
property particularly when those repairs are of a technical or specialized nature.
The Property Owner Rule
a. General Rule
Generally, a property owner is qualified to testify to the value of her 853*853 property even if she is not an
expert and would not be qualified to testify to the value of other property. See Porras v. Craig, 675 S.W.2d
503, 504 (Tex.1984). 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, 854*854 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., 188 Wash. 512, 63 P.2d 418, 420-21 (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, 247 Md.
522, 233 A.2d 793, 796 (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., 65 Ohio St.3d 621, 605 N.E.2d 936, 941 (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 855*855 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. v. Ivy, 920 S.W.2d 664, 669 (Tex.1996); Porras, 675 S.W.2d at 504.
REID ROAD MUN. UTILITY DISTRICT NO. 2 v. Speedy Stop Food Stores, Ltd., 337 SW 3d 846 - Tex: Supreme Court 2011
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