IN THE SUPREME COURT OF TEXAS
════════════
No. 09-0396
Reid Road Municipal Utility
District No. 2, Petitioner,
v.
Speedy Stop Food Stores, Ltd.,
Respondent
════════════════════════════════════════════════════
On Petition for Review from
the
Court of Appeals for the Fourteenth District of
Texas
Argued October 12,
2010
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.
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.
________________________________________
Phil Johnson
Justice
OPINION DELIVERED: March
11, 2011
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”).