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State v. Gleannloch Commercial Development, LP

Court of Appeals of Texas, Fourteenth District

December 21, 2017


         On Appeal from County Court at Law No. 2 Harris County, Texas Trial Court Cause No. 1042631

          Panel consists of Justices Boyce, Donovan and Wise.


          John Donovan Justice.

         The State of Texas brings this appeal from a judgment entered upon the jury's verdict in favor of Gleannloch Commercial Development, LP, for $13, 190, 562. The State raises threes issues: (1) sufficiency of the evidence, both legal and factual, to support the amount of the jury's award; (2) the admission of evidence; and (3) application of the project influence rule. For the reasons stated below, we affirm.


         Gleannloch owned a 25.33-acre tract on Boudreaux Road, near the city of Tomball, in Harris County, Texas. In a condemnation proceeding filed January 10, 2014, the State acquired approximately 14.42 acres[1] of Gleannloch's property for the construction of a portion of Segment F-2 of State Highway 99 ("the Grand Parkway"). The 14.42 acres acquired by the State is the only portion of its property for which Gleannloch sought compensation.

         A hearing was held August 5, 2014, by the appointed special commissioners and they awarded Gleannloch $4, 867, 946. Gleannloch objected. The commissioners' award was deposited into the registry of the court on September 3, 2014, and Gleannloch withdrew those funds.

         A jury trial was then conducted in September 2015 on the question of compensation to Gleannloch for the 14.42 acres (the "subject property"). The jury's verdict valued the subject property at $13, 190, 562, which equates to $21 per square foot. The trial court entered judgment in accordance with the verdict. The State timely filed a motion for new trial, which was overruled by operation of law. From the trial court's judgment, the State timely filed this appeal. The State complains:

• The evidence is legally and factually insufficient to support the jury's verdict;
• The trial court erred in admitting evidence; and
• The trial court improperly applied the project-influence rule. We address each issue in turn.

         Sufficiency of the Evidence

         In its first issue, the State contends the evidence was both legally and factually insufficient to support the jury's award. The State makes a single argument in support of its assertion that there was no evidence, or not enough evidence, to support the verdict - that the jury's award is greater than the highest amount adopted by by an expert witness. Accordingly, we address whether the record contains evidence from which a jury could value the subject property higher than did the expert witnesses.

         A. Standard of Review

         We review the entire record to determine whether the evidence is legally sufficient to support the judgment, crediting favorable evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). If they reasonably could do so, we assume that jurors decided questions of credibility or conflicting evidence in favor of the verdict. Id. at 819, 820. Evidence is legally sufficient to support the verdict if it would enable reasonable and fair-minded people to differ in their conclusions. Id. at 822. If the evidence falls within this zone of reasonable disagreement, we do not substitute our judgment for that of the trier of fact. Id. To determine whether the evidence is factually sufficient, we consider and weigh all of the evidence in a neutral light and only if the finding is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust do we conclude that the finding is not supported by sufficient evidence. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

         A jury is not bound to accept valuation expert testimony. Preston Reserve, L.L.C. v. Compass Bank, 373 S.W.3d 652, 666 (Tex. App.-Houston [14th Dist.] 2012, no pet.) (citing Callejo v. Brazos Elec. Power Co-op., Inc., 755 S.W.2d 73, 75 (Tex. 1988)). However, this does not permit the jury to "leap entirely outside of the evidence in answering" a valuation question. Callejo, 755 S.W.2d at 75. The jury may not substitute its own knowledge and experience for a party's evidence on value. Id. But the jury may "set the value at any amount between the lowest and highest values by the evidence." Preston Reserve, 373 S.W.3d at 666 (citing State v. Huffstutler, 871 S.W.2d 955, 959 (Tex. App.-Austin 1994, no writ). Only if the jury's verdict lies outside the range of testimony will we find there is no evidence to support the verdict. Callejo, 755 S.W.2d at 75.

         B. The Evidence

         The record shows Gleannloch Farms is a twenty-one acre master-planned development in northwest Harris County north of Beltway 8 and west of Interstate 45 ("I-45"). The primary component of the development is more than 2, 300 single-family residences with amenities such as a 27-hole golf course, lakes, parks, hike and bike trails, equestrian center, recreation centers, playground, swimming pool and tennis courts. Gleannloch Farms has two commercial reserves, one on the south end and one on the north end. The southern end of Gleannloch Farms is bordered by Spring Cypress Road.

         The subject property is part of the northern commercial reserve. The commercial reserve is restricted for commercial development and architectural controls have been placed upon it. The subject property fronts Boudreaux to the south. On its western side is Champion Forest, which passes through Gleannloch Farms. On its eastern side, Crescent Clover was supposed to intersect Boudreaux and provide a second point of access through Gleannloch Farms but it was stopped short. The City of Houston has designated both Boudreaux and Champion Forest, as well as Spring Cypress, as major thoroughfares. An access way, about eighty-five feet wide, connects the western part of the subject property to the eastern part so that both commercial portions of the subject property are connected and have cross-access.

         Three expert witnesses testified to their opinions of the subject property's market value as of the date of taking, September 3, 2014. One of Gleannloch's experts, Matthew Deal, was the first to testify. Gleannloch then called the State's expert, Michael Urban. He was followed by Gleannloch's second expert, David Bolton. Ron Dagley, president of Raymond R. Betz Interest, Inc. and Betz Commercial Brokerage, Inc., then testified on behalf of Gleannloch. Finally, Urban was called to the stand by the State.

         1. Matthew Deal

         Deal estimated the subject property's value to be $9, 247, 704. For 14.42 acres, the price per square foot ("psf") thus averaged to $14.72.

         The subject property is a commercial reserve which Deal described as the area set aside, typically on main roads, for commercial development such as restaurants, gas stations, grocery stores, retail stores, banks, etc. It is restricted for commercial development to enhance the value of Gleannloch Farms and architectural controls are in place to ensure it is put to a proper use in conformance with the high standards of Gleannloch Farms. Deal testified the commercial reserves are the most valuable portions of the property, they are on the major thoroughfares and supported by all of the residential housing. The development on the southern commercial reserve provides evidence of what was intended for the northern portion. Because of the taking, Gleannloch Farms cannot develop the northern end of its commercial reserve.

         Deal testified the subject property was really "improved property" and not "vacant land." Gleannloch Farms is not in the City of Houston so the water and sewer utilities are provided by a municipal utility district. The subject property has direct access to those utilities and the pipes were already there for development. The property had off-site detention so there was no land loss, typically ten to twenty percent, for detention use. Deal took these factors into account in appraising the subject property.

         Deal testified the demographics for the subject property were "incredible" and "good in every regard." According to Deal, residences drive the commercial development and in a five mile radius of the subject property there were 169, 000 residents. The average value of a home in Gleannloch Farms was $500, 000 with some worth $2.4 million. Within a three-mile radius of the subject property the average household income was $123, 000 a year, which is roughly five times the average household income in Houston of about $25, 000 a year. For commercial development, that average income is very important. In the area of the subject property, the population and the average household income was increasing.

         According to Deal, the amount of traffic is very important to the value of commercial property. C. J. Hensch and Associated conducted a study of how much traffic there was on Boudreaux in front of the subject property. The study reflected 15, 800 plus vehicles per day ("vpd"). Deal testified that was "a lot" of traffic.

         There were plans from the Texas Department of Transportation ("TxDot") showing Champion Forest extending north of Boudreaux and the widening of Boudreaux from two to four lanes. At the location of the subject property, Boudreaux is a two-lane asphalt paved road and the Grand Parkway is on top of it. Deal testified widening Boudreaux at that point would have wasted millions of dollars because the Grand Parkway was "going to wipe it out."

         Boudreaux becomes Spring Stuebner, which is four lanes. Before Spring Stuebner was widened to four lanes, a traffic study counted 16, 701 vpd. On Spring Stuebner between Mossy Oaks and Kuykendahl, the traffic count was 6, 233 vpd and it was widened to a four-lane standard roadway as part of the construction project. To the west of the subject property, Boudreaux had already been widened to four-lanes. Spring Cypress, to the south of Gleannloch Farms, was four lanes. Kuykendahl, to the east, had recently been widened to four lanes; the traffic count was 12, 737 vpd. Gosling, a two-lane asphalt-paved road like Boudreaux, was being widened to four lanes and its traffic count ranged from 6, 700 to 12, 530 vpd. On the day of the taking, the traffic count on Boudreaux was roughly 16, 000 vpd.

         Deal "appraised the property as if it's on a two-lane road, but based on this information, as well as the fact that Boudreaux has been widen [sic] in other parts that aren't where the Grand Parkway is not overlaying Boudreaux, it's reasonably probable and clear in my mind that Boudreaux would have been widen [sic], but for the Grand Parkway. If it wasn't for the pending construction and ultimate taking of Boudreaux for the Grand Parkway, Boudreaux would have been widen [sic] to a four-lane roadway."

         Deal testified that he spoke to two property owners who had attempted to develop their property which was east of the subject property. The City of Houston would not let them develop their property because it was in the path of the Grand Parkway. According to Deal, those properties would otherwise have been developed. Deal also testified the land north of the subject property was owned by Mr. Pancasarp, who already has an engineer's plans for development of that property. Deal testified the market area in the immediate vicinity of the subject property has been in limbo since 2010 and Boudreaux was not widened by Harris County because of the Grand Parkway project.

         Deal testified the highest and best use of the subject property is mixed-use commercial development - small pad sites that are independent economic units for uses such as a bank, pharmacy, retail shopping - that all have cross-access to each other and access to a major road, such as Champion Forest. Deal consulted with Peter Bosher of RVI Planning as to how the market would develop the subject property. Bosher gave Deal multiple plans with different options for "pad-site" development wherein pads would be sold to individual users. The pads would have access to each other and to Champion Forest and Crescent Clover.

         There are ten residential subdivisions, including Gleannloch Farms, on Boudreaux. Deal testified the people living in those subdivisions create a demand for groceries, gas, fast food, car washes, and pharmacies. That demand, where there is no current commercial development, is what makes the subject property so desirable. Deal testified that but for the taking of the north end along Boudreaux there would have been commercial development, as there was in the commercial reserves that the southern end of Gleannloch Farms and the southern entrance of Champion Forest.

         When Gleannloch Farms was created, the commercial reserve was designed for a larger user such as an H-E-B grocery store. Deal testified a grocery store creates a lot of traffic and other types of users, such as gas stations, shopping centers with nail salons and dry cleaners, fast food restaurants and banks, quickly follow. In October 2013, H-E-B acquired the tract immediately across Champion Forest from the subject property. Part of H-E-B's property was also taken by the Grand Parkway project. Deal opined that H-E-B chose that location because of "the rooftops . . . the supply of people and the dollars that are there, the income levels that are there." Deal stated that H-E-B "would have known, but for the taking, that Boudreaux would have been widen [sic]" and H-E-B was there because of the population and income. H-E-B was planning to start construction in February 2016 and open in October 2016. Deal testified the fact that H-E-B was coming into Gleannloch Farms was evidence it is an excellent location.

         Deal was questioned about an H-E-B built at Rayford Road and Riley Fuzzel where the Grand Parkway went through at the front of the property. Shortly after H-E-B's entry, from July 2014 to January 2015, four tracts of land across Rayford quickly sold for at values from $15.25 psf to $19 psf. The land was being used for a Texas Children's Hospital site, Sonic, car wash, and a retail shopping center. Those properties share access, as the subject property could since it is has a single owner.

         Deal also considered an H-E-B built at League City Parkway and South Shore Boulevard for highest and best use as well as "absorption, " which is how quickly neighboring properties are purchased. From May 2014 to June 2015, four tracts of nearby commercial property, ranging in size from 1.3 acres to 2.7 acres, sold for between $16.40 psf to $19.00 psf. The properties all had cross-access, like the subject property, which Deal stated was important. The one farthest away actually sold for the most. The uses were a car wash, fast food, and a shopping center. According to deal, those properties sold once H-E-B announced it was opening a store.

         Deal testified he did not use the sales prices of the properties near those two H-E-B's, even though it was a similar market, because there were other transactions in closer proximity to the subject property that were more appropriate. Deal looked at eight transactions in the same market area, with similar density of development, income level, and highest and best use. Another factor he considered was when the transaction occurred versus the date of value. Because the western portion of the subject property was closer to the major thoroughfare, it was worth more than the eastern portion. Deal determined the value of the western portion to be $16 psf and the value of the eastern portion to be $13 psf.

         Deal's comparable sale No. 1 was at the corner of Spring Cypress, a four-lane major thoroughfare, and Grant Road, a two-lane major thoroughfare that was asphalt paved with open ditch drainage, similar to Boudreaux. It sold in February of 2015 for $21 psf and the demographics of that property were very similar to the subject property. The population was 180, 000 as compared to the subject property being 170, 000. The income per household was $121, 000 as compared to the subject property being $118, 000. There was an H-E-B right across the ...

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