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The Mian Development Corp. v. State

Court of Appeals of Texas, Fifth District, Dallas

July 18, 2019

THE MIAN DEVELOPMENT CORPORATION, Appellant
v.
THE STATE OF TEXAS, Appellee

          On Appeal from the County Court at Law No. 5 Dallas County, Texas Trial Court Cause No. CC-14-03073-E

          Before Justices Whitehill, Molberg, and Reichek

          MEMORANDUM OPINION

          BILL WHITEHILL JUSTICE.

         This condemnation case concerns a more than forty-year old hotel along Highway 183 in Irving, Texas. The State condemned a portion of the hotel's front parking spaces for a highway expansion but none of the hotel's three buildings. The jury awarded the property owner, Mian Development Corporation, a total of $1, 186, 350 for both the land taken and damages to the remaining property.

         The dispute focused primarily on the second calculation, and that debate was heavily influenced by conflicting opinions regarding whether the hotel would be viable post-taking. Mian's owner, its two appraisal experts, and even the State's hotel data expert testified that the taking rendered the remaining hotel unviable; whereas, the State's appraisal experts testified that the hotel had a remaining useful life of at least five years. The jury's verdict in this contest between battling experts more closely aligned with the State's experts' opinions. Accordingly, this appeal concerns the admissibility of the State's experts' opinions.

         In four issues, Mian argues that (i) the trial court erroneously admitted testimony from three of the State's expert witnesses, two of whom Mian called as adverse witnesses in its own case in chief; (ii) the erroneous admission of the experts' testimony violated its constitutional rights to a jury trial, just compensation, and due process; (iii) the trial court erred by denying its motion for new trial; and (iv) cumulative errors require reversal. Because Mian does not contend that the State's experts were unqualified, the admissibility issue turns on whether their opinions were relevant and based on reliable valuation methods and underlying data. Both side's experts used one or more of the same valuation methods and much of the same supporting data.

         Based on the issues and arguments Mian asserts and the record before us, we conclude that Mian has not shown that the rulings were an abuse of discretion. Therefore, Mian's constitutional rights to a jury trial, due process, and just compensation were not violated. Likewise, the trial court did not err by denying the motion for new trial because: (i) the evidence is sufficient to support the judgment; (ii) there was no abuse of discretion in allowing the State's experts to testify; and (iii) Mian was not deprived of the opportunity to cross-examine the State's experts. Because there was no error, there was no cumulative error. We thus affirm the trial court's judgment.

         I. Background

         Before the taking, Mian owned a 4.3576 acre property on which the Sterling Hotel and garage are located (the Property). The Sterling has three buildings: a twelve-story full-service hotel tower with 360 rooms; an adjoining building in which the hotel lobby, restaurant, and common areas are located; and a five-story parking garage.

         (Image Omitted)

         In 2014, the State filed a petition for condemnation seeking to take a 24, 290 square foot parcel of the Property for its plan to widen State Highway 183, including some of the Sterling's parking spaces and landscaping. The taking also entails moving the new right-of-way line within three feet of the Sterling parking garage.

         Special commissioners awarded Mian $3, 499, 999. Both parties objected to the award and both disagreed about the Property's market value before the State's acquisition. The parties agreed to set aside the Commissioners' conditional order granting a writ of possession and the case was set for a jury trial.

         At trial, Mian argued it should be compensated for the Property and the values of the improvements because the taken portion rendered the remaining property unviable. That is, Mian argued that its damages were the hotel's value before the taking minus zero dollars for a total loss. To this end, Mian offered two appraisal witnesses, Josh Korman and Peter Malin, who testified that the total compensation due to Mian was $13, 600, 101 and $19, 100, 000, respectively.

         On the other hand, the State's appraisal witnesses, Matthew Browne and Alan Pursley, testified that the compensation owed to Mian was $1, 027, 927 and $764, 970, respectively. Both experts opined that the Sterling had some continued viability. Thus, their damages models measured the hotel's pre-taking value less its post-taking value.

         Bruce Walker, a hotel expert, also testified for the State and opined that the Sterling was unsustainable.

         The jury was asked to determine the value of the land taken and the damages to the remainder due to the taking and found, (i) the fair market value of the taking was $286, 350 and (ii) the damages to the remaining property were $900, 000. The trial court entered judgment on this verdict. Mian then moved for a new trial, which the trial court denied.

         The following chart summarizes the evidence regarding the (i) pre-taking values of, and damages to, the remainder property and (ii) jury's related damages finding:

Method

Mian

Korman[1]

Malin[2]

Browne[3]

Pursley

Jury

Income

NA

$13, 315, 033

$19, 255, 000

$3, 883, 609

NA

NA

Comparable Sales

NA

$13, 274, 573

$19, 425, 000

$3, 769, 524

NA

NA

Cost

NA

$13, 014, 275

18, 075, 000

$3, 489, 535

$4, 911, 985[4]

NA

Agreed Tax Valuation

$2, 550, 000

-

NA

NA

NA

NA

Damages to Remainder

NA

Total Loss

Total Loss

$804, 451

$0[5]

$900, 000

         II. Analysis

         A. First and Second Issues: Did the trial court abuse its discretion by admitting the expert testimony, thereby infringing Mian's constitutional rights?

         Mian argues that Walker's, Browne's, and Pursley's expert testimony should not have been admitted. According to Mian, these allegedly erroneous evidentiary rulings infringed on its constitutional rights to a jury trial, due process, and just compensation. [6] We reject these arguments because the record contains evidence from which the trial court could have reasonably found that the experts' opinions related to disputed issues, used accepted methods, and were based on reliable data. And the record does not establish that the experts' analysis contained analytical gaps.

         1. Standard of Review and Applicable Law

         The trial court is the "evidentiary gatekeeper" responsible for excluding irrelevant and unreliable expert evidence. Exxon Pipeline Co v. Zwahr, 88 S.W.3d 623, 629 (Tex. 2002). It has broad discretion to determine the admissibility of evidence, and we will reverse only for an abuse of that discretion. Id

         An expert's testimony is admissible if the expert is qualified to testify about "scientific, technical, or other specialized knowledge" and the testimony is relevant and based upon a reliable foundation. Tex. R. Evid. 702; TXI Transp. Co. v. Hughes, 306 S.W.3d 230, 234 (Tex. 2010).

         Expert testimony is unreliable if it is based on unreliable data or if the expert draws conclusions from his underlying data based on a flawed methodology. Ford Motor Co. v. Ledesma, 242 S.W.3d 32, 39 (Tex. 2007) (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 714 (Tex. 1997)).

         Testimony may also be unreliable if there is "too great an analytical gap between the data the expert relies on and the opinion offered." Zwahr, 88 S.W.3d at 629. In applying this reliability standard, the trial court does not decide whether the expert's conclusions are correct; rather, it determines whether the analysis used to reach those conclusions is reliable. Gammill v. Jack Williams Chevrolet, 972 S.W.2d 713, 727 (Tex. 1998).

         Unreliable expert testimony is legally no evidence, Seger v. Yorkshire Ins. Co., 503 S.W.3d 388, 410 n.23 (Tex. 2016), and it is an abuse of discretion to admit such testimony, see Gharda USA, Inc. v. Control Sols., Inc., 464 S.W.3d 338, 347-48 (Tex. 2015).

         2. Bruce Walker

         a. Introduction

         Walker is not a real estate appraiser; he is instead an expert on hotel valuation. Rather than giving a valuation opinion as such, Walker provided background testimony that educated the jury or related to the value calculations. His testimony was significant to this case because, contrary to Mian's experts, it tended to lower the hotel's pre-taking value and to increase the hotel's post taking value. As to the hotel's continued viability pre-taking, Walker walked a fine, line falling just short of unequivocally stating that hotel was not viable pre-taking.

         Mian argues that the trial court erred by denying its expert challenge to Walker because: (i) Walker relied on the Sterling's actual financials and valued the existing operation; (ii) even if using the existing financials was a correct methodology, Walker ignored the existing financials and formulated his own financial projections; (iii) Walker offered no evidence of income for the years he rejected; (iv) Walker incorrectly identified the two zip codes around the Sterling as the market; and (v) Walker's data did not assist the jury with understanding the evidence or determining an issue.

         Significantly, however, the court excluded the evidence Mian challenged in its first three arguments. And while Mian generally complains that the court excluded the objected-to data but allowed unreliable opinions about the data, the record reflects that the data was excluded and Walker did not opine about the excluded data.[7] Therefore, we consider only whether Walker's methodology was unreliable and whether his testimony was relevant to determining the damages that the taking caused to the remainder portion.

         b. Walker's Testimony Generally

         Walker testified generally about the Sterling's location, size, age, and branding (or lack thereof). He defined and explained certain terminology for the jury, including average daily rate or ADR (the average price the hotel charged the customer for the relevant time period), occupancy rate (the number of rooms sold divided by the number of rooms available), and RevPAR (total revenue for selling rooms divided by the number of rooms available.)

         Walker examined data for the Dallas County hotel market for 2014, and found an occupancy rate ranging from 66-72%, an ADR of $79-$83, and RevPAR from $52.99-$59.84. This market showed "pretty strong growth" percentages ranging from 4-6%.

         c. Zip Codes

         Walker also analyzed the lodging market for two zip codes, 75247 and 75062, around the Sterling. His analysis covered the years 2011-2014, and excluded the Sterling itself. Walker referred to this as the "local market."

         Comparing this market to the Dallas County market showed "significantly lower production," with approximately $55 RevPAR in the Dallas market and $47 RevPAR in the local market (a 14.5% difference). Walker thus concluded that the local market "doesn't appear to be a very good market."

         Mian contends that Walker provided no information about why he chose the two zip codes to define the local market or whether they were comparable to the Sterling's market. But Walker specifically testified that the local market was representative of the Sterling's market area and that this is the market that competes with the Sterling.

         Moreover, Mian's appraisers both focused on properties in these two zip codes. Korman looked at seven comparable properties and Malin at fourteen properties, and for each, five of the comparable properties were in the zip codes Walker used. Matthew Browne, one of the State's appraisers, also relied on comparable properties from this market area.

         d. Averaged Data

         Mian also complains that Walker only averaged the market data presented to the jury. The record reflects, however, that Walker provided hotel-by-hotel underlying data in addition to the market averages of ADR, occupancy rate, and RevPAR. Contrary to Mian's suggestion, Walker did not testify that the Sterling's value was the average of the market data. Moreover, Mian's expert also considered the average performance of hotels in the market area.

         e. Hotel Size and Age

         Walker opined that the Sterling is too large for its market, and said that "larger hotels have closed very significantly if they're not in the downtown area." Thus, according to Walker, the Sterling "is in jeopardy" because of its size and location. Walker further noted that the Sterling is forty years old and "the odds of it surviving five years are extremely low."

         f. Branding

         Walker explained the significance of a hotel's brand. He looked at the hotels in the local market and compared the 2014 RevPAR for independent hotels with chain hotels with a recognized brand.

         The branded hotels had $49.41 RevPAR and the independents had $27.57. Walker explained that this result is consistent with the hotel market in Texas generally. Independent hotels are only 14 percent of the hotel revenues in the state, and those that have brands are doing "extremely well." On the other hand, the low priced independents "are on their last legs." He explained that he calls those independent hotels "notel motels - - - and they can't get a brand." Walker therefore opined that the Sterling cannot survive without being branded.

         Mian insists that Walker's opinions consisted of "bare conclusions lacking any supporting basis."[8] According to Mian, the jury was told that "the Sterling was unsustainable simply because Bruce Walker says it is." But the record reflects otherwise. Walker's conclusion was that, viewing all of the characteristics that he described-location, size, age, and lack of branding-the Sterling is "not ...


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