Landowners in real-estate litigation frequently take advantage of the long-standing rule that property owners are qualified to give evidence on the value of their property, even if they would not be qualified to give opinion testimony about the value of other property. A decision from the Texas Supreme Court last week imposes new limits on the scope of that rule.
In Natural Gas Pipeline Company of America v. Justiss, No. 10-0451 (opinion here), the Court affirmed the viability of the Property Owner Rule. But the Court imposed additional standards on its use. The Court held that property-owner testimony is subject to Texas Rule of Evidence 701, and that landowners must explain the basis of their opinions of value. Significantly, the Court said:
Because property owner testimony is the functional equivalent of expert testimony, it must be judged by the same standards. Thus, as with expert testimony, property valuations may not be based solely on a property owner’s ipse dixit. An owner may not simply echo the phrase “market value” and state a number to substantiate his diminished value claim; he must provide the factual basis on which his opinion rests.
Even though each of the landowners testified that their opinions were based on market value, the Supreme Court found that their testimony was insufficient because there was not enough factual background to explain how the landowners reached their opinions. This is clearly a stricter standard than the one imposed in Porras v. Craig, where the Court held that it would be sufficient to ask the landowner if he is “familiar with the market value of his property.” 675 S.W.2d 503, 505 (Tex. 1984). In fact, the Supreme Court recognized that it was changing the standard, and remanded the case for a new trial instead of rendering judgment that the landowners take nothing.
In short, even unchallenged property-owner testimony may be insufficient to support a judgment if the landowner does not explain the factual basis of the opinion. It will be interesting to see how strictly the courts apply this new rule. If landowners are truly held to the same standards as experts, then the scope of the Property Owner Rule has been significantly diminished. Although the Supreme Court left the Property Owner Rule intact, this opinion may be the first of many blows that ultimately lead to the demise of the rule.
-- Rich Phillips, Thompson & Knight
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