News & Insights
Case Updates from the First Court of Appeals – October 2022
Houston Bar Association Appellate Practice Section
October 31, 2022
Amelang v. Harris County Appraisal District, No. 01-20-00623-CV, __ S.W.3d __, 2022 WL 4371518 (Tex. App.—Houston [1st Dist.] Sept. 22, 2022, no pet. h.).
Panel consisted of Justices Landau, Hightower, and Rivas-Molloy. Opinion by Justice Hightower.
This opinion deals with incompetent expert testimony offered to prove the fair market value for two properties.
Karl J. Amelang, Amelang Partners, and EGN Investments II, LP (together, “Amelang”) owned two properties which contained large, old buildings used as warehouses and builder showrooms. Both properties were under a long-term lease—meaning that Amelang or any subsequent purchaser could not simply tear down the old buildings and make another use of the property until the lease was over.
Amelang filed a tax-valuation protest against Harris County Appraisal District (“HCAD”) pursuant to Texas Tax Code chapter 42 for the 2017 and 2018 tax years. Amelang contended that HCAD had excessively valued the properties.
After a bench trial, Amelang lost. The trial court found that Amelang’s appraisal expert was uncredible and rendered a take-nothing judgment on the claim of excessive valuation. The First Court affirmed.
Among other things, the First Court held that the burden of proof rested on Amelang. The taxpayer in a tax appraisal suit must prove excessive valuation with competent evidence.
The First Court rejected an argument that Tax Code § 23.01(e) shifted the burden of proof to HCAD. Section 23.01(e) puts the burden of proof on the chief appraiser for the initial appraisal and proceedings before the Appraisal Review Board (“ARB”).
Having lost at the ARB, Amelang pursued de novo review in the trial court. Section 23.01(e) does not address the burden of proof for such de novo proceedings. Rather, the general rule that the party seeking relief bears the burden of proof applies. Thus, Amelang had the burden of proof.
The First Court also engaged in an extended analysis of whether Amelang presented competent expert evidence regarding the properties’ fair market value.
Fair market value is generally determined by one of three methods: (1) the comparable sales method, (2) the income method, or (3) the cost method. Amelang’s expert rejected the use of the comparable sales method, and testified in a conclusory manner that there were no appropriate comparable sales. Rather, the expert used the income approach.
But in doing so, the expert acknowledged that the lease’s rent was below the market rate. Thus, the expert calculated a market rent from comparable properties. Moreover, the expert acknowledged that the best use of the land would be for mid- or high-rise office or residential use, not for leasing out as warehouse space.
In other words, potential buyers would not want to buy the land to continue generating income from the pre-existing buildings.
Thus, the First Court found that the expert’s evidence was incompetent evidence of fair market value: “Given the nature of Bach’s testimony, relying solely on the income valuation method despite his testimony and other evidence indicating that the properties would not, in the open market, be priced according to the income that they already generate, we cannot say that Amelang proved, as a matter of law, the vital facts of its excessive appraisal claim.” Id. at *9.
The First Court also rejected a per se rule that the existence of a lease always requires the use of the income method: “[D]etermining whether the terms of a particular lease is an individual characteristic that impacts the market value of the property is necessarily fact-specific and must be done on a case-by-case basis.” Id. at *10.
Nguyen v. Terra Nostra Realty, Inc., No. 01-20-00668-CV, 2022 WL 4240909 (Tex. App.—Houston [1st Dist.] Sept. 15, 2022, no pet. h.).
Panel consisted of Justices Landau, Guerra, and Farris. Opinion by Justice Guerra.
Rene Castillo and his brokerage firm Terra Nostra Realty, Inc. (together, “Castillo”) sued Trinh Nguyen for breach of an oral agreement to share commissions earned in real estate transactions. Castillo alleged that the agreement was that Nguyen would give him ten percent of real estate sales commissions that Nguyen earned.
Initially, the trial court granted a no-evidence summary judgment motion filed by Nguyen because Castillo failed to respond. But Castillo filed a timely motion for new trial. He argued that his counsel was “duped into” not responding based on representations made by Nguyen’s counsel that the motion would be “passed” and argued that certain discovery was pending.
The trial court granted the new trial motion and re-instated Castillo’s claims. On appeal, the First Court held that the ruling granting the new trial was unreviewable. When a trial court grants a motion for new trial, it wipes the slate clean and starts over. Such an order is not subject to review on appeal.
Next, Nguyen’s no-evidence motion was re-set. This time, the trial court denied the motion. On appeal, the First Court held that this ruling was also unreviewable. The general rule is that the denial of a summary judgment motion cannot be reviewed on appeal. Instead, the party’s remedy is to assign error in the judgment rendered following trial on the merits.
In this case, the trial court rendered judgment in favor of Castillo following a bench trial. Castillo testified to the contents of the oral agreement, and the trial court awarded him money damages and attorney’s fees.
On appeal, Nguyen argued that two different statute of frauds applied. The First Court rejected both arguments.
First, Texas Business and Commerce Code § 26.01 requires that agreements that are “not to be performed within one year from the date of making the agreement” be in writing. But the First Court held that the agreement at issue here—to share real estate commissions—could have been performed within a year.
Second, Texas Occupations Code § 1101.806(c) bars judicial recovery of a real estate commission that is not based on a written promise, agreement, or memorandum. But § 1101.806(a) makes clear that this statute of frauds does not apply to any agreement to share compensation among license holders. The First Court held that the agreement at issue here was such an agreement, and therefore, the § 1101.806(c) statute of frauds did not apply.