MAJORITY OPINION In this condemnation case, the State appeals from the trial court’s judgment in favor of the landowner asserting that the trial court erred in denying two motions by the State to exclude evidence. Concluding that the trial court reversibly erred in denying one of these motions to the extent the State sought the exclusion of testimony under the Property Owner Rule as to two valuation approaches, we reverse and remand. Factual and Procedural Background In July 2015 appellee/defendant Audie Gray Family L.P., a Texas Limited Partnership (“Audie”) purchased 20.1586 acres of agricultural land in Fort Bend County outside the boundaries of any municipality, with frontage on State Highway 36 (“Parent Tract”). Audie paid $275,000 to buy the land, or approximately $13,642 per acre. Greg Carlson, one of the partners in Audie, testified that Audie bought this land intending to build a boat and recreational vehicle storage facility on the Parent Tract. Carlson testified that Audie developed part of the property into a boat and recreational vehicle storage facility (the “Storage Facility”). According to Carlson, when Audie bought the Parent Tract, Carlson noticed that the plat showed a right of way for the Texas Department of Transportation on part of the property adjacent to State Highway 36. Audie did not put any structure on the part of the property that was in the right of way because of the risk that this part of the property might be condemned in the future. Audie put a gravel road on this part of the property connecting the Storage Facility with State Highway 36. Audie also had electrical connections installed but did not connect the property to any public water or wastewater system. The State of Texas initiated a proceeding in the trial court seeking to condemn a 1.8923-acre (82,427 square feet) parcel from the Parent Tract (the “Property”), leaving a remaining property of 18.2663 acres still owned by Audie (the “Remainder”). Evidence in the record shows that before the State acquired the Property through condemnation, Audie installed two small billboards on the Property.[1] Carlson was told that he would receive sixty days’ notice before the State removed the billboards, so that Audie would have an opportunity to remove them. Instead, Carlson testified that the billboards were removed and disposed of without notice. The record shows that the Property is a strip of land that borders State Highway 36 and that in most places is 120 feet wide. In this photograph that was admitted in evidence at trial, the Property is outlined in red, and the Parent Tract is outlined in blue: At the time of the condemnation, TFG Associates LLC was conducting a boat and recreational vehicle storage business using the name “Texas 36 Storage” on the Remainder, and Audie was renting about one-half of an acre of the Property and part of the Remainder to a farmer for agricultural use. After the State filed its petition seeking condemnation of the Property, the trial court appointed special commissioners who conducted a hearing and assessed damages of $118,127 under section 21.042 of the Texas Property Code. To take possession of the Property, the State deposited this amount with the trial court on August 20, 2018 (the “Acquisition Date”). At Audie’s request, the trial court ordered that the deposited funds be disbursed to Audie. Both the State and Audie objected to the special commissioners’ findings, triggering a trial de novo in the trial court. The State retained Michael Miggins as its expert witness. Audie did not retain an expert witness but rather relied on Carlson to testify under the Property Owner Rule[2] as to the amount of compensation that should be awarded to Audie. Before trial the State filed a motion to exclude Carlson’s testimony related to his opinions regarding the value of the Property, asserting various arguments as to why the trial court should exclude this testimony (the “Motion”). The trial court denied the Motion on November 14, 2019, at the pretrial conference held shortly before trial began. The trial court also granted in part and denied in part another motion filed by the State, entitled “State’s Motion to Exclude Evidence & Strike Expert Designation” (the “Second Motion”).[3] At trial Carlson testified that based on his “income approach” to valuing the Property, fair compensation for Audie would be $406,800. Carlson also testified that based on his “sales comparison approach” to valuing the Property, fair compensation for Audie would be $371,708. When Audie offered documentary evidence summarizing Carlson’s opinions regarding his income approach and sales comparison approach, the State objected to these exhibits on the same grounds asserted in the Motion. The trial court overruled the State’s objections. Miggins testified that the total compensation to Audie should be $61,748. The jury found that the total compensation due to Audie as a result of the State’s acquisition of the Property is $236,700. The trial court rendered judgment on the jury’s verdict. The State filed a motion for new trial and a motion for judgment notwithstanding the verdict. The trial court denied both motions, and the State timely perfected this appeal. Issues and Analysis On appeal, the State asserts in its first issue that the trial court erred in denying the Motion and the Second Motion. It its second issue the State asserts that the evidence is legally and factually insufficient to support the jury’s finding as to the amount of compensation due to Audie. Both the United States and Texas Constitutions require governments to compensate landowners for takings of their property for public use. U.S. Const. amend. V (requiring “just compensation”); Tex. Const. art. I, §17 (requiring “adequate compensation”). When a governmental entity condemns real property, the normal measure of damages is the land’s market value. See Tex. Prop. Code Ann §21.042(b) (West, Westlaw through 2021 C.S.).; City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 182 (Tex. 2001). Thus, the central damage issue in the typical condemnation case is how to measure the market value of the condemned property. See Estate of Sharboneau, 48 S.W.3d at 182. Market value is “the price the property will bring when offered for sale by one who desires to sell, but is not obliged to sell, and is bought by one who desires to buy, but is under no necessity of buying.” Id. (quoting State v. Carpenter, 89 S.W.2d 979, 980 (Tex. 1936)) (internal quotations omitted). The three traditional approaches to determining market value are the comparable sales method, the cost method, and the income method. Estate of Sharboneau, 48 S.W.3d at 182. Courts have long favored the comparable sales approach when determining the market value of real property. Id. If the goal of an appraisal is to ascertain market value, then logically there can be no better guide than the prices that willing buyers and sellers actually negotiate in the relevant market. Id. Under a comparable sales analysis, data for sales of similar property are found, then an upward or downward adjustment is made to these sales prices based on differences in the subject property. Id. Comparable sales must be voluntary, and should take place near in time to the condemnation, occur in the vicinity of the condemned property, and involve land with similar characteristics. Id. Comparable sales need not be in the immediate vicinity of the subject land, so long as they meet the test of similarity. Id. But if the comparison is so attenuated that the appraiser and the fact-finder cannot make valid adjustments for these differences, a court should refuse to admit the sale as comparable. Id. Where, as in today’s case, only part of a tract is condemned, the proper measure for determining compensation is the market value of the land actually appropriated plus the difference, if any, in the market value of the remainder immediately before and immediately after the taking. See Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 627 (Tex. 2002). Because Audie has not contended that the condemnation caused any decrease in the market value of the Remainder, only the market value of the Property is at issue in this case. The jury may consider the highest and best use to which the Property taken can be adapted. See id. at 628. The existing use of the Property is its presumed highest and best use, but Audie may rebut this presumption by showing a reasonable probability that when the taking occurred, the Property was adaptable and needed or would likely be needed in the near future for another use. See id. Texas law permits Audie to introduce testimony that the Property is a self- sufficient separate economic unit, independent from the Remainder, with a different highest and best use and different value from the Remainder. See id. In this situation, the market value of the Property may be determined without reference to the Remainder. See id. But if the Property cannot be considered as a separate economic unit, the Property’s market value must be determined by evaluating the Property as a proportionate part of a larger economic unit including all or part of the Parent Tract. See id. The Property Owner Rule establishes that an owner is qualified to testify to the value of the owner’s property; nonetheless, the Supreme Court of Texas requires that such testimony meet the “same requirements as any other opinion evidence.” Natural Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 156 (Tex. 2012) (quoting Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984)) (internal quotations omitted). A property owner’s testimony must be based on the market value of the property, not the value of the property to the owner, the intrinsic value, or some speculative value of the property. See Justiss, 397 S.W.3d at 155, 158, 161 The Property Owner Rule falls under Texas Rule of Evidence 701, which allows a lay witness to provide opinion testimony if it is (a) rationally based on the witness’s perception and (b) helpful to a clear understanding of the witness’s testimony or the determination of a fact in issue. See Tex. R. Evid. 701; Justiss, 397 S.W.3d at 157. Based on the presumption that an owner is familiar with the owner’s property and its value, the Property Owner Rule is an exception to the requirement that a witness must otherwise establish his qualifications to express an opinion on land values. See Justiss, 397 S.W.3d at 157. Under the rule, an owner’s valuation testimony fulfills the same role as expert testimony. See id. Because property-owner testimony is the functional equivalent of expert testimony, it must be judged by the same standards. See id. at 159. Thus, as with expert testimony, an owner’s property valuation may not be based solely on the owner’s ipse dixit. See id. An owner may not simply echo the phrase “market value” and state a number to substantiate the owner’s claim; the property owner must provide the factual basis on which the owner’s opinion rests. See id. This burden is not onerous, particularly in light of the resources available today. See id. But, the valuation must be substantiated; a naked assertion of “market value” is not sufficient. See id. A property owner’s testimony must be based on the legal definition of market value. See id. at 158, 161. An owner’s qualification to testify does not allow the property owner to substitute a “value to me” standard for the governing legal standard of “market value.” See id. at 158, 161. Even if unchallenged, the property owner’s testimony must support the verdict, and conclusory or speculative statements do not. See id. Testimony is speculative if it is based on conjecture or guesswork. See id. at 156.
