Reversed and Rendered and Majority and Dissenting Opinions filed April 24, 2012.




                                         In The

                      Fourteenth Court of Appeals

                                  NO. 14-11-00045-CV


PRESTON RESERVE, L.L.C., ARTHUR A. LANCASTER, JR., LACY C. HOWE
               & ROBERT S. PEEK, JR., Appellants

                                            V.

                              COMPASS BANK, Appellee


                       On Appeal from the 189th District Court
                               Harris County, Texas
                         Trial Court Cause No. 2009-48427


                        MAJORITY OPINION

       This is a suit to recover a deficiency remaining after a foreclosure sale of land
securing a promissory note. Preston Reserve, L.L.C., Arthur A. Lancaster, Jr., Lacy C.
Howe, and Robert S. Peek, Jr. (“Borrowers”) appeal a judgment in favor of Compass
Bank, contending that the trial court (1) erred by concluding that there was a deficiency
after a foreclosure sale because there was no legally sufficient evidence to support a fair
market value finding of less than $2.7 million; and (2) should have entered a take nothing
judgment against Compass Bank. We reverse the trial court’s deficiency judgment and
render a take nothing judgment against Compass Bank.

                                       Background

       Compass Bank loaned $2.4 million to Preston Reserve LLC on January 31, 2008,
evidenced by a promissory note. The promissory note was guaranteed by Lancaster,
Howe, and Peek, and secured by a deed of trust on a 12.75 acre tract of land located in
Frisco, Texas.

       Preston Reserve bought the 12.75 acre tract in February 2008 for $3.2 million to
construct an apartment complex. Compass Bank then committed to loaning Preston
Reserve $22 million to build an apartment complex. Preston Reserve worked on getting
engineering and architectural plans and obtained all permits to move forward with
construction. In May 2008 — before Preston Reserve received all final permits —
Compass Bank modified its loan commitment and agreed to loan Preston Reserve 15
percent less than originally committed. Preston Reserve put its building plans on hold;
obtained an extension on the $2.4 million loan; and attempted to raise additional money.

       Preston Reserve could not raise enough money to go forward with construction
and defaulted on the $2.4 million loan on November 30, 2008. Compass Bank, through
“loan workout officer” Carl Scott, started working with Preston Reserve’s three
guarantors in October 2008 to salvage the loan. After a few months, Scott decided the
loan no longer was salvageable. The property was sold at a foreclosure sale on May 5,
2009. Compass Bank, the sole bidder at the foreclosure sale, bought the property for $1.2
million.

       Compass Bank sued the Borrowers on July 30, 2009 to recover a deficiency of
$1,242,153.85 that remained after the foreclosure sale, plus accrued interest of
$87,018.79. The Borrowers answered and challenged the deficiency; they also filed a
motion pursuant to Texas Property Code Section 51.003 requesting that the trial court
determine the fair market value of the property as of the date of foreclosure.

       A bench trial was held on November 11, 2010. Scott testified on behalf of

                                             2
Compass Bank that the property’s fair market value at the time of the foreclosure sale
was $1 million. Howe testified as a timely designated property valuation expert on
behalf of the Borrowers; according to Howe, the property’s value was between $2.7 and
2.8 million at the time of the foreclosure sale. After trial, Compass Bank and the
Borrowers filed motions for entry of judgment. The trial court signed a final judgment on
December 9, 2010, finding that the fair market value of the property was $2.4 million on
May 5, 2009, and that the Borrowers, jointly and severally, owed Compass Bank a
deficiency of $129,172.64 and attorney’s fees. The Borrowers timely appealed.

                                         Analysis

       The Borrowers raise two issues on appeal. First, they argue that no deficiency
existed because “there was no legally sufficient evidence to support the trial court’s
finding of a fair market value as of May 5, 2009, of less than $2,700,000.” Second, they
contend that, because there is legally insufficient evidence to support a finding that “the
fair market value of the 12.75 acre tract on May 5, 2009, was less than $2,700,000, the
trial court should have entered a judgment that Compass Bank take nothing.”

       I.     Standard of Review and Applicable Law

       The Borrowers and Compass Bank did not request findings of fact or conclusions
of law pursuant to Texas Rule of Civil Procedure 296, and the trial court filed none.
When no findings of fact or conclusions of law are filed or requested in a bench trial, it is
implied that the trial court made all necessary findings to support its judgment. Mays v.
Pierce, 203 S.W.3d 564, 571 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). We
must affirm the trial court’s judgment on any legal theory that finds support in the
evidence. Treadway v. Shanks, 110 S.W.3d 1, 5 (Tex. App.—Dallas 2000), aff’d, 110
S.W.3d 444 (Tex. 2003). A party’s failure to request findings of fact or conclusions of
law does not waive his right to challenge the legal sufficiency of the evidence on appeal.
See Tex. R. App. P. 33.1(d); Pruet v. Coastal States Trading, Inc., 715 S.W.2d 702, 704
(Tex. App.—Houston [1st Dist.] 1986, no writ).


                                             3
       When conducting a legal sufficiency review, we credit favorable evidence if a
reasonable factfinder could do so and disregard contrary evidence unless a reasonable
factfinder could not do so. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).
We consider the evidence in the light most favorable to the finding under review and
indulge every reasonable inference that would support it. Id. at 822. The factfinder is the
only judge of witness credibility and the weight to give to testimony. See id. at 819. We
sustain a legal insufficiency challenge only if: (1) the record reveals a complete absence
of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered
to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes
conclusively the opposite of the vital fact. Id. at 810; Niche Oilfield Servs., LLC v.
Carter, 331 S.W.3d 563, 569 (Tex. App.—Houston [14th Dist.] 2011, no pet.).

       Opinion testimony, even when uncontroverted, does not necessarily bind the trier
of fact. “[T]he judgments and inferences of experts or skilled witnesses, even when
uncontroverted, are not conclusive on the jury or trier of fact, unless the subject is one for
experts or skilled witnesses alone, where the [trier of fact] cannot properly be assumed to
have or be able to form correct opinions of their own based upon evidence as a whole and
aided by their own experience and knowledge of the subject of inquiry.’” Uniroyal
Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 338 (Tex. 1998) (quoting McGalliard v.
Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986)).

       As trier of fact, a trial court is not bound by the testimony of an interested witness
merely because it is uncontradicted. Ex parte Rosser, 899 S.W.2d 382, 386 (Tex. App.—
Houston [14th Dist.] 1995, no writ). Instead, testimony by an interested witness may
establish a fact as a matter of law only if the testimony could readily be contradicted if
untrue, and is clear, direct and positive, and there are no circumstances tending to
discredit or impeach it. Lofton v. Tex. Brine Corp., 777 S.W.2d 384, 386 (Tex. 1989).
The trier of fact has several alternatives available when presented with conflicting
evidence. McGalliard, 722 S.W.2d at 697. It may believe one witness and disbelieve

                                              4
others. Id. It may resolve inconsistencies in the testimony of any witness. Id.

       Texas Property Code Section 51.003 provides that if the price at which real
property is sold at a foreclosure sale is less than the unpaid balance of the indebtedness
secured by the real property, resulting in a deficiency, then an action to recover the
deficiency can be brought. Tex. Prop. Code Ann. § 51.003(a) (Vernon 2010). “Any
person against whom such a recovery is sought by motion may request that the court in
which the action is pending determine the fair market value of the real property as of the
date of the foreclosure sale.” Id. § 51.003(b).

       “The fair market value shall be determined by the finder of fact after the
introduction by the parties of competent evidence of the value.” Id. Competent evidence
of value may include, but is not limited to: (1) expert opinion testimony; (2) comparable
sales; (3) anticipated marketing time and holding costs; (4) cost of sale; and (5) the
necessity and amount of any discount to be applied to the future sales price or the cash
flow generated by the property to arrive at a current fair market value. Id.

       If the court determines that the fair market value is greater than the sale price of
the real property at the foreclosure sale, then the persons against whom recovery of the
deficiency is sought are entitled to an offset against the deficiency in the amount by
which the fair market value exceeds the sale price. Id. § 51.003(c).

       Under Texas law, “fair market value” is defined as “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.” Exxon Corp. v.
Middleton, 613 S.W.2d 240, 246 (Tex. 1981).

       II.    Fair Market Value and Deficiency

       In their first issue, the Borrowers argue that “there was no legally sufficient
evidence to support the trial court’s finding of a fair market value as of May 5, 2009, of
less than $2,700,000.” Therefore, the Borrowers contend that the finding of a deficiency
was erroneous.

                                             5
        A.      Property Owner Rule

        We first address the Borrowers’ challenge to opinion testimony from Compass
Bank officer Scott, who opined that the property’s value was $1 million at the time of the
foreclosure sale. The Borrowers contend that this testimony is not probative evidence of
fair market value because Scott was neither an expert nor qualified to testify under the
Property Owner Rule. See Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores,
Ltd., 337 S.W.3d 846, 847-48 (Tex. 2011); Porras v. Craig, 675 S.W.2d 503 (Tex. 1984).
The Borrowers contend that “Scott was not competent to testify” as to the value of the
land under the Property Owner Rule (1) “either by his position or his personal
knowledge;” and (2) because Compass Bank did not own the land at the time of the
foreclosure sale.1

        A property owner generally is qualified to testify about the value of his own
property even if he is not an expert and would not be qualified to testify about the value
of property owned by others. Porras, 675 S.W.2d at 504. This rule is based on the
presumption that an owner will be familiar with his own property and know its value.
Speedy Stop, 337 S.W.3d at 853.

        The Property Owner Rule applies to corporate entities; organizations are treated
“the same as natural persons for purposes of the Property Owner Rule, with certain
restrictions on whose testimony can be considered as that of the property owner.” Id. at
849. The “Property Owner Rule is limited to those witnesses who are officers of the
entity in managerial positions with duties related to the property, or employees of the
entity with substantially equivalent positions and duties.” Id. “Further, the Property
Owner Rule falls within the ambit of Texas Rule of Evidence 701 and therefore does not
relieve the owner of the requirement that a witness must be personally familiar with the
property and its fair market value, but the Property Owner Rule creates a presumption as

        1
          Compass Bank acknowledges that the trial court did not rely on Scott’s testimony in reaching its
value decision. See infra pp. 11-15. Given the absence of findings of fact and conclusions of law, we
nonetheless address whether the trial court’s judgment can be supported on the basis of implied findings
of fact predicated on Scott’s testimony.

                                                    6
to both.” Id.

        At trial, Scott testified that his responsibilities as a loan workout officer at
Compass Bank are to “work with problem loan assets and to achieve the best possible
outcome on those assets, when they have difficulties.” Scott testified that his “experience
included foreclosing on real estate collateral” and “reselling foreclosed real estate.” He
stated that he sold more than 5,000 properties following foreclosure; he never sold
properties unless they had been foreclosed properties because the “bank is not in the
business of buying and selling real estate in the usual course of business.” Based on this
testimony, we conclude that Scott was an officer of Compass Bank in a managerial
position with duties related to the property. See id. at 849.2

        Compass Bank asked Scott to state, “[a]s owner of the Frisco property on May 5
of 2009, once the bank foreclosed, what is the bank’s opinion of the fair market value of
the Frisco property at that time.” The Borrowers objected because Scott had not been
designated as an expert. When Compass Bank argued that Scott could give opinion
testimony under the Property Owner Rule as an officer of Compass Bank even without
having been designated as an expert, the Borrowers again objected to testimony from
Scott opining on the property’s fair market value.                       The trial court overruled the
objection.3


        2
          The dissent characterizes this conclusion as a holding that the Property Owner Rule applies to
Scott, and that Scott’s testimony properly was admitted under the Property Owner Rule. From this
premise, the dissent asserts that the trial court properly could have relied on Scott’s testimony because
Scott’s testimony properly was admitted. To be precise, we hold that Scott’s testimony satisfied the first
prong of the Speedy Stop standard for applying the Property Owner Rule to entities such as Compass
Bank because he is an “officer[] . . . of the entity in [a] managerial position[] . . . with duties related to the
property . . . .” Speedy Stop, 337 S.W.3d at 849. The second prong of the Speedy Stop standard focuses
on a different issue by asking whether the officer with duties related to the property is “personally
familiar with the property and its fair market value.” Id. If the requisite familiarity with both the property
and its fair market value is lacking, then any applicable presumption is rebutted and a valuation opinion
from the officer is “no evidence” because (1) the court is barred by the Property Owner Rule from giving
weight to the unfamiliar officer’s unsupported opinion; and (2) the unsupported opinion amounts to no
more than a mere scintilla. See City of Keller, 168 S.W.3d at 810.
        3
         The dissent suggests that the Borrowers waived any objection to Scott’s testimony on this point
because their objection did not specifically reference Texas Rule of Evidence 701. We reject this
suggestion. In response to the Borrowers’ objection that “[t]his man cannot give opinion testimony”
                                                        7
        Scott then testified as follows:

        SCOTT: My opinion of the value —
        COUNSEL FOR COMPASS BANK: No, the bank’s opinion.
        SCOTT: Yes. As an officer of the bank, the opinion of the bank is that the
        value at the time of foreclosure was about one million dollars.
        COUNSEL FOR COMPASS BANK: What does the bank base that
        conclusion on?
        SCOTT: Based upon offers received and the information given to us by our
        internal and external valuation experts.
        COUNSEL FOR COMPASS BANK: When you say offers, are these offers
        that the bank considered legitimate offers?
        SCOTT: Absolutely.
        COUNSEL FOR COMPASS BANK: Okay. Did the bank consider the fact
        that this property was zoned only for multifamily housing?
        SCOTT: That was part of the consideration. Also part of the consideration
        was the fact that the zoning – the plat for this property expired in January
        2010; therefore, in May 2009, if someone were to purchase the property
        and not already have the engineering and architectural plans for the
        property and approved construction for the property, then it is not feasible
        that they would be able to actually begin and complete construction in time
        to meet the local zoning and planning requirements.
        COUNSEL FOR COMPASS BANK: Did the bank also consider that 20
        percent of this property was in the flood plain and couldn't be built upon?
        SCOTT: It did. About two and a half acres are absolutely unusable for
        construction.


because he had not been designated as an expert and had not “been shown to have the expertise to be able
to value property,” Compass Bank expressly invoked the Property Owner Rule as applied to entities in
Speedy Stop and referred to the opinion by name. The Borrowers responded that Scott “does . . . not have
the credentials for fair market value.” Compass Bank replied by reading a direct quote from Speedy Stop
aloud to the trial court: “‘We hold that the property owner rule applies to corporate entities owning
property and that a representative of the corporate owner who is familiar with the market value of the
property in question may testify under this rule as to the market value of the property without being
designated as an expert witness.’” The trial court then overruled the objection. Even without a direct
reference to Texas Rule of Evidence 701, this exchange fairly put the trial court on notice of the
Borrowers’ contention that Scott lacked sufficient familiarity to opine under the Property Owner Rule as
applied to entities in Speedy Stop. See Speedy Stop, 337 S.W.3d at 849 (“[T]he Property Owner Rule falls
within the ambit of Texas Rule of Evidence 701 and therefore does not relieve the owner of the
requirement that a witness must be personally familiar with the property and its fair market value . . . .”).

                                                     8
      COUNSEL FOR COMPASS BANK: Did the bank also consider the
      availability of financing at that time?
      SCOTT: It did. Financing for raw land at that time was virtually nonexistent.

On cross-examination, the Borrowers questioned Scott regarding his views about a $2.73
million appraisal Compass Bank had received before the foreclosure sale from property
valuation company Integra Realty, Inc.:

      COUNSEL FOR BORROWERS: And you were delighted that it appraised
      for that much, because it was more than the bank had in the property, was it
      not?
      SCOTT: That would be a mischaracterization of my evaluation of the
      circumstances.
      COUNSEL FOR BORROWERS: And with respect to the property, you
      thought at that time, did you not, that if I foreclose on this, I can sell this
      property for more than the bank had in it, and the bank would come out
      looking good, would it not?
      SCOTT: Sorry, the question is?
      COUNSEL FOR BORROWERS: Sure. Isn’t that what you thought?
      SCOTT: No, ma’am.
      COUNSEL FOR BORROWERS: You were in a rush to foreclose on this
      property, because you figured you could get a property in excess of what
      was owed on it and that would make you look good as the manager of
      special assets?
      SCOTT: If you would review the documents provided to you in discovery,
      you will find when I received this appraisal, that I was shocked at the
      numbers the appraiser gave it and I challenged the appraisal through our
      appraisal group.
      COUNSEL FOR BORROWERS: No, sir. You did that after you
      foreclosed on the property. You never complained about this appraisal until
      after you had foreclosed and tried to market it for a month; isn’t that
      correct?
      SCOTT: I don’t remember the timing of receipt versus the timing of my
      complaint about the appraisal, but when I began to compare the appraisal
      with the reality in the market, the offers that were being received, the
      saturation in the market that I discovered existed, as well as our internal
      officer’s experience in that market, it was quite disturbing, because this
      value, though based upon historical sales, was not reflective at the time of

                                            9
        the current interest in raw land.
        COUNSEL FOR BORROWERS: Mr. Scott, isn’t it true that you, after you
        had foreclosed, went and asked for the appraiser to come back and re-
        appraise this, and you were told it wouldn’t do any good because the
        appraiser isn’t going to lower the value much below that 2.7.
        SCOTT: I was told that they would lower the value, but my appraisal group
        declined on having them submit their modification to the appraisal.
        COUNSEL FOR BORROWERS: In fact, you were upset after the
        foreclosure, after you had tried to market this foreclosed property
        unsuccessfully for a month, you were upset because you had relied on that
        in foreclosing on this property; isn’t that correct?
        SCOTT: That is correct. And found that it was unrealistic in value.

In light of this testimony, Compass Bank contends that the trial court could consider
Scott’s opinion regarding the property’s fair market value under the Property Owner
Rule.

        The supreme court’s extension of the Property Owner Rule to entities does not
dispense with the requirement that “a witness must be personally familiar with the
property and its fair market value.” Speedy Stop, 337 S.W.3d at 849. Thus, an officer or
employee who lacks personal knowledge of the property in question and its fair market
value is not a proper source of valuation testimony regardless of his job title. See id. at
849-50.

        In Speedy Stop, the supreme court addressed whether LaBeff — the vice president
of Speedy Stop’s corporate general partner — could testify about the value of condemned
property under the Property Owner Rule even though he had not been designated as an
expert. The supreme court concluded that LaBeff could not testify under the Property
Owner Rule because (1) he was not an officer or employee of Speedy Stop; (2) he did not
specify in his affidavit that he was familiar with the property and its value; and (3) his
affidavit failed to establish that his opinion was based on personal familiarity rather than
an expert’s “specialized knowledge, skill, experience, training, or education.” Id. at 849.

        In his affidavit, LaBeff stated that he (1) had been involved with the acquisition


                                            10
and sale of all Speedy Stop convenience stores since 1982; (2) had been in charge of all
real estate acquisitions and sales for Speedy Stop “for several years;” (3) was responsible
for dealing with easement issues at all Speedy Stop convenience stores and fast food
restaurants; (4) maintained familiarity with realty values in Harris County through
various means in order to fulfill his job duties; (5) was aware of how a utility easement
can affect the value of commercial property such as the tract at issue; and (6) was
“making this affidavit on behalf of the owner, as the owner’s representative and as the
owner.” Id. at 848. LaBeff also stated, “It is my opinion based upon my knowledge,
background, education and experience that the difference in the fair market value of the
property in question (which is the subject matter of the lawsuit) immediately before and
immediately after the condemnation of this easement, was $62,000.” Id. at 852. (original
emphasis). “Further, it is my opinion as the owner of the property in question that the
difference in value, immediately before and immediately after the condemnation, was
$62,000, all because of the condemnation and the easement which resulted from the
condemnation.” Id.

       The supreme court concluded that LaBeff’s affidavit did not satisfy the Property
Owner Rule because his opinion was based on “his expertise — his ‘knowledge,
background, education and experience’ — not his personal familiarity with the Property”
and its value. Id.

       Here, Scott listed several factors Compass Bank considered in forming the “bank’s
opinion” that the property’s value at the time of foreclosure was $1 million. However,
listing factors considered by Compass Bank does not demonstrate Scott’s personal
familiarity with the property’s value and knowledge of the market at the time of the
foreclosure sale. See id. at 849-50, 852. Scott also testified that Compass Bank’s opinion
of the property’s value was based on “offers received and the information given to us by
our internal and external valuation experts.” Scott testified that he compared Integra’s
$2.73 million appraisal with “the reality in the market;” offers Compass Bank received;
“the saturation in the market;” and a Compass Bank “internal officer’s experience in the

                                            11
market.” Based on this information, Scott opined that the $2.73 million appraisal value
did not reflect “the current interest in raw land.” Scott started questioning the appraisal
and looking into market conditions only after he foreclosed on the property in reliance on
the Integra appraisal and unsuccessfully marketed the property for one month.

          This testimony shows that, as in Speedy Stop, the opining individual’s property
value opinion was based on sources of information other than his own personal
knowledge and familiarity. Scott’s opinion of fair market value at the time of foreclosure
was based on information including offers received, information from “internal and
external valuation experts,” and another Compass Bank officer’s experience. This is
more in the nature of testimony predicated on a review of materials by a testifying expert.
See Tex. R. Evid. 703. But Scott, like LaBeff in Speedy Stop, could not testify as an
expert because he had not been designated as an expert. Scott did not testify that he was
personally familiar with the market in Frisco at the time of the foreclosure sale; what
Scott may have discovered after the foreclosure sale may or may not be reflective of the
market or the property’s value at the time of foreclosure.

          At most, the record before us demonstrates that Scott had some familiarity with
some of the property’s attributes; the record here does not demonstrate that Scott had
familiarity with the property’s value based on those attributes. We therefore conclude
that the evidence before us shows that the Borrowers rebutted the presumption that Scott
was personally familiar with the property’s fair market value in this case. Accordingly,
his testimony cannot be relied upon under the Property Owner Rule and did not constitute
evidence of market value that may be relied on to determine the property’s fair market
value.4

          B.    Market Value Is Not Established By An Unaccepted Purchase Offer, A
                Property Foreclosure Bid, Or A Property Sale One Year After
                Foreclosure
          We next consider the Borrowers’ arguments that the amount Compass Bank bid
          4
         In light of this disposition, we do not address whether Compass Bank properly could rely on the
Property Owner Rule with respect to property that Compass Bank did not own on the date of foreclosure.

                                                  12
for the property at the foreclosure sale, the price at which Compass Bank sold the
property one year after the foreclosure sale, and an unaccepted purchase offer to buy the
property do not establish the property’s fair market value at the time of foreclosure.

         Scott testified at trial that Compass Bank bid $1.2 million for the property at the
foreclosure sale; he testified that Compass Bank sold the property for $980,000 a year
after the foreclosure sale.

         Actual sales price is not evidence of fair market value when circumstances
indicate that the sale is out of the ordinary in some way. SPT Fed. Credit Union v. Big H
Auto Auction, Inc., 761 S.W.2d 800, 801 (Tex. App.—Houston [1st Dist.] 1988, no writ).
“‘[E]vidence of what property sold for at a foreclosure sale is not competent evidence of
its fair market value, since the transaction is not a free one between a willing seller and a
willing buyer.”’ Id. at 801-02 (citing Price v. Gulf Atlantic Life Ins. Co., 621 S.W.2d
185, 187 (Tex. App.—Texarkana 1981, writ ref’d n.r.e.)).

         Accordingly, Scott’s testimony that Compass Bank purchased the property for
$1.2 million at the foreclosure sale is incompetent evidence of the property’s fair market
value.    See id. Evidence of the property’s sale price of $980,000 a year after the
foreclosure sale also is not competent evidence of fair market value in this case because
the record does not reflect anything about the circumstances of the sale, i.e., if the sale
was “out of the ordinary in some way.” There is no evidence regarding how the property
was marketed a year later and whether market conditions were comparable to the
conditions at the time of the foreclosure sale on May 5, 2009. See id. at 801; see also
Moore v. Bank Midwest N.A., 39 S.W.3d 395, 402 (Tex. App.—Houston [1st Dist.] 2001,
pet. denied).

         The Borrowers asked Scott about an unaccepted purchase offer they received from
Landwhite Developers LLC about two weeks after Compass Bank purchased the property
at the foreclosure sale. In the offer, Landwhite proposed the following terms with regard
to the purchase price:


                                             13
       The purchase price of property shall be $2,500,000. All cash at closing less
       deposits and subject to customary adjustments and prorations. The
       purchase price will include the assignment to purchaser of all building
       plans and site plans, building specification survey, engineering report,
       geotechnical reports, environmental reports and all other project related
       materials and plans. Purchase price will also include the transfer and
       assignment to the purchase of all approvals, development rights and permits
       obtained, applied for by seller.
The Borrowers argue that the trial court could not rely on unaccepted offer evidence in
determining the property’s value because such evidence is not evidence of fair market
value as a matter of law.

       “Texas courts have long held that unaccepted offers to purchase property are no
evidence of market value of property.” Lee v. Lee, 47 S.W.3d 767, 785 (Tex. App.—
Houston [14th Dist.] 2001, pet. denied) (citing Hanks v. Gulf, Colo. & Santa Fe Ry. Co.,
159 Tex. 311, 320 S.W.2d 333, 336-37 (1959)). Therefore, the trial court could not rely
on any evidence relating to an unaccepted purchase offer or the terms of that offer in
determining the property’s fair market value in this case.

       Compass concedes that unaccepted offers generally are not evidence of fair market
value. However, Compass Bank argues that the trial court did not rely on unaccepted
offer evidence in determining the property’s fair market value and deficiency. Instead,
Compass Bank contends that “having been introduced to the information through
Appellants’ evidence and cross examination, the trial court appears to have determined
based on . . . Howe’s testimony that . . . additional assets – the ‘other project related
materials and plans . . . approvals, development rights, and permits (obtained or applied
for)’ – had value.”

       Compass Bank points to testimony from the Borrowers’ valuation expert, Howe,
who testified that the Borrowers had invested approximately $300,000 as of May 2009 in
what the trial judge referred to as “the specs, the reports, plans, and all of the paperwork.”
Compass Bank contends that the trial court’s valuation is supported because Howe’s
property valuation of $2.7 million “less his $300,000.00 value of the peripherals equals


                                             14
the trial court’s $2.4 million valuation determination.”

       Compass Bank relies on the following exchange between the trial court and Howe
to support its argument:

       THE COURT: I’ve got one [question]. I asked this before, but I think you
       are probably the only person who can answer it. What amount of money,
       as of May of 2009, did your company have invested in the specs, the
       reports, plans, and all of the paperwork involved in the development of this
       piece of property?
       HOWE: Without having numbers directly in front of me, it was close to
       $300,000.
       THE COURT: That would have been my guess. So, if — just doing the
       math then, netted out, it would be 2.2 — if you had been able to put
       together a package deal that everybody was interested in after the $2.5
       million offer, there would have been a net of 2.2 for the land.
       HOWE: No, sir, we would not have got anything for the plans.
       THE COURT: I know you may not have got anything in your plans, but if
       the buyer was insisting on getting all of the plans and you had to throw
       them in to make the deal go, then the cost of the land on an allocation
       between the plans and the land, the land would be about 2.2 and the plans
       would be worth about three — point three. You see what I am doing?
       HOWE: I see what you’re saying. It wouldn’t work exactly like that,
       because there is interest accrued in that $300,000; there is [sic] other costs
       included in that $300,000 that wouldn’t be a part of it. But I understand
       what you’re saying.
       THE COURT: Y’all see what I am saying?

Compass Bank’s contention that the trial court was not guided by unaccepted offer
evidence is contradicted by the trial court’s statements:

       THE COURT: Well, the only evidence — it seems to me the only pure
       evidence I have of the issue in this case is Mr. Howe’s opinion and the
       bank’s opinion. I mean, those are the only two opinions that have been
       expressed. I don’t have any independent third-party opinions backed up by
       data of the value on that date. You all have not brought me anything that I
       — I have the former owner’s opinion and the owner-to-be’s opinion of the
       value. That’s all that you all technically brought me. And then I have these
       other data points, offers that were made, maybe. Sales afterwards. Other
       things that shed some light on minimum values, maybe, or maximum

                                             15
      values, I don’t know. . . . I either adopt somebody’s opinion or I take my
      best stab of what the value probably was about that time and go from there.
                       *                     *                     *
      THE COURT: Here’s what I’m thinking. The closest value that we have in
      terms of time, chronologically, is that offer of May. It’s a little less than the
      fair market value in the [Integra] appraisal of the end of February [of $2.73
      million] and it includes the written plans and all of that, so my inclination is
      to — so, if I take the 2.5 million in that offer and I knock off the value of
      the specs and plans, that gives a 2.2 million for the — take off 300,000 for
      the specs and plans, that would leave a value of 2 million for the land alone,
      which is half a million less than the appraisal. So that’s not inconsistent
      with the appraisal of a couple of months earlier. So a fair market value of
      2.2 million, a foreclosure debt of 2.6, round numbers, will leave a
      deficiency of 400,000. Or a 2.2 credit against the deficiency amount, 2.6
      would be a deficiency of about 400,000. That’s where I’m coming out on
      it.
                            *                     *                     *
      THE COURT: I didn’t use that offer. I calculated my own, because you all
      didn’t give me a — nobody gave me, other than two interested parties’
      opinions, nobody gave me a fair market value as of the date of foreclosure.
      That’s the way I see the evidence right now.
                            *                     *                     *
      THE COURT: Okay. So, I mean, I don’t know that I have to accept either
      of those opinions, so I didn’t. I formulated my own best estimate.
We reject Compass Bank’s argument that the trial court properly “accepted Mr. Howe’s
$2.7 million [valuation] opinion as a starting point, declined to accept Mr. Howe’s
position that the survey, plans and approvals should not be considered, subtracted out
$300,000 for those ancillary items and valued the property at $2.4 million.”

      The record contains no evidence that the cost of preparing “specs and plans” — in
any amount — affected the property’s value and should be considered in determining fair
market value. Except for the terms of the unaccepted Landwhite offer (which constitutes
no competent evidence of market value), there is no evidence suggesting that having
“specs and plans” would increase the fair market value of raw land — or that not having
“specs and plans” would decrease the fair market value of raw land.             Accordingly,
evidence of the value of “specs and plans” is no evidence of fair market value and cannot
                                             16
be considered in determining the property’s fair market value in this case. We conclude
that there is legally insufficient evidence to support the trial court’s finding that the fair
market value of the property was $2.4 million at the time of the foreclosure sale.

       C.     Unchallenged Expert Testimony

       We next address the Borrowers’ argument that, “because there was no legally
sufficient evidence to support the trial court’s finding of a fair market value as of May 5,
2009, of less than” $2.7 million, the trial court erred by concluding a deficiency existed in
this case. In that regard, the Borrowers argue that Howe’s unchallenged expert opinion
was the only evidence of the property’s fair market value presented at trial; his opinion
established that the property’s fair market value at the time of the foreclosure sale was at
least $2.7 million; and, therefore, the fair market value exceeded the amount Borrowers
owed Compass Bank after the foreclosure sale.

       Although a factfinder is not bound to accept valuation expert testimony, it cannot
“leap entirely outside of the evidence in answering” a valuation question. See Callejo v.
Brazos Elec. Power Co-op., Inc. 755 S.W.2d 73, 75 (Tex. 1988). A factfinder also is not
entitled to rely on its “own knowledge and experience as a substitute for” a party’s
evidence on value. Id. A factfinder is allowed to set the value at any amount between the
lowest and highest values by the evidence. State v. Huffstutler, 871 S.W.2d 955, 959
(Tex. App.—Austin 1994, no writ).

       Howe’s expert testimony on the property’s fair market value was unchallenged at
trial and remains unchallenged on appeal.         Compass Bank did not present expert
testimony or any other competent evidence that the trial court could have relied upon in
determining a fair market value of $2.4 million. The only evidence of fair market value
is Howe’s unchallenged expert opinion that the property value at the time of the
foreclosure sale was $2.7 to $2.8 million.

       We also note that, although the fair market value of the property as determined in
the Integra appraisal was discussed at trial, the appraisal never was admitted into


                                             17
evidence “for the truth of what’s asserted therein.” The following exchange confirms this
determination:

      COUNSEL FOR BORROWERS: And you went and you got Integra
      appraisers — the bank went and hired Integra Appraisals to appraise this
      property, did it not?
      SCOTT: It did.
      COUNSEL FOR BORROWERS: And they came back and told you that
      the fair market value of this property—
      COUNSEL FOR COMPASS BANK: Objection, your Honor. This is a
      hearsay question. She is asking about an appraisal for a value from
      appraiser for the truth of the matter asserted, which is what the value he
      stated in that appraisal is.
      THE COURT: Well, maybe so, but you opened this up by getting his
      opinion on what the property was worth, and I would like to hear what his
      opinion was based on.
                       *                    *                     *
      THE COURT: It’s part of what the information he got in forming his
      opinion.
                       *                    *                     *
      COUNSEL FOR BORROWERS: Judge, we would offer, at this time,
      Defendant’s Exhibit 1 [the Integra appraisal].
      COUNSEL FOR COMPASS BANK: Objection, your Honor, hearsay.
      That person who prepared that appraisal is not here to testify; cannot be
      examined on any of the assumptions or anything else that are contained in
      that appraisal to allow the Court to understand the basis for that appraisal at
      the time it was made. It’s strictly hearsay.
      THE COURT: The hearsay objection is sustained in the sense that I’m not
      going to accept it for the truth of what’s asserted therein, but it will be
      admitted as an operative document, as something the bank had in front of it.
      And I think this witness, having opined as to the value of the property, can
      be examined about what somebody else said about the value of the
      property, that he had available to him at the time.
Because the Integra appraisal never was admitted “for the truth of what’s asserted
therein,” it is not competent evidence of fair market value and cannot be relied upon to




                                            18
establish a range of values.5

        Additionally, the trial court indicated that it did not rely on the Integra appraisal in
determining the property’s value in this case:

        THE COURT: Well, the only evidence — it seems to me the only pure
        evidence I have of the issue in this case is Mr. Howe’s opinion and the
        bank’s opinion. I mean, those are the only two opinions that have been
        expressed. I don’t have any independent third-party opinions backed up by
        data of the value on that date. You all have not brought me anything that I
        — I have the former owner’s opinion and the owner-to-be’s opinion of the
        value. That’s all that you all technically brought me. And then I have these
        other data points, offers that were made, maybe. Sales afterwards. Other
        things that shed some light on minimum values, maybe, or maximum
        values, I don’t know. But I really don’t have a hard, you know, an
        independent gauge of the value on the foreclosure date, so I’m going to
        have to make my best stab. Either that, or — I mean, I don’t — I either
        adopt somebody’s opinion or I make my best stab of what the value
        probably was about that time and go from there.
Under these circumstances, there is no evidence in the record before us to support a
finding that the property’s value was less than $2.7 million.

        It follows that the trial was not authorized to find that the property’s value was
$2.4 million when the only competent evidence presented at trial supports a fair market
value of at least $2.7 million. See Callejo, 755 S.W.2d at 75 (“There is simply no
testimony or other evidence in this record” to support the jury’s easement value of
$364,928.80 when no witness testified that the value was higher than $33,541);
Huffstutler, 871 S.W.2d 959 (affirming judgment notwithstanding the verdict because the
only evidence of value was the testimony of one expert that the property’s value was
$310,000 and the owner’s testimony that the property’s value was $450,000, but the jury

        5
          The dissent contends that “Howe also reviewed and considered” the February 27, 2009 Integra
appraisal of the property. The record does not support any suggestion that Howe relied in whole or in part
on the Integra appraisal in forming his own expert opinion regarding the property’s value at the time of
foreclosure. After the trial court ruled that it was “not going to accept [the Integra appraisal] . . . for the
truth of what’s asserted therein,” the Borrowers questioned Howe about the appraisal. Howe answered
the questions asked of him. Howe did not base his expert valuation testimony on the appraisal. Instead,
Howe based his expert valuation testimony on his expertise regarding conditions in the Frisco market in
2008 and 2009.

                                                      19
assigned the property a value of $230,000); First State Bank v. Keilman, 851 S.W.2d 914,
930 (Tex. App.—Austin 1993, writ denied) (“Except for the fact that the jury’s figure
falls in between the Keilmans’ $7,161.44 figure and FSB’s $0 figure, it appears that the
jury pulled its answer out of a hat” when both the Keilmans and FSB provided a
relatively precise method for calculating unauthorized interest.); Wegner v. State, 829
S.W.2d 922, 923 (Tex. App.—Tyler 1992, writ denied) ( “The Wegners’ two value
witnesses provided the only evidence on the issue. Their valuations of remainder damage
ranged from $97,894 to $99,000. The State presented no evidence of the . . . value . . .
from which the jury could have arrived at its answer of $30,000.”).

      A factfinder need not accept valuation evidence that it has determined to be
lacking in credibility. See, e.g., 2218 Bryan St., Ltd. v. City of Dallas, 175 S.W.3d 58,
66-67 (Tex. App.—Dallas 2005, pet. denied) (factfinder not required to accept valuation
expert’s testimony in face of specific finding that testimony is not credible even if no
other valuation testimony is proffered). This record contains no such determination with
respect to Howe, who was designated as an expert and testified as an expert. And,
although a factfinder has discretion to set the property value at any amount between the
range of values introduced into evidence, Huffstutler, 871 S.W.2d at 959, a factfinder
may not assess a value amount neither authorized nor supported by the evidence. See
Keilman, 851 S.W.2d at 930.

      The dissent suggests that the following factors affected the property’s value and
would justify a reduction from $2.7 million: “[T]he market for raw land had dropped in
the interim; available financing was limited; part of the property was within the flood
plain; the Borrowers had the property on the market unsuccessfully for 2-3 months prior
to foreclosure; and the value of the property was impacted by a foreclosure sale and its
sale by a bank.” This contention does not support a valuation of $2.4 million because
evidence of indeterminate “factors,” standing alone, does not suffice to establish market
value. No evidence in this record provides a means of computing a discounted $2.4
million value based on the impact of these unquantified factors, or a range within which

                                           20
the trial court could have chosen a value based on the identified factors. Therefore,
identification of these factors alone does not support a valuation of $2.4 million.6

        We also disagree with the dissent’s assertion that the trial court could have
considered the subsequent sale of the property for $980,000 — one year after the
foreclosure sale — as some evidence that the property was worth less than 2.7 million in
May 2009. Even if we assume that the 2010 sale was between a willing buyer and a
willing seller, there is no evidence regarding how the property was marketed to attract the
assumed willing buyer a year after the foreclosure sale and whether market conditions
were comparable to the conditions at the time of the foreclosure sale a year later.
Additionally, even if the subsequent property sale for $980,000 could have been
considered as some evidence that the property was worth less than $2.7 million at the
time of the foreclosure sale a year earlier, this evidence does not support Compass Bank’s
reliance on an assumption that the trial court subtracted $300,000 from Howe’s $2.7
million valuation.7

        Because the evidence authorized only a finding of a fair market value of at least
$2.7 million, we conclude that the trial court erred by using a lower figure and finding a
deficiency. At the time of the foreclosure sale, the Borrowers owed Compass Bank
$2,529,172.64, and the property’s fair market value was at least $2.7 million.
Accordingly, the trial court erred by finding a deficiency of $129,172.64. We sustain the
Borrowers’ first issue.

        6
          Howe, in contrast, testified that adverse changes in market conditions between February 2008
and May 2009 reduced the property’s market value by approximately 10 to 12 percent from its $3.2
million purchase price.
        7
            In arguing that the trial court admitted evidence of the $980,000 sale price from 2010 as “some
evidence of what the land was worth at the time in question,” the dissent relies upon a statement made by
the trial court in response to an objection during questioning of Howe. Compass Bank’s counsel asked
Howe: “Can you explain for me, then why one year after the foreclosure sale the bank was only able to
sell it for $980,000?” Counsel for the Borrowers objected to the question because it assumed facts not in
evidence and on relevancy grounds. The trial court stated: “Well, I assume that he can link it up to the
facts eventually. And I’ll admit it as some evidence of what the land was worth at the time in question.”
It is unclear whether “time in question” refers to the time of the foreclosure sale or the time of the
subsequent sale in 2010. In any event, the question was stricken after an additional colloquy with the trial
court and Howe never answered it.

                                                    21
       III.     Disposition

       In their second issue, the Borrowers contend that the trial court should have
entered a take nothing judgment against Compass Bank because the evidence established
that the property’s fair market value at the time of the foreclosure sale was at least $2.7
million and therefore exceeded the debt the Borrowers owed Compass Bank.               The
Borrowers ask this court to reverse and render judgment in their favor.

       We must determine what the appropriate appellate disposition is in this case. The
rules of appellate procedure provide that reversal requires rendition of a judgment unless
a remand is necessary for further proceedings. Tex. R. App. P. 43.3(a). We can render
judgment only if there is no evidence to support the deficiency amount awarded by the
trial court, and if the evidence conclusively establishes that there is no deficiency. See
Westtex 66 Pipeline Co. v. Baltzell, No.01-01-00826-CV, 2003 WL 21665312, at *8
(Tex. App.—Houston [1st Dist.] July 17, 2003, pet. denied) (mem. op.); Hill v. Spencer
& Son, Inc., 973 S.W.2d 772, 776 (Tex. App.—Texarkana 1998, no pet.); Wegner, 829
S.W.2d at 923. As discussed above, the only competent and unchallenged evidence of
the property’s fair market value at the time of the foreclosure sale presented at trial was
$2.7 to $2.8 million; the debt the Borrowers owed at the time of the foreclosure sale was
$2,529,172.64. Therefore, the fair market value was greater than the debt amount the
Borrowers owed Compass Bank and, as a matter of law, there is no deficiency.

       The correct appellate remedy is to reverse the trial court’s deficiency judgment
and render a take nothing judgment against Compass Bank. We sustain the Borrowers’
second issue.

                                       Conclusion

       Having concluded that (1) the trial court’s value determination of $2.4 million and
thus the deficiency judgment was not supported by competent evidence; (2) the only
competent evidence established a property fair market value of at least $2.7 million; and
(3) there is no deficiency because the debt the Borrowers owed was less than the


                                            22
property’s fair market value at the time of the foreclosure sale, we reverse the trial court’s
deficiency judgment and render a take nothing judgment against Compass Bank.




                                           /s/    William J. Boyce
                                                  Justice



Panel consists of Justices Brown, Boyce, and McCally. (McCally, J., dissenting).




                                             23
