2012 Attorney General Opinions and Court Decisions
Listed below are 2012 opinions and decisions concerning various property tax issues. The list does not include all opinions and decisions concerning property tax. The summaries are provided by the Comptroller's office as a public service intended solely as an informational resource. The summaries are not intended as substitutes for or interpretations of the opinions and decisions summarized and should not be relied upon as such. Additionally, the information provided neither constitutes nor serves as a substitute for legal advice. Questions regarding the meaning or interpretation of any information included or referenced herein should, as appropriate or necessary, be directed to an attorney or other appropriate counsel.
Attorney General Opinions
Opinion No. GA-0981
Re: Authority of a county to form a transportation reinvestment zone, collect an ad valorem tax increment, and pledge and assign all or part of the increment to secure bonds to pay the cost of a transportation project (RQ-1071-GA)
Summary: A county's issuance of tax increment financing bonds secured by a pledge of the county's ad valorem tax increment would be subject to constitutional challenge as violating the equal and uniform taxation requirements of article VIII, section 1(a) of the Texas Constitution.
Opinion No. GA-0974
Re: Whether there is a conflict between two provisions of the Transportation Code that permit judges and peace officers to omit their residence address from their drivers' licenses, and a provision of the Tax Code that requires the submission of proof of the residence address of an applicant for a homestead exemptions RQ-1060-GA)
Summary: If a federal or state judge, the spouse of a federal or state judge, or a peace officer is otherwise entitled to claim a homestead exemption under section 11.13 of the Tax Code, he or she may comply with the requirements of section 11.43(n) of the Tax Code by producing a personal identification certificate issued by the Department of Public Safety and showing his or her residence address. The Legislature has prohibited chief appraisers from accepting alternative forms of identification from homestead exemption applicants.
Opinion No. GA-0973
Re: Whether a taxing authority may impose, and a county is obligated to pay, penalties and interest on ad valorem taxes imposed on real property purchased by a county for the year of sale that have remained unpaid (RQ-1063-GA)
Summary: When a political subdivision acquires property from a private party and the property qualifies for a constitutional or statutory tax exemption, the exemption generally precludes charging the political subdivision penalties and interest for any outstanding ad valorem taxes.
Whether a particular piece of property acquired by a political subdivision is tax exempt on a specific date will depend on particular facts regarding the property.
Opinion No. GA-0965
Re: Transfer of a tax lien pursuant to section 32.06 of the Tax Code, and the items that may be secured by the transferred lien (RQ-1051-GA)
Summary: The tax assessor-collector, acting alone, must carry out the statutorily required duties related to a transfer of a tax lien under section 32.06 of the Tax Code. Neither the tax assessor-collector nor the governing body of the taxing unit is empowered to deny the transfer of a tax lien if the conditions of section 32.06 of the Tax Code are otherwise met.
A court could conclude that closing costs and lien recordation fees charged by a property tax lien transferee under section 32.06 of the Tax Code are secured by the transferred tax lien.
Opinion No. GA-0954
Re: Calculation of a county's rollback tax rate (RQ-1025-GA)
Summary: Chapter 26 of the Tax Code authorizes a petition for a rollback election when the sum of a county's individually adopted tax rates exceeds the combined rollback rate, but under chapter 26's plain terms, the right to petition for a rollback election is not automatically triggered when a county adopts a rate for a particular tax that is above the rollback rate for that particular tax.
Opinion No. GA-0953
Re: Authority of a county to issue bonds pursuant to article VIII, section 1-g(b), Texas Constitution (RQ-1040-GA)
Summary: The Legislature has not authorized a county to issue tax increment financing bonds as a city may under chapter 311 of the Tax Code.
A county qualifies as a "political subdivision" as that term is used in article VIII, section 1-g(b). A municipality has exclusive authority to pledge all or part of a tax increment fund, including any tax increments deposited by a county, for payment of tax increment bonds or notes. A county may not issue tax increment financing bonds or unilaterally pledge any part of the tax increment fund.
Opinion No. GA-0943
Re: Whether, in determining the market value of a residence homestead, a chief appraiser is required to consider the value of previously sold foreclosed residential property (RQ-1029-GA)
Summary: Pursuant to Tax Code section 23.01(c), a chief appraiser, in appraising a residence homestead, may not exclude from consideration the value of neighboring properties simply because they were subject to a foreclosure sale.
Opinion No. GA-0924
Re: Evidence that must be submitted with regard to an application for a residence homestead exemption under section 11.43, Tax Code (RQ-1008-GA)
Summary: Only a driver's license, personal identification certificate or vehicle registration receipt issued by this state may be used to meet the requirements of Tax Code subsection 11.43(j)(4).
Opinion No. GA-0918
Re: Proration of homestead property tax exemption under section 11.131 of the Tax Code for a fully disabled veteran who died during 2011; and application of that exemption to the surviving spouse of a veteran who dies during 2011 (RQ-1005-GA)
Summary: Effective January 1, 2012, subsection 11.131(c) of the Tax Code provides a residence homestead tax exemption to the surviving spouse of a fully disabled veteran who at the time of death qualified for an exemption under subsection 11.131(b) of the Tax Code. The fact that the disabled veteran died in 2011, prior to the effective date of subsection 11.131(c), does not deprive the surviving spouse of the exemption for the 2012 tax year.
The homestead tax exemption in subsection 11.131(b) of the Tax Code for a fully disabled veteran who died in 2011 continues for the remainder of the 2011 tax year.
Opinion No. GA-0917
Re: Authority of the Department of Public Safety to contract with a county tax assessor-collector to perform its duties relating to the issuance of driver's licenses and personal identification certificates (RQ-1002-GA)
Summary: The Department of Public Safety lacks statutory authority to contract with a county tax assessor-collector to perform its duties relating to the issuance of driver's licenses and personal identification certificates. Similarly, counties lack statutory authorization to participate in such a program.
Opinion No. GA-0911
Re: Jurisdiction of the Appraiser Licensing and Certification Board over a property tax appraiser's uniform and equal analysis (RQ-0992-GA)
Summary: Chapter 1103 of the Texas Occupations Code regulates the licensing and certification of real estate appraisers. Chapter 1103 subjects appraisers to the Uniform Standards of Professional Appraisal Practice ("USPAP") and Texas Appraiser Licensing and Certification Board ("Board") rules. If the USPAP or Board rules regulate a particular task that appraisers might perform, chapter 1103 would require appraisers to comply with those regulations. Subject to administrative and judicial review, the Board may determine whether the USPAP or Board rules regulate particular tasks that appraisers might perform.
Opinion No. GA-0908
Re: Whether the members of the board of trustees of the Clear Lake City Community Association may hold a meeting by means of a telephone conference call (RQ-0989-GA)
Summary: The members of the board of trustees of the Clear Lake City Community Association, a "property owners' association" as defined in the Open Meetings Act, chapter 551 of the Government Code, may not hold a meeting by means of a telephone conference call, even if only one member so participates, except in the limited circumstances described in section 551.125, Government Code.
Courts of Appeals Decisions
Dobroslavic et al. v. Bexar Appraisal District et al., No. 04-12-00207-CV (Fourth Court of Appeals – San Antonio)
(December 28, 2012)
This case involves dismissal for want of prosecution. The appellate court set forth the following factual background:
On September 28, 2010, the appellants filed a pro se suit for judicial review of a decision by the Bexar County Appraisal Review Board. The Bexar County Appraisal Review Board and the Bexar County Appraisal District, the appellees, filed separate answers to the suit on October 14, 2010, and October 19, 2010, respectively. For the next thirteen months, nothing was filed in the case. Then, on December 1, 2011, the trial court clerk sent appellants a notice advising them that their case was set for dismissal for want of prosecution on March 6, 2012. The notice stated that appellants’ case had been “on file for an extended period of time” and had “not been prosecuted,” and that “the court [was] of the opinion that in accordance with the Supreme Court guidelines” the case should be “specially set for dismissal for want of prosecution.” The notice further stated that the case was set for dismissal on March 6, 2012, at 8:30 a.m. “unless good and sufficient cause is shown for [its] retention on the docket.” After receiving the dismissal notice, appellants retained counsel to represent them.
On January 13, 2012, appellants’ counsel filed a notice of appearance in the case and asked the trial court clerk to set the case for a bench trial on July 9, 2012. Appellants received conflicting responses to their request for a trial setting. The trial court clerk responded that the case would not be set for trial because it was set on the dismissal docket. However, the trial court clerk also returned a copy of an order, signed by the trial court, setting the case for a bench trial on July 9, 2012.
On February 15, 2012, appellees filed a jury demand and paid the jury fee. On February 29, 2012, appellants filed a verified motion to retain the case on the trial court’s docket. In the motion, appellants urged the trial court to retain their case on the docket because they wished to prosecute the case. The motion also stated that during the period of time since appellants’ counsel had been hired in December 2011, expert witnesses had been retained, expert reports had been prepared and served on the appellees, and limited discovery had taken place. The motion further requested that the case be set for a jury trial after June 1, 2012.
On March 6, 2012, appellants and appellees appeared in the trial court in accordance with the dismissal notice. The trial court held a hearing. Thereafter, the trial court signed an order dismissing the case for want of prosecution. This appeal ensued.
In reviewing the record, the appellate court noted:
[T]o avoid dismissal for want of prosecution under the trial court’s inherent authority, appellants were required to demonstrate to the trial court that they had exercised reasonable diligence in prosecuting their suit. See McCray, 2012 WL 983172, at *2 (citing MacGregor, 941 S.W.2d at 75-76)). To decide the diligence issue, trial courts consider the entire history of the case, including whether the plaintiff requested a trial setting, the amount of activity in the case, the passage of time, and the plaintiff’s excuses for the delay. Scoville, 9 S.W.3d at 204; Christian, 985 S.W.2d at 514-15. No single factor is dispositive. Scoville, 9 S.W.3d at 204; Christian, 985 S.W.2d at 515. Reasonable diligence is generally a question of fact. Christian, 985 S.W.2d at 515 (citing MacGregor, 941 S.W.2d at 75-76)).
Here, the record shows there was a complete absence of activity in this case from the time the appellees filed their answers in October 2010, until January 13, 2012, when appellants’ counsel filed a notice of appearance. No trial setting was requested until January 13, 2012, when the appellants made their initial request for a bench trial setting. Thus, the record shows appellants did not begin to prosecute their case until after it had been set on the dismissal docket.
The appellate court found that the trial court did not abuse its discretion in dismissing the appellants’ case and affirmed the trial court’s judgment.
Sections 33.54 and 34.08
Security State Bank & Trust v. Bexar County, Texas et al., No. 04-11-00928-CV (Fourth Court of Appeals – San Antonio)
(December 21, 2012)
This case involves claims of entitlement to notice and joinder in a delinquent tax suit and notice of a subsequent tax sale. The County of Bexar, Northside Independent School District, and Bexar County Emergency Services District No. 8 (“Taxing Authorities”) filed suit on November 13, 2008 against Post Oak Development of Texas, Inc. (“Post Oak”) to collect delinquent property taxes. The Taxing Authorities obtained a final judgment on May 29, 2009, including judicial foreclosure on the tax lien, and an order of sale for the 10-acre property, after which time the property was sold at a sheriff’s sale to Majid Nikmaram (“Nikmaram”) for $55,000.The deed from the sheriff’s sale was filed in the county deed records on September 24, 2009 and, after satisfaction of the judgment for delinquent taxes, the remaining balance ($47,484.92) paid by Nikmaram was deposited into the court’s registry and was subsequently released to Post Oak.
Previously, in December of 2006, Post Oak had obtained a loan from Security State Bank and Trust (“Bank”) for $1,650,000 that was secured by property owned by Post Oak that included the 10-acre tract later sold at the tax sale. Post Oak defaulted and the Bank posted the property for foreclosure sale on March 2, 2010. The Bank purchased the property for approximately $1.1 million and filed the deed of record on March 2, 2010. As set forth by the appellate court:
On September 28, 2010, the Bank filed a petition against the Taxing Authorities and Nikmaram seeking a declaratory judgment vacating and setting aside the tax sale of the Property as void based on the failure to notify and join the Bank in the delinquent tax suit. The Bank subsequently added a claim to quiet title to the Property in its name based on its purchase at the foreclosure sale on March 2, 2010. The Taxing Authorities filed an answer asserting several affirmative defenses which included a limitations bar under Tax Code section 33.54 and failure to comply with a condition precedent to suit under section 34.08 of the Tax Code. TEX. TAX CODE ANN. §§ 33.54, 34.08 (West 2008). Nikmaram filed an answer asserting the same affirmative defenses based on sections 33.54 and 34.08 of the Tax Code, along with other defenses. Nikmaram also filed a counterclaim to quiet his own title and for recovery of attorney’s fees.
In its analysis, the appellate court noted that “[a] lienholder possesses a legally protected property interest,” “[b]ecause a tax sale significantly affects a lienholder’s property interest, due process requires that the lienholder receive notice of the pending tax sale,” and “[a] record lienholder possesses a significant interest in the property subject to foreclosure to enforce a tax lien and should be joined in the tax suit.” The court stated:
Here, as a pre-existing lienholder of record, the Bank had a property interest that it was entitled to protect which would be, and in fact was, significantly affected by the tax suit and subsequent tax sale; thus, it was constitutionally entitled to notice in order to afford it an opportunity to protect its property interest. Mennonite Bd., 462 U.S. at 798-99. It is undisputed that the Bank was not served with notice of the 2009 tax suit. The Taxing Authorities acknowledged during oral argument that the Bank was entitled to notice of the tax suit and sale, and stated it is their standard practice to research the title records and serve notice of a delinquent tax suit and tax sale on record lienholders; they conceded that a mistake was made in this case, resulting in the failure to notify the Bank. See Shepherd v. Ledford, 962 S.W.2d 28, 33 (Tex. 1998) (a stipulation is an agreement, admission, or concession made in a judicial proceeding by the parties or their attorneys respecting some matter incident thereto); El Paso Natural Gas Co. v. Strayhorn, 208 S.W.3d 676, 686S87 (Tex. App.—Texarkana 2006, no pet.).
. . . .
Even though the Taxing Authorities acknowledge the Bank should have been joined in the tax suit, and should have received notice of the tax sale, they argue summary judgment in their favor was proper because the Bank’s suit is barred by its failure to comply with sections 33.54 and 34.08 of the Tax Code.
. . . .
The Bank concedes it did not comply with either provision of the Tax Code, but asserts it was not required to do so in order to bring a collateral attack.
The appellate court held:
[W]e conclude the Bank’s due process rights were violated when it received no notice of the underlying delinquent tax suit and subsequent tax sale. The Bank is not bound by the tax judgment, but the tax judgment is valid as to the parties who were joined in the tax suit; Nikmaram took the Property at the tax sale subject to the Bank’s lien. See Strauss, 221 S.W.3d at 791; Jordan, 158 S.W.3d at 38-39. The Bank’s suit challenging the validity of the tax judgment and subsequent tax sale was a proper collateral attack, and the Bank is entitled to summary judgment on its claim to vacate and set aside the tax judgment and tax sale as to its lien interest.
The appellate court reversed the trial court’s judgment in favor of the Taxing Authorities and Nikmaram, rendered judgment in favor of the Bank vacating and setting aside the tax judgment and sale as to the Bank’s lien interest, and remanded the Bank’s claim to quiet title to the property to the trial court for further proceedings.
Sections 42.02 and 42.26
Harris County Appraisal District v. Houston 8th Wonder Property, L.P. d/b/a Six Flags Astroworld, No. 01-10-00154-CV (First Court of Appeals – Houston)
(November 8, 2012)
This case involves challenges to an appraisal district appeal pursuant to Tax Code §42.02 and challenges to expert testimony under Tax Code §42.26. In 2006, Houston 8th Wonder Property, L.P. d/b/a Six Flags Astroworld (Houston 8th Wonder) purchased 104.196 acres of unimproved land for $77,000,000. Harris County Appraisal District (HCAD) appraised 101.833 acres of the tract at $74,668,035 for 2006. Houston 8th Wonder protested pursuant to Tax Code §41.44, asserting that the value was both over market and unequal compared with other properties. The ARB “determined that the property appraisal is incorrect and unequal and the value should be changed” and reduced both the market value and the appraised value from $74,668,035 to $48,054,000. Both parties appealed to district court and the district court rendered judgment in favor of the property owner that the appraised value of the subject property for 2006 was $31,938,000. HCAD appealed.
The property owner challenged HCAD’s right to appeal. The property owner argued that the ARB order did not implicate market value and there was no ARB order based on market value for HCAD to appeal because the property owner alleged “its original tax protest had been limited to the question of equal and uniform appraisal because that was the only relevance of the evidence it presented to the ARB.” The court stated:
[T]he “Property Tax Notice of Protest” filed by the property owner listed two reasons for protest, namely: (1) value is over market and (2) value is unequal compared with other properties. In addition, the ARB order actually determined that the original property appraisal was both “incorrect and unequal,” and it reduced not only the “appraised” value but also the “market” value from $74,668,035 to $48,054,000. Accordingly, the suggestions that the property owner did not challenge the property’s market value and that the ARB did not actually lower market value are affirmatively disproved by the record on appeal.
The property owner also argued that “the chief appraiser had ‘no standing to appeal that which he had no standing to protest.’” The court noted and held:
This argument is apparently premised upon the requirement applicable to property owners that administrative remedies must be exhausted before seeking judicial review of an appraisal district’s property valuation. However, the procedural differences between the avenues of appeal available to the property owner and the appraisal district require that the exhaustion principle be applied differently to the two types of appeals. Only the property owner, and not the chief appraiser or the taxing unit, has the right to protest the appraised value of a single taxpayer’s property before the ARB. But both the property owner and the chief appraiser have distinct rights to appeal the ARB order determining the protest.
Unlike the property owner, the appraisal district had no prior administrative remedy to exhaust at the ARB stage of the proceedings. As the entity responsible for the initial property valuation, the appraisal district had no right to initiate the protest procedure and no control over what objections would be presented by the property owner to the ARB. Regardless of what issues were presented by the property owner, the appraisal district had no grievance until the ARB altered its determination of the property’s market value and appraised value. The statutory procedure for the appraisal district to complain about the ARB’s ruling began with its right of “appeal” to the district court for a trial de novo. Thus, because the appraisal district contended that the ARB erred by reducing the property’s market value and appraised value, and it followed the statutory procedures for initiating an appeal, it had standing to challenge the ARB’s order in accordance with its statutory right to do so. There was no prior administrative procedure available to the appraisal district that it failed to exhaust.
The property owner argued further “that market value, which the appraisal district sought to challenge in its appeal, is irrelevant to the issue of unequal appraisal, which was a basis of the property owner’s protest to the ARB and appeal to the district court.” The court noted:
Although market value may not be necessary to a determination made pursuant to Tax Code section 42.26(a)(3), it is not irrelevant to a determination of appraisal value made pursuant to section 42.26(a)(1) & (2) . . . . Because market value is an element of the calculation of “appraisal ratio” that may be used to determine whether an appraisal is equal and uniform, the market value is not irrelevant, and the property owner’s argument to the contrary was incorrect.
In considering whether any error of the trial court “probably caused the rendition of an improper judgment or prevented [HCAD] from properly presenting its appeal,” the appellate court stated that “a de novo bench trial mooted the effect of granting the property owner’s jurisdictional plea.”
HCAD argued on appeal that the trial court erred in admitting the testimony of Gerald Teel, the property owner’s expert. HCAD asserted that Teel’s testimony constituted no evidence due to flawed methodology and Teel’s failure to produce documents upon which he relied. The appellate court limited its sufficiency analysis to the reliability of Teel’s testimony “[b]ecause the appraisal district stipulated that Teel was qualified as a real estate appraiser.” The court held:
Teel’s testimony makes clear that he followed a statutorily-approved methodology for estimating an appraised value. See TEX. TAX CODE ANN. §42.26(a)(3). He used the appraisal value of the comparable properties as listed in the tax rolls as his starting point. When he adjusted the values of the comparable properties, he relied on generally accepted appraisal principles that are commonly used among professionals in his field. Teel testified that his methodology had been tested, was generally accepted as valid, and was mandated, to some extent, by statute. See, e.g., Robinson, 923 S.W.2d at 557. By choosing to limit the comparable properties he selected to those near the subject property, he minimized the extent to which his analysis relied on his subjective interpretation. See id.
Relying on Covert v. Williamson Central Appraisal District, 241 S.W.3d 655 (Tex. App.—Austin 2007, pet. denied), the appraisal district argues that the properties Teel selected are not comparable because they are improved and the subject property is vacant. In Covert, the court of appeals held that section 42.26 did not permit a taxpayer to appeal the valuation of only a component part of his property. 241 S.W.3d at 659. Rather, the statute provides for an appeal of the entire property valuation, which includes both the land and the improvements. Covert does not address the admissibility question posited here: whether an expert’s testimony is inherently unreliable when, in the absence of any similarly sized and situated vacant tracts of land, he considers the land-only value of similarly sized and situated improved properties to reach an opinion of whether the subject property was unequally appraised. “The question of the degree of similarity necessary to render testimony of sales of other property admissible in evidence rests largely in the discretion of the trial judge.” Cherokee Water Co. v. Gregg Cnty. Appraisal Dist., 773 S.W.2d 949, 955 (Tex. App.—Tyler 1989), aff’d 801 S.W.2d 872 (Tex. 1990). We conclude that the court did not abuse its discretion by permitting Teel to testify based on the comparable values he used in his analysis. Cf. Cherokee Water Co., 773 S.W.2d at 954 (“The peculiar circumstances affecting the subject property make it difficult to appraise by any orthodox appraisal method.”).
The appellate court affirmed the trial court’s judgment.
Travis Central Appraisal District v. Wells Fargo Bank Minnesota, N.A., No. 03-11-00707-CV (Third Court of Appeals – Austin)
(October 12, 2012)
This case addresses issues regarding jurisdiction and exhaustion of administrative remedies. Wells Fargo Bank Minnesota, N.A. (Wells Fargo) had claimed a partial pollution-control exemption based on a positive-use determination by the Texas Commission on Environmental Quality (TCEQ) on property that housed a residential apartment building that had formerly been used as a landfill. Travis Central Appraisal District (TCAD) interpreted TCEQ’s positive-use determination to exempt land value attributable to storm-water retention ponds, but not any part of the improvement value of the apartment building. Wells Fargo paid its 2007 taxes under protest and appealed TCAD’s determination, asserting that TCEQ’s positive-use determination also exempted the value of the first floor apartment units in which pollution control devices had been installed. The appraisal review board upheld TCAD’s determination and Wells Fargo appealed to district court.
While the case for tax year 2007 was pending, TCAD issued Wells Fargo “the 2008 notice of assessed value,” applying the exemption in the same manner in which TCAD had applied it in 2007. Wells Fargo did not protest, pay the taxes, file suit, or add tax year 2008 to the 2007 suit. After Wells Fargo’s 2008 deadline to protest had passed, the trial court granted summary judgment in the 2007 suit in favor of Wells Fargo “and ordered TCAD to apply the pollution-control use determination issued by the TCEQ in a manner consistent with Wells Fargo's interpretation.” TCAD did not appeal the summary judgment order and it became final.
TCAD continued to apply the exemption in the same manner it had in 2007 and Wells Fargo filed a motion for sanctions with the trial court. In 2008, “[t]he trial court granted Wells Fargo's motion and ordered that Wells Fargo recover as a sanction the portion of the ad valorem tax assessed on the first-floor units, which Wells Fargo had paid under protest for the 2007 tax year.” TCAD appealed. The appellate court affirmed,
holding that the trial court did not abuse its discretion in sanctioning TCAD for failing to comply with the summary-judgment order because by granting Wells Fargo's motion for summary judgment, it was sufficiently clear to TCAD that the summary-judgment order required TCAD to downwardly adjust the property-tax assessment for the 2007 tax year, and the evidence was undisputed that it had failed to do so.
During the pendency of that first appeal, TCAD issued “the 2009 notice of assessed value” and, again, Wells Fargo did not protest, pay the taxes, file suit, or add tax year 2009 to the existing suit. After the appellate court issued its first opinion in March 2010, TCAD applied the exemption to the first-floor apartments for the 2007 tax year, but not for 2008 or 2009. In 2010, TCAD applied the exemption as it first had in 2007 and Wells Fargo protested, but the parties subsequently entered a settlement agreement under which Wells Fargo withdrew its protest “and waived the right to any further proceedings related to the 2010 assessment.”
Wells Fargo subsequently filed a second motion for sanctions in the trial court.
Wells Fargo asserted that the 2008 summary-judgment order required TCAD to apply the exemption and adjust the assessed value in all future tax periods, regardless of whether Wells Fargo had protested valuation in those years, because the tax code provides that once a taxpayer qualifies for the pollution-control exemption, the property owner need not claim it in subsequent years (subject to certain exceptions not asserted to be applicable in this case). See Tex. Tax Code Ann. §11.43(c). Wells Fargo argued that, following the 2008 summary-judgment order, TCAD's implementation of the exemption to all prospective tax periods was a ministerial task, TCAD had no discretion in applying it, and TCAD had contumaciously failed to comply with the trial court's order requiring its application. See id. §11.31(i) ("The chief appraiser shall accept a final determination by the executive director as conclusive evidence that the facility, device, or method is used wholly or partly as pollution control property.").
The trial court granted Wells Fargo’s motion for sanctions against TCAD in the amount of $337,956. “The amount of the sanctions award was based on the full amount Wells Fargo claimed to have overpaid for property taxes in 2008, 2009, and 2010, plus assessed penalties.” TCAD appealed.
The appellate court noted that Wells Fargo’s underlying suit was limited in scope to a complaint regarding tax year 2007 and that Wells Fargo “neither requested relief for the 2008, 2009, and 2010 tax years nor exhausted its administrative remedies as to those years.” The appellate court found:
Wells Fargo is not challenging the 2008, 2009, and 2010 assessments in a tax-protest suit; it is seeking sanctions based on the 2008 summary-judgment order rendered in a suit that challenged the assessed value only for the 2007 tax year. We need not decide in this case whether Wells Fargo could have asserted claims for subsequent years without first exhausting its administrative remedies; the pertinent jurisdictional inquiry in this case is whether it did. On that point, we conclude that the 2008 summary-judgment order cannot properly be construed as applying to subsequent tax years that were not included within the scope of the underlying lawsuit because no relief was requested for those years, the failure to exhaust statutory prerequisites to suit indicates that those tax years were not placed at issue in the underlying lawsuit, and case law makes it clear that litigation of a tax dispute as to one tax period does not apply to subsequent tax periods.
Holding that the trial court exceeded its jurisdiction in sanctioning TCAD with regard to tax years 2008, 2009, and 2010, the appellate court vacated the sanctions order and “dismissed the appeal for want of jurisdiction.”
Bexar County Appraisal District v. Abdo et al., No. 04-11-00398-CV (Fourth Court of Appeals – San Antonio)
(September 12, 2012)
This case addresses issues regarding attorneys’ fees and the jury charge for a claim of unequal appraisal. The case involved thirty-one tracts of property, twenty-eight of which were resolved by agreed judgment and severed. A jury trial was held as to the three remaining properties. The appraisal district (the District) had valued the three properties at $1,126,100.00, $1,177,860.00, and $126,500.00. The jury returned a verdict finding the “equal and uniform value” of the properties to be $648,000.00, $364,774.50, and $47,225.50, respectively, and awarded attorneys’ fees of $17,042.35 as to the first property, $17,042.35 as to the second, and $3,787.20 as to the third. The trial court, however, awarded $10,098.35, $15,000.00, and $1,648.67, respectively. The District appealed, arguing, among other things, that the trial court erred with regard to the award of attorneys’ fees and the charge to the jury on the claim of unequal appraisal.
With regard to the award of attorney fees, the District complained that “(1) the court erred by making three awards instead of one, (2) the court ignored the statutory cap on attorney’s fees, and (3) the fees were not segregated as to each property.”
The appellate court held that (1) “whether each ‘appeal’ is prosecuted in separate lawsuits or in a single consolidated lawsuit, section 42.29 authorizes the award of attorney’s fees for each separate order appealed from in a multiple-property tax case”; (2) “the trial court correctly treated each property separately, rather than in the aggregate, when calculating the cap”; and (3) “[s]ubmitting to the jury an attorney’s testimony concerning the percentage of hours relating to specific claims is sufficient to satisfy a party’s burden to segregate its attorney’s fees.”
With regard to the jury charge, the District complained “that the jury charge asked the jury to decide ‘the equal and uniform value’ of each tract of land instead of asking whether the appraised value was ‘unequal,’ contended that “the jury instruction, which explained when a property is ‘appraised unequally,’ confused the jury because no definition or instruction was provided explaining the phrase ‘equal and uniform,’” and asserted that “the jury question was an impermissible comment on the weight of the evidence.”
According to the District, section 42.26 requires a two-step process: first, determine the property was appraised unequally and, second, determine the correct appraised value. The District contends that by asking only about step two, the trial court improperly suggested its own opinion that the property was appraised unequally.
The appellate court held:
Contrary to the District’s argument that section 42.26 requires a two-step process, this section requires only one determination: whether at least one of the three conditions in section 42.26(a) is satisfied. If one of those conditions is satisfied, then the property has been “appraised unequally.”
In this case, for each of the three properties, the jury was asked “[w]hat do you find to be the equal and uniform value of the property described below . . . .” The phrase “equal and uniform value” was not defined. Instead, the jury was provided with an instruction that quoted subsection (a)(3) of section 42.26: “A property is appraised unequally if the appraised value of the property exceeds the median appraised value of a reasonable number of comparable properties appropriately adjusted.” The jury was also instructed as follows: “The appraised value of the subject property or any of the comparable properties to which it has been compared consists of the value reflected on the appraisal roles of [the District] or by an appraisal.” Therefore, the essential element of appellees’ claim—whether any of the properties were appraised unequally—was included in the instruction. Although the question was not phrased in the negative—“was the appraised value unequal”—the question accompanied by the instruction “fairly placed the disputed issue” before the jury by requiring the jury to determine the “equal and uniform value” in comparison to “comparable properties appropriately adjusted.” Montgomery Cnty. v. Humble Oil & Refining Co., 245 S.W.2d 326, 335 (Tex. Civ. App.—Beaumont 1951, writ ref’d n.r.e.) (“The value of the appellee’s property and the value of other properties of other taxpayers in the county is a correct standard by which the trial court and reviewing courts might be able to determine whether there has been a violation of the principle of uniformity and equality of taxation and whether this litigant has been injured by such violation.”). Thus, the question mirrored the instruction, which, in turn quoted the statute. Therefore, we conclude the trial court properly submitted instructions and questions as necessary to enable the jury to render a verdict.
The appellate court affirmed the judgment of the trial court.
Groves v. Cameron Appraisal District et al., No. 13-12-00149-CV (Thirteenth Court of Appeals – Corpus Christi)
(August 31, 2012)
This case addresses issues of jurisdiction and exhaustion of administrative remedies. As set forth by the appellate court:
Groves owns a travel trailer listed in the appraisal records of the Cameron County Appraisal District (CAD). According to Groves, the travel trailer is neither a “manufactured home” nor a “permanent fixture” on her real estate, thus making it non-taxable personal property. See TEX. TAX CODE ANN. §§ 11.14, 11.432 (West 2008). In 2011, CAD did not appraise her travel trailer. Groves filed a protest of her appraised property tax value with the Cameron County Appraisal Review Board (Review Board), and the review board appraised the value of her property at zero.
Although Groves apparently did not pay any taxes with regard to her travel trailer, she appealed the Review Board’s order in district court. In her petition, Groves requested declaratory and injunctive relief and relief under the Texas Tax Code. Specifically, Groves requested the court to “enter other orders necessary to preserve rights . . . . including an order to [the Review Board] to remove [Groves] from the county appraisal rolls . . . .” She also, for the first time, requested a determination of situs.
The appraisal district and the appraisal review board filed a joint plea to the jurisdiction, asserting governmental immunity, arguing that Groves’ “only relief, if any, was limited to the exclusive remedies of the Texas Tax Code,” and asserting that the court lacked jurisdiction because Groves failed to plead exhaustion of administrative claims.
The court, noting that both the appraisal district and the appraisal review board are entitled to governmental immunity from suit and that nothing in the record revealed waiver, stated:
Further, Groves herself acknowledges that she had not exhausted her administrative remedies before filing suit in district court. In her brief, Groves argued that, “there is no sound reason for forcing a litigant through the administrative process when in good faith she is advancing a substantial complaint that the statute she is charged with violating is [un]constitutional.” In light of the foregoing facts, we hold that the trial court did not err when it granted the CAD’s and Review Board’s pleas to the jurisdiction.
With regard to Groves’ claims for declaratory and injunctive relief and request for determination of situs, the court concluded that Groves sought remedies both “outside the scope of the tax code” and “outside the jurisdiction of the trial court,” stating:
Groves’s request to be removed from the Cameron County appraisal rolls falls outside the exclusive remedies available under the Texas Tax Code. See id. § 42.09(a) (West 2009) (establishing that “procedures prescribed by this title for adjudication of the grounds of protest authorized by this title are exclusive. . . .). Thus, the trial court was within its discretion not to grant this request. It was also outside the trial court’s jurisdiction to consider Groves’s request for a “determination of situs” when she had not previously asked for that at the CAD or Review Board levels. See Rourk, 194 S.W.3d at 502. Further, we note that Groves was not “adversely affected” by an act of CAD or the Review Board in this case. It is undisputed that the Review Board appraised the value of Groves’s travel trailer property at zero. Groves, therefore, could not have been “adversely affected” by this action because she did not pay any taxes on her travel trailer in 2011. See TEX. TAX CODE ANN. § 41.41.
Finally, to the extent Groves claims that she is merely asserting constitutional claims, we disagree. See Rourk, 194 S.W.3d at 502. Similar to the Rourk taxpayers, Groves is “seeking more than a declaration that taxing trailers is unconstitutional—[she] is seeking to have [her] individual assessment” set aside.
The appellate court affirmed the decision of the trial court.
Sections 25.21 and 25.23
Todd C. Brennan et al. v. City of Willow Park, Texas et al., No. 02-11-00265-CV (Second Court of Appeals – Fort Worth)
(August 16, 2012)
This case involves challenges to tax bills assessing back taxes for taxing units that had not been included in prior tax bills.
In 2008, the City of Willow Park, the City of Aledo, Parker County Appraisal District, Parker County Appraisal Review Board, and the Parker County Tax Assessor/Collector (Appellees) realized that tax bills for 2003-2007 that had been sent to and paid by various property owners (Appellants) “had erroneously not included city taxes.”
Consequently, in October 2008, Parker County Appraisal District mailed Appellants a “notice” stating that “pursuant to the requirements of Property Tax Code section 25.21[,]” Appellants’ properties had been “omitted” from the appraisal rolls for the past five years. The notices enclosed a tax bill for city taxes for the years 2003-2007, and the notices stated that the “total tax shown on the attached statement is due upon receipt.”
On December 9, 2008, Parker County Appraisal Review Board (ARB) approved the supplemental appraisal records for the year 2008 as corrected and found that the supplemental appraisal records “should be . . . added to the appraisal roll for the district.”
Appellants refused to pay the tax bills purportedly assessing back city taxes for the years 2003-2007, and City of Willow Park filed collection suits against Appellants. Appellants joined third-party defendants City of Aledo, Parker County Appraisal District, Parker County ARB, each of Parker County’s members in their official capacity, and Larry Hammonds in his official capacity as Parker County Tax Assessor/Collector. Appellants also asserted counterclaims and third-party claims for declaratory judgment, injunctive relief, and mandamus.
Appellees filed pleas to the jurisdiction, alleging that Appellants had not exhausted their administrative remedies and that, in any event, Appellees were entitled to governmental immunity.
The trial court granted Appellees’ pleas to the jurisdiction and dismissed the property owners’ counterclaims and third-party claims. The property owners appealed. The issues raised on appeal included claims regarding Tax Code §§25.21 and 25.23, exhaustion of administrative remedies, and governmental immunity.
Considering Tax Code §25.21, the appellate court held:
Here, Appellants’ properties were already properly appraised and entered in the appraisal records of Parker County for the years 2003-2007. Indeed, Appellants paid all property taxes assessed against their properties for the years 2003-2007. The problem here was that taxing units—specifically, the Cities—were not listed in the 2003-2007 Parker County appraisal records as taxing units in which Appellants’ properties were taxable. Thus, the taxes assessed against Appellants’ properties and paid by Appellants for the years 2003-2007 did not include city taxes. The remedy for omitted property set forth in section 25.21&dmash;appraising the property as of January 1 of each year that it was omitted and entering the property and its appraised value in the appraisal records—accomplishes nothing here. Appellants’ properties were already properly appraised for the years 2003, 2004, 2005, 2006, and 2007 and were already properly entered in Parker County’s appraisal records for those years. No remedy is provided in section 25.21 for omitted taxing units. Thus, Appellees acted outside their statutory authority by utilizing section 25.21 to add the Cities as taxing units of their properties.
Reviewing Tax Code §25.23, the appellate court held:
Because section 25.23(a)(1) does not authorize the inclusion of the Cities as taxing units in supplemental appraisal records and because the statutory requisites for inclusion of Appellants’ properties on the Cities’ appraisal rolls for the tax years 2003-2007 via supplemental appraisal records were not met, Parker County ARB acted outside its statutory authority by purporting to approve the inclusion of the Cities as taxing units of Appellants’ properties for the years 2003-2007 via the December 9, 2008 order approving supplemental appraisal records for 2008.
Appellees also advanced an argument under Tax Code §11.43(i); however, the appellate court held that section inapplicable.
The appellate court concluded, with regard to Appellants’ failure to exhaust administrative remedies:
Accordingly, in our de novo review of the trial court’s dismissal of Appellants’ claims for want of jurisdiction, we hold that based on the pleadings, the jurisdictional facts presented, and the relevant provisions of the tax code, Appellants’ failure to exhaust administrative remedies concerning the October 2008 section 25.21 notice and enclosed tax bill or concerning the December 9, 2008 Parker County ARB order approving supplemental appraisal records for 2008 falls within one of the doctrine’s exceptions&dmash;that being that Appellees Parker County Appraisal District and Parker County ARB acted outside their statutorily authorized power by utilizing section 25.21 and/or section 25.23(a)(1) to assess back city taxes against Appellants based on the omission of taxing units from the district’s appraisal records.
With regard to governmental immunity in the context of Appellants’ declaratory judgment claims, the appellate court noted that “[a]n action to determine or protect a private party’s rights against a state official who has acted without legal or statutory authority is not a suit against the State that sovereign immunity bars.” The court held:
Appellants asserted a declaratory judgment action against Larry Hammonds in his official capacity as tax assessor/collector of Parker County Appraisal District and against each member of Parker County ARB in their official capacity, alleging in part that “immunity is waived or excepted by actions taken by government officials that are ultra vires of the scope of their authority.” Construing Appellants’ pleadings liberally, as we must, we hold that the trial court erred by granting the plea to the jurisdiction of Appellee Hammonds in his official capacity as Parker County’s Tax Assessor/Collector and the plea to the jurisdiction of Appellees who are the members of Parker County ARB sued in their official capacity on Appellants’ declaratory judgment action against them seeking a declaration that they acted outside their legal and statutory authority and that their actions were therefore void.
The appellate court further held that “Appellants’ claim for a declaration of their rights under the tax code provisions likewise constitutes a proper declaratory judgment” and noted that “governmental entities must be joined . . . when a declaratory judgment action seeks construction of a statute and a governmental entity may be bound by the statutory language.” The court held that the cities, appraisal district, and appraisal review board were, thus, properly joined in the suit for declaration of rights under the Tax Code.
The City of Willow Park and the City of Aledo also argued that the Declaratory Judgments Act did not waive their immunity from suit, claiming Appellants’ seek “to ‘recover damages.’” The appellate court held:
Appellants do not seek “damages”; at most they seek a refund of the assessed back city taxes paid by some Appellants as a result of the allegedly void actions of Appellees or attributable to Appellees. Appellants pleaded that any Appellants “who made any full or partial payments of the illegal bills sent out by Larry Hammond did so under duress.” Thus, because Appellants pleaded that illegal taxes were paid under duress, governmental immunity does not bar Appellants’ claim for declaratory relief that also seeks the refund of illegally collected taxes.
The appellate court also considered the trial court’s rulings regarding Appellants’ claims for injunctive relief and mandamus and, as to both, held that the trial court erred when it determined that it lacked jurisdiction.
The appellate court reversed the trial court’s judgment and remanded Appellants’ claims to the trial court for further proceedings.
Reddy Partnership/5900 North Freeway LP et al. v. Harris County Appraisal District, No. 11-0400 (Texas Supreme Court)
(June 29, 2012)
This case addresses the issues of proper plaintiffs for purposes of judicial review under Chapter 42 of the Tax Code and application of Tax Code §42.21(e). Framing the issue as “whether a plaintiff’s trivial misnomer in its petition for judicial review defeats a trial court’s jurisdiction,” the Court “concluded that it does not.”
The trial court granted a plea to the jurisdiction in favor of Harris County Appraisal District (HCAD) urged on the basis that the plaintiff did not have standing to appeal to district court because the plaintiff did not own the property on January 1 of the tax year at issue. The notice of appraised value had been mailed to, a notice of protest was filed under, and the appraisal review board order was addressed to “Reddy Partnership, ETAL.” Suit was filed by “Reddy Partnership ETAL, as the property owners.” In support of its plea to the jurisdiction, “HCAD attached a copy of the warranty deed in which Reddy Partnership sold the property to Reddy Partnership/5900 North Freeway, L.P.” In response to HCAD’s plea, the plaintiff amended its petition to name the record owner, Reddy Partnership/5900 North Freeway, L.P., and moved to substitute the record owner as plaintiff. The original plaintiff and record owner argued that the procedural defects had been corrected pursuant to Tax Code §42.21(e) and that, pursuant to Texas Rule of Civil Procedure 28, “Reddy Partnership, ETAL” was the common name for “Reddy Partnership/5900 North Freeway, L.P.” The trial court granted HCAD’s plea and dismissed the suit. Both the original plaintiff and the record owner appealed. The appellate court affirmed the trial court’s judgment and the original plaintiff and record owner petitioned the Texas Supreme Court for review.
Reviewing the record, the Court noted and held:
The court of appeals incorrectly assumed that “Reddy Partnership” protested the Board’s order and filed the original petition for review, even though the record makes clear that the administrative protest and petition were filed under the misnomer “Reddy Partnership, ETAL.” Misnomer arises “when a party misnames itself or another party, but the correct parties are involved.” In re Greater Hous. Orthopaedic Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2009) (per curiam). When the correct party sues or is sued under the incorrect name, “the court acquires jurisdiction after service with the misnomer if it is clear that no one was misled or placed at a disadvantage by the error.” Sheldon v. Emergency Med. Consultants, I, P.A., 43 S.W.3d 701, 702 (Tex. App.—Fort Worth 2001, no pet.).
This is in contrast to a misidentification, which “arises when two separate legal entities actually exist and a plaintiff mistakenly sues the entity with a name similar to that of the correct entity.” Chilkewitz v. Hyson, 22 S.W.3d 825, 828 (Tex. 1999). A misidentification’s consequences are generally harsh, but the same is not true for misnomers. See In re Greater Hous. Orthopaedic Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2009) (per curiam). Courts generally allow parties to correct a misnomer so long as it is not misleading. Id. “In a case like this, in which the plaintiff misnames itself, the rationale for flexibility in the typical misnomer case—in which a plaintiff misnames the defendant—applies with even greater force.” Id. at 326.
Here, HCAD did not question ownership at the administrative level or during the first year and a half of litigation. Nor was HCAD confused or prejudiced. On the contrary, HCAD records referred to the owner of the subject property as “Reddy Partnership, ETAL.” HCAD addressed the notice of the appraised value of the property, the notice of protest, and the Board’s order determining the protest to “Reddy Partnership, ETAL”—not Reddy Partnership/5900 North Freeway, L.P. Even assuming the owner’s name caused confusion, Reddy Partnership, ETAL amended the petition and corrected the name. See TEX. TAX CODE §42.21(e)(1). This amendment relates back to the filing of the original petition. See In re Greater Hous. Orthopaedic Specialists, 295 S.W.3d at 326 (noting that a petition involving a misnomer “is nonetheless effective, for limitations purposes, when filed, with any subsequent amendment relating back to the date of the original filing”).
The property owner exhausted its administrative remedies and timely filed a petition for judicial review. The trial court acquired jurisdiction to entertain the appeal.
The Supreme Court reversed the judgment of the court of appeals and remanded the case to the trial court for further proceedings.
Madelon Banks Bluntson, as Independent Administratrix of the Estate of Jemmie Lee Banks v. Wuensche Services, Inc. and Tonkawa Farms, L.P., No. 14-11-00718-CV (Fourteenth Court of Appeals – Houston)
(June 12, 2012)
This case involves an attempt to redeem property after a tax sale. The Estate of Jemmie Lee Banks owned a 25% interest in property. An undivided 50% interest of the property was sold at a tax sale. After the sale, the Administratrix of the Banks estate (Bluntson) sought to redeem the property. Bluntson delivered a letter, enclosing two checks and a quitclaim deed, to the tax sale purchaser (Wuensche) and subsequent transferee (Tonkawa) that stated:
Enclosed you will find two cashiers checks in the amount of $17,687.98 and $1,393.75, totaling $19,081.73 for redemption of the above-referenced interest pursuant to your letter dated June 26, 2009. The check for $17,687.98 represents the portion of the redemption price that [Bluntson] does not dispute. The check for $1,393.75 represents the $1,115 in costs and the applicable 25% redemption premium thereon, such portion of the redemption price which [Bluntson] hereby requests additional documentation and proof to substantiate the same. In your letter dated June 26, 2009, you stated that $1,099 was incurred in “labor for maintaining, preserving, and safekeeping the property” and $16 for insurance. However, you have not provided any documentation or receipts evidencing such costs. [Bluntson] has an obligation to the Estate to obtain proof of such expenses.
Further, since [appellees] already own the other 50% undivided interest, we would request documentation showing that these costs which were incurred represent one-half of the costs which were actually incurred in relation to the “maintaining, preserving, and safekeeping” of the property. We hereby request that the check for $1,393.75 be held in trust by you pending the provision of this documentation and resolution of this issue. Enclosed you will find a Quitclaim Deed for execution by the current title holder, Tonkawa Farms. L.P. in relation to [Bluntson’s] redemption.
Wuensche replied that the attempt to redeem the property was ineffective because the offer was conditional and Bluntson “did not utilize the prescribed alternative method for redemption when costs are disputed.” Bluntson sued. The trial court granted summary judgment in favor of Wuensche and Tonkawa and Bluntson appealed.
The appellate court agreed with Wuensche and Tonkawa that Bluntson’s letter was ineffective for redemption because the tender was conditional. The court stated:
Bluntson contends her offer of payment was unconditional because she tendered the total amount required for redemption and merely requested “substantiation” of the costs claimed by appellees. However, we conclude the offer was conditional because Bluntson did not merely seek substantiation. Rather, Bluntson indicated that amount may be disputed and requested appellees to hold the check for costs in trust pending “resolution” of the issue. Therefore, Bluntson’s letter raised doubts on whether appellees would be permitted to retain these funds if the issue of costs were not resolved to Bluntson’s satisfaction.
On appeal, Bluntson does not expressly mention her request that appellees hold the check in trust. However, in the trial court, Bluntson suggested that this request did not transform her tender into a conditional payment because the funds were “not restricted” and appellees could have nonetheless deposited the check. We reject the notion that Bluntson made an unconditional payment because appellees could have disregarded Bluntson’s own request and deposited the funds, thereby risking repercussions from such action. Quite simply, appellees were permitted to take Bluntson at her word and honor her instruction to not deposit the funds, thereby rendering the payment conditional.
The court held that “Bluntson failed to comply with section 34.21 because she did not make unconditional payment of the amount required for redemption within the statutory period.”
The appellate court affirmed the trial court’s judgment.
AHF Arbors at Huntsville I, LLC / AHF Arbors at Huntsville II, LLC v. Walker County Appraisal District, Nos. 10-0683 & 10-0714 (Texas Supreme Court)
(June 8, 2012)
These consolidated cases involve claimed exemptions under Tax Code §11.182. As set forth by the Court:
AHF-Arbors at Huntsville I, LLC, and AHF-Arbors at Huntsville II, LLC (collectively, “the Arbors”), each owns as its sole asset an apartment complex in Huntsville. The sole member of each limited liability company is Atlantic Housing Foundation, Inc., a South Carolina nonprofit corporation exempt from federal income taxation under Section 501(c)(3) of the United States Internal Revenue Code and certified as a CHDO by the Texas Department of Housing and Community Affairs (“TDHCA”). For federal income tax purposes, Atlantic and the Arbors are treated as a single entity. The Arbors applied to the Walker County Appraisal District for a tax exemption for their property for 2003 and subsequent years. The District denied their applications, and they sued.
The Arbors and Walker County Appraisal District (the District) moved for summary judgment. The trial court denied the Arbors’ motion and granted the District’s motion and the Arbors appealed. The court of appeals found that because the Arbors had offered no evidence that they had delivered, in accordance with Tax Code §11.182(g), a copy of their annual audit to TDHCA, “they failed to show that they qualified for an exemption.” The court of appeals affirmed the judgment of the trial court and the Arbors filed petitions for review with the Texas Supreme Court.
The Court stated that “Section 11.182(g) plainly conditions an exemption only on the preparation of an audit – something that must be done ‘[t]o receive an exemption,’” but noted “[t]he statute does not state that a failure to meet its other requirements – that the audit be detailed, that it reflect both the sources and uses of funds, and that it be delivered both to TDHCA and the chief appraiser — likewise results in the denial of an exemption.” Citing a prior opinion of the Court involving executory contracts under Property Code §5.077, the Court stated:
Under Section 11.182(g), the failure to conduct an audit is understandably fatal to a claim for exemption, but deficiencies in the contents or delivery are matters that presumably may be corrected. Which is not to say that the requirements are unimportant. According to the District, delivery of an applicant’s audit to TDHCA is critical because that agency administers NAHA funds and has the ability to analyze whether an organization is complying with federal requirements as well as the requirements for a state tax exemption. We do not disagree. Indeed, Section 11.182(g) makes delivery of the audit to TDHCA mandatory. But where, as here, the statute “does not specify the consequences for noncompliance[,] . . . we have looked to its purpose for guidance.”
The District argues, and we agree, that the statute requires applicants’ audits to be delivered to TDHCA so that chief appraisers will have the benefit of that agency’s review. If an appraisal district did not believe that review necessary in a particular case, it could grant an exemption based on its own review. If it needed the review, the district could delay action on the application until the requirement has been met. But the statute does not authorize a district to deny an exemption for nondelivery of an audit to TDHCA. The purpose of the statute is to provide a chief appraiser substantive information to use in processing an application for exemption. Withholding a ruling pending delivery of an audit to TDHCA serves the statute’s purpose; denying an exemption does not.
The Court concluded that the District was not entitled to summary judgment due to lack of evidence of compliance with Tax Code §11.182(g)’s audit delivery requirement.
The Court then noted that “[t]he Arbors’ central argument was not addressed by the court of appeals.” Considering what the Court framed as the “principal issue” – “whether a CHDO must have legal title to property to qualify for the exemption,” the Court held “equitable title is sufficient.” Analyzing the text of Tax Code §11.182, the Court noted:
The text of Subsection (b) does not suggest a resolution of the parties’ dispute. But Subsection (e) provides that in certain instances, property “owned by a limited partnership” may be tax-exempt if 100 percent of its general partner is controlled by a CHDO meeting the requirements of Subsection (b). The meaning of “owned” is no clearer in (e) than in (b), but even assuming “owned” requires legal title, Subsection (e) would still allow a CHDO an exemption for property to which it does not hold legal title, and may not completely control, to the extent limited partners may participate. We are unconvinced that limited partnerships are the one exception to Subsection (b)’s requirement of legal ownership by a CHDO and see no reason to distinguish between a general partner’s control of a limited partnership and other types of corporate control over related entities, such as Atlantic’s complete ownership of its subsidiaries in this case. The stronger argument is that Subsection (e) demonstrates that property may be tax-exempt even if a CHDO is only a participant in tiered ownership. The purpose of Subsection (e) is not to carve out an exception for non-CHDO limited partnerships but to limit exemptions for limited partnerships to those in which the general partner is wholly CHDO-owned.
Subsection (e) informs our construction of Subsection (b), three sentences earlier. Both provide a tax exemption for the CHDO-controlled use of property for low- and moderate-income housing without profit. Equitable ownership — the present right to compel legal title — assures greater CHDO control under Subsection (b) than required by Subsection (e).
Moreover, this construction, as the Arbors argue, acknowledges the realities of the commercial housing industry. We have observed that in many instances, lenders require that property be purchased by a single-asset entity “so that in the event of default, the collateral can be recovered more easily than from a debtor with multiple assets and multiple creditors.” Often, the timing of property acquisition does not allow the acquiring entity to obtain a federal tax exemption or otherwise qualify as a CHDO. When the entity is wholly owned by a CHDO, use of the property for low-income housing is assured. Also, tiered ownership allows greater flexibility for investors, encouraging the involvement of private funds in developing low-income housing, which was part of NAHA’s purpose in creating the concept of CHDOs. And, of course, the ad valorem tax exemption allows charitable organizations to operate with less revenue.
The District argues that this construction of Section 11.182(b) violates the rule that statutes conferring tax exemptions must be strictly construed. But strictly construing Subsection (b) does not require us to ignore Subsection (e) or the purpose of the exemption. The District points to legislative history surrounding the enactment of Subsection (j), suggesting that the Legislature made the exemption unavailable after 2003 because property was being removed from tax rolls with no real benefit to the community. But any reservations the Legislature may eventually have had about the wisdom of Section 11.182’s exemption do not alter the meaning of the statutory text.
The District argues that since taxation ordinarily falls only on legal ownership, exemptions should benefit only legal owners. While the argument has the virtue of symmetry, the Legislature is not so constrained in authorizing tax exemptions. The District also argues that entities that are separate for purposes of imposing liability should not be treated as one for purposes of qualifying for tax exemptions. But federal tax law disregards the separate identity of some entities, as it does with Atlantic and the Arbors, and there is no reason why Section 11.182 should not do the same.
. . . .
As long as a CHDO has equitable title to property, we see no reason to treat investors with a CHDO differently from investors in the CHDO.
The Court concluded:
Each of the Arbors is a limited liability company with a single asset — the apartments — and a single member — Atlantic, a CHDO. Each of the Arbors has managers, who, under Texas law, are the governing authority of the company. But managers serve at the pleasure of the members. Thus, Atlantic has complete control over the Arbors and equitable title to their property — the power to compel transfer of legal title. This ownership satisfies the requirement of Section 11.182(b) that exempt property be owned by a CHDO. For purposes of a federal income tax exemption, Atlantic and the Arbors are treated as one. For the same reason, the ad valorem exemption is imputed to the Arbors.
The Supreme Court reversed the judgment of the court of appeals and remanded the case to the court of appeals for further consideration.
Bobby and Joyce Seguin v. Bexar Appraisal District et al., No. 04-11-00337-CV (Fourth Court of Appeals – San Antonio)
(May 16, 2012)
Petition for review denied May 3, 2013
This case involves the disabled veterans’ exemption under Tax Code §11.22. In 1984, Bobby Seguin applied for and obtained an exemption under Tax Code §11.22 on the value of a home he and his wife had purchased the year prior. In 1990, Mr. Seguin moved to Alabama, where he has resided since. As his disability ratings increased, he obtained increased exemptions from the Bexar Appraisal District (the District), some of which were obtained after he had moved to Alabama. In 2009, the District conducted a review of exemptions and sent the Seguins a letter requesting information and an explanation as to why their mailing address was different than that of the subject property. The Seguins responded, stating that they moved to Alabama in 1990 and that their disabled niece lived at the property. The District removed the exemption for tax years 2004 through 2008 because Mr. Seguin was no longer a Texas resident. The Seguins protested and appeared before the ARB by affidavit. The ARB denied the protest and affirmed the removal of the exemption for the tax years at issue. The Seguins filed suit. The trial court granted summary judgment in favor of the District and the Seguins appealed.
The Seguins argued that Mr. Seguin “need not be a Texas resident in order to receive the disabled veteran tax exemption under section 11.22 of the Texas Tax Code.” The Seguins also raised constitutional claims. The appellate court held:
We conclude that in order to be entitled to receive the disabled veteran tax exemption, a disabled veteran must meet section 11.22(g)’s Texas residency requirement. We further hold that article VIII, § 2(b) does not create a vested property right and that the Texas Legislature had authority to impose section 11.22(g)’s residency requirement. Moreover, neither Bobby Seguin’s equal protection rights nor his due process rights were violated. The District and [the District’s Chief Appraiser] are not equitably estopped from removing the disabled veteran tax exemption from the Seguins’ property.
The appellate court affirmed the trial court’s judgment.
City of Bellaire et al. v. Efrem D. Sewell d/b/a The Law Offices of Efrem D. Sewell, P.C., No. 01-11-00131-CV (First Court of Appeals – Houston)
(May 10, 2012)
This case involves a suit for delinquent ad valorem taxes on business personal property. The taxing authorities and the City of Bellaire (the City) sought recovery of delinquent taxes and penalties and interest for tax years 2002-2009. As set forth by the appellate court:
At a bench trial on November 29, 2010, the taxing authorities and the City introduced certified copies of Sewell’s delinquent tax statements for tax years 2002–2009, issued by the Harris County Tax Assessor-Collector, which reflected the base tax owed and the statutory penalties, interest, and rendition penalties assessed. Sewell argued that collection of the delinquent taxes, penalties, and interest for the 2002–2004 tax years was barred by limitations, and the trial court agreed and rendered judgment to this effect. The final judgment included a table setting out the delinquent base tax, the penalties and interest accrued, and the total amounts owed to Harris County, the Houston Independent School District, the Houston Community College System, and the City. These amounts corresponded to the entries for the base taxes, penalties, and interest for each taxing unit for the tax years 2005–2009 as shown in the certified tax statements. In the judgment, the trial court crossed out the columns for “Penalty & Interest” and “Total,” and instead handwrote a total of $12,834.59 underneath the “Delinquent Base Tax” column. The trial court also awarded post-judgment interest and costs to the taxing authorities and the City and placed a tax lien against Sewell’s property.
The taxing authorities and the City appealed, asserting that the trial court erred in awarding only delinquent taxes because they were statutorily entitled to penalties and interest. The appellate court held:
Here, the taxing authorities and the City complied with section 33.47(a) by introducing into evidence certified copies of the delinquent tax statements for tax years 2002–2009. These statements demonstrated the delinquent tax owed, the applicable penalties, including rendition penalties, and the accrued interest assessed for each taxing unit and each tax year. The taxing authorities and the City thus established a prima facie case “as to every material fact necessary to establish [their] cause of action.” The burden then shifted to Sewell to introduce competent evidence showing either that he paid the full amount of taxes, penalties, and interest, or that some other defense applied to his case. Aside from asserting limitations with regard to the 2002–2004 tax years, which the taxing authorities and the City conceded, and arguing that his property was overvalued, which is not a proper defense in a suit to recover delinquent taxes, Sewell asserted no other defenses, and he presented no evidence that he had paid the full amount of taxes, penalties, and interest.
We conclude that the taxing authorities and the City were statutorily entitled to penalties and interest accrued on Sewell’s delinquent taxes for tax years 2005–2009. We hold that the trial court erred in failing to award the applicable penalties and interest to the taxing authorities and the City in its final judgment.
The appellate court reversed the trial court’s judgment insofar as it failed to award applicable penalties and interest and remanded the case to the trial court for calculation of same.
Sections 41.44(e), 42.016, and 42.21(e)
Storguard Investments, LLC and Maxima Communications Corp. v. Harris County Appraisal District, No. 01-10-00439-CV (First Court of Appeals – Houston)
(May 3, 2012)
This case addresses issues regarding proper plaintiffs for purposes of judicial review under Chapter 42 of the Tax Code. Maxima Communications Corp. (Maxima) filed suit in district court appealing the determination of the ARB on a property tax protest. Harris County Appraisal District (HCAD) filed a plea to the jurisdiction, arguing that Maxima lacked standing because it did not own the property on January 1 of the tax year at issue. Maxima, in response, moved to add Storguard Investments, LLC (Storguard) as a plaintiff pursuant to Tax Code §42.21(e) and Texas Rule of Civil Procedure 28. Maxima, which has an ownership interest in Storguard, had conveyed its interest in the subject property to Storguard four and a half years prior to the tax year at issue. HCAD’s records did not reflect the change in ownership and still had Maxima listed as the owner of the subject property. Maxima had received the notice of appraised value and protested before the ARB. The trial court granted HCAD’s plea and dismissed the suit. Storguard and Maxima appealed.
The appellate court noted that record property owners, designated agents, and certain lessees may seek judicial review of an ARB order, that “[t]he Tax Code provides the exclusive remedies available to property owners for adjudicating a property-tax valuation protest,” and that “[a] property owner’s failure to pursue administrative review of the initial valuation before the appraisal review board ‘deprives the courts of jurisdiction to decide most matters relating to ad valorem taxes.’” The appellate court held that, under the law in effect before September 1, 2011, although Maxima timely filed a petition for judicial review, it did not own the property on January 1 of the tax year at issue and thus lacked standing to protest before the ARB and pursue judicial review of the ARB’s order. The court also held:
Storguard, as the record legal owner of the property, had standing to protest the valuation of the property before the appraisal review board; however, the record indicates that it did not participate in the administrative protest process. Instead, Storguard did not become involved in this dispute until April 2010, when Maxima amended its petition for review and moved for substitution of Storguard as plaintiff under Tax Code section 42.21(e) and Rule 28. Under the prior law, because the Board never determined a valuation protest brought by Storguard, the actual property owner, there is no protest determination on which it can premise a suit for judicial review to the district court. Storguard, therefore, also has “‘[no] legal right to enforce, nor any real controversy to determine,’ and lacks standing to seek judicial review under section 42.21(a).”
With regard to 2011 legislative amendments to the Tax Code, Storguard argued that “its petition for review ‘clearly falls within the provisions of [new] Section 42.016 granting it standing and conferring full jurisdiction upon the district court.’” The court noted:
Storguard appears to qualify as a person entitled to intervene in a petition for review pursuant to section 42.016. The property at issue was “the subject of a protest hearing,” and Storguard owned the property during the 2008 tax year. This section effectively allows a party such as Storguard, who seeks intervention in a judicial review proceeding, to rely upon another person’s completion of the administrative protest process instead of requiring that the party seeking intervention personally exhaust its administrative remedies. Although Storguard may have standing to intervene under section 42.016, however, this section does not bestow standing upon Maxima, the party that administratively protested the initial appraised value and filed the petition for review. Maxima, unlike Storguard, is not seeking to intervene in the judicial review proceeding — it initially filed the petition.
The court then addressed the Texas Legislature’s amendment adding Tax Code §41.44(e). The court stated that the amended statute “allows a person in Maxima’s position — a previous owner of the property who is still listed as the record owner in the appraisal records — to administratively protest the property’s initial appraised value, which then provides the basis for a person in Storguard’s position to take advantage of this protest process and intervene in the judicial review proceeding at a later date.” The court also noted that the Legislature provided that the amendment applies “only to a protest that is pending on the effective date of this Act [September 1, 2011] or is filed on or after the effective date of this Act.’” The court held:
Here, Maxima’s administrative protest proceeding before the Board concluded on August 1, 2008, when the Board issued its final order; thus, it cannot take advantage of this new amendment to claim standing to administratively protest the initial value because it had no protest pending before the Board on September 1, 2011. Therefore, although Storguard may have standing to intervene in the judicial review proceeding under new section 42.016, no statute gives Maxima standing either to protest the initial value before the Board or to seek judicial review of the Board’s final decision. A proper party must have completed the administrative review process before Storguard can rely on the completion of that process, and there must be a properly pending suit in the district court before Storguard can seek to intervene. No proper party completed the administrative review process before the Board, and no such suit in the district court exists in this case. Because no party with standing sought judicial review of the Board’s order within the applicable statutory time frame, we conclude, even when considering the newly enacted provisions and amendments to the Tax Code, that, under the facts of this case, the district court never acquired subject-matter jurisdiction over Storguard’s or Maxima’s claims due to their failure to show that Maxima had standing as a proper party to advance those claims.
With regard to the application of Section 42.21(e) in light of the new amendments to the Tax Code, the court held:
Maxima timely filed a petition for review; however, Maxima did not own the property on January 1, 2008, and, therefore, it lacked standing to administratively protest the valuation before the Board and to pursue judicial review of the Board’s subsequent order. Section 42.21(e) requires both parties involved in the substitution to have standing to seek judicial review of the appraisal review board’s order. Because Maxima does not have standing, even under the new amendments to the Tax Code, Storguard cannot use section 42.21(e) to substitute as a plaintiff.
Storguard also argued that the trial court erred in granting HCAD’s plea to the jurisdiction because Maxima amended its petition by naming Storguard to correct a misnomer and that the amended petition relates back to the timely filed, original petition. The appellate court stated that to invoke the trial court’s jurisdiction, a plaintiff must: (1) timely file its petition; (2) be the record property owner; and (3) have exhausted administrative remedies by protesting before the ARB. The appellate court then noted that “Maxima timely filed a petition for review, but it was not the record owner of the property, and therefore it was not the proper party either to protest the appraised value or to seek judicial review of the Board’s valuation determination, and Storguard did not itself complete the administrative protest process.” The appellate court noted that Maxima maintained an interest in Storguard, but that the two are separate and distinct legal entities. The appellate court stated that “[b]ecause Maxima and Storguard are distinct entities and have separate corporate existences, Storguard, the record property owner, cannot rely on Maxima’s conduct to satisfy the jurisdictional prerequisites of completing the administrative process before the Board and timely filing a suit for review in the district court.”
The court further stated:
Newly-enacted section 42.016 allows a party seeking judicial review of an appraisal review board order to intervene in the judicial review proceeding without itself completing the administrative protest process, as long as someone with standing pursues an administrative protest. As we have already noted, however, Maxima lacked standing both to protest the appraised value to the Board and to seek judicial review of the Board’s final decision. Further, the Legislature’s amendment to Tax Code section 41.44, which would allow a person in Maxima’s position to properly protest a property’s initial value before an appraisal review board, does not apply to Maxima. Thus, no proper administrative protest occurred in this case, and, therefore, there is no protest on which Storguard can rely to give it standing pursuant to section 42.016. Allowing relation back of the amended petition in this case does not cure the jurisdictional defect.
Addressing the argument that the trial court should have allowed Storguard to substitute as plaintiff under Tex. R. Civ. P. 28, the appellate court noted that “Storguard made no showing that (1) it was doing business under the common name of Maxima, (2) it held itself out to the public as Maxima, or (3) it requested that HCAD refer to it as Maxima in its records” and that “HCAD’s appraisal records, account statements, property tax statements, notice of appraised value, and order determining protest might be some evidence that HCAD refers to Storguard as Maxima, but, without more, it is not evidence that Storguard does business under the common name of Maxima.” The appellate court thus held that Rule 28 is not applicable and that Storguard was not entitled to substitution pursuant to Rule 28.
The appellate court affirmed the trial court’s judgment.
Central Appraisal District of Taylor County v. Western AH 406, Ltd., No. 11-10-00115-CV (Eleventh Court of Appeals – Taylor)
(April 26, 2012)
This case involves the appraisal of a privatized military housing complex. The complex, Quail Hollow, is owned by Western AH 406, Ltd. (Western) and was constructed pursuant to a contract with the United States Air Force. Western filed suit regarding the Central Appraisal District of Taylor County’s (TCAD) appraised values for tax years 2002 through 2009. After a jury trial, the jury issued a verdict in Western’s favor and the trial court awarded Western attorney’s fees. TCAD appealed.
Both parties presented expert testimony at trial. Western’s expert, Gerald A. Teel (Teel), and TCAD’s expert, Dale A. Scoggins (Scoggins), both considered rental and occupancy restrictions in performing their appraisals and both “used the direct capitalization method of the income approach of appraisal to determine retrospective market values of Quail Hollow for the years in question.” As set forth by the appellate court:
Teel and Scoggins arrived at very similar NOIs and market cap rates for each of the years. However, their appraised values for each year differed by millions of dollars for three primary reasons: (1) Teel added an additional 2.5% “restriction premium” to his market cap rate for each year because he equated Quail Hollow with a low-income housing project; (2) Teel reduced his indicated value (Quail Hollow’s NOI divided by his cap rate) by 40% for each year based on his interpretation of the Lockbox Agreement; and (3) Scoggins added the value of Western’s favorable financing from the Air Force to his indicated value (Quail Hollow’s NOI divided by his cap rate) for each year. Scoggins gave another opinion of value for each year that did not include the value of the favorable financing.
Western also retained Ronald P. Little of National Realty Consultants as an expert. At Western’s request, Little performed a review of Teel’s appraisal. Little did not perform an independent appraisal of Quail Hollow. Little prepared a report of his review of Teel’s appraisal, dated November 19, 2009. Little concluded that Teel used appropriate methodologies and techniques and arrived at appropriate opinions of market value in his 2009 appraisal of Quail Hollow.
Among other things, TCAD argued “that Teel’s value opinions were flawed and unreliable because (1) he incorrectly interpreted the Lockbox Agreement and, therefore, erroneously deducted 40% of each year’s property values; (2) he improperly equated Quail Hollow to low-income housing apartments and, therefore, unjustifiably added a 2.5% ‘restriction premium’ to his yearly cap rates; and (3) he failed to account for the effect of Western’s favorable loan contract on Quail Hollow’s value in his yearly value conclusions.” TCAD also argued “(1) that the trial court erred by failing to exclude Teel’s testimony, appraisal report, and conclusions of value and Little’s testimony and report of his review of Teel’s appraisal and (2) that no evidence supports the jury’s verdict.”
After analyzing the testimony of the experts regarding the issues raised, the appellate court held “that the testimony of Western’s appraiser was legally insufficient to support the jury’s findings” and “[a]lthough there was some evidence of Quail Hollow’s market value, the evidence did not conclusively establish market value.”
The appellate court reversed the trial court’s judgment and remanded the case for further proceedings.
Preston Reserve, L.L.C. et al. v. Compass Bank, No. 14-11-00045-CV (Fourteenth Court of Appeals – Houston)
(April 24, 2012)
This case involves “a suit to recover a deficiency remaining after a foreclosure sale of land securing a promissory note.” On appeal, the court addressed several issues, including the property owner rule, evidence establishing market value, and unchallenged expert testimony.
With regard to the property owner rule, the appellate court, citing Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846 (Tex. 2011), held the following with regard to the testimony of an officer of Compass Bank (“Scott”):
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. 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 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.
With regard to evidence establishing market value, the appellate court held that testimony regarding the amount for which the property was purchased at the foreclosure sale, evidence of the property’s sale price a year after the sale absent “anything about the circumstances of the sale,” and an unaccepted purchase offer were incompetent evidence.
Addressing the issue of unchallenged expert testimony, the appellate court noted:
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).
The court then held that “the trial [sic] 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.”
The appellate court reversed the trial court’s judgment and rendered a take nothing judgment against Compass Bank.
Dick DeGuerin et al. v. Washington County Appraisal District et al., No. 01-11-00548-CV (First Court of Appeals - Houston)
(April 19, 2012)
This case involves taxation of private airplane hangars. The appellants argued that they did not hold an interest in the hangars that would subject them to taxation. The appellants leased the land at the City of Brenham Municipal Airport on which the hangars are located and used the hangars for storage of their private aircraft. The hangars are affixed to the land. As stipulated by the parties, the appellants “generally acquired their interest in the hangars through ‘bills of sale.’”
The appellate court held:
Assuming without deciding — as argued by appellants — that the lease agreement includes all of the improvements, including the hangar, this does not mean that the accompanying bills of sale are without effect. The bills of sale convey fee simple in the hangar improvements. A leasehold is less than fee simple. Dallas Cent. Appraisal Dist. v. Jagee Corp., 812 S.W.2d 49, 53 (Tex. App. — Dallas 1991, writ denied). Regardless of what portion of fee simple in the hangars was conveyed in the leases, the remainder was conveyed in the bills of sale. See Hall v. Prof’l Leasing Assocs., 550 S.W.2d 392, 394 (Tex. Civ. App. — Dallas 1977, no writ) (holding lease is merged when lessee acquires title to reversion). Accordingly, the appellants own the hangars.
As the parties acknowledge, the Tax Code contemplates that separate entities can own separate interests in land and improvements. See TEX. TAX CODE ANN. § 25.04 (Vernon 2008). Those entities can each be taxed on their separate interests. See id. Our state constitution requires that “[a]ll occupation taxes shall be equal and uniform upon the same class of subjects within the limits of the authority levying the tax; but the legislature may, by general laws, exempt from taxation public property used for public purposes . . . .” TEX. CONST. art. VIII, § 2. Because the hangars are owned by private entities and, accordingly, are not public property, whatever exemption may have applied to the City of Brenham does not extend to appellants.
At oral argument, appellants argued that the bills of sale were, in fact, assignments of a leasehold interest in the hangars. While the fourth stipulation of fact puts the term “bills of sale” in quotes, the two bills of sale included as attached exhibits refer clearly to the sale of the hangars, not a lease. There is no mention of monthly lease payments. There is no mention of a term of any lease. There is no mention of any matter typically attendant to a lease. Accordingly, there is no evidence in the stipulations of fact or the attached exhibits to support appellants’ claim that the bills of sale were anything other than sales of fee simple interests in the hangars subject to any listed encumbrances.
Sections 25.25, 31.02, and 33.10
Atlantic Shippers of Texas, Inc. v. Jefferson County, Texas, No. 09-10-00511-CV (Ninth Court of Appeals - Beaumont)
(March 8, 2012)
This case involves multiple challenges to a delinquent property tax judgment. Among several rulings, the appellate court held that Tax Code §33.10 does not allow a taxpayer to control the manner in which payments are applied to delinquent taxes, penalties, and interest; that the failure to exhaust the Tax Code’s “exclusive remedies provision” deprives a taxpayer of equitable defenses; and that “[b]ased on the language of section 25.25 . . . sending a corrected tax statement does not alter the delinquency date calculation provided by section 31.02.”
The appellate court affirmed the trial court’s judgment in part and reversed and remanded in part.
Morad Mekhail d/b/a Abtrust v. Duncan-Jackson Mortuary, Inc. f/k/a Jackson Mortuary, Inc., No. 01-11-00485-CV (First Court of Appeals - Houston)
(March 1, 2012)
This case involves a challenge to a trial court judgment setting aside a tax sale. Delinquent taxes on property owned by Duncan-Jackson Mortuary were the subject of a delinquent tax suit in which Harris County, on its own behalf and on behalf of seven other taxing authorities, obtained a default judgment awarding Harris County “$16,961.30 in taxes, penalties and interest, and research fees.” The judgment also set an interest rate of 1% on the base tax amount and awarded court costs, costs of service of process, and a Tax Master Fee. After a constable’s sale was set but prior to the sale, Duncan-Jackson Mortuary submitted an electronic payment of $17,483.40 through Harris County Tax Assessor-Collector’s website. $17,483.40 was the amount shown on the tax statement as the amount “equal to the amount of the taxes, penalties, and interest plus the interest on the taxes reflected in the judgment.” The amount did not include “the court costs, service of process fee, and Tax Master Fee that were also included in the judgment.” The tax sale proceeded and Mekhail was the highest bidder and received a constable’s deed. Duncan-Jackson Mortuary filed suit to set aside the sale based on the $17,483.40 payment. The trial court entered judgment in favor of Duncan-Jackson Mortuary and set aside the sale. Mekhail appealed.
Of the issues raised on appeal, the appellate court focused on whether the tax sale should be set aside based on either of two legal principles: de minimis non curat lex or substantial compliance. Describing de minimis non curat lex as “an infrequently used legal theory that ‘the law does not care for, or take notice of, very small or trifling matters,’” the court explained that “[t]he law is invoked to excuse negligible deviations from the letter of the law,” but “does not apply . . . just because the number complained of is small.” The court held that the unpaid amount on the date that Duncan-Jackson Mortuary made its electronic payment – $906.00 – was not a de minimis amount. Stating that “’[s]ubstantial compliance means one has performed the ‘essential requirements’ of the statute” and noting that “[t]he term has been applied to excuse deviations from a statutory requirement if such deviations do not seriously hinder the legislature’s purpose in imposing the requirement,” the court held “the principle of substantial compliance does not apply to subsection (e) of section 33.53” and “[b]ecause it did not pay the full amount owed under the judgment, Duncan-Jackson Mortuary was not entitled to have the tax sale set aside.”
The appellate court reversed the trial court’s judgment and remanded the case for entry of a take-nothing judgment.
Gregg Appraisal District v. Capacity of Texas, Inc., No. 12-11-00045-CV (Twelfth Court of Appeals - Tyler
(February 29, 2012)
This case involves interpretation and applicability of Tax Code §23.1241. Capacity of Texas, Inc. (Capacity) filed a Dealer’s Heavy Equipment Inventory Declaration pursuant to Tax Code §23.1241, but Gregg Appraisal District (GAD) “denied Capacity’s request” for valuation pursuant to §23.1241 “because it determined that Capacity did not have ‘any retail inventory’” and, therefore, “that Capacity’s inventory did not qualify for the special valuation.” As set forth by the appellate court:
Capacity manufactures and sells terminal tractors from its manufacturing facility in Gregg County, Texas. During calendar year 2006, Capacity sold 1,311 of these terminal tractors. During that same calendar year and on January 1, 2007, Capacity’s sales were outpacing its production. As a result, it maintained a backlog of orders. Capacity’s facility did not contain a showroom in which to display its products and did not have any completed inventory that did not have a buyer associated with it. Accordingly, if a potential buyer wanted to purchase a terminal tractor from Capacity during that time period, Capacity would manufacture the terminal tractor to the purchaser’s specifications on a first-come-first-served basis.
After GAD assessed Capacity’s inventory value at $1,981,918 for 2007, the tax year at issue, rather than at $151,408 as stated by Capacity in its Dealer’s Heavy Equipment Inventory Declaration, Capacity protested. The appraisal review board “denied Capacity’s special inventory valuation.” Capacity filed suit and the trial court entered judgment in favor of Capacity. GAD appealed.
On appeal, GAD argued that the trial court erred “because (1) Capacity’s inventory of heavy equipment was not held for sale at retail, (2) Capacity’s inventory is not subject to valuation under Texas Tax Code, Section 23.1241, and (3) the trial court’s interpretation of Section 23.1241 is unconstitutional.” With regard to the first two issues, the appellate court analyzed the concept of “held for sale,” reviewing Tax Code §23.1241 as well as a Tax Code sales tax section defining “’[s]ale’ or purchase.’” The appellate court found that
Capacity possessed the heavy equipment inventory after production and before shipping it to the purchaser. The time period for the transfer of possession from the dealer to the purchaser is irrelevant. Therefore, as long as Capacity had possession of the product before transferring to the purchaser, it “held” the item for sale.
The court held:
In sum, Capacity’s inventory of heavy equipment qualified as dealer’s heavy equipment inventory under Texas Tax Code, Section 23.1241 because those units of personal property were held for sale. Therefore, Capacity qualified for special valuation of its terminal tractor inventory pursuant to Section 23.1241.
With regard to GAD’s assertion that the trial court’s interpretation of the statute is unconstitutional, the appellate court held that the issue was not preserved for appellate review because the issue was not presented to the trial court.
The appellate court affirmed the trial court’s judgment.
Sections 42.09 and 42.21
Jefferson County Appraisal District et al. v. Glen W. Morgan, No. 09-11-00517-CV (Ninth Court of Appeals - Beaumont)
(February 9, 2012)
In December 2000, Glen W. Morgan (Morgan) entered into a lease agreement with Jefferson County under which Morgan leased land on which he intended to build a hangar at the Southeast Texas Regional Airport. Not until 2006 were the hangar and the leasehold interest in the land placed on the tax rolls. A fuel tank and fuel were added to the rolls under a third account number in 2007. Morgan protested the land and hangar for 2006, asserting in the protest, among other things, that he “leased the property and did not own it.” The appraisal review board held a hearing and issued an order on August 11, 2006. Morgan appealed to district court on September 5, 2006, but his original petition referenced 2005, not 2006. He filed a second amended petition on July 2, 2007 in which he referenced 2005, 2006, and 2007. Jefferson County Appraisal District and Appraisal Review Board of Jefferson County (JCAD), the named defendants, filed a motion to dismiss for want of jurisdiction. The trial court denied the motion and JCAD appealed.
JCAD argued that Morgan’s suit for tax year 2006 was not timely filed pursuant to Tax Code §42.21(a) because the second amended petition adding tax year 2006 was not filed until after the applicable 45-day deadline. Morgan argued that JCAD “had sufficient notice that he was challenging the appraisal value for the 2006 tax year” and that his pleadings, in accordance with cited rules of civil procedure, gave JCAD “fair notice of the claim involved.”
The appellate court held that the trial court has jurisdiction for tax year 2006, stating:
There was no tax assessment in 2005 to protest. Although Morgan did not refer to the 2006 tax year in his original petition, the record supports a conclusion that the 2005 tax year reference was simply a mistake, and that the appeal to district court was for the 2006 tax year on which he had filed a notice of protest. At the time Morgan filed the petition for review in September 2006, the only taxes that could have been at issue were those for 2006. There could be no confusion by the parties on that point.
JCAD also argued that “the trial court erred in denying their motion to dismiss because Morgan did not file a protest for the tax year 2008 on the hangar account and did not file a protest in tax year 2009 for either the hangar account or the fuel tank account.” Morgan argued “that he contested the question of ownership through a declaratory judgment action in his pleadings and maintains that, because he is not the owner of the property, he does not have to exhaust the ‘yearly, repetitive administrative requirements.’ He contend[ed] he was not precluded from amending his previous petition to include the new years for which he sought review.”
The appellate court held:
Here, the trial court has jurisdiction over other tax years and will be determining the ownership issue for those years. Assuming all material factual circumstances are the same in 2008 and 2009, the question of law regarding ownership will apparently be the same as in the other tax years. Under these circumstances, the trial court has jurisdiction to declare the effect of any ownership ruling on the 2008 and 2009 tax years. However, with respect to all other issues involved in the 2008 and 2009 tax years for the relevant accounts for which no protest or appeal was filed, the trial court lacks jurisdiction.
The appellate court affirmed the trial court’s judgment in part and reversed and remanded in part.
ections 25.25(c) and 1.04(18)
Dallas Central Appraisal District et al. v. Southwest Airlines Co., 05-10-00682-CV (Fifth Court of Appeals - Dallas)
(January 24, 2012)
This case involves claims pursuant to Tax Code §25.25(c). Southwest Airlines Co. (Southwest) rendered aircraft for tax years 2003 through 2007, applying the allocation formula set forth in Tax Code §21.05(b) to the fleet as a whole. "In 2008, in response to an inquiry from another department, Southwest's property tax manager discovered that had Southwest calculated the allocated value of its fleet on an aircraft-by-aircraft basis, it would have paid nearly $25 million less in taxes for the years in question." Southwest filed a motion to correct, "asserting that section 21.05 mandates the allocated value of each aircraft be separately calculated or computed, and that it mistakenly calculated or computed the allocated value on a fleetwide basis." Southwest alleged the error was a clerical error and requested a value reduction for each tax year. The ARB denied the motion and Southwest filed suit against the Dallas Central Appraisal District and Dallas County Appraisal Review Board (DCAD).
The trial court ruled in Southwest's favor, "concluding as a matter of law that (1) section 21.05 of the tax code requires the formula for allocating the value of commercial aircraft be applied on an aircraft-by-aircraft basis, not on a fleetwide basis, and (2) Southwest mistakenly applied the allocation formula in section 21.05 on a fleetwide basis in tax years 2003 to 2007 and that this mistake was a clerical error permitting correction." DCAD appealed.
The appellate court held:
Here, Southwest made no error in determining by mathematical process the value of its aircraft. Southwest did not transpose any of the numbers; it used precisely the figures it intended to use and then correctly computed or calculated those figures within the formula it intended to use. Southwest made no mathematical errors in the process; it correctly added, subtracted, multiplied, and divided the figures. Although Southwest argues its mistake is "functionally no different" than if it had used the wrong numbers and that its ignorance of the correct approach is the equivalent of a failure to calculate, we cannot agree. In short, what Southwest wants is to revise the methodology it used to calculate the renditions. Applying one methodology when another is either called for or would produce better results is simply not a clerical error as that term is contemplated by the statute.
The appellate court reversed the trial court's judgment and rendered judgment that Southwest take nothing.
Sections 25.25(c) and 1.04(18)
LFD Holdings, LLP v. Cameron County Appraisal District et al., No. 13-10-00672-CV and Lack's Valley Stores, Ltd. v. Cameron County Appraisal District et al., 13-10-00673-CV (Thirteenth Court of Appeals - Corpus Christi)
(January 5, 2012)
These consolidated cases involve claims pursuant to Tax Code §25.25(c). LFD Holdings, LLP and Lack’s Valley Stores, Ltd. (collectively “LFD”) rendered merchandise inventory for tax years 2003, 2004, and 2005 “which did not deduct any amount for depreciation of the property.” Cameron County Appraisal District (CCAD) “appraised the property in accordance with the rendered values” and notified LFD. “LFD later determined that the appraised value of the inventory was ‘far in excess’ of its cash fair market value,” exhausted administrative remedies, and filed suit. The trial court denied LFD’s claims and LFD appealed.
LFD stated on appeal:
CCAD‘s alleged error originated with the inclusion of the words “INVENTORY = 100% ORIGINAL COST” in its personal property depreciation table for the tax years at issue. According to LFD, this language violates section 20 of article eight of the Texas Constitution, as well as various tax code provisions including sections 23.01 and 23.011. See TEX. CONST. art. VIII, § 20; TEX. TAX CODE ANN. §§ 23.01 (West Supp. 2010) (“Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of January 1.”), 23.011 (West 2008) (stating that, if the cost method of appraisal is used to determine the market value of real property, the chief appraiser must “use cost data obtained from generally accepted sources” and “make any appropriate adjustment for physical, functional, or economic obsolescence”). LFD argues specifically that CCAD‘s adherence to this language in determining the inventory values was a clerical error under the statutory definition because it constitutes a “failure in . . . calculating.” See TEX. TAX CODE ANN. § 1.04(18)(A).
Citing its prior opinion in Lack’s Valley Stores, Ltd. v. Hidalgo County Appraisal Dist., No. 13-10-500-CV, 2011 Tex. App. LEXIS 4752 (Tex. App.—Corpus Christi June 23, 2011, pet. dism‘d w.o.j.)(mem. op.), the appellate court held:
CCAD‘s failure to account for depreciation of LFD‘s inventory was the result of a “deliberate determination” by CCAD in which it assessed the property and gave it a value which it deemed appropriate. See id. at *8. It was not a “mistake in writing or copying,” see Matagorda, 788 S.W.2d at 693, nor was it a “simple, inadvertent omission made while reducing a judgment into writing,” see Lack’s Valley Stores, Ltd., 2011 Tex. App. LEXIS 4752, at *8. Indeed, as was the case with HCAD in Lack’s Valley Stores, the judgment of the appraisal review board in this case was accurately reflected in CCAD‘s notice to LFD. See id. at *8–9.
LFD does not provide this Court with any basis for deviating from the reasoning expressed in Lack’s Valley Stores. We therefore conclude that CCAD‘s alleged failure to appropriately depreciate is not properly defined as a “clerical error” under the statutory definition.
The appellate court affirmed the trial court’s judgment.
In an order pronounced December 14, 2012, the Supreme Court denied the motion for rehearing in the case, and the Judgment issued October 26, 2012, was withdrawn, and a corrected judgment was issued in a decision without published opinion.