2013 Attorney General Opinions and Court Decisions
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Listed below are recent opinions and decisions concerning various property tax issues. The list is 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-1022Re: Authority to create overlapping emergency services districts that provide duplicative services and levy additional ad valorem taxes (RQ-1122-GA)
Summary: Pursuant to chapter 775 of the Health and Safety Code, two emergency services districts may overlap in territory but may not provide duplicative services in any territory where they overlap. Further, an emergency services district may not amend its provision of services in order to provide services duplicative of another overlapping emergency services district.
Opinion No. GA-1015 Re: Whether machinery and equipment at a cattle feedlot are used in the "production of farm or ranch products" for purposes of Tax Code section 11.161 (RQ-1071-GA)
Summary: The Comptroller's interpretation of Tax Code section 11.161, that a cattle feedlot is engaged in the "production of farm or ranch products," is reasonable and does not contravene any statute. Accordingly, a court would likely uphold the Comptroller's interpretation of section 11.161.
Courts of Appeals Decisions
This case involves a jurisdictional challenge based on Tax Code §42.08. Harris County Appraisal District (HCAD) appraised Chockalingam S. Palaniappan’s (Palaniappan) property at $960,401 in 2008. Palaniappan owed approximately $13,000 in taxes based on HCAD’s appraised value. Palaniappan protested the value to the appraisal review board, but the protest was denied. Palaniappan filed suit in district court.
In his petition, Palaniappan stated, “Pursuant to Section 42.08, Plaintiff intends on timely paying all taxes due on the property, or the taxes due on the undisputed portion of the value of the property, or, if unable to timely pay the lesser of these amounts, Plaintiff requests relief from the Court.” Palaniappan’s 2008 taxes were due before February 1, 2009. On January 23, 2009, Palaniappan paid $1,800 in property taxes. Palaniappan continued to make periodic payments after the February 1, 2009 delinquency date and, by June 30, 2009, Palaniappan had paid off the entire balance due for tax year 2008.
HCAD moved to dismiss Palaniappan’s suit for lack of subject-matter jurisdiction, asserting that Palaniappan had failed to comply with Tax Code §42.08.
Palaniappan responded that he complied with subsection 42.08(b)’s prepayment requirement because he paid “an undisputed amount” of the taxes due prior to the delinquency date. Id. § 42.08(b)(1) (allowing property owner to pay “the amount of taxes due on the portion of the taxable value of the property that is not in dispute”). Palaniappan also argued that he was excused from the prepayment requirement by section 42.08(d), which allows a property owner to “be excused from the requirement of prepayment of tax as a prerequisite to appeal if the court . . . finds that such prepayment would constitute an unreasonable restraint on the party’s right of access to the courts.” Id. § 42.08(d).
In support of this contention, Palaniappan filed an oath of inability to pay and a motion to determine substantial compliance pursuant to section 42.08(d).
The trial court held an evidentiary hearing on HCAD’s motion to dismiss and Palaniappan’s oath of inability to pay. During the course of the hearing, the trial court asked Palaniappan what amount he contended was undisputed.
Palaniappan’s counsel replied, “Your Honor, any amount would arguably be undisputed that being paid.” The trial court asked what Palaniappan’s experts thought the property should have been appraised at for 2008 and Palaniappan’s counsel informed the trial court that their experts appraised the 2008 value of the property at $610,703, and counsel estimated that the total amount of taxes due, based on that appraised value, was approximately $7,000.
The trial court denied Palaniappan’s motion for substantial compliance under Tax Code §42.08 and granted HCAD’s motion. Palaniappan appealed.
In addressing the issues before it, the appellate court first noted that “[c]ompliance with the prepayment requirements of section 42.08 is a jurisdictional prerequisite to the district court’s subject-matter jurisdiction to determine a property owner’s rights” and that, as the party seeking dismissal for lack of jurisdiction, HCAD had the burden of proof regarding substantial compliance with §42.08.
The appellate court addressed several challenges, including timeliness of Palaniappan’s oath of inability to pay, evidence demonstrating Palaniappan’s inability to pay, and sufficiency and credibility of the evidence.
Regarding timeliness of Palaniappan’s oath of inability to pay, the appellate court stated and, pursuant to Carter v. Harris Cnty. Appraisal Dist., 409 S.W.3d 26 (Tex. App.—Houston [1st Dist.] 2013, no pet.), held:
HCAD argues that Palaniappan failed to substantially comply with section 42.08(d) because he did not submit his oath of inability to pay until February 2, 2011—two years after the delinquency date—and he did not timely notify the taxing units that he would not be able to pay the taxes before the delinquency date. Palaniappan counters that the fact that his oath of inability to pay was submitted after the delinquency date does not mean that he failed to substantially comply with section 42.08.
. . . .
Pursuant to Carter, we hold that Palaniappan’s oath of inability to pay was also timely, and thus, HCAD failed to prove that Palaniappan failed to substantially comply with section 42.08 by filing an untimely oath of inability to pay.
Addressing whether Palaniappan’s evidence adequately established his inability to pay the full amount of taxes prior to February 1, 2009, the appellate court overruled Palaniappan’s related issues, stating:
[A]s HCAD points out, the bank records Palaniappan submitted show that he had over $23,000 cash on hand as of January 31, 2009. This amount is approximately $10,000 more than Palaniappan owed in property taxes as of January 31, 2009 (based on HCAD’s appraised value). Thus, unlike in Carter, there is evidence here calling into question the veracity of the property owner’s testimony regarding his inability to pay the taxes prior to the delinquency date. In light of this evidence, we conclude that Palaniappan failed to demonstrate by a preponderance of the evidence that he was financially unable to pay the taxes on the due date. See Carter, 409 S.W.3d at 36. Accordingly the trial court did not err in concluding that Palaniappan (1) did not substantially comply with section 42.08 . . . and (2) is not excused from substantially complying with section 42.08 by virtue of an inability to pay . . . .
The appellate court also concluded that “there was legally sufficient evidence to support the trial court’s finding that there was no or insufficient evidence supporting Palaniappan’s claim of financial hardship” and “the trial court’s finding that there was ‘[n]o and/or insufficient, credible or relevant evidence. . . relating to financial hardship’ is also factually sufficient because this finding is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.”
Later in its analysis of additional issues raised by Palaniappan, the appellate court held:
In light of Palaniappan’s testimony that he paid only $1,800 in property taxes prior to the delinquency date, even though he owed approximately $7,000 in taxes based upon his experts’ appraisal value of the property, we also conclude that the trial court’s finding on this issue is not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust, and therefore, the finding is supported by factually sufficient evidence.
. . . .
Because Palaniappan did not elect to pay the undisputed amount or state the amount he intended to pay in his petition as required by subsection 42.08(b-1), his partial tax payment before the delinquency date was insufficient to satisfy the requirements of subsection 42.08(b).
The appellate court affirmed the trial court’s judgment.
This case involves a 25.25(c) motion to correct the appraisal rolls for tax years 2007, 2008, and 2009. Stacy Family Enterprises, Inc. (Stacy) is a furniture retailer that maintains inventory in three locations in Tarrant Appraisal District (TAD). As set forth by the appellate court:
Stacy argued that TAD relied on Stacy’s good-faith estimates of its inventory’s market value and did not conduct an independent evaluation. Additionally, Stacy complained that TAD made no deductions for depreciation as it should have in accordance with the tax code’s cost-method formula. See id. § 23.011 (West 2008). TAD’s method, according to Stacy, inflated the appraised market value of the inventory.
The Tarrant Appraisal Review Board (TARB) denied Stacy’s motion. Stacy subsequently filed suit in district court. Both TAD and Stacy filed motions for summary judgment. The trial court granted TAD’s motion and denied Stacy’s motion. Stacy appealed.
With regard to Stacy’s no-evidence motion for summary judgment, the appellate court overruled Stacy’s issue, stating:
Stacy argues that the trial court should have granted its no-evidence summary judgment because TAD "ha[d] no evidence of its own showing the appraised values of [Stacy’s] inventories"; therefore, TAD could "make no defense, whatsoever, disputing [Stacy’s] evidence." At trial, Stacy would have had the entire burden of proof to establish its claim under section 25.25(c) of the tax code. Compare Tex. Tax Code Ann. § 25.25(c)(1), and Matagorda Cnty. Appraisal Dist. v. Conquest Exploration Co., 788 S.W.2d 687, 693 (Tex. App.—Corpus Christi 1990, no writ) (stating that taxpayer may obtain benefit of tax roll correction "if he proves that § 25.25(c) applies to his situation"), with Tex. Tax Code Ann. § 41.43(a) (West Supp. 2013) (placing burden of proof on appraisal district to establish value of property at administrative hearing). Further, TAD did not assert any affirmative defense to Stacy’s claim; thus, TAD would have shouldered no burden to produce any evidence of its defense. Cf. MHCB (USA) Leasing & Fin. Corp. v. Galveston Cent. Appraisal Dist. Review Bd., 249 S.W.3d 68, 81 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) ("[I]n a protest of the property’s appraised value . . . the appraisal district has the burden of establishing both the property’s value and the appraisal’s equality.").
Stacy could not properly move for no-evidence summary judgment. See Tex. Tax Code Ann. §§ 25.25(c)(1), 42.01(a)(1)(B); Reyes, 269 S.W.3d at 678. Even assuming that TAD had appraised Stacy’s inventory incorrectly, evidence of this alone would be insufficient to establish Stacy’s right to summary judgment under its section 25.25 claim. See Tex. Tax Code Ann. § 25.25(c). Stacy would still have to establish that TAD’s error was clerical. See id.
Regarding TAD’s motion for summary judgment, the appellate court again overruled Stacy’s issue:
In its motion for summary judgment, TAD argued that Stacy’s petition sought a substantive re-evaluation of the tax rolls, which was not reviewable by a motion to correct under section 25.25(c) of the tax code. The tax code provides that "[t]he appraisal review board, on motion of the chief appraiser or of a property owner, may direct by written order changes in the appraisal roll for any of the five preceding years to correct . . . clerical errors that affect a property owner’s liability for a tax imposed in that year." Id. § 25.25(c)(1). The tax code defines "clerical error" as:
(A) that is or results from a mistake or failure in writing, copying, transcribing, entering or retrieving computer data, computing, or calculating; or
(B) that prevents an appraisal roll or a tax roll from accurately reflecting a finding or determination made by the chief appraiser, the appraisal review board, or the assessor; however, ‘clerical error’ does not include an error that is or results from a mistake in judgment or reasoning in the making of the finding or determination.
Id. § 1.04(18)(A), (B) (West 2008).
Stacy contends that TAD committed a clerical error when it calculated the market value of Stacy’s property for its ad valorem taxes in the years 2007, 2008, and 2009. Specifically, Stacy maintains that TAD failed to independently evaluate the market value of Stacy’s inventory and failed to make depreciation deductions, which amounted to a "failure in . . . calculating" under section 1.04(18)(A) of the tax code. Id. § 1.04(18)(A). Whether an alleged error constitutes a clerical error is a question of law reviewed de novo. See First Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 631 (Tex. 2008), cert. denied, 556 U.S. 1221 (2009); Matagorda Cnty. Appraisal Dist., 788 S.W.2d at 693.
In its analysis, the appellate court discussed the appellate court decisions in Lack’s Valley Stores, Ltd. v. Hidalgo County Appraisal District, No. 13-10-00500-CV, 2011 WL 2475843 (Tex. App.—Corpus Christi June 23, 2011, pet. denied) (mem. op.) and Dallas Central Appraisal District v. Southwest Airlines Co., No. 05-10-00682-CV, 2012 WL 210964 (Tex. App.—Dallas January 24, 2012, pet. denied) (mem. op.). The court then stated:
We agree with these interpretations of "clerical error." For the years in dispute, TAD’s appraisal method involved accepting Stacy’s renditions of its inventory’s market value and making no further depreciation deductions. TAD deliberately utilized this methodology and the figures in the annual notices sent to Stacy accurately reflected TAD’s determination of the value of Stacy’s inventory. See Lack’s, 2011 WL 2475843, at *3 (noting that appraisal district’s failure to account for depreciation "was the byproduct of a deliberate determination" and "not properly defined as a clerical error"). Stacy does not allege that TAD transposed any numbers, copied the wrong figures, or committed any errors in adding, subtracting, multiplying, or dividing. See Sw. Airlines Co., 2012 WL 210964, at *3 (refusing to hold that a failure to use the correct methodology is equivalent to a "failure to calculate"). Although TAD might have used a flawed methodology, it did not make any error or failure in "writing, copying, transcribing, entering or retrieving computer data, computing, or calculating" the appraised amount. See Tex. Tax Code Ann. § 1.04(18)(A); Marubeni Am. Corp. v. Harris Cnty. Appraisal Dist., 168 S.W.3d 860, 863 (Tex. App.—Houston [1st Dist.] 2004, no pet.) (distinguishing the facts of Comdisco and holding that figures submitted to the appraisal district that were based on allegedly incorrect information were not clerical errors under subsection (A)).
Stacy’s desired correction to the appraisal roll is not ministerial or objective; instead Stacy seeks a substantive re-evaluation of the property’s market value. See Anderton v. Rockwall Ctr. Appraisal Dist., 26 S.W.3d 539, 543 (Tex. App.—Dallas 2000, pet. denied) ("In enacting section 25.25(c) of the tax code, the legislature specifically set forth . . . limited corrections . . . includ[ing] only objective and ministerial matters such as clerical errors . . . [and] not includ[ing] the substantive reevaluation of a property’s market value."). Further, TAD’s failure to make depreciation deductions was not a "clerical error" as defined by 1.04(18)(A). See Tex. Tax Code Ann. § 1.04(18)(A); Lack’s, 2011 WL 2475843, at *3. As a matter of law, Stacy could not establish that TAD committed a "clerical error" subject to correction under section 25.25(c) of the tax code. See Tex. Tax Code Ann. § 25.25(c). The trial court therefore properly granted TAD’s summary judgment motion.
Stacy also argued that the trial court erred in granting summary judgment for TAD "because it applied the tax code’s definition of "clerical error" from section 1.04(18)(B) (an error that "prevents an appraisal roll or a tax roll from accurately reflecting a finding or determination made by the chief appraiser, the appraisal review board, or the assessor" except for a "mistake in judgment or reasoning") rather than section 1.04(18)(A) (an error resulting from a "mistake or failure in writing, copying, transcribing, entering or retrieving computer data, computing, or calculating")." Overruling Stacy’s issue, the court stated:
Although nothing in the trial court’s order states which definition of "clerical error" it applied, Stacy’s claim fails under both subsections of 1.04(18). As we noted above, TAD’s alleged erroneous evaluation of the market value was not the result of an error in its calculation. TAD did not err in applying basic mathematical principles in its addition, subtraction, multiplication, or division. Instead, TAD used a different mathematical formula. An error in judgment does not fall within the bounds of either subsection of 1.04(18). See id. § 1.04(18)(A), (B); Gregg Cnty. Appraisal Dist., 2011 WL 3963013, at *3 (stating that section 1.04(18) does not alter the traditional definition of clerical error "as one that does not result from reasoning or determination").
The appellate court affirmed the trial court’s judgment.
In re Holcim (US), Inc., No. 10-13-00344-CV (Tenth Court of Appeals – Waco)
(December 12, 2013)
This case involves a pretrial discovery dispute on appeal by writ of mandamus. The majority opinion of the appellate court is a memorandum opinion simply denying the petition for writ of mandamus. The dissenting opinion states:
In this mandamus proceeding, Holcim asks this Court to compel the trial court to withdraw its order for discovery regarding the cost of a cement plant constructed in Ste. Genevieve, Missouri. Because Holcim has established that the nature, technology, location, and capacity of the Ste. Genevieve plant is so significantly different than the construction of a cement plant comparable to the plant in Midlothian, Texas, I would order the trial court to withdraw its order for discovery and to sustain Holcim’s objection to discovery of the cost of construction of the cement plant at Ste. Genevieve, Missouri. Because this Court has summarily denied Holcim relief, I will only briefly outline my disagreement as to why I must, respectfully, dissent. Accordingly, I will not set out the familiar standards for a writ of mandamus to issue or for discovery to be limited or denied.
The issue in the underlying case is the value of Holcim’s cement plant in Midlothian, Texas. The real party in interest is the Appraisal District for the taxing authority, Ellis County Appraisal District. There is generally agreement that one of the proper methods of valuation of such a plant requires the appraiser to start with the cost to build a similar plant that would have the same capacity as the one being valued. Holcim contends that the construction cost of the recently completed plant at Ste. Genevieve, Missouri is not relevant and identifies a number of differences as follows:
- Distance to Quarry;
- Location/Shipping Method vis-à-vis highway/river/SMSA; and
There are two basic problems for any appraiser trying to compare the cost of the two plants for the purpose of valuing the Midlothian plant. I will call one the "First Time Design" problem and the other the "Nature and Extent of Adjustments" problem. Both are most easily understood by simple analogies.
First Time Design is best understood by recognizing the need to quantify the one-time development cost incurred any time a new design is utilized. All the development cost of the first Boeing 787 Dreamliner makes the first one off the assembly line very expensive when compared to the second one. Only by building more than one can you effectively determine and isolate development cost from actual production cost of the second, third, fourth, to the 100th unit. In this case, there is no second unit after the unique design, engineering, and construction of the Ste. Genevieve plant to effectively isolate development cost.
Nature and Extent of Adjustment is also best understood by an analogy. An appraiser’s stock-in-trade is their ability to identify comparable properties with known values and make the necessary "adjustments" to the comparable property’s value to estimate the value of the subject property. Obviously, the closer the comparable property is when directly compared to the subject party, the fewer the adjustments that have to be made. Likewise, the greater the differences in the properties, the greater the number and amount of adjustments that have to be made. And fundamentally, the greater the number and amount of adjustments, the less reliable the result becomes, which is the appraised value of the subject property.
These are both plants that produce cement. That is about the only truly comparable feature of the two plants. It is like using the cost of Trump Tower in New York City to value a four-story office building in Waco, Texas: The number, type, and amount of "adjustments" needed to make a valuation comparison are simply too great to yield a reliable result. But yet, they both include "commercial office space" for rent or lease.
Because the cost to build a cement plant in Ste. Genevieve with so many differences from the Midlothian plant cannot yield any reliable data upon which to value the Midlothian plant, I would hold the trial court abused its discretion when it overruled Holcim’s objections to the discovery of the Ste. Genevieve data sought by the Ellis County Appraisal District. Because the Court holds otherwise, I respectfully dissent.
As noted above, by majority, the appellate court denied the petition for writ of mandamus.
This case involves a pretrial discovery dispute on appeal by writ of mandamus in a suit filed by Valero Refining-Texas, LP (Valero) against Galveston Central Appraisal District (GCAD) contesting GCAD's appraisal of Valero's Texas City refinery for tax year 2012. As set forth by the appellate court:
Valero challenges a trial court order compelling it to produce all "projected financial statements, including income statements, balance sheets, and statements of cash flows related to the Property" and all "Documents relating to the refinery yields, costs, and operating economics of the Property for each year" from January 2011 to the present. Valero contends, and GCAD concedes, that the requested information constitutes trade secrets. GCAD contends that its requested discovery is necessary to establish the value of Valero's property.
Noting that GCAD conceded that the information requested consists of trade secrets, the appellate court focused its analysis on whether the trade secrets are necessary to a fair adjudication of the case:
Taxable property is generally appraised at its market value. See TEX. TAX CODE ANN. § 23.01(a) (West Supp. 2012). There are three potential alternate methods of determining the market value of property: cost, income, and market data comparison. See id. § 23.0101 (West 2008). GCAD asserts that the requested records are necessary to complete an income-method appraisal of the property. An expert for GCAD averred that the income method applied because it is a valid and recognized method of determining the market value of refineries that buyers and sellers of refineries often use. GCAD also produced an industry article about appraising refineries that analyzes the application of each of the three appraisal methods to refineries. The article notes the benefits and shortfalls of each method and concludes that because none of the three are perfect, the most accurate appraisal would take into consideration all three appraisal methods.
Valero disputes the relevance of an income-based valuation in the context of appraising its refinery. But even assuming the relevance of the discovery requested by GCAD, to overcome the trade-secret privilege the evidence must be necessary and not merely relevant. See In re Bridgestone/Firestone, 106 S.W.3d at 732-33; In re Cont'l Gen. Tire, 979 S.W.2d at 611; In re XTO Res. I, 248 S.W.3d at 905. GCAD must show that without the trade secrets, its ability to defend its appraisal will be significantly impaired. See In re Union Pacific R.R., 294 S.W.3d at 592; In re Bridgestone/Firestone, 106 S.W.3d at 733. GCAD's expert did not conclude that the cost or market-data-comparison methods are inappropriate or inapplicable. Nor did he conclude that the income method is the most appropriate valuation method or that it is essential to create an accurate appraisal. The industry article produced by GCAD indicates that an ideal appraisal considers all three appraisal methods, but it also indicates that, depending on the circumstances, each of the three methods can produce a competent appraisal. The information requested by GCAD is therefore useful in that it will facilitate an income-method appraisal and perhaps reach an appraisal with more certainty. See In re Bridgestone/Firestone, 106 S.W.3d at 733; In re XTO Res. I, 248 S.W.3d at 905. Yet, it is not necessary, because an accurate appraisal can be completed without it. See In re Bridgestone/Firestone, 106 S.W.3d at 733; In re XTO Res. I, 248 S.W.3d at 905. Moreover, the record before us does not establish that an income-based valuation is not possible without the requested discovery.
GCAD contends that Tax Code section 23.0101 requires it to appraise the property by all three methods to determine the most appropriate method of appraisal. Section 23.0101 provides that the appraiser shall "consider" the three appraisal methods and "use the most appropriate method." TEX. TAX CODE ANN. § 23.0101. This statute requires that the appraiser determine which of the three appraisal methods is the most appropriate given the individual characteristics of the property that affect the property's market value and then apply that method. See id. § 23.01(b) (providing that "each property shall be appraised based upon the individual characteristics that affect the property's market value"). It does not require the appraiser to use all three appraisal methods, as confirmed by other provisions of the Tax Code that only apply "if" certain methods are used. See id. § 23.011 (West 2008) (imposing requirements on appraiser "[i]f the chief appraiser uses the cost method of appraisal"); id. § 23.012 (imposing requirements on appraiser "[i]f the income method of appraisal is the most appropriate method"); id. § 23.013 (West Supp. 2012) (imposing requirements on appraiser "[i]f the chief appraiser uses the market data comparison method of appraisal"). If the use of all three methods were mandatory, these provisions would not be conditioned on the use of one particular method.
Accordingly, GCAD has failed to adequately demonstrate its need for the requested information, because alternate methods of appraisal are available and it has presented no evidence that those methods will not produce competent evidence of the market value of the refinery. Valero asserts that releasing the confidential financial information covered by the requests for production will allow competitors to undercut its prices and give those competitors a significant competitive advantage. The Supreme Court of Texas has recognized that the release of confidential financial information such as pricing and production costs can result in significant harm. See In re Union Pac. R.R., 294 S.W.3d at 592-93.
GCAD contends that an existing protective order in the case limiting disclosure of confidential information to parties, experts who agree not to disclose the information, and attorneys in the case eliminates any potential harm from the disclosure of the trade secrets. However, a protective order limiting who can view this type of confidential financial information does not ensure that release of the information will not violate the trade secret privilege. See id. at 593. Moreover, the ability of a protective order to limit harm from the disclosure of trade secrets is only a factor if the trade secrets are necessary and must be disclosed. See In re Cont'l Gen. Tire, 979 S.W.2d at 613.
Even assuming that the discovery of Valero's trade secrets would be necessary for GCAD to conduct an income method appraisal, two other valid methods of appraisal are available. GCAD has not shown that these methods will not provide a competent appraisal and evidence of the market value of the property. Accordingly, GCAD has failed to meet its burden of establishing that the information is material and necessary to its case. See id. Valero therefore should not have been compelled to produce its trade secrets, and we need not address Valero's further contentions that the requests are overbroad or unduly burdensome.
The appellate court conditionally granted Valero's petition for writ of mandamus.
Sections 11.45, 25.01, 25.22, 41.11, 41.12, and 42.21(a)
Waters at Northern Hills, LLC et al. v. Bexar Appraisal District et al., Nos. 04-12-00820-CV & 04-12-00871-CV (Fourth Court of Appeals - San Antonio)
(October 2, 2013)
This case involves a challenge to the denial of a property tax exemption. As set forth by the appellate court:
Appellants, who were the plaintiffs below, own and operate a 304-unit low-income apartment complex known as the Waters at Northern Hills (“the property”), in San Antonio, Texas. Appellees, the defendants below, are the Bexar Appraisal District (“BAD”) and various taxing authorities (“Taxing Authorities”).
. . . .
Appellants provide affordable housing for low income and/or moderate income residents of San Antonio. In 2001, both appellants were certified as a Community Housing Development Organization (“CHDO”). For tax years 2001, 2002, and 2003, appellants were granted exemptions from ad valorem taxes on the property. However, for tax year 2004, appellants were required to reapply for a tax exemption, and the application was later denied. Taxes were then assessed on the property for tax years 2004 through 2008, and appellants later challenged these tax assessments. On December 8, 2008, appellants and the Taxing Authorities entered into an “Agreement for the Installment Payment of Delinquent Taxes” (“the installment agreement”) that allowed appellants to make installment payments on taxes and interest due for tax years 2006 and 2007. The installment agreement required appellants to pay all future taxes when those taxes became due during the time of the agreement. The last payment was due February 15, 2010, but appellants had the option to renew the installment agreement on or before that date. The agreement did not mention tax years 2004, 2005, or 2008. On December 11, 2008, the trial court signed an agreed judgment in which the court acknowledged the installment agreement and stated that BAD “shall grant” an exemption for tax years 2004 and 2005. Also on December 11, 2008, the trial court signed a second agreed judgment. In this judgment, the trial court again acknowledged the installment agreement, and directed BAD to revise the market value of the property for tax year 2008 and prepare and deliver a corrected supplemental tax bill. In June 2011, the installment agreement was amended to allow appellants to make a monthly payment of $10,000 beginning July 15, 2011 and ending December 15, 2011.
On February 5, 2009, BAD informed appellants they had to submit a new application and supporting documentation for a tax year 2009 exemption on the property. Appellants submitted their new application on April 16, 2009. On June 12, 2009, BAD notified appellants their application had been “disapproved,” but asked for additional information to be submitted no later than July 13, 2009, so that BAD could determine whether to grant or deny the exemption. On July 13, 2009, appellants notified BAD of their “conditional protest of the ‘disapproval’ letter.” On February 1, 2010, BAD notified appellants their application for a tax exemption for tax year 2009 had been “denied.” Appellants then appealed to the Bexar County Appraisal Review Board (“ARB”), and a formal hearing before ARB was set for October 12, 2010. On October 29, 2010, ARB rejected the protest, and appellant Waters at Northern Hills, LLC (“Waters”) sued BAD in district court in November 2010. On July 19, 2011, Waters filed a notice of nonsuit.
On May 4, 2012, both appellants sued all the appellees alleging various claims and requesting a declaratory judgment. In this lawsuit, appellants contended that pursuant to the installment agreement (1) they agreed to dismiss their “litigation against Bexar County” and pay over $1 million in installment payments in exchange for the grant of an exemption and the elimination of taxes for tax years 2004, 2005, and 2008, and (2) BAD agreed the property would maintain its exemption provided statutory requirements for such exemptions were satisfied. Appellants alleged appellees breached this agreement by refusing to acknowledge the property’s tax exempt status beyond 2008 and by wrongfully attempting to collect taxes for tax years 2009, 2010, and 2011. Appellants also alleged appellees made continuing promises intended to induce appellants to sign the installment agreement, forfeit their right to protest the assessment of taxes for tax years 2004 through 2008, and make over $719,988.00 in payments under the installment agreement. Appellants asserted appellees should be estopped, based on these promises, from revoking or failing to acknowledge the property’s tax exempt status and from collecting taxes on the property. Finally, appellants alleged appellees breached a duty of good faith and fair dealing by refusing to acknowledge the property’s tax exempt status beyond 2008, accepting payments when it had no intention of acknowledging the tax exempt status beyond 2008, enticing appellants to enter into the installment agreement, and wrongfully assessing taxes for tax years 2009, 2010, and 2011. Appellants also requested a declaratory judgment on the property’s tax exempt status, or alternatively, that the agreement was null and void.
BAD and the Taxing Authorities each filed a plea to the jurisdiction. The Taxing Authorities also filed a counterclaim and third party action to recover delinquent taxes for tax years 2006, 2007, and 2009. In a supplemental petition, appellants requested injunctive relief and raised affirmative defenses. The trial court granted the pleas and this appeal ensued.
As a result of procedural determinations in the trial court, the appellate court limited its opinion to issues related only to the 2009 tax year.
In setting forth the basic framework of the appeal, the appellate court stated:
ARB delivered its decision denying the exemption for tax year 2009 on October 29, 2010 and appellants filed the underlying lawsuit on May 4, 2012. In its plea to the jurisdiction, BAD argued the trial court lacked jurisdiction over claims related to tax year 2009 because appellants did not timely file suit from ARB’s decision within the statutory sixty-day period [pursuant to Tax Code §42.21(a)]. In their plea to the jurisdiction, the Taxing Authorities also asserted the trial court lacked jurisdiction because the time to appeal the denial of the 2009 exemption had lapsed.
On appeal to this court, appellants assert their suit is not time-barred because the 2009 tax assessment is null and void, and therefore, may be challenged at any time . . . . Appellants contend the 2009 tax assessment is void because ARB lacked jurisdiction to deny the 2009 tax exemption based on ARB’s failure to deliver written notice of the denial by May 20, 2009; ARB’s failure to hear and determine their protest by July 20, 2009; and ARB’s failure to provide written notice of any change in records resulting in increased tax liability by July 20, 2009.
Relying on Tax Code §41.11 and a prior appellate court decision, the appellants asserted that the ARB was without jurisdiction to deny the 2009 exemption “because it did not timely deny the exemption or give timely notice of the denial.” The appellate court stated:
Here, because appellants were provided with notice - albeit not within the timeframe appellants argue . . . should apply-there are no due process concerns. Therefore, we do not believe section 41.11 operates to automatically nullify ARB’s denial of the 2009 tax year exemption. Accordingly, we instead look to other sections of the Tax Code to determine whether ARB’s alleged late denial “voids” the denial.
The CHDO tax exemption at issue in this case is “perennial” in the sense that it “need not be claimed in subsequent years, and except as otherwise provided by Subsection (e), the exemption applies to the property until it changes ownership or the person’s qualification for the exemption changes.” TEX. TAX CODE ANN. § 11.43(c) (West Supp. 2013). “However, the chief appraiser may require a person allowed one of the exemptions in a prior year to file a new application to confirm the person’s current qualification for the exemption by delivering a written notice that a new application is required, accompanied by an appropriate application form, to the person previously allowed the exemption.” Id. Here, BAD notified appellants they needed to file a new application for the 2009 tax year exemption. Appellants submitted their new application on April 16, 2009.
“The chief appraiser shall determine the validity of each application for exemption filed with him before he submits the appraisal records for review and determination of protests as provided by Chapter 41 of this code.” Id. § 11.45(c) (West 2008). “By May 15 or as soon thereafter as practicable, the chief appraiser shall prepare appraisal records listing all property that is taxable in the district and stating the appraised value of each.” Id. § 25.01(a). “By May 15 or as soon thereafter as practicable, the chief appraiser shall submit the completed appraisal records to the appraisal review board for review and determination of protests.” Id. § 25.22(a). “If the chief appraiser modifies or denies an exemption, he shall deliver a written notice of the modification or denial to the applicant within five days after the date he makes the determination.” Id. § 11.45(d). Relying on sections 11.45, 25.01, and 25.22, appellants contend a decision on its new application was required before the May 15, 2009 deadline for submitting the appraisal records listing all taxable property. Based on this assertion, appellants then rely on section 11.45(d) as support for their argument that ARB failed to provide notice of the denial of the application five days later, on May 20, 2009. Therefore, appellants contend ARB’s October 29, 2010, notice of the denial was not timely.
We do not agree with appellants that May 15 is the absolute deadline by which the chief appraiser must both prepare appraisal records and submit those records to the ARB. Such an interpretation of sections 25.01(a) and 25.22(a) would render the qualification “or as soon thereafter as practicable” meaningless surplusage. See Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008) (courts may not adopt a construction that renders any part of a statute meaningless or superfluous). Such an interpretation also ignores other provisions in the Tax Code dealing with property owner protests, which often may be lengthy and document-intense.
. . . .
Section 41.12 requires “[t]he appraisal review board [to] complete substantially all timely filed protests before approving the appraisal records and may not approve the records if the sum of the appraised values, as determined by the chief appraiser, of all properties on which a protest has been filed but not determined is more than five percent of the total appraised value of all other taxable properties.” Id. § 41.12(b). Section 41.12(b) thus leaves open the possibility that 100% of all timely filed protests will not be completed before the appraisal records are approved. Under these circumstances, the appraisal records may still be approved if the sum of the appraised values of all properties on which filed protests have not been determined is less than five percent of the total appraised value of all other taxable properties.
In this case, on June 12, 2009, BAD notified appellants their application had been “disapproved,” but asked for additional information to be submitted no later than July 13, 2009, so that BAD could determine whether to grant or deny the exemption. BAD ultimately denied the application and provided notice on February 1, 2010. Appellants timely protested the denial to ARB, and a formal hearing was set for October 12, 2010. On October 29, 2010, ARB rejected the protest, Waters sued BAD in district court in November 2010, but nonsuited on July 19, 2011.
We do not believe appellants were denied due process because they received notice of the denial and were provided with an opportunity to be heard on their protest. Waters availed itself of this opportunity by timely filing its first lawsuit in November 2010. On this record, we cannot conclude the October 29, 2010, notice of the denial of the application for the 2009 tax exemption rendered ARB’s denial void. See Harris Cnty. Appraisal Dist. v. Pasadena Prop., LP, 197 S.W.3d 402, 407 (Tex. App.—Eastland 2006, pet. denied) (holding lack of notice did not make the chief appraiser’s cancellation of exemption a void act because “[n]otice is a procedural requirement that does not affect the appraisal district’s jurisdiction”).
In response to appellants’ contention that because the ARB was required, pursuant to Tax Code §41.12, and failed to both hear and determine appellants’ protest by July 20, 2009, the Taxing Authorities lost jurisdiction to assess and collect taxes for 2009, the appellate court disagreed for the same reasons set forth in response to appellants’ first argument.
The appellate court concluded:
A direct challenge to the denial of the application for a 2009 tax year exemption was timely-filed in November 2010. However, the challenge was later nonsuited. Because we conclude ARB’s denial of the 2009 tax exemption application is not void, it is susceptible only to a direct attack and may not be challenged collaterally. Therefore, appellants’ challenge to the denial of the 2009 tax year exemption and the assessment of the 2009 taxes in the underlying lawsuit is time-barred. Accordingly, the trial court did not err in granting BAD’s and the Taxing Authorities’ pleas to the jurisdiction.
The appellate court affirmed the trial court’s orders granting appellees’ pleas to the jurisdiction.
- John J. Boll et al. v. Cameron Appraisal District, No. 13-11-00750-CV (Thirteenth Court of Appeals - Corpus Christi)
(August 15, 2013)
This case involves a motion for attorney's fees under the Texas Uniform Declaratory Judgment Act (UDJA). As set forth by the appellate court:
Appellants filed a petition for judicial review and for declaratory relief against appellee Cameron Appraisal District ("the District") regarding the District's assessment of taxes upon exempt mobile homes/park homes allegedly assessed in violation of Texas Tax Code section 11.14 and challenging the constitutionality of taxing those trailer homes. See TEX. TAX CODE ANN. §§ 11.14 (West 2008), 41.41(a)(4) (West 2008); see also TEX. CONST. art. VIII, § 1(d)(2). Appellants filed their petition under chapter 42 of the tax code, see id. § 42.01(a)(1)(A), and the UDJA, see generally TEX. CIV. PRAC. & REM. CODE ANN. §§ 37.001-.011 (West 2008).
Pursuant to this Court's ruling in Rourk v. Cameron Appraisal District, the District agreed that appellants were entitled to the exemptions under section 11.14. See 305 S.W.3d 231 (Tex. App.-Corpus Christi 2009, pet. denied) (Rourk II). The trial court signed a judgment effecting such agreement. However, the trial court denied appellants' request for attorney's fees under the UDJA. This appeal ensued.
In its analysis, the appellate court stated that "in order for the underlying action to survive an assertion of sovereign immunity, it must be one for which immunity has expressly been waived." The court then noted:
Although the UDJA waives sovereign immunity, appellants' claims do not fall within the scope of these waivers. See, e.g., id. § 37.006(b) (West 2008) (waiving immunity for claims challenging the validity of ordinances or statutes); see also Heinrich, 284 S.W.3d at 373 n. 6; Tex. Educ. Agency v. Leeper, 893 S.W.2d 432, 446 (Tex. 1994) ("The [UDJA] expressly provides that persons may challenge ordinances or statutes, and that governmental entities must be joined or notified."). Appellants are not challenging the validity of a provision of the tax code; instead, they are challenging the Appraisal District's actions under it, and appellants do not direct us to any portion of the UDJA that expressly waives immunity for these claims. See Sefzik, 355 S.W.3d at 622. And appellants did not sue any state officials. Accordingly, the trial court lacked jurisdiction to hear any of appellants' claims under the UDJA, including their claim for attorney's fees.
Finding that the pleadings affirmatively negated the existence of jurisdiction, the appellate court held that the appellants would not be given an opportunity to amend.
The appellate court dismissed "appellants' claims and relief sought under the UDJA, including the collection of attorney's fees for lack of jurisdiction."
- Thora O. Rourk et al. v. Cameron Appraisal District, No. 13-11-00751-CV (Thirteenth Court of Appeals - Corpus Christi)
(August 15, 2013)
This case involves a motion for attorney's fees under the Texas Uniform Declaratory Judgment Act (UDJA). As set forth by the appellate court:
This case is before us for a third time. See Rourk v. Cameron Appraisal Dist., 131 S.W.3d 285 (Tex. App.-Corpus Christi 2004), rev'd, in part, and remanded, 194 S.W.3d 501 (Tex. 2006) (Rourk I); Rourk v. Cameron Appraisal Dist., 305 S.W.3d 231 (Tex. App.-Corpus Christi 2009, pet. denied) (Rourk II). In Rourk II, we concluded that the appellants' travel trailers and recreational vehicles were not improvements, or real property, but instead, tangible personal property that was exempt from taxation. See Rourk II, 305 S.W.3d at 236-39; see also TEX. TAX CODE ANN. § 11.14 (West 2008). Accordingly, we reversed the trial court's judgment to the contrary and remanded the case to determine whether the appellants were entitled to attorney's fees from appellee, Cameron Appraisal District (the Appraisal District).
On remand, appellants filed a motion for attorney's fees. After holding a hearing, the trial court denied appellants' motion for attorney's fees under the UDJA. This appeal followed.
In its analysis, the appellate court stated that "in order for the underlying action to survive an assertion of sovereign immunity, it must be one for which immunity has expressly been waived." The court then noted:
Although the UDJA waives sovereign immunity, appellants' claims do not fall within the scope of these waivers. See, e.g., id. § 37.006(b) (West 2008) (waiving immunity for claims challenging the validity of ordinances or statutes); see also Heinrich, 284 S.W.3d at 373 n. 6; Tex. Educ. Agency v. Leeper, 893 S.W.2d 432, 446 (Tex. 1994) ("The [UDJA] expressly provides that persons may challenge ordinances or statutes, and that governmental entities must be joined or notified."). Appellants are not challenging the validity of a provision of the tax code; instead, they are challenging the Appraisal District's actions under it, and appellants do not direct us to any portion of the UDJA that expressly waives immunity for these claims. See Sefzik, 355 S.W.3d at 622. And appellants did not sue any state officials. Accordingly, the trial court lacked jurisdiction to hear any of appellants' claims under the UDJA, including their claims for attorney's fees.
Generally, when we hold that a trial court is without subject-matter jurisdiction, we allow a plaintiff to replead if the defect can be cured. See Miranda, 133 S.W.3d at 226-27. Here, appellants did not sue any state officials; however, appellants brought their claims under the UDJA pre-Heinrich, when the case law interpreting the ultra vires exception to the doctrine of sovereign immunity, as well as to who the property party was in a suit for declaratory remedy, was "less than clear." See Heinrich, 284 S.W.3d at 373 ("We have been less than clear regarding the permissible use of a declaratory remedy in this type of ultra vires suit."). Thus, in light of the clarifications to this area of the law in Heinrich, appellants should have an opportunity to replead in an attempt to cure the jurisdictional defects of their petition. See Sefzik, 355 S.W.3d at 623 (giving plaintiff an opportunity to replead because her claim was brought pre-Heinrich).
The appellate court reversed the trial court's judgment and remanded the case for further proceedings.
This case involves a motion to correct the appraisal roll pursuant to Tax Code §25.25(c). As set forth by the appellate court:
[Bauer-Pileco, Inc. (Bauer)] is a Texas corporation with its headquarters in Harris County. Bauer submitted a rendition of its business personal property to [Harris County Appraisal District (HCAD)] for the 2008 tax year. The purpose of this rendition statement was to inform HCAD of the business personal property that Bauer owned in Harris County as of January 1, 2008. Bauer’s rendition form stated that it owned $38,831,203 worth of inventory in Harris County. Based on Bauer’s rendition statement, HCAD assessed $989,401.65 in personal property taxes against Bauer. Bauer timely paid these taxes, and it did not protest the appraised value as allowed by Tax Code Chapter 41.
On January 20, 2011, Bauer filed a motion to correct the appraisal roll pursuant to Tax Code section 25.25(c). Bauer checked the following “correction types” on the motion: (1) “Clerical, Mathematical, Computer, Transcription Error”; (2) “Property not located at address shown on roll”; and (3) “Property does not exist.” Bauer attached an explanation for the correction request, in which it informed HCAD that, after rendering its business personal property for the 2008 tax year, it discovered several errors in the rendition process that led it to report that it owned more personal property in Harris County on January 1, 2008, than it actually did. According to Bauer, when it prepared its 2008 rendition, it “added up all of the inventory subaccounts shown on [its] 2007 trial balance and included all of these account balances as a part of taxable inventory for Harris County [ad valorem] tax purposes.” Bauer mistakenly included an “inventory in transit” subaccount, which represented inventory that was in the process of being shipped to Bauer but was not yet located in Harris County on January 1, 2008. Bauer also mistakenly included “work in process” subaccounts in its rendition, and these accounts, which represented unbilled receivables, constitute intangible personal property that is not subject to taxation. Finally, Bauer stated that a sister corporation located in California merged with Bauer on December 31, 2007, and that company’s inventory, which was located in California and had never been located in Harris County, was subsequently listed in Bauer’s records and was mistakenly included on Bauer’s rendition form. Bauer concluded that it had mistakenly included $9,088,250 worth of inventory and intangible personal property in its rendition for the 2008 tax year, and it requested that HCAD change the appraisal roll to reflect that it actually had only $29,742,953 worth of taxable personal property in Harris County on January 1, 2008.
On March 22, 2011, the [Harris County Appraisal Review Board (Board)] issued an order denying Bauer’s correction request. The order stated, “No error exists-no change.”
Bauer filed suit in district court. Both Bauer and HCAD filed motions for summary judgment. The trial court granted HCAD’s motion and denied Bauer’s motion. Bauer appealed, arguing that “(1) the trial court erroneously rendered summary judgment in favor of HCAD because Bauer conclusively established its right to correct the appraisal roll under Texas Tax Code section 25.25(c); (2) the trial court erroneously interpreted section 25.25(c) as requiring Bauer to prove that it had no personal property located in Harris County to be entitled to correction of the appraisal rolls; (3) the trial court erroneously rendered summary judgment on its constitutional claim because HCAD did not move for summary judgment on this claim; and (4) the trial court failed to award attorney’s fees to it under Tax Code section 42.29.”
Addressing Bauer’s claims under Tax Code §25.25(c), the appellate court stated:
[U]nder the Tax Code, taxing authorities in Texas do not have jurisdiction to tax Bauer’s inventory in transit, Bauer’s inventory located in California, and Bauer’s intangible personal property. The taxing authorities cannot do an end-run around the statutory restrictions on what constitutes taxable property and acquire the ability to tax this property merely because Bauer mistakenly included it on its rendition statement and because Bauer also owns other personal property, which is permissibly subject to ad valorem taxation in Texas, in Harris County. To hold otherwise, and to allow the taxing authorities to collect taxes on property not otherwise subject to taxation in Texas, results in a situation in which “the payment of taxes based on the uncorrected records would be fundamentally unfair.” See Kellair Aviation Co., 99 S.W.3d at 707. This is the type of situation that section 25.25(c) was enacted to prevent. See id.; GE Capital Corp., 971 S.W.2d at 593.
The summary judgment evidence in this case clearly demonstrates that the property at issue did “not have any physical location in Texas throughout the entire taxable year.” See Tex. Gas Transmission, 105 S.W.3d at 98. We conclude that Bauer established that the appraisal roll for the 2008 tax year included $9,088,250 worth of property that did not “exist . . . at the location described in the appraisal roll.” TEX. TAX CODE ANN. § 25.25(c)(3). We hold that the trial court erroneously rendered summary judgment in favor of HCAD.
We sustain Bauer’s first and second issues and render judgment that Bauer established the right to remove “inventory in transit,” inventory located in California, and intangible “work in process” accounts from the appraisal roll for the 2008 tax year and that the appraisal roll should be corrected to reflect that Bauer owned $29,742,953 worth of taxable personal property. We further render judgment that Bauer is entitled to a tax refund in the amount of $229,360.17.
Because the appellate court ruled that the trial court erred in rendering summary judgment in favor of HCAD, the appellate court did not address Bauer’s constitutional claim. Analyzing Bauer’s claim regarding attorney’s fees, the appellate court reviewed the holdings of other courts of appeals that have addressed whether an attorney fee award under Tax Code §42.29 is discretionary or mandatory and declined “to follow the construction of section 42.29 adopted by those courts which read [the language of the statute] as mandatory.” The court stated:
Instead, we follow the Fourteenth Court of Appeals in holding that the term “may” in section 42.29 gives the trial court discretion in allowing the recovery of attorney’s fees by a prevailing party. See Tex-Air Helicopters, 940 S.W.2d at 304. Because Bauer was not a prevailing property owner in the trial court, the trial court had no reason to address whether to award attorney’s fees. See id. We therefore remand the case to the trial court to determine in the first instance whether to award Bauer attorney’s fees. See id.; see also Devon Energy Prod., L.P. v. Hockley Cnty. Appraisal Dist., 178 S.W.3d 879, 883 (Tex. App.-Amarillo 2005, pet. denied) (following Tex-Air Helicopters and remanding case to trial court for consideration of whether to award attorney’s fees to property owner).
The appellate court concluded:
We reverse the judgment of the trial court and render judgment that Bauer established the right to remove “inventory in transit,” inventory located in California, and intangible “work in process” accounts from the appraisal roll for the 2008 tax year and that the appraisal roll should be corrected to reflect that Bauer owned $29,742,953 worth of taxable personal property. We further render judgment that Bauer is entitled to a tax refund in the amount of $229,360.17. We remand the case to the trial court to determine whether to award Bauer attorney’s fees pursuant to Tax Code section 42.29.
This case involves a motion to correct the appraisal roll pursuant to Tax Code §25.25(b) for tax year 2009. As set forth by the appellate court:
At the time of the Appraisal District's assessment, Sebastian Cotton & Grain, Ltd. (SC&G) faced one-hundred percent tax liability for [an inventory of yellow-grain sorghum located at the Port of Harlingen]. In 2010, SC&G's representatives filed a motion and requested a hearing before the Appraisal District to protest and correct the ownership discrepancy of the grain inventory. According to SC&G's motion, at the time of the taxation (January 1, 2009), eighty-six percent of the inventory was owned by DeBruce Grain of Kansas City, Missouri, while the remaining fourteen percent was owned by SC&G. On March 29, 2010, the Appraisal Review Board determined that SC&G's protest was meritorious and ordered that SC&G's individual tax liability be modified. The record shows that no appeal was taken of the March 29, 2010 order.
On September 16, 2011, the Appraisal District's chief appraiser, Frutoso Gomez, mailed a letter to SC&G to notify it that Gomez had determined that the ownership of the grain should be corrected on the appraisal rolls to reflect that SC&G owned fourteen percent of the grain inventory and DeBruce Grain owned the remaining eighty-six percent of the inventory. Gomez relied on section 25.25(b) of the Texas Tax Code as authority. See TEX. TAX CODE ANN. § 25.25(b) (West Supp. 2011). SC&G again protested to the Appraisal Review Board.
On November 18, 2011, the Appraisal Review Board issued an order on SC&G's protest and determined that the ownership of the property as reflected in the 2009 appraisal records was incorrect, and ordered the rolls changed to reflect the following:
Owner Percentage Owned Value [SC&G] 79.1766 undivided $1,875,731 [DeBruce Grain] 20.8234 undivided $493,316
As a result of the November 18, 2011 Appraisal Review Board's decision, SC&G owed a greater amount in property taxes for the 2009 tax year. Accordingly, SC&G filed a petition for review of the Appraisal Review Board's order to the trial court. See id. §§ 42.21-.22 (West 2008).
After a bench trial, the trial court found in favor of SC&G, and ordered that the Appraisal District's September 16, 2011 action and the Appraisal Review Board's November 18, 2011 order were null and void because both constituted "an impermissible collateral attack" on the Appraisal Review Board's March 29, 2010 order.
Cameron Appraisal District appealed, seeking a determination as to "whether its action on September 16, 2011 pursuant to section 25.25(b) of the tax code . . . was null and void because it constituted an impermissible collateral attack on the Appraisal Review Board's March 29, 2010 order." The appellate court determined that Tax Code §25.25 and Chapters 41 and 42 must be read together to harmonize the scheme and ascertain the Legislature's intent. In its analysis, the appellate court stated:
With this general statutory construction in mind, we turn to the specific facts of this case. On March 29, 2010, the Appraisal Review Board determined that SC&G's protest of ownership was meritorious and ordered that SC&G's tax liability be modified. This decision in SC&G's favor was final and appealable by the Appraisal District subject to the procedures outlined in chapter 42 of the tax code. See id. § 42.02(a) (West 2008) (giving the chief appraiser authority, with board approval, to appeal an appraisal review board's adverse ruling). It is undisputed that the Appraisal District chose not to appeal the Appraisal Review Board's March 29, 2010 order. However, on September 16, 2011, the Appraisal District's chief appraiser then reversed the Appraisal Review Board order and changed the ownership of the property back to SC&G under the chief appraiser's presumed authority of section 25.25(b). See id. § 25.25(b). SC&G argues that this action effectively changed SC&G's tax liability for the 2009 tax year.
The Appraisal District's intention to ignore the Appraisal Review Board's March 29, 2010 order was made clear to the trial court as illustrated by the following colloquy with the Appraisal District's chief appraiser, Gomez:
You had issued a 25.25(b) motion to correct ownership of the property; correct?
That is correct, yes.
To correct the appraisal review board's decision in the first formal hearing to correct ownership?
That is correct.
In light of this testimony, we conclude that the chief appraiser's actions on September 16, 2011 amounted to a prohibited collateral attack against the Appraisal Review Board's March 29, 2010 order. See also Travis Cent. Appraisal Dist. v. Marshall Ford Marina, Inc., No. 03-05-00784-CV, 2009 WL 2900743 (Tex. App.-Austin Sept. 9, 2009, no pet.) (mem. op.) (concluding that the appraisal district pursued an impermissible collateral attack upon a previous appraisal review board's orders). The tax code provides for detailed administrative procedures for appeals that are exclusive, and most defenses are barred if not raised therein. Cameron Appraisal Dist. v. Rourk, 194 S.W.3d 501, 502 (Tex. 2006). Failure to appeal an appraisal review board proceeding deprives the court of jurisdiction to decide most matters relating to ad valorem taxes. Id.
The Appraisal District asserts that section 25.25(b) gives its chief appraiser the "complete" and "unilateral" authority to correct issues of ownership of taxable property, so long as the change or correction does not increase the amount of tax liability, and that the authority may be exercised regardless of whether ownership may have previously been determined by the appraisal review board. To construe section 25.25(b) as broadly as the Appraisal District's asks this Court to do today would effectively give the Appraisal District the power to circumvent, bypass, and ignore, at the chief appraiser's discretion, the detailed due process procedures and jurisdictional principles articulated in section 25.25 and chapters 41 and 42. Such a broad reading of the tax code and its remedies would lead to an absurd result that is not just and reasonable. See TEX. GOV'T CODE ANN. § 311.021; Hughes, 246 S.W.3d at 625-26. Accordingly, we decline to adopt the Appraisal District's position.
The Appraisal District also argues that the reason for the chief appraiser's actions on September 16, 2011 was due to the SC&G's "false testimony" to the Appraisal Review Board during its hearing in March 2010. No evidence is before this Court on that contention, and as such, we decline to address it. We note, however, that such an argument could have been raised and developed properly in a timely petition for judicial review brought by the Appraisal District following the Appraisal Review Board's March 29, 2010's order. See TEX. TAX CODE ANN. § 42.02(a).
The appellate court concluded that: "(1) section 25.25 should be read and construed in conjunction with chapters 41 and 42 of the tax code; (2) section 25.25(b) does not give the Appraisal District a "complete" and "unilateral" authority to correct issues of ownership, regardless of whether ownership was determined by the Appraisal Review Board; and (3) the Appraisal District actions on September 16, 2011 amounted to a prohibited collateral attack against the Appraisal Review Board's March 29, 2010 order."
The appellate court affirmed the trial court's judgment.
This case involves exemption claims sought by Texas Student Housing Authority (TSHA). As set forth by the appellate court:
After enjoying exemption from ad valorem taxes for the years 2002 through 2004, TSHA was denied tax exempt status beginning in the year 2005 through the year 2008. TSHA unsuccessfully protested the denials, maintaining that it was entitled to exemption from ad valorem taxes by way of the Texas Education Code. See TEX. EDUC. CODE ANN. § 53.46 (West 2012).
. . . .
TSHA is a higher education facility authority created in 1995 by the Town of Westlake, Texas, and is duly organized and existing under the Texas Higher Education Authority Act. See TEX. EDUC. CODE ANN. §§ 53.02(3), 53.11 (West 2012); see generally id. §§ 53.01-53.49 (West 2012). TSHA holds title to the property at issue, The Cambridge at College Station, which is a residential facility in College Station, Brazos County, Texas. The Cambridge consists of approximately 196 “dorm-like” rooms, a cafeteria, a swimming pool, and related amenities on approximately eight acres near the campuses of Texas A & M University (TAMU) and Blinn College.
. . . .
In the summer of 2005, TSHA provided housing to participants attending the 4-H Roundup. This event is organized and administered by the Texas 4-H and Youth Development Program service of TAES, an entity which . . . is categorized as one of the “agencies and services” of the TAMU System. See id. §§ 88.001(3), 88.821. 4-H Roundup attendees were district qualifiers who ranged in age from fifteen to nineteen years of age. At the Roundup, attendees competed in various educational challenges and attended various educational workshops. Scholarships were also awarded at the Roundup. All Roundup events were held on the TAMU campus. TAES was required to go through the application and approval process with TAMU’s Office of Student Affairs, and TAES made arrangements with and paid fees to TAMU for the use of campus facilities.
. . . .
Also beginning in the summer of 2005, TSHA provided housing for those individuals attending [Joint Admission Medical Program (JAMP)] . . . . JAMP participants are students of an institution of higher learning who have completed at least twenty-seven credit hours as college freshmen. The participants attend a six-week program at TAMU which includes course studies and rotations with doctors who practice in various fields of medicine. Participants must apply to and be accepted into the program. JAMP participants have library and parking privileges at TAMU in addition to their courses of study. TAMU contacted TSHA and requested TSHA’s bid for housing and board for JAMP participants. TSHA submitted a winning bid, and TAMU issued a purchase order. TSHA submitted invoices to and was paid by TAMU.
. . . .
Beginning in 2006, TSHA provided housing for participants in TAMU’s tennis, volleyball, and swim camps in addition to continuing to provide housing for the 4-H Roundup and JAMP. TAMU officials solicited bids from TSHA for housing the athletic camp attendees. As with JAMP, TSHA sent invoices to TAMU directly, and TAMU paid those invoices. The parties stipulated that the TSHA property was used solely to provide housing and board to the faculty and students who were attending the TAMU summer athletics camps. Each of the TAMU summer athletics camps was conducted directly by TAMU’s Athletic Department.
. . . .
Also beginning in the summer of 2006, TSHA began housing attendees of a hockey camp organized by Hockey Ministries International (HMI), a Christian charity registered in Canada and the United States. The parties’ stipulated facts provide that, in coordination with the TAMU ice hockey teams, HMI conducted one-week camps during the summers of 2006-2008 for the purpose of instructing children on hockey skills. The parties also stipulated that, at TAMU, ice hockey is a club sport. The men’s team competes in the West Region of the American Hockey Association Division II; the TAMU Women’s Hockey Club is “a recognized organization” at TAMU.
. . . .
[In the summer of 2007,] TSHA continued to provide housing and board for participants in JAMP, TAMU’s summer athletics camps, and HMI hockey camp. Apparently, TSHA no longer provided housing for the 4-H Roundup.
. . . .
In summer 2008, TSHA again provided housing for JAMP participants and attendees of both TAMU’s summer athletics camps and HMI’s Hockey Camp. Additionally, it provided housing for UCA Cheer Camp in June and August 2008. UCA is an assumed name of Varsity Spirit Corporation, a Tennessee for-profit corporation. UCA provides training for college and high school cheerleaders through summer camps and clinics held on college campuses. The parties stipulated that the TAMU’s Recreational Sports Department sponsored the UCA summer camps at TAMU. UCA was required to register and receive approval through TAMU. TAMU did approve the event. Nonetheless, TSHA billed UCA directly, and UCA paid the invoice from TSHA.
. . . .
The sole witness to testify at the trial to the bench was Peter Ehrenberg, TSHA’s Executive Director. He testified at the trial that demand for housing and board at The Cambridge is naturally lower in the summer. He testified that only approximately ten percent of The Cambridge’s rooms were occupied by “regular students that would go to Texas A & M University or Blinn College.” Ehrenberg explained how the summer use of The Cambridge benefits the university, its faculty, staff, and students:
I think that there’re a number of ways that it does that. Obviously, one of the ways is that The Cambridge is able to provide housing for the summer school students that attend both A & M and Blinn, and I think that gives some revenue to the university which they may not otherwise be able to get. As I understand it, the majority of the dorms at A & M are closed during the summer. And so we do have the ability to be able to do that.
Ehrenberg also described how, without supplementing the summer occupancy at The Cambridge with summer program attendees in the manner TSHA had been doing, it would be nearly impossible to keep The Cambridge open during the summer months. This closing would mean laying off approximately fifty people and displacing the traditional university students who did choose to stay at The Cambridge during the summer while attending regular summer school at either TAMU or Blinn College.
TSHA brought suit to challenge the denial of the claimed exemptions for 2005 through 2008, claiming entitlement under Texas Education Code §53.46, the Texas Constitution, and Tax Code §11.11. The trial court granted judgment in favor of Brazos Central Appraisal District (formerly Brazos County Appraisal District), denying TSHA’s tax exempt status for the years 2005 through 2008.
The trial court found that, during the years 2005 through 2008, although The Cambridge’s primary use was housing and boarding students of an institution of higher learning, The Cambridge also housed and boarded “persons who were not students, faculty or staff members of an institution of higher learning.” The trial court went on to conclude that, because the TSHA property was “not used exclusively for housing or boarding, or housing and boarding students, faculty or staff of an institution of higher learning,” that TSHA was not entitled to a tax exemption under section 53.46 of the Texas Education Code.
TSHA appealed. In reaching its conclusion, the appellate court addressed several issues, including exemption under Texas Education Code §53.46, the various programs for which TSHA provided housing and board, the relationship between Texas Education Code §53.46 and Tax Code §11.11, exemption under the Texas Constitution, TSHA’s claimed de minimus exception to ad valorem tax exemptions, and Tax Code §11.11. The appellate court summarized its analysis as follows:
With respect to the summer 2005 housing and boarding of students who attended the 4-H Roundup and JAMP events, TSHA should have continued to enjoy the previously granted tax exemption applied to The Cambridge; those participants are fairly considered students of TAMU in light of the programs’ closely connected and legislatively created relationships to TAMU. With that, the provision of housing and board to those participants would not undermine section 53.46’s requirement that the property be “devoted exclusively to the use and benefit of the students, faculty, and staff members of an accredited institution.” See TEX. EDUC. CODE ANN. § 53.46.
Beginning in the summer of 2006, when TSHA began to provide housing to HMI hockey camp attendees, such use of The Cambridge fell outside section 53.46’s exclusivity requirement. That is, the direct and substantial involvement of and benefit to a non-university entity means that the property was no longer “devoted exclusively to the use and benefit of the students, faculty, and staff members of an accredited institution.” See id. Adhering to the strict construction disfavoring exemptions from taxation, we resolve the doubts raised by the facts of this case against TSHA and in favor of BCAD with respect to the tax year 2006. The same resolution applies to the tax year 2007 when TSHA again provided housing and board to HMI Hockey Camp attendees. Beginning in the summer of 2008 and in addition to providing housing for hockey camp, TSHA began to provide housing for participants in UCA Cheer Camp, an event organized and developed by a for-profit corporation. Although there is evidence that TAMU did benefit financially from its involvement with the cheerleading camp, the record suggests that it was not only TAMU who benefitted from the housing and board TSHA provided to the camp attendees. The record establishes that TSHA dealt directly with UCA in terms of arranging for payment for the housing provided to those participants. We resolve the doubts associated with the facts surrounding UCA Cheer Camp against TSHA and in favor of BCAD for the tax year 2008.
Likewise, none of the other cited exemptions would operate on these facts to exempt TSHA’s property from ad valorem taxation during the tax years 2006 through 2008. Assuming that TSHA is an entity to which Article XI, section 9, would apply, the use of The Cambridge during these years does not meet the exclusive public purpose test. See TEX. CONST. art. XI, § 9. Similarly, such use failed to meet the exclusive public use requirements of section 11.11 of the Texas Tax Code. See TEX. TAX CODE ANN. § 11.11(a). Further, the property at issue is not “property owned by an institution of higher education” as contemplated by subsection (e). See id. § 11.11(e).
The appellate court concluded:
As to the tax year 2005, we sustain TSHA’s point of error with respect to the trial court’s conclusion that it was not entitled to the tax exemption provided by section 53.46 of the Texas Education Code. Accordingly, we reverse in part the trial court’s judgment, render judgment that TSHA’s property is exempt from ad valorem taxation for the year 2005, and order that BCAD remove TSHA’s property from its tax roll for the year of 2005. As to the tax years 2006 through 2008, we overrule TSHA’s points of error and, accordingly, affirm the trial court’s judgment that the TSHA property is not exempt from ad valorem taxation for those years. BCAD’s tax rolls for those years will so reflect.
This case involves a motion to correct filed pursuant to Tax Code §25.25(c) after resolution of protests by agreement. As set forth by the appellate court:
Cement is a business located in Harris County. At all times and for all purposes relevant to this litigation, Brett Koch and Ron Short acted as agents of Cement and HCAD, respectively.
For the 2009 tax year, HCAD initially appraised Cement’s business personal property at a value of $29,118,683. Based on information Cement provided, Koch protested the valuation in writing. Before the board’s hearing on the protest, however, Cement and HCAD agreed to an amended appraised value of $26,767,135, thereby resolving the dispute. Koch and Short executed and signed a written agreement to that effect.
Cement similarly protested HCAD’s initial appraised value of Cement’s property for the 2010 tax year. Before the board’s hearing, the parties again agreed to an amended appraised value and memorialized the resolution in a written agreement, executed and signed by Koch and Short. Both the 2009 and the 2010 agreements include itemized descriptions of the initial and final appraised values of several types of property, including inventory.
In January of 2011, Cement filed a motion to correct the 2009 and 2010 values of its property under section 25.25(c) of the Tax Code (the “Code”), arguing that, due to clerical errors, both valuations included inventory that had been in transit and not yet located in Harris County on January 1 of each respective tax year. The board dismissed Cement’s motion with respect to both years for lack of jurisdiction.
Cement brought a suit for judicial review of the board’s decision in district court, again arguing that HCAD had incorrectly appraised its property. The appellees filed a plea to the jurisdiction, arguing that the agreements rendered the 2009 and 2010 valuation amounts final and therefore section 1.111(e) of the Code precluded Cement’s suit. The trial court held a hearing on the matter, after which it granted the plea to the jurisdiction and dismissed Cement’s claims with prejudice. This appeal followed.
On appeal, Cement raised several issues, including an argument that the agreements at issue “did not specifically relate to inventory” and “that the ‘only logical construction’ of [Tax Code §1.111(e)] is ‘that an agreement is only final as to the specific matter to which the agreement relates.’”
The appellate court stated:
In this case, Cement’s argument that the agreements did not relate to inventory is contrary to the plain language of the agreements. Cement and HCAD clearly expressed harmony of opinion as to the final values of Cement’s combined business personal property and of its inventory in the signed, specifically written agreements. Because those final values were matters on which protests either could have been filed or had been filed but not yet determined by the board, the agreements are final as to those values. See Tex. Tax Code § 1.111(e)(1).
In a footnote, the appellate court also stated that “because a challenge to a subtotal is necessarily a challenge to its corresponding total, our conclusion would be the same even absent the line-item values for specific types of property.”
The appellate court affirmed the trial court’s judgment.
This case involves a suit to recover delinquent ad valorem taxes. As set forth by the appellate court:
Michael M. Carter owns real property (“the Property”) in Houston, Harris County, Texas. For tax year 2010, Harris County Appraisal District (“HCAD”) appraised the value of the Property to be $2,448,837.00. Carter filed a protest of the appraised value with the Appraisal Review Board of Harris County Appraisal District (“ARB”). The protest resulted in the appraised value of the Property being lowered to $2,365,000.00. Based on this lower appraised value, the ad valorem taxes owed by Carter on the Property for tax year 2010 was $54,835.95.
On October 13, 2010, Carter filed suit against ARB and HCAD seeking judicial review of the appraisal board’s final decision regarding the appraised value of the Property. The 2010 taxes on the Property were due by February 1, 2011. Carter did not pay the taxes by this date. After obtaining a loan, Carter paid the taxes on March 24, 2011.
On August 1, 2011, the Taxing Authorities moved to dismiss the suit for lack of subject-matter jurisdiction. They asserted that Carter did not substantially comply with the prepayment requirements of Tax Code section 42.08(b). The Taxing Authorities pointed out that section 42.08(b) requires the taxpayer to pay at least the taxes due on the portion of the taxable value of the property not in dispute before the delinquency date. They asserted that compliance with the subsection 42.08(b)’s prepayment requirement is a prerequisite to maintaining judicial review of the ARB’s final decision and that a failure to comply with the prepayment requirement results in the trial court’s loss of subject-matter jurisdiction over the suit. The Taxing Authorities averred that, because Carter had not paid the taxes by the delinquency date, the trial court was required to dismiss the suit for lack of subject-matter jurisdiction pursuant to section 42.08(b).
Carter responded to the dismissal motion. He also filed “Plaintiff’s Property Tax Code Section 42.08(d) Motion for Substantial Compliance and/or Excusing Prepayment.” In the motion, Carter asserted that he had been financially unable to pay the 2010 taxes in full by the delinquency date. Carter supported his claim with his own affidavit or “oath” in which he testified that he had not been financially able to pay the taxes when they became delinquent.
Carter averred in his affidavit, in relevant part, as follows:
The ad valorem taxes for the property were due before February 1, 2011. The ad valorem taxes for the property were not paid prior to February 1, 2011 because as of January 31, 2011, the due date, I was financially unable to pay those taxes in full. In early March 2011, still unable to pay the taxes, I contacted Propel Financial Services to obtain a loan to pay the taxes. On March 24, 2011, I contracted for a loan to pay the taxes, with all penalties and interest thereon. The taxes were paid directly by Propel after closing on the loan. Although some funds were deposited into the account between January 31, 2011 and March 30, 2011, the funds were used to pay the mortgage on the property and operating costs associated with the business. Had funds been available to pay both operating costs, along with the mortgage, and the taxes, I would have paid both. If the mortgage had not been paid, the property would have been subject to foreclosure. If the operating costs had not been paid, the business would not have had any additional income as it would not have been able to operate. If fund[s] had been available to pay the taxes any time prior to the delinquency date or any time prior to the taxes being paid in March, I would not have incurred the debt of an interest-bearing loan to pay the taxes.
Carter attached his checking account records and loan documents to the affidavit to support his inability-to-pay claim. He also asserted that, by filing his oath of inability to pay the 2010 taxes, Tax Code section 42.08(d) excused the prepayment requirement found in section 42.08(b). Because he was financially unable to pay the taxes when due, Carter requested the trial court to determine that the prepayment requirement would constitute an unreasonable restraint on his access to the courts.
The Taxing Authorities filed a reply. They asserted that Carter had failed to substantially comply with section 42.08(d) because he had failed to timely file his oath of inability to pay. The Taxing Authorities pointed to the fact that Carter had filed the oath after the delinquency date. They also argued that Carter failed to demonstrate an inability to pay the taxes.
The trial court held a hearing on the Taxing Authorities’ motion to dismiss and on Carter’s subsection 42.08(d) motion requesting the trial court to determine that he was excused from prepayment of the taxes. A transcript of the hearing, however, does not appear in the record. The trial court signed an order granting the Taxing Authorities’ motion to dismiss for lack of subject-matter jurisdiction, dismissing Carter’s suit with prejudice.
Carter appealed, asserting that the trial court erred in granting the Taxing Authorities’ motion to dismiss and in failing to grant his motion to excuse prepayment of the taxes. Setting forth an extensive analysis regarding compliance with Tax Code §42.08(d), the appellate court held that “to comply with subsection 42.08(d), a taxpayer is not required to file the oath of inability to pay, or otherwise to notify the taxing authorities of his inability to pay, before the delinquency date.” The appellate court then stated:
In their brief, the Taxing Authorities also link Carter’s subsection 42.08(d) compliance to compliance with subsection 42.08(b-1). Subsection (b-1) requires the taxpayer to accompany his suit for judicial review with a statement in writing of the amount of taxes he proposes to pay when he elects to pay only the undisputed portion of the taxes before the delinquency date, as allowed by subsection 42.08(b)(1). See TEX. TAX CODE ANN. § 42.08(b-1). The Taxing Authorities contend that that Carter was required to plead specifically whether he intended to pay the taxes in full or to pay only the undisputed amount. They point out that Carter did not specify the amount that he would pay.
Contrary to the Taxing Authorities’ contention, subsection 42.08(b-1) requires the taxpayer to identify the amount he intends to pay only if he elects to pay the lesser, undisputed amount. See id. If he does not make the election, a taxpayer will be required to pay the full amount of taxes or substantially comply with subsection 42.08(d). See id. § 42.08(b), (b-1), (d). If he does neither, he will forfeit his right to judicial review. See id. § 42.08(b), (d).
Here, Carter stated in his petition that he would pay either the full amount or the undisputed amount. Because he did not elect to pay only the undisputed amount, Carter was required, by default, to pay the full amount of taxes by the delinquency date, or to comply with subsection 42.08(d). See id. Here, the issue is whether Carter complied with subsection 42.08(d), not whether he complied with the prepayment requirements of subsection 42.08(b). The Taxing Authorities have not shown how Carter failed to comply with subsection 42.08(d) when he did not elect to pay the undisputed portion of the taxes.
The Taxing Authorities had the burden to show that Carter did not substantially comply with subsection 42.08(d). See U. Lawrence Boze’, 368 S.W.3d at 26. In this respect, the Taxing Authorities asserted that Carter had not timely filed his oath of inability to pay the 2010 taxes. The Taxing Authorities did not meet their burden to show Carter did not timely file his oath. Carter, however, demonstrated that he had complied with the timeliness aspect of subsection 42.08(d).
The Taxing Authorities also asserted that Carter’s proof was inadequate to show inability to pay taxes by January 10, 2010. The appellate court noted that “[s]ubsection 42.08(d) defines neither the required content of the oath of inability to pay nor the evidentiary standards to be met by a taxpayer seeking to be excused from prepayment under that subsection.” The court further stated:
We can find no basis to penalize Carter for failing to offer the evidence the Taxing Authorities identify as lacking, particularly when subsection 42.08(d) does not specify the items a taxpayer must prove to show that he was financially unable to pay the taxes on the due date. Although it requires an oath of inability to pay, subsection 42.08(d) does not require the submission of live testimony. See TEX. TAX CODE ANN. § 42.08(d). We also continue to be mindful that we must liberally construe a statute, such as subsection 42.08(d), that is designed to relieve a property owner from the harshness of the forfeiture of the right to judicial review. See U. Lawrence Boze’, 368 S.W.3d at 26.
After further analysis, the appellate court concluded “that Carter demonstrated by a preponderance of the evidence that he was financially unable to pay the taxes on January 31, 2010. Because he made this showing, requiring Carter to prepay the taxes as a prerequisite to judicial review constitutes an unreasonable restraint on his right of access to the courts.”
The appellate court reversed the trial court’s judgment and remanded the case for further proceedings.
Harvest Life Foundation, FKA Operation Reach Community Development Corporation v. Harris County Appraisal District, No. 14-11-01038-CV (Fourteenth Court of Appeals - Houston)
(June 6, 2013)
This case involves claimed exemptions pursuant to Tax Code §11.18. As set forth by the appellate court:
Harvest Life applied for exemptions for two tracts of property for tax years 2007-2009 and seven tracts for tax years 2008-2009 on the ground that the properties were used for charitable purposes. See generally Tex. Tax Code Ann. § 11.18(a) (West Supp. 2012) (providing that “An organization that qualifies as a charitable organization is entitled to an exemption from taxation of” certain property “owned by the charitable organization” and “used exclusively by qualified charitable organizations”). Harris County Appraisal District (“HCAD”) denied each application. The Appraisal Review Board for the Harris County Appraisal District (“the ARB”) denied Harvest Life’s protest. Harvest Life filed the present suit seeking de novo review of HCAD’s decision. See generally id. §§ 42.21-.30 (West 2008 & Supp. 2012).
On April 5, 2011, the trial court conducted a bench trial. The evidence presented by Harvest Life focused on several subsections of article 11.18(d), which provides that, for qualification, a charitable organization must, among other requirements, “engage exclusively in performing one or more of the following charitable functions” and then lists such functions. Id. § 11.18(d) (West Supp. 2012). Pertinent to this appeal, one such function (under the former version of the statute, applicable to this case) was “providing halfway house services pursuant to a certification as a halfway house by the pardons and paroles division of the Texas Department of Criminal Justice [“TDCJ”].” Act of May 22, 2001, 77th Leg., R.S., ch. 1420, § 18.001, 2001 Tex. Gen. Laws 4210, 4548 (amended 2009) (current version at Tex. Tax Code Ann. § 11.18(d)(12) (West Supp. 2012)).
At the close of evidence, HCAD argued that Harvest Life failed to present evidence that any of the properties were certified as a halfway house by the pardons and paroles division of TDCJ-the exemption for which Harvest Life applied-and HCAD had presented a page from the TDCJ’s website showing Harvest Life was not one of seven certified halfway houses in Texas. Harvest Life argued that (1) the certification question was irrelevant because Harvest Life proved that all tenants at each property satisfied at least one other subsection of article 11.18(d); and (2) Harvest Life satisfied subsection (d)(12).
The trial court inquired whether it was confined to considering only subsection (d)(12). HCAD asserted that, under the exhaustion-of-remedies principle, Harvest Life was required to prove the exemption for which it applied and was denied. HCAD presented a pre-trial stipulation signed by the parties and argued they agreed therein that only subsection (d)(12) was at issue. Harvest Life disagreed with HCAD’s characterization of the stipulation.
The trial court commented that it would “overlook” the stipulation because it was not a clear agreement that trial was confined to subsection (d)(12). The trial court re-opened the evidence to review Harvest Life’s applications, which had not been offered. Harvest Life presented part of its application for tax year 2009 and represented that all applications were the same. Based on this application, the trial court ruled that the exemption issue was not confined to subsection (d)(12) but stated that the parties were free to present additional evidence and briefing on that point. The trial court announced that, based on the evidence already presented, but subject to further briefing, it would find the properties were used for charitable functions, as defined under the statute, for all relevant years and grant the exemptions.
Subsequently, HCAD filed supplemental exhibits, consisting of the complete applications for tax years 2007-2009, and additional briefing. In its responses, Harvest Life objected to the filing of supplemental evidence. On August 19, 2011, the trial court conducted another hearing and admitted the supplemental evidence.
On September 1, 2011, the trial court signed a final judgment granting the exemption for one tract for 2007 and 2008 but denying all other requested relief. The trial court subsequently issued written findings of fact and conclusions of law. With respect to the relief denied, the trial court found that Harvest Life applied for exemptions for each tract for the relevant tax year on the ground the tract was primarily used as “a halfway house for men who were recently released from jail or prison” or “transitional housing for ex-offenders thru [TDCJ] parole office.” The trial court further concluded, “[a]lthough [the Harvest Life representative] testified that [Harvest Life] was designated as a halfway house by [TDCJ] since approximately 2006, Harvest Life was not listed on [TDCJ’s] website as one of seven (7) such facilities in the state.”
Harvest Life appealed, contending that the trial court erred by admitting the supplemental evidence and denying the exemptions. With regard to the first contention, the appellate court noted:
Under Texas Rule of Civil Procedure 270, “[w]hen it clearly appears to be necessary to the due administration of justice, the court may permit additional evidence to be offered at any time; provided that in a jury case no evidence on a controversial matter shall be received after the verdict of the jury.” Tex. R. Civ. P. 270. The decision to reopen the evidence is within the sound discretion of the trial court. In re Hawk, 5 S.W.3d 874, 876-77 (Tex. App.-Houston [14th Dist.] 1999, no pet.). In deciding whether to exercise this discretion, the court may consider a number of factors, including (1) the diligence of a party in presenting its evidence, (2) whether reopening the evidence will cause undue delay, (3) whether reopening the evidence “will do an injustice,” and (4) whether the evidence to be introduced is decisive. Id. at 877. The trial court should exercise its discretion liberally “in the interest of permitting both sides to fully develop the case in the interest of justice.”
The appellate court analyzed each of the four listed factors and determined that the trial court did not abuse its discretion in admitting the supplemental evidence.
With regard to Harvest Life’s contention that the trial court erred in denying its exemptions, the appellate court noted that exemptions are not favored by the law, will not be favorably construed, and are subject to strict construction. The court also noted that “the claimant seeking the exemption bears the ‘burden of proof of clearly showing’ that the organization falls within the statutory exception.” Viewing Harvest Life’s contention on appeal as a complaint regarding the legal sufficiency of the evidence, the appellate court considered the exemption claimed in Harvest Life’s applications and whether Harvest Life proved its entitlement to exemption. In considering the exemption claimed, the appellate court stated:
On appeal, Harvest Life does not seem to dispute that it was confined at trial to the exemption[s] claimed in its applications. The evidence supports the trial court’s finding that Harvest Life applied for only the subsection (d)(12) exemption. We have reviewed the complete applications for 2007 through 2009. As stated above, the first three pages of the applications for each year generally inquire about the organization. The applicant may check one or more listed functions under the instruction, “Check the appropriate box(es) if any of the following statements describe a function performed by the organization.” On all of the applications, Harvest Life checked multiple functions, including the function corresponding with subsection (d)(12).
We cannot consider the first three pages of the applications in isolation-without the attached schedules-to determine the exemptions for which Harvest Life applied. It is clear this portion was intended to inquire whether the applicant qualifies in the first place as a charitable organization eligible to claim an exemption. However, this portion does not inquire about the use of each property for which an exemption is claimed. HCAD requires the applicant to complete “Schedule A” which is entitled “Description of Real Property” and instructs “Complete one Schedule A form for EACH parcel qualification for exemption.” Indeed, Harvest Life does not attack the trial court’s conclusion of law that “[Harvest Life] is a nonprofit charitable organization as defined under the Texas Tax Property Code and, as such, is entitled to tax-exempt status per se; however, whether tax-exempt status must be granted for a particular year / particular property is determined on an application by application basis.”
On the schedule is a category instructing, “Describe the primary use of this property.” For each property and tax year at issue on appeal, Harvest Life wrote one of the following: “As a half-way house for men who are recently released from jail or prison,” “Traditional Housing for Ex-Offenders,” or “Transitional Housing thru agreement with Texas Department of Corrections and Parole.” Harvest Life did not mention any other “primary use” of the property. The schedule also contains a section instructing, “List all other individuals and organizations that used this property in the past year, and give the requested information for each.” Although this section apparently inquires about any uses in addition to the “primary use,” on each schedule, Harvest Life repeated information about the use as a halfway house. Harvest Life listed no other uses under this section. Accordingly, the supplemental evidence demonstrated that Harvest Life applied for exemptions under only subsection (d)(12), which deals with halfway-house services.
Harvest Life characterizes its entries on the applications as a “paperwork mistake,” “paperwork defect” or “scriveners error.” However, the entries on the schedules clearly reflect that Harvest Life claimed only the subsection (d)(12) exemption for each property even if that was not Harvest Life’s intent. For instance, on the one property for which the trial court granted exemptions for some tax years, Harvest Life wrote two different functions on each schedule, including subsection (d)(12). In contrast, on all the other schedules, Harvest Life did not write any function other than subsection (d)(12), indicating a deliberate claim of only that exemption.
Consistent with its argument in the trial court, the apparent crux of the “paperwork defect” contention is that the trial court incorrectly concluded Harvest Life is not entitled to the subsection (d)(12) exemption because its attempt to claim that exemption on the applications was inadequate. However, the issue is not whether Harvest Life sufficiently described its function as a halfway house; the disposition is based on the fact that Harvest Life described only its function as a halfway house and the trial court concluded it did not satisfy that exemption. Accordingly, the trial court did not deny the exemptions because of a paperwork mistake; rather, the trial court evaluated whether Harvest Life is entitled to the exemption under subsection (d)(12) as though it properly applied for that exemption.
In considering whether Harvest life proved its entitlement to exemption, the appellate court stated:
As previously noted, to be entitled to a subsection (d)(12) exemption, Harvest Life had the burden to prove, in connection with specific properties during specific years, from 2007 to 2009, that it was “providing halfway house services pursuant to a certification as a halfway house by the pardons and paroles division of [TDCJ].” Tex. Tax Code Ann. § 11.18(d)(12) (emphasis added). At trial, the founder and president of Harvest Life testified that Harvest Life has a “contract with TDCJ that began in 2010 to - - as a contracted facility . . . .” She also testified that prior to 2010, Harvest Life, since 2006, was on an approved list in a category TDCJ called “qualified or alternative or some name that they give them.” On cross-examination, she testified:
Q . . . Do you have a certificate from the Texas Department of Criminal Justice parole division certifying that you are a halfway house?
A They don’t issue certificates.
Q Yes or no question.
The appellate court found the evidence legally sufficient to support the trial court’s conclusion that Harvest Life did not satisfy its burden of proof.
The appellate court affirmed the trial court’s judgment.
This case involves a suit to recover delinquent ad valorem taxes. As set forth by the appellate court:
In this suit to collect delinquent ad valorem taxes, defendant David J. Felt appeared and testified at trial, but in the judgment against him, the trial court erroneously indicated that he failed to appear. In his appeal, Felt argues that if the trial court ruled based on the evidence, then the judgment must be reversed because the evidence presented at trial is legally insufficient to support the judgment against him in his personal capacity. He argues in the alternative that if the trial court based the judgment on Felt’s failure to appear for trial, then the judgment must be reversed because the record establishes that he did appear and testify.
. . . .
At trial, the County produced evidence documenting its claims. This evidence included a certified delinquent-tax statement covering the years 1990-2011 for real property identified as a .1487-acre parcel located at Lot 327, Block 13, MacGregor Terrace Section 1. On the tax statement, the owner is identified as Equi-Share, Inc. The County also introduced a certified copy of a 1983 warranty deed in which Equi-Share, Inc. conveyed the property-again identified as Lot 327, Block 13, MacGregor Terrace Section 1-to David J. Felt in exchange for his promissory note for $12,260.00. The deed was signed by David J. Felt, President, Equi-Share, Inc. His signature was notarized, and the deed was recorded in the Harris County Clerk’s office more than a month after it was executed.
Felt, on the other hand, testified that he did not “intentionally” do anything that would cause him to own the property, and that he never paid for it or exchanged anything of value for it. He stated that he does not own the property, does not know where it is located, does not know if it contains any improvements, has never attempted to lease the property, and has done nothing to exercise any control over it. He further testified that he was not familiar with the 1983 warranty deed. After examining it, Felt admitted that signature on the deed looked like his own, but stated that if he did sign the warranty deed, he did not do so intentionally.
In appealing the legal sufficiency of the evidence, Felt argued “that there is no competent evidence that he owed the taxes and no competent evidence of the amount of taxes owed.” The appellate court disagreed, finding that the County produced evidence as set forth in Tax Code §33.47(a):
By introducing such records, the taxing authority establishes a prima facie case as to every material fact necessary to establish its cause of action. Nat’l Med. Fin. Services, Inc. v. Irving Indep. Sch. Dist., 150 S.W.3d 901, 906 (Tex. App.-Dallas 2004, no pet.) (citing Davis v. City of Austin, 632 S.W.2d 331, 333 (Tex. 1982)). A rebuttable presumption arises that the amounts in question are due, delinquent, and unpaid. Id. (citing Flowers v. Lavaca Cnty. Appraisal Dist., 766 S.W.2d 825, 828 (Tex. App.-Corpus Christi 1989, writ denied)). Because the tax roll also identifies the person against whom the taxes were assessed, the same documents additionally establish that the defendant owned the property on January 1 of the year for which the tax was imposed. Id.
Felt points out that in the certified delinquent-tax statement introduced by the County, the property’s owner is identified as Equi-Share, Inc. Quoting Pete Dominguez Enterprises, Inc. v. County of Dallas, 188 S.W.3d 385, 387-88 (Tex. App.-Dallas 2006, no pet.), Felt argues that “[i]f the identity of the entity named as owner of the property on that tax roll does not match the identity of the defendant sued for non-payment, then no presumption [of compliance with the law] arises and no prima facie case is established by the taxing authority.” But there is a difference between prima facie evidence of a material fact in the case and prima facie evidence of every material fact.
We agree that the certified delinquent-tax statement did not give rise to a presumption that Felt owned the property, but on the question of ownership, the County did not rest its case solely on a presumption. The tax statement created a presumption that Equi-Share, Inc. owned the property, but the County also introduced and relied on a certified copy of a warranty deed conveying the property to Felt in 1983, and on Felt’s notarized signature on the deed. This is competent, unrebutted evidence that Felt was the owner of the property for each of the tax years at issue in this case. See Seiflein v. City of Houston, No. 01-09-00361-CV, 2010 WL 376048, at *3 (Tex. App.-Houston [1st Dist.] Feb. 4, 2010, no pet.) (mem. op.) (affirming judgment where tax statements failed to identify the defendant as the property owner, but the taxing authorities introduced evidence of ownership, including a certified copy of a deed showing that the property was conveyed to the defendant). As for the amounts at issue, a certified delinquent-tax statement is prima facie evidence of the amount of penalties, tax, and interest, and on those matters, and the County relied solely on the presumption under section 33.47(a) that these amounts are due, delinquent, and unpaid. Felt offered no evidence to rebut that presumption, which is not undermined by the misidentification of the property’s owner. See TEX. TAX CODE ANN. § 25.02(b) (West 2008) (“A mistake in the name or address of an owner does not affect the validity of the appraisal records, of any appraisal or tax roll based on them, or of the tax imposed.”).
Regarding Felt’s argument that the trial court erred in rendering a default judgment against him, the appellate court held that if the trial court’s judgment truly had been a default judgment, Felt would have been required to file a motion for new trial and because he failed to do so, the argument was not preserved for appeal.
The appellate court affirmed the trial court’s judgment.
This case involves the exemption under Tax Code §11.231. As set forth by the appellate court:
The Bryan-College Station Regional Association of Realtors sought to take advantage of a newly enacted tax statute which, if the Association met all of its requirements, would permit the exemption of Association property from taxation. The Brazos County Appraisal District denied the exemption because it believed the statute to be unconstitutional. After the Association’s protest was also denied, it filed suit in district court. The Appraisal District sought a summary judgment on the grounds that the statute was unconstitutional. Its motion was denied. The Association then sought summary judgment on the grounds that it met the requirements of the statute. Summary judgment in favor of the Association was granted.
Brazos County Appraisal District (BCAD) appealed. BCAD argued “that section 11.231 is unconstitutional because a nonprofit community business organization is not an institution that is engaged primarily in public charitable functions. Specifically, the Appraisal District argues that the functions defined in section 11.231(d) are not charitable functions.” The appellate court disagreed.
The appellate court cited Boyd v. Frost National Bank, 196 S.W.2d 497 (Tex. 1946), for the proposition that “charitable purposes” include: “1) the relief of poverty; 2) the advancement of education; 3) the advancement of religion; 4) the promotion of health; 5) governmental or municipal purposes; and 6) other purposes the accomplishment of which is beneficial to the community.” Stating that “a charitable purpose is a subset of charitable function, the appellate court held that Tax Code §11.231 does not violate Article VIII, Section 2(a) of the Texas Constitution.
BCAD also argued that the Bryan-College Station Regional Association of Realtors, Inc. (the Association) “did not prove it met the ‘charitable purpose’ requirement of Article VIII, Section 2(a) of the Texas Constitution. The appellate court held:
In support of its motion for summary judgment, the Association provided evidence by affidavit that it was a nonprofit community business organization engaged primarily in performing one or more of the following functions in the local community: (1) promoting the common economic interests of commercial enterprises; (2) improving the business conditions of one or more types of business; or (3) otherwise providing services to aid in economic development. The Appraisal District neither challenges this evidence on appeal nor at the trial court. Thus, the Association proved its qualifications for the exemption under the statute. Because we have held that those qualifications are included within the definition of charitable purposes which is a subset of charitable functions, the Association has also proved it met the requirements of Article VIII, Section 2(a) of the Texas Constitution.
BCAD also argued that the trial court erred in awarding the Association attorney’s fees. Noting that Tax Code §42.29 “authorizes attorney's fees for only two distinct types of protest: excessive value and unequal appraisal,” the appellate court held that “[t]he Association’s protest cannot be categorized as falling within either of those two” and sustained BCAD’s issue.
The appellate court modified the trial court’s judgment to delete the trial court’s order awarding attorney’s fees to the Association and affirmed the judgment as modified.
This case involves exhaustion of administrative remedies. As set forth by the appellate court:
When ETC Marketing, Ltd. was informed that Harris County Appraisal District (“HCAD”) had appraised ETC’s natural gas for tax year 2009 and valued it at $161,723,100, ETC filed a notice of tax protest in which it challenged the appraisal on five grounds. The appraisal review board held a hearing at which ETC argued its case, but the board determined that the appraised value should not be changed. ETC appealed the decision to a Harris County district court. In its petition, ETC raised some of the same grounds that it had raised with the appraisal review board. It also asserted for the first time that the property was exempt from taxation because it was in interstate commerce.
HCAD filed a partial plea to the jurisdiction in which it argued that the trial court lacked jurisdiction to address ETC’s interstate-commerce claim because ETC had not previously raised this argument, and thus, it failed to exhaust its administrative remedies concerning that issue. ETC then filed one or more unsuccessful motions with the appraisal review board for correction of the appraisal roll. ETC also filed a response in the trial court to HCAD’s jurisdictional plea, but before the trial court ruled on it, ETC moved for summary judgment on the ground that the natural gas was in interstate commerce and was therefore exempt from taxation. HCAD filed a response that incorporated its pending plea to the jurisdiction and a cross-motion for summary judgment on the same interstate-commerce issue. The trial court denied HCAD’s partial plea to the jurisdiction and its summary-judgment motion and granted ETC’s motion for summary judgment.
ETC argued “that it was not required to exhaust administrative remedies because HCAD’s action in assessing the ad valorem taxes was unconstitutional”; “that exhaustion was not required because it was raising a pure question of law on undisputed facts”; that “it would suffer irreparable harm if the assessment were not put aside”; and “that HCAD and the appraisal review board are without jurisdiction to grant the relief that ETC requested pursuant to section 25.25(d) of the Tax Code. In response, the appellate court noted that “ETC is not raising a pure question of law; it is also seeking to have its tax assessments set aside,” so ETC “is not relieved from the requirement of exhausting administrative remedies.” The appellate court held that the Tax Code’s administrative process does not cause irreparable harm to ETC because the process authorizes the appraisal review board to grant the relief that ETC seeks and that “under Chapter 41 of the Tax Code, the appraisal review board has jurisdiction to hear a timely protest that the appraisal rolls improperly include property that is in interstate commerce and therefore exempt from taxation.”
ETC also argued that, if required, it did exhaust its administrative remedies “because (1) it filed a tax protest on other grounds, and the appraisal review board refused to grant ETC any relief; (2) it filed motions with the appraisal review board requesting correction of the appraisal records pursuant to Texas Tax Code sections 25.25(c) and 25.25(d).” The appellate court held that “[f]iling a tax protest on other grounds did not exhaust administrative remedies as to the interstate-commerce exemption,” that “[m]oving for correction of the appraisal records pursuant to section 25.25(c)(3) did not correct the failure to exhaust administrative remedies,” and that “[m]oving for correction of the appraisal records pursuant to section 25.25(d) did not correct the failure to exhaust administrative remedies.” In reaching its holdings, the appellate court noted that “[a]n argument that certain property is exempt from taxation does not implicate either the property’s form or its location” and that “the appraisal review board cannot correct the appraisal rolls pursuant to section 25.25(d) if ‘the property’ was the subject of a tax protest under Chapter 41 at which the taxpayer presented argument or evidence, and on which the appraisal review board ruled on the merits.”
ETC also argued “that its failure to raise its interstate-commerce argument at the protest hearing did not deprive the trial court of jurisdiction because the appeal to the trial court was by a trial de novo, in which the court was required to ‘try all issues of fact and law raised by the pleadings in the manner applicable to civil suits generally.’” Noting that “[a]lthough the district court’s review is de novo, its jurisdiction is still appellate in nature and dependent upon the issue having been raised with the appraisal review board,” the appellate court held that a claim for a constitutional exemption “must be considered by the appraisal review board first and cannot be raised for the first time in the trial de novo.” The court stated that “[a]llowing such an exception would eviscerate any requirement of proper protest and exhaustion of remedies.”
The appellate court concluded that:
[A] taxpayer desiring to have its property removed from the tax rolls on the ground that the property is in interstate commerce and therefore is exempt from taxation must exhaust administrative remedies by raising that argument with the appraisal review board in a timely tax protest under Chapter 41 of the Texas Tax Code.
The appellate court reversed the trial court’s rulings denying HCAD’s partial plea to the jurisdiction and in addressing the merits of ETC’s interstate-commerce argument through the parties’ cross-motions for summary judgment and remanded the case to the trial court for further proceedings.
This case involves a suit to recover delinquent ad valorem taxes. As set forth by the appellate court:
Appellants are seventeen different corporations that own and operate shrimp boats in the Gulf of Mexico out of Port Lavaca, Calhoun County, Texas. On July 11, 2005, the Appraisal District filed suit pursuant to section 33.41 of the Texas Tax Code seeking to recover delinquent ad valorem taxes imposed against appellants for the tax years of 2001, 2002, 2003, and 2004. See TEX. TAX CODE ANN. § 33.41 (West 2008). For those tax years, appellants alleged that the Appraisal District failed to send them ad valorem tax notices. The Appraisal District claims in its brief that it sent notice to the previous owners of the shrimp boats in Matagorda County, Texas. It is undisputed that the previous owners are now appellants’ shareholders.
The Appraisal District filed a motion for summary judgment, which the trial court granted. The property owners appealed.
In its analysis, the appellate court noted:
When a taxing unit introduces its delinquent tax notices into evidence, a prima facie case is established as to every material fact necessary to establish its cause of action. See TEX. TAX CODE ANN. § 33.47(a) (West 2008); Maximum Med. Improvement, Inc. v. County of Dallas, 272 S.W.3d 832, 835 (Tex. App.-Dallas 2008, no pet.). A rebuttable presumption then arises that the taxing entity has taken all actions necessary to obtain legal authority to levy the tax, including proper delivery of all required tax notices. Maximum Med. Improvement, Inc., 272 S.W.3d at 835. However, there is no presumption of notice if the identity of the party named as owner of the property on the Appraisal District tax roll does not match the identity of the defendant sued for non-payment. Id. at 836-37 (“Although Section 33.47(a) provides a rebuttable presumption, if the identity of the entity named as the owner does not match the identity of the defendant sued for non-payment, no presumption arises as to the defendant . . . .”) (citing Pete Dominguez Enters. v. County of Dallas, 188 S.W.3d 385, 387 (Tex. App.-Dallas 2006, no pet.)).
In response to the Appraisal District’s motion for summary judgment in the trial court, the property owners filed copies of “the property appraisals from the Appraisal District’s website showing that the [property owners] were not listed as the owners of the properties at issue . . . during the 2002 and 2003 tax years.” The appellate court stated:
This constitutes evidence that the identity of the property owners listed in the Appraisal District tax rolls for the 2002 and 2003 tax years does not match the appellants’ identities. Therefore, any presumption of notice disappeared. . . . .The Appraisal District also argues that the Appraisal District records attached to appellants’ response neither proves nor disproves that notice was properly sent. However, it is reasonable to conclude that the Appraisal District sent notice of the taxes to the persons listed as the owners of the properties at the addresses listed in its own records as required by statute. See TEX. TAX CODE ANN. § 1.07(b) (West Supp. 2011) (requiring the taxing entity to address the tax notice to the property owner, or his agent, at the address according to the most recent record in the possession of the property taxing entity). Moreover, as previously stated, the presumption of notice did not arise in this case, and the Appraisal District has offered no evidence that notice was given.
The Appraisal District argued that the property owners should have filed a protest under Section 41.411 or 25.25(c) of the Tax Code. The appellate court noted that the pre-2008 version of Section 41.411 applicable to the case would not have permitted the property owners to file a protest if they did not receive notice before the taxes became delinquent. Similarly, the appellate court held that because there was no evidence indicating that the property owners received notice of the delinquent taxes before the Appraisal District filed suit, there is a question of fact as to whether the property owners could have filed a complaint pursuant to Section 25.25. The appellate noted that “Section 25.25 does not provide for a challenge to the taxes on the basis that the taxpayer did not receive notice.”
The appellate court reversed the trial court’s judgment and remanded the case to the trial court for further proceedings.