2013 PROPERTY TAX CASES And Attorney General s Opinions

MCCREARY, VESELKA, BRAGG & ALLEN, P.C. ATTORNEYS AT LAW 700 Jeffrey Way, Suite 100 Round Rock, Texas 78665 2013 PROPERTY TAX CASES And Attorney General s Opinions Last updated: January 5, 2015 Cases Palaniappan v. Harris County Appraisal District 2013 WL 6857983 (Tex. App. Houston [1 st Dist.], December 31, 2013, no pet. hist.) (to be published) Issues: Payment of taxes during appeal Palaniappan protested the 2008 appraisal of his property before the ARB, which denied the protest. Palaniappan then sued the appraisal district to appeal the ARB s order. In his petition, he said that he would: pay all the taxes assessed; pay taxes on the undisputed value; or, if he were unable to pay, request relief from the court. Based upon the district s $960,000 appraisal, taxing units assessed $13,000 in taxes. On January 23, 2009, Palaniappan paid $1,800. He paid the remainder of the assessment in June of 2009, well after the delinquency date. In early 2011, the appraisal district asked the trial court to dismiss the case based on Palaniappan s failure to make a sufficient and timely payment. Palaniappan then filed an oath of inability to pay. He swore that he had been unable to pay the taxes in full prior to the delinquency date. He attached copies of his bank statements, but they showed that he had $23,000 in his account as of January 31, 2009. At a hearing, Palaniappan testified paying more than $1,800 prior to delinquency would have caused a financial hardship for his business. He said that his opinion of the property s 2008 value was $610,000 based on an appraisal that he had commissioned. The taxes on that value would have been $7,000. The trial court dismissed the case, and Palaniappan appealed. The court of appeals upheld the dismissal of the case and explained in some detail how 42.08 of the Tax Code works. If a property owner who files an appeal plans to pay only the taxes on the undisputed value of his property, he must notify the court and the appraisal district when he first files his petition. If, he doesn t do that, he loses the right to make a partial payment and must pay the full assessment. The statement in Palaniappan s petition was too vague and uncertain to preserve his right to make a partial payment. Even if he had had the right to make a partial payment, the evidence supported the trial court s finding that he failed to pay the taxes on the undisputed $610,000 value. The court scoffed at Palaniappan s claim that he had paid an undisputed amount of taxes.

A property owner may be excused from the payment requirement if he files an oath of inability to pay and demonstrates that the requirement constitutes an unreasonable restraint on his right of access to the courts. The owner s oath does not have to be filed before the delinquency date. Palaniappan s oath was timely even though it was filed two years after delinquency. His bank records, however, contradicted his testimony that he could not have paid more than $1,800 and showed that he could have paid at least the taxes on the undisputed value. Palaniappan failed to substantially comply with 42.08, and the trial court was correct in dismissing his appeal. Stacy Family Enterprises, Inc. v. Tarrant Appraisal District 2013 WL 6564299 (Tex. App. Fort Worth, December 12, 2013, no pet.) (not reported) Issues: Appraisal roll corrections Stacy operated three furniture stores in Tarrant County. In 2011, it filed a motion with the ARB under 25.25(c)(1) of the Tax Code seeking corrections of alleged clerical errors in the appraisal rolls for 2007, 2008 and 2009. Stacy alleged that the appraisal district had erred by not applying depreciation to the values of Stacy s inventories. After the ARB denied the motion, Stacy filed suit against the district. The trial court granted a summary judgment for the district and Stacy appealed. The court of appeals upheld the summary judgment in favor of the district. The court explained that the error alleged by Stacy, if it was an error at all, was not a clerical error. The district s decision to not depreciate Stacy s inventory was deliberate. Stacy did not claim that the district had transposed any numbers, copied the wrong figures or committed any errors in adding, subtracting, multiplying of dividing. Section 25.25(c)(1) allows an ARB to correct errors that are objective and ministerial, but not to conduct a substantive re-evaluation of a property. An error in an appraisal district s judgment is not subject to correction under that law. Bandera County v. Hollingsworth 419 S.W.3d 639 (Tex. App. San Antonio, November 27, 2013, no pet.) Issues: Governmental immunity; settlement of delinquent-tax case In November, 2009, the county sent Hollingsworth a bill for back taxes on omitted property. The bill stated that Hollingsworth owed approximately $14,000 in taxes and interest for the years 2005-2009 and that the assessment would become delinquent on February 1, 2011. Hollingsworth paid only the 2009 portion of the bill. In April, 2010, the county sued her for the unpaid amounts. She complained because the bill said that delinquency would not occur until February 1, 2011. The tax office responded that the bill was erroneous because it did not contain all the applicable penalties and interest and because the stated delinquency date was wrong. The lawyers for Hollingsworth and the county exchanged some letters concerning a possible settlement, and Hollingsworth believed that a settlement had been reached based on the November, 2009 bill. The 2

county, however, claimed about $4,000 in additional penalties and interest. Hollingsworth then filed three counterclaims in the case: 1) a claim for a declaration that the parties had reached a binding settlement agreement; 2) a claim for a determination of the amount owed; and 3) a claim for attorneys fees. The county responded that it was immune from Hollingsworth s claims. She then filed a motion for a summary judgment. The trial court granted Hollingsworth the relief that she sought, ruling that the county had agreed to settle for an amount based on the November, 2009 bill and that that amount was all that Hollingsworth owed. The county appealed. The court of appeals recognized that governmental entities are immune from most types of claims. But, the county was not immune from Hollingsworth s counterclaim concerning a binding settlement agreement. The county had instigated the litigation, and Hollingsworth s counterclaim would only reduce the amount that she owed to the county. It would not affect the county s policymaking, nor would it require the county to pay money out of its pocket. The county was not immune from the counterclaim concerning a settlement agreement, but that did not mean that Hollingsworth was entitled to a summary judgment on that claim. The evidence did not prove the existence of an agreement because it did not show that the parties had reached a meeting of the minds, i.e., that they had agreed on all the essential details of a compromise. The letters exchanged by the lawyers did not satisfy Rule 11 of the Texas Rules of Civil Procedure, which allows parties to a lawsuit to resolve differences with written agreements. Hollingsworth was thinking in terms of the county s November, 2009 bill, but the county was thinking in terms of additional penalties and interest omitted from that bill. The court of appeals reversed the trial court s summary judgment on that first counterclaim and sent the matter back to the lower court. The county was immune from Hollingsworth s counterclaim asking the trial court to determine the amount that she owed to the county. The trial court had no jurisdiction to consider that claim. Neither did it have jurisdiction to consider Hollingsworth s claim for her attorneys fees. Hollingsworth could not recover attorneys fees in an ordinary breach-of-contract case, because the alleged agreement did not provide for attorneys fees. She could not use a claim for a declaratory judgment to receive relief that she could not have received otherwise. In re Willacy County Appraisal District 2013 WL 5942707 (Tex. App. Corpus Christi-Edinburg, November 1, 2013, orig. proceeding) (not reported) Issues: Agreement concerning appraisal; discovery in appeals This case is similar to Cameron Appraisal District v. Sebastian Cotton & Grain, Ltd., described below. In 2009, the appraisal district appraised some grain in the name of Sebastian Cotton & Grain. Sebastian later filed a motion with the ARB seeking a correction of the appraisal roll on the grounds that it did not own the grain. The district agreed to the change that Sebastian requested, and that agreement resolved Sebastian s motion. The next year, the district changed the 2009 roll again (citing 3

Section 25.25(b) of the Tax Code, which allows a chief appraiser to correct a determination of ownership) and again listed Sebastian as the owner of the grain. After an unsuccessful protest before the ARB, Sebastian sued the district. Sebastian claimed that the district was bound by its earlier agreement. The district responded that the agreement was obtained by fraud on Sebastian s part and therefore not binding. The district attempted to conduct discovery, sending interrogatories and scheduling Sebastian for a deposition. The district sought information concerning the actual ownership if the grain. Sebastian objected to the discovery, and the trial court ruled that Sebastian did not have to comply with the district s discovery. The district then sought relief from the court of appeals. The court of appeals ruled that the district was entitled to conduct the discovery. The trial court abused its discretion when it blocked the district s efforts. The court of appeals, however, was careful to limit its ruling. It did not rule that the district was legally correct in its claim that fraud on Sebastian s part made the agreement voidable. The court ruled only that the district s argument was viable, i.e., that it might be correct. The district was entitled to conduct discovery and gather relevant evidence to support its argument. In re Valero Refining-Texas, L.P. 415 S.W.3d 567 (Tex. App. Houston [1 st Dist.], October 17, 2013, orig. proceeding) Issues: Discovery in an appeal Valero filed an appeal against the appraisal district concerning the value of a refinery. The district requested financial and operational information including income statements, balance sheets, cash-flow statements and yields from the refinery. Valero objected to the requests. After holding a hearing and considering testimony from experts, the trial court overruled Valero s objections and ordered it to produce the information. Valero sought a writ of mandamus from the court of appeals. The higher court noted that the requested information constituted Valero s trade secrets, a point that the district did not dispute. In order to discover the trade secrets, the district had to prove that they were material and necessary for a fair adjudication of the case, that without the trade secrets, its ability to defend its appraisal would be significantly impaired. The district s expert had explained the significance of the information to an income-approach appraisal, but he did not say that the income approach was the most appropriate method for appraising the refinery or that using the income approach was essential to an accurate appraisal. The court also explained that 23.0101 of the Tax Code directs an appraisal district to consider the three standard approaches to valuation when appraising a property, but it does not require the district to actually use each approach. The court concluded that the district did not need Valero s trade secrets because it could perform an adequate appraisal of the refinery using the cost and market approaches to valuation. The district was not entitled to the information that it sought. 4

Waters at Northern Hills, LLC v. Bexar Appraisal District 414 S.W.3d 897 (Tex. App. San Antonio, October 2, 2013, pet. denied) Issues: Processing exemption applications; determining protests This is another opinion that is difficult to decipher. For one thing, the court of appeals does not seem to understand the difference between an appraisal district and an ARB. It uses the acronyms BAD and ARB interchangeably. We have done our best to make sense of the court s opinion. Waters filed an application for a CHDO exemption on April 16, 2009. The appraisal district responded on July 13, telling Waters that its application was disapproved but giving it thirty days to provide additional information. When Waters did not provide the information, the district denied the application and sent Waters a notice of the denial on February 1, 2010. Waters filed a protest. After a hearing, the ARB denied the protest and sent Waters a notice on October 29, 2010. Waters filed a timely appeal but dismissed its appeal before trial. Then, on May 4, 2012, Waters filed a second suit challenging the denial of its exemption application. It claimed that the denial of the exemption by the appraisal district was void because the district did not act quickly enough. The denial of the protest was void because the ARB did not act quickly enough. The trial court dismissed the case, and Waters appealed. The court of appeals affirmed the dismissal. The court noted that 11.45 of the Tax Code generally requires a chief appraiser to determine all timely exemption applications before submitting the appraisal records to the ARB. Section 25.01 states that the records should be submitted by May 15 or as soon thereafter as practicable. But these statutes do not require an appraisal district to determine every exemption application by May 15. The court explained that 11.45 allows an appraisal district to do exactly what the district did in this case, i.e., disapproving an application and giving a property owner thirty days to provide more information. That would generally be impossible if every application had to be determined by May 15. The district s handling of the application did not violate Waters s due-process rights and did not void its denial of the exemption. Similarly, 41.12 requires an ARB to hear and decide substantially all protests by July 20, but the ARB is not required to hear all protests by that date. The fact that the ARB did not determine Waters s protest before the protest was even filed did not void the ARB s order. The only option Waters had for challenging the denial of its protest was a timely appeal. When it filed a timely appeal and then dismissed the appeal, it lost that option. Thus, the courts had no jurisdiction to consider Waters s second suit. Boll v. Cameron Appraisal District 445 S.W.3d 397 (Tex. App. Corpus Christi-Edinburg, August 15, 2013, no pet.) Rourk v. Cameron Appraisal District 443 S.W.3d 217 (Tex. App. Corpus Christi-Edinburg, August 15, 2013, no pet.) Issues: Declaratory judgments: attorneys fees on appeal 5

In these related cases, property owners filed protests, then appeals claiming that their travel trailers were exempt as non-business personal property under 11.14 of the Tax Code. The appraisal district eventually agreed to grant the exemptions. The property owners, however, insisted on also recovering their attorneys fees. They claimed that they were entitled to attorneys fees under Chapter 37 of the Civil Practice and Remedies Code (the Uniform Declaratory Judgment Act). The trial court decided against awarding attorneys fees to the property owners, and the property owners appealed. The court of appeals explained that the state and its local governments are generally immune from suits under the Act. In a 2009 opinion, the Texas Supreme Court ruled that under certain circumstances, a plaintiff may seek a declaratory judgment against a state or local official, but not the state or local government itself. In light of the Supreme Court s opinion, the court of appeals ruled that the appraisal district was immune from the property owners claims under the Act, including their claim for attorneys fees. Some of the property owners filed their cases before the 2009 opinion was released. The court concluded that those property owners should be given an opportunity to amend their pleadings and name public officials as the defendants. Property owners who filed their suits after the 2009 opinion was released were not entitled to the same opportunity. The court of appeals simply dismissed their claims for attorneys fees. Editor s Comment: Other courts have simply noted that the Tax Code provides the exclusive procedures and remedies available to a property owner challenging the appraisal of his property. The Uniform Declaratory Judgment Act cannot be used as an alternative to the Tax Code. There was no need for the court of appeals to consider how interpretations of the Act have changed in other types of cases because, no matter how it has been interpreted, the Act does not apply to property-tax appraisals. Lyda Swinerton Builders, Inc v. Cathay Bank 409 S.W.3d 221 (Tex. App. Houston [14 th Dist.], August 13, 2013, pet. denied) Issues: Transfer of tax lien This complicated case involved a bank and a builder arguing over the priorities of their liens on a real property. The bank was lending money to the property owner for a development project and took a deed of trust on the property. The builder filed mechanic s liens against the property. As the owner sank into the financial abyss, the bank took some of the money it had committed to loan the owner and paid delinquent taxes on the property. Neither the bank nor the owner followed the rules in 32.06 and 32.065 of the Tax Code governing property-tax loans. When the owner went bankrupt, the bank and the builder were left with only their liens as a way to recover some of their losses. The bank claimed that it held top-priority tax liens by virtue of having paid delinquent taxes on the property. It argued that it had acquired the tax liens through the equitable principle of subrogation. Essentially, subrogation means that if a party with an interest in a property pays another party s debt secured by the property, the party 6

making the payment takes the creditor s lien. The owner s deed of trust provided for subrogation. When the bank foreclosed, the builder s liens were extinguished. The builder claimed that the bank did not acquire the tax liens because it didn t follow the Code s rules for property-tax loans. The builder further argued that its mechanic s liens were superior to the bank s deed of trust and that they survived the bank s foreclosure. The trial court considering the case entered summary judgment for the bank and the builder appealed. The court of appeals concluded that tax liens can be transferred through subrogation, even if the parties do not follow 32.06 and 32.065. When it enacted the detailed rules for property-tax loans, the legislature intended to create an alternative to subrogation, not to do away with it. The bank might have acquired the tax liens through subrogation, but making that determination would involve an equitable analysis of all the relevant facts. The deed of trust did not answer the question because it was an agreement between the bank and the owner and was not binding on the builder. The court thought that if the bank were subrogated to the tax liens, it could foreclose without having to follow the laws governing tax-lien foreclosures. That would prejudice the builder by depriving it of the Tax Code s procedural protections such as the right to notice of foreclosure. But finding prejudice to the builder did not end the court s analysis. Subrogation might nevertheless apply if it were necessary to a fair and just outcome and to prevent the bank s tax payments from unjustly enriching the builder. The court of appeals decided that more facts were necessary, so it reversed the trial court s judgment for the bank and sent the case back to the trial court to develop those facts. The higher court specifically mentioned factual questions such as whether the bank had deliberately avoided the Code s procedures in order to harm the builder and whether the taxing units were close to foreclosing their liens when the bank paid the taxes. Cameron Appraisal District v. Sebastian Cotton & Grain, Ltd. 443 S.W.3d 212 (Tex. App. -- Corpus Christi-Edinburg, August 8, 2013, no pet.) Issues: Correction of appraisal roll The court s opinion in this case is confusing and self-contradictory. This summary reflects our best efforts to make sense of it. In 2009, the appraisal district listed some sorghum in the name of Sebastian. Sebastian filed a protest and argued that it owned only 14% of the sorghum; the other 86% was owned by DeBruce. The ARB ruled in favor of Sebastian and ordered that the appraisal records be changed to reflect the amount of sorghum owned by each company. Neither side appealed. Eighteen months later, however, the district changed the 2009 appraisal roll to once again show Sebastian as the owner of all the sorghum. The district relied upon 25.25(b) of the Tax Code, which allows a chief appraiser to change an appraisal roll at any time to correct a determination of ownership as long as the change does not increase the amount of tax liability. Sebastian filed another protest. This time, the ARB ruled that Sebastian owned 79% of the sorghum and that DeBruce owned the other 21%. When Sebastian filed suit, the trial court voided the district s change to the roll and the ARB s order determining Sebastian s second protest. The district appealed. 7

The court of appeals affirmed the trial court s ruling for Sebastian. The court of appeals reasoned that the district was bound by the ARB s original order. If it disagreed with that order, its only option was to file an appeal. Section 25.25(b) did not authorize the appraisal district to disregard the order. The court called the district s change to the roll a prohibited collateral attack on the ARB s order. Millstone Investment &Management, L.L.C. v. BNC Retax, L.L.C. 410 S.W.3d 869 (Tex. App. Houston [14 th Dist.], August 8, 2013, no pet.) Issues: Transfer of tax lien BNC held tax liens that were transferred by the taxing units in 2006. Millstone bought the property when a deed of trust was foreclosed in 2010. He then sued BNC claiming that the 2006 transfers of tax liens were invalid. Millstone argued that in 2006, 32.06 of the Tax Code required a Tax Collector to execute an affidavit along with the transfer of a tax lien; the collector had to swear that the lien was transferred. That affidavit had to be recorded in the county s deed records in order for the transfer to be valid. In this instance, the tax collectors had applied their official seals to the transfer documents but not sworn to anything. Whatever liens BNC might have had were not tax liens and were inferior to the deed of trust that was foreclosed. BNC s liens were extinguished by the foreclosure. BNC responded that its liens had been validly transferred and were toppriority tax liens that survived the foreclosure of the deed of trust. The trial court entered a summary judgment for BNC, and Millstone appealed. The court of appeals upheld the judgment for BNC. The court acknowledged that the 2006 version of 32.06 contained the word affidavit. But, in the context of the statute, it meant the document in which the collector certified that the taxes had been paid and the lien transferred. The document had to have the collector s seal or be signed by the collector before a notary. The collector could certify that the payment and transfer had occurred without being under oath. The transfers of the tax liens had been valid, and those transferred liens had priority over the foreclosed deed of trust. BNC s liens were still attached to the property. Holmes v. Cassel 2013 WL 5497871 (Tex. App. Houston [14 th Dist.], August 15, 2013, pet. denied) (not reported) Issues: Challenging a tax sale In 1995, taxing units sued Bush for delinquent taxes on real property. In 1996, the court entered judgment for the taxing units. For unexplained reasons, the property was not sold until 2003, and the buyer, Cassel, did not record his deed until 2004. Cassel took possession of the property, made some repairs and renovations, rented part of it to a tenant and paid taxes on it. In 2011, Holmes filed suit against Cassel claiming that he owned a one-half interest in the property and that the tax sale had been void, at least as 8

to his interest. Holmes claimed that he had acquired half the property by means of a 1983 deed from Bush. (He produced a deed with a property description that was nearly illegible but which might have been the property that Cassel bought at the tax sale.) Holmes was not named as a party in the delinquent-tax suit or notified of that suit or the subsequent tax sale. Cassel responded that the tax sale was valid as to all interests in the property, that Holmes waited too long to challenge it and that Holmes had not made the necessary deposit of money with the court. The trial court entered a summary judgment for Cassel, and Holmes appealed. The court of appeals explained that under 33.54 of the Tax Code a suit concerning the title to real property and filed against a tax-sale purchaser must be filed within one year after the purchaser records his deed. If no one files suit within that year, the tax-sale purchaser has full title to the property, precluding all other claims. An exception to that rule applies to an owner who was not served in the delinquent-tax suit and who pays taxes on the property after the tax sale and until he files his suit to challenge the sale. In this case, Holmes filed his suit about seven years after Cassel recorded his deed. Holmes paid only half the taxes on the property and only in one year. Section 34.08 requires that someone filing suit to challenge a tax sale deposit money with the court in an amount equal to the amount of the delinquent-tax judgment plus the costs of the tax sale or file an affidavit of inability to pay. Holmes did neither. The Tax Code s requirements did not violate Holmes s constitutional rights to due process of law. The court of appeals affirmed the trial court s judgment for Cassel. Brewer v. Green Lizard Holdings, L.L.C. 406 S.W.3d 399 (Tex. App. Fort Worth, July 18, 2013, no pet.) Issues: Fraudulent claim to property; requirements for tax sale In April of 2011, Wells Fargo foreclosed its deed of trust on a property owned by a joint venture and acquired the property in the foreclosure sale. In May of 2012, the property was sold in a tax sale and purchased by Green Lizard. Green Lizard soon discovered that Brewer was occupying the property. He claimed to have acquired it through a deed from the joint venture executed just a few days before Wells Fargo s foreclosure. That deed was not recorded until September of 2011. Brewer also recorded a mechanic s lien on the property one day before the tax sale. Green lizard sued Brewer claiming that his purported interests in the property were fraudulent. Brewer counterclaimed that the tax sale to Green Lizard was void. Green Lizard produced an affidavit from an officer of the joint venture who swore that the joint venture never conveyed the property to Brewer and never executed the deed filed by Brewer. The trial court entered a summary judgment for Green Lizard. The court of appeals upheld the summary judgment. The court explained that Green Lizard had conclusively proven that: 1) Brewer made, presented or used his deed and his mechanic s lien with knowledge that he was making fraudulent claims on the property; 2) he intended the fraudulent documents to be given legal effect; and 3) he intended to cause financial injury to the rightful owner. That was enough to invalidate 9

Brewer s claims. The tax sale was valid. Under 34.015 of the Tax Code, a tax-sale buyer must present a tax assessor-collector s written statement that the buyer does not owe delinquent county, city or school taxes (as Green Lizard apparently did). But a corporate buyer does not have to produce statements about its members or shareholders. Texas Student Housing Authority v. Brazos County Appraisal District 440 S.W.3d 779 (Tex. App. Amarillo, June 27, 2013, no pet hist.) Issues: Public property exemption The Texas Student Housing Authority (TSHA) is a higher education facility authority created under Chapter 53 of the Education Code. It operated a dormitory-like residential facility with rooms primarily occupied by Texas A&M students. During the summers, however, some of the rooms were used by other types of people attending events at or near Texas A&M. For four years, 2005 through 2008, the appraisal district denied exemptions for the facility on the grounds that it was not used exclusively to house students. Following unsuccessful protests, the TSHA sought the exemption in a lawsuit. The trial court denied the exemptions and the TSHA appealed. The court of appeals focused first on 53.46 of the Education Code, which exempts a property owned by an authority such as the TSHA, provided that the property is held for educational purposes only and devoted exclusively to the use and benefit of the students, faculty, and staff members of an accredited institution of higher education. The exemption would apply if the summer residents were students of such an institution. In 2005, the events attended by summer residents were: 1) a 4-H educational program conducted for teenagers by a Texas A&M department; and 2) an educational event sponsored by Texas A&M and other universities for the benefit of some of their students who were hoping to go to medical school. In each case, Texas A&M arranged for attendees to stay at the TSHA facility and paid for their lodging. The court concluded that even though these people were not traditional, full-time students enrolled in regular courses at Texas A&M, they were nevertheless students for purposes of the exemption statute. They were studying in educational programs conducted by the University in the course of its statutory duties. The facility qualified for exemption in 2005. The years 2006 through 2008 were different. The summer events in those years included a children s hockey camp conducted by a private non-profit organization and a cheerleading camp conducted by a private for-profit company. In each case, the private entity paid for the attendees lodging at the TSHA s facility. The attendees at those events were not students, which meant that the facility was not used exclusively for exempt purposes in those years. The facility was taxable for those years. The court went on to consider whether the facility might qualify for exemption as public property under Art. XI, 9 of the Texas Constitution or 11.11 of the Tax Code but reached the same conclusions. The TSHA probably qualified as a public entity. In 2005, 10

the facility was used exclusively for public purposes, and it qualified for exemption. In the other years, the facility was not used exclusively for public purposes, and it was taxable. Section 11.11(e) states a special rule exempting certain property dedicated for the support, maintenance, or benefit of an institution of higher education. That rule did not apply in this case, however, because the facility was not owned by an institution of higher education. Houston Cement Co. v. Harris County Appraisal District 2013 WL 3243281 (Tex. App. Houston [14 th Dist.], June 25, 2013, no pet.) (not reported) Issues: Agreement resolving protest; appraisal roll corrections Cement protested the 2009 appraisal of its business personal property. Before the ARB could hear the protest, Cement s agent reached an agreement with the appraisal district s representative. Their agreement was in writing and included the agreed value of Cement s inventory. The same thing happened in 2010. Then, in 2011, Cement filed a motion claiming that the agreed values of its inventory for 2009 and 2010 reflected clerical errors because they mistakenly included items of inventory that were in transit and that had not actually arrived in the county yet. The ARB dismissed Cement s motion, and Cement took its claims to court. The trial court dismissed the case, reasoning that Cement could not challenge the appraisals to which it had previously agreed. Cement appealed. The court of appeals affirmed the trial court s dismissal of the case. The court explained that the written documents signed by Cement s agent in 2009 and 2010 plainly reflected agreements concerning the appraised values for Cement s personal property as a whole and for its inventory in particular. Under 1.111 of the Tax Code, the agreements finally determined those appraised values. They precluded Cement s later attempt to challenge those values before the ARB and before the trial court. Further, the court of appeals explained that testimony from Cement s agent to the effect that the company did not discover the errors concerning its inventory until after he had signed the agreements was irrelevant in light of the binding nature of the agreements. Carter v. Harris County Appraisal District 409 S.W.3d 26 (Tex. App. Houston [1 st Dist.], June 10, 2013, no pet.) Issues: Tax payment during appeal Carter protested the 2010 appraised value of his property (approximately $2.4 million). Although the ARB lowered his value by about $84,000, Carter proceeded to take the matter to court. His pleadings did not specify whether he proposed to pay the full tax assessment of $55,000 or the taxes on the property s undisputed value. When the delinquency date (February 1, 2011) came, he had not paid anything. Neither had he communicated with either the appraisal district or the tax office about a payment. In March of 2011, Carter borrowed money and paid the full tax assessment, plus penalties 11

and interest. In August of 2011, the appraisal district asked the court to dismiss the case under 42.08 of the Tax Code on the basis of Carter s failure to make a timely payment. Carter responded with: 1) a motion asking the court to excuse his late payment; 2) an affidavit stating that he had been financially unable to pay the taxes in full prior to delinquency; and 3) copies of some of his bank statements showing that a particular checking account had less than $1,400 in it in early 2011. After a hearing, the trial court dismissed the case. Carter appealed. The court of appeals reversed the trial court and ruled that Carter had substantially complied with 42.08. The higher court reasoned that a property owner is not required to provide notice of his payment plans at the time he files his suit unless he is planning to pay only undisputed taxes. If he does not provide that notice, he must either pay the full assessment or file an oath stating that he cannot pay the full assessment. The February 1 deadline that applies to a tax payment does not apply to a property owner s oath of inability to pay. A property owner does not even have to provide any notice prior to the delinquency date that he will not be paying. Carter s affidavit was adequate because he signed it under oath before a notary. It was sufficient to satisfy his burden of proving his inability to pay even though he did not discuss any assets other than the checking account and did not discuss whether he might have been able to borrow money before the delinquency date. The court concluded that requiring Carter to make a payment prior February 1 would have unreasonably restrained his right of access to the courts. His failure to pay was excused. Editor s Comment: Several court opinions have explained that the legislature intended 42.08 to prevent a property owner from using an appeal as a subterfuge for delaying or avoiding the payment of at least some taxes. see, e.g., Missouri Pacific Railroad Co. v. Dallas County Appraisal District, 732 S.W.2d 717 (Tex. App. Dallas, 1987, no writ). The opinion described above frustrates the legislature s purpose by allowing Carter to delay his payment even though: 1) he owned a multi-million dollar building; and 2) he never even denied that he could have paid the taxes on its undisputed value before the delinquency date. There is, however, some comfort to be taken from the fact that the penalties and interest that Carter paid probably came to almost $5,000. Harvest Life Foundation v. Harris County Appraisal District 2013 WL 2456867 (Tex. App. Houston [14 th Dist.], June 6, 2013, no pet.) (not reported) Issues: Charitable exemptions; exemption applications Harvest Life applied for charitable exemptions for several properties over the course of several years. In its application forms it claimed to perform several of the charitable functions listed in 11.18 of the Tax Code. But, in the part of the forms where it described its specific properties, it stated that each property was used as a halfway house. The appraisal district denied the applications. After an unsuccessful protest, Harvest Life took its claims to court. In the trial court, Harvest Life and the Appraisal District stipulated that Harvest Life had applied for the exemption of its properties as 12

halfway houses. After both sides had put on their evidence, which did not include the application forms, Harvest Life tried arguing that its properties were used not just as halfway houses, but for other charitable functions as well. The appraisal district objected and argued that Harvest Life s new arguments violated the stipulation. The trial judge thought that the stipulation didn t resolve the matter and reopened the evidence to allow the parties to introduce the application forms. Harvest Life s lawyer had a partial copy of one form, but nobody had anything more ready to offer at that time. The judge postponed making a decision, and the district soon sent in complete, certified copies of all the application forms. Four months later, the judge held a supplemental hearing, formally admitted the application forms into evidence and ruled against Harvest Life. Harvest life appealed. On appeal, Harvest Life argued that the trial judge should not have admitted the application forms as supplemental evidence. The court of appeals disagreed and explained that a trial judge has the discretion to reopen the evidence, especially if there is no jury. Reopening the evidence in this case was reasonable in light of the importance of the application forms and the parties different understandings about the stipulation. If one party introduces part of a document or communication, the Rules of Evidence generally allow another party to introduce the rest of it. Reopening the evidence did not violate 42.23 of the Tax Code, which provides for trial de novo in an appeal and generally prohibits a trial court from admitting evidence of an ARB s decision. Harvest life had the opportunity to object to the application forms in the trial court, but it didn t. The court of appeals went on to explain that Harvest Life could only claim the exemptions for which it had applied. The application forms showed that it had only applied to have its properties exempted as halfway houses. An ARB or a court could not consider whether a property might qualify on the basis of some other charitable use. Further, in order to receive an exemption, a halfway house has to have a certification from the Texas Department of Criminal Justice. Its president testified that Harvest Life had a contract with the TDCJ, but admitted that none of the properties had a certification from the agency. Thus, the trial court had correctly concluded that Harvest Life s properties did not qualify for exemption. The court of appeals affirmed the lower court s judgment. Palma v. Houston Independent School District 2013 WL 2146709 (Tex. App. Houston [1 st Dist.], May 16, 2013, no pet.) (not reported) Issues: Applicability of Fair Debt Collection Practices Act to taxes Taxing units sued Palma for delinquent taxes, and Palma responded with various counterclaims. One accused the taxing units and their lawyers of violating the federal Fair Debt Collection Practices Act (FDCPA). 15 U.S.C. 1692 et seq. After a jury trial, the trial court awarded the taxing units $2,559 and denied Palma any relief on his counterclaim. The trial court did ask the jury any questions about alleged violations of the FDCPA. Palma appealed. 13

The court of appeals ruled that Palma had failed to preserve error on eight issues raised in his briefs, i.e., he had failed to make the necessary request or objection in the trial court. The court of appeals did not discuss the merits of those issues. Palma did preserve error on his claim concerning the FDCPA. The higher court considered that issue but ruled against Palma. He was not entitled to go to the jury with his claim because the FDCPA itself defines debt in a way that does not include taxes. The statute applies to only consumer debts. Nothing that the taxing units of their lawyers might have done in their efforts to collect taxes from Palma could have violated the FDCPA. The court of appeals affirmed the trial court s judgment for the taxing units. Blanco National Bank v. Gonzales 2013 WL 1760604 (Tex. App. San Antonio, April 24, 2013, no pet.) (not reported) Issues: Effect of delinquent taxes on mortgage In 2005, the bank loaned Gonzalez money to buy a riverfront lot. In 2007, it loaned him money to buy property near downtown San Antonio (the Guenther property). In each instance, the loan agreement required Gonzalez to pay the taxes on the property and to avoid allowing a lien on the property superior to the bank s lien. Gonzalez did not pay taxes on the properties for the years 2008-2010. The bank alleged that he was also behind on his monthly loan payments. In late 2010, the bank accelerated the loans and notified Gonzales that it was going to foreclose. Gonzalez notified the bank that he had entered installment payment plans for the taxes. In early 2011, he got a property-tax loan from Propel and the tax liens on both properties were transferred to Propel. A few months later, he sold the lot. With the proceeds, he paid off the bank s loan on the lot. He planned to use the remaining proceeds to pay off Propel s tax loan on both properties. Somehow (the court s opinion doesn t say), the bank got is hands on the remaining proceeds and applied them to its loan on the Guenther property. Gonzalez sued the bank for breach of the loan agreements. The trial court ruled for Gonzalez, and the bank appealed. The court of appeals reversed the trial court s judgment and ruled for the bank. There was conflicting evidence about Gonzalez s loan payments, so the court based its opinion on the taxes. It explained that in order to prevail on a breach-of-contract claim, Gonzalez had to show that he had materially performed his own obligations under the loan agreements with the bank. But, when he failed to pay the taxes, he also failed to perform those contractual obligations. He breached the loan agreements when he allowed the tax liens, liens superior to the bank s liens, to remain on the properties. The court also thought that the bank had not breached the loan agreements by applying proceeds from the sale of the lot to the loan on the Guenther property. When the bank applied the proceeds, the loan on the Guenther property had already been accelerated, and the total amount was due. The two loans were cross-collateralized; the bank could look to one property to satisfy the unpaid debt on the other property. The bank was entitled to prevail on Gonzalez s breach-of-contract claim. 14

Felt v. Harris County 2013 WL 1738604 (Tex. App. Houston [14 th Dist.], April 23, 2013, no pet.) (not reported) Issues: Evidence in delinquent-tax trial; contesting default judgment Taxing units sued Felt for twenty years of delinquent taxes on real property. Felt appeared at the trial and denied owning the property. The taxing units introduced certified copies of their delinquent-tax records, but those records showed the property to be owned by Equi-Share, Inc. They also introduced a certified copy of a deed recorded in 1983. Felt had signed the deed as president of Equi-Share, and it conveyed the property from Equi-Share to Felt. The trial judge signed a judgment against Felt, but the judgment mistakenly said that that Felt had failed to appear at the trial. Felt appealed. The court of appeals affirmed the judgment against Felt. The court explained that 33.47 of the Tax Code allows a taxing unit to prove its case in a delinquent-tax trial by introducing certified copies of its delinquent-tax records. In this case, the records were sufficient to prove the amounts of the taxes, penalties, interest, etc. and that they were unpaid and delinquent. The records did not prove that Felt was the owner, but the deed provided sufficient proof of that, even though Felt denied ownership. Further, the mistake in the trial court s judgment was of no consequence. The record showed that Felt had appeared for trial and that the judgment had not been entered against him by default. Even if it really had been a default judgment, Felt could not attack it on appeal without having first filed a motion for new trial in the trial court. Because he did not file such a motion, he could not raise the issue on appeal. Dunmore v. Chicago Title Insurance Co. 400 S.W.3d 635 (Tex. App. Dallas, April 19, 2013, no pet.) Issues: Judgment for delinquent taxes; statutes of limitations Dunmore bought two lots from Long in 2001, but the title company s documents mentioned only one of the lots. Because of the title company s mistake, nobody paid taxes on the omitted lot for several years. In 2009, taxing units filed suit against Long, because the county deed records still showed her as the owner of the lot. The taxing units added Dunmore as a defendant in the case, and Dunmore cross-claimed against the title company with claims including negligence and breach of contract. The title company responded that Dunmore s claims concerning the 2001 closing documents were barred by statutes of limitations. In 2010, the title company: 1) had Long sign a new deed to Dunmore that included the omitted lot; and 2) paid Dunmore an amount equal to the penalties, interest and court costs associated with the delinquent taxes, but not the taxes themselves. Long was dismissed from the case, but Dunmore continued to pursue his claims against the title company. The trial court proceeded to enter a summary judgment in favor of the title company and to enter a judgment in rem against Dunmore for the taxes, penalties, etc. Dunmore appealed. 15

The court of appeals upheld the trial court s rulings. The higher court explained that the applicable limitations periods started running in 2001 when the title company messed up the closing documents. Dunmore was charged by law with knowing the contents of the documents that he signed and should have known at the closing that one lot was mistakenly omitted from those documents. His time for suing the title company for negligence expired two years after the closing; and his time for filing a breach-ofcontract claim expired four years after the closing. The court of appeals ruled that Dunmore had failed to adequately brief his challenge to the trial court s judgment insofar as it concerned the delinquent taxes. Editor s Comment: If the court of appeals had considered Dunmore s challenge to the delinquent-tax judgment, it probably would have ruled against him. Let s assume the Dunmore was right; he did not own the lot during the years in which the taxes were assessed because the title company omitted the lot from his original deed. That would mean that he was not personally liable for the taxes. By the time the judgment was signed, however, he did own the lot, and it was subject to liens for the delinquent taxes. Under those circumstances, the trial court correctly entered an in rem judgment against him. The judgment would have provided for the foreclosure of the tax liens, but it would not have included Dunmore s personal liability for the taxes. He stood to lose his lot but nothing more. Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. 419 S.W.3d 462 (Tex. App. Waco, April 18, 2013, pet. denied) Issues: Charitable exemptions; attorneys fees in appeals In 2009, the legislature enacted 11.231 of the Tax Code, which exempts the property of nonprofit community business organizations. Although the statute was enacted with chambers of commerce in mind, other types of organizations also began claiming the exemption. In this case, it was an association of realtors. The appraisal district and the ARB denied the association s claim. The association sued to appeal the ARB s ruling. The trial court rejected the district s claim that 11.231 was unconstitutional and entered summary judgment in favor of the association. The court also awarded the association its attorneys fees. The district appealed. The court of appeals upheld the trial court s judgment insofar as it exempted the association s property. The affidavits filed with the trial court proved that the association 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. Article VIII, 2 of the Texas Constitution allows exemptions for the property of institutions engaged primarily in public charitable functions which may conduct auxiliary activities to support those charitable functions. The court interpreted the phrase charitable functions very broadly, reading it to include virtually anything 16

beneficial to the community. The court upheld the constitutionality of 11.231 and ruled that because the association met the requirements of the statute, it also met the requirements of the Constitution. The court of appeals overturned the trial court s award of attorneys fees to the association. The higher court explained that 42.29 of the Code allows a court to award attorneys fees to a property owner who prevails on a claim of excessive value or unequal value, but not to a property owner who prevails on an exemption claim. Harris County Appraisal District v. ETC Marketing, Ltd. 399 S.W.3d 364 (Tex. App. -- Houston [14 th Dist.], April 2, 2013, no pet.) Issues: Exhaustion of remedies; appraisal roll corrections ETC protested the 2009 appraisal of its natural gas. The protest raised several issues concerning the value and ownership of the gas as well as a claim of multiple appraisals. The ARB denied the protest, and ETC appealed. In the trial court, ETC repeated its claim about multiple appraisals and added a new claim that the gas was exempt from taxation because it was in interstate commerce. The appraisal district asked the court to dismiss the interstate-commerce claim because it had not been raised before the ARB. ETC then filed motions with the ARB under 25.25 of the Tax Code alleging: 1) that the gas did not exist in the form or at the location described in the appraisal roll; and 2) that the appraised value of the gas was more than one-third too high. These motions were unsuccessful. The trial court denied the district s motion to dismiss ETC s interstatecommerce claim and actually entered a summary judgment for ETC on the basis of that claim. The district appealed. The court of appeals reversed the judgment for ETC and dismissed ETC s interstatecommerce claim. The court explained that ETC could not raise the claim in an appeal because it had not raised it in the protest before the ARB. If the claim had been raised, the ARB could have considered it and granted any appropriate relief, including ordering the removal of the gas from the appraisal records. If ETC had disagreed with the ARB s decision, it could have appealed that decision to the trial court. But, ETC could not raise an issue for the first time in an appeal. The trial court did not have jurisdiction to consider the interstate-commerce claim. The court of appeals went on to explain that neither the ARB nor the trial could consider ETC s claim under 25.25. A property owner may not file a motion under Subsection (d) if he filed a protest earlier in the year (provided that he appeared at the protest hearing and the ARB determined the protest on its merits). Subsection (c) does not allow a property owner to claim that his property was exempt from taxation. ETC did not deny that it had property in the form of natural gas present at the location described in the appraisal roll. The court of appeals noted that ETC s claim of multiple appraisals had not been considered by the trial court and referred that claim back to the lower court. Ike & Zack, Inc. v. Matagorda County 17

2013 WL 1091812 (Tex. App. Corpus Christi-Edinburg, March 14, 2013, no pet.) (not reported) Issues: Defenses to delinquent-tax suit; notice to property owners For years, the Matagorda County Appraisal District had been appraising several shrimp boats. The shrimpers incorporated their businesses sometime prior to 2001 and transferred the ownership of their boats to their new corporations. The shrimpers also concluded that their boats were taxable in Calhoun County, not Matagorda County, and they began rendering the boats in Calhoun County. But, they did not bother to tell the Matagorda County Appraisal District. Appraisal and tax records in Matagorda County continued to list the boats in the names of the individual shrimpers, and notices were sent to the individual shrimpers. The Matagorda County taxes on the boats were not paid for the years 2001 2004, and taxing units filed delinquent-tax suits against the corporate owners. The corporations attempted to raise several defenses including the MCAD s failure to send them ad valorem tax notices. (The court s opinion does not specify whether these were notices of appraised value or some other notices. Because the MCAD performs assessment and collection duties for some taxing units, the disputed notices might have even been tax bills or delinquent-tax notices.) The trial court determined that the corporations defenses were invalid and entered a summary judgment for the taxing units. The corporations appealed. The court of appeals reversed the trial court s summary judgment. The MCAD had sent its notices to the most recent owners and addresses in its records according to 1.07 of the Tax Code, but that was not enough for the court of appeals. The court ruled that the alleged lack of notice could give the corporations a defense to the delinquent-tax suit. The court added that the corporations were not required to file lack-of-notice protests under 41.411 because they were not notified of the taxes before the protest deadline, which was the delinquency date for each year s taxes. (The Code has since been amended to extend the protest deadline in some instances, but the amendment did not apply to this case.) The corporations were not required to file 25.25(c) motions with the ARB to complain about appraisals of property that did not exist at the locations stated on the MCAD s rolls because they were not notified of those appraisals before they were sued for delinquent taxes. The court reasoned that the corporations did not have to exhaust administrative remedies because they claimed that the MAD was acting outside its statutory authority. The court of appeals sent the case back to the trial court for further proceedings. Thornton v. GMAC Mortgage, LLC 2013 WL 775352 (N.D. Tex., March 1, 2013) Issues: Admissibility of evidence concerning tax appraisals GMAC made a home-equity loan to Thornton, who defaulted on the loan. When GMAC tried to foreclose, Thornton argued that the loan was void because it had been for more than 80% of the property s value in violation of Art. XVI, 50 of the Texas Constitution. 18

In a motion for summary judgment, GMAC offered an appraisal done at the time of the loan and stating a value of $102,000. It also offered an acknowledgement signed by Thornton and reflecting the $102,000 value. The loan was for $81,600, exactly 80% of that value. In response, Thornton offered the appraisal district s appraisal of the property at $80,160 to show that the loan amount was too high and that GMAC knew it. The court ruled that the tax appraisal did not create an issue of fact because tax appraisals rarely reflect true market value. Tax appraisals are not evidence of value for purposes other than taxation. The court considered Thornton s argument that tax appraisals are much more accurate than they used to be, but decided that it was bound by old case law holding that tax appraisals are not competent evidence of value. The court granted GMAC s motion for summary judgment. Wol+Med Southwest Dallas Limited Partnership v Dallas Central Appraisal District 2013 WL 1247053 (Tex. App. Dallas, February 27, 2013, no pet.) (not reported) Issues: Summary-judgment evidence After an unsuccessful protest before the ARB, Wol+Med filed an appeal alleging that the appraisal district had appraised its property excessively and unequally. After allowing time for discovery, the appraisal district filed a no-evidence motion for summary judgment alleging that Wol+Med had no evidence to support its claims. Wol+Med filed a response to the district s motion and generally alleged that the district s appraisal did not reflect the true, correct and accurate value of the property. The only actual evidence Wol+Med presented was an affidavit from its property manager, Smith, stating that he had personal knowledge of the matter s stated in Wol+Med s response. The trial entered a summary judgment for the district, and Wol+Med appealed. The court of appeals upheld the judgment for the district. The court explained that pleadings such as Wol+Med s response were not evidence. That would be true even if Smith had sworn that the statements in the response were true, which he didn t. Neither the response nor Smith s affidavit contained any opinion of the property s value or any comparison to the values of other properties. They did not even state that the district s value was excessive or unequal. Because Wol+Med presented no evidence, the trial court correctly granted summary judgment for the district. In re Heavy Equipment Appraisal Litigation MDL No. 12-0185 (Tex. M.D.L. Panel, February 14, 2013) Issues: Consolidation of appeals Section 23.1241 of the Tax Code purports to require a special appraisal method for a dealer s inventory of heavy equipment. A 2011 amendment purports to make the statute applicable to dealers who lease heavy equipment. The amendment has been particularly controversial with respect to the compressors used on natural-gas pipelines. Across the state, 226 lawsuits have been fled to appeal ARB orders in 83 counties. The property owners claimed that they were heavy-equipment dealers and that their leased 19

compressors were a form of heavy-equipment inventory. Many of them sought to have all of the cases consolidated in one court. The state s Multidistrict Litigation Panel considered the request and denied it. The Panel s opinion explains that the cases were not related. Although they all involve legal questions concerning the interpretation of 32.1241, the cases do not involve common questions of fact. Instead they involve different property owners who may or may not qualify as dealers. The cases involve different types of compressors that have been in their present locations for different periods of time. The unique facts about a particular compressor may determine whether it is even a form of personal property or a fixture permanently attached to the ground. The Panel further noted that consolidation of the cases would not further the goals of convenience and efficiency. Discovery in each case will involve the particular facts about the compressors that are the subject of that case. Appraisal districts would be seriously inconvenienced by having to send their lawyers and representatives to a court that might be far away. Editor s Comment: As Tolstoy observed: Happy property owners are all alike; every unhappy property owner is unhappy in his own way. Amrhein v. Reichert 2013 WL 1155473 (N.D. Tex., February 1, 2013) Issues: Sovereign immunity Amrhein bought a house in 2007. By 2012, she apparently found the house unsatisfactory and sued everybody remotely connected with the transaction: the sellers, the realtors, the title company, the house inspector, the mortgage company, etc., etc. She eventually expanded her suit to include any number of state and local governmental entities and officials including Governor Perry, Attorney General Abbott, the Supreme Court of Texas, judges of many lower courts, the Texas Legislature, and the Collin Central Appraisal District. Amrhein asserted dozens of claims, but only her claim against the CCAD involved property taxes. She claimed that it had valued her house excessively by comparing it to larger, better houses. She asserted this claim against the district despite having had the value of her house lowered in an earlier appeal. The defendants asked the court to dismiss Amrhein various claims. A federal magistrate reviewed the matter and wrote an opinion advising the court to dismiss Amrhein s case. With respect to the CCAD, the magistrate explained that the district was a political subdivision of the State of Texas and was entitled to sovereign immunity against Amrhein s suit. The magistrate recommended the dismissal of Amrhein s other claims as well and recommended that Amrhein be prohibited from filing any other suits in federal courts without the advance approval of a judge. O Dea v. Wells Fargo Home Mortgage 2013 WL 441461 (S.D. Tex., February 5, 2013) 20