Property Tax Opinions Released in 2005

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Tax Code does not prohibit manipulation of delinquent tax foreclosure.

The pre-foreclosure purchaser corporation applied for the excess proceeds. A lienholder also applied for the proceeds based on a pre-existing lien. However, the courts determined that the lienholder's lien had become stale and was no longer enforceable such that it was not entitled to excess proceeds to satisfy its debt. However, the lienholder also complained that the foreclosure sale process had been manipulated because of the pre-foreclosure purchase and the subsequent foreclosure purchase by a principal of the new owner. The court of appeals held that the two purchasers were separate entities and the Tax Code does not prevent such manipulation.

The methodology used by the pre-foreclosure purchaser in this case could result in it being able to outbid other potential purchasers at foreclosure, with the knowledge that it would receive the proceeds in excess of the tax liens. Thus, while a regular bidder would end up having to pay all of the purchase price for the property, the owner by using a related entity is able to purchase the property in effect for the tax lien only.

Tender of taxes to court does not stop running of interest on transferred tax lien.

The court held that, because the new owners were not original obligors on the lien notes, they had no claim for usury. The court also held that the attorney fees were in the amounts statutorily allowed for transferred tax liens. The court also held that, because the tender into the registry of the court was not an unconditional offer to pay the debt, interest continued to accrue on the debt even after the tender.

Default must be proved to foreclose transferred tax lien.

The court of appeals held that, while RFC proved up the existence of the transferred tax liens and the securing real estate notes, it failed to prove that the tax lien notes were in default or had been accelerated to allow for foreclosure. The court therefore reversed the trial court's judgment allowing foreclosure.

Homestead cap statute does not establish market value.

In the district court, the owner moved for summary judgment claiming that the appraisal district was precluded by Section 23.23 from increasing the value of the property by more than 10 percent. The owner introduced an agreed judgment from the prior year showing a market value of $200,000. Therefore, the owner claimed that the market value should be $225,000 ($200,000 plus 10 percent plus $5,000 in improvements to which he stipulated). The trial court entered judgment that the appraisal roll value could not exceed $225,000.

However, the appellate court noted that market value and the homestead cap value are two different things. The court held that market value cannot be determined under Section 23.23, but must be determined using generally accepted appraisal methodology. Though in some cases the market value and the capped value may be the same, the court noted that, if the market value exceeds the capped value, then the proper appraised value would be the capped value. However, this value would not be the market value. Because the owner had moved for determination of the market value under Section 23.23 and the trial court had entered a market value determination under Section 23.23, the appellate court reversed the summary judgment and remanded the case to the district court for further proceedings.

Citation in property tax appeal need not be served within 45-day appeal deadline.

The appellate court noted that there is no specific requirement in the Tax Code that the citation be served at any particular time and that jurisdiction of a tax appeal is not conditioned upon service by a particular date. Therefore, the court held that the trial court did have jurisdiction over the property owner's appeal. The court noted that the Legislature could have conditioned a tax appeal upon service within a certain period of time, but had not done so. Because the Legislature had not done so, the court refused to include any additional requirement regarding service. In a footnote, the court noted that the case should not be construed as overruling various cases holding that a lack of due diligence in serving citation may be used to show a claim is barred by a statute of limitations.

Underground salt dome caverns may be appraised and taxed as improvements to real property.

The Supreme Court appeared to focus heavily on the facts underlying the case. The caverns were not naturally occurring, but were in fact man-made having been created by the removal or mining of salt at considerable expense. The Supreme Court rejected the lessee's argument that the caverns were merely natual creations of the salt mining process. The Court also noted that the lessee paid more than $500,000 per year to rent and use the caverns. Finally, the Court noted that similarities between the underground caverns and an aboveground storage facility. Since both would be used for the same purposes, the fact that one was below ground and the other was above ground should not make any difference as far as the taxability of the storage facility.

Property owner entitled to refund of excess interest and penalty paid during pendency of value protest.

The appellate court held that a taxing unit is only entitled to interest and penalty on the corrected valuation when the appraised value is changed on the tax roll after a value protest is filed. If the property owner pays interest and penalty based on a higher value than the corrected value, then the property owner is entitled to a refund of the excess tax as well as the excess interest and penalty. However, the appeals court held that the property owner was entitled to attorney fees because the Tax Code only allows attorney fees in a suit for a refund if the lawsuit is filed 180 days or more after the value correction. In this case, the property owner filed the lawsuit before the 180 days had run.

One justice dissented from the majority opinion. That justice would have held that the taxpayer had no right to recover a refund of the interest and penalty because Section 42.43 of the Tax Code only specifies a refund of "taxes."

Taxing entities may be liable for attorney fee in declaratory judgment action.

The appellate court noted that taxing entities may be sued for a declaratory judgment and that sovereign immunity does not protect them from such a claim. Because they may be sued for declaratory judgment, they may also have attorney fees awarded against them. The appeals court did modify the portion of the judgment that allowed execution against the taxing entities for the judgment amount because a judgment can only be enforced against a governmental entity by mandamus action.

Taxpayer cannot rely on incomplete or incorrect information from appraisal district to avoid statutory administrative procedures.

On appeal, the taxpayer complained that the appraisal district had provided it with incomplete and incorrect information regarding the proper protest to file. Though the owner had complained orally regarding the lack of notice, the appraisal district provided the form for filing a 25.25(d) protest. The taxpayer asserted that the appraisal district should be estopped from complaining about the failure to file a 41.411 protest because of the inadequate information provided to the taxpayer. The court of appeals held that judicial jurisdiction cannot be conferred by estoppel and that the taxpayer was required to exhaust all available administrative remedies prior to pursuing action in the courts. Because no protest of lack of notice was filed and determined, the appellate court held that the lack of notice portion of the taxpayer's claims was properly dismissed.

However, the appellate court held that, because the taxpayer had filed a 25.25(d) motion, the court did have jurisdiction to consider that matter even if the value claimed by the taxpayer did not meet the statutory requirement. The court of appeals did point out that the 25.25(d) claim might be a proper subject for summary judgment, but could not be disposed by a motion to dismiss for lack of jurisdiction.

Community housing development organization must be actual owner of property to qualify for exemption.

The court of appeals held that the entity which is the actual owner of the property must itself be a ChoDO in order to qualify for the exemption under the Tax Code.

Purchaser of business who fails to withhold taxes from purchase price is liable for entire assessment during year of purchase.

The court of appeals held that the only limitation on liability for a purchaser is that the purchaser's tax obligation cannot exceed the purchase price.

Private attorney representing taxing unit may not be entitled to governmental immunity.

The purchaser sued the attorney based on the erroneous representation. The attorney claimed governmental and sovereign immunity based on its representation of the taxing unit.

The court of appeals held that the attorney would only be entitled to immunity if she could prove that she was an agent or employee of the governmental taxing unit and had acted in good faith. Because the attorney had not proved these facts in the summary judgment proceeding in the trial court, the court of appeals reversed the trial court's judgment and remanded the case for further proceedings.

Delinquent tax records not under seal cannot be used to prove tax delinquency.

In this new opinion, the court granted a motion for rehearing by the taxpayer and ruled that the delinquent tax records were deficient and inadmissible as evidence. Specifically, the court pointed out that the records had been admitted by the trial court as public records. However, because the documents did not contain a public seal or a certification under seal by a public officer, the records were not self-authenticating and thus inadmissible. Because the same defect appeared for both taxing units, the court reversed the judgment against the taxpayer and held the taxing units could not recover on the delinquent taxes.

The court of appeals did not address the issue of the use of a business record to prove up delinquent taxes, which it had held in its prior opinion was proper.

Taxpayer must exhaust administrative remedies in complaining of increased property appraisal.

This is the first reported case dealing with an increase in value based on the filing of an anmesty rendition in 2003. The owner's property was assigned a value in 2003 and that value was certified by the review board. Subsequently, the owner filed an amnesty rendition during the allowed period of 2003. As the result of the rendition, the appraisal district increased the appraised value of the property. The property owner filed a lawsuit contesting the increased appraisal, but did not file an administrative protest with the review board. The trial court and court of appeals held that an administrative protest was a prerequisite to seeking relief in the courts.

The property owner raised several issues as to why no administrative protest was necessary, but the court of appeals rejected all of the alleged excuses. In analyzing the property owner's claims, the court equated the increased appraisal with a notice of omitted property valuation and indicated that the amnesty rendition itself constituted evidence of omitted property. However, the holding was really that the property owner needed to file an administrative protest before filing a lawsuit.

Other lawsuits are pending around the state on similar increases in value or on notices of omitted property based on amnesty renditions. These protests include lawsuits filed after administrative protests filed with the appropriate review boards. Whether the Mag-T case ruling and discussion will impact those cases remains to be seen. The issue of amnesty renditions and increased valuations remains to be decided, but some courts and appraisal districts may misread this case to have decided that such increases are proper.

Purchaser must produce all tax sale documents to invoke two-year limitations.

On appeal, the purchaser argued that the taxpayer's claim was barred by limitations since the Tax Code provides that a suit to set aside a tax sale must be filed within two years. The majority of the appellate court held that the purchaser failed to produce sufficient evidence, including the decree of foreclosure and the order of sale, to provide that the limitations period in the Tax Code would apply. Therefore, they affirmed the judgment in favor of the owner.

One justice dissented to the ruling and stated his belief that the purchaser had presented sufficient evidence to create a fact issue to defeat summary judgment. He would have reversed the ruling in favor of the owner and returned the case to the trial court for further proceedings. The dissenter also would have held that, even if the tax deed was void due to the filing of the bankruptcy, this would not prevent the running of limitations under the Tax Code.

Suit to set aside delinquent tax sale must be filed within one year with deposit of delinquent taxes.

The Jordans owned two tracts of land. Delinquent tax lawsuits were filed relating to each tract, and judgments and orders of sale were subsequently entered in 1993 and 1997. The larger tract was struck off to the school district in 1995, while the smaller tract was sold at foreclosure to Bustamante in 1998, with the deed recorded in 1999. The school district sold the larger tract to Bustamante in 1997, with the deed recorded that year. Bustamante subsequently filed a lawsuit to remove liens on the property. The Jordans counterclaimed that the tax sales were void due to the failure to join lienholders in the delinquent tax lawsuits.

The court of appeals held that, while the tax judgments might be void as to the lienholders, the judgments were valid as to the Jordans who had no standing to raise the claim of the lienholders (the lienholders waived their lien claims).

The appellate court also held that the Jordans' claim regarding the larger tract was barred by limitations under Section 33.54 of the Tax Code, which requires a suit to set aside a tax sale be brought within one year of the filing of the deed. The court held that, with regard to the larger tract, the applicable date would be the date that the school district recorded its deed after the property was struck off to that taxing unit and not the date that the district later sold the property to Bustamante.

With regard to the smaller tract, the court held that, though the Jordans' action was timely filed, it was nevertheless barred because of their failure to file with the court the amount of delinquent taxes, interest and penalties as required by Section 34.08 of the Tax Code.

Ex-spouse may not be jailed for failure to pay property taxes.

A final decree of divorce ordered the husband to make certain child support payments and also to pay delinquent property taxes on the marital residence. When the former husband failed to make support payments and pay the property taxes, the former wife brought a motion for contempt. Finding the ex-husband in contempt, the trial court ordered the ex-husband jailed until he paid the ex-wife the back child support and attorney fees and also paid the property taxes.

On a writ of habeas corpus, the Supreme Court held that the ex-husband could not be jailed due to the failure to pay the property taxes under the divorce decree. The Court determined that the divorce decree did not order the taxes paid from specific funds, so the tax payment obligation was merely a debt. Because a person may not be jailed for a debt, the trial court's order was set aside.

The Supreme Court did note that the trial court might order the husband jailed on the child support defaults only (as these could constitute contempt of court), but could not on the property tax debt. Because the confinement order did not segregate the two types of obligations, the confinement order as drafted was held invalid.

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Recent Attorney General Opinions

Section 6.025(d) regarding overlapping jurisdiction does not on its face violate the Texas Constitution.

An appraisal review board may not set a protest hearing before the property owner files a protest.

A city might not be able to use TIF funds to reimburse a developer's costs for expenditures not subject to competitive bidding.

Attorney General Opinion No. GA-0304

Prior tax abatement agreement for personal property does not preclude later abatement agreement for new personal property.