BRUSNIAK'S 2003 PROPERTY TAX CASE LAW DIGEST

BRUSNIAK'S 2003 PROPERTY TAX CASE LAW DIGEST

UNITED STATES COURTS OF APPEALS

TAX INJUNCTION ACT BARS SUIT IN FEDERAL COURT CHALLENGING CONSTITUTIONALITY OF RETROACTIVE PROPERTY TAX COLLECTION PENALTY.

Washington v. Linebarger, Goggan, Blair, Pena & Sampson, LLP, 338 F.3d 442 (5^th Cir. 2003). [OPINION]

The City of New Orleans implemented a 30% retroactive delinquent property tax collection penalty payable to the attorneys representing the city in its collection efforts. A class action suit was filed in United States District Court challenging the constitutionality of the retroactive penalty. The federal district court dismissed the suit on jurisdictional grounds due to the Tax Injunction Act, and the taxpayers appealed. The appellate court upheld the dismissal, ruling that neither of the exceptions to the Tax Injunction Act had been established by the taxpayers. Contrary to the taxpayers' assertion, the court held that the penalty assessed was so inextricably intertwined with the tax assessment as to constitute a tax, and not a challengeable fee. It further ruled that the taxpayers had adequate remedies available to them in the state court, notwithstanding the significant procedural and substantive obstacles set forth in Louisiana law.

TEXAS SUPREME COURT

A STATE PROPERTY TAX CAN EXIST EVEN IF ONLY ONE OR A FEW TAXING DISTRICTS ARE IMPACTED; A STATE PROPERTY TAX IS CREATED WHEN A TAXING UNIT IS DENIED MEANINGFUL DISCRETION IN THE RATE SETTING PROCESS.

West Orange-Cove Consolidated Independent School District v. Alanis, 107 S.W.3d 558 (Tex. 2003). [OPINION]

Several school districts filed suit against the State of Texas alleging that the statutory scheme of utilizing ad valorem taxation to fund public education had resulted in the creation of an unconstitutional state property tax. The trial court dismissed the suit, ruling that the pleadings failed to state a viable cause of action. The Texas Supreme Court reversed, ruling that (1) a property tax could be deemed to be a state property tax even if it did not have state-wide effect, but only affected one or a few school districts; (2) that the constitutional prohibition against a state property tax would be violated whenever the state exercised such control over the taxing process as to deny a taxing authority "meaningful discretion" in setting its tax rates; (3) that the state was required to prove that school districts were not forced to tax at maximum rates to meet either state accreditation standards or the constitutional mandate of providing a general diffusion of knowledge; (4) that the school districts were entitled to prove that the existence of homestead exemptions did not afford them meaningful discretion in setting their tax rates; and (5) that the fact that the school districts were not actually taxing at the maximum rate of $1.50 per $100 of value did not necessarily prove that the school districts had meaningful discretion in setting their tax rates.

TEXAS COURTS OF APPEALS

TRIAL COURT MAY BLEND MARKET APPROACH, COST APPROACH AND INCOME APPROACH TO DETERMINE MARKET VALUE OF PROPERTY.

Houston R.E. Income Properties XV, Ltd. v. Waller County Appraisal District, 123 S.W.3d 859 (Tex. App.--Houston [1^st Dist.] 2003, no pet.). [OPINION]

In trial of market value of an income producing property, the court indicated that it would blend the market approach testimony with the income approach testimony to determine the market value of the property. Dissatisfied with the court's determination, taxpayer appealed the result claiming that blending valuation techniques was improper, and that the court was required to rely exclusively on either the market, cost or income approaches to valuation. The appellate court disagreed finding that the blended result produced a relevant and reliable indication of the property's market value.

APPRAISAL REVIEW BOARD MEMBERS ARE ENTITLED TO JUDICIAL IMMUNITY FOR THEIR ACTIONS IN CONDUCTING PROTEST HEARINGS.

Sledd v. Garrett, 123 S.W.3d 592 (Tex. App. - Houston [14^th Dist.] 2003, no pet.). [OPINION]

Tax consultant, compensated on a contingent fee basis, filed a protest and attended hearing before a three member panel of the Harris County Appraisal Review Board. The panel reduced the value of the property but not to the value advocated by the consultant. Consultant filed suit claiming that the panel was negligent because they ignored Section 41.43 which requires an appraisal district to establish value by a preponderance of the evidence. Consultant argued that the panel's negligence caused him damage due by reducing the amount of his contingent fee award. The trial court granted the panel's summary judgment. The appellate court found that appraisal review board panel members are quasi-judicial officials and therefore the doctrine of judicial immunity applies to them and operates as a bar to direct suits against them.

DISMISSAL OF PROTEST DOES NOT BAR A SUBSEQUENT PROCEEDING UNDER SECTION 25.25(D); ATTORNEY'S FEES MAY NOT BE AWARDED IN SUITS TO COMPEL SECTION 25.25(D) HEARINGS.

Koger Equity, Inc. v. Bexar County Appraisal Review Board, 123 S.W.3d 502 (Tex. App. - San Antonio 2003, no pet.). [OPINION]

Taxpayer timely filed a notice of protest challenging the valuation of twenty-eight parcels of land, but failed to appear at the scheduled hearing on the notices of protest. The appraisal review board dismissed the protests, and the taxpayer filed a motion to belatedly correct excessive valuation on those lots pursuant to Section 25.25(d) of the Texas Property Tax Code. The appraisal district claimed that the statute barred such hearings since they had been the subject of a prior protest hearing. The court disagreed ruling that dismissals are not adjudications of the rights of parties, but merely place the parties in the same position they were in before jurisdiction was sought to be invoked. Therefore, it ruled that an unadjudicated notice of protest did not bar a hearing on a subsequent motion filed under Section 25.25(d). The court refused the taxpayer's request for attorney's fees under Section 41.45(f) of the Texas Property Tax Code finding that attorney's fees could only be awarded for hearings denied under Chapter 41 and not under Chapter 25.

INTERSTATE ALLOCATIONS OF AIRCRAFT VALUATION ARE NOT PROPER SUBJECTS OF MOTIONS TO CORRECT VALUATIONS UNDER SECTION 25.25(C)(3).

WB Summit Properties, Inc. v. Midland Central Appraisal District, 122 S.W.3d 374 (Tex. App. - El Paso 2003, pet. denied). [OPINION]

Taxpayer owned two commercial aircraft which they rendered to the appraisal district in the years at issue, but did not seek an interstate allocation of value at the time. Subsequently, the taxpayer filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a five year retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel. The appraisal district sought dismissal of the suit contending that no jurisdiction existed due to the taxpayer's failure to exhaust administrative remedies. The court disagreed finding that the taxpayer had filed suit within forty-five days of the entry of the appraisal review board order, thereby conferring jurisdiction on the court. However, the court refused to grant such an allocation ruling that Section 25.25(c)(3) was not a proper means for obtaining such a correction since the aircraft had in fact been "located" within the boundaries of the appraisal district. The court reasoned that Section 25.25(c)(3) applies only when no property exists at the location described in the appraisal roll. Since it was conceded that the aircraft was at least partially located within the boundaries of the appraisal district, Section 25.25(c)(3) did not apply.

TAXPAYER MUST PRESENT SUFFICIENT EVIDENCE TO REBUT PRESUMPTION OF DELIVERY OF TAX BILLS AND NOTICES; TAX BILL CONTAINING APPRAISED VALUE SATISFIES DUE PROCESS REQUIREMENTS; TAXING UNIT IS NOT REQUIRED TO DELIVER TAX BILL IF IT DOES NOT HAVE CORRECT MAILING ADDRESS FOR TAXPAYER, BUT PENALTIES AND INTEREST DO NOT ACCRUE ON TAX BILLS WHICH ARE NOT SENT IF TAXING UNIT HAS CORRECT MAILING ADDRESS; POST-JUDGMENT INTEREST MAY ONLY BE COLLECTED ON TAX AMOUNTS FOUND TO BE DELINQUENT.

Aldine Independent School District v. Ogg, 122 S.W.3d 257 (Tex. App. - Houston [1^st Dist.] 2003, no pet.). [OPINION]

School district filed suit to collect delinquent taxes for tax years 1977 through 1987. County intervened seeking collection of taxes for 1984 through 1987. At trial, both taxing units presented certified copies of their delinquent tax rolls. In rebuttal, the taxpayer testified that he had never received any tax bills or any five year statutory reminder notifications. (A statute existed at the time which nullified all penalties and interest that had accrued if such notices had not been properly sent.) Taxpayer presented further evidence that the taxing units did not possess his correct mailing address for tax years 1982 and 1983 and that the records indicated an incorrect mailing address for 1985. Finally, taxpayer introduced testimony from a former taxing unit employee that delinquency notices in 1984 and 1985 were delivered by the school district by bulk mail rather than first-class mail (as required by law) and that the tax agent who was responsible for taxes for tax years 1998 and forward could not recall receiving any delinquent tax bills or notices, but claimed he would have forwarded them to the taxpayer had he received them. Based on this evidence, the court found that the statutory presumption of delivery as to the school district had been successfully rebutted and that no penalties or interest could be collected by the school district due to the five year statute for tax years 1978 through 1983. The court found that the evidence was legally insufficient to rebut the statutory presumption of delivery of the notices for the other years sought by the school district and for all years sought by the county. The court further found that a taxing unit is not required to deliver a tax bill in any year in which it does not have a proper address for a taxpayer; hence, all attorney's fees attributable to tax years 1982 and 1983 were property collectible. Taxes do not become delinquent if a taxing unit has a correct mailing address and fails to mail a bill to the taxpayer. Taxpayer complained that the appraisal district had failed to mail notices of appraised value as required by Section 25.19, thereby depriving the taxpayer of his due process rights. The court found that due process was satisfied by the placement of the appraised value of the property on the tax bill. Finally, the court ruled that the taxing units were entitled to recover post-judgment interest on all amounts which had been determined to be delinquent, but not as to any amounts not found delinquent.

TAX FORECLOSURE SUBSEQUENT TO SEIZURE EXTINGUISHES ALL CLAIMS AND RIGHTS OF JUNIOR LIENHOLDERS.

Conseco Finance Servicing Corp. v. J & J Mobile Homes, Inc., 120 S.W.3d 878 (Tex. App. - Fort Worth 2003, pet. denied). [OPINION]

Lienholder financed the purchase of a mobile home. Taxpayer failed to timely pay the property taxes due on the mobile home and the taxing units seized the home pursuant to a tax warrant. After giving the lienholder eleven days notice, the taxing units sold the mobile home at a public auction. Lienholder contended that its lien rights were not extinguished in the process because no specific statutory provision existed terminating junior lienholder's rights as to personal property. The court disagreed finding that the legislature intended to create a uniform method for extinguishment of real and personal property liens subject to foreclosure and that the specific provisions pertaining to the tax foreclosure of real property liens should be construed as applying to personal property liens as well to prevent an absurd result from occurring.

TAXING AUTHORITIES ARE NOT ENTITLED TO A PRESUMPTION OF DELIVERY OF NOTICE WITHOUT EVIDENCE THAT NOTICE WAS DEPOSITED IN THE U.S. MAIL, POSTAGE PREPAID; TAXING UNITS ARE REQUIRED TO PLEAD WAIVER AS AN AFFIRMATIVE DEFENSE TO AVAIL THEMSELVES OF SUCH REMEDY; TAXING UNITS MUST FILE A VERIFIED PLEA TO CLAIM LACK OF CAPACITY.

WHM Properties, Inc. v. Dallas County, 119 S.W.3d 325 (Tex. App. - Waco, August 4, 2003, no pet.). [OPINION]

Taxing units sued taxpayer to collect delinquent taxes. Third party intervened into the lawsuit, paid the disputed taxes under protest and contested the legality of the taxes under the five year notification statute (which has since been repealed). The trial court entered judgment for the taxing units, and the third party intervenor appealed the judgment. The appellate court ruled that the taxing units were required to refund the monies paid by the intervenor because the taxing units had failed to prove that they had mailed the requisite five year notice to the taxpayer, by United States mail, postage prepaid. The taxing authorities argued that the testimony of the taxpayer that he did not receive notice from the taxing units was not credible. The court ruled that such was irrelevant because the presumption of delivery had not arisen in this case due to the lack of evidence of mailing by the taxing units. The taxing units further argued that the taxpayer had not timely demanded a refund of the tax amounts and that this evidence had not been contested by the taxpayer. The court rejected this argument, finding that the taxing units had failed to plead waiver as an affirmative defense to the demand for refund, and affirmative defenses which are not plead are waived. Finally, the taxing units contended that the intervenor lacked capacity to sue the taxing units because it had failed to sustain an injury. The court rejected this argument as well, ruling that claims of capacity must be raised in trial court pleadings under a verified plea, which the taxing units had failed to file in this case.

TAXING UNIT IS NOT ENTITLED TO RESCIND TAX DEED DUE TO ERROR IN UNDERLYING JUDGMENT.

Whitehead v. Jasper County Water Control & Improvement District No. 1, 118 S.W.3d 485 (Tex. App. - Beaumont, October 9, 2003, pet. denied). [OPINION]

Taxpayer failed to pay taxes on two tracts of land. A judgment of foreclosure was entered and the tracts were struck off at a tax sale to one of the taxing units. Taxpayer tendered in full the redemption price stated in the judgment for one of the tracts, and the taxing unit executed a quitclaim deed transferring the title to that tract back to the taxpayer. Subsequently, the taxing unit discovered that an office building was located on the tract of land it had transferred (and not on the other tract of land as it had apparently assumed) and sought to rescind the redemption claiming mutual mistakes of fact or law and unconscionability. The court refused to rescind the transaction, finding that the taxing unit had never sought to determine the location of the office building and that the taxpayer was entitled to redeem the property by paying the fees and costs as specified under the Tax Code and the judgment. It further found that the taxing unit could not correct any errors which might have occurred in the underlying tax foreclosure judgment in a suit seeking to rescind a tax deed.

PROTEST BY LESSOR OF MARKET VALUE OF OTHER PROPERTY DOES NOT BAR PROTEST BY LESSEE; SALT DOME STORAGE CAVERNS DO NOT CONSTITUTE IMPROVEMENTS UNDER THE TAX CODE AND MAY NOT BE SEPARATELY ASSESSED.

Coastal Liquids Partners, L.P. v. Matagorda County Appraisal District, 118 S.W.3d 464 (Tex. App. - Corpus Christi 2003, pet. filed). [OPINION]

Lessor leased two improved underground salt dome storage caverns to lessee. The appraisal district created separate tax accounts for the underground storage caverns. Lessor filed notices of protest on the surface estates located above the storage caverns and the lessee challenged the taxability of the storage caverns. The appraisal district sought dismissal of lessee's suit under Section 41.413 of the Tax Code contending that the lessor's protest of the surface estate barred lessee's suit. That provision prohibits suits by lessees where a lessor has filed a prior challenge. The court refused to dismiss the case based on the appraisal district's creation of separate tax accounts for the underground storage caverns, finding that the lessor had not protested anything pertaining to the underground storage caverns. The court further ruled that underground storage caverns were not separately assessable subsurface mineral estates because they did not fit the definition of an improvement under the Tax Code.

TRIAL COURT MUST HOLD A DE NOVO HEARING WHEN A TIMELY NOTICE OF APPEAL OF TAX MASTER DECISION IS FILED.

City of Houston v. Alief Independent School District, 117 S.W.3d 913 (Tex. App. - Houston [14^th Dist.] 2003, no pet.). [OPINION]

School district filed suit to collect delinquent taxes from taxpayer. City and county intervened to collect taxes owed to them as well. Following a hearing, the tax master recommended that all of the taxing units take nothing from their claims. Each of the taxing units timely filed a notice of appeal of the tax master's decision. The case was set for trial before the district court. At an earlier scheduled hearing pertaining to a discovery dispute between the school district and the taxpayer (which the city and county did not attend because they were not parties to the discovery dispute) the school district settled its claims with the taxpayer and the trial court entered a final judgment pursuant to the settlement and ordered that the city and county take nothing. On appeal, the appellate court ruled that the trial court had acted improperly by not conducting a trial of the city and county claims since Section 33.74(g) of the Texas Property Tax Code mandated that a trial be held on all timely filed appeals from decisions by a tax master.

TAXING UNIT FILING CLAIM FOR DELINQUENT TAXES IN PROBATE COURT MUST OBSERVE PROBATE COURT FILING DEADLINES OR FORFEIT ITS RIGHT TO DELINQUENT TAX MONIES.

Andrews v. Aldine Independent School District, 116 S.W.3d 407 (Tex. App. - Houston [14^th Dist] 2003, pet. denied). [OPINION]

Taxpayer died intestate owing $217,318 in delinquent taxes. Taxing unit filed a claim in probate court seeking payment of the taxes. The administrator did not respond to the claim within the statutory thirty day period and the taxing unit did not file suit within the ninety day claim period. The probate court dismissed the claim for tax monies and the taxing unit appealed to the Court of Appeals. The court rejected the taxing units' claim, ruling that "Once a claim against an estate is rejected, the claimant must file suit within 90 days or the claim is forever barred." The taxing units further argued that their claim was not a "claim for money" but was instead only a claim "in rem." The court was not swayed, ruling that claims for the payment of taxes are specifically included within the probate code section, and that the taxing units' claim was clearly one for money notwithstanding the taxing units' contentions. The taxing units also argued that the probate court provisions were unconstitutional releases of tax under Article VIII, Section 10 of the Texas Constitution. The court rejected this argument finding that "there were many statutes that restricted the time, place and manner of collections by taxing units." None of them, including the statute issue, are unconstitutional releases of taxes.

SECTION 41.411 IS THE EXCLUSIVE AND MANDATORY PROVISION TO PROTEST FAILURE TO DELIVER A NOTICE OF APPRAISED VALUE; FAILURE TO PROVIDE A NOTICE OF APPRAISED VALUE IS NOT JURISDICTIONAL AND DOES NOT RENDER THE APPRAISAL VOID.

Denton Central Appraisal District v. CIT Leasing Corp., 115 S.W.2d 261 (Tex. App. - Fort Worth 2003, pet. denied) petition for cert. filed 2004 WL 1475971, (U.S. June 24, 2004) (No. 04-4). [OPINION]

Taxpayer owned an aircraft that was placed on the appraisal roll for the first time in 1998. Taxing unit provided taxpayer with a tax bill. Taxpayer timely paid the taxes on the aircraft but did not file a protest pursuant to Section 41.411 before the delinquency date for the taxes. Taxpayer filed suit in district court seeking to void the appraisal or alternatively seeking an interstate allocation of value. Taxpayer filed a no-evidence motion for summary judgment on the basis that there was no evidence that the appraisal district had sent a notice of appraised value to it. The appraisal district filed a traditional summary judgment motion alleging that the taxpayer's failure to exhaust administrative remedies provided by the Tax Code preempted it from obtaining judicial review. The trial court granted the taxpayer's motion and denied the appraisal district's. The appellate court reversed and rendered finding that the protest procedure in Section 41.411 was the taxpayer's exclusive remedy for contesting the appraisal district's failure to provide it with the notice of appraised value of the aircraft. Since the taxpayer did not file this protest, the taxpayer forfeited its right to a final determination of its protest. The appellate court further found that the legislature did not intend that the Section 25.19 notice be a prerequisite to a taxing unit's jurisdiction and therefore, the failure to provide the value notice was not jurisdictional and did not render the appraisal void.

THE OWNER OF A POSSIBILITY OF REVERTER INTEREST IS NOT A PROPER PARTY TO A DELINQUENT TAX SUIT, AND AS SUCH THE CONTINGENT INTEREST MAY NOT BE FORECLOSED.

Cypress-Fairbanks Independent School District v. Glenn W. Loggins, Inc., 115 S.W.3d 67 (Tex. App.-San Antonio 2003, pet. denied). [OPINION]

Taxing unit sued a taxpayer and the owner of a possibility of reverter for delinquent taxes. The owner of the possibility of reverter contended that it was not a proper party to the suit because its interest was nontaxable. The court agreed, ruling that any purchaser at a tax foreclosure sale would take title to the property subject to the contingent interest in the property.

TAXPAYER CLAIMING BENEFITS OF LATE FILING DEADLINE MUST PROVE DATE ON WHICH APPRAISAL REVIEW BOARD CERTIFIED THE APPRAISAL ROLL; TAXPAYER MUST PRESENT EVIDENCE OR ARGUMENT BEFORE APPRAISAL REVIEW BOARD PRIOR TO RAISING CLAIM WITH DISTRICT COURT.

Quorum International v. Tarrant Appraisal District, 114 S.W.3d 568 (Tex. App. - Fort Worth 2003, pet. denied). [OPINION]

In 1999, taxpayer filed a belated freeport application on June 23 with a cover letter which stated that its late filing had been due to an oversight and requesting the appraisal district to accept the late filing. The appraisal district denied the late application, and the taxpayer appealed the denial to the appraisal review board. At the hearing, the taxpayer failed to present any evidence or argument as to good cause for the late filing. When the appraisal review board further denied the freeport application, the taxpayer appealed to district court. On appeal, the taxpayer argued that the subsequent amendment in 2001 to the Tax Code allowing belated filings of freeport applications through the "date the appraisal review board approves the appraisal records" should have been retroactively applied to extend the taxpayer's filing deadline. The court rejected this claim, ruling that the taxpayer had failed to prove the date on which the appraisal review board had actually approved the records and that the statutory deadline of July 20 was not sufficient in and of itself to establish this fact. The court further ruled that the taxpayer could not judicially challenge the failure of the chief appraiser to extend the deadline on "good cause" grounds due to the failure of the taxpayer to raise this issue before the appraisal review board.

CLAIMS OF IMPROPER DENIAL OF EXEMPTION MAY NOT BE RAISED IN DEFENSE OF A DELINQUENT TAX ACTION.

St. Joseph Orthodox Christian Church v. Spring Branch Independent School District, 110 S.W.3d 477 (Tex. App. -Houston [14^th Dist.] 2003, no pet.). [OPINION]

Taxpayer purchased a property in March 1997 and converted it to use as a church. It sought a belated exemption from the appraisal district. The taxing units sued the church to collect delinquent taxes for that year. The church defended on the grounds that it had been improperly denied a religious use exemption. The trial court entered judgment for the taxes, and the church appealed. The court of appeals upheld the judgment ruling that the exclusivity of remedies provisions of Section 42.09 of the Tax Code barred the church from raising a claim of exemption as a defense to the delinquent tax collection suit. Such claim should have been raised in a suit against the appraisal district after the church had exhausted its administrative remedies.

TAXING UNITS DO NOT NEED TO OBTAIN PERMISSION TO FORECLOSE A PROPERTY FROM ASSIGNEES OF THE RESOLUTION TRUST CORPORATION; UNLESS THE JUDGMENT IS VOID, PROVISIONS IN A DELINQUENT TAX JUDGMENT MAY NOT BE COLLATERALLY ATTACKED; FAILURE TO OBJECT TO THE SALE OF MULTIPLE PROPERTIES TO SATISFY A DELINQUENT TAX JUDGMENT IN THE ORIGINAL SUIT WAIVES THE CLAIM; ATTORNEY'S FEES MAY NOT BE RECOVERED IN AN ACTION IN THE NATURE OF A SUIT FOR TRESPASS TO TRY TITLE.

Hawk v. E.K. Arledge, Inc., 107 S.W.3d 79 (Tex. App.-Eastland 2003, pet. denied). [OPINION]

In 1990, taxing units sued a taxpayer to foreclose two tracts of land for nonpayment of ad valorem taxes. The Resolution Trust Corporation was appointed receiver for the bank holding the notes on the tracts on February 1, 1990. The RTC subsequently transferred the property to another party and a series of further transfers ensued. The taxing units sued the RTC and later one of the subsequent transferees. A judgment of foreclosure was entered in 1997, and the excess proceeds from the foreclosure sale were paid to the original taxpayer. A subsequent transferee of the RTC sold the property at a deed of trust foreclosure sale in 1999, and a declaratory judgment suit was filed in an attempt to clarify the ownership of the property. The trial court found title in the purchaser through the tax foreclosure process and awarded attorney's fees to it. The purchaser who claimed title through the RTC appealed claiming (1) that the permission of the successor in title to the RTC was required under the provisions of the "Financial Institutions Reform, Recovery and Enforcement Act" (FIRREA), (2) that the sale of the two tracts together to satisfy the tax judgment violated the Texas Constitution; and (3) that the award of attorney's fees was not appropriate. The court ruled that the requirement of obtaining consent prior to foreclosing a property for delinquent taxes applied only to the RTC and not to "downstream assignees" of the RTC. It further ruled that a claim of improper sale of the two tracts together could not be raised in a new lawsuit as a collateral attack on the first judgment unless the judgment itself was void, and that any objections to the joint sale order were waived when the parties to the original suit failed to raise them. The court upheld the challenge to the award of attorney's fees ruling that attorney's fees were not recoverable in a Declaratory Judgment suit which was essentially a suit in trespass to try title.

TO CLAIM INTERSTATE ALLOCATION AS A COMMERCIAL AIRCRAFT, A TAXPAYER MUST RENDER THE AIRCRAFT AND SPECIFY ITS USE AS SUCH IN INTERSTATE COMMERCE; TO QUALIFY FOR INTERSTATE ALLOCATION AS A COMMERCIAL AIRCRAFT, THE OPERATOR OF THE AIRCRAFT (NOT THE AIRCRAFT) MUST BE A CERTIFICATED AIR CARRIER.

SLW Aviation, Inc. v. Harris County Appraisal District, 105 S.W.3d 99 (Tex. App.-Houston [1^st Dist.] 2003, no pet.). [OPINION]

Taxpayer rendered its aircraft with the appraisal district and provided the district with information showing its use in interstate commerce. It subsequently complained that the interstate allocation granted by the district was insufficient because the district had not utilized the formula applicable to commercial aircraft. The court overruled the challenge finding that the taxpayer was not entitled to such application because the taxpayer had failed to inform the district of the commercial use contention in its rendition. It further ruled that the taxpayer was not entitled to commercial allocation because it had only established that the aircraft was utilized as a "certificated air carrier." Such proof was insufficient because the statute required evidence that the operator of the aircraft was a "certificated air carrier."

TO CLAIM INTERSTATE ALLOCATION, A TAXPAYER MUST RENDER THE PROPERTY AND SPECIFY ITS USE IN INTERSTATE COMMERCE; INTERSTATE ALLOCATIONS OF AIRCRAFT VALUATION ARE NOT PROPER SUBJECTS OF MOTIONS TO CORRECT VALUATIONS UNDER SECTION 25.25(C)(3).

Harris County Appraisal District v. Texas Gas Transmission Corp., 105 S.W.3d 88 (Tex. App.-Houston [1^st Dist.] 2003, pet. denied). [OPINION]

Taxpayer owned a business aircraft which it flew in interstate commerce. The taxpayer filed a rendition for the aircraft with the appraisal district in 1995, but did not specify its use in interstate commerce and did not contest the valuation of the aircraft during the normal appeals period. The taxpayer subsequently filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel for 1995. The court ruled that the taxpayer was prohibited from obtaining an interstate allocation because of its failure to include the interstate allocation data on its rendition, holding that the Tax Code required such by implication and the Comptroller rules required such expressly. It further ruled that Section 25.25(c)(3) of the Tax Code could not be utilized to obtain such retroactive relief because that provision applied only to situations in which property did "not have any physical location in Texas throughout the entire taxable year." It held that the granting of such relief would undermine the penalty provisions contained in Section 25.25(d) of the Tax Code. The court expressly overruled its prior decision in Himont U.S.A. Inc. v. Harris County Appraisal District, 904 S.W.2d 740 (Tex. App. -Houston [1^st Dist.] 1995, no writ).

SUBSEQUENT PURCHASER MAY NOT CHALLENGE LACK OF NOTICE OF INCREASE IN APPRAISED VALUE IN PRIOR YEARS; FAILURE TO PAY TAXES VOIDS A CLAIM UNDER SECTION 41.411 OF THE TAX CODE.

Houston Land & Cattle Co. v. Harris County Appraisal District, 104 S.W.3d 622 (Tex. App. -Houston [1^st Dist.] 2003, pet. denied). [OPINION]

A party purchased property from a taxpayer with knowledge that the taxes on the property were delinquent. The party filed a protest under Section 41.411 of the Tax Code claiming that the taxes for the prior 20 years were void due to the failure of the appraisal district to send notices of appraised values to the prior owner for those years, notwithstanding repeated increases in value. The court denied the claim ruling that protests under Section 41.411 of the Tax Code could only be filed by the taxpayer to whom notice should have been delivered, and that such claims are nullified by the taxpayer's failure to timely tender tax payments as required by Section 42.08 of the Tax Code

DELINQUENT TAX CLAIM IS NOT WAIVED UNLESS TAXING UNIT IS SILENT OR INACTIVE FOR SO LONG A PERIOD TO SHOW AN INTENTION TO YIELD ITS KNOWN RIGHT.

Barua v. County of Dallas, 100 S.W.3d 629 (Tex. App.-Texarkana 2003, pet. denied). [OPINION]

Taxing units sued to collect delinquent tax and obtained a judgment on October 26, 1998. A sheriff's sale was scheduled for January 5, 1999. On or about that day, the taxpayer filed for bankruptcy protection and the automatic stay halted the sale. The bankruptcy court dismissed the bankruptcy on September 23, 1999. On November 30, 2000, the taxing units petitioned the court to vacate its earlier judgment based on a December 22, 1998 title report which discovered a creditor who had been omitted from the prior suit. They petitioned the court to enter a new judgment for foreclosure. Taxpayer defended the new suit by claiming that the taxing units had waived their right to sue by delaying the filing of their suit to vacate by almost two years. The court disagreed, ruling that the government had not been "silent or inactive for so long a period as to show an intention to yield the known right." The court noted that only a year had passed since the dismissal of the bankruptcy, that the statute pertaining to vacation of judgments did not establish a time limit for the filing of such petitions, and that the entire claim was still within the twenty year statute of limitations.

LEGAL DESCRIPTION MUST IDENTIFY PROPERTY WITH REASONABLE CERTAINTY TO SUPPORT A DELINQUENT TAX CLAIM; TAXING UNIT CLAIMING STATUTORY COLLECTION PENALTY MAY NOT IMPOSE ATTORNEY'S FEES ON DELINQUENT TAXES PAID PRIOR TO JULY 1.

Spring Branch Independent School District v. Siebert, 100 S.W.3d 520 (Tex. App.-Houston [1^st Dist.] 2003, no pet.). [OPINION]

Taxpayers replatted their property from one lot into three and changed the legal name of two of the platted lots. The appraisal district did not correctly record the name of the new plat because its computer would not allow the correction. Additionally, it listed the three lots as four lots. Taxing units sued to collect delinquent taxes on the lots claiming that the appraisal district's records were sufficient to support a judgment. They produced the appraisal district's maps into evidence, but the maps did not clearly match the properties in question. The court ruled that these inaccuracies prevented the taxing units from identifying the underlying property with reasonable certainty as is required to support a tax judgment. In a subsequent tax year, the taxpayer paid the amount specified by the taxing unit for taxes, penalties and interest on June 30. The taxing unit refused to accept the payment claiming that it was entitled to collect an additional 15% penalty for attorney's fees even though such statutory penalties are not incurred until July 1. The court ruled that there was no legal authority for the assessment of such a penalty prior to July 1, and that statutory attorney's fees are barred where a taxing unit has adopted a statutory collection penalty.

INTERSTATE ALLOCATIONS OF AIRCRAFT VALUATION ARE NOT PROPER SUBJECTS OF MOTIONS TO CORRECT VALUATIONS UNDER SECTION 25.25(C)(3).

Harris County Appraisal District v. Texas Eastern Transmission Corp., 99 S.W.3d 849 (Tex. App.-Houston [14^th Dist.] 2003, pet. denied). [OPINION]

Taxpayer owned two business aircraft which it flew in interstate commerce. The taxpayer filed annual renditions with the appraisal district, but did not seek an interstate allocation and did not contest any of the valuations of the aircraft during the normal appeals period. The taxpayer subsequently filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a four year retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel. The court refused to grant such an allocation ruling that Section 25.25(c)(3) was not a proper means for obtaining such a correction since the aircraft had in fact been "located" within the boundaries of the appraisal district. It ruled that Section 25.25(c)(3) did not authorize a correction on the grounds that the property existed "at the location for a shorter time than described on the appraisal roll." It held that interstate allocation challenges had to be presented during the normal appeals period.

INTERSTATE ALLOCATIONS OF AIRCRAFT VALUATION ARE NOT PROPER SUBJECTS OF MOTIONS TO CORRECT VALUATIONS UNDER SECTION 25.25(C)(3); CONSTITUTIONAL RIGHT TO INTERSTATE ALLOCATION IS WAIVED BY LACK OF TIMELY FILING OF NOTICE OF PROTEST UNDER CHAPTER 41 OF TAX CODE.

Kellair Aviation Co. v. Travis Central Appraisal District, 99 S.W.3d 704 (Tex. App.-Austin 2003, pet. denied). [OPINION]

Taxpayer owned a passenger aircraft which it flew in interstate commerce. The taxpayer did not file annual renditions with the appraisal district, and it did not contest any of the valuations of the aircraft during the normal appeals period. The taxpayer subsequently filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a two year retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel. The court refused to grant such an allocation ruling that Section 25.25(c)(3) was not a proper means for obtaining such a correction since the aircraft had in fact been "located" within the boundaries of the appraisal district. It ruled that such relief would require the court to illegally "look behind the appraisal roll to determine how the value was determined." It further ruled that the taxpayer had waived its federal constitutional right to the interstate allocation by failing to file its claim for allocation within the time frames provided in Chapter 41.

A & S Air Service, Inc. v. Denton Central Appraisal District, 99 S.W.3d 340 (Tex. App.-Ft. Worth 2003, no pet.). [OPINION]

Taxpayer owned a business aircraft which it flew in interstate commerce. The taxpayer filed annual renditions with the appraisal district, but did not seek an interstate allocation and did not contest any of the valuations of the aircraft during the normal appeals period. The taxpayer subsequently filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a four year retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel. The court refused to grant such an allocation ruling that Section 25.25(c)(3) was not a proper means for obtaining such a correction since the aircraft had in fact been "located" within the boundaries of the appraisal district. It ruled that such relief would require the court to illegally "look behind the appraisal roll to determine how the value was determined." It further ruled that the taxpayer had waived its federal constitutional right to the interstate allocation by failing to file its claim for allocation within the time frames provided in Chapter 41.

NO ABUSE OF DISCRETION OCCURS WHEN A COURT SEVERS AN UNRELATED TORT CLAIM AGAINST ONE TAXING UNIT FROM A DELINQUENT TAX COLLECTION SUIT BROUGHT BY MULTIPLE TAXING UNITS.

Qualls v. Angelina County, 98 S.W.3d 369 (Tex. App.-Beaumont 2003, no pet.). [OPINION]

Multiple taxing units sued taxpayer for delinquency. Taxpayer counterclaimed against one taxing unit in tort for a claim pertaining to the subject property. The trial court severed the counterclaim and entered judgment for the taxing units. Taxpayer appealed claiming an abuse of discretion by the district judge in severing the counterclaim. The court of appeals ruled that no abuse of discretion had occurred because the counterclaim would have been the proper subject of an independently asserted suit, and because the facts and issues of the severed claim were not so interwoven with the remaining action. The court further supported its ruling by pointing out that the counterclaim did not involve the other taxing units which were parties to the suit.

TEXAS ATTORNEY GENERAL OPINIONS

COST OF SUBSTANTIAL RECONSTRUCTION AND REPAIR OF HOMESTEAD FOLLOWING NATURAL DISASTER MUST BE ADDED TO TAX CAP VALUE AND TAX FREEZE VALUE; UPGRADES TO HOMESTEAD THAT INCREASE THE MARKET VALUE ARE IMPROVEMENTS AND MUST BE ADDED TO TAX CAP VALUE AND TAX FREEZE VALUE.

Op. Tex. Att'y Gen. GA-0091 (2003). [OPINION]

Appraisal district is required to add the cost of substantial reconstruction or repairs made to a homestead to homestead "cap" values and over-65 tax freeze values, including those performed in response to damages caused by a natural disaster. Only ordinary repairs are not added to such values. Replacing damaged components, such as dish washers, in a residence with new components is an ordinary repair; however, new improvements which enhance the market value of the homestead, such as the addition of a new room, must be added to the tax "cap" value and tax freeze value.

APPRAISAL DISTRICT BUDGET MAY NOT CONTAIN COSTS PERTAINING TO TAX COLLECTION.

Op. Tex. Att'y Gen. GA-0030 (2003). [OPINION]

The Attorney General ruled that an appraisal district, which collects taxes for some of its taxing units, may not include the costs of collection in its budget. Collection costs must be fully and separately compensated by the taxing units for whom collection is being made.

FORECLOSED PROPERTY HELD BY THE VETERANS' LAND BOARD IS EXEMPT FROM TAXATION.

Op. Tex. Att'y Gen. GA-0026 (2003). [OPINION]

The Attorney General ruled that property which has been foreclosed by the Veterans' Land Board under mortgages issued from its funds is exempt from ad valorem taxation because holding such property for resale to replenish the funds belonging to the board is a public purpose. The fact that neither the constitution nor the statute expressly provide that proceeds from such resales must be used for such purposes is irrelevant since that is precisely what they contemplate.