Opinion

Opinion issued May 19, 2011

In The

Court of Appeals

For The

First District of Texas

———————————

NO. 01-10-00043-CV

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Houston Independent School district, City of Houston,

Harris County, Harris County Education Department, Port of Houston of Harris

County authority,

Harris CountY Flood Control District,

Harris County Hospital District, and

houston Community College System , Appellants

V.

Ned B. Morris III , DANIEL W. SHIPPER, PATRICK A. SHIPPER,

ANITA GIBSON, MARY ANN MOSELY, DEBORAH L. MOORE,

LINDA SHIPPER BENDER, CAROLINE D. ARMSTRONG,

PAMELA K. MOORE, JOYCE SALTER, AND JAMES R. HUNT, Appellees

On Appeal from the 151st District Court

Harris County, Texas

Trial

Court Case No. 2004-71420

O P I N I O N

Appellees,

Ned B. Morris III, Daniel W. Shipper, Patrick A. Shipper, Anita Gibson, Mary

Ann Mosely, Deborah L. Moore, Linda Shipper Bender, Caroline D. Armstrong,

Pamela K. Moore, Joyce Salter, and James R. Hunt (collectively, “the

Taxpayers”) ,

have filed a motion for rehearing and a motion for en banc reconsideration of

our opinion issued on March 4, 2011. A ppellants, Houston Independent School

District, City of Houston, Harris County, Harris County Education Department,

Port of Houston of Harris County Authority, Harris County Flood Control District,

Harris County Hospital District, and Houston Community College System

(collectively, “the Taxing Units”), have filed a response. We deny the motion for rehearing, withdraw

our opinion and judgment of March 4, 2011, and issue this opinion and judgment

in their place. Because we issue a new

opinion, the Taxpayers’ motion for en banc reconsideration of our prior opinion

is moot. See Richardson‑Eagle,

Inc. v. William M. Mercer, Inc. , 213 S.W.3d 469, 472 (Tex.

App.—Houston [1st Dist.] 2006, pet. denied).

The Taxing Units bring this

interlocutory appeal of the trial court’s order denying their plea to the

jurisdiction. [1] The trial court determined it had

jurisdiction over the Taxpayers’ claims for refund of taxes. In their sole issue on appeal, the Taxing

Units assert that the trial court erred because the Taxpayers did not exhaust

their administrative remedies prior to filing their claims in district

court. We conclude the Taxpayers were

required to exhaust their administrative remedies and, therefore, the trial

court lacked jurisdiction. We reverse

and render an order of dismissal.

Background

The

Harris County Appraisal District’s appraisal roll listed the Taxpayers as the

owners of certain tracts of land, including 9.38 acres actually owned by the Taxpayers

and .96 acres not owned by the Taxpayers.

The Taxpayers did not timely challenge this determination

administratively. In December 2004, the

Taxing Units filed suit against the Taxpayers to collect taxes unpaid on all

10.34 acres for the years 1983 through 2003.

The Taxing Units placed a lien on the properties to secure the payment

of taxes, penalties, interest, and costs.

The Taxpayers answered with a general denial and affirmative defenses,

including that the petition failed to comply with the requirements in the Tax

Code, that the Taxing Units never properly notified the Taxpayers of the

delinquent taxes, that the assessment of taxes is erroneous based on the

description of the property, and that designated parties to the lawsuit have no

ownership interest in the properties.

While the suit was pending,

the Taxpayers, under protest, paid the taxes to stop further penalties and

interest from accruing, to avoid foreclosure of the 9.38 acres that they did

own, and to avoid breaching a contract to sell the 9.38 acres. The Taxpayers explained that they paid under

protest the entire amount because the Taxing Units would not accept payment of

the taxes apportioned between the 9.38 acres that the Taxpayers did own and the

.96 acres that the Taxpayers did not own.

Shortly after paying the taxes, the Taxpayers filed a counterclaim for a

refund of the taxes, penalties, and interest they had paid on the .96 acres. [2] After receiving payment, the Taxing Units

nonsuited their claims for delinquent taxes.

At the Taxpayers’ motion, the district court realigned the parties,

designating them as the plaintiffs.

In their eighth amended

petition, the Taxpayers contended they have never owned any interest in the .96

acres for which they paid taxes under duress and they sought a refund of that

amount through a declaratory judgment.

The Taxing Units answered by asserting affirmative defenses of

governmental immunity, failure to exhaust administrative remedies, voluntary

payment, and other allegations. The

Taxing Units filed a plea to the jurisdiction asserting the district court

lacked jurisdiction because the Taxpayers failed to exhaust their

administrative remedies as required by the Tax Code. The court denied the plea.

Standard of Review

When,

as here, the facts are undisputed and the plea to the jurisdiction presents

purely a legal question, we review de novo a trial

court’s ruling on a plea to the jurisdiction.

Tex. Dep’t of Parks & Wildlife v. Miranda , 133 S.W.3d 217,

226 (Tex. 2004); see Mayhew v. Town of Sunnyvale , 964

S.W.2d 922, 928 (Tex. 1998). A trial

court’s judgment is binding only if it has jurisdiction over the parties or

property, jurisdiction of the subject matter of the suit, jurisdiction to enter

the particular judgment, and the capacity to act as a court. State ex rel. Latty v. Owens , 907 S.W.2d 484, 485 (Tex. 1995). Subject matter jurisdiction involves the

kinds of controversies a court has the authority to resolve. Davis v. Zoning Bd. of Adjustment of City of La Porte , 865 S.W.2d

941, 942 (Tex. 1993). [3] Subject matter jurisdiction cannot be

waived. Tex. Ass’n of Bus. v . Tex. Air

Control Bd ., 852 S.W.2d 440 , 443–44 (Tex. 1993).

Statutory construction is also a legal

question that we review de novo. HCBeck, Ltd. v. Rice ,

284 S.W.3d 349, 352 (Tex. 2009).

In construing a statute, we must “ascertain and give effect to the

Legislature’s intent.” Id. To ascertain that intent, we begin with the

“plain and common meaning of the statute’s words.” Id. (quoting Tex. Dep’t of Transp.

v. City of Sunset Valley ,

146 S.W.3d 637, 642 (Tex. 2004)). We

also consider the objective the Legislature sought to achieve through the

statute as well as the consequences of a particular construction. Id. ;

see also Tex. Gov’t Code Ann. § 311.023(1), (5) (West 2005). We “must not interpret [a] statute in a

manner that renders any part of [it] meaningless or superfluous.” Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue , 271 S.W.3d 238,

256 (Tex. 2008). We thus construe

the text according to its plain and common meaning unless a contrary intention

is apparent from the context or unless such a construction leads to absurd

results. Presidio Indep. Sch. Dist. v. Scott , 309 S.W.3d 927, 930 (Tex. 2010).

Texas Tax Code

The Texas Constitution expressly

allows the Legislature to bestow exclusive original jurisdiction on

administrative bodies. Cameron Appraisal Dist. v. Rourk , 194

S.W.3d 501, 502 (Tex. 2006) (citing Tex.

Const . art.

V, § 8).

Pursuant to this power, the Texas Tax Code limits the general

jurisdiction of the district courts and provides “detailed

administrative procedures for those who would contest their property

taxes.” Id . (citing Tex. Tax Code Ann. §§ 41.01–.71 (West

2008 & Supp. 2010)).

The Texas Supreme Court has held that “a taxpayer’s failure to pursue an

appraisal review board proceeding deprives the courts of jurisdiction to decide

most matters relating to ad valorem taxes.”

Id. (quoting

Matagorda Cnty. Appraisal Dist. v.

Coastal Liquids Partners, L.P. , 165 S.W.3d 329,

331 (Tex. 2005)). “The

administrative procedures are ‘exclusive’ and most defenses are barred if not

raised therein.” Id. (citing Tex. Tax Code Ann. § 42.09 (West

2008)).

Section

42.09 of the Tax Code states:

REMEDIES EXCLUSIVE.

(a) Except as provided in Subsection (b) of this section, procedures

prescribed by this title for adjudication of the grounds of protest authorized

by this title are exclusive, and a property owner may not raise any of those

grounds:

(1) in defense to a suit

to enforce collection of delinquent taxes; or

(2) as a basis of a claim

for relief in a suit by the property owner to arrest or prevent the tax

collection process or to obtain a refund of taxes paid.

(b) A

person against whom a suit to collect a delinquent property tax is filed may

plead as an affirmative defense:

(1) if

the suit is to enforce personal liability for the tax, that the defendant did

not own the property on which the tax was imposed on January 1 of the year for

which the tax was imposed; or

(2) if the suit is to foreclose a lien securing the payment of a

tax on real property, that the property was not located within the boundaries

of the taxing unit seeking to foreclose the lien on January 1 of the year for

which the tax was imposed.

(c) For

purposes of this section, “suit” includes a counterclaim, cross-claim, or other

claim filed in the course of a lawsuit.

Tex. Tax Code Ann. § 42.09.

To complain

about ownership or any other matter adversely affecting the property or the

taxpayer, the property owner is required to timely file a written protest with

the appraisal review board within the applicable period of limitations. Id. § 41.44(a) (West 2008). Generally, a property owner must file a written notice of

protest within 30 days after delivery of notice. Id. After exhaustion of the administrative right

to protest, a property owner may file a petition for de novo review with the

district court. Id. §§ 42.21(a) (West Supp. 2010) ,

42.23(a) (West 2008). Administrative

decisions are final if not appealed to the district court within 60 days. Id. § 42.21(a); Cameron

Appraisal Dist. , 194 S.W.3d at 502 .

Taxpayers Are “ Property Owners” Entitled to Administrative Challenge

The parties dispute whether section

42.09(a) applies to the Taxpayers because it uses the term “property

owners.” See Tex. Tax

Code Ann. § 42.09(a). The Taxpayers point out that the

administrative tax protest procedure is only available to a “property owner,”

and they contend that the exhaustion requirement is inapplicable to one whom, in

fact, does not own the property in question.

See id. §§ 41.41(a),

42.09(a )( 1)–(2) (West 2008).

Section 41.41(a )( 7) states ,

“A property owner is entitled to protest before the appraisal review board the

. . . determination that the property owner is the owner of property

. . . .” Id. § 41.41(a )( 7). The literal meaning of “property owner” is

the actual property owner. Applying this

literal meaning, section 41.41(a )( 7) would provide,

“A[n] [actual] property owner is entitled to protest before the appraisal

review board the . . . determination that the [actual] property owner

is the owner of property.” Thus, read

literally, section 41.41(a)(7) authorizes a protest of a determination of

ownership only if that determination is correct and the party challenging the

tax is the party who is legally obligated to pay it. The legislature could not have intended to

create a right of administrative protest that can only be invoked in situations

where the determination being protested is correct. Cf.

Black’s Law Dictionary , 1344 (9th

ed. 2009) (defining “protest” in tax context as “A taxpayer’s statement to the

collecting officer that payment is being made unwillingly because the taxpayer

believes the tax to be invalid .”) ( emphasis added). The

plain meaning of “protest” in the tax context indicates that the Legislature

intended to create a right to challenge incorrect determinations. See id.

The

Taxpayers contend that the section 41.41(a)(7)’s “most reasonable meaning is

that one who actually owns the property can object if a tax notice is sent

elsewhere.” The Taxpayers thus interpret

the term “property owner” as having two different meanings within section

41.41(a )( 7).

Under their interpretation, section 41.41(a )( 7)

would provide, “A[n] [actual] property owner is entitled to protest before the

appraisal review board the . . . determination that the [person

listed as the] property owner [in the tax appraisal rolls] is the owner of

property . . . .” In the

scenario the Taxpayers describe, the actual property owner would not be the

assessed the tax; instead, the person erroneously determined to be the property

owner would. However, by definition, a

tax protest is made by the party against whom the tax is assessed—i.e., the

taxpayer. See id. By

restricting the term “property owner” to only the actual property owner, the

Taxpayers’ interpretation of section 41.41(a )( 7)

contradicts the definition of tax protest, as that term is used in section

41.41(a). See id.

In

contrast to the Taxpayers’ interpretation, we interpret the term “property

owner” with respect to section 41.41(a )( 7) as having a

consistent meaning—a person listed as the property owner in the tax appraisal

rolls. Under our interpretation, section

41.41(a )( 7) provides: “A [person listed as the] property owner [in

the tax appraisal rolls] is entitled to protest before the appraisal review

board the . . . determination that the [person listed as the]

property owner [in the tax appraisal rolls] is the owner of property

. . . .” Our

interpretation is consistent with the definition of a tax protest because it provides

that the person against whom the tax is assessed—not the untaxed actual

property owner—has the administrative right to challenge the tax erroneously

assessed against him.

Our

interpretation is confirmed by the case law from the Texas Supreme Court and

this Court as well as the broader statutory scheme. As explained above, section 42.09(a) provides

that if an administrative remedy is available to a person, he must exhaust that

administrative remedy before he may take that claim to the courts; failure to

exhaust results in forfeiture of the right to assert the claim. See Tex. Tax Code Ann. § 42.09(a). In Robstown

Independent School District v. Anderson , the Texas Supreme Court held that

a person who was listed in the tax rolls as the “property owner” “waived the

defense [of nonownership] . . . by failing to comply with the

administrative procedure of protest.” 706 S.W.2d 952, 953 (Tex. 1986). The interpretation of section 41.41(a )( 7) implicit in the Texas Supreme Court’s holding is the

same interpretation that we apply in the present case. Likewise, in First Bank of

Deer Park v. Harris County , this Court held that a banking corporation that

was assessed property taxes on shares of its own stock could have

administratively protested its nonownership of that stock by filing protest

with appraisal review board. 804 S.W.2d 588, 591 (Tex. App.—Houston [1st Dist.] 1991, no writ).

Following

Robstown , in 1987, the Legislature

added section 42.09(b) to provide an exception to the exhaustion

requirement: “A person against whom a

suit to collect a delinquent property tax is filed may plead as an affirmative defense . . . if the suit is to enforce personal

liability for the tax, that the defendant did not own the property on which the

tax was imposed . . . .” Act

of April 23, 1987, 70th Leg., R.S., ch. 53, § 1, sec. 42.09(b), 1987 Tex.

Gen. Laws 130 . ( codified at Tex. Tax Code Ann. § 42.09(b)).

The Taxpayer’s proposed interpretation of 41.41(a )( 7)

would render meaningless the exception to the exhaustion requirement. If only “actual property owners” can

challenge determinations of ownership, then, as the Taxpayers assert, exhaustion

would never apply to a nonowner, and a nonowner would be in no need of an

exception to the exhaustion requirement.

However, the Legislature’s exception to exhaustion, allowing persons to

plead nonownership as an affirmative defense, specifically contemplates that

exhaustion will apply to a nonowner. Otherwise,

the exception would only guarantee the right to plead nonownership as an

affirmative defense to an actual property owner. We must reject the Taxpayers’ interpretation

of section 41.41(a )( 7) because it would render the

exception in section 42.02(b) meaningless.

See Hogue , 271 S.W.3d at

256 .

Applying our interpretation, the

Taxpayers were entitled to protest the appraisal review board’s determination

that they were the owners of the property.

Because the Taxpayers failed to timely exercise their administrative

challenge under section 42.09(a), the district court did not obtain

jurisdiction over their case by an appeal under that portion of the statute. See Tex. Tax Code Ann. §§ 41.41, 42.21, 42.09; Cameron Appraisal Dist. , 194 S.W.3d at 502 .

The Taxpayers cite to several cases purportedly

showing that they lacked standing to pursue an administrative tax protest and,

therefore, could not have exhausted administrative remedies. The Taxpayers refer to KM-Timbercreek, LLC v. Harris Cnty. Appraisal Dist. , 312 S.W.3d 722 (Tex. App.—Houston [1st Dist.] 2009,

no pet.), Koll Bren Fund VI v. Harris Cnty. Appraisal

Dist. , No. 01-07-00321-CV, 2008 WL 525799 (Tex.

App.—Houston [1st Dist.] Feb. 28, 2008,

pet. denied ) (mem. op.), and Simmons & Co. Holdings, Inc. v. Houston

Indep. Sch. Dist. , No.

01-97-00691-CV, 1999 WL442141 (Tex. App.—Houston [1st Dist.] June 29, 1999, no pet.) ( not

designated for publication). [4] KM-Timbercreek

and Koll Bren are distinguishable

from this case because neither addresses the non-ownership ground of protest

involved in this case. See KM-Timbercreek , 312 S.W.3d at 726 ; Koll Bren , 2008 WL 525799 , at *1. Instead, these cases address the situation

where one entity sells property to a second entity and subsequently the first

entity administratively protests the taxes instead of the second entity. See

KM-Timbercreek , 312 S.W.3d at 725 ; Koll

Bren , 2008 WL 525799 , at *1. This

Court held the first entity lacked standing to protest the taxes because it had

sold the property to the second entity, which was the only entity with

standing. See KM-Timbercreek , 312 S.W.3d at 727 ; Koll Bren , 2008 WL 525799 , at *4.

In contrast, here, the Taxpayers, being listed as the owner in the tax

appraisal rolls, had standing to administratively protest their claim of

non-ownership as to the assessment of all the properties against them.

In Simmons ,

the taxing entities sued Simmons for delinquent taxes. Simmons , 1999 WL 442141 , at *1. Simmons had assumed a lease providing that it

would pay all property taxes. Id .

Simmons subleased part of the property, requiring the sublessee to pay

its portion of the property taxes. Id .

The sublessee failed to pay, and the taxing entities sued Simmons for

the amount. Id . Simmons defended itself

at trial by claiming it was entitled to an exemption, but the district court

determined Simmons was responsible for the taxes because it had not exhausted

all available administrative remedies. Id .

Examining a dictionary’s definition for “owner,” this Court determined

that a lessee could not be a “‘property owner’ for purposes of the relevant

provisions of the Tax Code . . . .” Id . at *2. The

primary question in Simmons was

whether a nonowner can administratively protest the applicability of a tax

exemption under section 41.41(a)(4), not, as in the present case, whether a

nonowner could protest the determination that he was the owner of the property

under section 41.41(a)(7). As explained

above, the term “property owner” as it applies to section 41.41(a )( 7) means the person listed as the property owner in the

tax appraisal rolls.

We conclude that because the Taxpayers failed to

timely exercise their administrative challenge under section 42.09(a), the

district court never acquired jurisdiction over their claim for a refund unless

the exception in section 42.09(b) applies.

See Tex. Tax Code Ann. §§ 41.41, 42.21, 42.09; Cameron

Appraisal Dist. , 194 S.W.3d at 502 .

Affirmative Defense

of Non-Ownership

The parties dispute whether the exception in section

42.09(b) is applicable. See Tex.

Tax Code Ann.

§ 42.09(b). In

a suit by a taxing authority “to enforce personal liability for the tax,” a

person who has not exhausted his administrative remedies may nevertheless

respond by asserting an “affirmative defense” that he “did not own the property

on which the tax was imposed.” Id.

This exception applies only when the person against whom a suit to

collect a delinquent property tax is filed is asserting an “affirmative

defense.” Id . Although the Taxpayers

initially asserted an affirmative defense of non-ownership, the present lawsuit

is no longer one in which the Taxpayers are asserting an affirmative

defense. Rather, because the Taxing

Units have nonsuited their claims against the Taxpayers, the Taxpayers’ present

lawsuit is a claim for affirmative relief with them as plaintiffs. The Taxpayers do not assert an affirmative

defense as required by the Tax Code. See id.

The Taxpayers accurately observe that

despite their failure to exhaust administrative remedies, when the Taxing Units

filed the lawsuit against them, they properly raised non-ownership as an

affirmative defense. See id. § 42.09(b )( 1);

Cameron Appraisal Dist. , 194 S.W.3d at 502 & n.2 (stating that

although other defenses are barred by failure to exhaust administrative

remedies, taxpayers “who do not file administrative protests may still assert

that . . . they did not own the property”). Had the Taxing Units not nonsuited their

claims against the Taxpayers, the trial court would have jurisdiction with the

Taxpayers in the posture of defendants asserting an affirmative defense. See Tex. Tax Code Ann. § 42.09(b )( 1); Cameron Appraisal Dist. , 194 S.W.3d at

502 . But when the Taxing Units dropped

the lawsuit, there was no longer any case for the Taxpayers to defend

against. We disagree with the Taxpayers that their “affirmative defense”

against the Taxing Units can continue after the Taxing Units nonsuited their

claims because the exception allows only an “affirmative defense” to a lawsuit

filed by the Taxing Units. See Tex.

Tax Code Ann.

§ 42.09(b).

An affirmative defense is different

from a claim for affirmative relief. See Hamm v. Millennium Income Fund,

L.L.C. , 178 S.W.3d 256, 268 (Tex.

App.—Houston [1st Dist.] 2005, pet. denied). “An affirmative defense ‘seeks to

establish an independent reason that the plaintiff should not recover’ and is

‘thus [a defense] of avoidance, rather than a defense in denial’; that is, it

is a defense of confession and avoidance.” Id. (quoting In re C.M. , 996 S.W.2d 269 , 270 (Tex. App.—Houston [1st Dist.] 1999, no pet.) ).

In contrast, “[a] claim for affirmative relief is one ‘on which the claimant

could recover compensation or relief even if the plaintiff abandons his cause

of action.’” Tex. Mut. Ins. Co. v.

Ledbetter , 251 S.W.3d 31, 38 (Tex. 2008) (quoting Univ. of Tex. Med.

Branch at Galveston v. Estate of Blackmon ex rel. Shultz , 195 S.W.3d 98,

101 (Tex. 2006) (punctuation omitted)).

When the Taxing Units nonsuited their claims for delinquent taxes, the

Taxpayers’ affirmative defense became moot, and the section 42.09(b) exception

was no longer applicable according to the express terms of the Tax Code. See

Tex. Tax Code Ann. § 42.09(b).

We recognize that the basis for an

affirmative defense that is proper under the Tax Code can, in some circumstances,

also be the basis a claim for affirmative relief. See First Bank of Deer Park , 804

S.W.2d at 593 (stating that in tax refund case, defensive theory may be pleaded

as either affirmative defense or as separate cause of action if party is

seeking affirmative relief). Although it

is possible for certain theories to form the basis of both claims for

affirmative relief and affirmative defenses, section 42.09(b) is only

applicable to an “affirmative defense.” S ee

Tex. Tax Code Ann. § 42.09(b). Therefore, the bar in section 42.09(a) that

prohibits proceedings in court when administrative remedies have not been

exhausted applies. S ee id.

§ 42.09(a )( 2).

The Taxpayers suggest that the rules

of civil procedure allow them to proceed with their claim even after the Taxing

Units nonsuited their claims. Texas Rule

of Civil Procedure 162 provides in pertinent part, “Any dismissal pursuant to

this rule shall not prejudice the right of an adverse party to be heard on a

pending claim for affirmative relief . . . .”

Tex. R. Civ. P. 162; In re

Greater Houston Orthopedic Specialists , 295 S.W.3d 323, 324 (Tex. 2009). Although generally a lawsuit may proceed

after dismissal of a claim by an adverse party, the lawsuit must independently

comport with a court’s jurisdiction. See Color Tile, Inc. v. Ramsey , 905 S.W.2d 620, 623 (Tex. App.—Houston

[14th Dist.] 1995, no writ).

Here, the Taxpayers’ affirmative claim for a refund does not comport

with the requirements of the Tax Code, which is required for the district court’s

jurisdiction in this case. S ee

Tex. Tax Code Ann. § 42.09(a )( 2).

The

Taxpayers rely upon City of Pharr v. Boarder to Boarder Trucking Serv., Inc.

to assert that the trial court was “authorized to dispose of the issues

involved in [the non-ownership] defense.” 76 S.W.3d 803, 806 (Tex.

App.—Corpus Christi 2002, pet. denied).

In City of Pharr , the court stated, “Furthermore, because the

appellee is able to use non-ownership as a defense, we hold that [the] trial

court is authorized to dispose of the issues involved in that defense.” Id.

City of Pharr is consistent with our decision today in that it concerns

issues related to a defense asserted by non-owners. See Tex. Tax Code Ann. § 42.09(b). Here,

the concern is not that there are issues related to a defense of non-ownership

but, rather, that there is no defense being asserted because the Taxpayers are

plaintiffs with a claim for affirmative relief.

We hold that the district court lacks jurisdiction because no party is

asserting an affirmative defense of non-ownership as required for jurisdiction

under section 42.09(b). S ee

id.

Exclusivity of

Tax Code

Generally, the administrative tax protest procedure is

a property owner’s exclusive opportunity for raising a ground challenging the

validity of a tax. S ee id. § 42.09(a). However, when “[t]he basis of [a plaintiff’s]

complaint in the trial court . . . is not a ground of protest

contained in the property tax code[,] . . . section 42.09’s

exclusivity provision is not applicable and does not preclude the trial court

from exercising subject matter jurisdiction over [plaintiff’s] lawsuit.” Dallas Cent. Appraisal Dist. v. 1420 Viceroy Ltd. ,

180 S.W.3d 267 , 269–70 (Tex. App.—Dallas 2005, no pet.)

(holding claim that failure of tax office—as opposed to chief appraiser,

appraisal district, and appraisal review board—to provide required notice is

not ground of protest authorized by Tax Code); see Tex. Tax Code Ann.

§ 42.09(a )( 2); Cameron Appraisal Dist. , 194 S.W.3d at 502 (holding claim seeking

declaration that tax is unconstitutional “need not be brought administratively”

through tax protest procedure before asserting that claim in district court but

claim seeking to set aside individual tax assessment, even though premised on

claim of unconstitutionality, must be brought administratively through tax

protest procedure).

As explained above, the ground for protest at issue

here is provided for in section 41.41, which states that a property owner is

entitled to protest before the appraisal review board the determination that

the property owner is the owner of the property. S ee Tex. Tax Code Ann. § 41.41(a). [5] The Tax Code, therefore, exclusively controls

the disposition of this case. S ee

id. § 42.09; Cameron

Appraisal Dist. , 194 S.W.3d at 502 . Having determined that the Taxpayers’

affirmative claims for refund on the grounds of non-ownership is controlled by

the Tax Code and that those claims fail to meet the requirements of the code,

we hold the district court lacks jurisdiction over the Taxpayers’ claims.

Implied Duress

The Taxpayers assert that the district

court had jurisdiction over their lawsuit because they paid the taxes under

implied duress. Statutory penalties and

accrued interest for late payment can constitute implied duress. Highland Church of Christ v. Powell , 640 S.W.2d 235 , 236–37 (Tex.

1982). Under the common law, a

person could sue for a refund of taxes if he was compelled under duress imposed

by a public entity to pay a tax that is illegal, illegally imposed, or

illegally collected. Dallas Cnty. Cmty. Coll. Dist. v. Bolton , 185 S.W.3d 868, 876 (Tex. 2005); Nivens v. City of League City , 245 S.W.3d 470, 474 (Tex.

App.—Houston [1st Dist.] 2007, pet. denied). However, there can

be no claim of implied duress if a person has a procedure by which he can pay

the disputed amount, avoid the penalties and interest, and assert a claim for

repayment. See First Bank of Deer

Park , 804 S.W.2d at 594–95 . The Tax Code provides this type of procedure

to a property owner in the form of the administrative tax protest. See

Tex. Tax Code Ann . §§ 41.41(a),

42.08 (West 2010) (to appeal decision after administrative tax protest, taxpayer

must pay lesser of amount of taxes due on (1) portion of taxable value of

property that is not in dispute or (2) property under the order from which the

appeal is taken); First Bank of Deer Park ,

804 S.W.2d at 595 . Accordingly, a

property owner has no claim of implied duress where he has had the opportunity

to assert a tax protest regardless of whether a protest was actually asserted. See

First Bank of Deer Park , 804 S.W.2d at 594–95 .

The Taxpayers contend that First Bank of Deer Park stands for the

proposition that duress would make exhaustion of administrative remedies

unnecessary. See id . at 595. First Bank of Deer Park sued Harris County

for a refund of taxes it paid for bank stock but it did not first

administratively protest the tax assessment. Id . at 592. This Court determined that the Bank’s failure

to administratively protest the ownership of the stock precluded it from

seeking judicial relief. Id .

This Court noted that the bank’s suit was for the refund of taxes it

paid to Harris County and that its assertion of implied duress was as an

affirmative defense to the voluntary-payment rule relied on by Harris County to

defend against the Bank’s case. Id . at 593–94. Under the “voluntary-payment rule,” a party

making a voluntary payment of taxes may not file a suit for a refund. Id. at 593 . This

Court held that the bank had failed to present any evidence of duress or any

other affirmative defense to voluntary-payment rule. Id. at 594–95. This

Court explained that although the bank presented evidence that a tax lien would

jeopardize the bank’s standing with governmental authorities that regulate it,

it could have avoided the penalties by administratively protesting the

tax. Id . at 595. First

Bank of Deer Park is instructive in that it explains that duress can be an

affirmative defense used by a taxpayer to defend against the voluntary-payment

rule when that rule is asserted by a taxing entity, but it also clarifies that

duress does not occur when the harm coming to a taxpayer could have been

avoided by an administrative protest to a tax assessment. Id . at 594–95. We,

therefore, disagree with the Taxpayers’ characterization of First Bank of Deer Park as not requiring

exhaustion of their administrative remedies.

The Taxpayers cite also Nivens

v. City of League City and Fort Bend

Independent School District v. Schindler , No. A14-90-00385-CV,

1991 WL 94414 (Tex. App.—Houston [14th Dist.] June 6, 1991, writ denied)

(not designated for publication), to support their entitlement to a refund of

taxes paid under duress. In Nivens , this Court determined that

governmental immunity does not apply when a taxpayer seeks a refund of

illegally collected taxes and alleges that the payments were made as a result

of duress. Nivens , 245 S.W.3d at 474 . Nivens sued the city to recover taxes they

had paid in excess of the amount the city was legally permitted to collect

under the water code, and the city responded that the action was barred by the

principle of governmental immunity. Id . at 473. Unlike Nivens ,

where governmental immunity was the basis of the plea to the jurisdiction,

here, the plea to the jurisdiction is premised on failure to exhaust

administrative remedies. Cf. id . at

474. Nivens ,

therefore, is inapplicable.

Schindler is also

inapplicable. Schindler sued for the

refund of taxes, and on appeal, Ford Bend Independent School District relied on

the voluntary-payment rule to defend against the suit. See

Schindler , 1991 WL 94414 , at *1. This Court noted that an exception to the

voluntary-payment rule exists when the payment is made under duress. Id . at *2. Schindler

does not mention jurisdiction at all, nor does it mention exhaustion of

remedies. Id . at *1–3.

Two other cases cited by the Taxpayers for their claim

of duress also do not support their assertion that they have a right,

regardless of exhaustion of administrative procedures, to sue for a refund of

taxes paid under duress. Both Bolton , 185

S.W.3d at 877 , and Austin National Bank

of Austin v. Sheppard , 71 S.W.2d 242, 246 (Tex. 1934), discuss duress as a

defense to the taxing authority’s assertion of the voluntary-payment rule. But the voluntary-payment rule has been

rendered largely unavailable due to the provisions in the Texas Tax Code, as

explained by the Supreme Court of Texas:

The voluntary-payment rule has also been

applied, albeit infrequently, to prohibit recovery of illegal taxes paid to the

sovereign. This Court has stated: “A person who voluntarily pays an illegal tax

has no claim for its repayment” unless that person paid under duress. . . . Although the

voluntary-payment rule has been applied, at times, in both the private and

public contexts, other legal and statutory remedies have evolved over time to

supplant the rule’s application in many of these contexts. Like other equitable claims and defenses, an

adequate legal remedy may render equitable claims of unjust enrichment and

equitable defenses of voluntary-payment unavailable. . . . For example, the Texas Tax Code now provides

that a person may recover a voluntary payment of certain illegal taxes, as long

as the person paid under protest.

BMG Direct Mktg., Inc. v.

Peake , 178

S.W.3d 763 , 769–71 (Tex. 2005). Similarly, the

Texas Supreme Court explains:

In many areas, the common-law requirements

for voluntary payments and duress have been supplanted by statute. In the years after [ Nat’l Biscuit Co. (Nabisco) v. State , 135 S.W.2d 687 (Tex. 1940),]

and Austin Nat’l Bank , the

Legislature systematically adopted refund mechanisms and protest requirements

in various statutes that obviated the need to show business compulsion in many

cases. . . . For example, the

Legislature adopted mechanisms for the refund of a “tax or fee imposed by

[Title 2 of the Tax Code] or collected by the comptroller under any law,

including a local tax collected by the

comptroller.” . . . .

The Legislature also enacted a mechanism to protest the payment of ad

valorem taxes in order to recover an overpayment. . . . These statutes apply to most of the taxes and

fees expressly authorized by statute.

They apply to state and local sales taxes, property taxes, corporate

franchise taxes, professional occupation taxes, and much more.

Bolton , 185

S.W.3d at 880 .

We hold that because the Taxpayers could

have administratively challenged the disputed amount, they cannot claim duress

based on the consequences resulting from their failure to make that challenge,

nor may they pursue as plaintiffs an affirmative claim for refund of taxes paid

under duress. See First Bank of Deer Park , 804 S.W.2d at 593 .

Due Process

Collection of a tax constitutes a deprivation of

property; therefore, a taxing unit must afford a property owner due process of

law. McKesson Corp. v. Div. of Alcoholic

Beverages & Tobacco, Dept. of Bus. Regulation of Florida ,

496 U.S. 18 , 36–37, 110 S. Ct. 2238 , 2250–51 (1990). Due process, at a minimum, requires notice

and a fair opportunity to be heard prior to a deprivation of a protected

property interest. Mathews v. Eldridge , 424 U.S. 319, 333,

348 , 96 S. Ct. 893, 902, 909 (1976).

The due process clause grants the aggrieved party the opportunity to

present his case and have its merits fairly judged. Bank of Am. Nat’l Trust & Sav. Assoc. v. Dallas Cent. Appraisal

Dist. , 765 S.W.2d 451, 454 (Tex. App.—Dallas

1988, writ denied).

Some form of hearing is required before an owner can be finally deprived

of a protected property interest. Appraisal Review Bd. of El Paso Cnty. Cent. Appraisal Dist. v. Fisher , 88 S.W.3d 807, 813

(Tex. App.—El Paso 2002, pet. denied) (holding that “[s]ince it is undisputed

that Mr. Fisher neither received notice nor had an opportunity to contest the

appraisal, he was denied due process, and any taxes and penalties assessed from

the appraisal is void.”); Bank of Am. ,

765 S.W.2d at 454 (remanding case to Dallas County Appraisal Review Board for

hearing on bank’s protest based on finding that Bank had been deprived of due

process based on application of Tax Code).

As we have noted above, the Taxpayers had a right to and could have

challenged their non-ownership of the property under the administrative

provisions of the Tax Code. S ee

Tex. Tax Code Ann. § 41.41(a )( 7).

The Taxpayers, however, suggest that they did not

receive adequate notice about the assessment.

They assert that “there is nothing in the record that the taxpayers were

furnished with appraisal notices” prior to being sued by the Taxing Units. The Taxpayers claim the record fails to show

they “were ever billed for the taxes on the properties not in dispute.” They suggest that this record defect “raises

issues under the federal and state constitutions,” although they do not explain

which issues are raised.

In the Taxpayers’ original answer (when they were still the

defendants), they asserted as an affirmative defense: “Notice of Delinquent

Taxes: Defendant further alleges that neither the Harris County Appraisal

District nor any taxing unit ever timely and properly notified the property

owners of delinquent taxes as required under §33.04(d) of the Texas Property

Tax Code.” After the realignment of the

parties, Taxpayers acting as plaintiffs responded to the Tax Authorizes second

amended plea to the jurisdiction. The Taxpayers never complained about a

lack of notice. Moreover, an attached affidavit from one of the

Taxpayers, James R. Hunt, explains that they met with an official from the

Harris County Appraisal District (HCAD) to discuss their non-ownership.

The Taxing Units suit to collect taxes was filed about one year later in

December 2004. The taxes were paid in October 2005.

In

general, a tax protest must be filed within 30 days of delivery of notice. S ee id. § 41.44(a). In 1985,

the Legislature added failure to give notice as a ground for a tax protest in

the Tax Code. See id. § 41.411(c)

(West 2008). [6] Although the record does not show when notice

of taxes due was first delivered to the Taxpayers, it is clear that by late

2003 the Taxpayers were discussing the matter with HCAD and had actual notice

about the assessment. The Taxpayers’

failure to bring an administrative tax protest to challenge failure to give

notice bars their ability to assert this ground in district court. [7] S ee id. §§

41.411(c), 41.44(c), 42.09(a). We

disagree with the implication by the Taxpayers that they have been deprived of

due process due to lack of notice because the record shows they received actual

notice at least one year before trial and they failed to administratively

protest the failure to give notice through the administrative procedures in the

Tax Code. See City of Houston v. Parkinson , 419

S.W.2d 900, 904 (Tex. Civ. App.—Houston 1967, writ ref’d n.r.e.) ( due process is satisfied if complaining party had actual

notice).

Conclusion

We hold the trial court erred by denying the Taxing

Units’ plea to the jurisdiction. See Tex. Tax Code Ann. § 42.09(a)(2); Cameron Appraisal

Dist. , 194 S.W.3d at 502 ; see also First Bank of Deer Park , 804

S.W.2d at 592 (stating that taxpayer did not preserve right to challenge

ownership of stock because protest of ownership under Tax Code section 41.41

was not timely filed). We sustain the Taxing Units’ sole issue. Top o We reverse the order of the trial court and

render judgment granting the plea to the jurisdiction.

Elsa

Alcala

Justice

Panel consists of

Justices Jennings, Alcala, and Massengale.

[1] See Tex.

Civ. Prac. & Rem. Code Ann. § 51.014(a )( 8)

(West 2008) (authorizing interlocutory appeal of order denying governmental

entity’s plea to the jurisdiction).

[2] The Taxpayers protested to the Harris County

Appraisal District (HCAD) the determination that they were the owners of the

.96 acre, and HCAD denied the protest.

The Taxpayers claim they timely filed suit against HCAD. Granting a plea to the jurisdiction, the

district court dismissed the case against HCAD, and that order has not been

appealed. The Taxpayers also included

claims for equitable subrogation against the parties who they believed were the

true owners of the land who should have paid the taxes. This appeal does not concern the claims for

equitable subrogation.

[3] We

note that the plea to the jurisdiction claimed by the Taxing Units here is

based on the exhaustion of administrative procedures in the Tax Code and not

based on sovereign immunity as a bar to the suit. Although the Taxpayers cite many cases

discussing sovereign immunity, those decisions are inapplicable based on this

plea premised on exhaustion of administrative procedures. See,

e.g. , Saturn Capital Corp. v. City of

Houston , 246 S.W.3d 242, 245 (Tex. App.—Houston [14th Dist.] 2007, pet.

denied) (sovereign immunity does not prevent one who paid illegal taxes under

duress from filing suit seeking repayment).

Furthermore, the issue here is not the Taxing Unit’s decision on the

merits. The Taxpayer’s

citation to Bashara v. Saratoga Indep. Sch. Dist. , 163 S.W.2d 631, 633 (Tex.

1942), is inapplicable because Bashara

concerns the merits of the underlying dispute.

[4] The

taxpayers also cite three cases not from this Court: Skylane

West Ltd. v. Harris Cnty. Appraisal Dist. , No. 14-08-00507-CV, 2009 WL 4913256 (Tex.

App.—Houston [14th Dist.] 2009, no pet.) (mem.

op.), Dallas Cent. Appraisal Dist. v. 1420 Viceroy Ltd. ,

180 S.W.3d 267, 270 (Tex. App.—Dallas 2005, no pet.), and Hood v. Hays Cnty. ,

836 S.W.2d 327, 329 (Tex. App.—Austin 1992, no pet.). However, these cases are distinguishable

because they do not address the non-ownership ground of protest. See

Skylane , 2009 WL 4913256 , at *1

(protest of valuation of property); 1420

Viceroy , 180 S.W.3d at 270 (holding that because ground of protest relied

upon by taxpayer, lack of notice from a taxing unit, was not contained in

chapter 41 of Tax Code, section 42.09 did not bar suit based on non-exhaustion

of remedies); Hood , 836 S.W.2d at 329

(protest of valuation of property).

[5] In

Robstown Independent School District v.

Anderson , the Texas Supreme Court held that a property owner who,

“[p]ursuant to section 41.41 . . . is

entitled to protest . . . a determination that he is the owner of

property” but “fails to comply with the administrative procedure of protest

. . . is precluded from raising non-ownership in defense to a suit to

enforce collection of delinquent taxes.”

706 S.W.2d 952, 953 (1986) (citing Tex.

Tax Code Ann . § 42.09

(West 1982)). The

Legislature amended section 42.09 to specifically overturn the Robstown holding. Gen. Elec. Capital Corp. v. City of Corpus Christi , 850 S.W.2d 596, 602 (Tex. App.—Corpus Christi 1993, writ

denied). In doing so, the

Legislature provided that a person, regardless of exhaustion of the

administrative protest procedure, may assert a claim of non-ownership as an

affirmative defense against a suit to enforce personal liability for a tax. T ex . Tax

Code Ann. § 42.09(b )( 1) (West 2008).

[6] Starting

on Dec. 31, 2007, if the ground of the tax protest is failure to give notice,

the tax protest must be filed prior to the date taxes would become delinquent,

which in that situation would be 125 days after written notice of taxes due is

first delivered. See Tex. Tax Code Ann. § 41.411(c) (West

2008).

[7] No

notice was timely filed by the Taxpayers within 30, or even 125, days of their

first notice.