Opinion
No. 01-10-00043-CV
Opinion issued July 22, 2010.
On Appeal from the 151st District Court, Harris County, Texas, Trial Court Case No. 2004-71420.
Panel consists of Justices JENNINGS, ALCALA, and MASSENGALE.
OPINION
This appeal concerns the district court's jurisdiction over a claim by taxpayers seeking a refund of taxes without first resolving the claim administratively. Appellants, 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"), bring this interlocutory appeal of the trial court's order denying their plea to the jurisdiction. The trial court determined it had jurisdiction over the counterclaims for refund of taxes filed by 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"). 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 counterclaims 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.
See TEX. CIV. PRAC. REM. CODE ANN. § 51.014(a)(8) (Vernon 2008) (authorizing interlocutory appeal of order denying governmental entity's plea to the jurisdiction).
Background
The Taxing Units filed suit against the Taxpayers in December 2004 for unpaid taxes on eight tax accounts from 1984 to 2003. The lawsuit sought taxes for 9.38 acres the Taxpayers owned and for four other tracts that they did not own. While the suit was pending, the Taxpayers paid the taxes to stop further penalties and interest from accruing and to avoid foreclosure of the 9.38 acres. Shortly after paying the taxes, the Taxpayers filed a counterclaim for a refund of the taxes, penalties, and interest they had paid for the property they did not own. A few days later, the Taxing Units nonsuited their claims for delinquent taxes because they had been paid by the Taxpayers. The Taxing Units then filed a plea to the jurisdiction concerning the Taxpayers' counterclaims on the grounds that they had failed to exhaust their administrative remedies as required by the Texas Tax Code. The trial court denied the Taxing Units' plea to the jurisdiction, and the Taxing Units filed this interlocutory appeal.
Exhaustion of Administrative Remedies Under the Texas Tax Code
In a single issue, the Taxing Units contend the trial court erred by denying their plea to the jurisdiction because the Taxpayers failed to exhaust their administrative remedies, depriving the trial court of subject matter jurisdiction.
A. Standard of Review
When, as here, the facts are undisputed and the plea to the jurisdiction presents purely a legal question, we review a trial court's ruling on a plea to the jurisdiction under a de novo standard of review. Tex. Dep't of Parks Wildlife v. Miranda, 133 S.W.3d 217, 226-27 (Tex. 2004); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). 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. We begin with the "plain and common meaning of the statute's words" to ascertain the Legislature's intent. Id. (citing Tex. Dep't of Transp. v. City of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004)).
B. Texas Tax Code
The Texas Tax Code provides "detailed administrative procedures for those who would contest their property taxes." Cameron Appraisal Dist. v. Rourk, 194 S.W.3d 501, 502 (Tex. 2006) (citing TEX. TAX CODE ANN. §§ 41.01-.71 (Vernon 2008 Supp. 2009)). "Administrative decisions are final if not appealed to the district court within 45 days." Id. (citing TEX. TAX CODE ANN. § 42.21(a) (Vernon Supp. 2009)). The 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.
To complain about ownership or any other matter adversely affecting the property or the taxpayer, the taxpayer is required to timely file a written protest with the appraisal review board. TEX. TAX CODE ANN. § 41.44(a) (Vernon 2008). Under the "taxpayer protest" section of the Texas Tax Code, the matter of whether a party is the true owner of the property is a matter that can be challenged in a protest. TEX. TAX CODE ANN. § 41.41(a)(7) (Vernon 2008). ("A property owner is entitled to protest before the appraisal review board the following actions:. . . . (7) determination that the property owner is the owner of the property.").
"The administrative procedures are `exclusive' and most defenses are barred if not raised therein." Cameron Appraisal Dist., 194 S.W.3d at 502 (citing TEX. TAX CODE ANN. § 42.09(a) (Vernon 2008)). The general rule stated in section 42.09 is, as follows:
(a) . . . 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.
TEX. TAX CODE ANN. § 42.09(a). The Tax Code, however, does allow an exception for certain matters that may be raised in the district court as an affirmative defense even though they were not resolved administratively. See TEX. TAX CODE ANN. § 42.09(a). This exception, in section 42.09, states,
(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.
TEX. TAX CODE ANN. § 42.09(b) (Vernon 2008). "Suit" as used in section 42.09 means "a counterclaim, cross-claim, or other claim filed in the course of a lawsuit." TEX. TAX CODE ANN. § 42.09(c) (Vernon 2008).
C. Analysis
The Taxpayers assert that because they are not "property owners," the Tax Code's requirement of exhaustion of remedies is inapplicable to them. The Taxpayers correctly note that section 42.09(a)(2) expressly uses the term "property owner" when requiring exhaustion of administrative remedies. TEX. TAX CODE ANN. § 42.09(a)(2). It states that a "property owner may not" assert "a claim for relief in a suit by the property owner . . . to obtain a refund of taxes paid" without first exhausting administrative remedies. TEX. TAX CODE ANN. § 42.09(a)(2).
The term "property owner" is not specifically defined in the Tax Code. The Tax Code, however, specifically requires a taxpayer to administratively protest the matter of whether he is the owner of the property. See TEX. TAX CODE ANN. § 41.41(a)(7) (Vernon 2008); City of Pharr v. Boarder to Boarder Trucking, 76 S.W.3d 803, 805-06 (Tex. App.-Corpus Christi 2002, pet. denied); see also First Bank of Deer Park v. Harris County, 804 S.W.2d 588, 591 (Tex. App.-Houston [1st] 1991, no writ). Under section 42.09(a), the failure to exhaust that administrative remedy deprives the district court of jurisdiction, unless the exception in section 42.09(b) applies. TEX. TAX CODE ANN. § 42.09; see First Bank of Deer Park, 804 S.W.2d at 591.
But the exception in section 42.09 (b) is inapplicable. That section applies when the taxpayer is asserting an "affirmative defense"; that is not the situation here because the Taxing Units have dropped their lawsuit against the Taxpayers. In a suit by a taxing unit, which is attempting "to enforce personal liability for the tax," section 42.09(b) allows a person who has not exhausted his administrative remedies to respond by asserting an "affirmative defense" that he "did not own the property on which the tax was imposed." See TEX. TAX CODE ANN. § 42.09(b).
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 to that lawsuit. See TEX. TAX CODE ANN. § 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 dropped the lawsuit against the Taxpayers, the trial court would have jurisdiction over this case. See TEX. TAX CODE ANN. § 42.09(b)(1); Cameron Appraisal Dist., 194 S.W.3d at 502 n. 2. But when the Taxing Units dropped the lawsuit, there was no longer any case for the Taxpayers to defend against. We, therefore, disagree with the Taxpayers that their "affirmative defense" against the Taxing Units can continue after the Taxing Units nonsuited their case. The reason for this is that the exception in the Tax Code that allows for a taxpayer to challenge ownership without exhausting administrative remedies is limited to an "affirmative defense" to a lawsuit filed by the Taxing Units.
An affirmative defense is different than a claim for relief. "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." Hong Kong Development, Inc. v. Nguyen, 229 S.W.3d 415, 457 (Tex. App.-Houston [1st] 2007, no pet.) (quoting Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 268 (Tex. App.-Houston [1st] 2005, pet. denied)). 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, 35 (Tex. 2008) (quoting Univ. of Tex. Med. Branch at Galveston v. Est. of Blackmon ex rel. Shultz, 195 S.W.3d 98, 101 (Tex. 2006)). When the Taxing Units nonsuited the claim for delinquent taxes, the Taxpayers' affirmative defense became moot, and the exception in section 42.09(b) became inapplicable under the express terms of the Tax Code. See TEX. TAX CODE ANN. § 42.09(b)(1).
We recognize that an "affirmative defense" that is proper under the Tax Code can, in some circumstances, be properly re-characterized as a cause of action for affirmative relief on those same grounds. See First Bank of Deer Park, 804 S.W.2d at 593 (stating, in tax refund case, that defensive theory may be pleaded as either affirmative defense or as separate cause of action, if party is seeking affirmative relief). But, here, the problem is that the entire basis for the affirmative defense no longer exists, and, therefore, that defense cannot be properly re-characterized as a claim for affirmative relief. See id. Because the Taxpayers are not asserting an "affirmative defense," section 42.09(b) is inapplicable. See 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. See TEX. TAX CODE ANN. § 42.09(a)(2).
The Taxpayers refer to First Bank of Deer Park to suggest they can challenge their payment of the tax as caused by duress. First Bank of Deer Park, 804 S.W.2d at 595. Specifically, the Taxpayers contend that First Bank of Deer Park stands for the proposition that duress "would make exhaustion of administrative remedies unnecessary." First Bank of Deer Park does not discuss the exhaustion of administrative remedies. Rather, we held that duress was an affirmative defense to the taxing unit's pleading of the "voluntary payment rule." Id. Under the "voluntary payment rule," the party making a voluntary payment of taxes may not file a suit for a refund of those taxes. Id. at 593. The voluntary payment rule is a different matter than ownership of the property, which is the issue here. Furthermore, even if duress applied to the issue of non-ownership of the property, it would apply as a defense which is inapplicable here because the Taxing Units' dropped their lawsuit.
The Taxpayers rely upon City of Pharr v. Boarder to Boarder Trucking to assert that the trial court was "authorized to dispose of the issues involved in [the non-ownership] defense." 76 S.W.3d at 806. In City of Pharr, the court did state, "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. Here, the problem is not whether there are issues related to a defense of non-ownership, but rather that there is no defense being asserted because the lawsuit by the Taxing Units has been dropped.
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).
Conclusion
We sustain the Taxing Units' sole issue. We reverse the order of the trial court and render an order dismissing the suit against the Taxing Units for want of jurisdiction.