Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc.

IN THE
TENTH COURT OF APPEALS

No. 10-11-00438-CV

BRAZOS COUNTY APPRAISAL DISTRICT,
Appellant
v.

BRYAN-COLLEGE STATION REGIONAL
ASSOCIATION OF REALTORS, INC.,
Appellee

From the 85th District Court
Brazos County, Texas
Trial Court No. 11-000629-CV-85

OPINION

The Bryan-College Station Regional Association of Realtors sought to take

advantage of a newly enacted tax statute which, if the Association met all of its

requirements, would permit the exemption of Association property from taxation. The

Brazos County Appraisal District denied the exemption because it believed the statute

to be unconstitutional. After the Association’s protest was also denied, it filed suit in

district court. The Appraisal District sought a summary judgment on the grounds that
the statute was unconstitutional. Its motion was denied. The Association then sought

summary judgment on the grounds that it met the requirements of the statute.

Summary judgment in favor of the Association was granted. We affirm the trial court’s

judgment as modified.1

PUBLIC CHARITABLE FUNCTIONS

In its first two issues on appeal, the Appraisal District contends that the trial

court erred in granting summary judgment in favor of the Association because section

11.231 of the Texas Tax Code is unconstitutional, and if it is constitutional, the

Association produced no summary judgment evidence to prove that it qualified for an

exemption under any provision of Article VIII, Section 2 of the Texas Constitution.

Section 2(a) of Article VIII authorizes the Texas Legislature to exempt certain

public property from taxation. TEX. CONST. art. VIII, § 2(a). Any law exempting

property not mentioned in this particular section is “null and void.” Id. The property at

issue here is of “institutions engaged primarily in public charitable functions, which may

conduct auxiliary activities to support those charitable functions; <” Id. (emphasis

added). In 1999, section 2(a) was amended to broaden the base of institutions that could

benefit from a tax exemption. See generally House Research Organization, “Proposed

1 The constitutionality of an exemption for the Association’s property appears to be an issue of first
impression. According to the Amicus Curiae, Texas Association of Realtors, appraisal districts in El Paso,
Taylor, Tarrant, Collin, Hood, Denton, Lubbock, Parker, Smith, Cameron, Burnet, Dallas, Erath,
McLennan, and Williamson Counties have granted the exemption to realtor associations while appraisal
districts in Brazos, Gillespie, Nueces, Bell, Hidalgo, Kerr, and Bexar Counties have denied the exemption
to realtor associations

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 2
Constitutional Amendments: November 1999 Election,” August 9, 1999 (retrieved from

http://ballotpedia.org/wiki/index.php/Texas_Proposition_4_(1999) on March 5, 2013).

With that amendment, the phrase “engaged primarily in public charitable functions”

replaced the prior phrase “purely public charity.” Id. “Public charitable functions” is

not defined by the Constitution.

The Legislature has sought to implement article VIII, § 2(a) by proposing and

adopting section 11.231 of the Texas Tax Code which became effective in January of

2010. TEX. TAX CODE ANN. § 11.231 (West Supp. 2012). This particular section exempts

from taxation property of nonprofit community business organizations which provide

economic development services to local communities. Id. To qualify for an exemption

under this section, the organization must be a “nonprofit community business

organization” which is “engaged primarily in performing one or more of the following

functions in the local community: (1) promoting the common economic interests of

commercial enterprises; (2) improving the business conditions of one or more types of

business; or (3) otherwise providing services to aid in economic development.” Id. (b),

(d).

The Appraisal District argues that section 11.231 is unconstitutional because a

nonprofit community business organization is not an institution that is engaged

primarily in public charitable functions. Specifically, the Appraisal District argues that

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 3
the functions defined in section 11.231(d) are not charitable functions. We disagree with

the Appraisal District.

In Boyd v. Frost National Bank, the Texas Supreme Court addressed the validity of

a trust created for "charitable purposes." Boyd v. Frost National Bank, 196 SW.2d 497, 499

(Tex. 1946). Relatives challenged the trust's reference to "charitable purposes" as being

too vague and indefinite for the trustee to enforce. Id. The Supreme Court rejected the

relatives' challenge. According to the Supreme Court, "charitable purpose" has a fixed

and definite meaning in law such that a determination may be made on whether a

given purpose is charitable. Id. at 501. The Supreme Court upheld the will's use of the

phrase "charitable purposes," and identified the following functions as "charitable

purposes:"

1) the relief of poverty;

2) the advancement of education;

3) the advancement of religion;

4) the promotion of health;

5) governmental or municipal purposes; and

6) other purposes the accomplishment of which is beneficial to the community.

Id. at 502; (citing RESTATEMENT (SECOND) OF TRUSTS §368 (1959)) (emphasis

added).

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 4
 The Appraisal District urges us to follow cases applying a former version of

Article VIII, section 2(a) when determining whether the functions listed in section

11.231(d) of the Tax Code are "charitable functions." See City of Houston v. Scottish Rite

Benevolence Ass'n, 111 Tex. 191, 230 S.W. 978, 981 (1921) (an institution was one of

"purely public charity" where: first, it made no gain or profit; second, it accomplished

ends wholly benevolent; and, third, it benefited persons, indefinite in numbers and in

personalities, by preventing them, through absolute gratuity, from becoming burdens to

society and to the State), and River Oaks Garden Club v. Houston, 370 S.W.2d 851, 854

(Tex. 1963) (same). We have rejected this type of argument before. In McLennan County

Appraisal District v. American Housing Foundation, the appraisal district urged this Court

to apply cases construing former Article VIII § 2(a), which exempted "institutions of

purely public charity." McLennan County Appraisal District v. American Housing

Foundation, 343 S.W.3d 509, 511 (Tex. App.—Waco 2011, pet. denied). We rejected the

"purely public charity" test and explained that the word 'purely' no longer appeared in

the constitutional definition of qualifying institutions. Id.; see TEX. CONST. ART. VIII, §

2(a). Thus, we held, the issue now is whether the owner of the property is “engaged

primarily in public charitable functions.” Id.

We find the definition of a charitable purpose found in Boyd to be more

persuasive in determining whether the functions set out in section 11.231(d) are, “public

charitable functions.” In our view, a charitable purpose is, at least, no less broad in

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 5
scope than a charitable function. In other words, a charitable purpose is a subset of

charitable function. This view corresponds with the general purpose of the 1999

amendment of Section 2(a). Thus, we hold that the phrase “public charitable function”

includes, at a minimum, everything that the Supreme Court has considered in Boyd to

be a “charitable purpose.” Further, promoting a local community’s common economic

interests of commercial enterprises; improving the business conditions of one or more

types of business of a local community; or otherwise providing services to aid in

economic development for a local community are at least included within the Boyd

charitable purpose of “other purposes the accomplishment of which is beneficial to the

community.” Boyd, 196 SW.2d at 502. And because we find “charitable purpose” is a

subset of “charitable function,” section 11.231 of the Texas Tax Code does not violate

Article VIII, Section 2(a) of the Texas Constitution.

The Appraisal District’s first issue is overruled.

The Appraisal District also argues that the Association did not prove it met the

“charitable purpose” requirement of Article VIII, Section 2(a) of the Texas Constitution.

See McLennan County Appraisal Dist. v. Am. Hous. Found., 343 S.W.3d 509, 511 (Tex.

App.—Waco 2011, pet. denied) (“Before an organization can be considered for

qualification for tax exempt status under . . . the Texas Tax Code, that organization must

first meet the applicable constitutional requirements which entitle those organizations

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 6
to seek the exemption,” quoting North Alamo Water Supply Corp. v. Willacy County

Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991)).

In support of its motion for summary judgment, the Association provided

evidence by affidavit that it was a nonprofit community business organization engaged

primarily in performing one or more of the following functions in the local community:

(1) promoting the common economic interests of commercial enterprises; (2) improving

the business conditions of one or more types of business; or (3) otherwise providing

services to aid in economic development. The Appraisal District neither challenges this

evidence on appeal nor at the trial court. Thus, the Association proved its qualifications

for the exemption under the statute. Because we have held that those qualifications are

included within the definition of charitable purposes which is a subset of charitable

functions, the Association has also proved it met the requirements of Article VIII,

Section 2(a) of the Texas Constitution.

The Appraisal District’s second issue is overruled.

ATTORNEY’S FEES

Lastly, the Appraisal District contends that the trial court erred in awarding

attorney’s fees to the Association. In Texas, attorney's fees are recoverable from an

opposing party only when authorized by statute or by contract between the parties.

Travelers Indem. Co. of Conn. v. Mayfield, 923 S.W.2d 590, 593 (Tex. 1996); Midland Cent.

Appraisal Dist. v. BP Am. Prod. Co., 282 S.W.3d 215, 225 (Tex. App.—Eastland 2009, pet.

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 7
denied). The Association asserts that attorney's fees were authorized by section 42.29 of

the Tax Code. The trial court awarded attorney’s fees in the amount of $8,000 to the

Association pursuant to section 42.29.

Section 42.29 provides that a "property owner who prevails in an appeal to the

court under Section 42.25 or 42.26 may be awarded reasonable attorney's fees." TEX.

TAX CODE ANN. § 42.29 (West Supp. 2012). Section 42.25 provides a remedy for an

excessive appraisal, entitling the owner to a reduction of the appraised value on the

appraisal roll. Id. § 42.25 (West 2008). Section 42.26 provides a remedy for the unequal

appraisal of property in relation to the appraised values of other properties. Id. § 42.26

(West 2008). Sections 42.25 and 42.26 do not apply to this case because the Association

did not challenge the appraised value of its property; it challenged the Appraisal

District’s denial of a tax exemption. Consequently, since the Association did not prevail

on a claim "under Section 42.25 or 42.26," attorney's fees were not authorized by section

42.29. See Midland Cent. Appraisal Dist., 282 S.W.3d at 225.

If the legislature had intended for attorney's fees to be recoverable in a case of

this type, it could have included in its section 42.29 authorization of attorney's fees an

appeal challenging the denial of an exemption. Id. The legislature specifically

authorized such protests in section 41.41(a). TEX. TAX CODE ANN. § 41.41(a) (West 2008)

(listing nine distinct actions that may be protested by taxpayer, including: excessive

value, unequal appraisal, denial of an exemption, ownership, and inclusion on tax roll).

Brazos County Appraisal District v. Bryan-College Station Regional Association of Realtors, Inc. Page 8
The legislature, however, did not authorize attorney's fees for all such protests. Section

42.29 authorizes attorney's fees for only two distinct types of protest: excessive value

and unequal appraisal. Dallas Cent. Appraisal Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77-79

(Tex. 1992); Midland Cent. Appraisal Dist., 282 S.W.3d at 225. The Association’s protest

cannot be categorized as falling within either of those two. See id.

Accordingly, the Appraisal District’s third issue is sustained.

CONCLUSION

Having sustained the Appraisal District’s third issue, we modify the trial court’s

final summary judgment signed on August 26, 2011 to delete its order awarding

attorney’s fees to the Association.

Having overruled the remaining issues, we affirm the judgment of the trial court

as modified.

TOM GRAY
Chief Justice

Before Chief Justice Gray,
Justice Davis, and
Justice Scoggins
Affirmed as modified
Opinion delivered and filed April 18, 2013
[CV06]

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