ACCEPTED
06-15-00007-CV
SIXTH COURT OF APPEALS
TEXARKANA, TEXAS
8/19/2015 9:41:39 AM
DEBBIE AUTREY
CLERK
No. 06-15-00007-CV
In the Court of Appeals for the
FILED IN
Sixth Judicial District of Texas 6th COURT OF APPEALS
Texarkana, Texas TEXARKANA, TEXAS
____________________________________________________________________
8/19/2015 9:41:39 AM
DEBBIE AUTREY
Clerk
HYDROGEO, LLC AND FIRST BANK & TRUST EAST TEXAS
Appellants
and
DEBERRY 3 OPERATING COMPANY, LLC
Appellants
vs.
QUITMAN INDEPENDENT SCHOOL DISTRICT, WOOD COUNTY, UPPER
SABINE WATER DISPOSAL DISTRICT, AND
WOOD COUNTY HOSPITAL DISTRICT,
Appellees
___________________________________
On Appeal from the 402nd Judicial District Court
Wood County, Texas
_________________________________________________________________
APPELLEE’S BRIEF FOR QUITMAN INDEPENDENT SCHOOL DISTRICT
____________________________________________________________________
David Hudson
Texas Bar No. 00786445
Tab Beall
Texas Bar No. 01954000
Perdue, Brandon, Fielder, Collins & Mott, LLP
PO Box 2007
Tyler, Texas 75710-2007
(903) 597-7664
Fax: (903) 597-6298
dhudson@pbfcm.com
tbeall@pbfcm.com
ORAL ARGUMENT NOT REQUESTED
Attorneys for Quitman Independent School District
TABLE OF CONTENTS
Page
TABLE OF CONTENTS i
CERTIFICATE OF INTEREST PARTIES ii
INDEX OF AUTHORITIES iii
STATEMENT OF THE CASE 1
STATEMENT REGARDING ORAL ARGUMENT 1
SUMMARY OF ARGUMENT 1
Issue No. 1 2
Issue No. 2 5
CONCLUSION 12
PRAYER 12
CERTIFICATE OF COMPLIANCE 13
CERTIFICATE OF SERVICE 13
i
Certificate of Interested Parties
The listed persons having an interest in the outcome of this case as identified
by Appellant in the Certificate of Interested Parties is not contested. Appellee,
Quitman Independent School District would add the following name as co-counsel
for Quitman ISD.
Appellee Counsel for Quitman Independent
Quitman Independent School District
School District
David Hudson, lead counsel
dhudson@pbfcm.com
Tab Beall, co-counsel
tbeall@pbfcm.com
Perdue, Brandon, Fielder, Collins & Mott, LLP
PO Box 2007
305 S. Broadway, Suite 200
Tyler, Texas 75710-2007
903-597-7664
fax: 903-597-6298
ii
INDEX OF AUTHORIES
Page
CASES
Aluminum Co. of Am. vs. Bullock 3
870 SW2d 2 (Tex. 1994)
Bocquet vs. Herring 3
972 SW2d 19 (Tex. 1998)
City of Bellaire vs. Sewell 4
426 SW3d 116 (Tex.App. – Houston [1st] 2012, no pet.)
Davis vs. City of Austin 7
632 SW2d 331 (Sup. 1982)
Harris County Appraisal District vs. Texas Gas Transmission Corp. 10
105 SW3d 88 (App.1 Dist. 2003) review denied
Maximum Medical Imp., Inc. vs. County of Dallas 7
272 SW2d 832 (App. 5 Dist. 2008)
Oscar Luis Lopez vs. LaMadeleine of Texas, Inc. 3, 4
200 SW3d 854 (Tex.App – Dallas, no pet.)
Parker Plaza West, Ltd. vs. Boniuk Invs., Ltd. 3
153 SW3d 729 (Tex.App – Dallas 2005, no pet.)
Ramos vs. Champlin Petroleum Co. 5
750 SW2d 873 (Tex.App. – Corpus Christi 1998, pet. denied)
Wal-Mart Stores, Inc. vs. Tinsley 4, 5
998 SW2d 911 (Tex.App. – Texarkana 1999, no pet.)
iii
STATUTES
Vernon’s Annotated Rules of Civil Procedure
Rule 193.6(a)(2) 4
Texas Tax Code
Section 11.01(a) 5
Section 11.01(b) 5
Section 21.01 5
Section 21.02 6
Section 21.02(a) 6
Section 21.021 6
Section 21.04 6
Section 21.05 6
Section 21.055 6
Section 22.01 10
Section 25.01 7
Section 25.12 7
Section 25.19 7
Section 25.19(d) 8
Section 25.21 11
iv
Section 26.01 7
Section 33.01 7
Section 31.01(g) 8
Section 33.07 7
Section 33.42 (a, b) 4
Section 33.47(a) 3
Section 41.41 7, 8
Section 41.41(a)(1) 8
Section 41.41(a)(3) 8
Section 41.41(a)(7) 8
Section 41.41(a)(9) 9
Section 41.411 8
Section 42.09(a) 9
Section 42.21 9
v
STATEMENT OF THE CASE
Appellee, Quitman Independent School District, adopts the Statement of the
Case set forth by Appellee Wood County, etal.
STATEMENT REGARDING ORAL ARGUMENT
Appellee, Quitman Independent School District, does not request Oral
Argument, but agrees the customary time limits should apply if the Court grants oral
argument.
SUMMARY OF ARGUMENT
Quitman Independent School District1 (hereinafter QISD) seeks
foreclosure of its tax lien following entry of Judgment (in the absence of payment of
the taxes). This Court should affirm the trial court’s Judgment because:
The trial Court properly admitted Exhibit “A”2 into evidence. This was a
bench trial, and the trial judge did not commit error.
1
At trial, Quitman Independent School District was represented by the same Counsel for Wood
County, etal. (Mr. Jim Lambeth, with the Linebarger, Goggan firm). On appeal, Quitman ISD is
represented by Mr. David Hudson, with the Perdue, Brandon firm. References to “Taxing
Entities”, as utilized by Appellant in its brief, shall include all appellee taxing jurisdictions.
References to “QISD” shall be limited to Quitman Independent School District. References to
Hydrogeo shall include both Hydrogeo, LLC and First Bank & Trust East Texas as Appellants.
2
Reference to Exhibit “A” shall mean Tax Entities Exhibit “A” introduced at trial, also included
in Appellant’s Brief at Appendix A.
1
Exhibit “A”, along with pre-trial discovery, put the defendant’s on notice of
the claim of Taxing Entities, and any typographical errors were cured by the
testimony of witnesses.
Taxing Entities met their burden of proof and established their prima facie
case with the admission into evidence of Exhibit “A”. To the extent Hydrogeo was
able to successfully rebut that presumption (which is denied), Taxing Entities
established through testimonial evidence facts sufficient to meet their burden and
support the Court’s Judgment.
Taxing Entities had levied their tax on working interest, which is a real
property interest, not a personal property interest. Taxing Entities obtained their
Judgment on real property, entitling them to foreclosure of their tax lien, and any
references to personal property are merely an irrelevant argument.
APPELLEE QUITMAN INDEPENDENT SCHOOL DISTRICT
REPLY TO APPELLANTS ISSUES PRESENTED
ISSUE NO. 1 (restated)
Did the trial court commit reversible error by admitting Plaintiffs’ Exhibit “A”
into evidence when the document had not been produced prior to trial, and
when the taxing authorities failed to make any showing of good cause for their
failure to produce the document.
Appellant’s contention in this issue is that taxing entities prima facie case fails
because Exhibit “A” was not offered pursuant to a discovery request and that the
2
trial court erred in admitting the document at trial and that admission of evidence
constitutes reversible error. The trial court’s evidentiary ruling can be reviewed on
appeal for abuse of discretion. Parker Plaza West, LTD. v. Boniuk Invs., Ltd., 153
S.W.3d 729, 734 (Tex.App.-Dallas 2005, no pet.) (citing Aluminum Co. of Am. V.
Bullock, 870 S.W.2d 2, 3 Tex. 1994)). It is an abuse of discretion for a trial court
to rule arbitrarily, unreasonably, without regard to guiding legal principles, or
without supporting evidence. Oscar Luis Lopez v. La Madeleine of Texas, Inc., 200
S.W.3d 854, 860 (Tex.App-Dallas, no pet.) (citing Bocquet v. Herring, 972 S.W.2d
19, 21 (Tex.1998)).
The evidentiary issue in this matter was the introduction of a “Certified Copy
of Tax Records”, dated August 22, 2014. (2 R. R. p.7 line 15-20).
In a suit to collect delinquent taxes, Texas Tax Code (hereinafter “Tax Code”)
Section 33.47(a) provides:
[T]he taxing unit’s current tax roll and delinquent tax roll or certified copies
of the entries showing the property and the amount of the tax and penalties
imposed and interest accrued constitute prima facie evidence that each
person charged with a duty relating to the imposition of the tax has complied
with all requirements of law and that the amount of tax alleged to be
delinquent against the property and the amount of penalties and interest
due on that tax as listed are the correct amounts.
In this case the Taxing Entities introduced the tax records described in Section
33.47(a), creating a rebuttable presumption that the taxes were due, delinquent, and
3
unpaid. City of Bellaire v. Sewell, 426 S.W.3d 116, 120 (Tex. App.—Houston [1st.]
2012, no pet.)
Appellants contention in their Issue No. 1 is that because the Certified Copy
of Tax Records was not provided in discovery, the trial court erred in admitting that
evidence over objection at trial without good cause effectively rebutting Taxing
Entities prima facie case causing harmful error. “The purpose of the discovery rules
is to encourage full discovery of the issues and facts before trial so that parties can
make realistic assessment of their respective positions in order to facilitate
settlements and prevent trial by ambush.” La Madeleine 200 S.W.3d at 860). In this
case there can be no contention of surprise or ambush at trial. Taxation is a fact of
life and Appellants knew or reasonably should have known that a tax liability was
due when served with citation. Taxing Units pleadings include claims for all
delinquent taxes penalties, interest, attorney’s fees, and costs. (See Original Petition,
CR at 9). Additionally, tax records are certified public records with the seal of the
appropriate official and Appellants had the same access to them as the Taxing Units.
V.T.C.A., Tax Code Sec. 33.42(a, b); Vernon’s Ann.Texas Rules Civ.Proc., Rule
193.6(a)(2).
Good cause for the admission of evidence is at the discretion of the Trial
Judge. “The trial court has the discretion to determine whether the offering party
has met his burden of showing good cause to admit the testimony.” Wal-Mart
4
Stores, Inc. v. Tinsley, 998 S.W.2d 911 at 671 (Tex.App.—Texarkana 1999 no pet.).
The trial court here, exercising its discretion, overruled objections and admitted the
tax records offered, Exhibit “A”, into evidence. (2 R.R. p. 9, line 5 – p. 9, line 13).
Furthermore, Wal-Mart, 998 S.W.2d at 671, citing, Ramos v. Champlin Petroleum
Co., 750 S.W.2d 873, 877 (Tex.App.-Corpus Christi 1998, pet. denied) recognizes
that the Trial Court can implicitly find good cause by simply admitting the evidence.
Because the Trial Court did not err in admitting Tax Records, and that
admission did not result in an improper judgment, a holding sustaining the Trial
Court’s admission of evidence should be affirmed.
ISSUE NO. 2 (restated)
Did the trial court err by holding taxing entities’ entire alleged tax lien
enforceable against Hydrogeo, LLC, and First Bank & Trust East Texas when
taxing entities failed to segregate that portion of the lien which was
unenforceable against Hydrogeo.
The argument raised in Issue #2 is based upon the erroneous assumption that
the value of the real estate (minerals in this case) is combined with the value of
personal property to establish one tax account. This is not the law, and all arguments
following from that erroneous assumption become moot.
The distinction and separation in the taxation of real estate (minerals in place)
from personal property is set forth in Tax Code §11.01(a) for real estate and
§11.01(b) for business personal property. The distinction is further echoed in §21.01
5
providing for the taxation of real estate by its situs (location) and §21.02 for the
taxation of personal property held for the production of income based upon its situs.
The reality in separating the taxation of real estate and personal property lies
in the fact the real estate is permanently in place, whereas personal property can be
moved. In fact, special rules exist for the taxation of personal property to determine
its situs for purposes of taxation as set forth in Tax Code §21.02(a). There are further
rules for the taxation of personal property such as vessels and other watercraft
(§21.021), railroad rolling stock (§21.04) and aircraft (§§21.05 and 21.055). There
are no provisions in the Tax Code for including the value of “production equipment,
such as casing, tubing, pump jacks tanks and surface pipelines” (p. 15 Appellant’s
Brief) in the value of the underlying working interest (or royalty interest) of a
mineral interest. The situs rules of §21.02(a) may have even resulted in the business
personal property of Hydrogeo being taxed in a different taxing jurisdiction: recall
the testimony of Mr. William E. Godsey, Jr., as owner of Hydrogeo, where he states
that if there is no longer any production he will “…take my equipment and use it on
some other leases”. (transcript p. 62). The personal property is clearly movable, and
there is nothing in the record to show the personal property of Hydrogeo had even
acquired taxable situs in Wood County. It may have been taxable in Wood County,
and it may have been taxable elsewhere; there is simply nothing in the Record to
6
show how, where, or if it was taxed. Certainly, there is no evidence that it was taxed
as part of the real estate – only the argument of Hydrogeo.
A more accurate analysis of the taxation of the working interest presently
owned by Hydrogeo and the existence of the business personal property at the well
head is as follows:
For each of the tax years in question (2009-2011) the Chief Appraiser of
Wood County appraised the real property (mineral working interests) the subject of
this appeal pursuant to Tax Code §25.01 and in compliance with §25.12. Any
required notices of Appraised Value were mailed pursuant to Tax Code §25.19, and
the respective market values of the subject properties were certified to the taxing
units pursuant to Tax Code §26.01. Tax bills were mailed pursuant to Tax Code
§33.01, and in the absence of payment, the taxes reflected in those bills became
delinquent and subject to penalties and interest authorized by Tax Code §33.01 and
33.07. The admission into evidence of Taxing Entities Exhibit “A” established their
prima facie case, Davis vs. City of Austin (Sup. 1982) 632 SW2d 331, and further
established proper delivery of all required tax notices despite taxpayer’s assertion
that he did not receive any notices. See also Maximum Medical Imp., Inc. vs. County
of Dallas (App. 5 Dist. 2008) 272 SW3d 832.
Of note, the Tax Code affords numerous rights to property owners beginning
with the Right of Protest authorized in Tax Code §41.41. Property owners can
7
protest all of the complaints raised by Hydrogeo, including (A) a determination of
the appraised value in §41.41(a)(1) to the extent Hydrogeo believed the real estate
and personal property values were combined in one total, (B) inclusion of the
owner’s property on the appraisal records (§41.41(a)(3)) or a determination that the
property owner is the owner of the property (§41.41(a)(7)) to the extent Hydrogeo
or any other property owner objected to their inclusion or exclusion from the
Appraisal Roll (such as Steelman Investments, Inc.), and (C) the failure to even
receive the notice of appraised value as authorized by §41.411.
Affording some protections to property tax jurisdictions (and preventing a
taxpayer from suggesting “I don’t owe anything because you never sent me a
statement”), the Tax Code provides in §25.19(d) that the failure to receive a notice
of appraised value “does not affect the validity of the appraisal of the property, the
imposition of any tax…the existence of any tax lien…or any proceeding instituted
to collect the tax”. Regarding tax bills, the Tax Code provides in §31.01(g) that the
failure to “receive the tax bill required by this section…does not affect the validity
of the tax, penalty, or interest… the existence of a tax lien, or any procedure to collect
a tax”.
The Tax Code is replete with rights and remedies for the taxpayer, and
provides procedures for the taxpayer to exhaust their administrative remedies
through the protest procedures set forth in the Tax Code (i.e. §41.41 to protest any
8
issues with a tax appraisal, including the catch all §41.41(a)(9) “any other
action…that applies to and adversely affects the property owner”. (emphasis added).
The administrative remedy provisions of the Tax Code are designed to resolve
valuation and description disputes on an administrative level (the taxpayer who
complies with the law and follows the administrative remedy provisions can later
file suit pursuant to Tax Code 42.21 – not the facts here). In order to emphasize the
requirement of exhaustion of administrative remedies, the Tax Code provides in
§42.09(a) that the protest procedures of the Tax Code are exclusive and may not be
raised “in defense to a suit to enforce the collection of delinquent taxes….” Most of
the arguments raised by Hydrogeo are issues that should have been timely protested
through the administrative remedies provisions of the Tax Code, and not raised as
defenses to the underlying delinquent tax suit.
Hydrogeo suggests that Taxing Entities live petition noted “the value of any
personal property that may be described above…” (emphasis added - Brief p. 16).
Although the live petition of Taxing Entities “may” describe personal property, it
did not describe or identify any personal property; Exhibit “A” did not identify any
personal property, and the Judgment did not recover taxes on any described personal
property. To the extent Taxing Entities may have sought taxes on personal property
(which is denied), the Court’s Judgment notes in its final paragraph that “All relief
prayed for in any of the pleadings in this cause which is not specifically granted by
9
this judgment is hereby denied”. (Appellant’s Brief, Appendix B). Hydrogeo raises
issues (or imaginatively tries to create issues) and presents appellate arguments
regarding the taxation of personal property that simply were not included in the
Judgment.
A party seeking to be excused from the lawful obligation of paying taxes
should otherwise comply with the law, which brings us to one final note regarding
the personal property. Tax Code §22.01 provides a person “…shall render for
taxation all tangible personal property used for the production of income….”
(emphasis added). See Harris County Appraisal District v. Texas Gas Transmission
Corp. (App. 1 Dist.2003) 105 SW3d 88 review denied – where the Court held “shall”
is mandatory, not discretionary. There is nothing in the record to show that any of
the taxpayer entities rendered their personal property as required by law (in Wood
County or elsewhere), or paid taxes on personal property and were somehow taxed
twice on the same property. There is nothing in the record to show that any of the
taxpayer entities had paid their personal property taxes but were delinquent on the
mineral interests. There is finally nothing in the record to show Taxing Entities
sought recovery of specific dollars on specific personal property. The inescapable
conclusion (and this conclusion is implicit in Hydrogeo’s argument) is that the
business personal property held for the production of income at the well head
(production equipment, such as casing, tubing, pump jacks tanks and surface
10
pipelines) escaped taxation altogether and perhaps should be added to the Tax Roll
as omitted property as authorized by Tax Code §25.21. But it is certainly not a basis
for a legal finding that the Judgment entered on the working interest (a real property
interest) of Hydrogeo is somehow defective because it did not describe and identify
personal property. Finally, Hydrogeo should not be rewarded for their failure to
render their own business personal property with a finding that such failure becomes
a basis to reverse the trial court’s Judgment.
The trial court’s Findings of Fact and Conclusions of Law (Appellant’s Brief,
Appendix F) does not make any finding of the existence or taxation of personal
property, nor does it include a conclusion of law that the omission of the personal
property impacts the lien on the mineral interest owned by Hydrogeo. The tax lien
of Taxing Entities is found to be valid and enforceable through foreclosure.
As the personal property was not taxed, the issue of Hydrogeo’s status as a
bona fide purchaser need not be addressed here.3
3
QISD maintains the testimony of Loretta Ward that she obtained “a receipt” (Transcript p.25), is not legally the same
as a Tax Certificate. See Tax Code §31.075 for receipts, and §31.08 for Tax Certificates. An erroneous Tax Certificate
can extinguish the lien of a taxing unit, whereas a receipt is merely evidence of a payment. Obtaining a receipt (not
produced in the record) does not make one a bona fide purchaser.
11
CONCLUSION
The Trial Judge did not commit error in admitting Exhibit “A” into evidence,
as the material included in Exhibit “A” had already been provided to the opposing
side – there was no surprise or ambush at trial resulting from the admission of
certified public records.
Although Appellant suggests that personal property was included in the
taxation of Hydrogeo’s working interest, the evidence produced by Plaintiff at trial,
the Court’s Judgment, the Trial Court Findings of Fact and Conclusion of Law and
the Texas Property Tax Code all definitively establish taxation of Hydrogeo’s
mineral interests was limited to their real property interest, and did not include the
taxation of personal property. Taxing Entities do not argue Hydrogeo did not have
or own personal property; simply that it was not taxed in the accounts the subject of
this litigation. Accordingly, the Judgment entered in favor of Taxing Entities is
valid.
PRAYER
Taxing Entities pray that this honorable Court affirm the Judgment of the Trial
Court.
12
Respectfully submitted,
__/s/ David Hudson_______________
David Hudson
Texas Bar No. 00786445
Tab Beall
Texas Bar No. 01954000
Perdue, Brandon, Fielder, Collins & Mott, LLP
PO Box 2007
Tyler, Texas 75710-2007
(903) 597-7664
Fax: (903) 597-6298
dhudson@pbfcm.com
tbeall@pbfcm.com
CERTIFICATE OF COMPLIANCE
Counsel certifies that this reply brief contains, as counted by Microsoft
Word, contains 2,915 words. It was typed in 14-point Times New Roman.
Dated: August 18, 2015.
/s/ David Hudson
David Hudson
CERTIFICATE OF SERVICE
I do hereby certify that the above and forgoing Appellee’s Brief for Quitman
Independent School District has been served on all counsel of record in accordance
with the Texas Rules of Appellate Procedure on August 18, 2015.
/s/ David Hudson
David Hudson
13