Travis Central Appraisal District v. Wells Fargo Bank Minnesota, N.A.

• Court: Court of Appeals of Texas
• Decided: March 19, 2010
• Docket: 03-09-00013-CV
• Status: Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

ON REHEARING

NO. 03-09-00013-CV

Travis Central Appraisal District, Appellant

v.

Wells Fargo Bank Minnesota, N.A., Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT NO. D-1-GN-08-000025, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING

MEMORANDUM OPINION

We withdraw our opinion and judgment dated January 26, 2010, and substitute the

following opinion in place of the earlier one.

Appellee Wells Fargo Bank Minnesota, N.A. (“Wells Fargo”) filed suit seeking to

compel appellant Travis Central Appraisal District (“TCAD”) to downwardly adjust the ad valorem

property valuation for property owned by Wells Fargo in accordance with an environmental-use

determination issued by the Texas Commission on Environmental Quality (“TCEQ”). The trial court

granted summary judgment in favor of Wells Fargo and ordered TCAD to apply the

use determination issued by the TCEQ. TCAD did not appeal from that judgment. Thereafter,

Wells Fargo filed a motion for sanctions, asserting that TCAD was still refusing to apply the use-determination exemption as ordered by the trial court. The trial court granted the motion and

ordered TCAD to pay Wells Fargo $97,459 in sanctions plus $7,500 in attorney’s fees. TCAD

appeals, arguing that the sanctions order was an abuse of discretion because it had acted in good

faith. We will affirm the trial court’s order.

FACTUAL AND PROCEDURAL BACKGROUND

Wells Fargo owns an apartment complex (the “property”), which was built over a

closed municipal solid-waste landfill. After taking measures to bring the property into compliance

with existing environmental regulations, Wells Fargo filed an application with the TCEQ to have

the property declared a “pollution control property,” thereby entitling Wells Fargo to apply for a

property-tax exemption. See Tex. Const. art. VIII, § 1-l; Tex. Tax Code Ann. § 11.31 (West 2008).

On its application, Wells Fargo described each of the portions of real estate and property

improvements for which it sought exemption. Among the improvements relevant to this appeal,

Wells Fargo listed “Fugitive Emissions Containment Structures” as a property improvement to be

exempt under its application. Wells Fargo identified these as “[s]tructures used to contain, for

monitoring purposes, emissions released from decomposing materials. Floor level structures contain

pollution control equipment (continuous emission monitors) used to detect VOCs.” Wells Fargo

stated on its application that these structures were not taxable on or before January 1, 1994. See Tex.

Const. art. VIII, § 1-l(b) (“This section applies to real and personal property used as a facility, device,

or method for the control of air, water, or land pollution that would otherwise be taxable for the first

time on or after January 1, 1994.”).

2 After reviewing Wells Fargo’s application, the TCEQ issued its final use

determination, which described the pollution-control property as follows:

Real Estate: 594,208 sq ft used for liners and cover system for landfill, slurry walls, and surface impoundments. Site contains 2 stormwater retention ponds size 1,244 sq. ft. and 65,586 sq. ft. Property: Continuous emission monitors; liners over landfill to restrict escape of wastes; semi-active gas extraction system for fugitive methane; methane monitoring & control equipment; two stormwater containment ponds; sloping of concrete surfaces for leachate collection and removal; landfill final cover system; groundwater monitoring wells; fugitive emissions containment structures; and building for active gas extraction system.

It then stated the TCEQ’s final determination as to the property, finding:

A positive use determination for 100% of the two stormwater retention ponds real estate (1,224 sf + 65,586 sf); continuous emission monitors; liners over landfill; semi-active gas extraction system; methane monitoring & control equipment; two stormwater containment ponds; sloping of concrete surfaces for leachate collection and removal; landfill final cover system; groundwater monitoring wells; fugitive emissions containment structures; and building for active gas extraction system. A negative determination for the 594,208 sq. ft. of real estate which is being used to house a commercial apartment complex.

Pursuant to section 11.31(d) of the tax code, the executive director of the TCEQ sent

notice to the chief appraiser of TCAD informing it of the application and final determination.

Neither Wells Fargo nor the chief appraiser of TCAD appealed the executive director’s

determination. See Tex. Tax Code Ann. § 11.31(e) (providing that either party may appeal

determination to TCEQ within 20 days).

3 Having obtained its use determination from the TCEQ, Wells Fargo applied to TCAD

for a property-tax exemption. TCAD, purporting to act “pursuant to the use determination,” granted

Wells Fargo a partial tax exemption of $120,258, which it arrived at in the following manner:

TCAD valued the land at $1.80 per square foot, taking into account a ten percent environmental adjustment. The value of the land was calculated at $1,069,574 (594,208 square feet x $1.80/square foot). Based on the use determination letter, the total square footage of the pollution control equipment was limited to 66,810 square feet (1,224 square feet + 65,586 square feet). TCAD determined the value of the exemption at $120,258 (66,810 x $1.80/square foot).

TCAD then subtracted the value of the exemption ($120,258) from the value of the land ($1,069,574) for a total land value of $949,316.

The total appraised value for the property for tax year 2007 was $10,794,842, with $9,845,526 accounting for the improvement value of the property.1

In other words, TCAD determined that none of the real property on which the apartment complex

was situated was exempt as a result of the TCEQ’s order because property used for residential

purposes is not “pollution control property” as a matter of law. See Tex. Const. art. VIII, § 1-l; Tex.

Tax Code Ann. § 11.31(a) (“Property used for residential purposes . . . is ineligible for an exemption

under this section.”).

After paying under protest the taxes assessed on the property, Wells Fargo appealed

TCAD’s determination to the Travis Appraisal Review Board. See Tex. Tax Code Ann.

§ 41.41(a)(4). The Board upheld TCAD’s determination, and Wells Fargo filed suit for judicial

1 These calculations were provided by TCAD’s Interim Director of Commercial Appraisal, Kay Bisson, who valued the property for tax year 2007 and whose affidavit was attached to TCAD’s motion for summary judgment.

4 review in district court. See id. § 42.01(1)(A) (West 2008), § 42.21 (West Supp. 2009). In its

original petition, Wells Fargo asserted that TCAD had failed to adjust its property-tax valuation for

the property in light of the TCEQ’s use determination, which it alleged amounted to an arbitrary

denial of the exemption and a violation of its due process rights. The parties filed cross-motions

for summary judgment, joining issue in their interpretations of the TCEQ’s use determination.

TCAD urged by its motion for summary judgment that the plain language of the tax code prevented

Wells Fargo from seeking an exemption for the apartment complex itself, which was “used for

residential purposes” and therefore was ineligible under the Texas Constitution and the tax code.

TCAD further argued that it—not the TCEQ—is vested with the authority to grant the

pollution-control tax exemption under section 11.43 of the tax code. Accordingly, TCAD asserted,

application of the use determination must be confined to the $120,258 partial exemption

described above.

The trial court granted Wells Fargo’s motion for summary judgment, which sought

a declaration that it was entitled to the use-determination exemption and a resulting adjustment in

the property-tax assessment for the property. The final order, in addition to granting Wells Fargo’s

summary-judgment motion, stated that “Defendants are ordered to apply the pollution control use

determination as issued by the Executive Director of the TCEQ on April 10, 2007.” TCAD filed a

motion for new trial, arguing that the trial court misinterpreted the TCEQ order and thus erred in

determining that the entire property qualified for tax exemption. Alternatively, TCAD urged that

because the TCEQ order stated that only a portion of the property qualified as pollution-control

property, summary judgment was improper because there were disputed fact issues as to which

5 portion of the property was actually tax exempt. The trial court denied TCAD’s motion for new trial.

TCAD did not appeal.

Several months later, Wells Fargo filed a motion for sanctions asserting that,

“[d]espite the court’s order directing defendant to apply the Use Determination Exemption to [the

property], defendant has refused to do so.” TCAD took the position in response to the request for

sanctions that it had applied the use determination made by TCEQ and that the interpretation of the

use determination order urged by Wells Fargo was in conflict with the governing law. At the hearing

on Wells Fargo’s sanctions motion, TCAD continued to assert its position that the TCEQ order

did not exempt the 594,208 square feet of real property on which the apartment complex stood.

TCAD’s witness, Kay Bisson, testified that she had applied the TCEQ use determination only to the

65,586 square feet of land that makes up the stormwater-retention ponds. She further testified that

the property had been on the tax rolls “since probably about 1985,” contrary to Wells Fargo’s

assertion that the property became taxable for the first time on or after January 1, 1994. On

cross-examination, Bisson stated that she did not take into consideration any of the improvements

listed on Wells Fargo’s application under “Improvements to Be Exempt,” including the first-floor

fugitive emissions containment structures, nor did she apply any exemptions to those improvements.

At the conclusion of the hearing, the trial court ordered that Wells Fargo recover as

a sanction the sum of $97,459, representing the portion of the ad valorem tax assessed on the

first-floor units, which Wells Fargo had paid under protest. The trial court also awarded Wells Fargo

$7,500 in attorney’s fees. TCAD now appeals from this sanctions order.

6 STANDARD OF REVIEW

A trial court’s ruling on a motion for sanctions is reviewed for an abuse of discretion.

Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004); Downer v. Aquamarine Operators, Inc.,

701 S.W.2d 238, 241 (Tex. 1985). The test for an abuse of discretion is not whether, in the opinion

of the reviewing court, the facts present an appropriate case for the trial court’s action, but “whether

the court acted without reference to any guiding rules and principles.” Cire, 134 S.W.3d at 838-39

(citing Downer, 701 S.W.2d at 241). The trial court’s ruling should be reversed only if it was

arbitrary or unreasonable. Id. at 839.

DISCUSSION

On appeal, TCAD argues that the trial court abused its discretion in ordering

sanctions for its noncompliance with the TCEQ’s use-determination order because it attempted in

good faith to apply the order in accordance with the governing statutes. In so arguing, TCAD asserts

that neither the summary judgment order nor the sanctions order specify how the TCEQ’s order

should be interpreted or how TCAD had failed to comply with it. Additionally, TCAD maintains

that the sanctions order is arbitrary and unreasonable because it is based on a misapplication of the

law and because it does not state any authority or good cause for imposing sanctions.

Under chapter 42 of the tax code, the district court in a suit for judicial review is

authorized to enter any orders “necessary to preserve the rights protected by and impose duties

required by the law.” Tex. Tax Code Ann. § 42.24(3); see also id. § 42.43(a) (providing taxing unit

shall refund to property owner difference between amount of taxes paid and amount of taxes for

which property owner is judicially determined to be liable); MAG-T, L.P. v. Travis Cent. Appraisal

7 Dist., 161 S.W.3d 617, 633 (Tex. App.—Austin 2005, pet. denied). The trial court, having

previously determined that Wells Fargo was entitled to the full exemption as urged in its motion for

summary judgment, was authorized to enter any orders necessary to carry out the earlier, unappealed

final judgment in Wells Fargo’s tax-protest suit. Because the record establishes that TCAD did not

comply with the earlier judgment by refunding Wells Fargo the amount it had paid under protest, the

order directing TCAD to pay that $97,459 as a sanction is neither arbitrary nor unreasonable.

Given the procedural posture of this case, TCAD’s arguments regarding the

correctness of the trial court’s initial interpretation of the TCEQ order are at this stage unavailing.

As Wells Fargo points out, TCAD had urged its interpretation of the TCEQ order not only in its

motion for summary judgment in the tax-protest suit, but also in its motion for new trial. TCAD did

not appeal those rulings; it cannot now justify its failure to comply with the order directing it to

“apply the pollution control use determination” in the manner urged by Wells Fargo, the prevailing

party in the initial tax-protest suit, based on an interpretation that has been twice rejected by the

lower courts and never appealed.

On this record, we cannot conclude that the trial court’s sanctions order was an abuse

of discretion. It is evident that the trial court based its decision to award sanctions on its

understanding that the summary-judgment order required TCAD to downwardly adjust the

property-tax valuation for the property and the undisputed evidence that it had failed to do so.

Cf. Kennedy v. Kennedy, 125 S.W.3d 14, 19 (Tex. App.—Austin 2002, pet. denied) (reversing trial

court’s sanction award where record did not establish that sanctioned party’s conduct significantly

interfered with court’s exercise of its core functions). Here, the trial court essentially determined that

8 the prior order granting Wells Fargo’s motion for summary judgment was sufficiently clear in

requiring TCAD to adjust its valuation of the property in a manner consistent with Wells Fargo’s

reading of the TCEQ order, as presented in its motion for summary judgment. Indeed, TCAD itself

seems to have understood the import of the trial court’s summary judgment order, as reflected in the

following statement from TCAD’s motion for new trial: “In granting Plaintiff’s motion for summary

judgment and denying Defendant’s motion for summary judgment, the court determined that the

entire property, even that part of the property that is not exempt per the TCEQ order, is entitled to

a pollution control exemption.” (Emphasis in original.) Although TCAD obviously disagreed with

that ruling, it did not perfect an appeal from the summary judgment. A party cannot ignore or flout

a court order simply because it believes the court got it wrong. The trial court was therefore entitled

to exercise its inherent power “to compel compliance with valid orders incident to the administration

of justice”—a power that is “fundamental, and closely related to the core functions of the judiciary.”

Kutch v. Del Mar Coll., 831 S.W.2d 506, 510 (Tex. App.—Corpus Christi 1992, no writ).

TCAD’s continued efforts to argue that the summary-judgment order is ambiguous

and that its interpretation of the TCEQ use determination is the proper one constitute an argument

that the trial court erred in granting Wells Fargo’s motion for summary judgment. That order,

however, was not appealed, and the issues resolved by that final judgment are not before this Court.

Furthermore, the record establishes that Wells Fargo was obligated to bring this motion for sanctions

in order to enforce the earlier judgment, thus providing a reasonable basis for the trial court’s award

of attorney’s fees in this proceeding. See generally In re Bennett, 960 S.W.2d 35, 40 (Tex. 1997)

9 (discussing trial court’s inherent power, in administration of justice and exercise of its core

functions, to impose sanctions, including attorney’s fees).

In light of the foregoing, we overrule TCAD’s issues on appeal and affirm the trial

court’s sanctions order.

CONCLUSION

Because the trial court did not abuse its discretion, we affirm the order awarding

Wells Fargo sanctions in the amount of $97,459, plus $7,500 in attorney’s fees.

J. Woodfin Jones, Chief Justice

Before Chief Justice Jones, Justices Waldrop and Henson

Affirmed on Rehearing

Filed: March 19, 2010