Court of Appeals of Texas, Eighth District, El Paso
from 243rd District Court of El Paso County, Texas (TC #
McClure, C.J., Rodriguez, and Hughes, JJ.
CRAWFORD McCLURE, Chief Justice.
tax suit presents two rather straightforward questions. The
first is whether a taxpayer who claims lack of notice from
the taxing entity as a defense must pursue an available
administrative remedy upon learning of the claimed tax
liability. The second question is whether a taxpayer can
avoid tax liabilities at trial based on affirmative defenses
which were never raised in a defensive pleading. Under the
facts of this case, we answer the first question
"yes" (one must pursue administrative remedies) and
the second question "no" (you can't rely on
affirmative defenses you never pled). Accordingly, we reverse
the judgment of the trial court and remand for a new trial.
City of El Paso filed suit on May 18, 2009, over property
taxes allegedly owed on some twenty-six specifically
identified tracts of land that were or had been owned by
Mountain Vista Builders, Inc. The tax liabilities were
claimed for various years between 2006 and 2008. Mountain
Vista answered the suit, filing a general denial. In the
years that followed, the City filed various partial non-suits
over some of the specific tracts, apparently as the parties
resolved the tax liabilities for specific pieces of property.
time the case was eventually set for trial in April of 2015,
the only remaining claims involved the 2006 taxes owed on
three specific tracts of land. Mountain Vista did not contest
that it owned those parcels on January 1, 2006, which is the
relevant date for assessing property taxes. Tex.Tax Code Ann.
§32.07(a) (West 2015)(providing that generally property
taxes are the personal obligation of the person who owns the
property on January 1st of the year for which the tax is
imposed). Instead, Mountain Vista presented testimony below
that it was developing the properties by building homes, and
in turn selling the developed tracts to interested buyers.
For the time periods when Mountain Vista owned the
properties, it forwarded any tax bill that it received to its
accountant for payment. And as those home sales closed at the
title company, any outstanding taxes due on the land should
have been addressed before title passed to the new owners.
According to Mountain Vista, the title company should have
been alerted to any notice of a tax deficiency prior to
closing. Mountain Vista's owner testified that he had no
personal knowledge of what the title company had done with
regard to identifying what taxes were due on the property at
the time of closing. For the particular subdivision at issue,
Mountain Vista built and sold some sixty homes and all the
parcels were sold to the eventual buyers by 2010 or 2011.
Vista also presented evidence that its procedure of paying
the taxes was hampered by the El Paso Central Appraisal
District (CAD) which sent some tax notices to the wrong
address. Mountain Vista had apparently changed its business
address in 2009 and 2011. By 2013, Mountain Vista sent a
certified letter to the CAD providing a correct address for
all its tax notices. But even as late as 2015, some tax
notices were delivered to the wrong address. Mountain Vista
learned of the claimed delinquent tax bills on these
properties from its bank around 2011. By that time, all the
properties had been sold. The title company that closed the
sales had gone out of business.
bench trial, the City objected to much of this evidence. The
City contended below that any claim of lack of notice must be
first be presented to the CAD, and failing that, Mountain
Vista failed to exhaust its administrative remedies which
denied the district court jurisdiction over that defense.
Mountain Vista agreed that it never filed any formal protest
with CAD. The City also contended that Mountain Vista's
general denial would not support any of its apparent
arguments which were in the nature of affirmative defenses
and therefore must be specifically pled. The trial court
overruled each of these objections and eventually entered a
take nothing judgment against the City. The trial court made
specific findings of fact and conclusions of law which
support that judgment on somewhat intertwined grounds.
the trial court entered findings supporting Mountain
Vista's contention that the taxing authority was sending
tax notices to the wrong address. Second, the court entered a
number of findings supporting Mountain Vista's claim that
when any developed property was sold, the title company would
have obtained from the City an amount shown as due, and would
have paid that amount from the closing funds. According to
the findings, the CAD published the amount of any tax due.
The title company which handled the closing on the property
asked the City for any amounts of tax due. The City would
have responded and the title company would have been paid any
amounts claimed as due. Finding of Fact No. Nine specified
that the City "allowed the closing on each and every
parcel without indicating there was any other amount
outstanding." The trial court further found that no
penalties and interest were due because the disputed taxes
had been paid. The court expressly found any claim for
additional amounts was "waived."
the findings of fact and conclusions of law as addressing
four possible defenses which the trial court accepted: (1)
the taxes were already paid; (2) the City failed to provide
notice of the tax due (and thus cannot claim penalties and
interest); (3) the City's conduct vis-à-vis the
closing sale conducted by the title company waived its right
to seek additional sums; or (4) the City's conduct
vis-à-vis the closing process estopped it from
claiming any additional taxes.
City brings three issues for review. It first contends that
any claim of lack of notice must have been raised to the CAD
in an administrative proceeding, and because Mountain Vista
failed to do so, the district court had no jurisdiction over
that defense. Second, the City claims that any evidence or
finding based on an unpled affirmative defense is improper.
Finally, in Issue Three, it attacks the portion of the trial
court's judgment taxing costs against the City. Mountain
Vista has not favored us with a brief. We sustain all three
points and reverse and remand for a new trial.
TO EXHAUST ADMINISTRATIVE REMEDIES
Texas Tax Code provides detailed administrative procedures
for a property owner to contest its property taxes.
See Tex.Tax Code Ann. §§ 41.01-.71 (West
2015); Cameron Appraisal District v. Rourk, 194
S.W.3d 501, 502 (Tex. 2006). Appraisal review boards, such as
the CAD, have exclusive jurisdiction over protests.
Roark, 194 S.W.3d at 502; Tex.Tax Code Ann. §
42.09(a). This administrative review process is intended to
"resolve the majority of tax protests at this level,
thereby relieving the burden on the court system."
Harris County Appraisal Dist. v. ETC Marketing,
Ltd.,399 S.W.3d 364, ...