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Willacy County Appraisal District v. Sebastian Cotton & Grain, Ltd.

Supreme Court of Texas

April 27, 2018

Willacy County Appraisal District, Petitioner,
Sebastian Cotton & Grain, Ltd., Respondent

          Argued January 10, 2018

          On Petition for Review from the Court of Appeals for the Thirteenth District of Texas


          Paul W. Green Justice

         This case arises out of a property-tax dispute regarding ownership of tangible personal property. Based on Sebastian Cotton & Grain Ltd.'s representation that it owned grain inventory stored on its property, Willacy County Appraisal District (WCAD) listed Sebastian as the owner of the grain on the 2009 appraisal roll. After receiving the tax bill, Sebastian requested a correction to the appraisal roll and produced to WCAD documents showing it had sold the grain to DeBruce Grain. Agreeing to Sebastian's request, WCAD corrected the appraisal roll to reflect DeBruce as the property owner. DeBruce then protested, asserting it was not the owner because the grain was not in its possession on the assessment date. WCAD ultimately changed the 2009 appraisal roll back to again reflecting Sebastian as the grain's owner. Sebastian protested, asserting that WCAD lacked authority to make that change to the appraisal roll.

         We must decide three legal issues: (1) whether Property Tax Code section 25.25(b) authorizes an appraisal district to correct ownership on an appraisal roll when such a correction necessarily alters the taxing units' expectation of who is liable for payment of property taxes; (2) whether an agreement under Property Tax Code section 1.111(e) may be voided if it was induced by fraud; and (3) whether a purported owner challenging ownership on the appraisal roll is entitled to recover attorney's fees under Property Tax Code section 42.29. We hold that when, as here, an ownership correction to the appraisal roll does not increase the amount of property taxes owed for subject property in the year of the correction, an appraisal district's chief appraiser has statutory authority under section 25.25(b) to make such a correction. We further hold that a section 1.111(e) agreement may be rendered voidable if fraud is proven. Finally, we hold that Sebastian is not entitled to attorney's fees under section 42.29. We reverse the judgment of the court of appeals and remand the case to that court for further proceedings consistent with this opinion.

         I. Background

         In May 2009, Jerry Jurica, Sebastian's property-tax agent, filed a Rendition of Taxable Personal Property with WCAD on behalf of Sebastian. See Tex. Tax Code § 22.01(a) (requiring a property owner to declare, or "render, " to the appraisal district "all tangible personal property used for the production of income that the person owns . . . on January 1" so that the property may be taxed). In its rendition, Sebastian represented to WCAD that it owned all of the grain in its possession as of January 1, 2009. At the same time, Sebastian filed an application for exemption of the grain inventory under section 11.251 of the Property Tax Code, the "Freeport" exemption.[1]In fact, the property was not eligible for the Freeport exemption, so WCAD denied Sebastian's exemption application. Based on the grain inventory values contained in Sebastian's rendition, WCAD appraised Sebastian's inventory at $2, 315, 894, and the 2009 appraisal roll reflected that value. See id. §§ 22.01(a) (requiring an owner to identify, describe, give the location of, and estimate the value of the tangible personal property it owns), 25.01(a) (requiring the chief appraiser to prepare the district's appraisal records based on rendition information and "listing all property that is taxable in the district and stating the appraised value of each"), 25.22(a) (stating that appraisal records are submitted to the appraisal review board (ARB) for review and determination of protests), 25.24 (stating that once corrected, if necessary, and approved by the appraisal review board, the appraisal records constitute the appraisal roll for the district). Property taxes were assessed and levied accordingly. See id. § 26.01 (requiring appraisal rolls to be submitted to the local taxing units so that taxes may be assessed accordingly).

         Upon receiving the tax bill, Sebastian called on Jurica to assist in getting ownership changed on the appraisal roll. Jurica emailed WCAD and asserted that only 14% of the grain rendered was actually owned by Sebastian. In his email, Jurica told WCAD that Sebastian "mistakenly thought the Freeport exemption exempted all the taxes which is why they did not distinguish ownership on the rendition." Sebastian's controller, who was responsible for coordinating the rendition of Sebastian's grain inventory, stated in affidavit evidence admitted at trial that it was her practice to render all grain in Sebastian's possession, even if Sebastian did not believe it was the actual owner of the grain. On Sebastian's behalf, Jurica filed a motion to correct ownership pursuant to section 25.25(c) of the Property Tax Code, asserting that 86% of the grain Sebastian had rendered was actually sold to DeBruce in 2008.[2] See id. § 25.25(c)(4) (allowing an ARB, on motion of the chief appraiser or a property owner, to direct changes in the appraisal roll to correct an error in which property is shown as owned by a person who did not own the property on January 1 of that tax year). In support of the motion, Jurica produced four purchase contracts indicating that Sebastian had sold the grain at issue, a total of 1, 340, 000 bushels, to DeBruce prior to January 1, 2009. Each contract was titled "Purchase Contract Confirmation, " and each was dated 2008.[3] All four contracts provided the shipment period to be during the year 2008.

         After filing the section 25.25(c) motion, Jurica called WCAD's chief appraiser to ask if he had received the motion and to inquire as to his position or response. The chief appraiser told Jurica that he had received the motion and that he would make the requested change. Jurica stated in his affidavit, "At that point, it was clear we had reached an agreement on the Section 25.25 Motion to Correct Ownership that I had filed." Because the dispute had been resolved, a hearing before the Willacy County Appraisal Review Board (WCARB) was never scheduled or conducted on the motion. See id. § 25.25(e) (providing that a party bringing a section 25.25(c) motion is entitled to request a hearing and a determination by the ARB if the chief appraiser and property owner do not agree to the correction before the 15th day after the motion is filed). Based on this phone call, Sebastian asserts that, with Jurica acting as its agent, it entered into a binding agreement with the chief appraiser under section 1.111(e) of the Property Tax Code. See id. § 1.111(e). Under that section, "[a]n agreement between a property owner or the owner's agent and the chief appraiser is final if the agreement relates to a matter . . . which may be corrected under Section 25.25 or on which a motion for correction under that section has been filed but not determined by the board." Id. The chief appraiser changed the appraisal roll to reflect DeBruce as the grain owner, and Sebastian received a tax refund as a result of this correction.

         DeBruce then protested the corrected appraisal roll and resulting tax assessment, also asserting non-ownership of much of the disputed grain. It argued that legal title and ownership of the grain were tied to shipment; thus, it owned only the portion of the grain that had been shipped as of January 1, 2009.[4] In support, DeBruce relied on the purchase contracts produced by Sebastian, which indicate the parties' agreement to follow the National Grain and Feed Association Rules (NGFA Rules) in the event of a dispute. Rule 6 of the NGFA Rules provides, in relevant part:

Title, as well as risk of loss and/or damage, passes to the Buyer as follows: (A) On f.o.b. origin or f.o.b. basing point contracts, at the time and place of shipment. The time of shipment is the moment that the carrier accepts the appropriate shipping document. . . . (B) On delivered contracts: . . . By truck, upon arrival at the Buyer's final destination.

Nat'l Grain & Feed Ass'n, NGFA Grain Trade Rules, Rule 6 (2017). Three of the four contracts are designated f.o.b. contracts, so under Rule 6, title would pass upon shipping. The fourth is a delivered contract-designated DEL-so under the same rule, title would pass upon arrival at the final destination. DeBruce produced evidence that, notwithstanding the shipping dates listed on the contracts (which indicated that the grain was to be shipped in 2008), the grain was actually shipped to DeBruce for resale on various dates in January 2009, the first being January 5. Additionally, grain under two of the contracts-totaling 808, 797 bushels-was never delivered and those orders were canceled. WCAD concluded that DeBruce did not own the grain on January 1, 2009, and the chief appraiser corrected the appraisal roll pursuant to Property Tax Code section 25.25(b) to again reflect Sebastian as the owner of the grain. See Tex. Tax Code § 25.25(b) (allowing the chief appraiser to change the appraisal roll to correct a determination of ownership under certain circumstances).

         Sebastian protested the chief appraiser's correction, arguing that WCAD exceeded its authority under section 25.25(b). The statute provides:

The chief appraiser may change the appraisal roll at any time to correct a name or address, a determination of ownership, a description of property, multiple appraisals of a property, an erroneous denial or cancellation of any exemption authorized by Section 11.13 if the applicant or recipient is disabled or is 65 or older or an exemption authorized by Section 11.13(q), 11.131, or 11.22, or a clerical error or other inaccuracy as prescribed by board rule that does not increase the amount of tax liability.

Id. (emphasis added). Sebastian argued before the WCARB that the statute does not allow WCAD to change a determination of ownership if doing so would increase the tax liability of an individual property owner-here, Sebastian. The record in this case does not contain a record of the WCARB hearing; however WCAD alleges that at the hearing, DeBruce presented evidence that it did not own the grain on January 1, 2009, but Sebastian did not provide any evidence of non-ownership. The WCARB determined that DeBruce's representation of non-ownership was correct and upheld the chief appraiser's authority to correct ownership under section 25.25(b). It issued orders allocating the value of the disputed grain between Sebastian and DeBruce based on their respective ownership on January 1, as determined by the shipping dates. Thus, under the WCARB's order, Sebastian owned 69.794% of the disputed grain, valued at $1, 390, 064, and DeBruce owned 30.206%, valued at $601, 605.

         Sebastian appealed to the district court, reasserting its argument that WCAD lacked authority under section 25.25(b) to change the ownership on the appraisal roll because such a change increased Sebastian's tax liability. See id. § 42.01 (outlining a property owner's right to appeal an order of the ARB to district court). Sebastian also argued that when WCAD agreed over the phone with Jurica to change the appraisal roll to reflect DeBruce as the owner of the grain, WCAD entered into a binding agreement under section 1.111(e) that was final and precluded both any subsequent determinations as to ownership by the chief appraiser or WCARB and judicial review of the matter. WCAD did not deny that there was such an agreement, but it asserted as an affirmative defense that the agreement resulted from Sebastian's fraudulent misrepresentations that it did not own the property, and that Sebastian should not benefit from that agreement. Specifically, WCAD asserted that Sebastian's section 25.25(c) motion to correct ownership of the grain was false, misleading, and/or fraudulent because Sebastian knew or should have known with the exercise of due diligence that it owned the grain as of January 1, 2009.

         While Sebastian's appeal of the WCARB decision was pending in the district court, WCAD sought discovery from Sebastian related to the question of ownership of the grain at issue here. The discovery issue was ultimately presented to the court of appeals, which granted mandamus relief. In re Willacy Cty. Appraisal Dist., No. 13-13-00550-CV, 2013 WL 5942707, at *5 (Tex. App.-Corpus Christi-Edinburg Nov. 1, 2013) (orig. proceeding) (mem. op.). The court declined to address the questions before us today, but it did decide that a fraud defense to a section 1.111(e) agreement is potentially viable. Id. at *3-4. Sebastian petitioned for mandamus relief, which we denied. 57 Tex. Sup. Ct. J. 310 (Mar. 24, 2014).

         The district court, in a trial de novo, upheld the WCARB's determination of ownership and made findings of fact, including:

4. On December 15, 2009, after it received its tax statement for 2009, Sebastian represented to WCAD that it did not own most of the grain inventory it had previously rendered because the grain had been sold to Debruce Grain prior to January 1, 2009. . . .
. . . .
12. The Rules of the National Grain & Feed Association, which governed the Purchase Confirmations, provide that title to and risk of loss [of] the grain identified in the four Purchase Confirmations did not transfer to DeBruce until the grain was delivered.
13. Of the grain described in the Purchase Confirmations, only 138, 300 bushels, with a value of $601, 605, had been delivered to DeBruce in 2008.
14. Sebastian's representations to WCAD as to the ownership of the grain as of January 1, 2009 were false.
15. Sebastian's representations as to the ownership of the grain as of January 1, 2009 were made knowingly and/or with reckless disregard for the truth and as a positive assertion.
16. Sebastian's representations were made with the intent that WCAD act on them.
17. WCAD acted on Sebastian's representations.
18. WCAD suffered injury as a result.

         The district court concluded that Sebastian obtained the section 1.111(e) agreement through fraudulent misrepresentations as to the ownership of the grain, and the agreement was void as a result of Sebastian's fraud.

         The court of appeals reversed and rendered in part, holding that WCAD lacked authority to change the ownership determination under Property Tax Code section 25.25(b), without reaching the issue of whether a section 1.111(e) agreement may be voided if it was induced by fraud. 492 S.W.3d 824, 835-36 (Tex. App.-Corpus Christi-Edinburg 2016, pet. granted). The court of appeals remanded the case to the trial court to determine reasonable and necessary attorney's fees consistent with Property Tax Code section 42.29. Id. at 836-37; see Tex. Tax. Code § 42.29 ("A property owner who prevails in an appeal to the court . . . of a determination of an appraisal review board on a motion filed under Section 25.25 . . . may be awarded reasonable attorney's fees."). We granted WCAD's petition for review. 60 Tex. Sup. Ct. J. 1607 (Sept. 1, 2017).

         II. Analysis

         We are presented with three statutory construction issues: (1) whether WCAD had authority under section 25.25(b) to correct the appraisal roll to reflect Sebastian as the owner of the grain; (2) if Sebastian and WCAD had a section 1.111(e) agreement, whether that agreement may be voided if it was induced by fraud; and (3) whether Sebastian is entitled to recover attorney's fees under section 42.29. We review issues of statutory construction de novo. Tex. Lottery Comm'n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010).

         In construing statutes, our primary objective is to give effect to the Legislature's intent. Id. We rely on the plain meaning of the text as expressing legislative intent unless a different meaning is supplied by legislative definition or is apparent from the context, or the plain meaning leads to absurd results. Id. When a statute is not ambiguous on its face, it is inappropriate to use extrinsic aids to construe the unambiguous statutory language. City of Rockwall v. Hughes, 246 S.W.3d 621, 626 (Tex. 2008). A statute is ambiguous if its words are susceptible to two or more reasonable interpretations and we cannot discern legislative intent from the language alone. Tex. State Bd. of Exam'rs of Marriage & Family Therapists v. Tex. Med. Ass'n, 511 S.W.3d 28, 41 (Tex. 2017). We use definitions prescribed by the Legislature and any technical or particular meaning the words have acquired. Tex. Gov't Code § 311.011(b); City of Rockwall, 246 S.W.3d at 625. Otherwise, we construe the statute's words according to their plain and common meaning. See Tex. Gov't Code § 311.011(a); City of Rockwall, 246 S.W.3d at 625-26.

         A. ...

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