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White Deer Independent School District v. Martin

Court of Appeals of Texas, Seventh District, Amarillo

November 5, 2019

WHITE DEER INDEPENDENT SCHOOL DISTRICT, ET AL., APPELLANTS
v.
KELLY MARTIN, APPELLEE

          On Appeal from the 100th District Court Carson County, Texas Trial Court No. 11807, Honorable Stuart Messer, Presiding

          Before QUINN, C.J., and PIRTLE and PARKER, JJ.

          OPINION

          Judy C. Parker Justice.

         Property owner Kelly Martin filed a lawsuit challenging White Deer Independent School District's decision to reduce its local option homestead exemption.[1] The State of Texas intervened in the lawsuit. The trial court granted the motions for summary judgment filed by Martin and the State as to their claims against the District, but denied their motions as to the claims against certain individual defendants. The competing motion for summary judgment filed by the District was granted with respect to the claims against the individual defendants and denied with respect to the claims against the District. We affirm in part and reverse and remand in part.

         I. Background

         A. Homestead Exemption Changes under S.B. 1 and S.J.R. 1

         For many years, the State of Texas has provided residence homestead owners a property tax exemption of $15, 000, exempting that amount of a homestead's appraised value from school district taxation. School districts and other local taxing units have had the option to grant an additional exemption of a percentage of the appraised value of a residence homestead. Tex. Tax Code Ann. § 11.13(n). The percentage may not exceed twenty percent and the amount of the exemption may not be less than $5, 000. Id. The District was among the minority of school districts that granted its residents this local option homestead exemption ("LOHE"). Under the Tax Code, LOHEs must be adopted before July 1 of the tax year in which the exemption applies. Id.

         In May 2015, the Legislature passed S.B. 1, which increased the statewide homestead exemption from $15, 000 to $25, 000 and created section 11.13(n-1) of the Texas Tax Code, which provides, in relevant part, "[A] school district . . . that adopted [a LOHE] under Subsection (n) for the 2014 tax year may not reduce the amount of or repeal the exemption. This subsection expires December 31, 2019." Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1, 2015 Tex. Gen. Laws 1779, 1779 (current version at Tex. Tax Code Ann. § 11.13(b), (n-1)). Thus, under the new subsection n-1, existing LOHEs had to be preserved for five years. S.B. 1 included provisions to protect school districts against the resulting loss in revenue associated with the increase in the homestead exemption.

         In addition, S.B. 1 was the enabling legislation for a proposed constitutional amendment. S.J.R. 1, a joint resolution passed the same day as S.B. 1, proposed amending the Texas Constitution to (1) increase the statewide homestead exemption to $25, 000, and (2) allow the Legislature to prohibit the governing body of a political subdivision that has adopted a LOHE from reducing the amount of or repealing the exemption before the end of the 2019 tax year. Tex. S.J. Res. 3, 84th Leg., R.S., § 1, secs. 1-b(c), 1-b(e), 2015 Gen. Laws 5412, 5412-14. If the proposed amendments were approved by voters, the changes to the Tax Code would take effect "on the date on which the constitutional amendment proposed by SJR-1 . . . takes effect" and would apply to the 2015 tax year. Act of May 29, 2015, 84th Leg., R.S., ch. 465, §§ 26-27, 2015 Tex. Gen. Laws 1779, 1786. If voters did not approve the constitutional amendment, then S.B. 1 would have "no effect." Id. § 27.

         B. White Deer ISD's Action

         The District's board of trustees met on June 30, 2015-after the Governor had signed S.B. 1 but before the vote on the constitutional amendments. At the meeting, the trustees voted five to zero to reduce the District's LOHE from twenty percent (the level adopted for the 2014 tax year) to ten percent.

         C. Passage of Constitutional Amendment and Subsequent Action by the District

         On November 3, 2015, Texas voters approved the constitutional amendments proposed by S.J.R. 1 that allowed the changes set out in S.B. 1 to become law. At its regular meeting in February of 2016, the District's board of trustees voted to continue the LOHE at ten percent for the 2016 tax year. On June 15, 2016, the Attorney General of Texas and the Texas Education Commissioner sent a joint letter to the District, asserting that the District's reduction of its LOHE violated S.B. 1's provisions. The letter advised the school board to restore its exemption to 2014 levels to bring the District into compliance with section 11.13(n-1) of the Tax Code. In February of 2017, however, the board of trustees again voted to maintain the LOHE at the reduced ten percent level it had adopted in 2015 and 2016.

         II. The Litigation

         A. The Lawsuit

         On September 15, 2016, White Deer resident Kelly Martin sued the District, seven members of the District's board of trustees, and the superintendent of the District, alleging that they had violated S.B. 1's provisions by reducing the LOHE.[2] [3] Martin alleged that the District imposed ad valorem taxes on her homestead and that she was entitled to the 2014-level LOHE in tax years 2015 through 2019. She sought a declaratory judgment that, among other things, (1) section 11.13(n-1) of the Texas Tax Code is constitutional, (2) school districts were prohibited from repealing or reducing the LOHE any time from January 1, 2015, through December 31, 2019, (3) any repeal or reduction of a LOHE in that time period was void as a matter of law, (4) the District's reduction of the LOHE was ultra vires, and (5) the District's assessment and collection of taxes subject to the LOHE was ultra vires. She also sought injunctive relief ordering the District to reinstate the LOHE and to stop assessing and collecting property taxes subject to the exemption. Finally, Martin sought a refund of the taxes collected by the District that were subject to the LOHE.

         B. The State's Intervention

         The same day Martin filed her lawsuit, the State of Texas filed a plea in intervention, asserting its interests in protecting Texas citizens and effecting the property tax relief measures provided by S.B. 1. The State sought a declaratory judgment that the acts of the District defendants violated S.B. 1 and S.J.R. 1 and a writ of mandamus ordering them to comply with such law.

         The District defendants answered and filed (1) special exceptions, (2) a motion to strike the plea in intervention, (3) a motion to dismiss the official-capacity claims against the individual defendants, (4) a plea in abatement, and (5) a plea to the jurisdiction.

         C. Summary Judgment

         On March 30, 2017, Martin and the State filed a joint motion for summary judgment, asserting that S.B. 1 prohibits school districts from reducing or repealing the LOHE after January 1, 2015. The District defendants filed a competing motion for summary judgment, and Martin and the State filed amended motions for summary judgment, on September 15, 2017. The District defendants alleged in their motion that the claims against them were barred by doctrines of immunity and that Martin and the State had failed to exhaust administrative remedies. They also argued that S.B. 1's prohibition was not in effect at the time the District reduced its LOHE.

         All parties filed responses to the motions for summary judgment on October 16, 2017. The trial court entered a final judgment on April 10, 2018, in which it granted the District defendants' motion for summary judgment and denied Martin's and the State's motions for summary judgment with respect to the claims brought against the individual defendants. However, the court granted Martin's and the State's motions for summary judgment and denied the District defendants' motion for summary judgment with respect to the claims against the District. The trial court's final judgment declared that (1) section 11.13(n-1) of the Texas Tax Code is constitutional as a matter of law; (2) section 11.13(n-1) prohibits school districts from repealing or reducing the amount of a LOHE at any time between January 1, 2015, through December 31, 2019, that was adopted for the 2014 tax year; and (3) the acts of the District complained of by Martin and the State violate S.B. 1 and S.J.R. 1 and, therefore, the repeal and any reduction of the LOHE by the District violates section 11.13(n-1), has no effect, and is void as a matter of law. In addition, the trial court ordered the District to stop assessing and collecting property taxes subject to the 2014 LOHE and to disgorge and refund any such taxes it had collected from Martin.

         The District defendants and Martin cross-appealed to this Court.

         III. Motion to Dismiss

         After briefing was complete in this appeal, the District filed a motion to dismiss in which it asserts that this Court lacks subject matter jurisdiction over all issues before it. The District argues that the ultra vires claims are moot because they seek prospective injunctive relief requiring the District to comply with section 11.13(n) and (n-1) of the Texas Tax Code, but the deadline for the District to act on the LOHE for the 2019 tax year has passed. The District then re-urges its claim that the trial court never had jurisdiction because Martin and the State did not exhaust their administrative remedies. Because the District's motion to dismiss challenges our subject matter jurisdiction over this cause, we will address it first. See Crites v. Collins, 284 S.W.3d 839, 840 (Tex. 2009) (per curiam) (noting that jurisdictional questions must be addressed before merits).

         "An appeal is moot when there is no longer a live controversy between the parties and appellate relief would be futile." Metro. Transit Auth. v. Douglas, 544 S.W.3d 486, 493 (Tex. App.-Houston [14th Dist.] 2018, pet. denied). That is, "a case is moot when the court's action on the merits cannot affect the parties' rights or interests." Heckman v. Williamson Cty., 369 S.W.3d 137, 162 (Tex. 2012). In this case, a live controversy exists between the parties regarding whether the District's reduction of its LOHE was valid. While the District focuses on the now-passed deadline to adopt a LOHE for the 2019 tax year and its effect on Martin's and the State's claims for prospective relief, it has ignored their claims for declaratory relief. The parties' rights may still be affected by an appellate ruling in this case, in that if this Court, or the Texas Supreme Court, were to hold that the District was prohibited from reducing the amount of its LOHE at any time between January 1, 2015, through December 31, 2019, then Martin and other affected taxpayers could litigate claims arising from any overpayment of taxes due to the improper LOHE that the District applied in tax years 2015 through 2019. Therefore, this appeal is not moot.

         We turn next to the District's assertion that we lack jurisdiction because "Martin and the State did not exhaust their administrative remedies and the trial court never had jurisdiction over their claims for reimbursement."[4] According to the District, Martin and the State were required to pursue administrative remedies found in the Texas Tax Code, the Texas Education Code, and/or the District's own policies before bringing their claims. The District defendants argue that, because they did not do so, they failed to exhaust their remedies, thus depriving this Court of jurisdiction. We disagree.

         Ordinarily, an aggrieved party must exhaust all available administrative remedies and obtain a final agency order before seeking judicial relief. See City of Sherman v. Public Util. Comm'n, 643 S.W.2d 681, 683 (Tex. 1983). "The policy behind the exhaustion-of-remedies doctrine is to allow the agency involved to resolve disputed issues of fact and policy and to assure that the appropriate body adjudicates the dispute." Kilgore Indep. Sch. Dist. v. Axberg, 535 S.W.3d 21, 34 (Tex. App.-Texarkana 2017, no pet.). This policy is intended to encourage parties to resolve disputes without resort to litigation when an administrative procedure is available. Id. However, there are exceptions to the doctrine: (1) where an injunction is sought and irreparable harm would result; (2) where the administrative agency cannot grant the requested relief; (3) when the issue presented is purely a question of law; (4) where certain ...


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