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Texas Tax Solutions, LLC v. City of El Paso

Court of Appeals of Texas, Eighth District, El Paso

December 30, 2019

CITY OF EL PASO, Appellee.

          Appeal from County Court at Law No. 5 of El Paso County, Texas (TC# 2014DTX0412)

          Before Alley, C.J., Rodriguez, and Palafox, JJ.



         This is an appeal from a judgment that, in pertinent part, denies the claim of Appellant Texas Tax Solutions, LLC ("Texas Tax") to enforce a transferred tax lien. That denial is based on the trial court's finding that the lien is void and invalid because the documents on which the lien was based were fraudulently executed. We affirm.


         Texas Tax is in the business of making loans for the payment of delinquent taxes. In March 2011, it executed documents ("Lien Documents") evidencing a loan to Christina Gage for payment of delinquent ad valorem taxes owed on certain property in El Paso, Texas, in exchange for a transferred tax lien on the property. The Lien Documents include a Promissory Note, a Sworn Document Authorizing Transfer of Tax Lien, and a Tax Lien Deed of Trust, each of which was purportedly signed by Christina Gage. Texas Tax paid Appellee City of El Paso ("City") the taxes owing on the Gage property for the years 2008 through 2010, and the City issued a Certified Statement of Transfer of Tax Lien.

         In July 2014, the City initiated this lawsuit by filing a claim against Christina Gage for delinquent ad valorem taxes for the years 2011 through 2013. The City later joined Texas Tax as a party and invited it to intervene to assert its claim as a tax lien transferee. The City subsequently amended its petition to join individuals believed to be Christina Gage's heirs, who might have an ownership interest in the property.

         On September 3, 2015, Texas Tax filed its original (in rem) answer and a plea in intervention to enforce its transferred tax lien. On that same date, Texas Tax filed a suggestion of death for Christina Gage. It was later determined, and was undisputed at the final hearing, that Christina Gage had died in 2001, ten years before the Lien Documents were signed. In two amended pleas in intervention, Texas Tax specifically alleged that it was defrauded because Christina Gage's signatures on the Lien Documents were forged by an unknown person, possibly one of Gage's children.[1]

         The matter came on for final hearing before the trial court on March 27, 2018. Prior to the introduction of any evidence, Texas Tax argued that the City had not raised the validity of the transferred tax lien until four days before trial and had not asserted in its pleadings that the lien was invalid. Texas Tax declined the trial court's offer to entertain a request for a continuance. Texas Tax then informed the court that it believed Christina Gage's son, Alexander Gage, executed the Lien Documents. Counsel for Texas Tax further stated, "My client has been defrauded . . . by Mr. Gage. I'm not disputing that." The court agreed: "There is no question, and I would put it in a finding, that your client was defrauded. No question about that."

          The only testimony presented at the hearing was the City's evidence concerning its diligence in attempting to serve persons who may have an interest in the property. Christina Gage was identified as the last known record owner of the property and the person listed on the tax and appraisal records as the property owner. Texas Tax did not offer any testimony, but introduced a number of exhibits, including the Lien Documents, as business records.

         In response to inquiries from the court, counsel for Texas Tax acknowledged on the record that, "[t]o the best of [its] information," Christina Gage died in 2001 and the Lien Documents were not signed by her. The court then reiterated that there was no question but that Texas Tax had been defrauded. The court also noted that Texas Tax had been aware of Christina Gage's death for eight months. In fact, Texas Tax had been aware since at least February 2017 that Christina Gage was deceased and that someone else signed her name to the Lien Documents, because it alleged as much in its first amended plea in intervention.

         On April 19, 2018, the trial court signed a judgment specifically reciting that Texas Tax was the victim of fraud as the Lien Documents "were signed by a person other than Christina Gage, the person whose name appears on" those documents. The judgment further recites that this fraud rendered the transferred tax lien void and invalid, resulting in the denial of Texas Tax's claim that the transferred tax lien was valid and enforceable. Texas Tax filed a motion for new trial in which it asserted that the City had not pleaded fraud as an affirmative defense. That motion was overruled by operation of law.

         On July 13, 2018, Texas Tax filed a Notice of Filing Rule 11 Agreement, accompanied by the Rule 11 Agreement itself, which is signed by counsel for both the City and Texas Tax. The agreement states that, at or before a hearing set for July 13, 2018, the parties would jointly ask the trial court to modify its judgment in certain respects. It further provides that Texas Tax would prepare and submit a proposed Agreed Final Judgment for the City's consideration as soon as possible and that, upon agreement of counsel, the Agreed Final Judgment would be presented to the court for signature. The record does not reflect that any such agreed judgment was presented to the trial court. Texas Tax then timely perfected this appeal.


         Texas Tax asserts that the trial court erred by finding that its transferred tax lien was invalid due to fraud because (1) the City did not plead fraud as an affirmative defense and the issue was not tried by consent, and (2) there is legally and factually insufficient evidence to support a finding of fraud. Texas Tax also contends that the trial court abused its discretion by failing to approve and enter a valid Rule 11 agreement.


         The parties agree that the trial court's decision to consider the issue of fraud is reviewed for abuse of discretion. "A trial court abuses its discretion when it acts arbitrarily or unreasonably, or without reference to guiding rules and principles." Arzate v. Andujo, 576 S.W.3d 755, 758 (Tex. App.-El Paso 2019, no pet.) (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, ...

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