Donna Independent School District v. John Rogers, and Others Similarly Situated ( 2002 )

                                   NUMBER 13-01-277-CV

                             COURT OF APPEALS

                   THIRTEENTH DISTRICT OF TEXAS

                                CORPUS CHRISTI

DONNA INDEPENDENT

SCHOOL DISTRICT,                                                            Appellant,

                                                   v.

JOHN ROGERS, AND OTHERS

SIMILARLY SITUATED,                                                        Appellees.

     On appeal from the 332nd District Court of Hidalgo County, Texas.

                          OPINION ON REHEARING

                     Before Justices Dorsey, Yañez, and Chavez^[1]

                                   Opinion by Justice Yañez

Our original opinion in this case was issued May 16, 2002. See Donna Indep. Sch. Dist. v. Rogers, No. 13-01-277-CV, 2002 Tex. App. LEXIS 3521 (Tex. App.BCorpus Christi May 16, 2002, no pet. h.) (not designated for publication).  Appellees, John Rogers, et al.,  filed a motion for reconsideration, arguing that this Court erred in: (1) treating the issue of voluntary payment as a jurisdictional issue, rather than as an affirmative defense; and (2) addressing voluntary payment as a bar to appellees= recovery because appellant Donna Independent School District (Athe District@) waived the issue by failing to plead it as an affirmative defense.  Appellees argue that the issue of voluntary payment as a bar to recovery is an issue of standing, estoppel, or waiver, and that each of these theories must be pled as an affirmative defense.  See Tex. R. Civ. P. 94.  Upon review of the record, we withdraw our prior opinion, and substitute the following opinion.

In this appeal, the District challenges a judgment requiring it to either: (1) refund a surplus of funds raised with an ad valorem tax or (2) hold a referendum election to have the voters determine the disposition of the surplus.  The District contends, inter alia, that the trial court was without subject matter jurisdiction because appellees failed to exhaust their administrative remedies under the tax code.  We agree and hold the trial court=s judgment is void.  We dismiss appellees= claims.    

Background^[2]

The District adopted an ad valorem tax rate of $1.41 for the 1996-1997 school year.  $0.19 of this rate was levied to pay existing bond debt.  In February of 1997, the District paid off the bond debt, leaving a surplus amount of $1,132,000.00 in the Ainterest and sinking fund,@ which was the account created to hold the bond monies. The surplus money in the interest and sinking fund represented an accumulation of money from bond taxes, delinquent bond taxes, and interest and penalties on delinquent bond taxes. 

In August of 1998, the District transferred the surplus funds in the interest and sinking fund to the District=s maintenance and operations fund.  The appellees filed suit,  initially seeking injunctive relief and a declaratory judgment.^[3]  The appellees later amended their petition to remove the prayer for declaratory relief, leaving only a prayer that the trial court issue a judgment ordering that the Afull amount of the surplus be rebated to the tax payers or that in the future, the tax payers receive a roll back on their taxes equivalent to the amount of the surplus.@  The appellees also requested attorneys= fees and costs.

The case was tried before a jury in September of 2000. The jury found that at the end of the 1996-1997 fiscal year, the District had $1,132,000 in its debt service fund, $1,072,000 of which was transferred to the maintenance and operations fund during the fiscal year 1997-1998.  The jury further found that the District did not have outstanding bond debt at the time of the transfer of funds.  The jury also found that ten percent of the money would be reasonable attorneys= fees.

The trial court issued a judgment ordering the District to implement one of the following alternatives: (1) reimburse each person in the District who paid school taxes in 1996 and 1997 a pro rata share of the $1,132,000 surplus, plus five percent interest; (2) credit each current taxpayer in the District a pro rata share of the surplus, plus five percent interest; or (3) hold a referendum election to enable taxpayers within the District to determine if the District should reimburse the taxpayers, credit the taxpayers, or use the surplus for the construction of specific future school projects.^[4]  The trial court also awarded appellees all court costs and $132,196.00 in attorneys= fees.

By nine issues, the District challenges the judgment of the trial court, contending generally: (1) the trial court lacked subject matter jurisdiction because appellees failed to exhaust their administrative remedies, which are the exclusive means by which taxpayers may obtain a tax refund; (2) appellees failed to state a legally cognizable claim because the Texas Education Code neither prohibits a school district from creating a surplus in its interest and sinking fund nor from transferring such a surplus to its general fund; (3) the trial court erred in awarding appellees attorneys= fees; and (4) the trial court erred in awarding appellees prejudgment interest.

Jurisdiction

By its second issue, the District contends the trial court lacked subject matter jurisdiction in this case because appellees failed to exhaust their administrative remedies.  Specifically, the District argues that appellees= claim is essentially a claim for a refund of ad valorem taxes and that the exclusive remedy available for obtaining such a refund is provided by the administrative provisions set forth in the tax code.  See Tex. Tax Code Ann. ' 42.09(a)(2) (Vernon 2001).  The District contends that compliance with the administrative procedures provided in the tax code is jurisdictional.  Because it is undisputed that appellees failed to exhaust their administrative remedies under the tax code,^[5] the District contends the trial court lacked subject matter jurisdiction.

In considering the question of the trial court=s jurisdiction, we note that subject matter jurisdiction is never presumed and cannot be waived.  Texas Ass=n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 443-44 (Tex. 1993); Garcia-Marroquin v. Nueces County Bail Bond Bd., 1 S.W.3d 366, 373 (Tex. App.BCorpus Christi 1999, no pet.).  Appellate court jurisdiction of the merits of a case extends no further than that of the court from which the appeal is taken.  Dallas County Appraisal Dist. v. Funds Recovery, 887 S.W.2d 465, 468 (Tex. App.BDallas 1994, writ denied).  If the trial court lacked jurisdiction, then an appellate court only has jurisdiction to set the judgment aside and dismiss the cause.  Id.   

In order for a taxpayer to protest an action taken by a taxing authority, the taxpayer must follow the procedures outlined by the tax code. Harris County Appraisal Dist. v. Texas Nat'l Bank, 775 S.W.2d 66, 69 (Tex. App.BHouston [1st Dist.] 1989, no writ).  These requirements are jurisdictional.  Id.  The procedures prescribed by the tax code are the exclusive means by which a property owner may challenge the valuation of his property by an appraisal district. Dallas County Appraisal Dist. v. Lal, 701 S.W.2d 44, 46 (Tex. App.BDallas 1985, writ ref'd n.r.e.).  Section 42.09 specifically states:

Remedies Exclusive

(a) Except as provided by Subsection (b) of this section, procedures prescribed by this title for adjudication of the grounds of protest authorized by this title are exclusive, and a property owner may not raise any of those grounds: (1) in defense to a suit to enforce collection of delinquent taxes; or (2) as a basis of a claim for relief in a suit by the property owner to arrest or prevent the tax collection process or to obtain a refund of taxes paid.

Tex. Tax Code Ann. ' 42.09(a) (Vernon 2001) (emphasis added).   The tax code thus prohibits a party from filing suit for a tax refund, unless the party first protests the tax under the provisions of the tax code.  See id.; First Bank of Deer Park v. Harris County, 804 S.W.2d 588, 591 (Tex. App.BHouston [1st Dist.] 1991, no writ). 

Section 41.41 of the tax code provides eight specific determinations that may be protested by a property owner or agent to an appraisal review board.  See Tex. Tax Code Ann. ' 41.41 (Vernon 2001).  In addition to the determinations specified in the statute, subsection (9) authorizes a taxpayer to protest "any other action of the chief appraiser, appraisal district, or appraisal review board that applies to and adversely affects the property owner."  Id. ' 41.41(9). 

The intent of the administrative review process is to provide aggrieved taxpayers relief without the necessity of resorting to the courts.  Webb County Appraisal Dist. v. New Laredo Hotel, Inc., 792 S.W.2d 952, 954 (Tex. 1990); Funds Recovery, Inc., 887 S.W.2d at 470. 

As the Fort Worth Court of Appeals has stated,

Where a statute creates a right not existing at common law (such as the right to appeal granted in the section of the tax code under discussion) and prescribes a remedy to enforce that right, the courts have subject matter jurisdiction to act only in the manner provided by the statute that created the right.  This principle applies with full force to the Texas Tax Code.

Fountain Parkway, Ltd. v. Tarrant Appraisal Dist., 920 S.W.2d 799, 802 (Tex. App.BFort Worth 1996, writ denied) (citations omitted). 

In the case before us, appellees contend they are entitled to a tax refund  because the District collected an illegal bond tax by taking that portion of appellees= ad valorem taxes levied to pay bond taxes and placing it in the District=s operating account. 

At trial, Francis Rogers testified as class representative.  Rogers was the only plaintiff to testify.  Rogers stated that he is a concerned citizen and has Aalways been involved,@ because of his belief that his tax money has been spent unwisely.  Rogers stated that he challenges governmental entities that misuse his tax money. Rogers frequently attends meetings of the District=s Board of Trustees and was doing so at the time the $0.19 tax in question was levied.  Rogers testified that he was familiar with laws requiring the publication of the District=s tax rate and the laws involved in challenging that tax rate. We find no evidence in the record that Rogers complied with the administrative procedures outlined in the tax code.

We find appellees= claim of entitlement to a tax refund because the District collected an illegal debt tax is Aa basis of a claim for relief in a suit by the property owner to arrest or prevent the tax collection process or to obtain a refund of taxes paid.@  Tex. Tax Code Ann. ' 42.09(a) (Vernon 2001).  We hold that because appellees did not exhaust their administrative remedies, this Court lacks jurisdiction to review appellees= claims.

Accordingly, we sustain the District=s second issue, set aside the trial court=s judgment, and DISMISS appellees= cause.

LINDA REYNA YAÑEZ

Justice

Do not publish. Tex. R. App. P. 47.3.

Opinion delivered and filed this the

8th day of August, 2002.

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^[1]Retired Justice Melchor Chavez, assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to Tex. Gov=t Code Ann. ' 49.09(f) (Vernon 1998).

^[2]Because appellees did not contradict the appellant=s statement of facts as contained in its appellate brief, the facts presented in this opinion are taken from the appellant=s brief.  See Tex. R. App. P. 38.1(f) (in a civil case, appellate court is to accept as true facts stated in appellant=s brief unless another party contradicts those facts).

^[3]The plaintiffs in this lawsuit, appellees in this appeal, are defined in the petition as John Rogers and all other taxpayers subject to the $0.19 ad valorem tax.

^[4]On September 17, 2001, the District adopted a resolution authorizing a credit to each tax account in the District, whereby the debt tax levied for the fiscal year 2001-2002 is to be paid for out of excess funds prior to September 30, 2001.  No issues with regard to the District=s adoption of the September 17, 2001 resolution are before us and we decline to comment on it. 

^[5]There was testimony from Agapito Navarro, the District=s assistant superintendent for business and finance, that three people did protest the 1996-97 tax.  However, these three people are not identified in the record before us and no evidence was adduced concerning them at trial by appellees.