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

                                   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.

                                   O P I N I O N

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

                                   Opinion by Justice Yañez

Appellant, Donna Independent School District (Athe District@), challenges a judgment requiring the District to either refund a surplus of funds raised with an ad valorem tax or to hold a referendum election to have the voters determine the disposition of the surplus.  We reverse and render.

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.  The trial court also awarded appellees all court costs and $132,196.00 in attorneys= fees.

The District challenges the judgment of the trial court with four issues,^[4] arguing that: (1) the relevant sections of the Texas Education Code do not prevent a school district from creating a surplus in its interest and sinking fund by collecting an unauthorized tax, and further, there is no duty to refund that surplus; (2) the trial court lacked subject matter jurisdiction because the appellees had administrative remedies which they did not exhaust; (3) the appellees were not entitled to an award of attorneys= fees; and (4) the appellees were not legally entitled to an award of prejudgment interest.

Voluntary Payment

In its second issue, the District argues that the trial court did not have subject matter jurisdiction in this case because the appellees failed to exhaust their administrative remedies.^[5]  Appellants argue that the tax code provides an administrative process for protesting the imposition of ad valorem taxes and obtaining a tax refund.  In the course of arguing this issue, appellant points out that appellees did not protest the imposition of the ad valorem tax at issue in this case.  We read this as including an argument that the appellees paid the tax voluntarily.  Tex. R. App. 38.1(e). 

It  has long been the law in Texas that taxes voluntarily paid may not be recovered by the taxpayer, even if the tax is illegal.  State v. Connecticut Gen. Life Ins. Co., 382 S.W.2d 745, 746 (Tex. 1964); Johnson Controls, Inc. v. Carrollton‑Farmers Branch Indep. Sch. Dist., 605 S.W.2d 688, 689 (Tex. Civ. App.BDallas 1980, writ ref=d n.r.e.); Amplifone Corp. v. Cameron County, 577 S.W.2d 567, 569 (Tex. Civ. App.BCorpus Christi 1979, no writ).  The recognized exceptions to the rule against the recovery of voluntary payments of an illegal tax are: (1) fraud; (2) express or implied duress; and (3) mutual mistake of fact.  Salvatore v. Houston Indep. Sch. Dist., 709 S.W.2d 306, 308 (Tex. App.BHouston [14th Dist.] 1986, writ dism=d w.o.j.); San Antonio Indep. Sch. Dist. v. Nat=l Bank of Commerce of San Antonio, 626 S.W.2d 794, 797 (Tex. App.BSan Antonio 1981, no writ).

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.

There is no evidence of duress or mutual mistake of fact in the record.  The record contains documents from the District showing the tax rates and the level of indebtedness.  This information was available to taxpayers.  The jury found that Rogers did not pay the taxes levied by the District for the 1996-1997 under a written protest.  See Tex. Tax Code Ann. ' 31.115 (Vernon 2001) (payment of an ad valorem tax is involuntary if the taxpayer indicates that the tax is paid under protest on the instrument by which the tax is paid, or in an accompanying document).  The record shows that Rogers voluntarily paid the ad valorem taxes that he now seeks to have refunded, and because none of the recognized exceptions are applicable, the appellees= claim is precluded under Texas law.^[6]

The judgment of the trial court is REVERSED and judgment RENDERED that appellees take nothing.

LINDA REYNA YAÑEZ

Justice

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

Opinion delivered and filed this the

16th day of May, 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]Appellant lists nine issues under the heading AIssues Presented@ in its brief; however, in the argument section of the brief, appellant raises four issues.  We address the issues which are actually discussed in the argument section of the brief.  See Tex. R. App. P. 38.1(h).

^[5]Appellees argue that the District has waived this argument on appeal by not raising it at the trial level.  However, subject matter jurisdiction 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.).  The failure of the appellees to protest the payment of the taxes was raised at the trial level, and thus, is properly before this Court on appeal.

^[6]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 and no evidence was adduced concerning these people at trial by appellees.