Houston Lighting & Power Co. v. Dickinson Independent School Dist., 9759

• Decision Date: 08 May 1990
• Docket Number: No. 9759,9759
• Citation: 794 S.W.2d 402
• Parties: HOUSTON LIGHTING & POWER COMPANY, Appellant, v. DICKINSON INDEPENDENT SCHOOL DISTRICT, et al., Appellees.
• Court: Texas Court of Appeals

Page 402

794 S.W.2d 402

HOUSTON LIGHTING & POWER COMPANY, Appellant, v. DICKINSON INDEPENDENT SCHOOL DISTRICT, et al., Appellees.

No. 9759.

Court of Appeals of Texas,

Texarkana.

May 8, 1990.

Opinion Modified,

Rehearing Overruled June 26, 1990.

Second Motion for Rehearing

Overruled July 31, 1990.

Edward Kliewer, III, William T. Armstrong, III, Foster, Lewis, Langley, Gardner & Banack, San Antonio, James P. Simpson, Texas City, Frank G. Harmon, Houston, for appellant.

Benjamin Powel, Galveston, R. Douglas Muir, William C. Bednar, Jr., Austin, Roland L. Bassett, Galveston, for appellees.

BLEIL, Justice.

This case concerns the correctness of tax assessments of property value. The appeal is taken from a judgment in four consolidated lawsuits in which Houston Lighting & Power Company complained that the assessed value of its property was excessive and sought relief against the Dickinson Independent School District, the Galveston County Appraisal District, and the Galveston County Appraisal Review Board. After a jury trial to determine the fair market value of HL & P's property, the trial court entered judgment against HL & P for the 1981 tax year and in favor of HL & P for the 1982, 1983 and 1984 tax years.

Each side has filed an appeal. HL & P appeals the judgment rendered on the 1981 tax year, contending that it should be entered in accordance with the jury finding because the taxing units' assessment of HL & P's property was grossly excessive. The taxing units appeal the judgment rendered on the 1982, 1983 and 1984 tax years, contending that HL & P did not prove the market value of its property. We reverse the judgment to the extent that it covers the 1981 tax year, and we affirm the judgment as it pertains to the 1982-1984 tax years.

Before the adoption of the Texas Tax Code, to successfully complain of an assessed value, a property owner was required to show that the assessed value was grossly in excess of the fair market value of the property. Under the Code, a property owner need only show that the assessment exceeds the fair market value. This distinction explains why different rules govern the 1981 assessment than govern the 1982, 1983 and 1984 assessments.

The 1981 Tax Year

HL & P sought to set aside the taxing units' assessment for the 1981 tax year on the ground that it was grossly in excess of the property's fair market value. The 1981 assessment of HL & P's property included the P.H. Robinson Electric Generating Plant and appurtenant equipment and supplies. The taxing units assessed the value of the property at $270,000,000.00. The jury found that its fair market value was $147,363,600.00. ¹ The trial court entered a take-nothing judgment against HL & P, concluding that the taxing entities' valuation of the property was not grossly excessive.

While fair market value is a question of fact, whether a tax assessment is grossly excessive is a question of law. Polk County v. Tenneco, Inc., 554 S.W.2d 918, 920 (Tex.1977). For the 1981 tax year, the mere excessiveness of the assessed value is an insufficient reason to set aside a tax appraisal board's valuation. See City of Waco v. Conlee Seed Company, 449 S.W.2d 29, 30 (Tex.1969). Thus, only if the taxing units' 1981 assessment is grossly excessive, is HL & P entitled to have the assessment set aside. The standard for determining gross excessiveness can be stated as follows: the value assessed must be so far above the fair market value as to shock the mind, thus raising the presumption that the valuation was either fraudulent or does not represent a fair and conscientious effort on the part of the board to arrive at a fair market value. Westwood Independent School District v. Southern Clay, 604 S.W.2d 511, 515 (Tex.Civ.App.-Tyler 1980, writ ref'd n.r.e.); Pierce v. City of Jacksonville, 403 S.W.2d 512, 517 (Tex.Civ.App.--Tyler 1966, writ ref'd n.r.e.).

The taxing units' assessment of $270,000,000.00 of HL & P's property is $122,636,400.00, or 83%, above the fair market value of $147,363,600.00 found by the jury. The critical question for the 1981 tax year is whether this assessment is grossly excessive. Davis v. City of Austin, 632 S.W.2d 331 (Tex.1982), relied on by the taxing units, indicates that before an assessment can be considered grossly excessive, the assessment must be a multiple of the property's market value. In that case, the issue was whether an assessment of $177,507.00 for property that had a fair market value of $155,000.00 was grossly excessive. The court concluded that the assessment was excessive, but said that grossly excessive assessments usually have been found only when the assessed value has been some multiple of the property's market value. Davis v. City of Austin, 632 S.W.2d at 335, citing City of Waco v. Conlee Seed Company, 449 S.W.2d 29 (assessed value was thirteen times the fair market value); Dallas County v. Dallas Nat. Bank, 142 Tex. 439, 179 S.W.2d 288 (1944) (five times); French Independent School Dist. v. Howth, 134 Tex. 211, 134 S.W.2d 1036 (1940) (ten times); Ogburn v. Ward County Irr. Dist. No. 1, 280 S.W. 169 (Tex.Comm'n App.1926, holding approved) (nine times). However, these cases do not require that an assessment be a multiple of fair market value to be grossly excessive, and there are cases to the contrary. See, e.g., Corrigan Properties, Inc. v. City of West University Place, 430 S.W.2d 917 (Tex.Civ.App.--Houston [1st Dist.] 1968, no writ) (fair market values of properties which ranged from 65.8% to 69.4% above assessments were grossly excessive); Simkins v. City of Corsicana, 86 S.W.2d 792 (Tex.Civ.App.--Waco 1935, no writ) (fair market value which was 68.7% above assessment was grossly excessive); City of Sweetwater v. Biard Development Co., 203 S.W. 801 (Tex.Civ.App.--El Paso 1918, no writ) (fair market value which was 75% above assessment was grossly excessive). The taxing units' assessment of $270,000,000.00 for property which has a fair market value of $147,363,600.00, makes an approximate $123,000,000.00 difference. This is too great a difference for us to decide that the assessment was not grossly excessive. We conclude that the 1981 assessment was grossly excessive.

The taxing units reply that HL & P is not entitled to relief because it voluntarily tendered its 1981 taxes. Under the voluntary payment rule, one who voluntarily pays for an illegal tax has no valid claim for its repayment, except in cases of fraud, implied or express duress, or mutual mistake. State v. Connecticut General Life Insurance Co., 382 S.W.2d 745, 746-47 (Tex.1964). Further, a taxpayer is required to tender the amount of taxes owed under its own theory of valuation. State v. Hoffman, 109 Tex. 133, 201 S.W. 653 (1918); Harding Bros. Oil & Gas Co. v. Jim Ned Independent School District, 457 S.W.2d 102 (Tex.Civ.App.-Eastland 1970, no writ). However, the parties entered into three stipulations during the pendency of this lawsuit. The stipulations allowed HL & P to unconditionally tender the amount of taxes which it admitted was due for the 1981 tax year. The stipulations also allowed HL & P to deposit more than it asserted was due; this was to include all taxes possibly due, together with interest, penalties, and attorney's fees. The stipulations provide that the deposits were made without prejudice to the assertion of any right or contention of either party, and further provide that in the event of a judgment reflecting a tax liability less than the sum deposited, HL & P is entitled to a reimbursement of the difference. The stipulations show an intent to allow HL & P to pursue its legal remedies against the taxing units. Therefore, the voluntary payment rule does not bar HL & P from pursuing its legal remedies through these proceedings.

The taxing units also reply that HL & P is barred by issue preclusion from relitigating the market value of its property using the unit valuation method. The parties were involved in a previous lawsuit contesting HL & P's 1980 property taxes. Houston Lighting & Power Co. v. Dickinson Independent School District, 641 S.W.2d 302 (Tex.App.-Houston [14th Dist.] 1982, writ ref'd n.r.e.). In that case, HL & P attempted to prove its property value using the unit valuation method, while the taxing units used the cost and income approach. The unit valuation method values the entire property of HL & P over several taxing districts using three techniques: the cost approach, the income approach, and the market approach. The unit value is then apportioned and allocated among the taxing districts. See American Institution of Real Estate Appraisers, Real Estate Appraisal Terminology 212-13 (1975). The court of appeals affirmed the trial court's decision that HL & P did not satisfy its burden of proof.

The taxing units now contend that the 1980 litigation determined that the unit valuation method was no evidence of market value. Issue preclusion bars relitigation of identical issues of fact or law that were actually litigated and essential to the judgment in a prior suit. Van Dyke v. Boswell, O'Toole, Davis & Pickering, 697 S.W.2d 381, 384 (Tex.1985). To invoke the doctrine, a party must establish that: (1) the facts sought to be litigated in the second action were fully and fairly litigated in the prior action; (2) these facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. Mendez v. Haynes Brinkley & Co., 705 S.W.2d 242, 245 (Tex.App.-San Antonio 1986, writ ref'd n.r.e.).

In order for HL & P to be barred by issue preclusion from utilizing the unit valuation approach, the approach must have been litigated in the prior lawsuit and determined to be an invalid approach. The focus of the 1980 appeal was on whether HL & P had sustained its burden and proved that the taxing units' appraisal was grossly excessive. HL & P argued that the unit valuation approach was the only valuation method which could be used to value its property....