Inwood Dad's Club, Inc. v. Aldine Independent School Dist.

• Decision Date: 18 August 1994
• Docket Number: No. 01-93-00300-CV,01-93-00300-CV
• Citation: 882 S.W.2d 532
• Parties: INWOOD DAD'S CLUB, INC. v. ALDINE INDEPENDENT SCHOOL DIST. (1st Dist.)
• Court: Texas Court of Appeals

Page 532

882 S.W.2d 532

INWOOD DAD'S CLUB, INC. v. ALDINE INDEPENDENT SCHOOL DIST.

No. 01-93-00300-CV.

Court of Appeals of Texas Houston (1st Dist.).

Aug. 18, 1994.

Rehearing Denied Sept. 22, 1994.

Johnny J. Williams, Houston, for appellant.

Mike Driscoll, Valerie B. Ueckert, Murray E. Malakoff, Houston, for appellee.

Before OLIVER-PARROTT, C.J., and COHEN and WILSON, JJ.

OPINION

OLIVER-PARROTT, Chief Justice.

After a bench trial, the court found that appellant, Inwood Dad's Club, Inc. (Inwood), owed ad valorem property taxes to appellees, taxing authorities Aldine Independent School District (AISD), and the State of Texas-County of Harris (County). In addition to finding Inwood delinquent, the court held Inwood liable for interest, penalties, and attorney's fees. In three points of error, Inwood claims it is exempt from ad valorem property taxes for 1985 through 1989, that it owed no interest or penalties to the County for tax years before 1984, and that it is not liable for attorney's fees. We reverse and render in part, reverse and remand in part, and affirm in part as modified.

Inwood incorporated in 1970, and changed its charter in 1974 to become a charitable organization. In 1975, Inwood purchased a 7.5-acre tract of land in an area known as Woodland Trails North, Section 7, which was within the boundaries of AISD and the County. From 1976 to the filing of this suit in 1989, Inwood paid no ad valorem taxes to AISD or the County. It claims that the change of its charter in 1974, and its concomitant charitable activities, made it an organization that was exempt from ad valorem property taxes under TEX.TAX CODE ANN. § 11.18(d)(9) (Vernon 1992), which replaced TEX.REV.CIV.STAT.ANN. art. 7150, § 22(6). ¹

AISD did not agree with Inwood's claimed exemption status, and it sued Inwood in 1989 to recover delinquent ad valorem taxes for 1976 through 1982 and 1985 through 1989, along with interest, penalties, and attorney's fees. The County intervened, seeking delinquent ad valorem taxes for 1976 through 1983 and 1985 through 1989, along with interest, penalties, and attorney's fees. Both taxing authorities had classified Inwood as exempt for 1984, and neither seeks taxes for that year. ²

A tax master heard the case and found Inwood delinquent. Inwood appealed to the district court for trial de novo. The district court also found Inwood delinquent, and it rendered judgment that Inwood pay to AISD back taxes, interest, and penalties totaling $10,870.12, covering the tax years 1976 through 1982 and 1985 through 1989. ³ It also ordered Inwood to pay to the County back taxes, interest, and penalties totaling $12,460.85, covering the tax years 1976 through 1983 and 1985 through 1989, as well as attorney's fees of $1,626.78. It further ordered Inwood to pay postjudgment interest and all costs. Finally, the trial court ordered a foreclosure sale if Inwood failed to pay the judgment.

In its first point of error, Inwood asserts that the trial court erred in holding that Inwood was not an organization exempt from ad valorem property tax for the tax years 1985 through 1989. Inwood claims that it was and is a charitable organization under TEX.TAX CODE ANN. § 11.18(d)(9) (Vernon 1992). That provision states:

(d) A charitable organization must be organized exclusively to perform religious, charitable, scientific, literary, or educational purposes and, except as permitted by Subsection (h) of this section, engage exclusively in performing one or more of the following charitable functions:

....

(9) promoting the athletic development of boys or girls under the age of 18 years[.]

A former Inwood board member testified that the organization's purpose was to provide athletic activities for boys and girls ages four through 14. Inwood argues that its activities made it exempt under the statute. AISD and the County granted Inwood the exemption for tax year 1984, and neither taxing authority seeks back taxes for that year. AISD and the County have also granted an exemption for 1990 and the years following.

Under TEX.TAX CODE ANN. § 11.43(c) (Vernon 1992), this exemption, once granted, extends through subsequent tax years without need for Inwood to file a new application. The only exception to this automatic extension of an exemption is where the chief appraiser requires a new application to confirm the taxpaying entity's current qualifications for the exemption. Id. If the chief appraiser decides to require a new application, he must deliver to the taxpayer "a written notice that a new application is required, accompanied by an appropriate application form...." Id.

If the chief appraiser did not deliver the written notice to Inwood, then he failed to satisfy the statutory requirements under which he could exercise his authority to require Inwood to file a new application for exemption. If the chief appraiser did not deliver the notice, Inwood's exemption continued, without refiling, from 1984 throughout the subsequent tax years. Id.

Inwood alleges that the chief appraiser did not send notice of any requirement to reapply for an exemption. Harris County Appraisal District employee, Joel Castro, supervisor of the exemption center, testified that the appraisal district had granted Inwood the exemption in 1984, and that the appraisal district did not send written notice to Inwood requiring it to reapply.

Neither AISD nor the County claims that Inwood received the statutory notice that its exemption had been removed or that its qualification must be confirmed. AISD and the County contend, however, that they did not have to send the statutory notice to Inwood, because they had sent delinquent tax notices during 1985 through 1989.

AISD argues that Section 11.43(c) does not require the chief appraiser to send notice to Inwood, but merely allows him to do so. AISD's construction of the statute is unreasonable. The statute states that the exemption, once obtained, shall continue until the property changes ownership or until the property no longer qualifies for the exemption:

An exemption provided by Section ... 11.18 ... of this code, once allowed, need not be claimed in subsequent years, and ... the exemption applies to the property until it changes ownership or the person's qualification for the exemption changes. However, the chief appraiser may require a person allowed one of the exemptions in a prior year to file a new application to confirm his current qualification for the exemption by delivering a written notice that a new application is required, accompanied by an appropriate application form, to the person previously allowed the exemption.

TEX.TAX CODE ANN. § 11.43(c) (Vernon 1992) (emphasis added).

AISD claims that this statute is permissive, not mandatory, regarding notice to the taxpayer. Such a construction runs against fundamental notions of due process, and we cannot agree with AISD. The only permissive element in this code section involves the chief appraiser's authority to require a taxpayer to confirm his qualification for exemption status. It is true that the chief appraiser may require this from the taxpayer, but he need not do so. The appraiser may, on the other hand, simply allow the exemption to continue without further confirmation. That is the limit of the permissive aspect of this section.

Section 11.43(c) is predominantly a mandatory provision. It states that the exemption will continue until either of two conditions occurs: (1) change of ownership; or (2) change of qualification (i.e., charitable use of the property, in this case). If the appraiser chooses to exercise his authority to require the taxpayer to confirm his qualifications, then he must send written notice to that effect, along with a new application form. This is also a mandatory provision of this code section. AISD's notice argument fails.

The County argues that Inwood has waived its right to complain of its failure to receive notice that its exemption had been removed, because Inwood did not bring this complaint to the appraisal review board. The County claims that the tax code provides the exclusive means of resolving disputes over tax assessments, including claims of exemption. It cites sections 41.411 and 42.09 of the tax code, and several cases addressing disputes over exemption. The code sections follow:

(a) A property owner is entitled to protest before the appraisal review board the failure of the chief appraiser or the appraisal review board to provide or deliver any notice to which the property owner is entitled.

(b) If failure to provide or deliver the notice is established, the appraisal review board shall determine a protest made by the property owner on any other grounds of protest authorized by this title relating to the property to which the notice applies.

(c) A property owner who protests as provided by this section must comply with the payment requirements of Section 42.08 or he forfeits his right to a final determination of his protest.

TEX.TAX CODE ANN. § 41.411 (Vernon 1992).

(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;

(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.

(b) A person against whom a suit to collect a delinquent property tax is filed may plead as an affirmative defense:

(1) if the suit is to enforce personal liability for the tax, that the defendant did not own the property on which the tax was imposed on January 1 of the year for which the tax was imposed; or

(2) if the suit is to foreclose a lien securing the payment of a tax on real property, that the property was not located within the boundaries of the taxing unit...