Tarrant Appraisal Dist. v. Colonial Country Club

• Decision Date: 08 March 1989
• Docket Number: No. 2-87-224-CV,2-87-224-CV
• Citation: Tarrant Appraisal Dist. v. Colonial Country Club, 767 S.W.2d 230 (Tex. App. 1989)
• Parties: TARRANT APPRAISAL DISTRICT, Tarrant County Appraisal Review Board and Colonial Country Club, Appellants, v. COLONIAL COUNTRY CLUB, Tarrant Appraisal District and Tarrant County Appraisal Review Board, Appellees.
• Court: Texas Court of Appeals

Page 230

767 S.W.2d 230

TARRANT APPRAISAL DISTRICT, Tarrant County Appraisal Review Board and Colonial Country Club, Appellants, v.COLONIAL COUNTRY CLUB, Tarrant Appraisal District and Tarrant County Appraisal Review Board, Appellees.

No. 2-87-224-CV.

Court of Appeals of Texas Fort Worth.

March 8, 1989.

Cantey & Hanger, and Jack C. Wessler and Catherine Alder, Fort Worth, for appellants.

William L. Kirkman, Debra Dillehay Daniel, Bourland & Kirkman, Berl E. Godfrey, Fort Worth, for appellees.

Before WEAVER, C.J., and FARRIS and LATTIMORE, JJ.

OPINION

FARRIS, Justice.

The fundamental question underlying this lawsuit is the constitutionality of subchapter F of Chapter 23 of the Tax Code, the so-called "Greenbelt Act."TEX.TAX CODE ANN. secs. 23.81-23.87(Vernon 1982).

Appellee Colonial Country Club filed suit protesting a determination by Tarrant Appraisal District and Tarrant County Review Board that Colonial was not entitled to special appraisal under subchapter F.The trial court, sitting without a jury, ruled that the Greenbelt Act was not applicable to Colonial as a country club.However, the court refused to allow Colonial to be taxed according to the land's full fair market value.Instead, the trial court based the value on a self-imposed restriction filed by Colonial in the county deed records.

Each party has alleged a large number of points of error, cross-points, and reply points.For the sake of convenience, we have grouped, by party, those points relevant to our disposition of this appeal.

The position of the District and Review Board may be summed up thusly: Colonial's deed restrictions are unenforceable and should not affect the appraisal; the evidence is factually and legally insufficient to support the trial court's determination of the value of the property for the tax years 1982 and 1984 through 1986; and in response to Colonial's cross-point that Colonial did come within the scope of the Greenbelt Act, the District and Review Board argue alternatively that the Greenbelt Act is a violation of article VIII of the Texas Constitution and that Colonial failed to satisfy the requirements of the Act.

Colonial's position may be summed up thusly: the Greenbelt Act is a valid constitutional legislative enactment; Colonial qualifies for appraisal under the Act; even if Colonial does not qualify under the Greenbelt Act, the deed restriction is valid and the property must be appraised with the restriction in mind; and the evidence was legally and factually sufficient to support the trial court's determination of value for the tax years in question.In addition, Colonial contends that the trial court lacked jurisdiction to determine the appraised value of the property for the tax year 1982.

We reform and affirm the judgment of the trial court because the Greenbelt Act is a valid constitutional enactment, applicable to private country clubs, and Colonial has satisfied its requirements.We also find that the trial court had jurisdiction to determine the appraised value for 1982 and there is sufficient evidence to support the trial court's determination of value for the tax years 1982-1986.

I.CONSTITUTIONALITY OF THE GREENBELT ACT

A.Method of Appraisal

In point of error fourteen, the District and Review Board argue that the trial court erred in holding the Greenbelt Act does not violate the Texas Constitution.They take the position that section 23.83 of the Act, providing for appraisal of land based on its value as recreational, scenic or park land, results in a partial tax exemption by allowing the land to be taxed at less than its full market value.TEX.TAX CODE ANN. sec. 23.83(Vernon 1982).

The Texas Constitution provides that taxation of real property shall be equal, uniform and in proportion to value.TEX. CONST. art. VIII, sec. 1.The term "value," within the constitutional requirement that taxation be equal and uniform, means the reasonable cash market value of the property.Whelan v. State, 155 Tex. 14, 282 S.W.2d 378, 380(1955);Lively v. Missouri, K. & T. Ry. Co. of Texas, 102 Tex. 545, 120 S.W. 852, 856(1909).The term "market value" has been defined by the supreme court as the price that property will bring when offered for sale by one who desires but is not obliged to sell, and is bought by one who desires to buy, but is under no necessity of buying.State v. Carpenter, 126 Tex. 604, 89 S.W.2d 194, 202(1936).This definition of market value is codified in TEX.TAX CODE ANN. sec. 1.04(7)(Vernon 1982).Tax exemptions are limited to those specifically enumerated in article VIII of the constitution.TEX. CONST. art. VIII, secs. 1,2;State v. Am. Legion Post No. 58, 611 S.W.2d 720, 723(Tex.Civ.App.--El Paso 1981, no writ).The District and Review Board argue that the special appraisal amounts to a partial exemption which does not fall into a constitutionally permitted or required exception.

We disagree.First, appraisal under the terms of the Act provides only a method of assessing value; it does not result in exemption from taxation.Second, the method of appraisal employed by the Act is based upon market value.The fact that the valuation reflects the restricted use to which the land can be put does not render it unconstitutional.The Greenbelt Act provides for a reasonable classification of property based upon a legitimate state interest: the continued existence of scenic, park, and recreational lands in urban areas.As it is equally and uniformly applied under a legitimate system of classification, it does not violate the mandate of article VIII of the Texas Constitution.

The fact that the Greenbelt Act offers favorable tax treatment to those willing to commit the use of their land to scenic, park or recreational use does not raise the exchange of unrestricted property use for reduced taxes to the status of a tax exemption.Valuation consistent with restricted use does not amount to an exemption.

Both the Texas Supreme Court and the Legislature recognize the inherent difference between valuation and exemption.The Tax Code defines the taxable value of property as the appraised value of the property multiplied by the assessment ratio minus any allowable exemption.TEX.TAX CODE ANN. sec. 1.04(8), (9), (10)(Vernon 1982).Fifty years ago, the Texas Supreme Court explained the distinction between statutes providing for exemptions and those defining a method of valuation in Republic Ins. Co. v. Highland Park Ind. School Dist., 129 Tex. 55, 102 S.W.2d 184, 193(1937).Holding that reinsurance reserves were to be deducted from the total valuation of assets in computing taxable property, the court held that the deduction of reserves did not constitute an unconstitutional exemption of taxable property, explaining that "[t]he question is not one primarily of exemption of property from taxation, but is the fixing of a standard of valuation. ...The question is not one of lack of power, but purely of the exercise of discretion and judgment on the part of the Legislature."Id. at 193.The court later reaffirmed its holding in Hardin v. Central American Life Ins. Co., 374 S.W.2d 881, 884(Tex.1964), pointing out that the constitution, after providing that all property is to be taxed in proportion to its value, provides that value is to be "ascertained as may be provided by law."TEX. CONST. art. VIII, sec. 1(amended 1984).The court noted that the Legislature"has simply provided that in arriving at the valuation of assets of an insurance company, account must be given to the reserve."Hardin, 374 S.W.2d at 884.

The method of determining value employed in the Act correctly adapts the standard of market value assessment to property encumbered by use restrictions and is consistent with the constitutional requirement of equality and uniformity in taxation.The logic of defining value for tax purposes as the price which could be obtained for property in a hypothetical sale on the open market requires that adjustment be made to compensate for the effect of limits upon the owner's use of the property.

The market price of unrestricted land suggests the greatest returns an owner could expect to realize from the use of the land.This standard, however, does not reflect the returns the owner of a parcel of restricted property could expect to realize.Appraisal of land according to its market value as recreational, scenic or park land reflects the fact that the owner of restricted land, unlike the owner of unrestricted land, is no longer free to realize the returns associated with making the highest and best use of the land.A method of valuation that is cognizant of use restrictions on the property reflects the returns that may be realized by the restricted owner, just as full market valuation reflects the returns that may be realized by the owner of unencumbered property.One should not lose sight of the fact that the valuation is used only for purposes of taxation.Adjustment in the terms of the hypothetical sale simply takes account of the effect of the restriction on the value of the land to its owner during the tax year.What would occur in an actual sale would have no bearing on the proper valuation for tax purposes.

Market valuation that takes account of use restrictions upon the property does not violate the equality and uniformity on taxation provision of the Texas Constitution.It has long been recognized that absolute equality and uniformity is an unobtainable ideal.Whelan, 282 S.W.2d at 380.The requirement of equality and uniformity does not prevent the reasonable classification of persons and property for taxation.San Jacinto Nat. Bank v. Sheppard, 125 S.W.2d 715, 717(Tex.Civ.App.--Austin 1938, no writ).The Legislature is given broad powers to classify property for taxation.Dancetown, U.S.A., Inc. v. State, 439 S.W.2d 333, 336(Tex.1969).The requirements of equality and uniformity are met when the classification is not unreasonable or arbitrary and operates...