Appraisal Review Bd. of HCAD v. O'Connor & Assoc.

The Appraisal Review Board of HCAD v. O'Connor & Associates (Tex.App.- Houston [14th Dist.] Aug. 19, 2008)
(Yates) (
property tax appeal, failure to exhaust their administrative remedies before filing suit requires
jurisdictional dismissal)
REVERSED AND RENDERED: Opinion by
Justice Leslie Brock Yates  
Before Justices Brock Yates, Anderson and Brown
14-07-00354-CV The Appraisal Review Board of Harris County Appraisal District, and Robert Cunningham,
former Chairman v. O'Connor & Associates, Wolverine Crosby LP, E Pointe Properties I Ltd, Baker-Orr Joint
Venture, and J. Frederick Welling
Appeal from 127th District Court of Harris County
Trial Court
Judge: Sharolyn P. Wood

O P I N I O N

Appellants, the Appraisal Review Board of Harris County Appraisal District (the Board) and former chairman of
the Board Robert Cunningham, appeal the trial court's denial of their plea to the jurisdiction.  We conclude that
because appellees, O'Connor & Associates, Wolverine Crosby Green LP, E Pointe Properties I Ltd., Baker -
Orr Joint Venture, and J. Frederick Welling, failed to exhaust their administrative remedies before filing suit,
the district court lacked subject matter jurisdiction over this dispute.  We reverse the trial court's judgment and
render judgment dismissing the case for lack of subject matter jurisdiction.  

I.  Factual and Procedural Background

O'Connor & Associates originally filed suit against Harris County Appraisal District (HCAD), chief appraiser Jim
Robinson, the Board, and Cunningham seeking mandamus, injunctive, and declaratory relief.  O'Connor
alleged the appellants were violating procedures outlined in the Tax Code for conducting property tax
appraisal protest hearings.  O'Connor claimed that, contrary to the Tax Code, the Board was postponing
hearings, refusing to consider property owners' evidence, considering evidence that HCAD had not produced
to property owners, determining protests in favor of HCAD even when HCAD presented insufficient or no
evidence, and issuing only one order to resolve claims contesting both the appraised value and unequal
appraisal of the property.

In response, the defendants filed a plea to the jurisdiction asserting that because O'Connor had not exhausted
its administrative remedies as required by the Tax Code, the district court lacked subject matter jurisdiction to
hear O'Connor's claims.  The day before the hearing on the defendants' plea to the jurisdiction, O'Connor filed
a first amended petition, adding plaintiffs Wolverine Crosby Green LP, E Pointe Properties I Ltd., Baker‑Orr
Joint Venture, and J. Frederick Welling (collectively the “Taxpayers”).  The petition also alleged that the
plaintiffs had either already filed or would likely file protests of the appraised value of their property for the
2005 tax year and that proper hearings in accordance with chapter 41 of the Tax Code were either untimely
held or not held at all.  

The trial court denied the plea to the jurisdiction as to O'Connor's claims in the original petition only; on
appeal, this court dismissed the issue as moot.  See Harris County Appraisal Dist. v. O'Connor & Assocs., No.
14-06-00098-CV, 2006 WL 3072079, at *3 (Tex. App.- Houston [14th Dist.] Oct. 31, 2006, no pet.).[1]  The
case returned to the trial court, and after a second hearing on the defendants' plea to the jurisdiction, the trial
court granted the plea as to HCAD and Robinson and denied the plea as to the Board and Cunningham.  Now
before us on the second appeal in this matter, the Board and Cunningham (collectively the “Taxing
Authorities”) argue in two issues that the district court erred in denying their plea to the jurisdiction because
the court lacked subject matter jurisdiction and because appellees lack standing.  

II.  Subject Matter Jurisdiction

A plea to the jurisdiction is a dilatory plea seeking to defeat a plaintiff's claims, regardless of merit, by
challenging the district court's jurisdiction to hear the subject matter of the dispute.  Bland Indep. Sch. Dist. v.
Blue, 34 S.W.3d 547, 554 (Tex. 2000).  To prevail, the defendant must show that even if all the plaintiff's
pleaded allegations are true, an incurable jurisdictional defect remains on the face of the pleadings that
deprives the trial court of subject matter jurisdiction.  Brenham Hous. Auth. v. Davies, 158 S.W.3d 53, 56 (Tex.
App.- Houston [14th Dist.] 2005, no pet.).  We review a trial court's ruling on a plea to the jurisdiction de novo.  
See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004).  When a plea to the
jurisdiction challenges the pleadings, we determine if the pleader has alleged facts affirmatively demonstrating
the court's jurisdiction to hear the cause.  Id.  We construe the pleadings liberally and look to the pleader's
intent.  Id.  

Trial courts are courts of general jurisdiction, and they are presumed to have subject matter jurisdiction unless
a contrary showing is made, such as when the legislature bestows exclusive original jurisdiction on an
administrative body.  See Tex. Const. art. V, ' 8; Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d
212, 220 (Tex. 2002).  An agency has exclusive jurisdiction when a pervasive regulatory scheme indicates that
the legislature intended for the regulatory process to be the exclusive means of remedying the problem to
which the regulation is addressed.  Subaru, 84 S.W.3d at 221.  Typically if an agency has exclusive
jurisdiction, a party must exhaust all administrative remedies before seeking judicial review of the agency's
action.  Id.  Until then, the trial court lacks subject matter jurisdiction and must dismiss the claims within the
agency's exclusive jurisdiction.  Id.  

The Tax Code is a classic example of a pervasive regulatory scheme, evidencing a legislative intent to vest the
appraisal review boards with exclusive jurisdiction.  See Jim Wells County v. El Paso Prod. Oil & Gas Co., 189
S.W.3d 861, 871 (Tex. App.- Houston [1st Dist.] 2006, pet. denied).  The Tax Code sets forth administrative
procedures for aggrieved property owners to protest their tax liabilities.  See generally Tex. Tax Code Ann. ch.
41-42 (Vernon 2008).  A property owner may protest to the Board the appraised value of the owner's property,
the inclusion of the property on the appraisal records, a failure by the chief appraiser or the Board to provide
the property owner with any notice to which the owner is entitled, and any other action by the chief appraiser,
appraisal district, or Board that applies to and adversely affects the property owner.  Id. __ 41.41(a)(1), (3),
(9), 41.411(a).  The Board must schedule a hearing on the property owner's protest.  Id. _ 41.45(a).  The Tax
Code specifies how the Board is to conduct appraisal hearings and includes provisions for the taking of
evidence and the burden of proof.  Id. __ 41.43, 41.66-.67.  A property owner may bring suit in district court
against the appraisal district and the Board (1) after the owner has been denied a hearing to which the owner
is entitled or (2) to appeal an order by the Board determining the owner's protest.  Id. __ 41.45(f), 42.01(1)
(A).  Review in the district court is by trial de novo, and the district court may enter any order necessary to
preserve rights protected by and impose duties required by the law.  Id. __ 42.23(a), 42.24(3).  Therefore, the
Board has exclusive jurisdiction over property tax disputes, and property owners generally must exhaust their
administrative remedies before seeking judicial review.  See MAG-T, L.P. v. Travis Cent. Appraisal Dist., 161 S.
W.3d 617, 624 (Tex. App. - Austin 2005, pet. denied).

In their first issue, the Taxing Authorities argue that the trial court erred in denying their plea to the jurisdiction
because chapter 41 of the Tax Code is a pervasive regulatory scheme, vesting the Board with exclusive
original jurisdiction over tax appraisal protests.  The Taxing Authorities claim that before bringing suit in district
court, the Taxpayers were required to exhaust their administrative remedies by obtaining an appraisal protest
hearing before the Board and then appealing the order from the hearing in the manner dictated by chapter 42
of the Tax Code.  The Taxpayers concede that generally a property owner must exhaust his administrative
remedies before proceeding to judicial appeal in the district court.  However, the Taxpayers argue that even
though they did not complete the administrative process, the district court still has subject matter jurisdiction to
hear their claims because (1) section 41.45(f) of the Tax Code allows the district court to compel the Board to
hold a hearing, (2) article V, section 8 of the Texas Constitution gives the district courts mandamus power to
compel public officials to perform nondiscretionary acts, and (3) judicial interference in an administrative
scheme is permissible when the agency is acting outside its statutorily conferred powers.

Section 41.45(f) states that the district court may compel the Board to hold a hearing when a property owner
has been denied a hearing to which he is entitled.  Tex. Tax Code Ann. _ 41.45(f).  The Taxpayers contend
that the hearing to which a property owner is entitled under section 41.45(f) is one conducted according to the
law and ending with a proper order.  According to the Taxpayers, because the Board is failing to conduct
hearings in accordance with the procedures outlined in the Tax Code, section 41.45(f) gives the district court
jurisdiction over their claims.  We disagree with this interpretation of section 41.45(f).

When interpreting a statute, we view a statute's terms in context, and our objective is to determine and give
effect to the legislature's intent.  See Tex. Gov't Code Ann. ' 312.005 (Vernon 2005); Liberty Mut. Ins. Co. v.
Garrison Contractors, Inc., 966 S.W.2d 482, 484 (Tex. 1998).  Moreover, we presume that the legislature
would not do a useless act.  See Webb County Appraisal Dist. v. New Laredo Hotel, Inc., 792 S.W.2d 952, 954
(Tex. 1990).  Chapter 42 provides an administrative remedy to property owners who claim they did not receive
a properly conducted hearing by allowing the property owner to obtain de novo review by timely filing suit in
district court.  Tex. Tax Code Ann. __ 42.01(1)(A), 42.21(a), 42.23(a).  Adopting the Taxpayers' interpretation
of section 41.45(f) would allow property owners to circumvent the appeal provisions in chapter 42 and sue in
district court simply by alleging the Board failed to adhere to procedural guidelines.  Interpreting section 41.45
(f) as creating another avenue of appeal to the district court would essentially render the appeal provisions in
chapter 42 meaningless.  We hold that on the facts of this case, section 41.45(f) does not provide a basis for
the district court to exercise subject matter jurisdiction.  See also Appraisal Review Bd. of Harris County
Appraisal Dist. v. Spencer Square Ltd, 252 S.W.3d 842, 845 (Tex. App.- Houston [14th Dist.] 2008, no pet.)
(declining to read section 41.45(f) as providing an additional avenue to attack appraisal review board orders).  

The Taxpayers also assert that jurisdiction is appropriate because the Texas Constitution empowers trial
courts to issue writs of mandamus to compel public officials to perform ministerial acts.  Tex. Const. art V, _ 8
(“District court judges shall have the power to issue writs necessary to enforce their jurisdiction.”).  A
mandamus will issue only to correct a clear abuse of discretion or the violation of a duty imposed by law and
when there is no other adequate remedy at law.  Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 305
(Tex. 1994).  Mandamus is not appropriate when a party is afforded a trial de novo on appeal.  See Grimm v.
Garner, 589 S.W.2d 955, 956-57 (Tex. 1979) (holding right to appeal and obtain trial de novo provided
adequate remedy at law); Blasingame v. Krueger, 800 S.W.2d 391, 394 (Tex. App.- Houston [14th Dist.] 1990,
no pet.) (concluding mandamus was not appropriate because relators had adequate remedy at law by virtue of
trial de novo).  The Tax Code provides for de novo judicial review in the district court upon appeal of a Board's
order determining a protest.  See Tex. Tax Code Ann. _ 42.23(a).  We conclude that judicial appeal in this
case provides an adequate remedy at law; therefore mandamus is not appropriate.

Finally, the Taxpayers contend that the exception to the exhaustion of administrative remedies doctrine, which
applies when an agency acts outside its statutory authority, applies in the instant case because the Taxing
Authorities are acting outside their statutory authority.  The Taxpayers claim this excuses them from having to
exhaust their administrative remedies and allows them to appeal directly to the district court.  The Taxing
Authorities respond that the exception does not apply because the Taxpayers failed to allege actions by the
Taxing Authorities that are completely outside their jurisdiction.  We agree.

The general rule in Texas is that courts do not interfere with the statutorily conferred duties and functions of
an administrative agency.  Westheimer Indep. Sch. Dist. v. Brockette, 567 S.W.2d 780, 785 (Tex. 1978).  
However, courts may intervene in administrative proceedings when an agency exercises authority beyond its
statutorily conferred powers.  Id.  This exception to the exhaustion of administrative remedies doctrine is a
variation of the rule that where the administrative agency lacks jurisdiction, a trial court may intercede before
administrative remedies are exhausted.  See City of Houston v. Williams, 99 S.W.3d 709, 717 (Tex. App. -
Houston [14th Dist.] 2003, no pet.). “In such a case, the purposes underlying the exhaustion of remedies rule
are not applicable, judicial and administrative efficacy are not served, and agency polices and expertise are
irrelevant if the agency's final action will be a nullity.”  MAG-T, L.P., 161 S.W.3d at 625.  However, the mere
claim that an administrative agency acted ultra vires does not authorize litigation before administrative
remedies are exhausted, nor does failure to perfectly comply with all of the intricacies of the administrative
process necessarily constitute extra-jurisdictional action by an agency.  See City of Houston, 99 S.W.3d at
717; Friends of Canyon Lake, Inc. v. Guadalupe-Blanco River Auth., 96 S.W.3d 519, 528 (Tex. App.- Austin
2002, pet. denied).  

In Friends of Canyon Lake, an environmental group alleged that the Texas Natural Resource Conservation
Commission (TNRCC) and the local river authority had failed to correctly follow all the requirements of the
water rights permit application process.  96 S.W.3d at 528.  The plaintiff environmental group argued that this
failure of compliance had resulted in the TNRCC acting outside its statutory authority, and therefore the group
was excused from exhausting its administrative remedies.  Id.  The court held that for this exception to apply,
the environmental group was required to allege that the agency had acted wholly outside its jurisdiction, not
merely that it had failed to meet certain statutory procedural requirements.  Id.  The instant case presents a
similar situation.  The Taxpayers do not allege that the Taxing Authorities are acting wholly outside the Tax
Code provisions.  Instead, they claim that the manner in which the hearings are being conducted does not fully
comply with the procedural requirements of the Tax Code.  Accordingly, we conclude the “acting outside
statutory authority” exception does not apply in this case.  See City of Houston, 99 S.W.3d at 717; Friends of
Canyon Lake, Inc., 96 S.W.3d at 528.  

III.  Conclusion

The Tax Code is a pervasive regulatory scheme, vesting the Board with exclusive original jurisdiction over
property tax appraisals.  Accordingly, the Taxpayers were required to exhaust their administrative remedies.  
Because they failed to do so, we conclude the district court lacked subject matter jurisdiction to hear the
causes of action raised in the first amended petition.  We sustain the Taxing Authorities' first issue.  Having
done so, we need not address the Taxing Authorities' second issue concerning standing.

We reverse the district court's order denying the plea to the jurisdiction as to the Board and Robinson and
render judgment dismissing the causes of action raised by the Taxpayers for want of subject matter jurisdiction.

/s/      Leslie B. Yates

Justice

Judgment rendered and Opinion filed August 19, 2008.

Panel consists of Justices Yates, Anderson, and Brown.

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[1]  O'Connor's original petition was not a live pleading at the time of the trial court's ruling.  Harris County Appraisal Dist., 2006
WL 3072079, at *3.  Therefore, we concluded that any action this court took on the merits of the appeal would not affect the rights
of the parties because the parties could still challenge the trial court's jurisdiction based on the causes of action in the
amended petition.  Id.