Kilgore Indep. Sch. Dist. v. Axberg

572 S.W.3d 244

KILGORE INDEPENDENT SCHOOL DISTRICT, et al., Appellants

v.Darlene AXBERG, John Claude Axberg, Sheila Anderson, and the State of Texas, Appellees

No. 06-18-00016-CV

Court of Appeals of Texas, Texarkana.

Date Submitted: December 4, 2018

Date Decided: February 11, 2019

Rehearing Denied February 26, 2019

Dennis J. Eichelbaum, Lead Counsel, Andrea L. Mooney, Scott W. Thomas, Eichelbaum Wardell Hansen Powell & Mehl, PC, 5801 Tennyson Parkway, Ste. 360, Plano, TX 75024, for Appellants.

Jonathan F. Mitchell, Lead Counsel, John B. Scott, Scott PLLC, 508 West 14^th Street, Austin, TX 78701, Daniel R. Smith, Popp Hutcheson, PLLC, 1301 S. Mopac, Ste. 430, Austin, TX 78746, Timothy M. Hoch, Hoch Law Firm, 5616 Maivey Ave., Fort Worth, TX 76107-5121, Forrest Smith, Friedman & Feiger, LLP, 5301 Spring Valley Rd., Ste. 200, Dallas, TX 75254, for Appellees Darlene Axberg, John Claude Axberg, Sheila Anderson.

Kristofer S. Monson, Lead Counsel, Office of the Attorney General, PO Box 12548, MC 059, Austin, TX 78711, for Intervenor State of Texas.

Before Morriss, C.J., Burgess and Moseley,^* JJ.

OPINION

Opinion by Justice Burgess

I. Introduction

In May 2015, the Texas Legislature passed a comprehensive school funding bill designated as SB-1. In one of SB-1’s provisions, the Legislature prohibited school districts from repealing or reducing the amount of any Local Option Homestead Exemption (LOHE)¹ that they had previously adopted. The Governor signed SB-1 on June 15, 2015. Apparently believing that a question existed about whether it had the authority to pass such a prohibition, the Legislature also passed a joint resolution, SJR-1, proposing an amendment to the Texas Constitution granting it the authority to "prohibit the governing body of a political subdivision that adopts a [LOHE] from reducing the amount of or repealing the exemption." Tex. S.J. Res. 3, 84th Leg., R.S., § 1, sec. 1-b(e), 2015 Tex. Gen. Laws 5412, 5413–14; see TEX. CONST. art. VIII, § 1-b (c), (e).

The Legislature passed both SB-1 and SJR-1 on the same day. The Legislature conditioned SB-1’s effectiveness on the voter’s approval of SJR-1, but it also stated that, in the event SJR-1 was approved, SB-1 would become effective on the date that SJR-1’s proposed constitutional amendments took effect. SJR-1 stated that the proposed amendments "take effect for the tax year beginning January 1, 2015." Tex. S.J. Res. 3, 84th Leg., R.S., § 3(b), 2015 Tex. Gen. Laws 5412, 5414. The Texas voters approved SJR-1 in the November 2015 election.

Two weeks after SB-1 was passed and signed by the Governor—but before the Texas citizens approved SJR-1—the Kilgore Independent School District (the District) repealed its LOHE. After SJR-1 was approved, the Texas Attorney General and the Texas Education Commissioner made written demand on the District to restore the LOHE. The District refused.

The individual taxpayers, Darlene Axberg, John Claude Axberg, and Sheila Anderson (collectively the Axbergs) then filed suit against the District seeking declaratory and injunctive relief. They also sought reimbursements of their excessive tax payments. The Texas Attorney General filed a petition in intervention requesting similar declaratory relief and requested that the trial court issue a writ of mandamus directing the District to comply with SB-1 and SJR-1. The District answered and asserted affirmative defenses.

Subsequently, the Axbergs and the State filed joint motions for summary judgment. The District filed an opposing motion for summary judgment. The trial court granted the plaintiffs' motion for summary judgment and denied the District’s motion for summary judgment. The trial court granted declaratory relief, injunctive relief, mandamus relief, and restitution of the additional taxes paid by the individual plaintiffs. The District appeals, arguing that the trial court erred in granting summary judgment to the State and the Axbergs.

We agree that the trial court erred in granting summary judgment to the Axbergs, and we will reverse the summary judgment in favor of the Axbergs. However, we agree with the trial court that SB-1 and SJR-1 were intended to prohibit the District’s repeal of its LOHE and rendered the District’s repeal of no effect.

Accordingly, to this extent, we will affirm the summary judgment in favor of the State.²

II. Background

A. The Applicable Homestead Exemptions and the Effect of SB-1 and SJR-1

Texas law grants several types of homestead exemptions which exempt from taxation certain portions of the appraised or assessed value of an adult’s residence homestead. See TEX. TAX. CODE ANN. § 11.13 (West Supp. 2018). Before the 2015 tax year, one of these exempted $15,000.00 of the homestead’s appraised value from taxation by a school district (the State Homestead Exemption). Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1, sec. 11.13(b), 2015 Tex. Gen. Laws 1779, 1779 (current version at TEX. TAX CODE § 11.13(b) ). Also, under Section 11.13(n), a local taxing unit may, at its option, grant an additional exemption of a percentage of the appraised value of a residence homestead, which cannot exceed twenty percent.³ TEX. TAX CODE ANN. § 11.13(n). The District granted its residents a LOHE in the 1980s, which remained in effect until June 29, 2015.

1. SB-1 Provisions

In 2015, the Legislature passed SB-1, which raised the State Homestead Exemption to $25,000.00⁴ and created Section 11.13(n-1) of the Texas Tax Code, which states, in relevant part, "[A] school district ... that adopted [a LOHE] under Subsection (n) for the 2014 tax year may not reduce the amount of or repeal the exemption. This subsection expires December 31, 2019" (SB-1’s repeal prohibition).⁵ Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 1, sec. 11.13(n-1), 2015 Tex. Gen. Laws 1779, 1779 (current version at TEX. TAX CODE § 11.13(n-1) ).

Section 27 of SB-1 states that the above provisions,⁶ inter alia , "take[ ] effect on the date on which the constitutional amendment proposed by SJR-1 ... takes effect," but if the voters do not approve the amendment, then SB-1 "has no effect." Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 27(a)(1), (2), 2015 Tex. Gen. Laws 1779, 1786. In addition, Section 26 of SB-1 states that SB-1 "applies beginning with the 2015 tax year." Act of May 29, 2015, 84th Leg., R.S., ch. 465, § 26, 2015 Tex. Gen. Laws 1779, 1786. The governor signed SB-1 on June 15, 2015. Act of May 29, 2015, 84th Leg., R.S., ch. 465, 2015 Tex. Gen. Laws 1779, 1786.

2. SJR-1 Provisions

On the same day that the Legislature passed SB-1, it passed a joint resolution, SJR-1, which proposed amendments to Article VIII of the Texas Constitution that increased the amount of the State Homestead Exemption to $25,000.00, and provided that the Legislature "may prohibit the governing body of a political subdivision that adopts [a LOHE] from reducing the amount of or repealing the exemption." Tex. S.J. Res. 3, 84th Leg., R.S., § 1, secs. 1-b(c), 1-b (e), 2015 Tex. Gen. Laws 5412, 5412–14; see TEX. CONST. art. VIII, § 1-b (c), (e). SJR-1 provided that these proposed amendments "take effect for the tax year beginning January 1, 2015." Tex. S.J. Res. 3, 84th Leg., R.S., § 3(b), 2015 Tex. Gen. Laws 5412, 5414. Voters approved the amendments proposed by SJR-1 on November 3, 2015.

B. The District’s Subsequent Action

On June 29, 2015, the District’s Board of Trustees repealed its LOHE, effective for the 2015 tax year. On June 15, 2016, the Attorney General of Texas and the Texas Education Commissioner sent a joint letter to the District, alleging that the District’s repeal of its LOHE violated SB-1’s repeal prohibition.

C. The Litigation

In September 2016, the Axbergs brought suit against the District⁷ in which they alleged that the District violated SB-1’s repeal prohibition by repealing the LOHE. As relevant to this appeal, the petition sought a declaratory judgment that (1) the repeal prohibition is constitutional; (2) the repeal prohibition and SJR-1, prohibit school districts from repealing or reducing a LOHE at any time between January 2015 and December 31, 2019; and (3) any repeal of or reduction in the amount of a LOHE by a school district is void as a matter of law. The petition also sought (1) a permanent injunction mandating that the District reinstate the LOHE for application in the 2015 through 2019 tax years and stop the collection of taxes subject to the LOHE, (2) a refund of the "illegally collected taxes" that the Axbergs claim to have paid under duress, and (3) attorney fees and costs.

The State of Texas filed (1) an amended plea in intervention seeking a declaratory judgment that the District’s repeal of its LOHE was in violation of SB-1 and SJR-1 and (2) a writ of mandamus ordering the District to comply with SB-1 and SJR-1. The District filed its first amended answer and asserted a general denial, a special denial,⁸ affirmative defenses, and a counterclaim alleging that the Axbergs' suit was frivolous. Among its affirmative defenses, the District pleaded that applying SB-1 before November 3, 2015, would be unconstitutional under the Texas Constitution.

D. The Parties' Competing Motions for Summary Judgment

On March 29, 2017, the Axbergs and the State (jointly Appellees) filed a joint motion for traditional summary judgment in which they sought judgment (1) that SB-1 prohibited school districts from reducing or repealing the LOHE before SB-1 became law on November 3, 2015, and (2) that SB-1’s repeal prohibition was not unconstitutionally retroactive. The Appellees argued that, by its terms, SB-1’s repeal prohibition applied to the 2015 tax year and would take effect on the date the constitutional amendments took effect and that SJR-1 provided that the constitutional amendments therein "take effect for the tax year beginning January 1, 2015." Consequently, according to the Appellees, SB-1’s repeal prohibition was retroactive to January 1, 2015.

Appellees also argued that it was constitutionally retroactive under the...