Oncor Elec. Delivery Co. NTU v. Wilbarger Cty. Appraisal Dist.

691 S.W.3d 890

ONCOR ELECTRIC DELIVERY COMPANY NTU, LLC, Petitioner,

v.WILBARGER COUNTY APPRAISAL DISTRICT and Wilbarger County Appraisal Review Board, Respondents

~ consolidated for oral argument with ~

Mills Central Appraisal District and Mills County Appraisal Review Board, Petitioners,

v.Oncor Electric Delivery Company NTU LLC, Respondent

No. 23-0138, No. 23-0145

Supreme Court of Texas.

Argued March 21, 2024

OPINION DELIVERED: June 21, 2024

On Petition for Review from the Court of Appeals for the Seventh District of Texas

On Petition for Review from the Court of Appeals for the Third District of Texas

James Robert Evans Jr., Ryan L. James, D. Kirk Swinney, Marjorie Bachman, Leander, Erin Gaines, for Respondent Wilbarger County Appraisal District in 23-0138.

Christopher Scott Jackson, Andrew Dylan Wood, Austin, Eric C. Farrar, for Amicus Curiae Metropolitan Council of Appraisal Districts in 23-0138.

Jonathan Whitsitt, for Respondent Wilbarger County Appraisal Review Board in 23-0138.

David Hitchcock Gilliland, Mamie A. McCormick, Austin, for Petitioner in On- cor Electric Delivery Company NTU LLC in 23-0138.

Christopher Scott Jackson, Andrew Dylan Wood, Austin, Eric C. Farrar, for Amicus Curiae Metropolitan Council of Appraisal Districts in 23-0145.

David Hitchcock Gilliland, Marnie A. McCormick, Austin, for Respondent in Oncor Electric Delivery Company NTU LLC in 23-0145.

Peter W. Low, Leander, Julia Lacy Armstrong, Roy L. Armstrong, for Petitioner Mills County Appraisal Review Board in 23-0145.

Marjorie Bachman, Peter W. Low, D. Kirk Swinney, Ryan L. James, James Robert Evans Jr., Leander, Erin Gaines, for Petitioner Mills Central Appraisal District in 23-0145.

Justice Busby delivered the opinion of the Court.

In these two property tax disputes, Oncor seeks a multimillion-dollar reduction in the total values of certain electric transmission lines in the 2019 certified appraisal rolls for the Wilbarger County Appraisal District (Wilbarger CAD) and Mills Central Appraisal District (Mills CAD). Oncor’s predecessor agreed to the lines’ value in each county to settle its protests of the Districts’ initial appraised values, but Oncor now contends that these agreements are void due to mutual mistake.

Oncor filed unsuccessful motions for correction of the appraisal rolls with each County Appraisal Review Board (ARB) and then sued in district court in Wilbarger and Mills Counties, asserting that it was entitled to judicial review under Section 42.01 of the Tax Code as well as declaratory relief under the Uniform Declaratory Judgments Act (UDJA). These suits raise several questions regarding a taxpayer’s ability to correct errors in a district’s appraisal rolls once certified, as well as the finality of a "statutory agreement" between the taxpayer and a district under Section 1.111(e) of the Tax Code.#

The parties’ disputes come to us on appeal from rulings on the taxing authorities’ pleas to the jurisdiction. Thus, we must consider first whether questions regarding the effect of a Section 1.111(e) agreement—such as its validity and scope—are relevant to a trial court’s subject-matter jurisdiction over a suit for judicial review under Section 42.01 of the Tax Code. The trial and appellate courts below provided conflicting answers. Like the Austin Court of Appeals, we hold that the resolution of such questions does not implicate jurisdiction and remand the cases to the tidal courts for further proceedings.

Because proof that a statutory agreement is valid and applicable would not deprive a trial court of subject-matter jurisdiction, we do not reach the merits of the parties’ disputes about whether Oncor has identified errors eligible for correction under Sections 25.25(c) or (d) of the Tax Code, whether any such errors fall within the scope of the parties’ Section 1.111(e) settlement agreements, and whether the doctrine of mutual mistake is an available defense to such agreements, applies here, and affords the remedy Oncor seeks. We likewise do not reach the parties’ arguments about the UDJA or Whether the ARBs are proper parties to Oncor’s suit and the subsequent appeals.

Statutory Background

Determining the nature of the issues in dispute and which of them (if any) are properly before us at this procedural stage requires an understanding of the various phases of the Tax Code’s administrative process. We therefore begin with an overview of that process and the remedies available to taxpayers.

[1–3] "The Tax Code establishes a detailed set of procedures that property own ers must abide by to contest the imposition of property taxes." Morris v. Houston Indep. Sch. Dist., 388 S.W.3d 310, 313 (Tex. 2012). Under Section 42.09 of the Code, those "administrative procedures are ‘exclusive’ and most defenses are barred if not raised therein." Cameron Appraisal Dist v. Rourk, 194 S.W.3d 501, 502 (Tex. 2006). As a result, a taxpayer’s failure to exhaust the Tax Code’s exclusive administrative remedies "deprives the courts of Jurisdiction to decide most matters relating to ad valorem taxes." Id.

In general, the chief appraiser of each county appraisal district is responsible for preparing appraisal records listing all property that is taxable in the district and stating the appraised value of each. Tex Tax Code § 25.01.¹ Under certain conditions, the chief appraiser "may contract with a private appraisal firm to perform appraisal services for the district, subject to his approval." Id. § 25.01(b). The chief appraiser "submit[s] the completed appraisal records to the appraisal review board for review and determination of protests," id. § 25.22(a), which are addressed in Chapters 41 and 42 of the Code.

Taxpayers may protest the appraised value of their properties and certain other matters under Chapter 41, Subchapter C. ARBs are charged with holding a hearing on each protest at which the taxpayer is entitled to appear and offer evidence. Id. § 41.45. The taxpayer—and, under certain circumstances, the chief appraiser—can seek judicial review of the ARB's determination of the protest under Chapter 42. Alternatively, as occurred here, the taxpayer can settle either before or after filing a protest by agreeing to a value with the chief appraiser under Section 1.111(e). This section provides that such an agreement "is final" if it relates to certain matters, id. § 1.111(e), in which case the ARB "may not review or reject" the agreement. Id. § 41.01(b).

[4] Although Chapter 41 protests "are broad in scope and weigh[ted] in favor of the property owner," they are also "subject to strict time limitations." Willacy County Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d 29, 40 (Tex. 2018). In contrast, Section 25.25 "allows corrections after the time to protest has expired and appraisal rolls have been approved," but "[s]uch corrections can be made only under limited circumstances." Id. For example, subsection (d) authorizes motions "to change the appraisal roll to correct an error that resulted in an incorrect appraised value for the owner’s property" under certain conditions, which can be brought before the taxes become delinquent. Tex. Tax Code § 25.25(d).² And subsection (c) authorizes motions to "change[] … the appraisal roll for any of the five preceding years to correct" certain catego- ries of errors, including clerical errors³ that affect a property owner’s liability for a tax imposed in that tax year. Id. § 25.25(c)(1). As with Chapter 41 protests, the ARB’s determination of a motion to correct the appraisal roll under Section 25.25 is subject to judicial review under Chapter 42.

Chapter 42 provides for review of ARB decisions by trial de novo in district court. Id. § 42.23(a). Subject to limited exceptions, a petition for review "must be brought against the appraisal district" and "may not be brought against the appraisal review board." Id. § 42.21(b).⁴ Section 42.01(a)(1) lists six types of ARB orders that the property owner is "entitled to appeal," including "a protest by the property owner as provided by Subchapter C of Chapter 41" and "a motion filed under Section 25.25." Id. § 42.01(a)(1)(A)-(B). Section 42.01(a)(1) separately authorizes the property owner to appeal an order of the ARB determining, among other things, "that the appraisal review board lacks jurisdiction to finally determine a protest by the property owner under Subchapter C, Chapter 41, or a motion filed by the property owner under Section 25.25 because the property owner failed to comply with a requirement of [those statutes]." Id. § 42.01(a)(1)(E).

Factual and Procedural Background

A. Oncor’s predecessor files and settles protests in several counties

Sharyland Distribution & Transmission Services, L.L.C., owned a system of four different voltages of transmission lines— 345 kV, 230 kV, 138 kV, and 69 kV—that crossed several Texas counties. Sharyland timely filed Chapter 41 protests of the 2019 appraised values of its lines in Wilbarger CAD and Mills CAD, as well as eleven other county appraisal districts. As grounds for its protests, Sharyland asserted that the appraised value was incorrect as well as unequal compared with other properties. Those thirteen appraisal districts hired an appraisal firm, Pritchard & Abbott (P&A), to help them evaluate the appraised values of Sharyland’s property in each county for 2019. Sharyland hired Duff & Phelps to act as its agent.⁵

Rather than appraising the property in each county according to its characteristics there, P&A employed the "unit valuation" method of appraisal. Working with Duff & Phelps, P&A began by determining the taxable value of Sharyland’s property statewide, then allocated that value among different categories of property to come up with a statewide value for each category, including separate categories for transmission lines of different voltages. The next step in the process involved dividing the allocated value for each voltage category by the total number of miles of transmission lines...