The Texas Supreme Court has resolved a conflict between the Amarillo and Austin Courts of Appeals, affirming the Austin court’s holding that trial courts have jurisdiction to hear lawsuits challenging the validity of an agreement between a taxpayer and an appraisal district under § 1.111(e), Tax Code. That section allows a taxpayer who has filed a protest or a § 25.25 motion to correct the appraisal roll with the appraisal review board to withdraw the protest or motion to execute an agreement with the appraisal district settling the contested issue. The statute deems the agreement final and not subject to further protest or appeal.
The two cases, Oncor Electric Delivery Company NTU, LLC v. Wilbarger County Appraisal District and Wilbarger County Appraisal Review Board (No. 23-0138) and Mills Central Appraisal District and Mills County Appraisal Review Board v. Oncor Electric Delivery Company NTU LLC (No. 23-0145; June 21, 2024), present virtually identical facts. In both cases, Oncor’s predecessor entity, Sharyland Utilities LP, entered into § 1.111(e) agreements with the respective appraisal districts that established the 2019 market value of electric transmission lines in the two counties. In May 2019 Oncor acquired Sharyland, and in January 2020 discovered that a mistake had been made in the information provided by Sharyland to the appraisal districts’ appraisal firm. That mistake allegedly resulted in a miscalculation of the appraised value of the lines and, consequently, a substantial over-appraisal. Oncor filed § 25.25 motions to correct the appraisal rolls, arguing that a clerical error resulted in overappraisal and that the 2019 assessment included property that did not exist on the counties’ 2019 appraisal rolls (the mistake involved confusion between two types of transmission lines). In the Wilbarger County case, the ARB heard the claims and denied them. In the Mills County case, the appraisal district determined that it didn’t have jurisdiction because § 1.111(e) agreements are final. Oncor sought judicial review.
The trial courts reached opposite conclusions. In Wilbarger County, the trial court denied the CAD and ARB’s plea to the jurisdiction. They subsequently filed an interlocutory appeal to the Amarillo Court of Appeals. In Mills County, the trial court issued an order granting the CAD’s plea to the jurisdiction but did not appear to rule on the ARB’s plea. Oncor filed an interlocutory appeal to the Austin Court of Appeals. The Amarillo court ruled that § 1.111(e) agreements are final and cannot be challenged, regardless of whether the agreed valuation was based on erroneous information. The court held further rejected Oncor’s argument that the agreement was voidable based on mutual mistake and could therefore be corrected under § 25.25. Oncor cited Willacy Cnty. Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d 29, 51-52 (Tex. 2018) for that proposition, but the court read the case to allow a correction only in case of fraud. Consequently, the court reversed and rendered judgment for the appraisal district.
The Austin Court of Appeals begged to differ. In a more extensive analysis than that provided by the Amarillo court, the court concluded that a taxpayer could challenge a § 1.111(e) agreement on the basis of mutual mistake, a longstanding contract law doctrine. “Oncor’s petition alleged sufficient facts to affirmatively plead the elements of mutual mistake, and the Appraisal District does not contend otherwise,” the court stated. “Accordingly, the controlling question in the present case is whether the trial court lacks jurisdiction to consider any challenge to an appraisal roll under the mutual-mistake doctrine in the face of an agreement previously made under Section 1.111(e) of the Tax Code.” Like the Amarillo court, the Austin court turned to the Willacy case for the answer. Unlike the Amarillo court, however, the Austin court read Willacy to provide broader potential relief. Because the Willacy court permitted a challenge for fraud, the court reasoned, it “necessarily held that courts have jurisdiction to review the validity of such an agreement and, with appropriate evidence, to render a judgment finding the agreement invalid.” The court distinguished several cases cited by the appraisal district, but some of them were pre-Willacy and others presented different procedural postures (i.e., involved appeals from summary judgments, not pleas to the jurisdiction). The court thus remanded Oncor’s cause of action against the appraisal district for further proceedings.
In an opinion by Justice Busby, SCOTX affirmed the Austin court’s decision and reversed the Amarillo court’s. When we initially reported on the appellate decisions back in 2022, we opined that “though the language of § 1.111(e) states that an agreement is ‘final,’ we would think that if such an agreement is procured by fraud or rested on a mutual mistake, it’s not an ‘agreement’ at all, much less a ‘final agreement.’” We also thought that the Austin court’s reading of Willacy as countenancing a challenge based on fraud or mutual mistake was correct, especially because, as the court pointed out, those terms are paired so often in contract cases. As the Amarillo court’s opinion offered no further explanation of why Willacy should be limited only to fraud, when the effect of mutual mistake is precisely the same, Austin had, on our view, the better of the argument.
SCOTX approached this case as part of its post-Dubai jurisprudence, which, in Justice Busby’s terms, “recognize[s] that the ‘modern direction of policy’ is ‘to reduce the vulnerability of final judgments to attack on the ground that they tribunal lacked subject matter jurisdiction.’” Absent explicit “legislative intent to the contrary,” consequently, the post-Dubai cases have defaulted in favor of trial courts resolving disputes on the merits rather than “leav[ing] the decisions and judgments of the [administrative agencies] in limbo and subject to future attack.” Here the Court declined to read § 1.111(e)’s “finality” language as jurisdictional, particularly in light of the 2019 legislative response to the Court’s decision in Willacy that: (1) permitted judicial review of an ARB order determining that the ARB lacks jurisdiction of § 25.25(c) motion to correct, and (2) entitled a property owner to a final judicial determination of its § 25.25 motion. In short, interpreting “final” in this context altogether to deprive a trial court of subject matter jurisdiction is not consistent with the statutory scheme.
What is limited, however, is the scope of the trial court’s review of a § 1.111(e) agreement. Oncor seeks to set aside the agreements with Wilbarger and Mills CADs based on mutual mistake, whereas the ARBs assert a preclusion defense based on the same statute. Those are merits issues for the trial court. “Similarly,” Justice Busby added, “the appealing taxpayer (or appraisal district) may only prevail on its motion to correct in district court based on matters that are either consistent with the terms of or oustide the scope of a valid Section 1.111(e) agreement.” There is no jurisdictional bar to the trial court determining the validity or scope of such an agreement. The Court sent both cases back to their respective trial courts for further proceedings.
This decision is undoubtedly correct based on our understanding of § 1.111(e) agreements. That section simply confers authority on the chief appraiser to make a deal with the taxpayer without worrying about justifying it to the ARB, which should have no interest in the matter if both the chief appraiser and taxpayer are happy with the deal. Those agreements are thus “final” as to the ARB. But if they have another problem, i.e., they were fraudulently induced or were concluded based on mutual mistake, there is a mechanism for fixing them administratively (§ 25.25) or by judicial review. Clearly, SCOTX, as well as the Austin Court of Appeals, viewed all of the satellite litigation over subject matter jurisdiction as beside the point, which is to make sure that the appraisal roll is accurate and everybody pays their fair share.
