### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

ON REHEARING

NO. 03-09-00013- CV

Travis Central Appraisal District , Appellan t

v. Wells F argo Bank Min nesota, N.A., Appellee

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 201 ST JUDICI AL DISTRICT NO. D-1 -GN-0 8-0 0002 5, H ONO RAB LE MARGARET A. CO OP ER, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N We withdraw our opinion and judg ment dated January 26, 2010, and substitute the following opinion in place of the ear lier one.

Ap p el l ee Wells Fa

rg o Ba nk Minnesota, N.A. (“Wells Fa rg o”) filed suit seeking to compel appellant Travis Central Appra isal District (“TCAD ”) to downwar dly adjust the ad valore m proper ty valuation for proper

ty owned by Wells Fa

rg o in acc ordanc e with an environmenta l-use deter mination issued b y th e T e xa s Co mm is s ion on Environmental Quality (“TCEQ” ). The trial court gra n ted summary judgme nt in favor of Wells Fa rg o and order ed TCAD to appl y t h e

use deter mination issued by the TCEQ. TCAD did not appea l fro m that judgme nt. There afte r, Wells Fa rg o filed a motion for sanctions, asser ting that TCAD was stil l re fu s i n g t o apply theuse-de termination exemption as ordered by the t rial court. The trial court gra nted t he mot ion and order ed TCAD to pay Wells Fa rg o $97,459 in sanctions plus $7, 5 0 0 i n at t o rney ’s fee s. TCAD appea ls, arg uing that the sanctions order was an abuse of discretion beca use it had acte d in g ood faith. We will affirm the tr ial court’s or der.

F ACTUAL AND P ROCEDURAL BACK GR OUND Wells Fa rg o o wn s an ap artment complex (the “prope rty ”), which was built over a closed municipal solid-waste landfill. After taking measure s to bring the proper ty into compliance with exis ting environmental reg ulations, Wells Fa rg o filed an application with t h e T C E Q to have the proper

ty decla red a “p o l l u t i on control proper ty ,” there by entitling Wells Fa rg o to apply for a proper ty -tax exemption. See Tex. Const. art. VI I I , § 1- l ; Tex. Tax Code Ann. § 11.31 (West 2008). On its application, Wells Fa rg o descr ibed eac h of the portions of rea l estate and proper ty improvements for whi ch i t s o u ght exemption. Among the improvements rele vant to this appea l, Wells Farg o listed “ Fug itive E missions Containment St ructure s” as a proper ty improvement to be exempt under its application. Wells Fa rg o identified these as “[s] tructu re s used to contain, for monitoring purpo s e s , e mi s s io n s r e le a sed from decomposing materia ls. Floor level structure s contain pollution control equipment (continuous emission monitors) used to detec t VOCs.” W el l s Farg o stated on its application that these structure s wer e not taxable on or befor e J anuar y 1, 1994. See Tex. Const. art. VI I I , § 1- l (b) (“This section applies to rea l and persona l proper ty used as a fac ility , device ,
or method for the control of air, water , or land pollution that would otherwise be taxable for the first time on or afte r January

1, 1994.”).

2After revie wing Wells Fa rg o’s application, the TCEQ issued its final use deter mination, which descr ibed the pollution-control prope rty as follows:

Real Estate: 59 4 , 208 sq ft used for liners and cover sy stem for landfill, slurry walls, and surf

ace impoundments. S ite contains 2 stormwate r re tention ponds siz e 1,244 sq. ft. and 65,586 sq. ft. Property : Continuous emission monitors; liners over landfill to re s t ri ct esca pe of wastes; semi-ac tive g as extraction sy stem for fug itive methane; methane monitoring & control equipment; two stormwater cont ainment ponds; sloping of concr ete surfa ces for leac hate collection a n d r e mo v a l; landfill final cover sy stem; g roundwa ter monitoring wells; fug itive emissions containment structure s; and building for active g as extraction sy stem.

I t then stated the TCEQ’ s final deter mination as to the proper

ty , finding :

A positive use deter

mination for 100% of the two stormwater rete nti o n ponds rea l estate (1 , 2 2 4 sf + 65,586 sf); continuous emission monitors; liners over landfill; semi-ac tive g as extraction sy stem; methane monitoring & control equipment; two stormwater containment ponds; sloping of concr ete surfa ces for leac hate collection and remova l; landfill final cover sy stem; g roundwa ter monit o ri ng wells; fug itive emissions containment structure s; and building for active g as extraction sy stem. A neg ative deter

mination for the 594,208 sq. ft. of rea l estate which is being used to house a c ommercia l apar

tment complex.

Pursuant to section 11.31(d) of the tax code, the executive direc tor of the TCEQ sent notice to the chief appra iser of TCAD informing it of the application and final deter mination. Neither Wells Fa

rg o nor the chief appra iser of TCAD appea led the execut ive direc tor’s deter mination. See Tex. Tax Code Ann. § 11.31(e) (providi n g t h at either party may appea l deter mination to TCEQ withi n 20 day s).

3Havin g o b ta in e d its use deter mination from the TCEQ, Wells Fa rg o applied to TCAD for a proper

ty -tax exemption. TCAD, purporting to act “pursua nt to the use deter

mination,” g rante d Wells Farg o a par

tial tax exemption of $120,258, which it arrived a t in the following ma nner:

TCAD valued t h e land at $1.80 per square foot, taking into acc ount a ten perc ent environmenta l adjustment. The value of the land was calc ulated at $1,0 69,574 (594,208 square fee t x $1.80/square foot). Ba sed on the use deter mination letter, the total square footag e of the pollution control equipment was limit ed to 66,810 square feet (1,224 square fee t + 65,586 square fee t). TCAD deter mined the value of the exemption at $120,258 (66,810 x $1.80/square f oot). TCAD then subtracte d the value of the exemption ($120,258) from the value of the land ($1,069,574) f

or a total land va lue of $949,316. The total appr aised va lue for the proper ty for tax y ear 2007 was $10,794,842, with $9,845,526 acc ounting f

or the improveme nt value of the proper ty

. 1

I n other wor ds, TCAD deter mined that none of the rea l proper ty on which the apartment c omplex

was situated was exempt as a result of the TCEQ’s order beca use prop er t y u s ed for residential purposes is not “pollution control proper ty ” as a matter of law. See Tex. Const. art. VI I I , § 1- l ; Tex. Tax Code Ann. § 11.31(a) (“Prope rty used for residential purposes . . . is ineligible for an exemption under this sec tion.”).

After pay ing under protest the taxes assessed on the proper ty , Wells Fa

rg o appea led TCAD’s deter

mination to the Travis Appra isal Review Boa rd. See Tex. Tax Code Ann. § 41.41(a) (4). The Boa

rd uph el d T C AD’s deter

mination, and Wells Fa

rg o filed suit for judicial

These calc ulations wer e provided by TCAD’s I nterim Direc tor of Commercial Appra isal, 1 Kay Bisson, who valued the proper ty for tax y ear 2007 and whose aff idavit was attache d to TCAD’s motion for summary

judgme nt. 4review in district court. See id. § 42.01(1)( A) (West 2008), § 42.21 (West Supp. 2009). I n its

orig inal petition, Wells Fa rg o asser ted that TCAD had failed to adjust its proper ty -tax valuation for the proper

ty in light of the TCEQ’s use deter mination, which it alleg ed amounted to an arbitra ry denial of the exemption and a violation of its due proce ss rig hts. The par t i es fi l ed cross-motions for summary judgme nt, joining issue in t h ei r i n t er preta tions of the TCEQ’s use deter mination. TCAD urg ed by its motion for summary judgme nt that the plain lang uag e of the tax code preve nted Wells Fa rg o from seeking an exemption for t h e ap artment complex itself, which was “used for residential purposes” and there fore was ineligible under the Tex as C onstitut ion and the tax code. TCAD further arg ued that it—not the TCEQ—is vested wi t h t h e authority to g rant the pollution-control tax exemption under section 11.43 of the tax code. Acc ording ly , TCAD asser ted, application of the use deter mination must be confine d to the $120,258 partial exemption descr ibed above

.

The trial court g rante d Wells F arg o’s motion for summary judgme nt, w hich soug ht a dec lara tion that it was entitled to the us e-de termination exemption and a resulting adjustment in the proper

ty -tax assessment for the proper ty

. The final order , in addition to g ranting Wells Fa rg o’s summary -judg ment motion, st ated that “ Def endants are ordere d to apply the pol lution control use deter mination as issued by the Ex ecutive Direc tor of the TCEQ on April 10, 2007.” TCAD filed a motion for new trial, arg uing that the trial court misint erpr eted t h e T C E Q o rd er and thus err ed in deter mining that the entire proper ty qualified for tax exemption. Al t er n atively , TCAD urge d that beca use the TCEQ order stated that only a portion of the proper ty qualifi ed as p o l l ution-control proper ty , summary judgme nt was improper beca use there wer e disputed fa ct issues as to which

5portion of the proper ty was actua lly tax exempt. The trial court denied TCAD’s motion for new trial. TCAD did not appea l.

Severa l months later, Wells Fa rg o filed a mot i o n for sanctions asser ting that, “[d] espite the c ourt’s orde r direc ting de fenda nt to apply the Use D eter

mination Ex emption to [ the proper ty ], defendant ha s ref

used to do so.” TCAD took the position in response to the r equest for sanctions that it had applied the use deter mination made by TCEQ and that the interpre tation of the

use deter mination order urg ed by Wells Fa rg o was in conflict with the g overning law. At the hear ing

on Wells Fa

rg o’s sanctions motion, TCAD continued to asser t i t s position that the TCEQ order did not exempt the 594,208 square fee t of re al p ro p erty on which the apar tment complex stood. TCAD’s witness, Kay Bisson, testified that she had applied the TCEQ use deter mination only to the 65,586 square fee t of land that makes up the stormwater -re tention ponds. She further testified that the proper

ty had been on the tax rolls “si n ce p ro b ab l y about 1985,” contra ry to Wells Fa

rg o’s

asser tion that the proper

ty beca me taxable for t h e fi rs t time on or afte r J anuar y 1, 1994. On

cross-e x amination, Bisson stated that she did not take into consideration any of the improveme nts listed on W ells Fa

rg o’s applica

tion under “I mprovements to B e Exempt,” including the first-floor fug itive emissions containment structure s, nor did she apply any exemptions to those improvements.

At the conclusion of the hear ing, the trial court order ed that Wells F arg o rec over as

a sanction the sum of $97,459, repr esenting the portion of the ad v al o re m t ax assessed on the first-floor units, which Wells Fa rg o had paid under protest. The trial court also awa rded Wells Fa

rg o $7,500 in attorney ’s fe es. TCAD now a ppeals fr om this sanctions order.

6STANDARD OF REVIEW A trial court’s ruling on a motion for sanctions is revie wed for an abuse of discretion. Cire v. Cummings , 134 S.W .3d 835, 838 (Tex. 2004); Downer v. Aquamari n e Op er a tors, Inc. , 701 S.W .2d 238, 241 (Tex. 1985). The test for an abuse of discretion is not whether , in the opinion of the revie wing court, the fac ts prese nt an appropr iate case for the trial court’s action, but “whe ther the court acte d without ref ere nce to any g uiding rules and principles.” Cire , 134 S.W .3d at 838-39 (citing Dow n er , 7 0 1 S.W .2d at 241). The trial court’s ruling should be reve rsed only if it was arbitra ry or unre asonable

. Id. at 839.

DISCUSSIO N On appea l, TCAD arg

ues that the trial court abused its discretion in o rder ing sanctions for its noncomplianc e with the TCEQ’s use -dete rmination order beca use it attempted in g ood faith to apply the order in acc ordanc e with the g overning statutes. I n so arg uing, TCAD asser ts that neither the summary judgme nt order nor the sanctions order specify how the TCEQ’s order should be int erpr eted or how TC AD had failed to comply with it. Additionally , TCAD m aintains that the sanctions order is arbitra ry and unrea sonable beca use it is based on a misapplication of the law and be cause it does not state any authority or g ood cause for imposing sanctions. Under chapte r 42 of the tax code, the district court in a suit for ju d i ci al re v iew is authorized to enter any order s “nec essar y to prese rve the rig hts p rot ecte d by and impose duties require d by the law.” Tex. Tax Code Ann. § 42.24(3); see also id. § 42.43(a) (providing taxi ng unit shall ref und to proper

ty owner d i ff

er en ce betwee n amount of taxes paid and amount of taxes for which proper

ty owner is judicially deter mined to be liable); MAG- T, L.P. v. Travis Cent. Appraisal

7Dist. , 161 S.W .3d 617, 633 (Tex. App.—Austin 2005, pet. denied)

. The trial court, having

previously deter

mined that Wells Fa

rg o was entitled to the full exemption as urg ed in its motion for summary judgme nt, was authorized to enter any order s nece ssary to car ry out the ear lier, unappea led final judgme nt in Wells Fa rg o’s tax-protest suit. Be cause the rec ord establishes that TCAD did not comply with the ear lier judgme nt by ref unding Wells Fa

rg o the amount it had paid under protest, the order direc ting TCAD to pa

y that $97,459 as a sa

nction is neither ar

bitrary nor unre asonable

. Given the proce d u ra l p osture of this case , TCAD’s arg uments reg arding the

corr ectne ss of the trial court’s initial interpr etation of the TCEQ order are at this stag e unavailing

. As Wells Fa

rg o points out, TCAD had urg ed i t s i n terpre tation of the TCEQ order not only in its motion for summary judgme nt in the tax-protest suit, but also in its motion for new trial. TCAD did
not ap p ea l t h o s e ruling s; it cannot now justify its failure to comply with the order direc ting it to “apply the pollution control use deter mination” in the manner urg ed by Wells Fa rg o, the preva iling party in the initial tax-protest su i t , b ased on an interpre tation that has been twice reje cted by the lower c ourts and neve r appe aled.

On this rec ord, we cannot conclude that the trial court’s sanctions order was an abuse of discretion. I t is evident that the trial co u rt b as ed i t s decision to awa rd sanctions on its understanding t h at the summary -judg ment order require d TCAD to downwar dly adjust the proper ty -tax valuation for t h e p roper ty and the undisputed evidenc e that it had failed to do so. Cf. Kennedy v. Kennedy , 125 S.W .3d 14, 19 (Tex. App.—Austin 2002, pet. denied) (re versing trial court’s sanction awa

rd wher e rec ord did not establish that sanctioned party ’s conduct signific antly interfe red with court’s exercise of its core functions). Her e, the trial court essentially deter mined that

8the prior order g ranting Wells Fa rg o’s motion for summary judgme n t was sufficie ntly clea r in requiring TCAD t o adjust its valuation of the pro p er t y i n a m anner consistent with Wells Fa rg o’s

rea ding of the TCEQ order , as prese nted in its motion for summary judgme nt. I ndeed, TCAD itself

seems to have understood the import of the trial court’s summary judgme nt order , as ref lected in the following statement from TCAD’s motion for new trial: “I n g ranting Plaintiff’s motion for summary judgme nt and deny ing Def endant’ s motion for summary judgme nt, the court determ i n ed that the entire proper

ty , eve n that part of the property that is not e xem pt pe r the TCEQ orde r , is entitled to

a pollution control exemption.” (Emphasis in orig inal.) Although TCAD obviously disag ree d with that ruling , it did not perf

ect an appea l from the summary judgme nt. A party cannot ignor e or flout

a court order simply beca

use it believes the court g ot it wrong . The trial court was there fore entitled
to exercise its inhere nt power “to compel compliance with valid order s incident to the administration of justice”—a power that is “funda mental, and closely rela ted to the core functions of the judiciary .” Kutch v. De l Mar Coll. , 831 S.W .2d 506, 510 (Tex. App.—Corpus Christi 1992, no writ).

TCAD’s continued eff

orts to arg ue that the summary -judg ment order is a mbiguous and that its int erpr etation of the TCEQ use deter mination is the proper one constitute an arg ument that t h e t ri al court err ed in g ranting Wells Fa rg o’s motion for summary judgme nt. That order , howeve r, was not appea led, and the issues resolved by that final judgme nt are not befor e this Court. Fur thermore , the rec ord establishes that Wells Fa rg o was obliga ted to bring this motion for sanctions in order to enfor ce the ear lier judgme nt, thus providing a rea sonable basis for the trial court’s awa rd of attorney ’s fees i n this proce eding

. See ge nerally In reBenne tt , 960 S.W .2d 35, 40 (Tex. 1997)

9(discussing trial cou rt ’s inhere nt power , in administration of justice and exercise of its core

functions, to impose sanctions, including attorney ’s fe es).

I n light of the fore g oing, w e over rule TCAD’ s issues on appea l and af firm t he trial court’s sa nctions order

.

CONCLUSION Be cause the trial court did not abuse its discretion, we aff irm the order awa

rding Wells Farg o sanctions in the amount of $97,459, plus $7,500 in attorney ’s fe es.

J . Woodfin J ones, Chief Just ice Be fore Chief J ustice Jones, J ustices Waldrop and He nson Affir med on Rehea

ring Filed: Mar ch 19, 2010

10