### 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

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 Ap p el l ee Wells Fa

rg o Ba nk Minnesota, N.A. (“Wells Fa rg o”) filed suit seeking t o 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 environme ntal-use deter mination issued by the Texa s Co mm is s io n o n E n vironmental Quality (“TCEQ” ). The trial court g rante d summary judgme nt in favor of Wells Fa rg o and o rd ere d TCAD to apply the use deter mination issued by the TC EQ. TCAD di d not appea l from that judg ment. There afte r, Wells Fa rg o filed a motion for sanctions, asser ting that T C AD was still ref using to apply the use-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 $7,500 i n at t o rn ey ’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 owns an apar

tment complex (the “p ro p er t y ”), 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 ap p l i ca t i on with the TC EQ t o have the proper

ty decla red a “pollution con t ro l p ro p erty ,” 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 which it soug ht exemption. Among the improv em en t s re l evant to this appea l, Wells Farg o listed “Fug itive Emissi ons Containment St ructure s” as a proper ty improvement to be exempt under its application. Wells Fa rg o identified these as “[s] tructure s u s ed to contain, for monitoring purposes, emissions rele ased fro m d e c o mp o s in g ma te r ia ls. Floor level structure s contain pollution control equipment (continuous emi s s i o n m onitors) used to detec t VOCs.” Wells Fa rg 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.”). After revie wing Wells Fa rg o’s applicat ion, the TCEQ issued its final use deter mination, which descr ibed the pollution-control prope rty as follows:

Real Estate: 594,208 sq ft used for liners and cover sy stem for landfill, slurry walls, and surfa ce i mpoundments. Site contains 2 stormwater rete ntion ponds siz e 1,244 sq. ft. and 65,586 sq. ft. Property : Continuous emission monitors; liners over landfill to restri ct es cape of wastes; semi-ac tive g as extraction sy stem for fug itive methane; methane monitoring
2& control equipment; two stormwater containm ent ponds; sloping of concr ete

surfa ces for leac hate collection and remova l; landfill fi n a l c o v e r s y 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 posit i v e use deter

mination for 100% of the two stormwater rete ntion ponds rea l estate (1,224 sf + 65,586 sf); continuous emission moni t o rs ; l i n ers over landfill; s emi -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 an d remova l; landfill final cover sy stem; g roundwa ter monitoring wells; fug itiv e emissions containment structure s; a nd 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 ise r 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 executive director’s deter mination. See Tex. Tax Code An n . § 11.31(e) (providing that either party may appea l deter mination to TCEQ withi n 20 day s).

Having obtained its use deter mination from the TCEQ, Wells Fa rg o ap p li e d to T CA D 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 the land at $1.80 per square foot, taking into acc ount a ten p er cent environmenta l adjustment. T he value of the land was calc ulated at $1,069,574 (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 fee t (1,224 square fee t + 65,586 square fee t). TCAD deter mined t h e value of the exemption at $120,258 (66,810 x $1.80/square f oot).
3TCAD 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 words, TCAD deter mined that none of the rea l proper t y o n wh i ch the apar

tment complex was sit u at ed was exempt as a result of the TCEQ’s order beca use proper

ty used 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 ) (“ Property used for residential purposes

. . . is ineligible for an exemption under this section.”).

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 upheld TCAD’s deter

mination, and Wells Fa

rgo fi l ed suit for judicial revie w in district court. See i d

. § 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 o f 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 parties filed cross-motions for summary judgme nt, joining issue in their interpre tations 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 the apar tment complex itself, which was “used for residential

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. 4purposes” and there fore was ineligible under the Texas Constit ution and the tax code. TCAD further

arg ued that it—not the TCEQ—is vested with t h e au t hority 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 conf

ined to the $120,258 par

tial exempti on 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 r esulting a djustment 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, stated t hat “Defe ndants are order ed to apply the pollution 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 tr i al co u rt m isinterprete d the TCEQ order and thus err ed in deter mining that the e n t i re proper ty qualified for tax exemption. Alterna tively , TCAD urge d that beca use t h e T C E Q o rder stated that only a portion of the proper ty qualified as pollution-control p ro p erty , summary judgme nt was improper beca use there wer e disputed fac t issues as to which portion 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 motion for sanctions asser tin g t h at, “[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

o n Wells Fa

rg o’s sanctions motion, TCAD continued to asser t its position that the TCEQ order

5did not exempt the 594,208 square fe et o f re al proper ty 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 h ad b ee n o n the tax rolls “since probably about 1985,” contra ry to Wells Fa

rg o’s

asser tion that the proper

ty beca me taxa b l e fo r t he first time on or afte r J anuar y 1, 1994. On

cross-e x amination, Bisson stated that she did not take into consider ation any of the improvements 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, repres en t i n g t h e portion of the ad valore m tax 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.

STANDARD 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 .3 d 8 3 5 , 8 38 (Tex. 2004); Downer v. Aquamarine Operators, 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 Downer , 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.

6DISCUSSIO N On appea l, TCAD arg

ues that the trial court abused its discretion in order 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 ord er should be int erpr eted or how TC AD had failed to comply with it. Additi onally , 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. As an initial matter, we no te th a t a lt h o ug h Wells Fa

rg o initiated the proce eding g iving rise to this appea l as a reque st for “sanctions,” what it actua lly so u gh t was the enfor ceme nt of t he trial court’s prior order in its suit for judicial revie w of the appra isal revie w board’ s final deter mination. I t is undisput ed that the a war d of $97,459 repr esents the portion of the ad valore m proper ty tax assessed for the first -f l o or level of the proper

ty , which the trial court in the ear lier proce eding had found to qualify for tax exemption and which Wells Fa rg o had paid under protest. The only true “ sanction” soug ht by Wells Farg o was the a ttorney ’s fe e aw ard of $7,500. Under chapte r 42 of the tax code, the district court in a s u i t fo r judicial revie w is authorized to enter any order s “nec essar y to prese rve the rig hts protec ted by and impose du t i es 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 differ ence betwee n amou n t o f t axes 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 Dist. , 161 S.W .3d 617, 633 (Tex. App.—Austin 2005, pet. denied)

. The tax code further authorizes

7the awa

rd of rea sonable attorney ’s fee s to a proper ty owner who preva ils in an appea l to the court. See id. § 42.29(a)

. The trial court, having previously deter mined that Wells Fa

rg o was entitl ed 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 o u t the ear lier, unappea led final judgme nt in Wells Fa rg o’s tax-protest suit. Be cause the record establishes that TCA D d i d not comply with the earlier judgment by ref unding Wells Fa rg o the amount it had paid under protest, the order direc ting TCAD to pay that $97,459 as a “sa nction” is neither a

rbitrar y nor unre asonable

. Given the proce dural posture of t h i s ca se, TCAD’s arg uments reg arding the

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

. As Wells Fa

rg o points out, TCAD had urg ed its interpre tation of the TCEQ order not only in i t s motion for summary judgme nt in the tax-protest suit, but also in its motion for new trial. TCAD did
not appea l those ruling s; it cannot now j u s t i fy i t s 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 suit, based on an interpre tation that h as 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

o f d i s cr et i on. I t is evident that the trial court based its decision to awa rd sanctions on i t s

u n derstanding that the summary -judg ment order require d TCAD to downwar dly adjust t h e proper ty -tax valuation for the proper ty and the undisputed evidenc e t h at i t 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

8interfe red with court’s exercise of its core functions). Her e, the trial court essentially deter mined that the prior order g ranting Wells Fa rg o’s motion for summary judgme nt was sufficie ntly clea r in

re q u i ri n g TCAD t o adjust its valuation of the property in a manner consist ent wit h Wells Fa rgo’ 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 fo r s u mmary judgme nt, the court deter mined 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 e ntitled 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 a rg ue that the summary -judg ment order is ambig uous and that its interpre tation of the TCEQ use deter mination is the proper one constitute an a rg ument that the trial court err ed in g ranting Wells Fa rg o’s m o t i o n fo r 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 n t, thus providing a basis for the trial court’s awa rd of attorney ’s fe es in this procee ding.

9I n light of the fore g oing, we over rule TCAD’ s issues on appea l and af firm the 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 $94,459, 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 Filed: January

26, 2010

10