Opinion ID: 894694
Heading Depth: 2
Heading Rank: 2

Heading: Student Services Fee

Text: Section 54.503 of the Education Code authorizes public institutions of higher education to charge fees to fund student activities. [6] It provides, however, that the amount of such fees may not be increased more than ten percent in one year unless the increase is approved by a majority vote of students voting in an election held for that purpose or by a majority vote of the student government at the institution. TEX. EDUC. CODE § 54.503(f). The Class contends that section 54.503(f) governs this case and that the District failed to rebut its summary judgment proof that several of the public junior college campuses did not approve the fee increase as required. The district contends that the fee increase was approved but even if the fee were charged in violation of section 54.503, the trial court erred in awarding the Class almost $1.5 million in damages. It notes that the Class paid the fees without ever protesting their validity, and it asserts that the fees were non-recoverable voluntary payments to the government. The Class responds that the trial court properly held that the fees were recoverable because they were paid under duress, as a matter of law, and were therefore not non-recoverable voluntary payments to the government. Our precedents on duress and voluntary payments to government entities extend into the nineteenth century. In paying taxes and government fees, we have long recognized that, under the common law, duress may play a pivotal role in the payor's ability to recover those payments when the taxes and fees are later determined to be unlawful. A person who pays a tax voluntarily and without duress does not have a valid claim for its repayment even if the tax is later held to be unlawful. Nat'l Biscuit Co. (Nabisco) v. State, 134 Tex.293, 135 S.W.2d 687, 692-93 (1940); Austin Nat'l Bank v. Sheppard, 123 Tex. 272, 71 S.W.2d 242, 245-46 (1934). In 1890, we held that it was well settled that a tax voluntarily paid cannot be recovered, though it had not the semblance of legality. City of Houston v. Feizer, 76 Tex. 365, 13 S.W. 266, 267 (1890). This voluntary payment rule may seem counterintuitive, but there are important reasons supporting it. In the taxation context, the rule secures taxing authorities in the orderly conduct of their financial affairs. Id., 13 S.W. at 267 (It is a rule of quiet as well as of good faith . . . .); see also Salvaggio v. Houston Indep. Sch. Dist., 752 S.W.2d 189, 193 (Tex.App.-Houston [14th Dist.] 1988, writ denied). The Supreme Court also has recognized the government's exceedingly strong interest in financial stability in this context and threats to a state's financial security that can arise from unpredictable revenue shortfalls. McKesson Corp. v. Div. of Alcoholic Bevs. & Tobacco, Dep't of Bus. Regulation of Fla., 496 U.S. 18, 37, 110 S.Ct. 2238, 110 L.Ed.2d 17 (1990). The rule also supports the age-old policies of discouraging litigation with the government. See Austin Nat'l Bank, 71 S.W.2d at 246; see also Salvaggio, 752 S.W.2d at 193. On the other hand, a person who pays government fees and taxes under duress has a valid claim for their repayment. Union Cent. Life Ins. v. Mann, 138 Tex. 242, 158 S.W.2d 477, 479 (1941); Nabisco, 135 S.W.2d at 692-93; Austin Nat'l Bank, 71 S.W.2d at 246. Reimbursement of illegal fees and taxes is allowed, in essence, when the public entity compels compliance with a void law and subjects the person to punishment if he refuses or fails to comply. State v. Akin Prods. Co., 155 Tex. 348, 286 S.W.2d 110, 111-12 (1956); see also In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex.2001). We have applied these rules to the imposition of illegal fees as well as illegal taxes, holding that a party may seek reimbursement of illegal license fees paid under duress. Akin Prods. Co., 286 S.W.2d at 111-12; Crow v. City of Corpus Christi, 146 Tex. 558, 209 S.W.2d 922, 925 (1948).
In considering duress, it is useful to review its historical context. The early common law restricted duress to imprisonment or threats sufficient to put a brave man in fear of loss of life or limb or of imprisonment of himself or a member of his immediate family. RESTATEMENT (SECOND) OF TORTS § 892B cmt. j (1977). We characterized duress as the result of threats which render persons incapable of exercising their free agency and which destroy the power to withhold consent. Dimmitt v. Robbins, 74 Tex. 441, 12 S.W. 94, 96-97 (1889). The common law concept of duress was later enlarged. Akin Prods. Co., 286 S.W.2d at 111 (The early common-law doctrine of duress has been expanded and many courts have adopted the modern doctrine of `business compulsion' . . . .); see also Ward v. Scarborough, 236 S.W. 434, 437 (Tex.Com.App. 1922). The Restatement of Restitution defined duress less restrictively as a serious risk of imprisonment or of the loss of possession of his things or of other substantial loss and a reasonable anticipation by the payor of substantial risk of loss or serious inconvenience if the payment is not made. RESTATEMENT (FIRST) OF RESTITUTION § 75(1)(b) cmt. f (1937). Many courts have recognized an additional, modern type of duress often referred to as business compulsion or economic duress. Akin Prods. Co., 286 S.W.2d at 111; Crow, 209 S.W.2d at 924; PROSSER AND KEETON ON TORTS § 18, at 121 (5th ed.1984). We have referred to business compulsion and economic duress as implied duress, because the pressure to pay these government exactions is indirect and flows from statutes or ordinances. See Miga v. Jensen, 96 S.W.3d 207, 211, 224-25 (Tex.2002) (compulsion implied by the threat of statutory penalties and accruing interest constitutes economic duress); Powell, 640 S.W.2d at 237 (holding that duress may be implied from a statute which imposes a penalty and interest for failure to timely pay a tax); Austin Nat'l Bank, 71 S.W.2d at 246; Nabisco, 135 S.W.2d at 692-93. We have also held that business compulsion [7] may constitute duress and allow recovery of the payment of an illegal tax or fee. In Crow we held that a city ordinance compelling a choice between paying an illegal license fee to operate a cab or cab company and forfeiting one's livelihood or right to do business constitutes business compulsion, or implied duress, as a matter of law. 209 S.W.2d at 924-25. We also determined that if, due to imposition of taxes on packaged citrus fruit, a reasonably prudent man finds that in order to preserve his property or protect his business interest it is necessary to make a payment of money which he does not owe, the taxes were paid under duress. Akin Prods. Co., 286 S.W.2d at 111. Failure to pay the mandatory citrus tax would have resulted in the businessman suffering a daily penalty and interest. Id. In another circumstance, the National Biscuit Company (Nabisco) paid franchise and permit fees for several years rather than pay a penalty of twenty-five percent of the fees and forfeit its right to do business in Texas. Nabisco, 134 Tex. 293, 135 S.W.2d 687. After the fees were declared unconstitutional, Nabisco sued to recover them. We held that, where a statute imposed the penalties at issue, the taxes were paid under duress and the taxpayer need not take the risk of incurring the statutory punishments while the case was being litigated. Id. at 693. Finally, we held that Highland Church of Christ's payment of a judgment for ad valorem taxes on an office building it owned was involuntary. Highland Church of Christ v. Powell, 640 S.W.2d 235 (Tex.1982). The Church paid the judgment to avoid penalties and interest which would accrue while the case was on appeal, and this Court held that the judgment was therefore not voluntarily paid. Id. at 237. This Court has consistently recognized business compulsion arising from payment of government fees and taxes coerced by financial penalties, loss of livelihood, or substantial damage to a business. See Metro. Life Ins. Co. of N.Y. v. Mann, 140 Tex. 450, 168 S.W.2d 212 (1943) (threatened revocation of certificate of authority to transact insurance business for failure to pay void occupation taxes); Union Cent. Life Ins. v. Mann, 138 Tex. 242, 158 S.W.2d 477 (1941) (threatened revocation of certificate of authority to transact insurance business for failure to pay void taxes on annuity premiums); Austin Nat'l Bank of Austin v. Sheppard, 123 Tex. 272, 71 S.W.2d 242 (1934) (holding that duress was established when a company showed that the Secretary of State's refusal to file an amended charter of asphalt company jeopardized its ability to do business unless a second filing fee was paid). A common element of duress in all its forms (whether called duress, implied duress, business compulsion, economic duress or duress of property) is improper or unlawful conduct or threat of improper or unlawful conduct that is intended to and does interfere with another person's exercise of free will and judgment. See In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 574 (Tex.1999) (defining duress as a threat to do some act which the threatening party has no legal right to do); Ward v. Scarborough, 236 S.W. 434, 437 (Tex. Com.App.1922) (The restraint, intimidation, or compulsion is sufficient if it induces... some act ... contrary to his will.); RESTATEMENT (SECOND) OF TORTS §§ 892B cmt. j, 871 cmt. f(1979); Crow, 209 S.W.2d at 925. The compulsion must be actual and imminent, and not merely feigned or imagined. See Ward, 236 S.W. at 437; Dimmitt, 12 S.W. at 96-97. We have repeatedly held that duress is established where the unauthorized tax or fee is required, necessary, or shall be paid to avoid the government's ability to charge penalties or halt a person from earning a livelihood or operating a business. Crow, 209 S.W.2d at 924; Metro. Life Ins. Co., 168 S.W.2d at 215; Union Cent. Life Ins., 158 S.W.2d at 481; Nabisco, 135 S.W.2d at 692-93; Austin Nat'l Bank, 71 S.W.2d at 246. Succinctly, the decision faced is to comply or close up. Akin Prods. Co., 286 S.W.2d at 111; Ward, 236 S.W. at 437 (The restraint must be imminent and such as to destroy free agency without present means of protection.).
In many areas, the common-law requirements for voluntary payments and duress have been supplanted by statute. In the years after Nabisco and Austin Nat'l Bank, the Legislature systematically adopted refund mechanisms and protest requirements in various statutes that obviated the need to show business compulsion in many cases. See, e.g., TEX. GOV'T CODE § 403.202; TEX. TAX CODE §§ 31.115, 112.051; see also State Life Ins. Co. v. Daniel, 6 F.Supp. 1015, 1017 (W.D.Tex. 1934) (noting that the Texas Legislature enacted the first protest statute after taking notice of the fact that taxpayers were being required by officers of the state to make payments which they believed to be unlawful, and that the Legislature desired to effect an arrangement by which payments could be made without waiver of the right to seek a refund). For example, the Legislature adopted mechanisms for the refund of a tax or fee imposed by [Title 2 of the Tax Code] or collected by the comptroller under any law, including a local tax collected by the comptroller. TEX. TAX CODE § 112.051. The Legislature adopted a similar refund mechanism for the recovery of allegedly illegal occupation, excise, gross receipts, franchise, license, or privilege tax[es] or fee[s] paid to any department of the state government. TEX. GOV'T CODE § 403.202. The Legislature also enacted a mechanism to protest the payment of ad valorem taxes in order to recover an overpayment. TEX. TAX CODE § 31.115. These statutes apply to most of the taxes and fees expressly authorized by statute. They apply to state and local sales taxes, property taxes, corporate franchise taxes, professional occupation taxes, and much more. See, e.g., TEX. GOV'T CODE § 403.202; TEX. TAX CODE §§ 31.115, 112.051. Fees paid to state universities also fall under the protest statute, as do property taxes paid to community college districts. TEX. GOV'T CODE § 403.202; TEX. TAX CODE § 31.115; see also Rainey v. Malone, 141 S.W.2d 713, 714 (Tex.Civ. App.-Austin 1940, no writ) (holding that, in order to contest the legality of the student union fee at the University of Texas, a student was required to pay it under protest, and bring suit for its recovery). However, none of these statutes applies directly to fees charged by public junior colleges.
Where the facts are undisputed, determination of whether a payment is voluntary or involuntary is a question of law. See Windham v. Alexander, Weston & Poehner, P.C., 887 S.W.2d 182, 185 (Tex. App.-Texarkana 1994, writ denied); Matthews v. Matthews, 725 S.W.2d 275, 278 (Tex.App.-Houston [1st Dist.] 1986, writ ref'd n.r.e.); accord Merrill v. Gordon, 15 Ariz. 521, 140 P. 496, 501 (1914) (Whether a payment was made voluntarily or not is a question of law, where the facts are undisputed.); Eslow v. Albion, 153 Mich. 720, 117 N.W. 328 (1908) (The question as to whether the [license] payments were voluntarily made where the facts are undisputed is one of law.). The Class contends that attending school is the business of students. It argues that the District's increase in a mandatory student services fee meets the business compulsion exception to the voluntary payment rule, as a matter of law, because students who refused to pay the fees risked complete inability to take classes and receive credit therefor in order to obtain a degree. Because the Class asserted that duress was shown as a matter of law by the imposition of the mandatory fees, it contends that it was not necessary to submit evidence of any coercive impact of the fee increase. The District contends that the Class is not entitled to a refund of the fees because the fees were voluntary payments as a matter of law and because the Class introduced no evidence of duress. Both sides acknowledge that there are no disputed issues of material fact. Therefore, we decide this issue as a matter of law. See Metro. Life Ins. Co. v. Mann, 140 Tex. 450, 168 S.W.2d 212, 213 (1943). The undisputed facts are as follows: The student services fee was increased from a flat fee of $10 per semester to a sliding scale fee of $2 per semester credit hour, with a minimum of $10 and a maximum of $40. [8] The amount of the fee increase is dependent on the number of credit hours taken by the student. Depending on the student's choices, there may be no increase at all or an increase of up to $30. The students also had the option, if they believed that they could not afford the fee, to seek an exemption from all or part of the fee from the District. See TEX. EDUC. CODE § 54.503(e) (allowing the District to waive all or part of any compulsory fee for any student facing undue financial hardship). The dissent points out that the statute limits actual waivers to ten percent of the student body and thus ninety percent of the quarter of a million members of the class could not benefit from the waiver. The dissent makes an argument that the Class did not. However, if there were evidence that students sought waivers and were denied them, or that the students made any protest at all at the time of payment, the Court's analysis might be different. Perhaps only ten percent of the students could actually be awarded a waiver, but fully one hundred percent could have requested it. The fact that no student sought a waiver supports the conclusion that the fees were voluntarily paid. The Class asserts that the District's student services fees put students at risk of not being able to take any junior college classes and receive credit. The evidence establishes the contrary. The students had options by which they could avoid paying the increased fee or at least lower the fee and still take college classes. As discussed, students who faced financial hardship could seek an exemption from all or part of the fee. See TEX. EDUC. CODE § 54.503(e). Other students, if facing financial hardship, would incur no increase in fees if they enrolled in five credit hours or less. Students could also limit the financial burden of the student services fee by taking fewer than twenty credits. For example, a student taking seven credit hours for the semester would pay $4 in additional student services fees and one taking ten credits would pay $10 more in addition to the tuition. The Class members by their choices determined the amount of the fee charged and exercised the option of attending a public junior college in the District. Thus, the student taking seven hours would avoid the alleged duress of a $4 increased fee payment by taking five credit hours. The increase in the student services fee may create financial incentives, but such financial incentives or disincentives do not transform a choice into coercion. Payment of the increased fee was not mandatory for any member of the Class; it was contingent on enrollment in a junior college in the Dallas County Community College District and selection of a certain number of credit hours for the semester. In light of the choices the students retained and their right to request a waiver of the fees or otherwise protest the imposition of the fee, any coercion that existed was not actual and imminent and did not constitute duress as a matter of law. [9] This decision is consistent with our jurisprudence for more than a century. Although the dissent asserts that, in modern times, we have always require[d] public agencies to reimburse taxes and fees that were determined later to be void, this statement is simply not true. See Carrollton-Farmers Branch Ind. Sch. Dist. v. Edgewood Ind. Sch. Dist. (Edgewood III), 826 S.W.2d 489, 515-21, 538 (Tex.1992) (rejecting argument by J. Doggett, dissenting, that prior taxes paid should be returned) [10] ; Corsicana Cotton Mills v. Sheppard, 123 Tex. 352, 71 S.W.2d 247, 249 (1934); City of Houston v. Feizer, 76 Tex. 365, 13 S.W. 266, 267-68 (1890); Galveston City Co. v. City of Galveston, 56 Tex. 486, 491, 494-495 (1882). This Court has also held that voluntary payment of void taxes and fees is not recoverable. Corsicana Cotton Mills, 71 S.W.2d at 249 (Under the facts detailed above this corporation was a volunteer in paying the taxes here involved. It therefore had no legal claim against the state for their repayment at the time this appropriation was made.); Feizer, 13 S.W. at 268 (the evidence does not show an involuntary payment). Rather than challenge the proposition that our precedents refute the contention that public agencies are always required to reimburse payment of void fees, the dissent complains that one of the precedents is old, two others involve voluntary payments and the most recent one, Edgewood III, was based on a different ground. To be sure, we do not base the inability to recoup the payments in this case on any philosophical view of the government's entitlement to the funds, but we adhere to longstanding legal precedent and predictability in the law, and acknowledge practical considerations of the public fisc. These holdings recognize the necessity for a governmental authority to be able to rely on a predictable income stream  the very interest that the voluntary payment rule seeks to protect. [11] The dissent also suggests that today's decision is inconsistent with recent case law and cites several cases in which this Court ordered that government fees be reimbursed. See, e.g., Lubbock County, Tex. v. Trammel's Lubbock Bail Bonds, 80 S.W.3d 580, 585-86 (Tex.2002); Camacho v. Samaniego, 831 S.W.2d 804, 815 (Tex. 1992). The dissent itself refutes the force of these opinions by noting that these cases all have one thing in common  there is no mention in any of them of voluntary payment as a defense. The parties did not raise the issue of voluntary payment in those cases, and the Court did not address it. See Exito Elecs. Co. v. Trejo, 142 S.W.3d 302, 304 n. 1 (Tex.2004) (noting that the Court does not consider issues not raised by the parties). Finally, the dissent asserts that it is hard to see why students should have less protection than bail bondsmen. This statement obfuscates rather than addresses the issue. The students in this case have the same protections under the laws as others who establish duress. In the cases cited by the dissent, it was clear that the harm suffered by the bail bond agents or other professionals was actual and imminent  they would lose their ability to earn a living or do business. In this case, the harm is far more speculative. While the college was authorized to prevent enrollment or to deny credit, it is undisputed that there is no evidence that the college denied either benefit to any student or that it would actually have done so. Furthermore, as noted above, the students had the option to avoid the fee by adjusting their course loads, seeking a waiver or injunction to halt collection of the fees, or seeking other educational opportunities. No member of the class pursued any of these options. We conclude that the Class did not establish duress as a matter of law, and that the District established that the student services fee payments were voluntary payments as a matter of law.