Court Opinion

ID: 4050513
Source: CourtListenerOpinion
Date Created: 2016-09-29 01:16:38.499989+00
Date Added: 2024-06-11T14:04:37.368558
License: Public Domain

ACCEPTED
                                                                                       06-15-00007-CV
                                                                            SIXTH COURT OF APPEALS
                                                                                  TEXARKANA, TEXAS
                                                                                   7/2/2015 9:18:06 AM
                                                                                      DEBBIE AUTREY
                                                                                                CLERK

                             No. 06-15-00007-CV

                          In the Court of Appeals for the             FILED IN
                                                               6th COURT OF APPEALS
                          Sixth Judicial District of Texas       TEXARKANA, TEXAS
                                 Texarkana, Texas              7/2/2015 9:18:06 AM
                                                                   DEBBIE AUTREY
                                                                       Clerk

            HYDROGEO, LLC AND FIRST BANK & TRUST EAST TEXAS
                                    Appellants
                                      AND
                  DEBERRY 3 OPERATING COMPANY, LLC,
                                    Appellants

                                         v.

 QUITMAN INDEPENDENT SCHOOL DISTRICT, WOOD COUNTY, UPPER SABINE
WASTE DISPOSAL DISTRICT, AND Woon COUNTY CENTRAL HOSPITAL DISTRICT,
                                    Appellees

               On Appeal from the 402nd Judicial District Court
                           Wood County, Texas

            BRIEF OF APPELLANTS, HYDROGEO, LLC and
                FIRST BANK & TRUST EAST TEXAS

                                              J. DON WESTBROOK
                                              Texas Bar No. 21215500
                                              COGHLAN CROWSON, LLP
                                              1127 Judson Road, Suite 211
                                              Longview, Texas 75601
                                              (903) 758-5543
                                              (903) 753-6989 (fax)
                                              dwestbrook@ccfWw.com
ORAL ARGUMENT REQUESTED                       Attorneys for Hydrogeo, LLC and
                                              First Bank & Trust East Texas
                        Certificate of Interested Persons

      The undersigned counsel of record certifies that the following listed persons
have an interest in the outcome of this case.

Appellants                                   Counsel for Hydrogeo, LLC and
Hydrogeo, LLC and                            First Bank & Trust East Texas
First Bank & Trust East Texas
                                             J. Don Westbrook
                                             Michael E. Starr
                                             Coghlan, Crowson, LLP
                                             1127 Judson Road, Suite 211
                                             P.O. Box 2665
                                             Longview, Texas 75606-2665

Appellant                                    Counsel for DeBerry 3 Operating
DeBerry 3 Operating Company, LLC             Company, LLC:

                                             Michael L. Dunn
                                             Smead, Anderson & Dunn
                                             2110 Horseshoe Lane
                                             Longview, Texas 75606

Appellee                                     Counsel for Wood County, Upper
Wood County, Upper Sabine                    Sabine Waste Disposal District and
Waste Disposal District and Wood             Wood County Central Hospital
County Central Hospital District             District

                                             Edward J. (Nick) Nicholas
                                             Linebarger Goggan Blair &
                                             Sampson, LLP
                                             4828 Loop Central Drive, Suite 600
                                             Houston, Texas 77081

                                        ii
                                            Jim L. Lambeth
                                            Alison Wylie
                                            Linebarger Goggan Blair & Sampson,
                                            LLP
                                            1517 W. Front St. Suite 202
                                            Tyler, Texas 75702

Appellee                                    Counsel for Quitman Independent
Quitman Independent School District         School District

                                            David Hudson
                                            Perdue, Brandon, Fielder, Collins &
                                            Mott, LLP
                                            POBox2007
                                            Tyler, Texas 75710

                                      iii
                                     TABLE OF CONTENTS

INDEX OF AUTHORITIES ...................................................................... v, vi

STATEMENT OF THE CASE ..................................................................... vii

STATEMENT REGARDING ORAL ARGUMENT .................................. viii

ISSUES PRESENTED ................................................................................. viii

STATEMENT OF FACTS .............................................................................. l

SUMMARY OF THE ARGUMENT .............................................................. 5

ARGUMENT AND AUTHORITIES ............................................................. 7

         A. Issue No. 1........................................................................................ 7

         B. Issue No. 2 ...................................................................................... 11

CONCLUSION ............................................................................................. 20

PRAYER ....................................................................................................... 21

CERTIFICATE OF COMPLIANCE ............................................................ 22

CERTIFICATE OF SERVICE ...................................................................... 22

INDEX OF APPENDICES ........................................................................... 23

                                                            iv
                                      INDEX OF AUTHORITIES

Cases

Interstate Northborough P 'ship v. State, 66 S.W.3d 213
       (Tex. 2001) ............................................................................................ 7

Alvarado v. Farah Mfg. Co., 830 S.W.2d 911
      (Tex. 1992) ................................................................................... 7, 8, 9

Good v. Baker, 339, S.W.3d 260
      (Tex. App.-Texarkana 2011, pet. denied) ...................................... 11

Maro v. State, 168 S.W.2d 510
     (Tex. Civ. App.-Amarillo 1943, writ ref'd) .................................... 12

K.R.P., 80 S.W.3d 669
      (Tex. App.-Houston [1 ' 1 Dist.] 2002, pet. denied) ........................... 12

Maximum Medical Improvement, Inc. v. County ofDallas, 272 S.W.3d 832
     (Tex. Civ. App.-Dallas 2008, no pet.) ................................. 12, 13, 15

Pete Dominguez Enterprises v. County ofDallas, 188 S.W.3d 385
      (Tex. Civ. App.-Dallas 2006, no pet.) ............................................. 13

DMV Vacuum Services, Inc. v. Zavala County Appraisal District, 812 S.W.2d 435
    (Tex. App.-San Antonio 1991, no writ) .................................... 13, 14

Estates ofElkins v. County ofDallas, 146 S.W.3d 826
      (Tex. App.-Dallas 2004, no pet.) ............................................... 14, 15

Sonnier v. Chisholm Ryder Co., 909 S.W.2d 475
      (Tex. 1995) ......................................................................................... 18

Logan v. Mullis, 686 S.W.2d, 605
     (Tex. 1985) ......................................................................................... 18

Palmer v. Palmer, 831S.W.2d479
     (Tex. App.-Texarkana 1992, no writ) ............................................. 19

                                                            v
University Savings and Loan Ass'n v. Security Lumber Co., 423 S.W.2d 287
      (Tex. 1967) ................................................................................... 19, 20
Taylor v. Rigby, 574 S.W.2d 833
      (Tex. App.-1978 writ refd) ............................................................. 20

Goldberg v. R.J Longo Constr. Co., 54 F.3d 243
     (5th Cir. 1995) .................................................................................... 20

Shipley v. Biscamp, 580 S.W.2d 52
      (Tex. App.-Houston [14th Dist.] 1979, no writ) ............................. 20

Spencer-Sauer Lumber Co. v. Ballard, 98 S.W.2d 1054
     (Tex. App.-San Antonio 1936, no writ) .......................................... 20

Other

Tex. Bus. & Com. Code Ann. §1.20l(b)(9)(Vernon 1987) ............... 2, 16, 17

Tex. Tax Code Ann. §33.47(a) (Vernon 1992) .................. 2, 6, 11, 13, 14, 19

Tex. Tax Code Ann.§ 32.03 (Vernon 1992) ........................................... 2, 16

TEX. R. CIV. P. 193.6 ............................................................................. 3, 6, 9

TEX. R. CIV. P. 193.6 (b) ..................................................................... 6, 9, 10

TEX. R. CIV. P. 193.6 (a) ..................................................................... 8, 9, 10

TEX. R. CIV. P. 307 ...................................................................................... 12

Tex. Tax Code Ann.§ 33.47 (Vernon 1992) ......................................... 12, 13

Tex. Tax Code Ann.§ 33.05 (Vernon 1992) ............................................... 16

Tex. Tax Code Ann.§ 32.03(a) (Vernon 1992) ........................................... 17

Texas Attorney General Opinion No. DM-438, May 2, 1997 ..................... 16

                                                          vi
                               No. 06-15-00007-CV

                                       In the
                             Court of Appeals for the
                          Sixth Judicial District of Texas
                                 Texarkana, Texas

             HYDROGEO, LLC AND FIRST BANK & TRUST EAST TEXAS
                                    Appellants

                                       AND

                    DEBERRY 3 OPERATING COMPANY, LLC,
                                    Appellants

                                         v.

 QUITMAN INDEPENDENT SCHOOL DISTRICT, Woon COUNTY, UPPER SABINE
WASTE DISPOSAL DISTRICT, AND Woon COUNTY CENTRAL HOSPITAL DISTRICT,
                                     Appellees

                 On Appeal from the 40znct Judicial District Court
                             Wood County, Texas

                         STATEMENT OF THE CASE

      Hydrogeo, LLC and First Bank & Trust East Texas, (hereinafter "Hydrogeo"),

appellants in the above captioned appeal, file this Brief of Appellants, and

respectfully request this Honorable Court of Appeals to reverse the judgment granted

in favor of Quitman Independent School District, Wood County, Upper Sabine

Waste Disposal District and Wood County Central Hospital District (hereinafter

                                         vii
"taxing entities") by the 402°ct Judicial District Court in Wood County, Texas and

render judgment that appellees take nothing by this suit.

              STATEMENT REGARDING ORAL ARGUMENT

      Hydrogeo believes that oral argument will aid in the Court's decision

concerning the arguments raised in this appeal.

                              ISSUES PRESENTED

                                   ISSUEN0.1

       Did the trial court commit reversible error by admitting Plaintiffs'
Exhibit "A" into evidence when the document had not been produced prior to
trial, and when the taxing entities failed to make any showing of good cause for
their failure to produce the document.

                                   ISSUE N0.2

      Did the trial court err by finding the taxing entities' entire alleged tax lien
enforceable against Hydrogeo, when taxing entities failed to segregate that
portion of the lien which was unenforceable against Hydrogeo.

                                         viii
                              STATEMENT OF FACTS

       This appeal is from the trial court's decision granting various taxing entities

the authority to foreclose tax liens on two oil and gas leases owned and operated by

Hydrogeo. Appellant First Bank & Trust East Texas owns a mortgage lien on the

leases, which leases are located in Wood County, Texas.

       The taxing entities originally filed suit in July 2012 naming three different

owners and listing two leases i.e., the Denton White (Tract One) and the I.E.

Robinson (Tract Two), claiming delinquent taxes owed for the years 2009 through

2011, and seeking foreclosure of real and personal property interests. (1 C.R. p.8) 1

At the time of the filing of the lawsuit, taxing entities, although aware ofHydrogeo's

leasehold ownership, incorrectly sued three entities who did not own any interest in

the Denton White lease. (2 R.R. p. 57, line 21 - p. 58, line 8.) Taxing entities did

not sue anyone owning an interest in the Robinson lease for the years 2010 and 2011

(2 R.R. p. 109, line 7 - p. 110, line 18). Even a cursory search of the applicable

county clerk's records or their own tax rolls would have revealed the correct owners'

names. (2 R.R. p. 25 line 20 - p. 26, line 3). It was not until a year later that they

filed a First Amended Petition naming Hydrogeo, LLC and First Bank & Trust East

1
  References to the Clerk's Record will be by Arabic numeral indicating the volume, the
abbreviation "C.R." and page number. References to the Reporter's Record will be in the same
manner using the abbreviation "R.R." References to the appendix will be with the abbreviation
"App." and the letter of the referenced appendix tab.

                                              1
Texas for the first time. (1 C.R. p. 36) They filed a second petition naming a 50%

leasehold owner in one of the two leases, DeBerry 3 Operating Company, LLC on

March 6, 2014. ( 1 C.R. p. 164) None of appellants received notification of taxing

entities' claimed tax liens prior to filing their First Amended Petition. (2 R.R. p. 56,

lines 17-19). Hydrogeo, LLC has always been current on its ad valorem taxes since

the time it began operations of the two leases in 2012. (2 R.R. p. 56, lines 13-16).

      As mentioned, Hydrogeo, LLC purchased the two leases in question in 2012,

meaning they did not own the properties on January 1' 1 of either 2009, 2010 or 2011,

which is significant because Hydrogeo alleges they are buyers in ordinary course as

defined by Tex. Bus. Com. Code §1.201 (b) (9) (Vernon 1987). (2 R.R. p. 55, line

19-p. 56, line 5.) Hydrogeo filed verified denials and obtained response to requests

for admissions confirming no ownership, lack of prior notice, and questioning the

validity of the amount of the lien. (1 C.R. p. 54, 58, 78). As such, Hydrogeo contends

they effectively rebutted the presumption given to taxing authorities under Tex. Tax

Code Ann. §33.47(a) (Vernon 1992). Additionally, Hydrogeo as a buyer in ordinary

course, believe they are protected against enforcement of the taxing authorities' tax

lien as it relates to any personalty located on the two oil and gas leases. (Tex. Tax

Code § 32.03, App. G).

      The enforceability of the tax lien was tried as a bench trial before the court on

September 18, 2014. The taxing entities offered Plaintiffs' Exhibit "A", labeled

                                           2
"Certified Copy of Tax Records'', dated August 22, 2014. (2 R.R. p. 7 line 15-20).

Hydrogeo objected to the offer of Exhibit "A" for admission. (2 R.R. p. 8, line 1 -

line 7). The objection dealt with the potential violation of TEX. R. CIV. P. 193.6, in

that Exhibit "A" had not been provided to Hydrogeo prior to trial. (2 R.R. p. 8 line

20 - p. 9, line 1). Hydrogeo believes the trial court erred by admitting Exhibit "A"

even though taxing entities made no showing of good cause or lack of unfair surprise

and/or prejudice. The questionable Exhibit "A" was the only evidence offered by

taxing entities, who then rested. (2 R.R. p. 9, line 10-16). Hydrogeo moved for

directed verdict, which was overruled. (2 R.R. p. 19, line 15-18 and 2 R.R. p. 22,

line 3).

       Exhibit "A" is a seven page document regarding the two leases, and is attached

as Appendix A. Page one describes a 0.83335 royalty interest in the Denton White

lease for the year 2009. (emphasis added). (2 R.R. p. 40, line 9 -p. 41, line 9). The

owners of the leases on Exhibit "A" are listed as "Black Diamond Operating Co.

LLC" for year 2009 and "Rheata Resources LLC" for years 2011 and 2012. (3 C.R.

p. 7-9 and App. A). The trial court subsequently ruled that Rheata Resources LLC

never owned an interest in either of the two oil and gas leases for the years in

question and issued a directed verdict confirming its ruling. (2 R.R. p. 109, line 7 -

p. 110, line 18, and App. B). Subsequently, evidence at trial revealed the owner and

operator of both leases during all three years in question was "Steelman Investments,

                                          3
Inc." (Defendants Black Diamond and Rheata Exhibit Nos. 3 and 5). The taxing

entities have never sued "Steelman Investments, Inc." for collection of the

delinquent taxes.

      In addition to listing the wrong owners, Plaintiffs' Exhibit "A" describes, on

page one, the interest being taxed as a "royalty interest". (App. A). Page one of

Exhibit "A" is taxing entities' sole evidentiary support for its claim for delinquent

taxes for year 2009 regarding the Denton White lease. (2 R.R. p. 7, line 15 - 20).

Subsequent testimony during trial revealed that taxing entities' claim for taxes on a

royalty interest was incorrect. (2 R.R. p. 40, line 9 - p. 41, line 9). A royalty interest

comes from the lessor side of an oil and gas lease, while taxing entities' intended

lien is for a working interest, which comes from the lessee side. (2 R.R. p. 40, line

9, - p. 41, line 9). Despite taxing entities' Exhibit "A" listing the wrong owners and

describing the wrong interest, the trial court ultimately ruled in favor of taxing

entities on January 14, 2015, granting their request for foreclosure on tax liens on

Hydrogeo's two leases. (App. B).

      Hydrogeo requested Findings of Fact and Conclusions of Law on January 21,

2015. (App. C). The trial court issued Findings of Fact and Conclusions of Law on

February 4, 2015. (App. D). Hydrogeo objected to the trial court's findings by

requesting Additional Findings of Fact and Conclusions of Law on February 13,

2015, and by listing specific findings and conclusions. (App. E). The trial court

                                            4
denied Hydrogeo' s requests by re-issuing the same Findings of Fact and Conclusions

of Law on February 23, 2015. (App. F). Hydrogeo filed its Notice of Appeal on

January 27, 2015. (App. I).

                             SUMMARY OF ARGUMENT

       Hydrogeo's two leases should be free from the taxing entities' efforts to

foreclose because:

       1)       the one piece of evidence (App. A) was incorrectly admitted by the trial

court, in that it had not been provided to opponents prior to trial and good cause was

not shown by taxing entities to allow admission;

       2)       even if Exhibit "A" was properly admitted, it does not prove taxing

entities' claims because it lists the wrong owners, describes the wrong properties,

and does not distinguish between the values given to the leases' personalty from the

values given to the realty;

       3)       taxing entities' reliance on its rebuttable presumption is misplaced

because Hydrogeo effectively rebutted the presumption, forcing the taxing entities

to prove each element of their cause of action, which they failed to do;

      4)        failure by the taxing entities to prove the valid amount of the underlying

tax claims is critical because without a valid debt, there can be no valid lien on which

to foreclose.

                                             5
       Regarding the evidentiary question, the taxing entities offered one document

(Exhibit "A") into the evidence and then rested. (2 R.R. p. 7, line 15 - p. 7, line 20);

(2 R.R. p. 9, line 10 - p. 9, line 16). Exhibit "A" constitutes the entire proof offered

by taxing entities. Since Exhibit "A" had not been provided to opponents prior to

trial in direct violation of TEX. R. CIV. P. 193.6, the trial court had no discretion to

admit Exhibit "A" unless taxing entities were able to make a showing of good cause

for not complying with discovery requests. TEX. R. CIV. P. 193.6 (b). The record

is silent on this issue; no showing was made by the taxing entities. There can be no

doubt that since Exhibit "A" constitutes the entire proof offered by taxing entities,

that the trial court's decision to improperly admit it constitutes harmful error.

       Even if Exhibit "A" was properly admitted, it contains incorrect information

such as listing the wrong owners, describing the wrong property and failing to

distinguish between realty and personalty. (App. A).

      Exhibit "A" is a certified copy of the delinquent tax rolls regarding the alleged

tax lien. Under §33.47a of the Tax Code, taxing entities are entitled to a rebuttable

presumption unless Hydrogeo is able to offer sufficient evidence to rebut that

presumption.    Hydrogeo offered verified pleadings, responses to requests for

admissions, documents and testimony sufficient to rebut the taxing entities'

presumption. Since the burden of going forward with evidence shifted back to them,

the taxing entities were required to prove their case; they offered no additional proof.

                                           6
       The failure by the taxing entities to prove the valid amount of the underlying

tax claims is critical because without a valid debt, there can be no valid lien on which

to foreclose. A lien is incident to and inseparable from the debt. Since no attempt

was made by the taxing entities to segregate those taxes assessed for personalty,

there is no evidence of the valid amount of taxes owed. Thus, there is no evidence

of a valid lien.

       Since taxing entities offered less than a scintilla of admissible evidence

supporting their underlying tax claim, their alleged lien is also invalid. Thus, the

trial court's judgment permitting foreclosure ofHydrogeo's property was in error.

                       ARGUMENT AND AUTHORITIES
                           ISSUES PRESENTED
                               ISSUEN0.1

      Did the trial court commit reversible error by admitting Plaintiffs'
Exhibit "A" into evidence when the document had not been timely produced
prior to trial, and when taxing entities failed to show good cause for its failure
to timely supplement discovery responses.

       Regarding the standard of review for the evidentiary objection presented in

Issue No. 1, the trial court's decision to admit or exclude evidence is reviewed for

abuse of discretion. Interstate Northborough P'ship v. State, 66 S.W.3d 213, 220

(Tex. 2001 ). However, the trial court had no discretion to admit Exhibit "A" without

taxing entities making a showing of good cause. Alvarado v. Farah Mfg. Co., 830

                                           7
S.W.2d 911, 914. Since taxing entities made no effort, and there is no record of

good cause being shown, the trial court committed error.

      Taxing entities offered Plaintiffs' Exhibit "A" to be admitted. (2 R.R. p. 7,

line 15-20). Hydrogeo objected on the grounds that the document being proffered

had not been provided to Hydrogeo prior to the trial, even though a specific request

for production had been made. (2 R.R. p. 8, line 1-p. 9, line 8). Specifically, in

request for production No. 8, taxing entities were asked to produce, "each and every

tangible piece of evidence you plan to use at the trial of this cause." (2 R.R. p. 8, line

21-23). Taxing entities acknowledged the proposed Exhibit "A" had not been

provided prior to trial but argued that the proposed exhibit was an updated version

ofa document produced in year 2013 without offering any evidence of how Exhibit

"A" differed from the earlier production. (2 R.R. p 9, line 2 - 4.)

      TEX. R. CIV. P. 193.6 (a) states that "a party who fails to make, amend, or

supplement a discovery response in a timely manner may not introduce in evidence

the material or information that was not timely disclosed, or offer the testimony of a

witness other than a named party who was not timely identified unless the court finds

that: "l) there was good cause for the failure to timely make, amend or supplement

the discovery response; or 2) the failure to timely make, amend or supplement the

discovery response will not unfairly surprise or unfairly prejudice the other parties."

(App. J).

                                            8
       The burden of proving good cause and/or a lack of unfair prejudice rests on

taxing entities as the party introducing the evidence. TEX. R. CIV. P. 193.6 (b).

Taxing entities failed to offer any reason why they did not timely produced the

exhibit in question. (2 R.R. p. 9, line 2-4). The Supreme Court considered this issue

in Alvarado v. Farah Mfg. Co., 830 S.W.2d 911, 914 (Tex. 1992), and held that

TEX. R. CIV. P. 193.6 is mandatory, and its sole sanction- exclusion of evidence-

is automatic, unless there is good cause to excuse its imposition. The good cause

exception permits a trial court to excuse a failure to comply with discovery in

difficult or impossible circumstances. The trial court has discretion to determine

whether the offering party has met his burden of showing good cause to admit the

testimony; but the trial court has no discretion to admit testimony excluded by the

rule without a showing of good cause. Id. (emphasis added). As the court stated, "It

is both reasonable and just that a party expect that the rules he has attempted to

comply with will be enforced equally against his adversary.              To excuse

noncompliance without a showing of good cause frustrates that expectation." Id. at

914.

       Simply put, good cause did not exist for failing to comply with the applicable

discovery rules. The trial court erred by admitting the evidence without requiring

taxing entities to make a showing of good cause. The next question is whether the

taxing entities proved a showing oflack of unfair surprise or unfair prejudice, TEX.

                                          9
Rawle CIV. P. 193.6(a). The burden of proving lack of unfair surprise and prejudice is

on taxing entities and must be supported by the record. TEX. R. CIV. P. 193.6(b).

The following quote constitutes taxing entities' entire showing and is recorded at

(2 R.R. p. 8, line 16-19 and p. 9, line 2-4).

      "Your Honor, we did provide them tax statements. We also gave them the

      calculations for taxes under the Texas Property Tax Code.

      The Court: So this is simply the updated tax rolls?

      Mr. Lambeth: Yes, your Honor."

      There is no record of what tax statements, if any, were provided or what

calculations if any, were ever given to Hydrogeo. In fact, taxing entities point out

the proposed Exhibit "A" is not the same document which might have been provided

back in 2013, and by its nature, could not have been produced back in 2013 since it

is dated in 2014. (2 R.R. p. 8, line 20-p. 9, line 1.) Since the document in question

was not produced back in 2013, taxing entities' discovery responses necessarily

needed to be supplemented prior to trial. Clearly it is a different document. As the

record indicates, no other explanation is offered by taxing entities.

      Finally, since no showing of good cause, lack of unfair surprise and/or

prejudice is shown, the only remaining question for the Court of Appeals is whether

the trial court's error is harmful. To obtain reversal for any error arising from an

erroneous admission of evidence, Hydrogeo must show that the error probably

                                           10
resulted in an improper judgment. Good v. Baker, 339 S.W.3d 260, 273 (Tex.

App.-Texarkana 2011, pet. denied).

      As shown in the record, the only document offered by taxing entities to

support their allegations in the entire case is Exhibit "A". (2 R.R. p. 9, line 10-16.)

An alleged certified copy of the tax rolls regarding the property in question allows

the taxing authorities a rebuttable presumption to establish its prima facia case as to

every material fact necessary to establish its cause of action. Tex. Tax Code

§33.47(a). In fact, Exhibit "A" constitutes taxing entities' entire prima facia case.

So if this document was improperly admitted, taxing entities produced no evidence

to support any of their allegations. There can be no question therefore that the trial

court's error in improperly admitting Exhibit "A" constitutes harmful error. Clearly,

the trial court's judgment should be reversed and rendered.

                                       ISSUE NO. 2

      Did the trial court err by holding taxing entities' entire alleged tax lien
enforceable against Hydrogeo, LLC, and First Bank & Trust East Texas when
taxing entities failed to segregate that portion of the lien which was
unenforceable against Hydrogeo.

      Regarding the standard of review, Hydrogeo objected and excepted to the

findings of fact of the trial court and asked for further findings consistent with its

theory of the case. Thus, the court of appeals may review the findings of the trial

court and is not bound by the trial court's findings unless such are supported by the

                                          11
evidence in the case. TEX. R. CIV. P. 307; Maro v. State, 168 S.W.2d 510 (Tex. Civ.

App.-Amarillo 1943, writ refd). The trial court's conclusions of law are not

binding on the court of appeals and are reviewed de nova. In re K.R.P., 80 S.W.3d
669, 674 (Tex. App.-Houston [1st Dist.] 2002, pet. denied).

      In a suit to collect delinquent taxes, the taxing units offering of a certified

copy of delinquent tax rolls showing the property and the amount of the tax and

penalties imposed and the interest accrued, constitutes prima facia evidence that each

person charged with a duty relating to the imposition of the tax has complied with

all requirements of law and that the amount of tax alleged to be delinquent against

the property and the amount of penalties and interest due on that tax as listed are the

correct amounts. Tex. Tax Code Ann. § 33.47 (Vernon 1992). This is a rebuttable

presumption. Maximum Medical Improvement, Inc. v. County ofDallas, 272 S.W.3d
832, 836-837 (Tex. Civ. App.-Dallas 2008, no pet.). As this court held, once the

presumption is rebutted, the taxing authorities are required to prove each and every

element of its cause of action. Id.

      Here, Hydrogeo filed an affirmative defense and verified denial in its First

Amended Answer on August 8, 2013. (1 C.R. p. 54, 58) The only documents offered

into evidence by taxing entities did not list Hydrogeo as the delinquent tax payer.

Plaintiffs' Exhibit "A" (2 R.R. p. 7 line 15-19 and App. A). Additionally, Hydrogeo

offered two request for admission responses in which taxing entities acknowledged

                                          12
not providing notice to Hydrogeo prior to serving them with the amended petition.

(1 C.R. p. 78). Because these facts were undisputed at trial, no presumption existed

under Tex. Tax Code Ann.§ 33.47 (Vernon 1992) and taxing entities were required

to prove each and every element of their case. Maximum Medical Improvement, Inc.

v. County of Dallas, 272 S.W.3d 832, 836-837 (Tex. Civ. App.-Dallas 2008, no

pet.). Since the trial court did not apply the proper burden of proof, this case should

be reversed and rendered.

         THE BURDEN OF PROOF IS ON THE TAXING ENTITIES

      According to Pete Dominguez Enterprises v. County of Dallas, 188 S.W.3d
385 (Tex. Civ. App.-Dallas 2006 no pet.), the evidentiary presumption envisioned

by §33.47(a) is rooted in part on the reliability of taxing authorities' processes and

records. (citing DMV Vacuum Services, Inc. v. Zavala County Appraisal District,

812, S.W.2d 435, 437-38 (Tex. App.-San Antonio 1991, no writ). However, ifthe

party named in the certified tax roll is incorrect, the court cannot rely on the accuracy

of the tax records. Id. As stated by Dominguez, "if the identity of the entity named

as owner of the property on that tax roll does not match the identity of the defendant

sued for non-payment, then no presumption arises and no prima facia case is

established by the taxing authority." Id. ·

      While Dominguez is an ownership issue case, it is not the only case dealing

with the sufficiency of the rebuttable presumption referenced in §33.47(a). For
                                              13
instance, Estates ofElkins v. County ofDallas, 146 S.W.3d 826 (Tex. App.-Dallas

2004, no pet.), states that after the taxing authority makes its prima facia case by

introducing the tax records required by Tex. Tax Code Ann. § 33.47(a) (Vernon

1992), the burden then shifts to the taxpayer to show, by introducing competent

evidence, that he has paid the full amount of taxes, penalties and interest, or that

there is some other defense that applies to his case. (Emphasis added).

      In this case the defense is not misidentification of the party, but rather lack of

ownership, failure to prove the amount of taxes due on the underlying debt, failure

to correctly identify the interest on which the lien was claimed and lack of

enforceability of the tax lien. On these issues Hydrogeo offered competent evidence

rebutting the presumption set out in §33.47(a). Once that happened, taxing entities

were required to establish sufficient evidence to support their alleged claims. As

stated in the Estates of Elkins case, if the taxing authorities' evidence did, in fact,

create a legal presumption, that presumption disappeared when the Estates offered

evidence rebutting the taxing authorities' evidence. See also DMV Vacuum Services,

Inc. v. Zavala County Appraisal District (explaining the presumption under

§33.47(a)). As the DMV court explains, ifthe taxpayer offers evidence sufficient to

justify a finding against a presumed fact, the presumption disappears as to that

element of the taxing authorities' cause of action. The taxing authorities' evidence

then has to stand on its own to prove that particular element. Id.

                                          14
       The Estate of Elkins case did not consider misidentification as the issue, but

instead considered whether of the full amount of taxes, penalties and interest was

due, and the court found that the evidence offered by the taxing authorities, (in effect

only the certified copy of tax rolls), did not constitute more than a mere scintilla of

evidence. Therefore, the court of appeals reversed and rendered judgment in favor

of the appellant.

       Another case, Maximum Medical Improvement, Inc. v. County ofDallas, 272
S.W.3d 832, (Tex. App.-Dallas 2008, no pet.) found that "when a taxing

authority's prima facia case is rebutted, the presumption disappears ... " As in our

case, the taxpayer filed a verified denial that it was improperly sued, claiming that

another entity was a proper party. Dallas County attempted, as in this case, to argue

that the prima facia presumption still applies. The court of appeals disagreed,

reversed the judgment and rendered a take nothing judgment on Dallas County's

claims.

      Hydrogeo is an oil and gas operator, and the property sought to be foreclosed

on by taxing entities is two producing oil and gas leases. As it relates to ad valorem

taxes, these properties are taxed in at least two different categories: 1) the leasehold

estate itself, which is the oil and gas in the ground, including the legal right to operate

the well; 2) the actual production equipment, such as casing, tubing, pump jacks,

tanks, and surface pipelines.

                                            15
      According to their Second Amended Petition, at least a portion of taxing

entities' judgment sought was due to taxes on Hydrogeo's personalty. (1 C.R. p.

164). Its petition states that "the value of any personal property that may be described

above, and which the tax lien is sought to be enforced, is in excess of FIVE

HUNDRED AND NO 100/ DOLLARS ($500.00)". Taxing entities clearly seek to

foreclose on a tax lien against both personal and real property.

         As stated in a 1997 Texas Attorney General Opinion, "irrespective of whether

production equipment is real or personal property, it must be appraised separately

from its corresponding mineral leasehold interest. Opinion No. DM-438, May 2,

1997. As the opinion also recognizes, the classification of property as real or

personal is material to such matters as the statute of limitations because the statute

treats real and personal property differently. Tex. Tax Code Ann.§ 33.05 (Vernon

1992).

         The statute of limitations is not the only issue the legislature uses to treat real

and personal property differently. In our case, Hydrogeo, because of the undisputed

evidence offered at trial, is exempt from having any lien foreclosed on their

personalty. Tex. Tax Code Ann. § 32.03 (Vernon 1992), and Tex. Bus. & Com.

Code Ann. §1.201(b)(9)(Vernon 1987). Since Hydrogeo filed a verified denial

contesting ownership of the property during the applicable years in question and

questioning the sufficiency of the lien on the property both real and personal, the

                                             16
burden of proof to plead and prove all of the elements of taxing entities' claim shifted

to them. They offered no evidence distinguishing between the amounts of the lien

claimed for real property compared to the amount claimed for personalty. Thus,

taxing entities failed, as a matter of law, to meet their burden of proof.

      Tex. Tax Code Ann §32.03(a) states in part "[E]xcept as provided by

Subsection (a-1), a tax lien may not be enforced against personal property transferred

to a buyer in ordinary course of business as defined by § 1.201 (9) of the Business

and Commerce Code for value who does not have actual notice of the existence of

the lien." (App. G). The exception listed in Subsection a-1 applies only to

manufactured homes, and has no application to our case. According to § 1.201 (b)(9),

a "buyer in ordinary course of business" essentially means a person that buys in good

faith, without knowledge that the sale violates the rights of another person. (App.

H). Thus, combining the elements of §32.03(a) and §1.20l(b)(9), Hydrogeo needs

to show they paid value for their personalty, without notice of the lien, in an arm's

length transaction, and in the normal course of business.

      The undisputed evidence presented at trial is that Hydrogeo was a buyer in

ordinary course of business as defined. Bill Godsey testified he had no knowledge

of a previous tax lien. (2 R.R. p. 55, line 11-15). He testified Hydrogeo paid value

for the leases. (2 R.R. p. 55, line 19-21). He testified Hydrogeo comported with the

usual and customary practices of a buyer in the industry, in an arm's length

                                           17
transaction. (2 R.R. p. 55, line 22-p. 56, line 5). No effort was made by taxing

entities to rebut this line of testimony.

       Once Hydrogeo established itself as a buyer in the ordinary course of business,

the taxing entities' claim for a tax lien regarding Hydrogeo's personalty is not

enforceable. (App G.). The next question is whether taxing entities segregated that

portion of its unenforceable lien from the enforceable part. In order to answer this

question, the trial court should have determined what portion of the taxes were

assessed for the personalty, compared to that portion assessed for the realty. The

personalty is that portion of the leases which is not fixed to the realty.

      In determining whether oil and gas equipment is a fixture to real estate, courts

consider primarily the intention of the party making the annexation. Sonnier v.

Chisholm Ryder Co., 909 S.W.2d 475, 479, (Tex. 1995); Logan v. Mullis, 686

S.W.2d, 605, 607-08 (Tex. 1985). In the trial of this case Bill Godsey, president of

Hydrogeo, testified he can and will remove any and all production equipment from

the two leases in question. (2 R.R., p. 62, line 10 - p. 64, line 3.) Loretta Ward,

landman for Hydrogeo also testified that the equipment can and will be removed. (2

R.R. p. 26, line 7 - p. 26, line 17.) Since the testimony offers undisputed evidence

regarding the intent of the owner of the equipment in question, the only decision

supported by the evidence is that all of the production equipment on the two oil and

gas leases is personalty. This distinction is important because Hydrogeo as a buyer

                                            18
in ordinary course as defined in Tex. Tax Code Ann. § 32.03 (a) (Vernon 1992), is

exempt from enforcement of any part of the taxing entities' alleged lien against their

personalty. (Id.)

       Because at least a portion of the lien is unenforceable, it was incumbent on

taxing entities to prove at trial how much of their alleged lien was due to the

personalty on the two well locations. This the taxing entities failed to do. (2 R.R.

p. 88, line 7- 14.) In fact, the only testimony regarding the value of the personalty

was provided by Bill Godsey, President ofHydrogeo, (2 R.R. p. 59, line 10 - p. 61,

line 16, and Exhibit HB-9), showing that the value of the personalty actually exceeds

the total appraised value of the leases.

       Since taxing entities' lien is based on a total value of the taxes due for both

realty and personalty, and because that portion of the lien for personalty is

unenforceable, and since the value of the personalty exceeds the value of taxing

entities' entire alleged lien, the underlying basis for the alleged lien fails as a matter

of law. The taxing entities' claim of right to foreclose on Hydrogeo's two leases

also fails.

       Taxing entities must prove the amount of the underlying debt on the real

property. A lien is an incident of, and is inseparable from, the debt. Palmer v.

Palmer, 831 S.W.2d 479, 482, (Tex. App.-Texarkana 1992, no writ); citing

University Savings and Loan Ass'n v. Security Lumber Co., 423 S.W.2d 287 (Tex.

                                           19
1967); See also Taylor v. Rigby, 574 S.W.2d 833, 839 (Tex. App.-1978 writ

refd); As the court stated in Taylor v. Rigby: "where there is ... a debt secured by

a lien, the lien is an incident of and inseparable from the debt. When one sues on the

debt, the lien is thereby necessarily implicated, and both must be put in issue ... ".

Goldberg v. R.J. Longo Constr. Co., 54 F.3d 243, 246 (5th Cir. 1995); citing Taylor

v. Rigby, 574 S.W.2d 833, 839 (Tex. App. 1978 writ refd).

      In Shipley v. Biscamp, 580 S.W.2d 52, 54 (Tex. App.-Houston [14th Dist.]

1979, no writ), the plaintiff failed to prove a current debt to support a lien. The issue

before the court was whether there was any debt in existence upon which foreclosure

of the contractual lien could be predicated at the time of trial, since it is fundamental

that without a debt there can be no lien. Id. The court states "that the general rule

seems to be universal that a lien is but an accessory to, or mere incident of, the debt

secured by it, and is discharged and extinguished, ipso facto et eo instante, by

payment of the debt." Id. citing Spencer-Sauer Lumber Co. v. Ballard, 98 S.W.2d
1054 (Tex. App.-San Antonio 1936, no writ). The court held that it was plaintiffs

burden to prove a debt in existence at the time of trial.

                                   CONCLUSION

      As shown herein, the one piece of evidence offered by taxing entities was

improperly admitted because it had not been provided to opponents prior to trial and

no effort was made by taxing entities to prove good cause which would allow

                                           20
admission. By definition, as the one document proffered by taxing entities, the trial

court's error was harmful.

      Even if the document was properly admitted, it does not prove the essential

elements of taxing entities' claims and the rebuttable presumption relied upon by

them and the trial court was misplaced.          Hydrogeo effectively rebutted the

presumption requiring taxing entities to offer admissible evidence to prove their

cause of action. Since no evidence was offered, their claims fail.

      The only document relied upon by taxing entities 1s fraught with

misinformation, such as listing the wrong owners, listing the interest as a "royalty

interest" and failing to segregate the amount of taxes assessed for personalty.

Segregating the portion of the taxes assessed for personalty was essential because

the amount of the tax lien for personalty was unenforceable against a buyer in the

ordinary course of business, such as Hydrogeo. Taxing entities made no attempt to

segregate. As such, the evidence cannot support taxing entities' desire to foreclose

on the entire claimed lien on the two oil and gas leases in question. The trial court's

judgment therefore should be reversed and rendered.

                                      PRAYER

      Wherefore Premises Considered, the Court should reverse the trial court's

judgment, and render judgment in favor of appellants Hydrogeo, LLC and First Bank

and Trust East Texas and hold that the taxing entities take nothing against appellants.

                                          21
                                       Respectfully submitted,

                                        Isl J. Don Westbrook
                                       J. Don Westbrook
                                       Texas Bar No. 21215500
                                       COGHLAN CROWSON, L.L.P.
                                       1127 Judson Road, Ste. 211
                                       Longview, Texas 75605
                                       (903) 758-5543
                                       (903) 753-6989 Facsimile
                                       email: dwestbrook@ccfww.com
                                       Attorneys for Appellants Hydrogeo, LLC
                                       and First Bank & Trust East Texas

                      CERTIFICATE OF COMPLIANCE

Counsel certifies that this brief contains, as counted by Microsoft Word, 5,644
words. It was typed in 14-point Times New Roman.

Dated: July 2, 2015                          Isl J. Don Westbrook
                                             J. Don Westbrook

                         CERTIFICATE OF SERVICE

      I hereby certify that the above and foregoing Brief of Appellants has been

served on all counsel of record in this appeal in accordance with the Texas Rules of

Appellate Procedure on July 2, 2015.

                                       Isl J. Don Westbrook
                                       J. Don Westbrook

                                        22
                             Index of Appendices

A.   Plaintiffs' Exhibit "A", Certified Copy of Tax Records, dated August 22,
     2014 (7 pages).

B.   Trial court's Judgment dated January 14, 2015 (C.R. p. 199-203)

C.   Hydrogeo, LLC and First Bank & Trust East Texas' Request for Findings of
     Fact and Conclusions of Law, dated January 21, 2015. (C.R. p. 207 - 208).

D.   Court's Findings of Fact and Conclusions of Law, dated February 4, 2015.
     (C.R. p. 217 - 221).

E.   Hydrogeo, LLC and First Bank & Trust East Texas' Request for Additional
     Findings of Fact and Conclusions of Law, dated February 13, 2015. (C.R. p.
     222-226).

F.   Court's Findings of Fact and Conclusions of Law, dated February 23, 2015.
     (C.R. p. 227 - 231 ).

G.   Tex. Tax Code §32.03 (a) (Vernon 1992).

H.   Tex. Bus. & Com. Code Ann. §1.201(b)(9) (Vernon 1987).

I.   Hydrogeo, LLC and First Bank & Trust East Texas' Notice of Appeal, dated
     January 27, 2015. (C.R. p. 204 - 205).

J.   Tex. R. Civ. P. 193.6(a) & (b).

                                       23
Appendix A
..
                         CERTIFIED COPY OF TAX RECORDS
                                      FOR
       QUITMAN INDEPENDENT SCHOOL DISTRICT, WOOD COUNTY, UPPER SABINE
      WASTE DISPOSAL DISTRICT AND WOOD COUNTY CENTRAL HOSPITAL DISTRICT

                                                SUIT NO. T-3625

            QUITMAN INDEPENDENT SCHOOL DISTRICT, ET AL VS. BLACK DIAMOND
                             OPERATING CO LLC, ET AL

     THE STATE OF TEXAS                                  x
     WOOD COUNTY                                         x

     I hereby certify that the following exhibit (ensuing page(s)) is a true and correct copy of entries in the
     tax records of my office. The penalty and interest amounts were calculated according to Section 33.01
     and 33.07 of the Texas Property Tax Code.
                                                                              r..&l
     In testimony whereof, witness my hand and seal of office this     O? ~     day of_-'~~_,,'--"='----'
     20.l!f__.

                                                          Carol Taylor
                                                          Tax Assessor-Collector and Custodian of the Tax
                                                          Records for: QUITMAN INDEPENDENT
                                                          SCHOOL DIS1RICT, WOOD COUNTY, UPPER
                                                          SABINE WASTE DISPOSAL DIS1RICT and
                                                          WOOD COUNTY CENTRAL HOSPITAL
                                                          DIS1RICT

                                                EXHIBIT "A"

      Suit No. T-3625                                                                          Suit Key No. 2137912
                                             Account Summary
Carol Taylor, Tax Collector
Wood County Tax Office
P.O. BOX 1919
Quitman, TX 75783
Ph: (903)763-2261 Fax: (903)763-5753

                                                               Property:            0154550-0001055-5-RI
                                                               Quick Ref ID:        N355851
                                                               Owner:               BLACK DIAMOND OPERATING CO LLC
                                                               Legal Description:   0.833335 0154550 WHITE DENTON BLACK
                                                                                    DIAMOND OPER RI (ROYALTY INTERESl)

    BLACK DIAMOND OPERATING CO LLC
    4420 VALLEY RANCH RD
    LONGVIEW, TX 75602-6671

Tax Bill (Effective Date: 09/15/2014)              Balance Due if Paid By September 30, 2014:                          29,131.29
Bill                                          Levy                       Disc/Credi
                                   Levy    Balance      P & I Atty Fees           t Date Paid              Amt Paid     Balance
2009
  Quitman lsd                 10,679.32   10,305.12     7,082.29     2,664.25          0.00   09/2212010      516.38    19,909.48
  Waste Disposal District       169.36       163.42      112.33         42.24          0.00   09/2212010        8.20       315.73
  Wood county                  4,375.23    4,221.93     2,901.57     1,455.37          0.00   09/2212010      220.76     8,511.41
  yyao~. ~unty Central          211.70      204.28       140.39         52.82          0.00   09/2212010       10.24       394.67
  Totals                      15,435.61   14,894.75    10,236.58     4,214.68          0.00                   755.58    29,131.29

Totals                       15,435.61    14,894.75   10,236.58     4,214.68           0.00                  755.58    29,131.29

                                                      Balance Due if Paid By September 30, 2014:                       29,131.29

                                                                         Pay By                                        Total Due
                                                                         October 31, 2014                              29,304.68
                                                                         November 30, 2014                             29,478.09
                                                                         December 31, 2014                             29,651.50

PrintedonB/2212014 11:43AM                                                                                    Page     1 of 1
                                           Account Summary
Carol Taylor, Tax Collector
Wood County Tax Office
P.O. BOX 1919
Quitman, TX 75783
Ph: {903)763-2261 Fax: (903)763-5753

                                                              Property:            0154550-0715543-WI
                                                              Quick Ref ID:        N357528
                                                              Owner:               RHEATA RESOURCES LLC
                                                              Legal Description:   0.833335 0154550 WHITE DENTON BLACK
                                                                                   DIAMOND OPER WI

     RHEATA RESOURCES LLC
     PO BOX921
     KILGORE, TX 75663

Tax Bill (Effective Date: 09/10/2014)                Balance Due if Paid By September 30, 2014:                     22,099.47
Bill                                         Levy                          Disc/Credi
                                   Levy   Balance         P&I Atty Fees             t Date Paid        Amt Paid      Balance
2010
  Quitman lsd                  5,309.68   5,309.68     2,973.42     1.242.47          0.00                   0.00     9,525.57
  Waste Disposal District        89.10      89.10        49.89         20.85          0.00                   0.00        159.84
  Wood County                  2,415.20   2.415.20     1,352.51       753.54          0.00                   0.00      4,521.25
  ~oo_~. saunty Central         104.58     104.58         58.57         24.47         0.00                   0.00        187.62
   Totals                      7,918.56   7,918.56     4,434.39     2,041.33          0.00                   0.00    14,394.28
 2011
   Quitman lsd                 3,070.38   3,070.38     1,350.97       663.20          0.00                   0.00     5,084.55
   waste Disposal District       53.48      53.48        23.53          11.55         0.00                   0.00        88.56
   Wood County                 1,405.18   1,405.18      618.28        404.69          0.00                   0.00     2,428.15

   ........
   Wood County Central
   Totals
                                 62.76
                               4,591.80
                                            62.76
                                          4,591.80
                                                         27.61
                                                       2,020.39
                                                                       13.56
                                                                    1,093.00
                                                                                      0.00
                                                                                      0.00
                                                                                                             0.00
                                                                                                             0.00
                                                                                                                         103.93
                                                                                                                      7,705.19

Totals                       12,510.36 12,510.36      6,454.78     3,134.33           0.00                  0.00    22,099.47

                                                     Balance Due if Paid By September 30, 2014:                     22,099.47

                                                                        Pay By                                      Total Due
                                                                        October 31, 2014                            22,245.25
                                                                        November 30, 2014                           22,391.03
                                                                        December 31, 2014                           22,536.79

Printedon8/22/2014 11:44AM                                                                                 Page      1 of 1
                                            Account Summary
Carol Taylor, Tax Collector
Wood County Tax Office
P.O. BOX 1919
Quitman, TX 75783
Ph: (903)763-2261 Fax: (903)763-5753
                                                             Property:            0154550-0716237-WI
                                                             Quick Ref ID:        N366493
                                                             ONner.               HYDROGEO LLC
                                                             legal Description:   0.833335 0154550 WHITE DENTON HYDROGEO
                                                                                  LLCWI

       HYDROGEO LLC
       PO BOX 921
       KILGORE, TX 75663

Tax Bill (Effective Date: 08/22/2014)                Balance Due if Paid By August 31, 2014:                                0.00
Bill                                          Levy                         Disc/Credi
                                   Levy    Balance        P & I Atty Fees           t Date Paid          Amt Paid       Balance
2012
  Quitman lsd                    473.88       0.00        0.00          0.00         0.00   01/03/2013       473.88          0.00
   Waste Disposal District          8.12      0.00        0.00          0.00         0.00   01/03/2013          8.12         0.00
   Wood County                   213.14       0.00        0.00          0.00         0.00   01/0312013       213.14          0.00
   yyood. sounty Central            8.88      0.00        0.00          0.00         0.00   01/0312013          8.88         0.00
   Totals                        704.02       o.oo        0.00          0.00         o.oo                    704.02          0.00
 2013
   Quitman lsd                  3,086.91      0.00        0.00          0.00         0.00   02/06/2014     3,086.91          0.00
   Waste Disposal District        53.67       0.00        0.00          0.00         0.00   02/06/2014        53.67          0.00
   Wood County                  1,394.67      0.00        0.00          0.00         0.00   02/0612014     1,394.67          0.00
   Wood County Central            56.18       0.00        0.00          0.00         0.00   02/06/2014        56.18          0.00
   "   .......
   Totals                       4,591.43      0.00        0.00          0.00         0.00                 '. 4,591.43        0.00

 Totals                         5,295.45      0.00        0.00          0.00         0.00                 5,295.45          0.00

                                                     Balance Due if Paid By August 31, 2014:                                0.00

Printed on 8122/2014 11:44 AM                                                                                Page       1 of 1
                                             Account Summary
Carol Taylor, Tax Collector
Wood County Tax Office
P.O. BOX 1919
Quitman, TX 75783
Ph: (903)763-2261 Fax: (903)763-5753

                                                                Property:            0133400.0713907-WI
                                                                Quick Ref ID:        N310883
                                                                Owner.               BLACK DIAMOND OPERATING CO LLC
                                                                legal Description:   0.875000 0133400 ROBINSON IE BLACK
                                                                                     DIAMOND OPER WI

       BLACK DIAMOND OPERATING CO LLC
       4420 VALLEY RANCH RD
       LONGVIEW, TX 75602-6671

Tax Bill (Effective Date: 09/23/2014)                  Balance Due if Paid By September 30, 2014:                         9,423.15
Bill                                           levy                          Disc/Credi
                                    Levy    Balance         P&I Atty Fees             t Date Paid           Amt Paid      Balance
2007
  Quitman lsd                    5,187.91       0.00      933.82        918.26          0.00   0712212008     7,039.99         0.00
   Waste Disposal District         77.36        0.00       18.84          14.41         0.00   0512112009      110.61          0.00
   Wood County                   2,138.87       0.00      520.67        531.91          0.00   05/2112009     3,191.45         0.00
   ~od. c,ounty Central           112.40        0.00       27.35         20.98          0.00   05/21/2009      160.73          0.00
   Totafs                        7,516.54       0.00     1,500.68     1,485.56          0.00                 10,502.78          0.00
2008
  Quitman lsd                       92.43       0.00        12.02          0.00         0.00   05121/2009       104.45         0.00
   Waste Disposal District           1.32       0.00        0.17           0.00         0.00   05/21/2009         1.49         0.00
   Wood County                      37:17       0.00         4.83·         0.00         0.00   05/21/2009        42.00         0.00
   Wood County Central               1.78       0.00        0.23           0.00         0.00   05121/2009         2.01         0.00
   "   .......
   Totals                          132.70       0.00       17.25           0.00         0.00                   149.95          0.00
2009
  Quitman lsd                    3,704.18   3,333.42     2,338.38       906.37          0.00   09/2212010      508.76      6,440.17
   Waste Disposal District          58.74      52.86       37.07          14.37         0.00   0912212010         8.06       102.12
   Wood County                   1,517.57   1,365.67      958.02        495.12          0.00   0912212010      217.51      2,753.20
   ~oOO.. c,ounty Central           73.43      66.08       46.35          17.97         0.00   09/22/2010        10.09       127.66
   Totals                        5,353.92   4,818.03     3,379.82     1,433.83          o.oo                   744.42       9,423.15

Totals                          13,003.16   4,818.03    4,897.75     2,919.39           0.00                11,397.15     9,423.15

                                                       Balance Due if Paid By September 30, 2014:                         9,423.15

                                                                          Pay By                                         Total Due
                                                                          October 31, 2014                                9,479.25
                                                                          November 30, 2014                               9,535.33
                                                                          December31,2014                                 9,591.43

Printed on 8/22/2014 11:42 AM                                                                                  Page       1 of 1
..
                                                    Account Summary
      Carol Taylor, Tax Collector
     Wood County Tax Office
      P.O. BOX 1919
      Quitman, TX 75783
      Ph: (903)763-2261 Fax: (903)763-5753

                                                                      Property:            0133400-0715543-VVI
                                                                      Quick Ref ID:        N357525
                                                                      owner:               RHEATA RESOURCES LLC
                                                                      Legal Description:   0.875000 0133400 ROBINSON IE BLACK
                                                                                           DIAMOND OPER WI

          RHEATA RESOURCES LLC
          PO BOX921
          KILGORE, TX 75663

     Tax Bill (Effective Date: 09/10/2014)                Balance Due if Paid By September 30, 2014:                        21,750.06
     Bill                                            Levy                       Disc/Credi
                                        Levy      Balance      P&I Atty Fees             t Date Paid           Amt Paid      Balance
     2010
       Quitman lsd                    4,480.57    4,480.57     2,509.11     1,048.45          0.00                   0.00        8,038.13
        Waste Disposal District          75.19       75.19       42.10          17.59         0.00                   0.00         134.88
        Wood County                   2,038.06    2,038.06     1,141,32        635.88         0.00                   0.00        3,815.26
        '!'!".°":.~aunty Central         88.25       88.25       49.42          20.65         0.00                   0.00         158.32
        Totals                        6,682.07    6,682.Ql     3,741.95     1,722.57          0.00                   0.00       12,146.59
      2011
        Quitman lsd                   3,826.81    3,826.81     1,683.80        826.59         0.00                   0.00        6,337.20
        Waste Disposal District         66.65        66.65       29.33          14.40         0.00                   0.00         110.38
        Wocx! County                  1,751.36    1,751.36       no.60         504.39         0.00                   0.00        3,026:35
        'f'!".od. ~unty Central          78.22       78.22       34.42          16.90         0.00                   0.00         129.54
        Totals                        5,723.04    5,723,04     2,518.15     1,362.28          o.oo                   0.00        9,603.47

     Totals                          12,405.11   12,405.11    6,260.10     3,084.85           0.00                   0.00   21,750.06

                                                             Balance Due if Paid By September 30, 2014:                     21,750.06

                                                                                Pay By                                      Total Due
                                                                                October 31, 2014                            21,894.61
                                                                                November 30, 2014                           22,039.17
                                                                                December 31, 2014                           22,183.73

     Printed on 812212014 11:42 AM                                                                                 Page     1 of 1
..
                                                 Account Summary
      Carol Taylor, Tax Collector
      Wood County Tax Office
      P.O. BOX 1919
      Quitman, TX 75783
      Ph: (903)763-2261 Fax: (903)763-5753

                                                                   Property:            0133400-0716237-WI
                                                                   Quick Ref ID:        N366491
                                                                   Owner:               HYDROGEO LLC
                                                                   Legal Description:   0.875000 0133400 ROBINSON I E HYDROGEO
                                                                                        LLCWI

          HYDROGEO LLC
          POBOX921
          KILGORE, TX 75663

      Tax Bill (Effective Date: 08/2212014)             Balance Due if Paid By August 31, 2014:                                 0.00
      Bill                                         Levy                       Disc/Credi
                                         Levy   Balance      P & I Atty Fees           t Date Paid             Amt Paid     Balance
      2012
        Quitman lsd                  1,376.69      0.00        0.00           0.00         0.00   01/03/2013     1,376.6~        0.00
        Waste Disposal District        23.58       0.00         0.00          0.00         0.00   01103/2013        23.58        0.00
        Wood County                   619.20       0.00         0.00          0.00         0.00   01/03/2013      619.20         0.00
        y:ro_o~. scunty Central        25.81       0.00         O.DD          0.00         0.DD   01/03/2013        25.81        0.00
        Totals                       2,045.28      0.00         0.00          0.00         0.00                  2,045.28        o.oo
      2013
        Quitman lsd                  4,142.30      0.DD         0.00          0.00         0.00   02106/2014     4,142.30        0.00
        Waste Disposal District        72.02       0.00        0.00           0.DD         0.00   02/06/2014       72.02         0.00
        Wood County                  1,871.50      0.00        0.00           0.00         0.00   02/06/2014     1,871.50        O.DD
        ~"ilio 'i__myof            ;:-dg~
                                                                    ,,
                                                                                                      Judge Presiding

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                                                                                                                        I
Appendix E
  ,..
02/13/2015 FRI 14:33
  .
                          PAX    903~989       Cognlan Cro,,.on

                                                                                    •                                                   iZJOOS/013

                                                     SUIT NO. T-3625
                                                                                                                   ~
                                                                                                       v            'c:l-
        Q ITMAN INDEPENDENT SCHOOL §                                IN THE DISTRICT COURT ~ ~
                                                                                       ~O:'('>        ~
        DI TRI CT, ET AL           §                                                    ·:/
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                                                                                               <;.,,T /       "T7

                                   §                                                       <> ~-2:, O>
                                   §                                WOOD COUNTY, TEXAS ~~ ~
                                   §                                                                       ;;,>, c>\     i'71
      &                                             x                402ND JUJR~it
                                                                              - '
                                                                                   ;,T~er   ''

      LACK DIAMOND OPERATING CO                     X                    WOOD ~oakTtTEXAS.
      LC, ETAL

                   FINDINGS OF FACT AND CONCLUSIONS OF LAW

             On January 14, 2015 the Court entered judgment on the above captioned cause.
      fter considering the pleadings, the evidence, the argument and briefs from counsel, the
      ourt, in response to request from Defendant, makes findings of fact and conclusions of
     aw as follows:

                                        Findings of Fact

        There are two properties that are the subject of this delinquent tax suit. Tract 1 is a
      .833335 Interest in the Denton White Lease # 154550, Abstract 588, the D Townsend
      urvey, Wood Coiinty, Texas. Tract 2 is a 0.875 Working Interest in the IE Robinson
      ease #133400, Abstract 588, the D Townsend Survey, Wood County, Texas. There are
        es, penalties and interest due and owing on these two properties for tax years 2009-
      011 in the amount of$82,403.97 as of the date of trial.

     . Defendants Black Diamond Operating Co LLC and DeBerry 3 Operating Company,
     LC were the owners as of January l, 2009, of certain property described as a 0.833335
      terest in the Denton White Lease #154550, Abstract 588, the D Townsend Survey,
      corded in Volume 23 l 9, Page 32, official Deed Records of Wood County, which is the
     ubject of Tract I tax account number N35585 l .

      . The appraisal roll and tax roll of Wood County names Black Diamond Operating Co
      LC as the owner of a 0.833335 Interest in the Denton White Lease #154550, Abstract
      88, the D Townsend Survey, which is the subject of Tract 1 tax account number
       355851 for the tax year 2009 .

      . Taxes, penalties and interest are due and owing on Tract 1 tax account number
       355851 to Quitman Independent School District, Wood County, Upper Sabine Waste
       isposal District and Wood County Central Hospital District for the tax year 2009 in the
         ount of $29,131.29 as of the date of trial, after all credits and offsets have been                     f
      roperly posted to the account.                                                                             r
      . Defendant DeBerry 3 Operating Company, LLC and Steelman Investments, Inc were

                                                                                                                 II
     t e owners as of January l, 2010 and January 1, 2011, of certain property described as a

                                                                                                  "00227
I
l
                          •                                          •
I   .833335 Interest in the Denton White Lease #154550, Abstract 588, the D Townsend
j
    urvey, recorded in Document No. 2009-00009144, official Deed Records of Wood
     ounty, which is the subject of Tract I tax account number N357528 .

I
1
    . The appraisal roll and tax roll of Wood County incorrectly names Rheata Resources
    LC as the owner of a 0.833335 Interest in the Denton White Lease #154550, Abstract
    88, the D Townsend Survey, which is the subject of Tract I tax account number
     357528 for the tax years 2010-2011.

    . Taxes, penalties and interest are due and owing on Tract I tax account number
     357528 to Quitman Independent School District, Wood County, Upper Sabine Waste
     isposal District and Wood County Central Hospital District for the tax years 20 I 0 and
    011 in the amount of $22,099 .47 as of the date of trial, after all credits and offsets have
    een properly posted to the account.

    . Defendants Hydrogeo, LLC and DeBerry 3 Operating Company, LLC are the current
    wners as of the date of the trial of certain property described as 0.833335 Interest in the
     enton White Lease #154550, Abstract 588, the D Townsend Survey, recorded in
     acumen! No. 2012-00004176, official Deed Records of Wood County, which is the
    ubject of Tract l's current tax account number N366493 and Tract l's prior tax account
    umbers N3558 i and N357528 .

    . Defendant First Bank & Trust East Texas is a lienholder on certain property described
    s a 0.833335 Interest in the Denton White Lease #154550, Abstract 588, the D

                                                                                                      I
    ownsend Survey, recorded in Document No. 2013-00002376, official Deed Records of
      ood County, which is the subject of Tract l's current tax account number N366493 and
    ract I's prior tax account numbers N3558 l and N357528.

    0. The total amount of taxes, penalties and interest that are due for Tract 1, comprised of
    he tax accounts N35585 l and N357528, to Quitman Independent School District, Wood
     aunty, Upper Sabine Waste Disposal District and Wood County Central Hospital
     istrict for the tax years 2009-2011 is $51,230.76 as of the date of trial, after all credits
    nd offsets have been properly posted to the accounts.

     I. Steelman Investments, Inc was the owner as of January 1, 2009, of certain property
    escribed as a 0.875 Working Interest in the IE Robinson Lease #133400, Abstract 588,              f

                                                                                                      I
    he D Townsend Survey, Wood County, which is the subject of Tract 2 tax account
    umber N310883.

    2. The appraisal roll and tax roll of Wood County incorrectly names Black Diamond
     perating Co LLC as the owner of a 0.875 Working Interest in the IE Robinson Lease                f
    133400, Abstract 588, the D Townsend Survey which is the subject of Tract 2 tax                   f
    ccount number N310883 for the tax year 2009.

    3. Taxes, penalties and interest are due and owing on Tract 2 tax account number
     310883 to Quitman Independent School District, Wood County, Upper Sabine Waste
                                                                                                      I
                                                                                           "fl0228
                                                                                            . ··' l
                                                                                                      I
                                                                                                      f
                                                                                                      l
                      •                                          •
Disposal District and Wood County Central Hospital District for the tax year 2009 in the
amount of $9,423.15 as of the date of trial, after all credits and offsets have been properly
 osted to the account.

14. Steelman Investments, Inc was the owner as of January 1, 20 I 0 and January I, 2011,
 f certain property described as a 0.875 Working Interest in the IE Robinson Lease
 133400, Abstract 588, the D Townsend Survey, Wood County, which is the subject of
 ract 2 tax account number N357525.

15. The appraisal roll and tax roll of Wood County incorrectly names Rheata Resources
  LC as the owner of a 0.875 Working Interest in the IE Robinson Lease #133400,
  bstract 588, the D Townsend Survey, Wood County, which is the subject of Tract 2 tax
 ccount number N357525 for the tax years 20 I 0-20 ! I.

6. Taxes, penalties and interest are due and owing on Tract 2 tax account number
 357525 to Quitman Independent School District, Wood County, Upper Sabine Waste
 isposal District and Wood County Central Hospital District for the tax years 2010-2011
n the amount of $21,750.06 as of the date of trial, after all credits and offsets have been
roperly posted to the account.

 7. Defendant Hydrogeo, LLC is the current o\vner as of the date of trial of certain
 roperty described as a 0.875 Working Interest in the IE Robinson Lease #133400,
  bstract 588, the D Townsend Survey, recorded in Document No. 2012-00004176,
 fficial Deed Records of Wood County, which is the subject of Tract 2's current tax
 ccount number ' N36649 l and Tract 2' s · prior tax account numbers N3 l 0883 and
  357525.

 8. Defendant First Bank & Trust East Texas is a lienholder on certain property described
 s a 0.875 Working Interest in the IE Robinson Lease #133400, Abstract 588, the D
 ownsend Survey, recorded in Document No. 2013-00002376, official Deed Records of
  ood County, which is the subject of Tract 2's current tax account number N366491 and
 ract 2's prior tax account numbers N310883 and N357525.

I . The total amount of taxes, penalties and interest that are due for Tract 2, comprised of
  e tax accounts N310883 and N357525, to Quitman Independent School District, Wood
 ounty, Upper Sabine Waste Disposal District and Wood County Central Hospital
 istrict for the tax years 2009-2011 is $31,173.21 as of the date of trial, after all credits      I
  d offsets have been properly posted to the accounts.                                             !
2 . Defendant Rheata Resources LLC is not a past owner, nor a current owner, for neither
  act I nor Tract 2 and therefore is not liable, whether in rem or in personam, for any of         r
t e tax amounts set forth.                                                                         f
                                                                                                   I

                                                                                         00022.9
                                                                                                   I
                                                                                                   I
                      •                                           •
                                   Conclusions of Law

I. The Court had personal jurisdiction over all parties necessary to the judgment entered
 erein and had jurisdiction over the subject matter before the Court .

 . Delinquent taxes, penalties and interest are due and owing on Tract I, comprised of
he tax accounts N35585 l and N357528, for the tax years 2009-2011 in the amount of
51,230.76, as shown in the delinquent tax statement submitted by Quitman Independent
 chool District, Wood County, Upper Sabine Waste Disposal District and Wood County
  entral Hospital District as Plaintiffs' Exhibit "A", under Chapter 33, TEX. TAX CODE

. Delinquent taxes, penalties and interest are due and owing on Tract 2, comprised of the
ax accounts N3 l 0883 and N357525, for the tax years 2009-2011 in the amount of
 31,173.21, as shown in the delinquent tax statement submitted by Quitman Independent
 chool District, Wood County, Upper Sabine Waste Disposal District and Wood County
 entral Hospital District as Plaintiffs' Exhibit "A", under Chapter 33, TEX. TAX CODE.

 . Quitman Independent School District, Wood County, and Wood County Central
  ospital District are further entitled to additional· penalties and interest for unpaid taxes
 n Tract 1 and Tract 2 at the rates prescribed by Subchapters A and C of Chapter 33,
 EX. TAX CODE which accrues from the date of judgment until paid .

  . Plaintiffs Quitman Independent School District, Wood County, Upper Sabine Waste
   isposal District and Wood County Central Hospital District shall recover of and from
  efendant Black Diamond Operating Co LLC, a personal money judgment as to Tract 1,
 ccount number N355851 for tax year 2009 only in the amount of$29,131.29 plus post
j dgment interest as provided by Subchapters A and C of Chapter 33, TEX. TAX CODE
   hich accrues from the date of judgment until paid .

 . Plaintiffs Quitman Independent School District, Wood County, Upper Sabine Waste
  isposal District and Wood County Central Hospital District shall recover of and from
   fondants Hydrogeo, LLC; DeBerry 3 Operating Company, LLC; and First Bank &
  rust East Texas, an in rem judgment as to Tract 1, account numbers N355851 and                 I
  357528 for tax years 2009-2011 in the amount of $51,230.76 plus post judgment
i terest as provided by Subchapters A and C of Chapter 33, TEX. TAX CODE which
                                                                                                 f
a crues from the date of judgment until paid.
                                                                                                 I[
7 Plaintiffs Quitman Independent School District, Wood County, Upper Sabine Waste
  isposal District and Wood County Central Hospital District shall recover of and from
d fondants Hydrogeo, LLC; DeBerry 3 Operating Company, LLC; and First Bank &
                                                                                                 Ii
    st East Texas, an in rem judgment as to Tract 2, account numbers NJ I 0883 and
  357525 for tax years 2009-2011 in the amount of $31,173.21 plus post judgment
i terest as provided by Subchapters A and C of Chapter 33, TEX. TAX CODE which                   li
a crues from the date of judgment until paid.

                                                                                       800230
                                                                                                 l
                                                                                                 I
                                                                                                 !
                      •                                       •
8. Plaintiffs Quitman Independent School District, Wood County, Upper Sabine Waste
  isposal District and Wood County Central Hospital District shall recover nothing from
  efendant Rheata Resources LLC.

 . A tax lien has attached to the properties which are the subject of Tract l tax account
 umbers N355851, N357528, and N366493; and Tract 2 tax account numbers N310883,
  357525, and N366491 securing payment of the amounts set forth above.

0. Quitman Independent School District, Wood County, Upper Sabine Waste Disposal
 istrict and Wood County Central Hospital District are entitled to a final judgment
oreclosing the tax lien attached to the property, which is the subject of Tract 1 tax
ccount numbers N355851, N357528, and N366493; and Tract 2 tax account numbers
 310883, N357525, and N366491.

 l. Costs of Suit, including Costs of Court and Abstract Fees, are assessed against
 efendants Black Diamond Operating Co LLC, in personam; and Hydrogeo, LLC;
 eBerry 3 Operating Company, LLC; First Bank & Trust East Texas, in rem.

 2. An Order of Sale shall be issued by the Clerk upon the request of any Plaintiff or
  tervening taxing unit and any sale shall be done as prescribed by Subchapter A of
 hapter 34, TEX. TAX CODE.

 3. All relief not granted is denied.

 igned this the   ;2. tf day of    ;;;;;-4         '2015.

                                                                         Judge Presiding

                                                                                                I!
                                                                                                t;:
                                                                                                ~

                                                                                     ']{)0231
Appendix G
711/2015                                                                                Tex. TaxCode§32.03

~ r~~;;~.~ci~"· ~ v ~ ~) II
  Document: Tex. Tax Code§ 32.03 r·§ i                        Aotiom•

     • Previous                                                                                                                                                                   Next •
                                                                             Tex. Tax Code § 32.03

                                                                                              Citation

      This document Is current through the 2015 regular session, 84th Legislature, S.B. 45, S.B. 293 (ch. 2), S.B. 415(ch. 15), S,B, 459, S.B. 529 (ch. 37), S.B. 835 (ch, 6), S.B.
                                                         901 (ch. 54), S.B. 903 (ch. 3), S.B. 1749 (ch. 29), and S.B. 1985 (ch, 4).

     Texas Statutes&. Codes Annotated by LexisNexis®               Occupations Code        Title 1 Property Tax Code        Subtitle E Collections and Delinguencv         Chapter 32
     Tax Liens and Personal Liabilitv

     Sec. 32.03. Restrictions on Personal Property Tax Lien.
     (a) Except as provided by Subsection (a-1), a tax lien may not be enforced against personal property transferred to a buyer in ordinary course of business as defined by
     Section 1.201(9) of the Business & Commerce Code for value who does not have actual notice of the existence of the lien,
     (a-1} With regard to a manufactured home, a tax lien may be recorded at any time not later than six months after the end of the year for which the tax was owed. A tax
     lien on a manufactured home may be enforced if it has been recorded in accordance with the laws in effect at the time of the recordation of the lien, A properly recorded tax
     lien may not be enforced against a new manufactured home that is owned by a person who acquired the manufactured home from a retailer as a buyer in the ordinary course
     of business.
     (a-2) A person may not transfer ownership of a manufactured home until all tax liens perfected on the home that have been timely filed with the Texas Department of
     Housing and Community Affairs have been extinguished or satisfied and released and any personal property taxes. on the manufactured home which accrued on each January
     1 that falls within the 18 months preceding the date of the sale have been paid. This subsection does not apply to the sale of a manufactured home in inventory.
     (b) A bona fide purchaser for value or the holder of a lien recorded on a manufactured home statement of ownership and location is not required to pay any taxes that have
     not been recorded with the Texas Department of Housing and Community Affairs. Jn this section, manufactured home has the meaning assigned by Section 32.015(b),
     Unless a tax lien has been filed timely with the Texas Department of Housing and Community Affairs, no taxing unit, nor anyone acting on its behalf, may use a tax warrant
     or any other method to attempt to execute or foreclose on the manufactured home.
     (c) A taxpayer may designate in writing which tax year will be credited with a particular payment. If a taxpayer pays all the amounts owing for a given year, the taxing unit
     shall issue a receipt for the payment of the taxes for the des·1gnated year.
     {d} Notwithstanding any other provision of this section, if a manufactured home was omitted from the tax roll for either or both of the two preceding tax years, the taxing
     unit may file a tax lien within the 150-day period following the date on which the tax becomes delinquent.
     (e) If personal property taxes on a manufactured home have not been levied by the taxing unit, the taxing unit shall provide, upon request, an estimated amount of taxes
     computed by multiplying the taxable value of the manufactured home, according to the most recent certified appraisal roll for the taxing unit, by the taxing unit's adopted tax
     rate for the preceding tax year. In order to enable the transfer of the manufactured home, the tax collector shall accept the payment of the estimated personal property taxes
     and issue a certification to the Texas Department of Housing and Community Affairs that the estimated taxes are being held in escrow until the taxes are levied. Once the
     taxes are levied, the tax collector shall apply the escrowed sums to the levied taxes. At the time the tax collector accepts the payment of the taxes, the tax collector shall
     provide notice that the payment of the estimated taxes is an estimate that may be raised once the appraisal rolls for the year are certified and that the new owner may be
     liable for the payment of any difference between the tax established by the certified appraisal roll and the estimate actually paid.

     History

     Enacted by Acts 1979, 66th Leg., ch. 841 (S.B. 621), § 1, effective January l, 1982; am. Acts 1985, 69th Leg., ch, 846 (S.S. 1267), § 16, effective September 1, 1985;
     am. Acts 1991, 72nd Leg., ch. 617 (S.S. 1539), § 12, effective August 26, 1991; am. Acts 1991, 72nd Leg., ch, 836 (S.S. 772), § 5.2, effective August 26, 1991; am. Acts

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AppendixH
711/2015                                                                                 Tex. Bus. & Com. Code§ 1.201

                                                                                                                                                                                      ;....1ore

      i    Previous                                                                                                                                                                   Next•
                                                                          Tex. Bus. & Com. Code § 1.201

                                                                                                   Citation

          This document is current through the 2015 regular session, 84th legislature, S.B. 45, S.B. 293 (ch. 2), S.B. 415(ch. 15), S.B. 459, S.B. 529 (ch. 37), S.B. 835 (ch. 6), S.B.
                                                            901(ch.54), S.B. 903 (ch. 3), S.B.1749 (ch. 29), and s.B. 1985 (ch.4).

      Texas Statutes and Codes           BUSINESS AND'COMMERCE CODE                  TITLE 1. UNIFORM COMMERCIAL CODE                 CHAPTER 1. GENERAL

      PROVISIONS           SUBCHAPTER B. GENERAL DEFINITIONS AND PRINCIPLES OF INTERPRETATION

      § 1.201. General Definitions
      (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other chapters of this title that apply to

  Document: Tex. Bus. & Com. Code§ 1.201 r"'·s~ Actions ...
-~--fli)~so·cJe-ctl6~det1tilt10hs-tohta·1n·ecri11othm-n-apters··orthlS-nt1e·i:rraca-pp1y·!:'cfpan:1cular chapters or parts thereof:
      ( 1) "Action," in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined.

      (2) "Aggrieved party" means a party entitled to pursue a remedy.
      (3) "Agreement," as distinguished from "contract," means the bargain of the parties In fact, as found in their language or inferred from other circumstances, including course
      of performance, course of dealing, or usage of trade as provided in Section 1.303.
      { 4) "Bank" means a person engaged in the business of banking and includes a savings bank, savings and Joan association, credit union, and trust company.
      {5) "Bearer'' means a person in control of a negotiable electronic document of title or a person in possession of a negotiable instrument, a negotiable tangible document of

     title, or a certificated security that is payable to bearer or indorsed in blank,
      {6) MBlll of lading" means a document of title evidencing the receipt of goods for shipment issued by a person engaged in the business of directly or indirectly transporting or
     foiwarding goods. The term does not include a warehouse receipt.
      (7) "Branch" includes a separately incorporated foreign branch of a bank,
      (8) "Burden of establlshing" a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.

      (9) "Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods,
      and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the

      person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices. A person

     that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for
     cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that

     takes possession r.f the goods or has a right to recover the goods from the seller under Chapter 2 may be a buyer in ordinary course of business. "Buyer in ordinary course of
      business" does not include a person that acquires goods in a transfer in bulk or as security for or In total or partial satisfaction of a money debt.
      (10) "Conspicuous," with reference to a term, means so wrltten, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it.
      Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:
      (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and
      (B) language tn the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set
     off from surrounding text of the same size by symbols or other marks that call attention to the language.
      (11) "Consumer" means an individual who enters into a transaction primarily for personal, family, or household purposes.

      (12) "Contract," as distinguished from "agreement," means the total legal obligation that results from the parties' agreement as determined by this title as supplemented by
      any other applicable laws.
      (13) "Creditor" includes a general creditor, a secured creditor, a lien creditor and any representative of creditors, including an assignee for the benefit of creditors, a trustee
      In bankruptcy, a receiver in equity and an executor or administrator of an insolvent debtor's or assignor's estate.
      (14) "Defendant" includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.

      (15) "Delivery," with respect to an electronic document of title, means voluntary transfer of control, and with respect to an instrument, a tangible document of title, or

     chattel paper, means voluntary transfer of possession.                          Q
      (16) "Document of title" means a record that in the regular course of b L J r financing is treated as adequately evidencing that the person in possession or control of
      the record is entitled to receive, control, hold, and dispose of the record and the goods the record covers, and purports to be issued by or addressed to a bailee and to cover

      goods in the bailee's possession which are either identified or are fungible portions of an Identified mass. The term Includes a bill of lading, transport document, dock warrant,
      dock receipt, warehouse receipt, and order for delivery of goods. An electronic document of title is evidenced by a record consisting of information stored in an electronic
      medium. A tangible document of title is evidenced by a record consisting of lnforrnation that is inscribed on a tangible medium.
      (17) "Fault" means a default, breach, or wrongful act or omission.
      (18) "Fungible goods" means:
      (A) goods of which any unit, by nature or usage of trade, is the equivalent cl any other like unit; or

      (B) goods that by agreement are treated as equivalent.

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Appendix I
                                                                                               ...
                                                                                              ;.
                                                                                           l' / /
                                                                                  ;,:'-      'L '··
                                           SUIT NO. T-3625                         "·· J,·· , "' C: · ·,

 Q TMAN INDEPENDENT SCHOOL                       §       IN THE DISTRICT      863 S.W.2d 458 (fex.1993). A party who objects to production or d ·
                                                             from a remote time period should produce documents from a more~
in evidence the material or information that was not         riod unless that production would be burdensome and duplicative shGUJd:
timely disclosed, or offer the testimony of a witness        objection be overruled.
(other than a named party) who was not timely identi-              3. This rule governs the presentation of all privileges includingl'rOrtpM.:
                                                             uct. It di~pe~ses wit~ objections ~o written discovery requests on the basii6;1(
fied, unless the court finds that                            r:sponsive infonnabon or mate.nals are. protected by a specific pri\ilege ' -
    (I) there was good cause for the failure to timely       d1scovery. Instead, the rule requires parties to state that information ornWtrl-

make, amend, or supplement the discovery response; or
    (2) the failure to timely make, amend, or supple-
ment the discovery response will not unfairly surprise
                                                             als have been withheld and to identify the privilege upon which thepartyJdiea.
                                                             The statement should not be made prophylactically, but only when sperificS.
                                                             fonnation and materials have been withheld. The party must amend
                                                             ment the statement if additional privileged infonnation or material i' f~
                                                             subsequent to the initial response. Thus, when large numbers of documera
                                                                                                                                           or.
or unfairly prejudice the other parties.                     are being produced, a party may amend the initial response when dOCU!llClb
                                                             are found as to which the party claims privilege. Aparty need not state Lhat•
    (b) Burden of establishing exception. The bur-           terial created by or for lawyers for the litigation has been withheld as it wk
                                                             assumed that such material will be withheld from virtually any request oolll
den of establishing good cause or the lack of unfair sur-    grounds of attorney-client privilege or work product However, the rule docs~
prise or unfair prejudice is on the party seeking to in-     prohibit a party from specifically requesting the material or infonnation if~
                                                             party has a good faith basis for asserting that it is discoverable. An eX111f1!
troduce the evidence or call the witness. A finding of       would be material or infonnation described by Rule 503(d}(l) of the Rules.
good cause or of the lack of unfair surprise or unfair       Evidence.                                                                          -
prejudice must be supported by the record.                         4. Rule 193.3(d) is a new provision that allows a party to assert a daiat
                                                             privilege to material or infonnation produced inadvertently without int~
    (c) Continuance. Even if the party seeking to in-        to waive the privilege. The provision is commonly used in complex c~lolt
troduce the evidence or call the witness fails to carry      duce costs and risks in large document productions. The focus is on !ht iald
                                                             to waive the privilege, not the intent to produce the material or informatillLj
the burden under paragraph (b), the court may grant a        party who fails to diligently screen documents before producing them does•
continuance or temporarily postpone the trial to allow a     waive a claim of privilege. This rule is thus broader than TRE51 l and844 S.W.2d 223 (Tex.1992), tolht~
response to be made, amended, or supplemented, and           the two conflict The ten-day period (which may be shortened by the cow1)•
to allow opposing parties to conduct discovery regard-       lowed for an amended response does not run from the production oflht mil
                                                             rial or infonnation but from the party's first awareness of the mistake..Tollti
ing any new information presented by that response.          complications at trial, a party may identify prior to trial the documents intcafi!
   D         Production of Docnments Self-Authenti-
cating. Aparty's production of a document in response
                                                             to be offered, thereby triggering the obligation to assert any overloom!prit
                                                             lege under this rule. Atrial court may also order this procedure.
                                                                   5. This rule imposes no duty to supplement or ame~d de~siu~ Ill
                                                             mony. The only duty to supplement deposition testimony 1s pra11derl 111 }
                                                                                                                                          ....·

to written discovery authenticates the document for
                                                             195.6.
use against that party in any pretrial proceeding or at            6. Any party can request a hearing in which the court wi1! re~~
trial unless-within ten days or a longer or shorter          brought up in objections or withholding statements. The party seeking Ill ·,1
time ordered by the court, after the producing party has     discovery has the burden of proving the objection or privilege. .               c.i
                                                                   7. The self-authenticating provision is new. Authenticat~on 1 ~
actual notice that the document will be used-the pariy       but a condition precedent to admissibility and does not establish a ~
                                                             See .TRE 9~l(a). The ten-day period all~wed for ~bject~on to ~)~
objects to the authenticity of the document, or any part
                                                             (which period may be altered by the court m appropnate c1rcmn ~pill     5
of it, stating the specific basis for objection. An objec-   not run from the production of the material or infonnation ~ut f~~~
tion must be either on the record or in writing and must     actual awareness that the document will be used. To avoid co Ptiec6c!l
                                                             trial, a party may identify prior to trial the docume~~ inten~~ to rt a•ili
have a good faith factual and legal basis. An objection      thereby triggering the obligation to object to authenticity. Atn ~u~fij
made to the authenticity of only part of a document          order this procedure. An objection to authenticity must be made rn

1018   O'CONNOR'S TEXAS RULES