Court Opinion

ID: 4649364
Source: CourtListenerOpinion
Date Created: 2021-01-06 07:13:59.214529+00
Date Added: 2024-06-11T08:01:24.662945
License: Public Domain

AFFIRM; Opinion Filed December 29, 2020

                                        In The
                             Court of Appeals
                      Fifth District of Texas at Dallas
                                No. 05-19-01354-CV

        DALLAS CENTRAL APPRAISAL DISTRICT, Appellant
                           V.
    INTERNATIONAL AMERICAN EDUCATION FEDERATION INC.,
                         Appellee

                     On Appeal from the 95th District Court
                             Dallas County, Texas
                      Trial Court Cause No. DC-18-18763

                                   OPINION
              Before Justices Schenck, Osborne, and Partida-Kipness
                            Opinion by Justice Schenck
      Dallas Central Appraisal District (DCAD) appeals the trial court’s grant of

summary judgment in favor of International American Education Federation Inc.

(IAEF). In its sole issue on appeal, DCAD urges the court erred by concluding IAEF

was entitled to an exemption for certain property it leased. We affirm the trial court’s

judgment.

                                    BACKGROUND

      IAEF operates charter schools in Dallas County, Texas, as well as other

counties in Texas. In 2016, IAEF leased real property (Property) from a private
landowner to operate IAEF’s schools.                    In 2017, IAEF requested that DCAD

designate the Property as exempt from ad valorem taxes under Section 11.11 of the

Texas Tax Code. DCAD denied IAEF’s exemption request, and IAEF followed

DCAD’s administrative appeal process. IAEF’s administrative appeal resulted in a

hearing before DCAD’S Appraisal Review Board (ARB), which denied IAEF’s

administrative appeal.

         IAEF timely filed its petition for review in the Dallas County District Court.

The parties filed cross-motions for summary judgment. The district court conducted

a hearing on the competing motions for summary judgment and later issued a final

judgment that granted IAEF’s motion for summary judgment, denied DCAD’s

motion for summary judgment, and issued a final judgment in IAEF’s favor, which

granted IAEF the declaratory and injunctive relief requested in its petition.1

   1
       The final judgment included the following declarations:
         a. Property purchased or leased in conformance with Section 12.128 of the Texas
            Education Code is public property for all purposes under state law and is property of
            the state, and when the charter school has equitable title/ownership, including through
            a purchase option as present in this case, it is exempt from taxation pursuant to Section
            11.11 of the Texas Tax Code as presented in Plaintiff’s arguments in its Motion.
         b. If there are no relevant changes to Section 12.128 of the Texas Education Code and
            Section 11.11 of the Texas Tax Code, and if [Plaintiff] continues to use the Subject
            Property as a public school in conformance with Section 12.128 of the Texas Education
            Code, the Subject Property will remain exempt from ad valorem taxation pursuant to
            Section 11.11 of the Texas Tax Code, and that no further application or request need
            be made by Plaintiff to maintain the exemption from ad valorem taxation on the
            Subject Property.
   The final judgment further granted the following injunctive relief:
         Defendant, Dallas Central Appraisal District, is ORDERED, effective immediately, to take
         all steps necessary to notify the Dallas County Tax Assessor-Collector that the Subject
         Property was and is exempt from ad valorem taxation, and ensure any taxes paid, penalties,

                                                    –2–
                                         DISCUSSION
      In a single issue, DCAD urges the district court erred by concluding IAEF

was entitled to an exemption for the Property.

      We review a trial court’s summary judgment rulings de novo. KMS Retail

Rowlett, LP v. City of Rowlett, 559 S.W.3d 192, 197 (Tex. App.—Dallas 2017)

(mem. op.), aff’d, 593 S.W.3d 175 (Tex. 2019). Both parties moved for summary

judgment on traditional grounds, and thus each bore the burden of establishing that

there are no issues of material fact and it is entitled to judgment as a matter of

law. See id. When both parties move for summary judgment and the trial court

grants one party’s motion for summary judgment and denies the other party’s

motion, we can consider both motions, review the summary judgment evidence

presented by both sides, determine all questions presented, and render the judgment

the trial court should have rendered. Id.

      Statutory construction is a question of law that we review de novo. Sw.

Royalties, Inc. v. Hegar, 500 S.W.3d 400, 404 (Tex. 2016). Our primary objective

is to give effect to the legislature’s intent, which we ascertain from the plain meaning

of the words used in the statute, if possible. Id. Tax exemptions are narrowly

construed, and the taxpayer has the burden to “clearly show” that an exemption

applies. See TEX. TAX CODE § 151.318(r); id.

      fees or late charges assessed by the Dallas County Tax Assessor-Collector or any other
      taxing authority be disallowed, reversed and refunded to Plaintiff.
                                              –3–
        The Tax Code provides, except in circumstances not present here, “property

owned by this state or a political subdivision of this state is exempt from taxation if

the property is used for public purposes.” TAX § 11.11(a). Thus, in order to qualify

for this exemption, IAEF must establish that the Property is (1) owned by the state

and (2) used for a public purpose. See id. DCAD does not dispute that the Property

is used for the public purpose of operating schools.2 Instead, the parties dispute

whether the Property is “owned by this state or a political subdivision of this state.”

See id. (emphasis added).

        Texas courts generally have defined “ownership” for taxation purposes in

terms of the person or entity holding legal or equitable title. Odyssey 2020 Acad.,

Inc. v. Galveston Cent. Appraisal Dist., 585 S.W.3d 530, 534 (Tex. App.—Houston

[14th Dist.] 2019, pet. granted) (citing Childress Cty. v. State, 92 S.W.2d 1011, 1015

(Tex. 1936) (person who has legal title is the “owner” for taxation purposes); TRQ

Captain’s Landing L.P. v. Galveston Cent. Appraisal Dist., 212 S.W.3d 726, 732

(Tex. App.—Houston [1st Dist.] 2006) (explaining that legal and equitable title

holders may claim tax exemption), aff’d, 423 S.W.3d 374 (Tex. 2014); Comerica

Acceptance Corp. v. Dallas Cent. Appraisal Dist., 52 S.W.3d 495, 497–98 (Tex.

    2
      “An open-enrollment charter school is part of the public school system of this state.” TEX. EDUC.
CODE § 12.105; see also LTTS Charter Sch., Inc. v. C2 Constr., Inc., 342 S.W.3d 73, 78 (Tex. 2011)
(holding open-enrollment charter school to be an “institution, agency, or organ of government” for purposes
of the Texas Tort Claims Act).

                                                   –4–
App.—Dallas 2001, pet. denied) (common meaning of “owner” in Tax Code is

person or entity holding legal title or equitable right to obtain legal title to property));

see also Willacy Cty. Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d
29, 46 (Tex. 2018) (“Generally, equitable title has been considered sufficient to

establish ownership for property tax purposes.”).

       Equitable title for these purposes includes “the present right to compel legal

title.” AHF–Arbors at Huntsville I, LLC v. Walker Cty. Appraisal Dist., 410 S.W.3d
831, 837, 839 (Tex. 2012) (defining “equitable title” and holding that it is sufficient

to establish ownership for the purpose of exemptions under the Tax Code); see also

Tex. Dep’t of Corr. v. Anderson Cty. Appraisal Dist., 834 S.W.2d 130, 131 (Tex.

App.—Tyler 1992, writ denied) (holding that where state in possession of property

would acquire full legal title upon payment of all lease payments, property was

“owned by the state ‘no different[ly] from that of any private owner who holds

property against which there is an outstanding lien’”).

       Whether property is publicly owned for tax-exemption purposes must be

based on facts—not legislative declaration—establishing that the state or one of its

political subdivisions has legal or equitable title. Odyssey 2020 Acad., Inc., 585
S.W.3d at 534.

       Public ownership, for tax-exemption purposes, must grow out of the
       facts; it is a legal status, based on facts, that may not be created or
       conferred by mere legislative, or even contractual, declaration. If the
       state does not in fact own the taxable title to the property, neither the

                                           –5–
        Legislature by statute, nor the [parties], may make the state the owner
        thereof by simply saying that it is the owner.
Id. (quoting Tex. Turnpike Co. v. Dallas Cty., 271 S.W.2d 400, 402 (Tex. 1954)).

        IAEF argues, as the trial court declared, that it has equitable title to the

Property because a purchase option within the lease agreement gave it the

unqualified, unilateral right to assume fee title to the property.3 The option within

the lease agreement provides as follows:

        So long as no Event of Default then exists, Tenant shall have an option
        to purchase fee title to the Premises during the period between the
        Effective Date and August l, 2021. If Tenant fails to exercise its option
        to purchase the Premises within said time limitation, Tenant’s option to
        purchase the Premises shall become null and void, subject to Landlord’s
        approval, in its sole and absolute discretion, of an extension of the
        period to exercise the option. Notwithstanding anything to the contrary
        contained herein, if the Substantial Completion Date is delayed past the
        Anticipated Substantial Completion Date, then the expiration of the
        foregoing option periods will be extended on a day-for-day basis.
        Without limiting the generality of the foregoing and for illustrative
        purposes only, if the Substantial Completion Date is August 15, 2017,
        then the first option period will be extended through September 1, 2021.

The foregoing provision thus provides the lessee, IAEF, with the power to compel

transfer of legal title. Accordingly, we conclude, under the facts of this case, there

was no room for reasonable disagreement about whether IAEF could have

    3
       IAEF’s motion for summary judgment argued in the alternative that even if it did not hold equitable
title at the time of the hearing before the DCAD ARB, Section 12.128 of the Education Code exempts the
Property from ad valorem taxation under Section 11.11 of the Tax Code. Section 12.128 provides that
property purchased or leased with funds received by a charter holder is considered to be public property for
all purposes under state law. See EDUC. § 12.128(a). However, we need not address this basis for applying
Section 11.11 because we conclude infra IAEF held equitable title to the Property.

                                                   –6–
compelled issuance of the title at any time from the effective date of the lease

agreement.4

       DCAD argues, however, that IAEF had no right to compel legal title to the

Property and relies on decisions from the Austin Court of Appeals. See Travis Cent.

Appraisal Dist. v. Signature Flight Support Corp., 140 S.W.3d 833, 840 (Tex.

App.—Austin 2004, no pet.); Hays Cty. Appraisal Dist. v. Sw. Tex. State Univ., 973
S.W.2d 419, 422 (Tex. App.—Austin 1998, no pet.). We find both decisions to be

inapposite.

       In Hays County Appraisal District v. Southwest Texas State University, a state

university’s private nonprofit support foundation purchased property and leased it

back to the state university. Sw. Tex. State Univ., 973 S.W.2d at 420. The state

university and its foundation asserted title would pass to the state university upon

full payment, but the lease agreement was silent on the issue of transfer of title. See
id. at 422. The trustees of the foundation passed a resolution of intent to donate the

property to the state university, but the appellate court concluded appellees

“present[ed] no authority, however, under which such a resolution of intent

establishe[d] a legally enforceable obligation to transfer title.” See id.

   4
      The record contains as an attachment to IAEF’s motion for summary judgment a special warranty
deed executed in favor of IAEF on December 20, 2018. At oral argument, DCAD’s counsel conceded that
special warranty deed granted IAEF legal title to the Property.
                                               –7–
        Similarly, in Travis Central Appraisal District v. Signature Flight Support

Corp., the appellate court held that a lease provision granting the lessee the right to

sell its non-freehold interest in the property did not create equitable title. See 140
S.W.3d at 841. Instead, where “the City own[ed] the improvements but lease[d]

them to appellees, it [was] perfectly correct to refer to appellees’ ownership interests

in the leased facilities and allow them the right to ‘sell’ that leasehold interest,” not

the fee interest. See id.

        Here, in contrast to the facts in the above cases, the lease contains a purchase

option that gave IAEF, by unilateral exercise of its own will, the immediate right to

compel the transfer of fee title.      We therefore agree with the district court’s

conclusion that IAEF held equitable title to the Property so as to be entitled to an

exemption from ad valorem taxation provided in Section 11.11 of the Texas Tax

Code.

                                     CONCLUSION

        We affirm the trial court’s judgment.

                                             /David J. Schenck/
                                             DAVID J. SCHENCK
                                             JUSTICE
191354F.P05

                                          –8–
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

DALLAS CENTRAL APPRAISAL                       On Appeal from the 95th District
DISTRICT, Appellant                            Court, Dallas County, Texas
                                               Trial Court Cause No. DC-18-18763.
No. 05-19-01354-CV           V.                Opinion delivered by Justice
                                               Schenck. Justices Osborne and
INTERNATIONAL AMERICAN                         Partida-Kipness participating.
EDUCATION FEDERATION INC.,
Appellee

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

    It is ORDERED that appellee INTERNATIONAL AMERICAN
EDUCATION FEDERATION INC. recover its costs of this appeal from appellant
DALLAS CENTRAL APPRAISAL DISTRICT.

Judgment entered this 29th day of December, 2020.

                                         –9–