Court Opinion

ID: 2913795
Source: CourtListenerOpinion
Date Created: 2015-09-10 17:50:28.45793+00
Date Added: 2024-06-11T11:38:05.445103
License: Public Domain

Opinion filed March 1, 2006

 

 

Opinion filed March 1, 2006
 
 
 
 
 
 
                                                                        In The
                                                                              
    Eleventh Court of Appeals
                                                                 ____________
 
                                                          No. 11-03-00061-CV 
                                                    __________
 
                                       CITY OF DALLAS, Appellant
 
                                                             V.
 
                                 JIM
LOWENBERG ET AL, Appellees
 

 
                                         On
Appeal from the 298th District Court
 
                                                          Dallas
County, Texas
 
                                              Trial
Court Cause No. DV98-08100
 

 
                                                 O
P I N I O N   O N   R E M A N D
 

This appeal stems from a class action suit against
the City of Dallas.  Jim Lowenberg, on
behalf of himself and a certified class of all others similarly situated, (the
plaintiffs) sued the City seeking a declaration that a fire safety registration
fee assessed against owners and operators of commercial buildings was
unconstitutional.  The plaintiffs also
sought a refund of those fees plus additional attorney=s
fees.  Both sides moved for summary
judgment.  The trial court denied the
City=s motions
and granted the plaintiffs=
motion in part.  After a hearing
regarding attorney=s fees,
the trial court entered judgment in favor of the plaintiffs in the amount of
$1,847,454.36.  Both sides appealed.  On original submission, we found that the
plaintiffs= claims
were barred by limitations.[1]  The Texas Supreme Court reversed our judgment
and remanded the cause to this court for consideration of the remaining issues
on appeal.  Lowenberg v. City of
Dallas, 168 S.W.3d 800 (Tex. 2005). 
We now reverse and render in part and remand in part.  
                                                                Remaining
Issues
The City asserts five points of error with various
subpoints, and the plaintiffs assert one cross-point involving prejudgment
interest.  In its first point of error,
the City contends that the trial court erred in granting the plaintiffs= motion for summary judgment.  In its second point, the City explains that
the granting of summary judgment was erroneous because the plaintiffs failed to
establish duress, because the plaintiffs failed to establish that the
registration fee was actually a tax, because there is a genuine issue of fact
regarding whether the registration fee was a tax, because the plaintiffs failed
to establish that they were entitled to declaratory relief as a matter of law,
and because the plaintiffs failed to establish that they were entitled to
attorney=s fees as
a matter of law.  In the third point, the
City contends that the trial court erred in granting the plaintiffs= motion for summary judgment and
denying as a matter of law the City=s
defense of voluntary payment.  In its
fourth point, the City argues that the trial court erred in denying the City=s motions for summary judgment because
there was either no evidence of duress or there was conclusive proof of the
voluntariness of the payments and because the City established that there were
no genuine issues of material fact and that it was entitled to judgment as a
matter of law on the plaintiffs=
claims for declaratory relief and attorney=s
fees.  In its final point of error, the
City challenges the certification of the plaintiff class.[2]
                                                               Class
Certification

The City contends in its fifth point of error that
the trial court abused its discretion in certifying the plaintiff class without
demonstrating how common issues would predominate over individual issues.  The issue of class certification has already
been addressed at the appellate level. 
The City brought an interlocutory appeal to the Dallas Court of Appeals
after the trial court certified the class. 
See Tex. Civ. Prac. &
Rem. Code Ann. '
51.014(a)(3) (Vernon Supp. 2005).  The
Dallas Court of Appeals upheld the certification in City of Dallas v.
Brewster, No. 05-00-00335-CV, 2000 WL 1716508 (Tex. App.CDallas Nov. 17, 2000, no pet.)(not
designated for publication).  Because the
Dallas Court of Appeals has already determined the propriety of the
certification, we need not address that issue. 
The arguments made in this appeal either were made or should have been
made in the interlocutory appeal.  The
fifth point of error is overruled.  
                                              Summary
Judgment Standard of Review
In order to address the City=s first four points of error attacking
the propriety of the summary judgment rulings, we will apply the
well-recognized standard of review for summary judgment.  A trial court must grant a traditional motion
for summary judgment if the moving party establishes that no genuine issue of
material fact exists and that the movant is entitled to judgment as a matter of
law.  Tex.
R. Civ. P. 166a(c);  Lear
Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991).  Once the movant establishes a right to a
summary judgment, the nonmovant must come forward with evidence or law that
precludes summary judgment.  City of
Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678‑79 (Tex.
1979).  When reviewing a summary
judgment, the appellate court takes as true evidence favorable to the
nonmovant.  Am. Tobacco Co., Inc. v.
Grinnell, 951 S.W.2d 420, 425 (Tex. 1997); Nixon v. Mr. Prop. Mgmt. Co.,
690 S.W.2d 546, 548‑49 (Tex. 1985).
                                               Validity
of Fire Safety Registration Fee

The summary judgment evidence shows that the City
adopted an ordinance amending the Dallas Fire Code effective January 1, 1995.[3]  The ordinance, No. 22206, provided for the AFire Safety Registration of Commercial
Buildings.@  The ordinance required the owners or
operators of commercial buildings within Dallas to obtain an annual certificate
of registration.  To obtain such a
certificate, an applicant was required to submit a form containing the
following information:  the applicant=s name, address, telephone number, and
verified signature; the name, address, and main telephone number of the
commercial building; the name, address, and telephone number of an
emergency-contact person; the size of the building; the type of occupancy; a
description of any hazardous operations in the building; and a description of
the building=s fire
protection features and unique aspects. 
The ordinance also required that applicants, in order to obtain a
certificate of registration, must pay an annual registration fee ranging from
$70 to $2,150 depending upon the area of the building.  The ordinance provided further, AA person commits an offense if he owns,
operates, or controls a commercial building in the city without a valid
certificate of registration.@
Whether the fire safety registration fee imposed
by the City actually constituted an occupation tax or a license fee depends
upon the primary purpose of the registration fee when considering the ordinance
as a whole.  Hurt v. Cooper, 110
S.W.2d 896, 899 (Tex. 1937); City of Houston v. Harris County Outdoor Adver.
Ass=n,
879 S.W.2d 322, 326 (Tex. App.CHouston
[14th Dist.] 1994, writ denied).  If the
primary purpose of such an exaction is for regulation, then it is a license
fee; if, however, the primary purpose is to raise revenue, then the exaction is
an occupation tax regardless of the name by which it is designated.  Hurt, 110 S.W.2d at 899; Harris
County Outdoor Adver. Ass=n,
879 S.W.2d at 326.
Upon considering the ordinance as a whole and
other summary judgment evidence, it is apparent that the primary purpose of the
fire safety registration fee was to raise revenue.  The record shows that the City commissioned a
study by an outside consultant to review selected fees and charges to determine
to what extent the full cost of associated services are recovered by revenues
and to identify new fee sources or increases. 
The consulting firm initially recommended a fire inspection fee, but the
City rejected that recommendation and instead adopted the fire safety
registration program (FSRP).  According
to Karen Bass, Deputy Chief of the Dallas Fire Department, projected revenue
from the FSRP, based upon a 70% collection rate, Awas
targeted to fully offset the cost of fire prevention services currently funded
through the City=s General
Fund.@  Thus, the owners and operators of commercial
buildings were essentially paying for all of the City=s
fire prevention services.  No special
benefits or regulations came from the ordinance. 

Because the primary purpose of the registration
fee was to raise revenue, it was an occupation tax.  We can find no authority, and the City has
cited us to none, authorizing such an occupation tax on the owners and operators
of commercial buildings.  See Tex. Const. art. VIII, ' 1(f); Harris County Outdoor Adver.
Ass=n,
879 S.W.2d at 326 (municipality prohibited from levying occupation tax where no
such tax has been previously levied by the State).  We hold that the evidence does not raise a
genuine issue of fact regarding the purpose of the statute and that the trial
court did not err in determining that the plaintiffs showed as a matter of law
that the registration fee was in actuality an illegal occupation tax.  
                                                         Voluntariness
of Payment
Having determined that the trial court was correct
in declaring the ordinance to be invalid, we must now determine whether the
trial court was correct in its determination that the plaintiffs were entitled
to repayment.  The City asserted that,
regardless of the propriety of the registration fee, reimbursement was
impermissible because the plaintiffs voluntarily paid the fee.  The City had the burden of conclusively
establishing its defense of voluntary payment. 
Dallas County Cmty. Coll. Dist. v. Bolton, No. 02-1110, 2005 WL
3241846, at *2 (Tex. Dec. 2, 2005).  The
plaintiffs responded that their payments were not voluntary but, instead, were
paid under duress.  
In paying taxes and government fees, courts have
long recognized that duress may play a pivotal role in the ability to recover
those payments when the taxes and fees are later determined to be
unlawful.  Id. at *7.  A person who pays a tax or fee voluntarily
and without duress does not have a valid claim for its repayment even if the
tax or fee is later held to be unlawful. 
Id.; Nat=l
Biscuit Co. v. State, 135 S.W.2d 687, 692-93 (Tex. 1940).  The issue has been expressed as Awhether plaintiffs paid the tax by
reason of an Act which was so burdensome and onerous as to justify the trial
court=s belief
that the plaintiffs paid the taxes under duress.@  State v. Akin Prods. Co., 286 S.W.2d
110, 111 (Tex. 1956).  More recently, the
supreme court stated: AA
common element of duress in all its forms . . . is improper or unlawful conduct
or threat of improper or unlawful conduct that is intended to and does
interfere with another person=s
exercise of free will and judgment.@  Bolton, 2005 WL 3241846, at *9.  Where the facts are undisputed, the
determination of whether a payment is voluntary or involuntary is a question of
law.  Id. at *11.  
Important public policy reasons favor the
voluntary payment rule even though the rule Amay
seem counterintuitive.@  Id. at *7.  Justice Wainwright recently expressed these
reasons as follows: 

In
the taxation context, the rule secures taxing authorities in the orderly
conduct of their financial affairs. Id. [City of Houston v. Feizer,
13 S.W. 266 (Tex. 1890)], 13 S.W. at 267 (AIt
is a rule of quiet as well as of good faith ....@);
see also Salvaggio v. Houston Indep. Sch. Dist., 752 S.W.2d 189, 193
(Tex.App.--Houston [14th Dist.] 1988, writ denied).  The Supreme Court also has recognized the Agovernment=s
exceedingly strong interest in financial stability in this context@ and threats to a state=s financial security that can arise
from unpredictable revenue shortfalls.  McKesson
Corp. v. Div. of Alcoholic Bevs. & Tobacco, Dep=t of Bus. Regulation of Fla., 496
U.S. 18, 37, 110 S. Ct. 2238, 110 L. Ed. 2d 17 (1990).  The rule also supports the age-old policies
of discouraging litigation with the government. 
See Austin Nat=l
Bank, 71 S.W.2d at 246; see also Salvaggio, 752 S.W.2d at 193. 
 
Bolton, 2005 WL 3241846, at *7.  
The record in this case shows that little summary
judgment evidence was presented regarding this issue of voluntariness but that
the facts were not disputed.  The terms
of the ordinance were included in the record. 
The ordinance provided that a person who failed to pay the fee could be
prosecuted in municipal court for an offense punishable by a fine not to exceed
$2,000.  A few of the plaintiffs
presented summary judgment evidence regarding their payment of the registration
fee.  Lowenberg testified that he
initially intended to challenge the fee in municipal court but that, Aafter speaking with some other people,@ he Adecided@ to pay the fee in exchange for the
City=s
agreement to drop the fine.  Likewise,
plaintiff A. E. Brewster was cited to appear in municipal court, but he too
paid the fee in exchange for a dismissal. 
Plaintiff Henry McAdams was not cited to appear in municipal court, but
he stated that he had paid the fee Aunder
protest.@  The ordinance did not provide for a protest
procedure.  Nothing in the record shows
that any of the plaintiffs, prior to paying the fee, challenged the validity of
the ordinance in any court proceeding. 
Furthermore, nothing in the record indicates that the plaintiffs were
subjected to duress based on an economic or business compulsion theory.  See id.; Akin Prods. Co., 286
S.W.2d at 111; see also City of Houston v. Feizer, 13 S.W. 266 (Tex.
1890).  The possibility of an impending
fine does not necessarily constitute duress. 
See, e.g., Feizer, 13 S.W. at 267-68 (where the possibility of a
$100 fine in 1890 did not constitute duress). 
The ordinance in this case did not otherwise impact business operations,
the right to do business, the building premises, or the title to the real
property. 

In light of the public policy considerations, the
terms of the ordinance, and the options available to challenge the fee, we
cannot hold that the possibility of being fined up to $2,000 constitutes the
type of duress that would Ainterfere
with another person=s
exercise of free will and judgment.@  See Bolton, 2005 WL 3241846, at
*9.  We hold that the City established as
a matter of law that the plaintiffs paid the fee voluntarily and that any
coercion to pay the fee did not constitute duress.  See Bolton, 2005 WL 3241846, at *7-13;
Salvaggio v. Houston Indep. Sch. Dist., 752 S.W.2d 189, 193 (Tex. App.CHouston [14th Dist.] 1988, writ denied).  Consequently, the trial court erred in
granting summary judgment to the plaintiffs and in denying the City=s request for summary judgment on this
basis.  
                                                                  Attorney=s Fees
Next, we must consider the trial court=s award of attorney=s fees to the plaintiffs.  The plaintiffs brought this lawsuit in part
pursuant to the Texas Uniform Declaratory Judgments Act.  Tex.
Civ. Prac. & Rem. Code Ann. '
37.001-.011 (Vernon 1997 & Supp. 2005).[4]  This Act provides that a trial court Amay award costs and reasonable and
necessary attorney=s fees as
are equitable and just.@  Section 37.009.  The award of attorney=s
fees in a declaratory judgment action is within the trial court=s discretion and is not dependent on a
finding that a party substantially prevailed.  
Barshop v. Medina County Underground Water Conservation Dist.,
925 S.W.2d 618, 637-38 (Tex. 1996); Oake v. Collin County, 692 S.W.2d
454, 455 (Tex. 1985).  Consequently, we
must remand this cause to the district court for it to consider and exercise
its discretion on the amount of attorney=s
fees, if any, which should be awarded to the parties in this case.  Barshop, 925 S.W.2d at 638.
                                                             Prejudgment
Interest
Finally, we must consider the plaintiffs= cross-point challenging the accrual
date used by the trial court to calculate prejudgment interest.  Because the plaintiffs paid the fees
voluntarily, they were not entitled to repayment.  Thus, the City was entitled to a take-nothing
summary judgment on the claim for damages. 
The only issue remaining is the amount, if any, of attorney=s fees. 
Prejudgment interest is not recoverable on an award of attorney=s fees. 
Cushman & Wakefield, Inc. v. Fletcher, 915 S.W.2d 538, 547
(Tex. App.CDallas
1995, writ denied).  Consequently, we
need not determine whether the trial court used the correct date of
accrual.  Tex. R. App. P. 47.1. 
Moreover, we note that the plaintiffs provided the proposed judgment,
which contained the interest that they now complain about on appeal, and that
one of the plaintiffs=
attorneys agreed to the accrual date, stating in open court: A[T]hat=s
what we agreed on was the correct way that the interest should be calculated.@ 
The plaintiffs, therefore, did not preserve the issue for review.  The cross-point is overruled.  
 

                                                                     Conclusion
The City=s
first, second, third, and fourth points of error are sustained insofar as they
relate to the issues of duress and voluntariness of the plaintiffs= payments.  Because, as a matter of law, the payments
were made voluntarily, the trial court erred in granting the plaintiffs= motion for summary judgment and in
denying the City=s motion
for summary judgment on these issues. 
Consequently, the judgment of the trial court is reversed, and we render
judgment that the plaintiffs take nothing on their claims for repayment of the
registration fees.  The issue of attorney=s fees is, however, remanded to the
trial court for further consideration.  
 
JIM R. WRIGHT
CHIEF JUSTICE
 
March 1, 2006
Panel
consists of:  Wright, C.J., and
McCall,
J., and Strange, J. 
 

 

 

Opinion filed March 1, 2006
 
 
 
 
 
 
                                                                        In The
                                                                              
    Eleventh Court of
Appeals
                                                                 ____________
 
                                                          No. 11-03-00061-CV 
                                                    __________
 
                                       CITY OF DALLAS, Appellant
 
                                                             V.
 
                                 JIM LOWENBERG ET AL, Appellees
 

 
                                         On
Appeal from the 298th District Court
 
                                                          Dallas
County, Texas
 
                                              Trial
Court Cause No. DV98-08100
 

 
                               D I S S E N T
I N G   O P I N I O N   O N  
R E M A N D
 
I agree with the majority on all issues save their
finding that plaintiffs voluntarily paid the fire safety registration fee.  I would find that the fee was paid
involuntarily and that plaintiffs are entitled to reimbursement.  Accordingly, I respectfully dissent.

The supreme court=s
recent decision in Dallas County Community College District v. Bolton1 supports reimbursement
here because plaintiffs had to pay the fee to avoid financial penalties.  Justice Wainwright, writing for a 6-3
majority in Bolton, found the Community College District had improperly
charged two student fees but held that the students were barred from seeking
reimbursement because the fees had been voluntarily paid.  The three dissenters agreed the fees were
improper but believed they had been involuntarily paid.  
Justice Wainwright=s
analysis indicates that the differences between the student fees and the City=s fire registration fee should lead to
a different result in this case.  First,
the student fees were not mandatory.  The
City=s fee
was.  A student could avoid the fees by
going to a different school, restructuring their class load, or by applying for
a waiver.  Dallas businessmen had no such
options.  All owners and operators of
commercial property were required to pay the fee.
Second, the ordinance included a potential $2,000
penalty if the fee was not timely paid. 
The Bolton majority acknowledged that a person is entitled to
reimbursement when a public entity compels compliance with a void law and
subjects them to punishment for noncompliance.2  They recognized three instances where the
supreme court had found Aimplied
duress.@3  Of these, the most applicable is Highland
Church.4  There, a church disputed its liability
for an ad valorem tax.  A judgment was
rendered against it, and it appealed. 
The church paid the tax during the appeal to avoid further penalties and
interest.  The supreme court held that
the church=s payment
was not voluntary and, thus, that its appeal was not moot.  The other two cases can be distinguished
factually.  National Biscuit5 involved a much more severe
penalty: forfeiture of the right to do business in the State. Miga6 concerned the payment of
a judgment during an appeal to avoid postjudgment interest.  But in both instances, a party made a payment
it did not believe it owed to avoid further financial consequence; and, in each
case, the Supreme Court held the payment was not voluntary.

The financial impact the void fee had on
plaintiffs is a relevant inquiry. 
Draconian consequences support a finding of duress but are not
required.  The Bolton majority
noted: AWe have
repeatedly held that duress is established where the unauthorized tax or fee is
>required,=
>necessary,=
or >shall=
be paid to avoid the government=s
ability to charge penalties or halt a person from earning a livelihood or
operating a business.@7  (emphasis added)  Thus, being forced out of business would
support a finding of duress but so too would a mandatory payment made to avoid
financial penalties.        Plaintiffs had the option of contesting
the ordinance in municipal court or filing a pre-emptive lawsuit in district
court.  Due process, therefore, was
satisfied.  But paying the fire
registration fee was not only mandatory, it was the only way to avoid the
potential $2,000 penalty.  Some
plaintiffs received citations to appear in municipal court.  If they had challenged the ordinance in
municipal court and lost, they owed the fee and any assessed penalty.  If they had challenged the ordinance in
district court, a judge might or might not have enjoined collection of the fee
or penalty.  Consequently, a plaintiff
wishing to avoid a potential $2,000 fine had one choice free from
uncertainty:  pay the fee.
The financial impact reimbursement of the invalid
fee would have on the City is also a relevant inquiry.  The Bolton majority recognized the
necessity for a governmental authority to be able to rely on a predictable
income stream.8  Forcing the City to reimburse fees we find it
should never have collected thrusts financial unpredictability and unexpected
expenditure upon the City.  While
relevant, the supreme court has never characterized this as determinative.  To hold otherwise would have the perverse
effect of encouraging public entities to provide lesser rather than greater
protection to their citizens.  
The City provided no mechanism for contesting the
fee or paying it under protest.  Instead,
it adopted a penalty that was sufficiently high to encourage compliance but at
the same time was less than one would incur in litigation contesting the
ordinance.  Plaintiff Lowenberg, for
example, was assessed an $80 fee.  The
City cited him for failing to pay it.  If
he had contested his liability in municipal court and lost, he could have been
required to pay $2,080.  He
understandably paid the $80 fee to avoid a fine.

Because the ordinance operated exactly as
intended, money which should never have been collected was.  That money was presumably placed immediately
in the City=s
coffers.  Requiring the City to reimburse
plaintiffs will impose a hardship on the City, but the City should not be in a
better legal position today because it immediately spent the void fee than it
would be had the ordinance provided citizens with a mechanism to pay under
protest, or otherwise challenge the fee without incurring a financial penalty.
For these reasons, I would find the plaintiffs= payments were involuntary and I,
therefore, respectfully dissent.
 
RICK STRANGE
JUSTICE
 
March 1, 2006
Panel
consists of:  Wright, C.J., and
McCall,
J., and Strange, J.

[1]City of Dallas v. Lowenberg, 144 S.W.3d 46 (Tex. App.CEastland 2004).  

[2]In setting forth the City=s points
of error, we have omitted the subpoints regarding limitations because the issue
of limitations has already been decided by the supreme court. 

[3]We note that, after public outcry, the City
subsequently repealed this ordinance insofar as it required applicants to pay a
registration fee but that the City continued its collection efforts for the
year that the ordinance had been in effect.

[4]Declaratory relief is appropriate to determine the
construction or validity of a municipal ordinance.  Section 37.004.

1Bolton, No. 02-1110, 2005 WL
3241846 (Tex. Dec. 2, 2005).

2See In re FirstMerit Bank, N.A.,
52 S.W.3d 749, 758 (Tex. 2001), and State v. Akin Prods. Co., 286 S.W.2d
110, 111-12 (Tex. 1956).

3Miga v. Jensen, 96 S.W.3d 207,
211, 224-25 (Tex. 2002); Highland Church of Christ v. Powell, 640 S.W.2d
235, 237 (Tex. 1982); and Nat=l
Biscuit Co. v. State, 135 S.W.2d 687

(Tex. 1940).

4640
S.W.2d at 235.

5135
S.W.2d at 687.

696
S.W.3d at 207.

7Bolton, 2005 WL 3241846, at
*10.

8Bolton, 2005 WL 3241846, at
*12.