Court Opinion

ID: 4578215
Source: CourtListenerOpinion
Date Created: 2020-10-19 07:14:16.363855+00
Date Added: 2024-06-11T09:28:11.449610
License: Public Domain

Petition for Writ of Mandamus Granted and Opinion filed October 13, 2020.

                                      In The

                       Fourteenth Court of Appeals

                                NO. 14-20-00541-CV

                         IN RE APTWT, LLC, Relator

                         ORIGINAL PROCEEDING
                           WRIT OF MANDAMUS
                              215th District Court
                             Harris County, Texas
                       Trial Court Cause No. 2019-70068

                                    OPINION

      On August 3, 2020, relator APTWT, LLC filed a petition for writ of
mandamus in this court. See Tex. Gov’t Code § 22.221; see also Tex. R. App. P. 52.
In the petition, relator asks this court to compel the Honorable Elaine H. Palmer,
presiding judge of the 215th District Court of Harris County, to vacate her July 24,
2020 order compelling relator to produce documents related to its purchase of the
Weston Oaks Apartments. Relator argues that much, if not all of the information
contained in these documents is not relevant to its action for unequal appraisal of its
Weston Oaks Apartments under Tax Code section 42.26(a)(3) because that statute
does not require consideration of the market value of the subject property. Because
not all the information contained in these documents is relevant to the selection of
comparable properties and making appropriate adjustments, the trial court’s
discovery order is overbroad. Tex. Tax Code 42.26(a)(3). We therefore conclude
that relator is entitled to the requested relief.

                     FACTUAL AND PROCEDURAL BACKGROUND

       Relator owns an apartment complex known as the Weston Oaks Apartments
in Harris County, Texas. Pursuant to Tax Code 42.26(a)(3), relator filed suit against
the Harris County Appraisal District (“HCAD”), alleging that HCAD’s 2019
appraisal of the Weston Oaks Apartments was unequal because it exceeds the
median appraised value of a reasonable number of comparable properties
appropriately adjusted. See id. After HCAD filed a motion to compel the production
of documents which relator had objected to, the trial court signed an order that relator
produce all appraisals, sales documents, and closing statements arising out of
relator’s purchase of the Weston Oaks Apartments (“Apartment Purchase
Documents”).

                                MANDAMUS STANDARD
       To obtain mandamus relief, a relator generally must show both that the trial
court clearly abused its discretion and that relator has no adequate remedy at law,
such as an appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex.
2004) (orig. proceeding); In re Garza, 544 S.W.3d 836, 840 (Tex. 2018) (orig.
proceeding) (per curiam). A trial court clearly abuses its discretion if it reaches a

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decision so arbitrary and unreasonable as to amount to a clear and prejudicial error
of law or if it clearly fails to analyze the law correctly or apply the law correctly to
the facts. In re Cerberus Capital Mgmt. L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig.
proceeding) (per curiam). “The relator must establish that the trial court could
reasonably have reached only one decision.” Walker v. Packer, 827 S.W.2d 833, 840
(Tex. 1992) (orig. proceeding). “Even if the reviewing court would have decided the
issue differently, it cannot disturb the trial court’s decision unless it is shown to be
arbitrary and unreasonable.” Id.

      While the scope of discovery is generally within the trial court’s discretion,
the trial court must impose reasonable discovery limits. In re Graco Children's
Prods., Inc., 210 S.W.3d 598, 600 (Tex. 2006) (orig. proceeding) (per curiam).
Discovery requests must be reasonably tailored to include only matters relevant to
the case. See In re Am. Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998) (orig.
proceeding) (per curiam).

      “A discovery order that compels production beyond the rules of procedure is
an abuse of discretion for which mandamus is the proper remedy.” In re Nat’l Lloyds
Ins. Co., 507 S.W.3d 219, 223 (Tex. 2016) (orig. proceeding). “Our procedural rules
define the general scope of discovery as any unprivileged information that is relevant
to the subject of the action, even if it would be inadmissible at trial, as long as the
information sought is ‘reasonably calculated to lead to the discovery of admissible
evidence.’” Id. (generally quoting Tex. R. Civ. P. 192.3). “What is ‘relevant to the
subject matter’ is to be broadly construed.” Id. These liberal bounds, however, have
limits, and “discovery requests must not be overbroad.” Id. “A request is not
overbroad ‘so long as it is ‘reasonably tailored to include only matters relevant to
the case.’” Id. (quoting Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex. 1995)

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(orig. proceeding) (per curiam)). “An order that compels overbroad discovery is an
abuse of discretion for which mandamus is the appropriate remedy.” In re Sun Coast
Res., Inc., 562 S.W.3d 138, 146 (Tex. App.—Houston [14th Dist.] 2018, orig.
proceeding). We evaluate relevancy of discovery on a case-by-case basis by
considering, among other things, the claims as pleaded. Id. In many instances, the
Texas Supreme Court has granted mandamus relief to remedy overly broad
discovery. In re AIU Ins. Co., 148 S.W.3d 109, 117 (Tex. 2004) (orig. proceeding)
(listing decisions).

      When a discovery order compels production of patently irrelevant or
duplicative documents, there is no adequate remedy by appeal because the order
imposes a burden on the producing party far out of proportion to any benefit that
may obtain to the requesting party. In re CSX Corp., 124 S.W.3d 149, 153 (Tex.
2003) (orig. proceeding) (per curiam). Information is “patently irrelevant” when
reasonable minds would not differ that it has no tendency to prove or disprove any
issue involved in the subject matter of the suit and the information’s irrelevancy is
apparent from the face of the record. In re Sun Coast Res., Inc., 562 S.W.3d at 146.

                                          ANALYSIS

      To determine the relevancy of the Apartment Purchase Documents, we first must
examine the text of the statute under which relator brought its unequal appraisal action.
Section 42.26(a)(3) of the Tax Code, entitled “Remedy for Unequal Appraisal,”
provides: “(a) The district court shall grant relief on the ground that a property is
appraised unequally if: . . . (3) the appraised value of the property exceeds the median
appraised value of a reasonable number of comparable properties appropriately
adjusted.” Tex. Tax Code § 42.26(a)(3). “The selection of comparable properties and

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the application of appropriate adjustments for the determination of an appraised value of
property by any person under Section 41.43(b)(3) or 42.26(a)(3) must be based on the
application of generally accepted appraisal methods and techniques. Adjustments must
be based on recognized methods and techniques that are necessary to produce a credible
opinion.” Tex. Tax Code § 23.01(f).

       The relief authorized by section 42.26(a)(3) does not hinge upon whether the
subject property’s appraisal is consistent with its market value. Rather, section
42.26(a)(3) assumes whatever “appraised value” has been assigned by the appraisal
district, regardless how derived or whether correctly or incorrectly determined under that
measure. In re Catherine Tower, LLC, 553 S.W.3d 679, 686 (Tex. App.—Austin 2018,
orig. proceeding). “[T]he analysis prescribed by Section 42.26(a)(3) does not
independently determine the market value of either the subject property or the
comparison properties.” Id. (citing our decision in Harris Cty. Appraisal Dist. v. United
Inv’rs Realty Trust, 47 S.W.3d 648, 651–53 (Tex. App.—Houston [14th Dist.] 2001,
pet. denied)).

       In United Investors, this court was asked to interpret the identically worded
predecessor to section 42.26(a)(3)—former Tax Code section 42.26(d).1 See 47 S.W.3d
at 651–53. On appeal, HCAD’s primary argument was that the valuation method used
by United Investors and the trial court was unlawful because it did not take into account
the market value of the subject property, Mason Park Centre, and that to establish
inequality, section 42.26(d) should be interpreted as requiring comparisons of appraised
values to actual market value. Id. at 650. This court rejected this argument, concluding:

       Act of June 1, 1997, 75th Leg., R.S., ch. 1039, § 42, 1997 Tex. Gen. Laws 3897, 3917
       1

(amended 2003) (current version at Tex. Tax Code § 42.26(a)(3)).

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       Unlike section 42.26(a), subsection (d) does not contain a requirement
       of independent appraisals of all or some of the property in the district.
       Tex. Tax Code Ann. § 42.26 (Vernon Supp. 2000). Consequently, the
       plain language of section 42.26(d) dispenses with the requirement of an
       independent appraisal. It requires only a comparison of the appraised
       value of the property at issue with “comparable properties appropriately
       adjusted.” Id. at § 42.26(d). . . .

       In short, the plain language of the statute requires us to hold that subsection
       (d) allows a protest without proof of the market value of the comparable
       properties.
Id. at 653. This court further held that “[i]f a conflict exists between taxation at market
value and equal and uniform taxation, equal and uniform taxation must prevail.” Id. at
654.

       In Weingarten Realty Investors v. Harris County Appraisal District, this court
interpreted United Investors as rejecting HCAD’s argument that an unequal appraisal
action requires consideration of market value:

       In United Investors Realty Trust, this court noted that section 42.26(d)
       became law on January 1, 1998, enacted as part of the Taxpayer’s Bill
       of Rights. See id. at 652. It was intended to facilitate tax remedies for
       property owners. Id. In using the methodology mandated by this new
       avenue for ad valorem tax relief, this court rejected any requirement of
       independent market-value appraisals of comparable properties,
       appraisal ratios, or a statistical sample of comparable properties. See id.
       at 653. The proper application of section 42.26(d) does not mandate
       consideration of market value. Id. at 654. . . . HCAD asserts that section
       42.26(d) requires consideration of independent market value of
       comparable properties. This court rejected that argument in United
       Investors Realty Trust. See id. at 653. By statute, appraised value is
       market value. See Tex. Tax Code § 23.01(a). Furthermore, if a conflict
       exists between taxation at market value and equal and uniform taxation,
       equal and uniform taxation must prevail.

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93 S.W.3d 280, 287 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (emphasis added).
Thus, this court has clearly held that evidence of the market value of the subject property
or the comparable properties is not required for an unequal appraisal action under section
42.26(d)—the identically worded predecessor to section 42.26(a)(3).

       Our decision in United Investors was followed by the First Court of Appeals. See
Harris County Appraisal Dist. v. Kempwood Plaza Ltd., 186 S.W.3d 155 (Tex. App.—
Houston [1st Dist.] 2006, no pet.). There, HCAD argued that the property owner’s expert
should be excluded because the expert had no idea of the market value of the owner’s
property (Kempwood) or of the compared properties. Id. at 162. The First Court of
Appeals rejected this argument, citing United Investors’s holding that “it is unfair, and
constitutionally prohibited, to require one taxpayer to pay a tax based on market values
if other taxpayers are paying a rate that is lower than the market value of their properties.
. . . If a conflict exists between taxation at market value and equal and uniform taxation,
equal and uniform taxation must prevail.” Id. The First Court also noted that “the former
subsection 42.26(d) of the Texas Tax Code required only an analysis between the
appraised value of the property and the median appraised value of a reasonable number
of comparable properties appropriately adjusted.” Id.

       If, as this court and the First Court have held, proof of market value is not
required and market value does not prevail over uniform taxation in a property owner’s
unequal appraisal action under section 42.26(a)(3), then it logically follows that evidence
of market value of the subject property is not necessarily relevant in such an action.

       The mandamus relief sought by relator is similar to the relief granted in In re
Catherine Tower, LLC, in which Catherine Tower, LLC (“Catherine Tower”) obtained
a loan from Prudential Insurance Company to acquire the property that was the subject

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of the appraisal by the Travis Central Appraisal District (“TCAD”). Catherine Tower,
553 S.W.3d at 682. The trial court ordered Catherine Tower to produce “[a]ny
appraisals, valuations or estimates of value performed in connection with the loan by
[Prudential] to Catherine Tower.” Id. The Third Court of Appeals appropriately relied
on our decision in United Investors to hold that “Section 42.26(a)(3) does not
independently determine the market value of either the subject property or the
comparison properties.” Id. at 686. Accordingly, the Third Court rejected TCAD’s
premise that a dispute about a property’s tax appraisal value in an action under section
42.26(a)(3) places the property’s market value (in the sense of what a willing buyer
would pay a willing seller) at issue and thereby permits broad discovery of market-value-
related information. Id. at 685. The Third Court held that if the information in the
Prudential financing appraisal could have any potential relevance to Catherine Tower’s
section 42.26(a)(3) claim, it could only be in regard to the independent analysis required
under that provision, identifying “comparable properties” and making “appropriate
adjustments.” Id. at 687 (citing Tex. Tax Code § 42.26(a)(3)).

      Acknowledging the potential relevance of the financing appraisal to adjustments,
Catherine Tower argued that TCAD was at most entitled to production of limited
portions of the financing appraisal revealing the properties deemed comparable by the
third-party appraiser and the factors this appraiser used in making adjustments to those
properties. 553 S.W.3d at 687. Catherine Tower produced twenty-nine pages of redacted
excerpts from the financing appraisal in which it purported to disclose that information.
Id. But TCAD insisted that it was entitled to the entirety of the financing appraisal, save
only an agreed-upon redaction of the sales price Catherine Tower paid for its property.
Id. The Third Court rejected TCAD’s argument, stating:

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      TCAD’s arguments reveal its request to be, at best, vastly overbroad, a
      mere “fishing expedition.” “A central consideration in determining
      overbreadth is whether the request could have been more narrowly
      tailored to avoid including tenuous information and still obtain the
      necessary, pertinent information.” In re CSX Corp., 124 S.W.3d at 153
      (citing In re American Optical Corp., 988 S.W.2d 711, 713 (Tex. 1998)
      (orig. proceeding) (per curiam)). If TCAD perceives in good faith that
      Catherine may possess specific information not already produced that
      is relevant to the selection of comparable properties and the application
      of appropriate adjustments to those properties under Section
      42.26(a)(3), then it should formulate requests that seek that specific
      information (subject, of course, to Catherine’s right to raise further
      objections at that juncture regarding scope, or assertions of privilege).
      But the present request, to the effect of “hand over your entire financing
      appraisal,” is “narrowly tailored” only if one credits TCAD’s fallacious
      syllogism that an appraisal dispute under Section 42.26(a)(3) means
      that market value is at issue, exposing the taxpayer to intrusive
      discovery of “market data.”
Id. at 688. Accordingly, the Third Court ordered the trial court to withdraw its orders
compelling production of the Prudential financing appraisal. Id. at 689.

      HCAD argues that we should not follow Catherine Tower because it is contrary
to the decision of the First Court of Appeals in In re MHCB (USA) Leasing & Finance
Corp., which held, in an action for unequal taxation under section 42.26(a)(3), that
requests for information regarding the market value of owner’s property are reasonably
calculated to lead to the discovery of admissible evidence for use in comparing
properties and evaluating adjustments and are therefore not beyond the scope of
discovery. No. 01-06-00075-CV, 2006 WL 1098922, at *2–4 (Tex. App.—Houston [1st
Dist.] Apr. 27, 2006, orig. proceeding) (mem. op.).

      The First Court’s apparent holding—that all information regarding the market
value of the subject property is relevant—is inconsistent with Catherine Tower’s and

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this court’s holding in United Investors Realty that the “[t]he analysis prescribed by
Section 42.26(a)(3) does not independently determine the market value of either the
subject property or the comparison properties.” Catherine Tower, 553 S.W.3d at 685–
86 (citing United Inv’rs Realty Trust, 47 S.W.3d at 651–53 (reaching that conclusion
under identically worded predecessor statute)). Although some information in the
Apartment Purchase Documents regarding the market value of the Weston Oak
Apartments, such as the property’s quality, size, age, and depreciation, may be relevant
to selecting and making adjustments to comparable properties, we do not see how the
price that relator paid for the Weston Oaks Apartments (stated in the sales and the closing
statements) or the market value of the Apartments (stated in the appraisal) are relevant
for this purpose.

        We therefore disagree with the overly broad holding of In re MHCB (USA)
Leasing & Finance Corp., but rather agree with the above-discussed holdings in
Catherine Tower, which are consistent with this court’s decisions in United Investors
and Weingarten.2 Accordingly, in an unequal appraisal action under section 42.26(a)(3),
discovery related to market value should be narrowly tailored to information that is

        2
          HCAD notes: “[N]o trial court ‘has a right to decide cases contrary to an opinion of the
appellate court for its jurisdiction on the same question.’” Rice v. Rice, 533 S.W.3d 58, 61–62
(Tex. App.— Houston [14th Dist.] 2017, no pet.). HCAD therefore argues that the trial court did
not abuse its discretion because it was bound to follow the First Court of Appeals’s decision in In
re MHCB. We disagree for two reasons. First, the trial court had discretion to instead follow this court’s
decision in United Investors Realty. Second, HCAD’s argument leads to an absurd result that this court
has not accepted, namely, that this court would be precluded from ever deciding whether an opinion of
the First Court was correctly decided or should be followed, as this court has done several times. See
e.g., City of Houston v. Rodriguez, 369 S.W.3d 262, 267 n.4 (Tex. App.—Houston [14th Dist.] 2011,
pet. denied); Holt v. State, No. 14-99-01156-CR, 2000 WL 1876794, at *1 (Tex. App.—Houston [14th
Dist.] Dec. 28, 2000, no pet.) (mem. op., not designated for publication).

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relevant to the selection of comparable properties and the application of appropriate
adjustments to those properties.

       We apply this holding to the trial court’s order as follows. Here, the trial court
ordered relator to produce all appraisals, sales documents, and closing statements arising
out of relator’s purchase of the Weston Oaks Apartments. The discovery that HCAD
requested and the trial court ordered is overbroad because it is not narrowly tailored to
documents or information relevant to the selection of comparable properties and making
appropriate adjustments, but includes irrelevant information such as the price that relator
paid for the Apartments (stated in sales documents and closing statements) and the value
of the Apartments stated in the appraisal. In Catherine Tower, even TCAD recognized
that it was not entitled to discovery of the purchase price, as it did not object to Catherine
Tower’s redaction of the price it paid for the subject property in the financing appraisal
documents that Catherine Tower produced. 553 S.W.3d at 683. As did the Third Court
in Catherine Tower, we recognize that HCAD may be entitled to limited portions of the
appraisal of the subject property to the extent that the appraisal may reveal the properties
deemed comparable by the third-party appraiser and the factors this appraiser used in
making adjustments to those properties. Id. at 687. The trial court’s overbroad discovery
order is an abuse of discretion for which relator is entitled to mandamus relief. See
Catherine Tower, 553 S.W.3d at 683–88; see also In re Nat’l Lloyds Ins. Co., 507
S.W.3d at 223; In re Sun Coast Res., Inc., 562 S.W.3d at 146.

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                                     CONCLUSION

      For the above reasons, we grant the requested relief and direct the respondent
to vacate the July 24, 2020 order.

                                              /s/   Charles A. Spain
                                                    Justice

Panel consists of Justices Spain, Hassan, and Poissant.

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