Oncor Electric Delivery Company NTU, LLC v. Wilbarger County Appraisal District, No. 23-0138, No. 23-0145, 2024 WL 3075706 (Tex. June 21, 2024)

Settlement and waiver agreements are not entirely fatal to future motions to correct. If you have ever protested and negotiated a resolution with a Texas appraisal district, you have likely signed a settlement and waiver agreement controlled by Section 1.111(e) of the Texas Property Tax Code. You may have thought that agreement wholesale prevented you seeking any future corrections pursuant to Section 25.25, or at least would create a timely and costly fight to obtain an ARB hearing and ultimately bring a lawsuit. There was some partial truth to this reasoning prior to Oncor Electric Delivery Company NTU, LLC v. Wilbarger County Appraisal District.

In that case, Oncor purchased some transmission lines from a company that previously settled market and equity protests for the 2019 tax year. Each settlement was executed on a document entitled “Settlement and Waiver of Protest,” and each stated a total value for the transmission lines. But after the purchase, Oncor discovered that the 2019 settlement was based on its predecessor and Mills and Wilbarger CAD’s reliance on an incorrect number of miles of transmission lines. With this, Oncor filed two Section 25.25 motions to correct with the Mills and Wilbarger County ARBs — motion to correct a clerical error (25.25(c)(1)) and motion to correct the inclusion of property that does not exist in the form or location described in the appraisal roll (25.25(c)(3)).

The Mills County ARB issued an order indicating that the ARB lacks jurisdiction to determine the correction motions. And the Wilbarger County ARB issued an order denying the correction motions.

Oncor filed parallel lawsuits against the appraisal districts for Mills and Wilbarger County. In the trial court, Mills and Wilbarger CAD successfully obtained dismissals of Oncor’s Section 25.25 claims by arguing the settlement between Oncor’s predecessor and Wilbarger and Mills CAD strips the trial court of jurisdiction. Mills CAD argued that the Mills ARB dismissed Oncor’s motions for lack of jurisdiction based on the prior settlement agreement, so there is no order from Mills ARB determining Oncor’s motions on the merits that can be appealed to the trial court. Mills CAD also argued that under Section 1.111(e) the agreement is final and not subject to judicial review in a property owner’s suit under Chapter 42.

Wilbarger CAD argued that although the Wilbarger ARB had issued an order determining Oncor’s correction motions on the merits, the agreement under Section 1.111(e) is final and as a result precludes a trial court from having jurisdiction to make any future determination.

The Supreme Court of Texas rejected both Mills and Wilbarger CAD’s arguments and held that the terms and existence of a Section 1.111(e) agreement is a potential defense to the merits of a property owner’s lawsuit, not a jurisdictional bar to a property owner bringing a lawsuit in the first place. The high court reasoned as follows.

It acknowledged that Section 1.111(e) settlement agreements are “final” without approval or adoption by the ARB and that an ARB has no authority to change them. But it rejected that the legislature intended the term “final” to inherently prevent a property owner from bringing a lawsuit. The court reasoned that if the term final in Section 1.111(e) was intended this way (“agreement between a property owner or the owner’s agent and the chief appraiser is final”), then such agreements would confer greater finality than a courts prior final judgment resolving the merits of the parties’ dispute. For understanding of this, the court directly relied on the doctrine of “res judicata.”

The doctrine of res judicata is a defense to the relitigation of a claim resolved by a prior final judgment on the merits. Res judicata is an affirmative defense, not a jurisdictional bar, and depends on a final judgment signed by a trial court. The Supreme Court of Texas in Oncor connected that if res judicata is not a jurisdictional bar, then likewise a Section 1.111(e) agreement should not be.

With this adopted, SCOTEX held the following, which is a clear rejection that Section 1.111(e) settlement agreements are jurisdictional bars to a property owner bringing a lawsuit: “We therefore hold that although the assertion of a preclusion defense based on a Section 1.111(e) agreement may narrow the trial court’s scope of review, this limitation is not jurisdictional. Rather, much as the scope of the taxpayer’s Chapter 41 protest limits the grounds a CAD may assert on appeal, the limitation is procedural. See Tex. Disposal Sys. Landfill, Inc. v. Travis County Cent. Appraisal Dist., ––– S.W.3d ––––, –––– – ––––, 2024 WL 3075673, slip op. at 14-15 (Tex. June 21, 2024) (No. 22-0620). Similarly, the appealing taxpayer (or appraisal district) may only prevail on its motion to correct in district court based on matters that are either consistent with the terms of or outside the scope of a valid Section 1.111(e) agreement.” *13.

The takeaway from this case is a great development that gives more certainty around settlement and waiver agreements under Section 1.111(e). If you represent someone whose property was previously subject to a settlement and waiver agreement, not all may be lost. You can still have the claims considered in trial court, but just watch out that the prior agreement will likely be used as a defense.

Tex. Tax Code § 1.111(e):
(e) An agreement between a property owner or the owner’s agent and the chief appraiser is final if the agreement relates to a matter: (1) which may be protested to the appraisal review board or on which a protest has been filed but not determined by the board;  or (2) which may be corrected under Section 25.25 or on which a motion for correction under that section has been filed but not determined by the board.
Tex. Tax Code § 25.25(c), (g):
(c) The appraisal review board, on motion of the chief appraiser or of a property owner, may direct by written order changes in the appraisal roll for any of the five preceding years to correct: (1) clerical errors that affect a property owner’s liability for a tax imposed in that tax year; (2) multiple appraisals of a property in that tax year; (3) the inclusion of property that does not exist in the form or at the location described in the appraisal roll;  or (4) an error in which property is shown as owned by a person who did not own the property on January 1 of that tax year.
(g) Within 60 days after receiving notice of the appraisal review board’s determination of a motion under this section or of a determination of the appraisal review board that the property owner has forfeited the right to a final determination of a motion under this section for failing to comply with the prepayment requirements of Section 25.26, the property owner or the chief appraiser may file suit to compel the board to order a change in the appraisal roll as required by this section.  A taxing unit may not be made a party to a suit filed by a property owner or chief appraiser under this subsection.
Tex. Tax Code § 42.01(a):
(a) A property owner is entitled to appeal: (1) an order of the appraisal review board determining: (A) a protest by the property owner as provided by Subchapter C of Chapter 41; (B) a motion filed under Section 25.25; (C)  that the property owner has forfeited the right to a final determination of a motion filed under Section 25.25 or of a protest under Section 41.411 for failing to comply with the prepayment requirements of Section 25.26 or 41.4115, as applicable; (D) eligibility for a refund requested under Section 23.1243;  or(E) that the appraisal review board lacks jurisdiction to finally determine a protest by the property owner under Subchapter C, Chapter 41, or a motion filed by the property owner under Section 25.25 because the property owner failed to comply with a requirement of Subchapter C, Chapter 41, or Section 25.25, as applicable;  or (2) an order of the comptroller issued as provided by Subchapter B, Chapter 24,  2 apportioning among the counties the appraised value of railroad rolling stock owned by the property owner.

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To review the Opinion from Oncor Electric Delivery Company NTU, LLC v. Wilbarger County Appraisal District, click the following link (or copy and paste): https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=46fb5a88-bff9-457d-aa25-65fcb5cda9ff&coa=cossup&DT=OPINION&MediaID=f04e3354-ab48-427f-be5d-f1c1c387c61f.

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Key Sections of Texas Property Tax Code: 
§ 1.111(e), Representation of Property Owner
§ 25.25(c), (g), Correction of Appraisal Roll
§ 42.01(a), Right of Appeal by Property Owner

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