True Stories of the Appellate Courts
Property taxes concern homeowners, especially when
property values are rising. The Texas Tax Code caps or
limits increases in the appraised value of a residence for
tax purposes to 10 percent annually when no improvements
have been made to the property. But a recent case called
the statute into question (Bader v. Dallas Central Appraisal
Dist. [139 SW3rd 778]. In it, a homeowner used a novel approach
to interpret the statute (Section 23.23).
Briefly, Section 23.23 says the appraised value of a residential
homestead for property tax purposes may not exceed the
lesser of the market value or sum of three items:
the value of the property the last year it was appraised for
tax purposes,
10 percent of the last appraised value times the number of
years since the appraisal occurred, plus
the market value of any new improvements to the property.
In 2001, the Bader’s residential property appraised at
$217,000 for tax purposes. The land was $75,000 of the value
and the improvements (the residence) $142,000. Because of
the cap, the appraised value for tax purposes was limited to
$181,500.
In 2002, the residential property appraised at
$235,000 — $75,000 for the land and $160,000 for
improvements. Because of the cap, the assessed value
was limited to an increase of $18,150 (10 percent of
$181,500).
The Baders protested. They contended the 10 percent
increase applied to the taxpayers’ residence (improvements)
and to the land separately, not as a unit.
Because the value of the land remained constant, they
argued, the increase in appraised value should be
limited to 10 percent of last year’s appraised value for
the residence or $16,000, not $18,150.
The trial court ignored the Baders’ plea and granted
the appraisal district summary judgment. A trial
court grants summary judgment when there is
no real disagreement about the facts of the case,
and the only issue is a question of law. The judge
decides the case based on the facts and grants a
summary judgment to the prevailing party.
The Baders focused on the interpretation of
the term property as used in Section 23.23.
They contended the term encompassed two
components: the land and the improvements,
and the 10 percent rule applies separately to
each. The homeowners contended Section
23.19(f) of the Tax Code supported their
argument because it requires appraisal
districts to list each component separately
with its value.
The appellate court affirmed the summary
judgment against the Baders. The
court found no connection between the
caps in Section 23.23 and the separate
listing of the land and improvements in
Section 23.19(f). Instead, the court pointed
to the defi nition of residence homestead in
Section 11.13, which reads “a structure . . .
together with the land and improvements used
as the residential occupancy of the structure .
. .” The court ruled the two components are
assessed for taxes as a whole, not separately.
The court concluded that the legislature
“intended the 10 percent cap to apply to the
residence homestead as a single unit, i.e., the
land together with improvements.”
it is a homestead or a commercial property. No right of redemption
exists in Texas following a mortgage foreclosure sale,
but one is afforded after a homeowners association forecloses
for nonpayment of assessments.
A property tax foreclosure sale eliminates most, if not all, existing
liens on the property — certainly existing mortgage liens. To
protect themselves, lenders must make sure property taxes are
paid in a timely manner.
While redemption restores title to the delinquent taxpayer, it
does much more than that, as the Hunts found out in Associates
Home Equity Services Co. v. Hunt (151 SW3rd 559).
The Hunts borrowed $155,000 from Associates Home Equity
Services (Associates) to purchase a home in Montgomery
County in 1996. The debt was secured by a deed of trust. The
Hunts failed to pay the property taxes, which led to a tax foreclosure
sale in 1998. A third party purchased the property at
the sale, but the Hunts subsequently redeemed it. Following the redemption, Associates (the lender) posted
the property for foreclosure because the Hunts failed to
make the mortgage payments. The Hunts sought an injunction
to stop the sale. The trial court granted the Hunts
summary judgment based on the fact that the tax foreclosure
sale forever eliminated the mortgage lien on the property. Associates
appealed.
Associates argued the redemption not only restored title to
the Hunts, but restored the mortgage held by Associates on
the land. Associates cited the case of Reynolds v. Batchelor
(216 SW2d 663), in which the court held that an owner who
redeems property does not strengthen his or her title against
other owners or lienholders.
The appellate court agreed, reversed the summary judgment
and remanded the case for trial. The court held that, as long
as the third-party buyer at the tax sale held title, the mortgage
lien was temporarily suspended. But, when the former owners
redeemed the property, the lien was restored. Whether or
not the Hunts redeem the property, the ruling stated, they are
personally liable for the repayment of the loan.
The Reynolds case illustrates a situation that plagues many
property co-owners. One cotenant pays all the property taxes
to prevent a tax foreclosure sale. While the law provides that
nonpaying cotenants are personally liable for their share of the
taxes, litigation among co-owners, especially family members,
seldom occurs.
To eliminate the nonpaying cotenants’ ownership in the
property, the cotenant paying the property taxes simply stops,
lets the property go to foreclosure, then redeems the property
from the buyer. The cotenant is now the sole owner.
Basically, this is what happened in the Reynolds case but
with a twist. Homer Hamilton owned property in Fort Worth.
He died intestate in 1934. His heirs failed to pay the property
taxes, and the sheriff sold the property to the City of Fort
Worth for $1,800. After the sale and still within the redemption
period, Batchelor purchased one of the heirs’ one-sixth undivided
interest in the property. He then proceeded to purchase
the land from the city for $1,800.
When the other heirs discovered the redemption, they sued
to partition the property, alleging that Batchelor’s redemption
restored their co-ownership. The trial court ruled in favor of
Batchelor. The heirs appealed.
The court had to decide whether Batchelor purchased the
property from the city or redeemed it. The weight of the
Texas statutory law allows a person who loses
property at a property tax foreclosure sale to
redeem it (buy it back) at a stipulated price
within a certain period (see “Forced Sale
Remedies,” www.recenter.tamu.edu/pdf/652.pdf).
The redemption period varies depending on whether
In 2002, the residential property appraised at
$235,000 — $75,000 for the land and $160,000 for
improvements. Because of the cap, the assessed value
was limited to an increase of $18,150 (10 percent of
$181,500).
The Baders protested. They contended the 10 percent
increase applied to the taxpayers’ residence (improvements)
and to the land separately, not as a unit.
Because the value of the land remained constant, they
argued, the increase in appraised value should be
limited to 10 percent of last year’s appraised value for
the residence or $16,000, not $18,150.
The trial court ignored the Baders’ plea and granted
the appraisal district summary judgment. A trial
court grants summary judgment when there is
no real disagreement about the facts of the case,
and the only issue is a question of law. The judge
decides the case based on the facts and grants a
summary judgment to the prevailing party.
The Baders focused on the interpretation of
the term
They contended the term encompassed two
components: the land and the improvements,
and the 10 percent rule applies separately to
each. The homeowners contended Section
23.19(f) of the Tax Code supported their
argument because it requires appraisal
districts to list each component separately
with its value.
The appellate court affirmed the summary
judgment against the Baders. The
court found no connection between the
caps in Section 23.23 and the separate
listing of the land and improvements in
Section 23.19(f). Instead, the court pointed
to the defi nition of
Section 11.13, which reads “a structure . . .
together with the land and improvements used
as the residential occupancy of the structure .
. .” The court ruled the two components are
assessed for taxes as a whole, not separately.
The court concluded that the legislature
“intended the 10 percent cap to apply to the
residence homestead as a single unit, i.e., the
land together with improvements.”
Texas statutory law allows a person who loses
property at a property tax foreclosure sale to
redeem it (buy it back) at a stipulated price
within a certain period (see “Forced Sale
Remedies,” www.recenter.tamu.edu/pdf/652.pdf).
The redemption period varies depending on whether
evidence favored a purchase. The redemption price, according
to the statute, would have been $2,700, not $1,800. Also,
Batchelor received a general warranty deed from the city, not a
redemption receipt. The transaction with the city, though, occurred
during the redemption period, not afterwards.
If the transaction was a redemption, the heirs win. The redemption
restored their ownership in much the same way the
redemption restored the lien on the property discussed earlier
in the Hunt case.
“It is a general principle of law” wrote the court, “that one
who by virtue of an existing legal or contractual relation with
another is under an obligation to such other person to pay the
taxes on the lands, but who omits to pay such taxes, cannot be
allowed to strengthen his title to such land by buying the tax
title when the property is sold as a consequence of his omission
to pay the taxes . . .”
If the transaction was a purchase, the heirs lose. The purchase
would not restore their interest; thus, they would have
no right to partition the land.
The court ruled the transaction a purchase for two reasons.
The deed to Batchelor from the cotenant conveyed “all rights,
title and interest” to the property, not the cotenant’s undivided
interest. Under Texas case law, this amounts to a repudiation
of the other cotenants’ interest.
Second, Batchelor acquired title from the cotenant after the
foreclosure sale. He owed no responsibility to pay the property
taxes on behalf of the other cotenants. He did not profi t from
his own neglect. The results would have been different had
Batchelor acquired the title prior to the foreclosure sale.
Based on the Reynolds case, a cotenant may not voluntarily
withhold payment of property taxes in an attempt
to gain sole ownership of land by redeeming the
property following a tax sale. However, the Texas Tax
Code describes another little-known alternative that may be
benefi cial.
In a nutshell, Sections 29.001 through 29.004 outline the following
procedures for acquiring another cotenant’s undivided
interest for not paying his or her share of the property taxes.
First, a person acquires title to an undivided interest in private
property in one of three ways:
• by inheritance (under the rules of descent and distribution
when the owner dies intestate or without a will),
• by devise (under the terms of someone’s will when the
owner dies testate) or
• by joint tenancy with the right of survivorship or by some
other survivorship agreement (a type of co-ownership
where the person who lives the longest gets full title to
the land).
Second, one of the joint tenants (co-owners) pays all the
property taxes on behalf of another cotenant for three out of
fi ve years.
Third, the joint tenant who pays the taxes formally
demands reimbursement and at least half of the
amount is not forthcoming.
Fourth, the cotenant who paid the taxes (the petitioner)
petitions the district court located in the same
county as the property, asking it to order the nonpaying
cotenant (the defendant) to sell his or her property
to the petitioner. Another co-owner conducts the
sale.
At times the petitioner may not be able to identify
or locate the other co-owners for whom the
payments are made. In such cases, it is impossible
to make formal demands for repayment. The statute
anticipates this problem and allows formal
demand to be made via the county newspaper.
The demand must appear once a week for four
consecutive weeks. The petition in the district
court must be fi led within 30 days after the
fourth publication. The district court conducts a hearing based
on the petition. The petitioner must
prove all elements of the case by “clear
and convincing” evidence, a much
higher standard than in most civil cases.
If the petitioner successfully meets
the burden of proof, the court orders the
defendant’s undivided interest sold to the
petitioner based on a court-ordered appraisal.
The petitioner tenders the defendant
the appraised value of the property less
the amount owed for taxes. The court may
order the defendant to execute and deliver
a deed proving the transfer if the defendant
is known and can be located.
The statute outlines a viable means
by which a cotenant may, under certain
circumstances, acquire another cotenant’s
undivided interest in property. No Texas
appellate courts have construed the statute,
leaving several unanswered questions
including the following.
• Who does the petitioner pay when the defendant
is unknown or cannot be located?
• What happens when the defendant’s undivided
interest appraises for less than the defendant
owes the petitioner for reimbursement? Is the
defendant still personally liable for the excess?
• What if the county does not have a weekly
newspaper?
• How is the sale conducted when there are
only two cotenants? The statute specifi cally
requires “another owner of an undivided interest
in the property” to sell the property to the
petitioner. The language appears to require a
third cotenant other than the petitioner and
defendant.
Fambrough (judon@recenter.tamu.edu) is a member of the State
Bar of Texas and a lawyer with the Real Estate Center at Texas
A&M University.
Third, the joint tenant who pays the taxes formally
demands reimbursement and at least half of the
ourth, the cotenant who paid the taxes (the petitioner)
petitions the district court located in the same
county as the property, asking it to order the nonpaying
cotenant (the defendant) to sell his or her property
to the petitioner. Another co-owner conducts the
At times the petitioner may not be able to identify
or locate the other co-owners for whom the
payments are made. In such cases, it is impossible
to make formal demands for repayment. The statute
anticipates this problem and allows formal
demand to be made via the county newspaper.
The demand must appear once a week for four
consecutive weeks. The petition in the district
court must be fi led within 30 days after the
he district court conducts a hearing based
prove all elements of the case by “clear
dant the appraised value of the property less
a deed proving the transfer if the defendant
Who does the petitioner pay when the defendant
is unknown or cannot be located?
What happens when the defendant’s undivided
interest appraises for less than the defendant
owes the petitioner for reimbursement? Is the
defendant still personally liable for the excess?
What if the county does not have a weekly
How is the sale conducted when there are
only two cotenants? The statute specifi cally
requires “another owner of an undivided interest
in the property” to sell the property to the
petitioner. The language appears to require a
third cotenant other than the petitioner and
) is a member of the State
Bar of Texas and a lawyer with the Real Estate Center at Texas