Under Texas law, an agreement entered into by Oncor and two counties resolving a tax appraisal dispute is a done deal and cannot be amended based on what Oncor contends is a clerical error, a lawyer for the counties told Texas Supreme Court justices during oral arguments Thursday.
The justices had consolidated the oral arguments in two cases that involve disputes in Mills and Wilbarger counties. The cases are part of a large group of lawsuits filed by Oncor to fight the valuation of its transmission lines in 13 counties. The utility company argues incorrect data provided by a private appraisal firm to determine 2019 values led to a $7 million overvaluation of its property and a “windfall” of taxes for the local governments.
Justice Debra Lehrmann asked a pointed question in response to the argument from James Robert Evans, an attorney at Low, Swinney Evans & James who represents Mills and Wilbarger counties, that the agreement the parties entered into under Texas Tax Code Section 1.111(e) is final and that defenses typically available in a contract dispute — including mutual mistake — do not apply to this statutory agreement.
“It just seems contrary to all ideas of justice that a party would not be able to clarify a clerical error,” Lehrmann said. “Certainly in the legal world we do that with nunc pro tuncs all the time, so why would this be any different?”
Various sections of the tax code allow for amendments to be made, Evans said, but not Section 1.111(e).
Marnie McCormick, a partner at Duggins Wren Mann & Romero who represents Oncor, pointed to other tax code sections that detail what types of errors may and may not be corrected to combat the counties’ interpretation of Section 1.111(e). Errors in rendition statements and excessive market valuation of property are examples of errors that are barred from correction, McCormick said. But objective factual errors such as clerical errors and taxation of property outside a jurisdiction are not blocked from being corrected, she argued.
Oncor has also offered the mutual mistake doctrine — in which the parties to a contract had the same mistaken or erroneous belief — as an alternative argument if the justices don’t agree other sections of the tax code allow for correcting the error.
In 2019, Oncor began acquiring property from Sharyland Distribution & Transmission Services. Soon after, Oncor discovered the private appraisal firm hired by the counties had mixed up the number of two types of transmission lines, which led to inaccurate calculations for the value per mile.
Oncor filed motions to correct the errors with the appraisal review boards in Mills and Wilbarger counties. The appraisal districts denied the motions, concluding settlement agreements are “final” under the Texas Tax Code. Oncor then filed lawsuits in the respective counties.
The trial court judge in the Mills County case granted the appraisal district’s plea to jurisdiction and dismissed the case. A panel of the Third Court of Appeals reversed. But the trial court judge in the Wilbarger case denied that appraisal district’s plea to jurisdiction, a decision the Seventh Court of Appeals panel later reversed.
“I hope you can help me with a jurisdictional question because, I think, the courts of appeal came out differently on whether this is within the scope of the agreement and whether you can overturn an agreement for mutual mistake. And I think everybody wants us to answer that question,” Justice Brett Busby said while questioning McCormick.
McCormick said “the answer to the mutual mistake question is a stark issue of law” and vowed to submit a letter brief with case law supporting the argument.
The parties have debated the impact of the Texas Supreme Court’s 2018 opinion in Willacy County Appraisal District v. Sebastian Cotton & Grain. In that case, justices ruled an appraisal district’s chief appraiser may make an ownership correction to the appraisal roll when it does not increase the property taxes amount owed in the year of the correction, and that a section 1.111(e) agreement may be voided where fraud is proven.
McCormick argued the court’s decision in Willacy was not limited to fraud, which Evans disagreed with.
Justice Jane Bland asked why the high court would have carved out a fraud defense but not carve out other defenses.
“Because 1.111(e) is created by the legislature,” Evans said. “It is not a contract. And this court has stated that in Willacy … it is a legislative enactment.”
Oncor is also represented by David H. Gilliland of Duggins Wren Mann & Romero.
Wilbarger County Appraisal Review Board is represented by Jonathan Whitsitt.
Wilbarger County Appraisal District is represented by Erin Gaines, Marjorie Bachman, Kirk Swinney, Ryan L. James and James Robert Evans Jr. of Low Swinney Evans & James.
Mills County Appraisal Review Board is represented by Julia Lacy Armstrong and Roy L. Armstrong of Armstrong and Armstrong in Taos, New Mexico.
Mills Central Appraisal District is represented by Erin Gaines, Marjorie Bachman, Peter W. Low, D. Kirk Swinney, Ryan L. James and James Robert Evans Jr. The case numbers are 23-0138 and 23-0145.