Affirmed and Memorandum Opinion filed April 28, 2015.




                                       In The

                     Fourteenth Court of Appeals

                               NO. 14-14-00366-CV

      PACIFIC WESTERN BANK, AS SUCCESSOR BY MERGER TO
                CAPITALSOURCE BANK, Appellant
                                         V.
                        BRAZORIA COUNTY, Appellee

                    On Appeal from the 239th District Court
                           Brazoria County, Texas
                         Trial Court Cause No. 70781

                 MEMORANDUM                       OPINION


      In this interlocutory appeal, the appellant challenges the trial court’s grant of
a plea to the jurisdiction that dismissed one of appellant’s defenses to the
underlying tax delinquency suit. We conclude that the trial court does not have
jurisdiction to consider the asserted defense, because appellant failed to exhaust its
administrative remedies. Therefore, we affirm.
                       FACTUAL AND PROCEDURAL BACKGROUND

      CapitalSource Bank (“CapitalSource”), which was the predecessor-in-
interest to appellant Pacific Western Bank, 1 allegedly had a financial arrangement
(the details of which are unclear) with Chiquita Brands L.L.C. (“Chiquita”)
pertaining to the purchase of refrigerated cargo containers. These containers
allegedly are used by Chiquita in international trade, but at times a certain number
of containers are temporarily located at a storage facility in Freeport, Brazoria
County, Texas.

      In April 2011, an agent acting on behalf of CapitalSource filed a business
personal property rendition of taxable property with the Brazoria County Appraisal
District (“the District”) for the cargo containers. The rendition listed CapitalSource
as the “Property owner/manager[],” and included a signed attestation that
CapitalSource was the property owner or an affiliated entity of the property owner.
CapitalSource,       however,      also   added     stamped      notations   reading   “FOR
INFORMATIONAL PURPOSES ONLY,” and included notes reading “Tax
Obligation of User, not Taxpayer – Personal Property” and “INFORMATIONAL
FILING ONLY – Please Assess User Directly.” The only reference made to
Chiquita in the rendition was in an attached table that listed “Chiquita Brands,
LLC” under a column titled “Site Name.” In May 2011, the District issued to
CapitalSource a notice of appraised value for the cargo containers, which listed an
estimated tax of over $317,000. CapitalSource admittedly did not file a protest of
the tax assessment with the District claiming that the cargo containers are exempt
from taxation. See Tex. Tax Code Ann. §§ 41.41, 41.44 (West, Westlaw through
2013 3d Called Sess.).


      1
          We will refer to CapitalSource Bank exclusively in this opinion.

                                                2
      In April 2012, CapitalSource again filed a business personal property
rendition of taxable property with the District for the cargo containers. As with the
2011 rendition, the 2012 rendition listed CapitalSource as the “Property
owner/manager[],” and included a signed attestation that CapitalSource was the
property owner or an affiliated entity of the property owner. CapitalSource also
affirmed that “the information contained in the most recent rendition statement
filed by the property owner in a prior year is accurate with respect to the current
tax year.” But, CapitalSource also included on the 2012 rendition various
handwritten and stamped notations reading “BILL TO LESSEE,” “FOR
INFOMATIONAL PURPOSES ONLY,” “Tax Obligation of User, Not Taxpayer –
Personal Property,” “INFORMATIONAL FILING ONLY – Please Assess User
Directly,” “Capital Source Bank – For Chiquita Brands LLC Please Assess User
Directly,” and “PER HUGH LANDRY FILE INFORMATIONAL.”

      In May 2012, the District issued to CapitalSource a notice of appraised value
for the cargo containers, which listed an estimated tax of over $349,000. In June
2012, CapitalSource filed a formal administrative protest of the tax assessment.
The only reason for the protest disclosed on the notice stated, “VALUE
INCREASED FROM PRIOR YEAR – NO EXPLANATION.” The District’s
appraisal review board sent CapitalSource notice that the protest hearing was
scheduled for July 11, 2012 at 1:00 PM. CapitalSource, however, did not appear
for the protest hearing, and it admits it did not pursue that protest. Also,
CapitalSource admittedly did not file a protest of the tax assessment with the
District claiming that the cargo containers are exempt from taxation.

      In December 2012, appellee Brazoria County filed a delinquent tax suit
against CapitalSource alleging that the assessed taxes on the cargo containers,
along with penalties and interest, had not been paid. CapitalSource subsequently

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filed a third-party petition against Chiquita. In December 2013, CapitalSource and
Chiquita jointly filed a motion for summary judgment, in which they argued that
the ad valorem taxes assessed against the containers are unconstitutional under
federal law, and, therefore, unenforceable, because the containers are
instrumentalities used exclusively in international commerce. In response, Brazoria
County filed a plea to the jurisdiction, motion to dismiss, and response to the
motion for summary judgment, in which Brazoria County argued, among other
matters, that the trial court lacks jurisdiction to hear the constitutional claim
because neither CapitalSource nor Chiquita exhausted its administrative remedies
by filing a protest of the tax assessment as required by the Tax Code. See Tex. Tax
Code Ann. § 42.09 (West, Westlaw through 2013 3d Called Sess.). CapitalSource
and Chiquita filed a response to Brazoria County’s plea.

      After a hearing, the trial court signed an order on April 24, 2014, granting
Brazoria County’s plea to the jurisdiction, and dismissing the constitutional
defense asserted by CapitalSource and Chiquita in their respective answers.
CapitalSource then filed this interlocutory appeal of the trial court’s order. 2 See
Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(8) (West, Westlaw through 2013
3d Called Sess.).

                                             ANALYSIS

      In its sole issue, CapitalSource argues that the trial court’s grant of Brazoria
County’s plea to the jurisdiction was in error, because CapitalSource’s failure to
file a formal administrative protest of the ad valorem tax assessment against the
cargo containers does not preclude it from asserting in the underlying litigation that
the taxes are unconstitutional and, thereby, unenforceable. “We review de novo a
trial court’s ruling on a plea to the jurisdiction.” Allstate Indem. Co. v. Mem’l
      2
          Chiquita did not appeal the trial court’s order.

                                                   4
Hermann Health Sys., 437 S.W.3d 570, 573 (Tex. App.—Houston [14th Dist.]
2014, no pet.); see also Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d
217, 226 (Tex. 2004).

Challenges to a Property Tax Assessment Generally Must Be Made Through an
Administrative Protest Process and Corresponding Judicial Review.
      “The Texas Tax Code provides detailed administrative procedures for those
who would contest their property taxes.” Cameron Appraisal Dist. v. Rourk, 194
S.W.3d 501, 502 (Tex. 2006) (per curiam). Under the Tax Code, a property owner
is entitled to protest various actions before the respective appraisal review board,
such as “inclusion of the owner’s property on the appraisal records,” “denial to the
property owner in whole or in part of a partial exemption,” and “any other action . .
. that applies to and adversely affects the property owner.” Tex. Tax Code Ann.
§ 41.41(a)(3), (a)(4), (a)(9) (West, Westlaw through 2013 3d Called Sess.). “The
intent of the administrative review process is to resolve the majority of tax protests
at this level, thereby relieving the burden on the court system.” Webb Cnty.
Appraisal Dist. v. New Laredo Hotel, Inc., 792 S.W.2d 952, 954 (Tex. 1990). “If
the property owner is dissatisfied by the determination of the appraisal review
board following the protest hearing, the property owner is then entitled to judicial
review under Chapter 42 of the Tax Code—a trial de novo in the district court
further appealable as any civil case.” Appraisal Review Bd. of Harris Cnty.
Appraisal Dist. v. Spencer Square Ltd., 252 S.W.3d 842, 845 (Tex. App.—
Houston [14th Dist.] 2008, no pet.).

      As a corollary to the existence of the administrative protest process,
including the availability of further judicial review, the Tax Code provides (with
limited exceptions not applicable here) that the “procedures prescribed . . . for
adjudication of the grounds of protest authorized by this title are exclusive, and a


                                          5
property owner may not raise any of those grounds: (1) in defense to a suit to
enforce collection of delinquent taxes.” Tex. Tax Code Ann. § 42.09(a).3
Therefore, “a taxpayer’s failure to pursue an appraisal review board proceeding
deprives the courts of jurisdiction to decide most matters relating to ad valorem
taxes.” Matagorda Cnty. Appraisal Dist. v. Coastal Liquids Partners, L.P., 165
S.W.3d 329, 331 (Tex. 2005); see also Patel v. Harris Cnty. Appraisal Dist., 434
S.W.3d 803, 812–13 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (“[A]
property owner’s failure to protest a ground of protest before the appraisal review
board deprives the district court of jurisdiction because the property owner has
failed to exhaust administrative remedies as to that ground.”).

CapitalSource’s Constitutional Defense to the Delinquency Suit Seeks to Set
Aside the Tax Assessments, Which is a Claim that Must Be Brought
Administratively.
       CapitalSource acknowledges that it did not pursue a formal administrative
protest of either the 2011 or 2012 tax assessments on the cargo containers based on
CapitalSource’s assertion that the containers are exempt from taxation as
instrumentalities of international commerce. CapitalSource nonetheless argues that
it may raise the alleged unconstitutionality of the tax assessments as a defense to
Brazoria County’s suit—notwithstanding Section 42.09(a) of the Tax Code—
because the defense is a pure question of law. We disagree.

       In Rourk, the supreme court reversed a court of appeals’ decision that the
requirement to exhaust administrative remedies was inapplicable because the
taxpayers had raised purely legal and constitutional questions. The court reasoned:
“The taxpayers here are seeking more than a declaration that taxing trailers is
       3
          Exhaustion of administrative remedies is not required to assert an affirmative defense
that the taxpayer either did not own the property or that the property was outside the boundaries
of the taxing unit. Rourk, 194 S.W.3d at 502 n.2; Tex. Tax Code Ann. § 42.09(b) (West,
Westlaw through 2013 3d Called Sess.).

                                               6
unconstitutional—they are seeking to have their individual assessments set aside.
While the former claim need not be brought administratively, the latter must.”
Rourk, 194 S.W.3d at 502. CapitalSource is likewise seeking to have the 2011 and
2012 tax assessments on the cargo containers set aside. Therefore, this is a claim
that CapitalSource was required to bring administratively.

      Our recent decision in Harris County Appraisal District v. ETC Marketing,
Ltd., 399 S.W.3d 364 (Tex. App.—Houston [14th Dist.] 2013, pet. denied), is
particularly instructive. In that case, the taxpayer claimed that the property in
question was exempt from taxation under federal law because it was in interstate
commerce. The taxpayer failed to raise that claim in its administrative protest to
the appraisal review board. Instead, the taxpayer raised the claim for the first time
in the appeal to the district court of the review board’s decision. Id. at 366. The
taxpayer argued it was not required to exhaust its administrative remedies because
the assessed tax was unconstitutional and the taxpayer was raising a pure question
of law. Id. at 368. We rejected that argument, stating: “[The taxpayer] is not raising
a pure question of law; it also is seeking to have its tax assessments set aside. It
therefore is not relieved from the requirement of exhausting administrative
remedies.” Id. (citing Rourk, 194 S.W.3d at 502). Here, CapitalSource is making
effectively the same argument that we rejected in ETC Marketing, except that it is
trying to raise the claim even later in the process as a defense to a collection suit—
which section 42.09(a) expressly says it cannot do.

CapitalSource’s Attempts to Distinguish this Case Are Unpersuasive.

      CapitalSource makes several arguments why the holding in Rourk should
not apply here, but we are not persuaded by these arguments. As one argument,
CapitalSource places great emphasis on the fact that it marked its 2011 and 2012
renditions as being “for informational purposes only” and with similar such

                                          7
statements. But CapitalSource does not provide us any authority to demonstrate
that the handwritten and stamped markings on its filed renditions have any legal
effect, nor are we aware of any such authority. Moreover, even were we to assume
that the markings added by CapitalSource on its renditions provided some legally-
effective instructions to the District, CapitalSource does not provide any authority
to support its position that it was excused from having to file an administrative
protest of the resulting tax assessments in order to raise its constitutional claim
merely because CapitalSource included the “informational” markings on the
renditions. Indeed, to the extent the various markings added by CapitalSource have
any significance at all, it appears to be in connection with which entity—
CapitalSource or Chiquita—should have been assessed the tax, which is distinct
from the constitutional claim CapitalSource now makes that the containers should
be exempt from tax. 4 Cf. ETC Mktg., 399 S.W.3d at 369–70 (holding that filing a
protest on other grounds did not exhaust administrative remedies with respect to
constitutional claim).

       CapitalSource also attempts to distinguish the holding in Rourk based on
purported admissions by Brazoria County that the tax assessments were
inappropriate because Brazoria County granted a full exemption for cargo
containers in the 2013 tax year. As an initial matter, we do not read the record as
containing an admission by Brazoria County that the 2011 and 2012 tax
assessments for cargo containers were inappropriate. And, even were we to
conclude that Brazoria County did make such an admission, CapitalSource
provides no authority to support its argument that such an admission relieves it
from having to exhaust its administrative remedies. If CapitalSource had a valid

       4
         For example, on both the 2011 and 2012 renditions, CapitalSource included the notation
“Please Assess User Directly.” This statement does not challenge the validity of any assessment,
but rather concerns the obligee on the assessment.

                                               8
argument that cargo containers were exempt from taxation under federal law in
2011 and 2012, it could have—and should have—raised that argument through an
administrative protest. See Tex. Tax Code Ann. § 11.12 (West, Westlaw through
2013 3d Called Sess.) (“Property exempt from ad valorem taxation by federal law
is exempt from taxation.”); ETC Mktg., 399 S.W.3d at 366 (“[A] taxpayer desiring
to have its property removed from the tax rolls on the ground that the property is in
interstate commerce and therefore exempt from taxation must exhaust
administrative remedies by raising that argument with the appraisal review board
in a timely tax protest under Chapter 41 of the Texas Tax Code.”).

      CapitalSource further refers to “informal dialogue” that it claims it engaged
in with the District following the issuance of the 2011 notice of appraised value,
although CapitalSource fully acknowledges that it did not pursue any formal
administrative protest of either the 2011 or 2012 tax assessment based on the
asserted unconstitutionality of the assessments. In its opening brief, CapitalSource
suggests such informal dialogue has some bearing on why it is excused from
having to file a formal administrative protest, but CapitalSource does not explain
that suggestion or provide any authority in support. In its reply brief, CapitalSource
suggests that the alleged informal dialogue “may lead to the determination that an
informal protest was triggered sufficient to satisfy the Tax Code and preserve the
issue for judicial determination.”

      CapitalSource’s claim of ongoing “informal dialogue” with the District does
not affect our conclusion. First of all, CapitalSource’s suggestion in its reply brief
that such informal dialogue may be a sufficient protest under the Tax Code was not
made in CapitalSource’s opening brief, and therefore is waived. See Zurita v.
Lombana, 322 S.W.3d 463, 477 (Tex. App.—Houston [14th Dist.] 2010, pet.
denied). Next, there is insufficient evidence in the record to demonstrate whether,

                                          9
and to what extent, the claimed informal dialogue actually occurred, which
CapitalSource effectively concedes by its statements that discovery is still being
sought on this topic. Also, CapitalSource fails to provide any authority to support
its position that engaging in informal dialogue enables it to challenge the
constitutionality of the tax assessment in a delinquency suit in district court when
the Tax Code mandates the formal administrative protest procedure as the
exclusive initial route. See Tex. Tax Code Ann. §§ 41.44(a) (“[T]o be entitled to a
hearing and determination of a protest, the property owner initiating the protest
must file a written notice of the protest with the appraisal review board . . . .”),
42.09(a) (West, Westlaw through 2013 3d Called Sess.) (providing that the
“procedures prescribed by this title for adjudication of the grounds of protest
authorized by this title are exclusive”); Rourk, 194 S.W.3d at 502 (“The
administrative procedures are ‘exclusive’ and most defenses are barred if not raised
therein.”) (quoting section 42.09).

CapitalSource Failed to Obtain a Determination that the Assessed Tax on the
Cargo Containers is Unconstitutional Through the Exclusive Procedure for
Doing So.
      CapitalSource further argues that the existence of an administrative
procedure to challenge the constitutionality of a tax does not mean that an
unconstitutional tax is enforceable. This argument presupposes that the 2011 and
2012 tax assessments are unconstitutional—a fact that has neither been adjudicated
nor stipulated. As previously noted, the Tax Code provides an exemption for
property exempted from taxation under federal law. See Tex. Tax Code Ann.
§ 11.12 (West, Westlaw through 2013 3d Called Sess.). But the Tax Code also
specifies exclusive procedures that CapitalSource was required to follow after
receiving the notices of appraised value in order to assert its claim to a
constitutionally-based exemption. See Tex. Tax Code Ann. § 42.09(a)(1); Rourk,

                                        10
194 S.W.3d at 502; ETC Mktg., 399 S.W.3d at 366, 368. CapitalSource appears to
be arguing that requiring adherence to the mandatory procedures of the Tax Code
is impermissible, because doing so may result in Brazoria County collecting a tax
on property that otherwise may have been determined to be exempt from taxation
under federal law. To the extent CapitalSource is making such an argument, that
argument cannot be reconciled with Rourk or ETC Marketing.

                                   CONCLUSION

      CapitalSource failed to avail itself of the exclusive procedures established by
the Tax Code to claim that the 2011 and 2012 tax assessments on the cargo
containers should be set aside because the containers are exempt from taxation as
instrumentalities of international commerce. As a consequence, the district court
does not have jurisdiction to consider CapitalSource’s constitutional defense in the
underlying tax delinquency suit. Therefore, the trial court was correct to have
granted Brazoria County’s plea to the jurisdiction with respect CapitalSource’s
assertion that the cargo containers are exempt from taxation under federal law.

      Accordingly, we overrule appellant’s sole issue presented, and affirm the
judgment of the trial court.


                                              /s/   Marc W. Brown
                                                    Justice



Panel consists of Justices Jamison, Busby, and Brown.




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