                                                                                           ACCEPTED
                                                                                       03-15-00430-CV
                                                                                               6561637
                                                                            THIRD COURT OF APPEALS
                                                                                       AUSTIN, TEXAS
                                                                                 8/19/2015 12:38:59 PM
                                                                                     JEFFREY D. KYLE
                                                                                                CLERK

                           NO. 03-15-00430-CV
                                                                      FILED IN
                                                               3rd COURT OF APPEALS
                                     In The                         AUSTIN, TEXAS
                                                               8/19/2015 12:38:59 PM
                       Third Court of Appeals                      JEFFREY D. KYLE
                                                                        Clerk

                               AT   AUSTIN, TEXAS

Sanadco Inc., Mahmoud A. Isba, Broadway Grocery, Inc., Shariz, Inc., Ruby
& Sons Store, Inc., and Rubina Noorani,
                                                           APPELLANTS
                                       VS.

The Office of the Comptroller of Public Accounts; Glenn Hegar, in his
individual and official capacities as Comptroller of Public Accounts for the
State of Texas; and Ken Paxton in his official capacity as Attorney General
of the State of Texas,
                                                                 APPELLEES
            __________________________________________________________
                        Appeal From Cause No D-1-GN-13-004352
                     The 250th District Court Of Travis County, Texas
                         The Honorable Karin Crump, Presiding
            __________________________________________________________

                      APPELLANT’S MOTION TO EXTEND TIME
                   FOR FILING RECORD AND TO TRANSFER RECORD
            ___________________________________________________________


TO THE HON0RABLE THIRD COURT OF APPEALS:

         NOW COME SANADCO INC, MAHMOUD AHMED ISBA, BROADWAY
GROCERY, INC., SHARIZ, INC., RUBY & SONS STORE, INC., AND RUBINA
NOORANI, Appellants in the above-referenced cause, and file this Motion to
Transfer the record filed in an accelerated appeal, and for cause would show the
court:


 1.      The Clerk has previously filed a record in this court in Accelerated

         Appeal No. 03-14-00771-CV consisting of the then-existing records
     from Cause No. D-1-GN-13-004352 filed in the 200th District Court

     of Travis County, Texas. The court is requested to take judicial

     notice of the files in this cause.

2.   The court entered judgment in No. 03-14-00771 on July 3, 2015

     from which no motion for rehearing was filed, and the judgment

     became final on August 2, 2015.

3.   Judgment was rendered in Cause No. D-1-GN-13-004352 on April

     27, 2015, denying Appellants’ Application for Temporary

     Restraining Order and Temporary Injunction for lack of

     jurisdiction and stayed all further proceedings pending judgment

     in No. 03-14-00771. (Exhibit A)

4.   Appellants extended the time for filing appeal by timely filing a

     Motion for New Trial on May 18, 2015. (Exhibit B). No hearing was

     held, and said motion became final by operation of law on July 12,

     2015, and the court’s plenary jurisdiction expired on August 11,

     2015.

5.   It now appears that the judgment appealed from was not a final

     judgment because it was a denial of temporary orders, and not on

     the merits of the case, thus the appeal may not be pursued until a

     hearing on the merits is conducted.

6.   No date has been set for a hearing on the merits, and it is

     anticipated that the parties may require time to prepare motions
       for summary judgment prior to setting the merits hearing.

  7.   Without an extension of time to file the record, it will become due

       on August 27, 2015.

                                 PRAYER

       ALL PREMISES CONSIDERED, Appellants respectfully move the

court to abate these proceedings and extend the time for filing the record

pending a final judgment on the merits in Cause No. D-1-GN-13-004352,

and to grant Appellants motion to transfer the clerk’s record on file in No.

03-14-00771 pending this appeal.

                                           Respectfully submitted,

                                           By: /s/ Samuel T Jackson
                                           Law Office of
                                           Samuel T. Jackson
                                           Texas Bar No. 10495700

                                           2315 Vernell Way
                                           Round Rock, TX 78664-4617
                                           Mob. (512) 924-5794
                                           Tel. (512) 692-6260
                                           Fax. (866) 722-9685
                                           FOR APPELLANTS
                                           Email: jacksonlaw@hotmail.com
                          CERTIFICATE OF SERVICE

      I hereby certify by my signature above that a true and correct copy of
the above and foregoing instrument was served on the parties or their
attorneys via facsimile, certified mail, return receipt requested, and/or
hand delivery on August 19, 2015, in accordance with the Texas Rules of
Appellate Procedure, to the following:

JACK HOHENGARTEN
Assistant Attorney
General State Bar No.
09812200 Office of the
Attorney General
Financial Litigation, Tax, and Charitable Trusts Division
P.O. Box 12548
Austin, Texas 78711-2548
Tel: (512) 475-3503
Fax: (512) 477-2348
jack.hohengarten@texasattorneygeneral.gov
Attorney for Appellees


                       CERTIFICATE OF CONFERENCE

      I hereby certify by my signature above that I have attempted to confer
with opposing counsel of record regarding this motion by electronic mail dated
August 18, at 2:04 p.m., but I have not yet received his response. Consequently,
this motion is considered to be opposed by the appellees.
EXHIBIT A
                                                                    5/18/2015 11:35:55 AM
                                                                                         Velva L. Price
                                                                                        District Clerk
                                                                                        Travis County
                                                                                       D-1-GN-13-4352
                               CAUSE NO. D-1-GN-13-4352

   SANADCO INC, A TEXAS CORPORATION,                  §      IN THE DISTRICT COURT
   MAHMOUD AHMED ISBA, BROADWAY                       §
   GROCERY, INC., SHARIZ, INC., AND RUBY &            §
   SONS STORE, INC., AND RUBINA NOORANI,              §
     Plaintiffs,                                      §
                                                      §
                                                      §
   VS                                                 §
                                                      §
   SUSAN COMBS, IN HER INDIVIDUAL                     §      TRAVIS COUNTY, TEXAS
   AND OFFICIAL CAPACITY                              §
   AS COMPTROLLER OF PUBLIC ACCOUNTS,                 §
                                                      §
   OFFICE OF COMPTROLLER OF PUBLIC                    §
   ACCOUNTS FOR THE STATE OF TEXAS,                   §
                                                      §
   AND GREGG ABBOTT IN HIS OFFICIAL                   §
   CAPACITY AS ATTORNEY GENERAL OF                    §
   THE STATE OF TEXAS                                 §
                                Defendants            §      200TH JUDICIAL DIST.


                      PLAINTIFFS’ MOTION FOR NEW TRIAL
                            AND BRIEF IN SUPPORT


TO THE HONORABLE JUDGE OF SAID COURT:

COME NOW SANADCO INC, MAHMOUD AHMED ISBA, BROADWAY GROCERY, INC.,
SHARIZ, INC, RUBY & SONS STORE, INC., AND RUBINA NOORANI , Plaintiffs, who
move this Court to set aside its Order Denying Plaintiffs’ Application for Temporary
Restraining Order and Temporary Injunction, entered in this cause on April 27, 2015, and
grant a new trial pursuant to Tex. R. Civ. P. 329b, and to permit Plaintiffs to amend their
pleadings to comply with jurisdictional requirements, and for cause would show the Court
the following:


                                                                    EXHIBIT B
  1.      This Motion for New Trial is presented within 30 days of rendition of judgment as
          prescribed by the Texas Rules of Civil Procedure and is requested for good cause.

  2.      Plaintiffs incorporate by reference the attached Appellant’s motion for further
          rehearing brief filed in a related case in the Third Court of Appeals in support of
          this motion as though it were fully recited verbatim herein, and further assert the
          following:

  3.      The Court erred in concluding that Chapter 112 governed its jurisdiction over all of
          Plaintiffs’ claims because Chapter 112 was held to be unconstitutional by the Texas
          Supreme Court in R Communications, Inc. v. Sharp, 875 S.W.2d 314, 314 (Tex.
          1994), Weck v. Sharp, 884 S.W.2d 153, 154 (Tex. 1994), and in the Third Court of
          Appeals’ holdings in Richmont Aviation, Inc. v. Combs, 03-11-00486-CV (Tex.App.-
          Austin 9-12-2013); FM Express Food Mart, Inc. v. Combs, No. 03-12-0144-CV, 2013
          Tex. App. LEXIS 2744, at *17 n.6 (Tex. App.-Austin Mar. 15, 2013, no pet.) (mem.
          op.); and Local Neon Co. v. Strayhorn, No. 03-04-00261-CV, 2005 Tex. App. LEXIS
          4667, at *17 n.6 (Tex. App.-Austin June 16, 2005, no pet.) (mem. op.) Page-11;
          Rylander v. Bandag Licensing Corp., 18 S.W.3d 296 (Tex. App.-Austin 2000, pet.
          denied)—all        holding that Chapter 112’s prepayment requirements are
          unconstitutional as a prohibitive bar to access to the courts.

  4.      Neither of these cases was overruled by In re Nestle USA, Inc., 359 S.W.3d 207 (Tex.
          2012), because the issue of the constitutionality of the statute was never raised by
          either party, nor addressed by the court. Accordingly, the court erred in denying
          Plaintiffs’ motions for failure to comply with an unconstitutional statute.

  5.      The Court erred in concluding that it was without jurisdiction to consider Plaintiffs’
          application for temporary injunction because they have properly alleged
          jurisdiction pursuant to TEX. GOV’T. CODE ANN. § 2001.038, wherein sovereign
          immunity is waived when it is alleged that a rule or its threatened application
          interferes with or impairs, or threatens to interfere with or impair, a legal right or
          privilege of the plaintiff.

  6.      Plaintiffs pleaded that the rules in question impair or threaten to impair their legal

PLAINTIFFS’ MOTION FOR NEW TRIAL                                                        PAGE -2
          rights. Having complied with the statute's condition, Plaintiffs were entitled to a
          declaratory judgment regarding the rules' validity before the rule’s application.
          Rutherford Oil v. Land Office of Texas, 776 S.W.2d 232, 235 (Tex.App.-Austin 1989).
          Accordingly, the trial court abused its discretion by refusing to enjoin the
          comptroller from engaging in enforcement activities before adjudication of the
          validity of the rule.

  7.      The court erred in concluding that it was without jurisdiction over Plaintiffs’ petitions
          for judicial review because In re Nestle USA, Inc., 359 S.W.3d 207 (Tex. 2012), did
          not apply to timely filed petitions for judicial review because the Texas Supreme
          Court in Nestle affirmed that “these taxpayer rights of action are created by statute,
          waiving the State's immunity from suit, ‘the courts may act only in the manner
          provided by the statutes which created the right.’” Id. at 212, citing, Dan Ingle, Inc.
          v. Bullock, 578 S.W.2d 193, 194 (Tex.Civ.App.-Austin 1979, writ ref'd) citing
          Robinson v. Bullock, 553 S.W.2d 196, 197 (Tex.Civ.App.-Austin 1977, writ ref'd
          n.r.e.).

  8.      The right to judicial review is created by subchapter G of the Administrative
          Procedure Act (APA). See TEX. GOV'T CODE ANN. §§ 2001.171-.178, which
          provides: “A person who has exhausted all administrative remedies available within
          a state agency and who is aggrieved by a final decision in a contested case is entitled
          to judicial review under this chapter.” Id. § 2001.171.

  9.      These parties, with the exception of Ruby & Sons Store, Inc., and Rubina Noorani,
          have exhausted their administrative remedies and are therefore entitled to judicial
          review without the additional burden of compliance with Chapter 112, and this
          court’s denial of this right for failure to comply with its requirements was in error.

  10.     The court erred in concluding that it was without jurisdiction over Plaintiffs’ ultra
          vires and constitutional claims because sovereign immunity is not impacted by
          these claims since they are not claims against the state.

  11.     Ultra Vires suits to require state officials to comply with statutory or constitutional
          provisions are not prohibited by sovereign immunity. City of El Paso v. Heinrich,

PLAINTIFFS’ MOTION FOR NEW TRIAL                                                           PAGE -3
          284 S.W.3d 366, 372-73 (Tex. 2009). To fall within the ultra vires exception to
          sovereign immunity, a suit "must allege, and ultimately prove, that the officer acted
          without legal authority or failed to perform a purely ministerial act." Id. (citations
          omitted). Ultra vires suits must be brought against governmental actors in their
          official capacity, not against the governmental entities themselves. Id.

  12.     Because no waiver of sovereign immunity is necessary for claims challenging the
          constitutionality of a state statute, to the extent any of these claims is viable the
          district court has jurisdiction over them. See General Services Commission v. Little-
          Tex Insulation Co., 39 S.W.3d 591, 598 (Tex. 2001); Texas State Employees Union v.
          Texas Workforce Commission, 16 S.W.3d 61, 66-67 (Tex.App.-Austin 2000, no pet.).

  13.     Sovereign immunity bars such suits unless the legislature has waived immunity,
          see Mega Child Care, Inc., 145 S.W.3d at 198 (acknowledging that statutory right to
          judicial review of administrative decisions waives sovereign immunity against
          such suits), or the claimant affirmatively alleges facts demonstrating that the
          agency's action is unconstitutional or ultra vires of the agency's statutory authority.
          See Texas Highway Commission v. Texas Association of Steel Importers, 372 S.W.2d
          525, 530 (Tex. 1963); Southwestern Bell Tel. Co. v. Public Util. Commission, 735
          S.W.2d 663, 668 (Tex.App.-Austin 1987, no writ). Creedmoor-Maha Water Supply
          v. TCEQ, 307 S.W.3d 505, 514-15 (Tex.App.-Austin 2010).

  14.     Plaintiffs alleged that the Comptroller engaged in ultra vires conduct by failing to
          perform the non-discretionary act of promulgating AP92 and AP122 before
          authorizing their implementation, and challenged the constitutionality of TEX. TAX
          CODE ANN. §§ 111.0042 and 111.022 for vagueness, and, unless the court finds
          these pleadings to be deficient, jurisdiction is acquired.

  15.     The Court erred when it concluded that Chapter 112 deprived it of jurisdiction of
          Sanadco’s defensive claims, because the collection suit was filed pursuant to Tax
          Code § 111.010 and not Chapter 112.

  16.     "[W]here a state voluntarily files a suit and submits its rights for judicial


PLAINTIFFS’ MOTION FOR NEW TRIAL                                                         PAGE -4
          determination it will be bound thereby and the defense will be entitled to plead and
          prove all matters properly defensive, including the right to make any defense by
          answer or cross-complaint germane to the matter in controversy." Reata
          Construction Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006); Anderson, Clayton
          & Co. v. State ex rel. Allred, 122 Tex. 530, 62 S.W.2d 107, 110 (1933).

  17.     Sanadco has alleged valid claims against the State under § 2001.038 for its
          violations regarding AP 92 and AP 122. Sanadco, et al v. Office of the Comptroller of
          Public Accounts, et al, No. 03-11-00462 (Austin App.) (Sept. 26, 2013). He has also
          alleged valid ultra vires claims asserting the Comptroller’s failure to perform
          purely ministerial acts, and engaging in conduct which exceeded its statutory
          authority. Consequently, the State’s immunity is not impacted by these
          proceedings, and the court has not been deprived of subject-matter jurisdiction.

  18.     The court erred in failing to grant Plaintiffs an opportunity to amend their complaints
          to satisfy jurisdictional requirements because "It has long been the rule that a
          plaintiff's good faith allegations are used to determine the trial court's
          jurisdiction." Frost Nat'l Bank v. Fernandez, 315 S.W.3d 494, 502-03 (Tex. 2010).

  19.     If the pleadings do not contain sufficient facts to affirmatively demonstrate the trial
          court's jurisdiction, the issue is one of pleading sufficiency and the plaintiff should
          be afforded the opportunity to amend. Texas Dep't of Parks & Wildlife v. Miranda,
          133 S.W.3d 217, 226 (Tex. 2004).

  20.     The court’s failure to afford Plaintiffs and opportunity to amend their pleadings
          was an abuse of discretion because the pleadings did not affirmatively
          demonstrate a lack of jurisdiction. Plaintiffs therefore request an opportunity to
          amend their pleadings to comply with jurisdictional prerequisites before entry of
          final judgment on this motion.

               WHEREFORE, PREMISES CONSIDERED, Appellants pray this court to grant
  this Motion for New Trial, or grant Appellants the opportunity to amend their pleadings
  to meet the jurisdictional prerequisites to suit.



PLAINTIFFS’ MOTION FOR NEW TRIAL                                                         PAGE -5
                                            Respectfully submitted,
                                            By: __/s/ Samuel T Jackson___
                                            Samuel T. Jackson
                                            Texas Bar No. 10495700
                                            PO Box 170633
                                            Arlington, TX 76003-0633
                                            Tel.; (512) 692-6260
                                            Fax. (866) 722-9685
                                            ATTORNEY FOR APPLICANTS
                                            Email: jacksonlaw@hotmail.com



                                    CERTIFICATE OF SERVICE

       I hereby certify by my signature above that a true and correct copy of the above and
foregoing instrument was served on the parties or their attorneys via facsimile, certified
mail, return receipt requested, and/or hand delivery on May 18, 2015, in accordance with
Rule 21a, Texas Rules of Civil Procedure, to the following:

JACK HOHENGARTEN
Assistant Attorney General
State Bar No. 09812200
Office of the Attorney General
Financial Litigation, Tax, and Charitable Trusts Division
P.O. Box 12548
Austin, Texas 78711-2548
Tel: (512) 475-3503
Fax: (512) 477-2348
jack.hohengarten@texasattorneygeneral.gov
ATTORNEY FOR DEFENDANTS




 PLAINTIFFS’ MOTION FOR NEW TRIAL                                                   PAGE -6
BRIEF IN SUPPORT OF MOTION FOR NEW TRIAL
                          NO. 03-11-00462

                                 In The
                   Third Court of Appeals
                           AT   AUSTIN, TEXAS

Sanadco Inc., Mahmoud A. Isba, Walid Abderrahman, Majic Investments
Inc., Faisal Khan, Isra Enterprises, Inc., Hattab Al-Shudifat, Haifa
Enterprises, Inc., EID Corp., Mohammed S. Al Hajeid, Majdi Rafe Okla
Nsairat, Omar Unlimited, Inc., and All Others Similarly Situated,
                                                             APPELLANTS
                                       VS.

The Office of the Comptroller of Public Accounts; Susan Combs, in her
individual and official capacities as Comptroller of Public Accounts for the
State of Texas; and Greg Abbott in his official capacity as Attorney General
of the State of Texas
                                                                 APPELLEES
         __________________________________________________________
                     Appeal From Cause No D-1-GV-10-000902
                   The 98th District Court Of Travis County, Texas
                        The Honorable Tim Sulak, Presiding
         __________________________________________________________

              APPELLANTS’ FURTHER MOTION FOR REHEARING
                  AND FOR RECONSIDERATION EN BANC
        ___________________________________________________________

SAMUEL T. JACKSON
SBN 10495700
P.O. BOX 670133
ARLINGTON, TX 76003-0133
TEL: (512) 692-6260
FAX: (866) 722-9685
E-MAIL: jacksonlaw@hotmail.com
COUNSEL FOR RELATORS
                 IDENTITY OF PARTIES AND COUNSEL

APPELLANTS:

    Sanadco Inc., Mahmoud A. Isba, Walid Abderrahman, Majic
    Investments Inc., Faisal Khan, Isra Enterprises, Inc., Hattab Al-
    Shudifat, Haifa Enterprises, Inc., EID Corp., Mohammed S. Al Hajeid,
    Majdi Rafe Okla Nsairat, Omar Unlimited, Inc., and All Others
    Similarly Situated,

COUNSEL FOR APPELLANTS:

                      LAW OFFICE OF
                      SAMUEL T. JACKSON
                          P.O. Box 170633
                          Arlington, Texas 76003-0633
                          TEL: (512) 692-6260
                          FAX: (866) 722-9685
                          Email: jacksonlaw@hotmail.com


APPELLEES:

    The Office of the Comptroller of Public Accounts; Glenn Hager, in his
    official capacity as Comptroller of Public Accounts of the State of Texas;
    and Ken Paxton, in his official capacity as Attorney General of the State
    of Texas

COUNSEL FOR APPELLEES:

                            JACK HOHENGARTEN
                            Assistant Attorney General
                            FINANCIAL LITIGATION DIVISION
                            P.O. Box 12548
                            Austin, TX 78711-2548
                            TEL: (512) 475-3503
                            FAX: (512) 477-2348/480-8327
                            Email: jack.hohengarten@oag.state.tx.us
                               NO. 03-11-00462

                                      In The
                       Third Court of Appeals
                                AT   AUSTIN, TEXAS

Sanadco Inc., Mahmoud A. Isba, Walid Abderrahman, Majic Investments Inc., Faisal
Khan, Isra Enterprises, Inc., Hattab Al-Shudifat, Haifa Enterprises, Inc., EID Corp.,
Mohammed S. Al Hajeid, Majdi Rafe Okla Nsairat, Omar Unlimited, Inc., and All Others
Similarly Situated,
                                                                       APPELLANTS
                                           VS.

The Office of the Comptroller of Public Accounts; Susan Combs, in her individual and
official capacities as Comptroller of Public Accounts for the State of Texas; and Greg
Abbott in his official capacity as Attorney General of the State of Texas
                                                                           APPELLEES
             __________________________________________________________
                         Appeal From Cause No D-1-GV-10-000902
                       The 98th District Court Of Travis County, Texas
                            The Honorable Tim Sulak, Presiding
             __________________________________________________________

                    APPELLANTS’ FURTHER MOTION FOR REHEARING
                        AND FOR RECONSIDERATION EN BANC
              ___________________________________________________



TO THE HONORABLE THIRD COURT OF APPEALS:

Appellants, SANADCO, INC. ET AL, pursuant to TEX. R. APP. P. 49.5 (b),

submit this Motion for Further Rehearing and for Reconsideration En Banc, in

response to the opinion issued by this Court on March 25, 2015, reversing its

opinion of September 26, 2013 on other grounds. Further Rehearing is requested

because the court’s opinion on rehearing ignores prior Texas Supreme Court
precedent of R Commc'ns, Inc. v. Sharp, 875 S.W.2d 314, 314 (Tex. 1994), and its

own holdings in Richmont Aviation, Inc. v. Combs, 03-11-00486-CV (Tex.App.-

Austin 9-12-2013); Rylander v. Bandag Licensing Corp., 18 S.W.3d 296 (Tex.

App.-Austin 2000, pet. denied); FM Express Food Mart, Inc. v. Combs, No. 03-

12-0144-CV, 2013 Tex. App. LEXIS 2744, at *17 n.6 (Tex. App.-Austin Mar. 15,

2013, no pet.) (mem. op.); and Local Neon Co. v. Strayhorn, No. 03-04-00261-

CV, 2005 Tex. App. LEXIS 4667, at *17 n.6 (Tex. App.-Austin June 16, 2005, no

pet.) (mem. op.) Page-11, all holding that Chapter 112’s prepayment requirements

were unconstitutional as a prohibitive bar to court access.

     This decision effectively overrules these cases sub silentio without

acknowledgment or explanation while applying compliance with Chapter 112 as

jurisdictional to virtually all challenges to tax assessments, an opprobrious bar to

judicial access. The court’s apparent reliance on the Texas Supreme Court’s

decision in In re Nestle appears to be woefully misplaced, therefore Appellants

respectfully request that this Honorable Court consider the following issues:
                      ISSUES PRESENTED
I.     Is it unconstitutional to require prepayment of taxes to file
       petitions for judicial review of administrative proceedings?

II.    Is Tex. Tax Code Ann. § 112.108 applicable to petitions for
       declaratory relief filed pursuant to Tex. Gov’t Code Ann. §
       2001.038?

III.   Was it error for the court to dismiss the joined petitioners’ claims
       without giving consideration to their individual claims?

IV.    Was it error for the court to dismiss Sanadco’s claims for failure
       to submit issues to the administrative tribunal which they were not
       legally authorized to address?
                                                TABLE OF CONTENTS


IDENTITY OF PARTIES AND COUNSEL ...................................................... 2
ISSUES PRESENTED ......................................................................................... 5
  I. Is it unconstitutional to require prepayment of taxes to file petitions for judicial
  review of administrative proceedings? .................................................................................... 5
  II. Is Tex. Tax Code Ann. § 112.108 applicable to petitions for declaratory relief filed
  pursuant to Tex. Gov’t Code Ann. § 2001.038?...................................................................... 5
  III. Was it error for the court to dismiss the joined petitioners’ claims without giving
  consideration to their individual claims? ................................................................................ 5
  IV. Was it error for the court to dismiss Sanadco’s claims for failure to submit issues
  to the administrative tribunal which they were not legally authorized to address? ........... 5
TABLE OF CONTENTS..................................................................................... 6
ARGUMENT ......................................................................................................10
  I. Chapter 112 is unconstitutional as applied to the cross-plaintiffs’ suits because they
  were contested cases pursuant to the Administrative Procedure Act with timely filed
  petitions for judicial review which do not require prepayment under Chapter 112. ....... 12
  II. The Court failed to recognize the individual claims of each party joining the Sanadco
  counter-petition and erroneously attributed Sanadco’s deficiencies to the counter-
  plaintiffs.................................................................................................................................... 17
  III. The Court erred when it determined that Chapter 112 deprived it of jurisdiction
  of the cross-plaintiffs’ rule validity claim filed pursuant to Government Code § 2001.038
         …………………………………………………………………………………………19
  IV. The Court erred when it determined that Chapter 112 deprived it of jurisdiction
  of Sanadco’s defensive claims, because the collection suit was filed pursuant to Tax Code
  § 111.010 and not Chapter 112. .............................................................................................. 22
CONCLUSION ...................................................................................................28
PRAYER .............................................................................................................29
CERTIFICATE OF COMPLIANCE ................................................................30
CERTIFICATE OF SERVICE ..........................................................................31
                                              TABLE OF AUTHORITIES

Cases
Anderson, Clayton & Co. v. State ex rel. Allred,
  122 Tex. 530, 62 S.W.2d 107, 110 (1933) ................................................................................ 21

Bennett v. Grant,
  03-11-00669-CV (Tex.App.-Austin 3-20-2015) ....................................................................... 16

City of El Paso v. Heinrich,
  284 S.W.3d 366, 372 (Tex. 2009) ........................................................................... 14, 22, 23, 25

City of Sherman v. Public Util. Comm'n,
  643 S.W.2d 681, 683 (Tex. 1983) ............................................................................................. 18

Combs v. Entertainment Publ'ns, Inc.,
 292 S.W.3d 712, 720 (Tex. App.-Austin 2009, no pet.) ................................................... 1, 3, 23

Combs v. City of Webster,
 311 S.W.3d 85, 100-01 (Tex.App.-Austin 2009, pet. denied) .................................................. 19

Combs v. Texas Entm’t Ass’n, Inc.,
 287 S.W.3d 852, 864-65 (Tex. App.—Austin, 2009) ............................................................... 13

Comunidad Corp. v. State,
 445 S.W.3d 401 (Tex.App.-Houston [1st Dist.] 2013) ............................................................. 24

Creedmoor-Maha Water Supply Corp v. Texas Commission on Environmental Quality),
307 S.W.3d 505 (Tex. App.—Austin, 2010) ................................................................................. 25

Cunningham v. Parkdale Bank,
660 S.W.2d 810, 813 (Tex. 1983) ................................................................................................. 21

FM Express Food Mart, Inc. v. Combs,
No. 03-12-0144-CV, 2013 Tex. App. LEXIS 2744, at *17 n.6 (Tex. App.-Austin Mar. 15, 2013,
 no pet.)................................................................................................................................... 4, 12

Guar. Trust Co. v. United States,
 304 U.S. 126, 134-35, 58 S.Ct. 785, (1938) .............................................................................. 21

Hendee v. Dewhurst,
 228 S.W.3d 354, 368-69 (Tex. App.-Austin 2007, pet. denied) ............................................... 25

In re Nestle USA, Inc.,
  359 S.W.3d 207, 208 Tex.2012 ........................................................................................... passim
In re Union Carbide Corp.,
  273 S.W.3d 152, 155 (Tex.2008) .............................................................................................. 16

Local Neon Co. v. Strayhorn,
  No. 03-04-00261-CV, 2005 Tex. App. LEXIS 4667, at *17 n.6 (Tex. App.-Austin June 16,
  2005, no pet.)......................................................................................................................... 4, 12

Montrose Mgt. Dist. v. 1620 Hawthorne, Ltd.,
 435 S.W.3d 393, 410-11; fn. 16 (Tex.App.-Houston [14th Dist.] 2014) .................................. 14

R Commc'ns, Inc. v. Sharp,
  875 S.W.2d 314 (Tex. 1994) ........................................................................................... 4, 11, 14

Reata Const. Corp. v. City of Dallas,
  197 S.W.3d 371 (Tex. 2006) ..................................................................................................... 21

Richmont Aviation, Inc. v. Combs,
  03-11-00486-CV (Tex.App.-Austin 9-12-2013) ....................................................... 4, 11, 12, 26

Rylander v. Bandag Licensing Corp.,
  18 S.W.3d 296 (Tex. App.-Austin 2000, pet. denied)............................................... 4, 11, 12, 26

Sanadco, et al v. Office of the Comptroller of Public Accounts, et al,
  No. 03-11-00462 (Austin App.) (Sept. 26, 2013) ............................................................... 19, 23

Subaru of America v. David McDavid Nissan,
  84 S.W.3d 212, 224 (Tex. 2002) ............................................................................................... 13

Tex. Dep't of Human Servs. v. ARA Living Ctrs. of Tex., Inc.,
  833 S.W.2d 689, 693 (Tex.App.-Austin 1992, writ denied) ..................................................... 17

Texas Department of Insurance v. Reconveyance Services, Inc. 284 S.W.3d 366 (Tex. 2009);
  306 S.W.3d 256 (Tex. 2010) ..................................................................................................... 23

Texas Dep't of Pub. Safety v. Salazar,
  304 S.W.3d 896, 903 (Tex.App.-Austin 2009, no pet.) ............................................................ 18

Texas Entm’t Ass’n, Inc. v. Combs,
  431 S.W.3d 790, 795 (Tex. App.—Austin 2014, pet. denied) .................................................. 13

Texas Logos, L.P. v. Texas Dep't of Transp.,
  241 S.W.3d 105, 123 (Tex.App.-Austin 2007, no pet.) ................................................ 17, 18, 24

Tex-Hio Part. v. Garner,
  106 S.W.3d 886 (Tex.App.-Dallas 2003).................................................................................. 17
Weck v. Sharp,
 884 S.W.2d 153, 154 (Tex. 1994) ............................................................................................. 11


Statutes

Government Code
§ 2001.038…………………………………………………………………………………passim
§ 2001.176……………………………………………….………………………………. 9
§ 2001.171, ………………………………………………………………………………….9
§ 173.10………………………..…………………………………………………………….9

Tax Code
Chapter 112 ........................................................................................................................... passim
§ 111.010............................................................................................................................... 6, 9, 20
§ 111.0102..................................................................................................................................... 21
§ 112.052......................................................................................................................................... 9


Rules

Rule 40 .......................................................................................................................................... 16
Rule 42; ......................................................................................................................................... 15
Rule 97 (f) ………………………………………………………………………………………15
                                                   ARGUMENT
           The court paints with an extremely broad brush respecting Sanadco’s claims

and those of the counter-plaintiffs in holding that “the only permitted taxpayer

actions challenging state taxes are ‘a suit after payment under protest, suit for

injunction after payment or posting of a bond, and a suit for a refund,’” (quoting In

re Nestle USA, Inc., 359 S.W.3d 207, 208 Tex.2012). It relies heavily on Nestle for

the erroneous assertion that Tax Code Chapter 12 bars all of Sanadco’s claims and

those of the remaining claimants, while ignoring several obvious distinctions

between the two cases. Among them is the fact that the relator in Nestle sought to

avoid filing its protest claims in district court through an original mandamus

proceeding challenging the constitutionality of the franchise taxes pursuant to § 24

of the Texas Franchise Tax Act1. Thus, the Nestle court primarily addressed

jurisdictional issues that are inapplicable to Sanadco's claims.

           On the other hand, Sanadco presented defensive claims and counter- petitions

involving a suit filed in district court by the Attorney General pursuant to Tex. Tax

Code Ann. § 111.010 to collect alleged delinquent excise sales and use taxes.

Sanadco raised defensive claims challenging the validity of the audits, challenges to

the comptroller’s ultra vires conduct in excess of his statutory authority, claims

challenging the constitutionality of certain tax statutes, and unconstitutional takings


1
    Act of May 2, 2006, 79th Leg., 3d C.S., ch. 1, § 24, 2006 Tex. Gen. Laws 1, 40 (House Bill 3
claims which were all joined by the counter-plaintiffs. In addition, the counter-

plaintiffs sought judicial review of their administrative claims pursuant to Gov’t

Code § 2001.176 pending exhaustion of their administrative remedies. None of these

claims or defenses were addressed by the court in Nestle, and cannot be reasonably

presumed from its holding.

       The Texas Supreme Court specified that its opinion applied to suits authorized

by Tax Code Chapter 12 . (Taxpayer suits generally, and suits challenging the

franchise tax in particular, are permitted by chapter 112 of the Tax Code.) Nestle

359 S.W.3d at 208. It also made clear that the litigation specifically pertained to

franchise taxes (Section 112.052 (a) provides that "[a] person may bring suit against

the state to recover [a] . . . franchise . . . tax . . .). Id. Section 112.052 identifies the

remaining tax suits which may be brought under Chapter 12, including occupation,

excise, gross receipts, franchise, license, or privilege tax or fee. The sales and use

tax does not appear among the eligible categories of taxes.

       To state categorically, that “Nestle explicitly prohibits any attempt at relief

from assessed state taxes on any basis except as provided in [Chapter 112]”, cuts too

wide a swath, and cannot be supported on closer analysis.
       I.     Chapter 112 is unconstitutional as applied to the cross-plaintiffs
              suits because they were contested cases pursuant to the
              Administrative Procedure Act with timely filed petitions for
              judicial review which do not require prepayment under Chapter
              112.

      The counter-plaintiffs first joined Sanadco’s “Counterclaim for Declaratory

Judgments and Injunction” in its Second Amended Petition filed on February 5,

2011. They did not, however, join Sanadco’s defenses in the Attorney General’s suit

against Sanadco for the collection of the delinquent taxes. When judgment granting

the Attorney General’s plea to the jurisdiction was entered on July 8, 2011, the live

pleading, filed on June 7, 2011 as “Defendant, Counter-Plaintiffs Fourth

Amendment and Counterclaim for Declaratory Judgment, Injunctive Relief and

Compensatory Damages”, alleged jurisdiction of their petition for judicial review

pursuant to Gov’t Code §§ 2001.171, 173, the validity claims pursuant to Gov’t Code

§ 2001.038, and ultra vires claims pursuant to the UDJA. Each claimant alleged their

current involvement in litigation before SOAH.

      For almost four decades it has been unconstitutional to require compliance

with the Chapter 112 prepayment requirements to petitions for judicial review of

contested administrative proceedings. When discussing the constitutionality of the

statutes authorizing judicial review of tax assessments, the supreme court held that

“conditioning a taxpayer's right to initiate judicial review on the payment of taxes or

the posting of a bond equal to twice the alleged tax obligation violates the open
courts mandate." R Commc'ns, Inc. v. Sharp, 875 S.W.2d 314, 314 (Tex. 1994). The

prepayment provisions, the ban on declaratory judgments, "mean that a taxpayer is

financially restricted in its ability to get to court." Id. at 317-18. Accordingly, the

supreme court determined that section 112.108 is unconstitutional and void. Id. at

318. In Weck v. Sharp, 884 S.W.2d 153, 154 (Tex. 1994) the court determined that

because the prohibition in section 112.108 against declaratory-judgment actions and

other similar remedies was invalid, the trial court could consider the taxpayer's

declaratory claim and remanded the case. Id.

      This Court has emphasized this constitutional ruling on at least four occasions.

See Richmont Aviation, Inc. v. Combs, 03-11-00486-CV (Tex.App.-Austin 9-12-

2013) (reaffirming its prior decisions finding section 112.108 was unconstitutional);

Rylander v. Bandag Licensing Corp., 18 S.W.3d 296 (Tex. App.-Austin 2000, pet.

denied) (concluding that section 112.108 violated open-courts provision and

imposed unreasonable financial barrier to court access even though it excused

prepayment for indigent taxpayers); FM Express Food Mart, Inc. v. Combs, No. 03-

12-0144-CV, 2013 Tex. App. LEXIS 2744, at *17 n.6 (Tex. App.-Austin Mar. 15,

2013, no pet.) (mem. op.) (stating that this Court previously determined that

amended version of section 112.108 was unconstitutional); Local Neon Co. v.

Strayhorn, No. 03-04-00261-CV, 2005 Tex. App. LEXIS 4667, at *17 n.6 (Tex.
App.-Austin June 16, 2005, no pet.) (mem. op.) Page-11 (relating that Comptroller

"concedes on appeal that this Court held section 112.108 unconstitutional").

      This court has not wavered from this conclusion, even after In re Nestle was

decided. In footnote 2 of Richmont, it stated:

             Specifically, the Comptroller urges that the supreme court overruled
      Bandag in In re Nestle USA, Inc., 359 S.W.3d 207 (Tex. 2012). In Nestle, the
      court did discuss the restrictions imposed by section 112.108 and also
      discussed the amendment to the provision excusing prepayment in certain
      circumstances. Id. at 210-11 & n.38. . . However, the court did not mention
      Bandag or our determination that the amended version was also
      unconstitutional, nor did the court expressly state that the amendment cured
      the constitutional infirmity. See id.; see also FM Express Food Mart, Inc. v.
      Combs, No. 03-12-0144-CV, 2013 Tex. App. LEXIS 2744, at *17 n.6 (Tex.
      App.-Austin Mar. 15, 2013, no pet.) (mem. op.) (explaining that although
      supreme court in Nestle explained that statute was amended in response to
      determination that statute violated open-courts provision, supreme court "did
      not address whether it did so successfully"). Accordingly, we do not agree
      with the Comptroller's assertion that our determination in Bandag has been
      overruled.

      In the instant decision this court acknowledged that Chapter 112 was not

applicable to the counter-plaintiffs suits in footnote 10 where it was noted that the

decision was limited “to cases in which a taxpayer seeks relief from a tax assessment

that has become a final liability and is no longer subject to review through

administrative procedures; . . .”

      Here, unlike Sanadco, each of the counter-plaintiffs alleged that they were

currently engaged in the administrative process and awaiting a hearing before
SOAH. They also alleged that the court had jurisdiction over their petitions for

judicial review subject to the results of the administrative proceedings. Accordingly,

there was no final liability determination, and the cases remained subject to review

through administrative procedures and should have been excluded from the Chapter

112 requirements according to the court’s own language. See, Subaru of America v.

David McDavid Nissan, 84 S.W.3d 212, 224 (Tex. 2002).

      In support of this limitation, the court cited Texas Entm’t Ass’n, Inc. v. Combs,

431 S.W.3d 790, 795 (Tex. App.—Austin 2014, pet. denied) (citing Combs v. Texas

Entm’t Ass’n, Inc., 287 S.W.3d 852, 864-65 (Tex. App.—Austin, 2009), rev’d on

other grounds, 347 S.W.3d 277 (Tex. 2011)) (on remand, citing with approval its

previous   opinion    holding    that   declaratory-judgment     action   challenging

constitutionality and implementation of new tax statute was not preempted by

Chapter 112 of Tax Code); Combs v. Entertainment Publ’ns Inc., 292 S.W.3d 712,

723 (Tex. App.—Austin 2009, no pet.) (affirming trial court’s denial of plea to

jurisdiction in suit in which taxpayer sought declaratory and injunctive relief to

prevent Comptroller from implementing allegedly invalid rule).

      Footnote 10 further declared that “we do not hold that Chapter 112 preempts

every suit challenging a Comptroller rule or tax statute’s constitutionality. See also,

In re Nestle, footnote 39:

                  Petitioners do not argue that the limitations of these actions is
             unconstitutional, as did the taxpayers in R Communications, 875
             S.W.2d at 314-315. Nor do petitioners contend that an ultra vires suit
             against the Comptroller is outside chapter 112's provisions. See City of
             El Paso v. Heinrich, 284 S.W.3d 366, 372 (Tex. 2009).

      These are the precise allegations raised in counter-plaintiffs’ petitions which

challenged the validity of AP92 and AP122, and the constitutionality of various tax

statutes, as well as the comptroller’s ultra vires conduct. Other courts have likewise

limited the application of Nestle, see, Montrose Mgt. Dist. v. 1620 Hawthorne, Ltd.,

435 S.W.3d 393, 410-11; fn. 16 (Tex.App.-Houston [14th Dist.] 2014) (Nestle does

not apply to ultra vires claims)

      Moreover, In re Nestle did not overrule R Commc'ns, Inc. and its progeny

because the constitutionality of Chapter 112 was never raised by the parties, and was

not referred to at all by the Court. The issue before the court was the constitutionality

of the Franchise Tax Act and its jurisdiction to hear the claim, not Chapter 112.

Though Chapter 112 was referred to in the decision and played a major role in the

holding, there was no occasion for the court to rule on its constitutionality absent the

issue being raised by one of the parties.

      The court’s decision, however, erroneously tied Sanadco’s conduct to that of

the counter-plaintiffs to their detriment, including them in its conclusion that

Sanadco had “sought injunctive relief from liability for the tax long after completion

of the administrative process and the deficiency assessment had become final. None

of these conclusions fit the circumstances surrounding the counter-petitioners who
should have been included in the court’s distinguishing factors as one of “those cases

in which the taxpayers sought declarations of the validity or constitutionality of rules

and statutes and their threatened enforcement prior to finality of an agency

determination.” (Footnote 10).

      Accordingly, the court was in error by requiring compliance with Chapter 112

to establish its jurisdiction and should reverse its ruling requiring compliance with

Chapter 112 as to these plaintiffs and remand the cause to the trial court for further

proceedings as appropriate.


       II.    The Court failed to recognize the individual claims of each party
              joining the Sanadco counter-petition and erroneously attributed
              Sanadco’s deficiencies to the counter-plaintiffs.

      The counter-plaintiffs joined Sanadco’s counterclaims as permissive and

class-action plaintiffs. Tex. R. Civ. Proc. Rules 40; 42; 97 (f). Their claims,

however, remain separate and apart from other joining parties’ claims and judgment

may be given for one or more of the plaintiffs according to their respective rights to

relief, and against one or more defendants according to their respective liabilities.

Tex. R. Civ. Proc. Rule 40. They need not be interested in obtaining or defending

against all the relief demanded. Id.

      Rule 40 (a) provides that “All persons may join in one action as plaintiffs if

they assert any right to relief jointly, severally, or in the alternative in respect of or

arising out of the same transaction, occurrence, or series of transactions or
occurrences and if any question of law or fact common to all of them will arise in

the action". In re Union Carbide Corp., 273 S.W.3d 152, 155 (Tex.2008)

(“Permissive joinder relates to proper parties to an action who may be joined or

omitted at the pleader's election."). Rule 97 (f) provides that persons other than those

made parties to the original action may be made parties to a counterclaim in

accordance with the provisions of Rule 40. Bennett v. Grant, 03-11-00669-CV

(Tex.App.-Austin 3-20-2015). As class-action plaintiffs, Rule 42 permits a class

claimant to represent the claims of other similarly situated plaintiffs if, inter alia,

“there are questions of law, or fact common to the class, [and] the claims or defenses

of the representative parties are typical of the claims or defenses of the class. . .”

      The Attorney General made no objection to the joinder, nor has he claimed

that the initial petition failed to invoke the court’s jurisdiction and neither has this

court except for the claims relating to compliance with Chapter 112. Accordingly,

there is no bar to considering the cross-plaintiffs’ claims as those entitled to be

treated in accordance with the joinder provisions. Tex-Hio Part. v. Garner, 106

S.W.3d 886 (Tex.App.-Dallas 2003). Even if the court should determine that joinder

is improper for some reason, dismissal of the improperly joined claims is improper.

Rule 41. Instead, the improper party “may be severed and each ground of recovery

improperly joined may be docketed as a separate suit between the same parties”. Id.
      Accordingly, this court should reverse its decision intimating that the counter-

plaintiffs’ claims were denied because of their failure to pursue administrative

procedures, and remand the cause for further proceedings.


       III.   The Court erred when it determined that Chapter 112 deprived it
              of jurisdiction of the cross-plaintiffs’ rule validity claim filed
              pursuant to Government Code § 2001.038

      Section 2001.038 is a grant of original jurisdiction and waives sovereign

immunity. Tex. Logos, L.P. v. Tex. Dep't of Transp., 241 S.W.3d 105, 123(Tex.App.-

Austin 2007, no pet.); Tex. Dep't of Human Servs. v. ARA Living Ctrs. of Tex., Inc.,

833 S.W.2d 689, 693 (Tex.App.-Austin 1992, writ denied). The section also

provides that "[a] court may render a declaratory judgment without regard to whether

the plaintiff requested the state agency to rule on the validity or applicability of the

rule in question.” Tex. Gov’t Code Ann. § 2001.038 (d).

      The Texas Supreme Court has held that an action for declaratory relief is

permissible, even during the pendency of an administrative proceeding, when the

issue is whether the agency is exercising authority beyond its statutorily conferred

powers. See City of Sherman v. Public Util. Comm'n, 643 S.W.2d 681, 683 (Tex.

1983). Further, the statutory language emphasized above clearly implies that section

2001.038 permits a plaintiff to bring a declaratory-judgment action challenging the

validity of an agency rule even after the initiation of administrative proceedings.
      Section 2001.038 waives sovereign immunity to the extent of creating a cause

of action for declaratory relief regarding the validity or applicability of a rule if it is

alleged that the rule or its threatened application interferes with or impairs, or

threatens to interfere with or impair, a legal right or privilege of the plaintiff." Tex.

Gov't Code Ann. § 2001.038(a); see Texas Logos, L.P. v. Texas Dep't of Transp.,

241 S.W.3d 105, 123 (Tex.App.-Austin 2007, no pet.) ("Section 2001.038 is a grant

of original jurisdiction and, moreover, waives sovereign immunity"). Claims under

section 2001.038 invoke the district court's subject-matter jurisdiction if properly

pled. Determining whether the plaintiffs have done so, unlike with the analysis of

ultra vires claims, does not require the court to delve into the merits of the claims,

see Texas Dep't of Pub. Safety v. Salazar, 304 S.W.3d 896, 903 (Tex.App.-Austin

2009, no pet.) — nor would such an inquiry be proper. See Bland Indep. Sch. Dist.,

34 S.W.3d 547; Hendee, 228 S.W.3d at 366.

      Plaintiffs have alleged that AP92 and AP122 are invalid and unenforceable

rules because they are of general application to convenience store audits, and they

implement and prescribe agency policy, but were implemented without compliance

with the APA notice and comment requirements. These factual allegations suffice to

invoke the district court's subject-matter jurisdiction if the memos are rules within

the meaning of the APA. See, e.g., Combs v. City of Webster, 311 S.W.3d 85, 100-

01 (Tex.App.-Austin 2009, pet. denied) (recognizing that "[t]o the extent that no rule
as defined by the APA is at issue, section 2001.038 does not provide any basis for

the district court's jurisdiction over appellees' declaratory judgment action").

      Plaintiffs’ claims are buttressed by this court’s holding in the first Sanadco

case in which this issue was addressed where the court held, “we conclude that the

directives in AP 92 and AP 122 are in fact rules. For that reason, we must also

conclude that the district court had jurisdiction over Sanadco’s claim that AP 92 and

AP 122 were invalid rules and that, therefore, the district court erred by dismissing

Sanadco’s first counterclaim”. Sanadco, Inc. et. al. v. Texas Comptroller of Public

Accounts, et. al., No. 03-11-00462-CV (Tex. App.—Austin, September 26, 2013).

Although this court reversed that decision on other grounds, the reasoning in this

case gives a strong basis for the conclusion that the memoranda are rules, and the

district court’s jurisdiction was therefore invoked by plaintiffs’ claim.

      Aside from the unconstitutionality of            Chapter 112’s prepayment

requirements, plaintiffs further assert that suit under Section 2001.038 is not a suit

filed under Chapter 112 because its purpose is to determine the validity of the audit

procedure, and not to challenge the propriety of a tax assessment, potentially

bringing it into the purview of Chapter 112. See, Combs v. Entertainment

Publications, Inc., 292 S.W.3d 712 (Tex. App. 2009) (“Entertainment did not seek

declaratory relief regarding the tax itself, but regarding the validity of the rule

promulgated by the Comptroller in violation of the APA, for which the legislature
has expressly permitted suit by a declaratory-judgment action”). Since suit pursuant

to Section 2001.038 is pursuant to an original grant of authority, it is filed without

regard to Chapter 112 mandates, and is therefore sufficient to invoke the court’s

jurisdiction without compliance with Chapter 112. Thus, the court should reverse its

decision denying subject-matter jurisdiction and enter judgment on the plaintiffs’

Section 2001.038 claims because there is no assertion by the Comptroller that he

complied with the APA’s requirements.

       IV.    The Court erred when it determined that Chapter 112 deprived it
              of jurisdiction of Sanadco’s defensive claims, because the
              collection suit was filed pursuant to Tax Code § 111.010 and not
              Chapter 112.

      Chapter 112 asserts jurisdiction over a taxpayer suit brought under this

chapter. The collection suit against Sanadco was filed in Cause No. D-1-GV-10-

000902 by the office of the Attorney General on July 6, 2010 in the 98 th District

Court of Travis County, Texas. The petition alleged that “venue and jurisdiction of

this suit are exclusively conferred upon this Court pursuant to the Tex. Tax Code

Ann. ("Tax Code"), Title 2 § 111.010 (Vernon Supp. 2001).” This section applies to

state taxes imposed by this title or by other laws not included in this title except the

state ad valorem tax on property. § 111.010 (b). The franchise tax is notably absent

from the exceptions. Sanadco’s suit seeking to challenge or avoid the comptroller

collection action is governed by Tax Code § 111.0102 where venue and jurisdiction
is exclusively conferred on the district courts of Travis County. It is therefore not a

suit brought under Chapter 112, and not subject to its prepayment requirements.

      It has been long held that, "[W]here a state voluntarily files a suit and submits

its rights for judicial determination it will be bound thereby and the defense will be

entitled to plead and prove all matters properly defensive. This includes the right to

make any defense by answer or cross-complaint germane to the matter in

controversy." Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex. 2006);

Anderson, Clayton & Co. v. State ex rel. Allred, 122 Tex. 530, 62 S.W.2d 107, 110

(1933).

      “It would be fundamentally unfair to allow a governmental entity to assert

affirmative claims against a party while claiming it had immunity as to the party's

claims against it. See Guar. Trust Co. v. United States, 304 U.S. 126, 134-35, 58

S.Ct. 785, (1938); see also Cunningham v. Parkdale Bank, 660 S.W.2d 810, 813

(Tex. 1983) (stating that fundamental fairness requires parties to be heard on the

merits of their cases). Reata Const. Corp. v. City of Dallas, 197 S.W.3d 371 (Tex.

2006).

      The State of Texas has filed a suit for damages against the Plaintiffs and has

therefore waived its sovereign immunity to the extent that these defenses and

counterclaims are “germane to, connected with, and properly defensive to" claims

that the State has asserted. The court’s opinion curiously overlooks this long-held
legal principle and fails to assert that Sanadco’s defenses and counterclaims are not

germane, connected with, or properly defensive to the claims raised by this law suit,

and must reverse its assertion of lack of jurisdiction.

      Plaintiffs challenged Sanadco’s claims and defenses on the grounds of

sovereign immunity because they failed to comply with various statutory

requirements of the Tax Code before seeking this relief. They assert that Sanadco’s

failure to comply with the requirements for filing a protest suit, a refund claim or an

injunction, precluded Sanadco from seeking the remedies sought. This defense is

without merit, however, in the context under which these claims have arisen and the

legal basis upon which they have been brought because sovereign immunity is not

implicated in any of the claims.

      A suit asserting that a government officer "acted without legal authority" and

seeking to compel the official "to comply with statutory or constitutional provisions"

is an ultra vires suit that is not protected by sovereign immunity. City of El Paso v.

Heinrich, 284 S.W.3d 366, 372 (Tex. 2009). They are not barred by sovereign

immunity because they "do not attempt to exert control over the state." Id. Instead,

the suits "attempt to reassert the control of the state." Id.; Saenz, 319 S.W.3d at 920.

The supreme court recently expounded upon sovereign immunity in ultra vires cases

in. Heinrich and Texas Department of Insurance v. Reconveyance Services, Inc. 284

S.W.3d 366 (Tex. 2009); 306 S.W.3d 256 (Tex. 2010) (respectively). The supreme
court determined that "while governmental immunity generally bars suits for

retrospective money relief, it does not preclude prospective injunctive remedies in

official-capacity suits against government actors who violate statutory or

constitutional provisions." Heinrich, 284 S.W.3d at 368-69.

      In Heinrich, the supreme court confirmed that "suits to require state officials

to comply with statutory or constitutional provisions are not prohibited by sovereign

immunity, even if a declaration to that effect compels the payment of money."

Heinrich, 284 S.W.3d at 372. Reconveyance, 284 S.W.3d at 434. Moreover, if valid

challenges to the agency’s rules under the APA are raised, then it is not necessary to

determine whether the Appellees have properly alleged ultra vires claims because

the trial court's subject-matter jurisdiction is established by section 2001.038 of the

APA. See Tex. Gov't Code Ann. § 2001.038; Combs v. Entertainment Publ'ns, Inc.,

292 S.W.3d 712, 720 (Tex. App.-Austin 2009, no pet.). Section 2001.038 is

considered a legislative grant of subject-matter jurisdiction, so that valid claims

raised pursuant to that provision are not barred by sovereign immunity. Id.; Tex.

Dept. of Pub. Safety v. Salazar, 304 S.W.3d 896 (Tex. App. [3rd] 2010).

      Sanadco has alleged a valid claim against the State under 2001.038 for its

violations regarding AP 92 and AP 122. Sanadco, et al v. Office of the Comptroller

of Public Accounts, et al, No. 03-11-00462 (Austin App.) (Sept. 26, 2013). He has

also alleged valid ultra vires claims asserting the Comptroller’s failure to perform
purely ministerial acts, and engaging in conduct which exceeded its statutory

authority. Consequently, the State’s immunity is not impacted by these proceedings.

      The court finds that it does not have jurisdiction over Sanadco’s

constitutional, ultra vires, and validity claims because they were not raised in an

administrative proceeding before the State Office of Administrative Hearings

(SOAH) though SOAH has previously held that it does not have jurisdiction over

these claims. See, Comp. Hearing No. 109,293 (Oct. 31, 2014); Comp. Hearing No.

106,516 (Nov. 29, 2012); Comp. Hearing No. 105,002 (Oct. 19, 2011). To bring

these issues before SOAH without any expectation of a ruling from the comptroller,

would have constituted engaging in a useless act, which litigants are not required to

do. See, Comunidad Corp. v. State, 445 S.W.3d 401 (Tex.App.-Houston [1st Dist.]

2013).

      In APA section 2001.038, the Legislature has waived sovereign immunity to

the extent of creating a cause of action for declaratory relief regarding the "validity"

or "applicability" of a "rule," as defined under the Act. Tex. Gov't Code Ann. §

2001.038(a); see Texas Logos, L.P. v. Texas Dep't of Transp., 241 S.W.3d 105, 123

(Tex.App.-Austin 2007, no pet.) (holding that "section 2001.038 is a grant of original

jurisdiction and, moreover, waives sovereign immunity").

      To determine whether appellees have asserted a valid ultra vires claim that

invokes the district court's subject-matter jurisdiction, we would construe the
provisions of the tax code and UCR Act that define the scope of the Comptroller’s

legal authority, apply them to the facts that Sanadco has alleged, and ascertain

whether those facts constitute acts beyond the Comptroller’s legal authority. See

Heinrich, 284 S.W.3d at 372-73 (ultra vires suit "must not complain of a government

officer's exercise of discretion, but rather must allege, and ultimately prove, that the

officer acted without legal authority or failed to perform a purely ministerial act");

Creedmoor-Maha Water Supply Corp v. Texas Commission on Environmental

Quality), 307 S.W.3d 505 at 516 n. 8 (quoting Hendee v. Dewhurst, 228 S.W.3d 354,

368-69 (Tex. App.-Austin 2007, pet. denied) (when analyzing whether plaintiff has

alleged ultra vires acts, we construe the relevant statutory or constitutional

provisions that define the governmental actor's discretionary authority, apply the

provisions to the pled and un-negated facts, and determine whether those facts fall

within or outside that authority). Appellants emphasize that they explicitly pled that

the Comptroller acted "ultra vires" or contrary to his legal authority. To this extent,

the jurisdictional inquiry with respect to appellees' purported ultra vires claims

would substantially overlap with the claims' merits. Id. at 516 n. 8.

      Accordingly, Sanadco’s constitutional and ultra vires claims are not barred by

sovereign immunity or the requirements of Chapter 112 and the court has jurisdiction

of such claims.
                                   CONCLUSION
      The court’s opinion that jurisdiction over Appellants’ claims is predicated

upon compliance with Chapter 112 is clearly erroneous and must be reconsidered.

R. Communications, Bandag and Richmont retain their vitality and were not

overruled by In re Nestle as this court now seems to intimate, contrary to its prior

decisions on this issue. The court’s assessment that Nestle did not overrule these

decisions because “the court did not discuss the restrictions imposed by section

112.108,” or the effect of the subsequent amendments, remains a valid evaluation.

Put simply, the constitutionality of Chapter 112 was not revisited in Nestle because

the issue was not raised by either party, thus any decision addressing its

constitutionality would have been a prohibited advisory opinion.

      The Nestle court said as much in footnote 39 where the court expressly noted

that neither the constitutionality of Chapter 112 or its application to ultra vires claims

was raised.

      The application of the opprobrious and prohibitive requirements of Chapter

112 remain an unconstitutional burden on the plaintiffs’ access to the courts, and

must be reconsidered.
                                     PRAYER
      Appellants pray this Honorable Court to reconsider its opinion on rehearing

and to reverse and render its decision regarding the validity of the audits, and to

remand the remaining claims to the trial court for further proceedings.
                                       Respectfully submitted,
                                       Law Office of
                                       Samuel T. Jackson
                                       __/s/ Samuel T Jackson
                                       Texas Bar No. 10495700

                                       PO Box 170633
                                       Arlington, TX 76003-0633
                                       Tel: (512) 692-6260
                                       Fax. 866 -722-9685
                                       jacksonlaw@hotmail.com
                                       ATTORNEY FOR APPELLANTS


                      CERTIFICATE OF COMPLIANCE
       This document complies with the typeface requirements of Tex. R. App. P.
9.4(e) because it has been prepared in a conventional typeface no smaller than 14-
point for text and 12-point for footnotes. This document also complies with the
word-count limitations of Tex. R. App. P. 9.4(i) (2) (D), because it contains 4,484
words, excluding any parts exempted by Tex. R. App. P. 9.4(i)(1), as counted by
the computer program used to prepare this document.

                                             __/s/ Samuel T. Jackson__
                                             SAMUEL T. JACKSON
                         CERTIFICATE OF SERVICE

      By my signature above, I hereby certify that a true and correct copy of the
above and foregoing instrument was served on the parties or their attorneys via
facsimile, certified mail, return receipt requested, and/or hand delivery on May 11,
2015, in accordance with the Texas Rules of Appellate Procedure, to the following:

JACK HOHENGARTEN
Assistant Attorney General
FINANCIAL LITIGATION DIVISION
P.O. Box 12548
Austin, TX 78711-2548
Tel: (512) 475-3503
Fax: (512) 477-2348/480-8327
Email: jack.hohengarten@oag.state.tx.us
