      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                      ON REHEARING



                                     NO. 03-18-00123-CV



                      Houston Independent School District, Appellant

                                                 v.

                           Texas Workforce Commission, Appellee


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
      NO. D-1-GN-16-000534, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING



                                           OPINION


              We withdraw our opinion and judgment dated April 25, 2019, and substitute the

following opinion and judgment in their place.

              The Houston Independent School District (Houston ISD) sued the Texas Workforce

Commission to recover allegedly overpaid unemployment taxes.              See Tex. Lab. Code

§§ 213.071–.074. Both parties moved for summary judgment. After a hearing on the controlling

question of law and the undisputed facts, the district court rendered final judgment granting the

Workforce Commission’s motion, denying Houston ISD’s motion, and ordering each party to bear

its own costs. Houston ISD now appeals from that judgment. We will affirm.
                                         BACKGROUND

               In 2011, the Commissioner of Education revoked the accreditation of North Forest

Independent School District (North Forest), a school district near Houston. After North Forest’s

unsuccessful appeal of that revocation, the Commissioner ordered Houston ISD to annex North

Forest’s territory and to assume its assets and debts. See Tex. Educ. Code § 13.054(a) (“The

commissioner by order may annex to one or more adjoining districts a school district that has been

rated as academically unacceptable for a period of two years.”). The Workforce Commission

subsequently billed Houston ISD for unemployment benefits paid to former North Forest employees.

Houston ISD refused to remit payment, arguing: (1) it is not responsible for any sums due under

governing law, and (2) to the extent it might be responsible, the county commissioners must make

that determination. See Tex. Educ. Code § 13.004(a).

               When Houston ISD learned it could not appeal the determination without first paying

the allegedly overdue sum, it remitted nearly $4 million in benefits and interest and then filed suit

for judicial review in district court. See Tex. Lab. Code §§ 213.071–.074 (setting forth procedures

by which employer may “bring an action in a court of competent jurisdiction in Travis County

against the commission for review of the commission’s refusal to allow an adjustment or a refund”).

Both parties moved for summary judgment on an undisputed record. The Workforce Commission

argued that Texas law renders Houston ISD a “successor employer” responsible for any benefits

distributed to North Forest’s former employees. See id. § 204.086 (rendering employer acquiring

“substantially all of the assets of an organization” “liable to the commission for prompt payment of

the contribution, penalty, or interest,” if at acquisition the acquired employer was indebted to



                                                 2
Workforce Commission). Houston ISD disagreed with that construction, arguing that North Forest

was not “indebted” at the time of annexation and, regardless, that the county commissioners must

approve Houston ISD’s assumption of any debt. See Tex. Educ. Code § 13.004(a). The district court

granted the Workforce Commission’s motion, denied Houston ISD’s motion, and rendered final

judgment in the Workforce Commission’s favor. Houston ISD’s motion for new trial was denied

by operation of law. Houston ISD perfected timely appeal from the final judgment.


                                    STANDARD OF REVIEW

               Summary judgment is proper when the evidence before the district court shows there

are no disputed issues of material fact and the movant is entitled to judgment as a matter of law.

Tex. R. Civ. P. 166a(c). When both parties move for summary judgment on overlapping issues, we

undertake de novo review of all evidence and issues presented, and, if the trial court erred, render

the judgment the trial court should have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d 656,

661 (Tex. 2005); see also Tex. R. App. P. 43.2(c).


                                           DISCUSSION

               The parties ask this Court to resolve a single question of law: whether, under relevant

provisions of the Labor Code, an annexing school district must reimburse the State for

unemployment benefits distributed to former employees of the annexed district after annexation is

ordered pursuant to Chapter 13 of the Education Code. See Tex. Educ. Code § 13.054(a). “We

review questions of statutory construction de novo, and our primary objective is to give effect to the

Legislature’s intent as expressed in the language of the statute.” Risk Mgmt. Strategies, Inc. v. Texas



                                                  3
Workforce Comm’n, 464 S.W.3d 864, 868 (Tex. App.—Austin 2015, pet. dism’d) (citing Railroad

Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011); First

Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 632 (Tex. 2008)). “We discern legislative intent from

the statute as a whole, not from isolated portions.” Id. (citing 20801, Inc. v. Parker, 249 S.W.3d 392,

396 (Tex. 2008)). “Absent an absurd result, we rely on the plain meaning of the text unless a

different meaning is supplied by legislative definition or is apparent from the context.” Risk Mgmt.

Strategies, 464 S.W.3d at 868 (citing City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26

(Tex. 2008)).

                The Texas Unemployment Compensation Act provides short-term financial relief for

individuals who become unemployed through no fault of their own.                 See Keen v. Texas

Unemployment Comp. Comm’n, 148 S.W.2d 211, 212 (Tex. App.—Galveston 1941, no writ). The

program is funded in part through taxes levied on employers. Lally v. State, 138 S.W.2d 1111, 1112

(Tex. App.—Austin 1940, no writ). By default, a covered employer must remit a contribution

calculated as a function of its total payroll, the benefits provided to its former employees in the

previous calendar year, and other factors not relevant here. See Tex. Lab. Code § 204.103(a)–(b).

In the alternative, Chapter 205 of the Labor Code allows governmental employers to elect “to pay

reimbursements for benefits instead of contributions.” See id. § 205.001. These “reimbursing

employers” must make a payment of 100% of the regular and extended benefits actually paid to

former employees during that quarter. See id. § 205.013(a)–(c). In this case, Houston ISD and North

Forest each elected classification as reimbursing employers for the pertinent time periods.




                                                  4
                The parties disagree over the proper application of Labor Code Section 204.086 to

the facts of this case. The Section governs the collection of taxes from “successor employers”

and provides:


       An individual or employing unit that acquires the organization, trade, or business or
       substantially all of the assets of an organization, trade, or business of an employer
       who, at the time of the acquisition is indebted to the commission for a contribution,
       a penalty, or interest, is liable to the commission for prompt payment of the
       contribution, penalty, or interest.


Id. § 204.086(a). Although the Section only refers to contributions, it applies to both contributing

employers and to reimbursing employers. See id. § 205.011 (listing provisions of Chapter 204

inapplicable to employers electing reimbursement under Chapter 205 and providing that reimbursing

employer is subject to all other obligations). The parties do not dispute that Houston ISD acquired

substantially all of North Forest’s assets.

                Houston ISD contends Section 204.086(a) imposes no liability for any unemployment

taxes arising from benefits paid to the former employees because North Forest was not “indebted”

for those sums at the time of annexation. Chapter 204 does not define “debt” or “indebtedness,” so

we look to common usage and prior interpretation to inform our analysis. See Tex. Gov’t Code

§ 311.011(a) (common usage), (b) (technical, particular, or legislative meaning). Black defines

indebtedness as “the quality, state, or condition of owing money” and “something owed; a debt.”

Indebtedness, Black’s Law Dictionary (10th ed. 2014). A debt, in turn, is defined as an obligation

owed to another. See The Compact Oxford English Dictionary 395 (2d ed. 1994) (“anything which

one person is under obligation to pay or render another”); Merriam Webster Collegiate Dictionary



                                                 5
297 (10th ed. 1993) (“something owed: an obligation”). This definition is consistent with our high

court’s understanding of the term. See Reconstruction Fin. Corp. v. Gossett, 111 S.W.2d 1066, 1073

(Tex. 1938) (“‘[W]hile ordinarily it imports a sum of money arising upon a contract, express or

implied, in its more general sense it means that which one person is bound to pay to or perform for

another.’” (expounding on Webster’s definition of debt as “obligation [or] liability” and quoting

Barber v. City of East Dallas, 18 S.W. 438, 439 (Tex. 1892))).

               This Court has already explained that a contributing employer’s obligation to

contribute to the State’s unemployment fund arises when wages are due—not when unemployment

taxes are due. See generally Wilburn v. State, 824 S.W.2d 755 (Tex. App.—Austin 1992, no writ).1

In Wilburn, the State sued to recover certain unemployment taxes, leading a corporate officer to

dispute, among other things, when the corporation’s obligation to remit the taxes had arisen. Id. at

763–64. We summarized the parties’ competing understandings of the obligation:


       Appellant argues that the taxes are created or incurred and become due on each day
       a person is employed . . . . This approach ignores the clear language of [the
       contribution provision of the Unemployment Compensation Act], which bases
       liability for contributions on wages actually paid . . . . [T]he State argues that while


       1
          While the Wiburn opinion interpreted a predecessor to the current provision mandating
employer contributions, see Wilburn v. State, 824 S.W.2d 755, 764 (Tex. App.—Austin 1992, no
writ), we see no substantive difference that would impact the date an employer’s obligation arises.
Compare Tex. Rev. Civ. Stat. art. 5221b-5(a) (1987) (“Contributions shall accrue and become
payable by each employer for each calendar year, or portion thereof . . . with respect to wages for
employment paid during such calendar year or portion thereof . . . .”), with Tex. Lab. Code § 204.002
(“An employer shall pay a contribution on wages for employment paid during a calendar year or the
portion of the calendar year in which the employer is subject to this subtitle.”). Although Houston
ISD might argue that a reimbursing employer’s obligation does not arise until an employee becomes
eligible for benefits, the Legislature has not made that distinction in Chapter 204 or 205 of the
Labor Code.

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       the debt is created when wages are paid, it is incurred when contributions are due.
       The State essentially is arguing that the debt is created by one event, but incurred by
       another.


Id. at 764 (internal citations omitted). We went on to hold that the obligation to contribute to the

unemployment compensation fund is “created and incurred” when wages are due. Id. Here, North

Forest elected quarterly reimbursement under Chapter 205 rather than the pre-payment option under

Chapter 204, but that election does not change the date its obligation arose. Compare Tex. Lab.

Code § 204.101 (“A governmental employer shall pay a contribution . . . on wages paid . . . .”

(emphasis added)), with id. § 205.011(a) (“A reimbursing employer is . . . subject to the duties and

responsibilities of all provisions of this subtitle [i.e., including Section 204.101].”). Thus, at

annexation North Forest was already indebted to the Workforce Commission for any unemployment

benefits its employees would eventually receive.

               Houston ISD argues that Section 204.086(a) should not apply because it did not hire

the North Forest employees who received unemployment benefits, and—unlike in the private

sector—this was not a voluntary acquisition of one employer by another. But an “employer”

includes “an individual or employing unit that acquires or otherwise receives, through any means,

all or part of the organization, trade, business, or workforce of another that was an employer subject

to this subtitle at the time of acquisition.” Id. § 201.022 (emphasis added). The Unemployment

Compensation Act applies to nearly all employers, including non-profit organizations and

governmental entities. See, e.g., id. §§ 201.021 (general definition of employer), .023 (tax exempt

non-profit organizations), .026 (political subdivisions). Accordingly, and in light of the expansive

nature of the phrase “through any means,” we can only conclude the Legislature intended to include

                                                  7
acquisitions outside the private sector—including annexations like the one at issue here—in those

covered by Section 204.086. We reject Houston ISD’s interpretation of the Section.

                We also find unpersuasive Houston ISD’s argument that Section 13.004 of the

Education Code precludes the Workforce Commission from recovering the disputed reimbursement

without first seeking the approval of the county commissioners. Section 13.004 provides:


        If under this chapter a school district assumes a portion of the indebtedness of
        another district, the commissioners court by order shall equitably allocate the
        indebtedness among the districts involved. . . . If districts located in more than one
        county are involved, the commissioners court of each county in which an involved
        school district is located must agree on the allocation of indebtedness and personal
        property.


Tex. Educ. Code § 13.004(a). But this is not a case involving a school district assuming “a portion

of” the indebtedness of another district. Nor does this case involve multiple receiving districts such

that the commissioners would determine the proper allocation of the debt. Instead, the Section’s

only relevance is its provision of various means by which the receiving school district or its board

might generate the funds necessary to cover the assumed indebtedness. See id. § 13.004(d)–(f).

Other statutory sections offer additional sources of funding for receiving districts that suffer financial

hardships from annexation ordered under Chapter 13. See, e.g., id. § 13.054(f)–(g) (allowing

Commissioner of Education to adjust “local fund assignment” and provide “additional state aid” for

five years following annexation). Thus, Chapter 13 as a whole only confirms that the Legislature

anticipated and intended the transfer of outstanding financial obligations from the annexed school

district to the receiving district or districts.




                                                    8
               As ostensible support for its proposed construction of Chapter 13, Houston ISD cites

to the Commissioner’s unpublished Abdullah decision, which it characterizes as holding that “neither

Chapter 13 nor [the] common law provides for [an] annexing school district to assume contractual

or legal obligations of the annexed district.” See Tex. Comm’r of Educ., Abdullah v. La Marque

Indep. Sch. Dist., Docket No. 058-R1-07-2016 (Oct. 11, 2016) (order on motion for rehearing)

(citing Barnhart Indep. Sch. Dist. v. Mertzon Indep. Sch. Dist., 464 S.W.2d 197, 201 (Tex.

App.—Austin 1971, writ ref’d n.r.e.); Rocky Mt. Indep. Sch. Dist. v. Jackson, 152 S.W.2d 400, 403

(Tex. App.—Texarkana 1941, writ ref’d)). Yet Abdullah stands for the proposition that “the Texas

Education Code does not require a district to which the Commissioner annexes the territory of a

former school district to assume the term contract obligations [i.e., employment contracts] of the

former district.” See id. at 2. Here, the Workforce Commission is not asking Houston ISD to honor

North Forest’s employment contracts; it is requiring Houston ISD to assume North Forest’s

outstanding financial obligation to the State—an obligation that already existed at the time of

annexation—pursuant to Section 204.086 of the Labor Code. Abdullah is therefore inapposite.

               Nor are we persuaded by Houston ISD’s argument that Chapter 13 of the Education

Code limits an annexing district’s assumption of debt to what Houston ISD refers to as “bonded

indebtedness.” Chapter 13 makes only one reference to bonds, allowing an annexing district to

“issue refunding bonds for bonds of another district assumed under this chapter.” See Tex. Educ.

Code § 13.004(e). In other words, a receiving district’s governing body may issue new bonds to

retire the bonded debt previously undertaken by the annexed school district. See Tex. Gov’t Code

§§ 1206.001–.008 (authorizing issuance of refunding bonds by “political and governmental



                                                 9
entit[ies]” and establishing procedures governing such issuance). But Chapter 13 includes no

language indicating that a receiving district may only assume bonded debt, and Houston ISD offers

no other authority for the proposition.

               Finally, Houston ISD argues that it is “unjust” and “unreasonable” to ask the

taxpayers of Houston ISD, which now include North Forest’s former tax base, to reimburse the

Workforce Commission for unemployment benefits distributed to North Forest’s former employees

following the annexation. However, “[a] court is not authorized, under any pretext, to modify,

repeal, or rewrite a statute or even to construe an unambiguous act to conform to its own notions of

justice, policy, propriety, or wisdom.” Canal Ins. Co. v. Hopkins, 238 S.W.3d 549, 562 (Tex.

App.—Tyler 2007, pet. denied) (citing 67 Tex. Jur. 3d Statutes § 85 (2003)). Instead, policy

arguments like the one raised by Houston ISD are best reserved for the Legislature. See Morath

v. Texas Taxpayer & Student Fairness Coal., 490 S.W.3d 826, 886 (Tex. 2016) (declining to

“supplant[] lawmakers’ policy wisdom”). Thus, because the Workforce Commission has shown that

Labor Code Section 204.086 requires Houston ISD to reimburse the State for unemployment benefits

distributed to former employees of North Forest, we agree with the district court that the Workforce

Commission is entitled to judgment as a matter of law. Tex. R. Civ. P 166a; Dorsett, 164 S.W.3d

at 661; Risk Mgmt. Strategies, 464 S.W.3d at 868.


                                          CONCLUSION

               Because the district court did not err in granting the Workforce Commission’s motion

for summary judgment and denying Houston ISD’s competing motion, we affirm its final judgment.




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                                            __________________________________________
                                            Edward Smith, Justice

Before Chief Justice Rose, Justices Kelly and Smith

Affirmed on Rehearing

Filed: April 26, 2019




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