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Title 1. Property Tax Code
Subtitle E. Collections and Delinquency

Chapter 32. Tax Liens and Personal Liability

Sec. 32.01. Tax Lien.
Sec. 32.014. Tax Lien on Manufactured Home.
Sec. 32.015. Tax Lien on Manufactured Home.
Sec. 32.02. Restrictions on a Mineral Interest Tax Lien.
Sec. 32.03. Restrictions on Personal Property Tax Lien.
Sec. 32.04. Priorities Among Tax Liens.
Sec. 32.05. Priority of Tax Liens Over Other Property Interests.
Sec. 32.06. Transfer of Tax Lien.
Sec. 32.065. Contract for Foreclosure of Tax Lien.
Sec. 32.07. Personal Liability for Tax.

Sec. 32.01. Tax Lien.

(a) On January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property, whether or not the taxes are imposed in the year the lien attaches. The lien exists in favor of each taxing unit having power to tax the property.

(b) A tax lien on inventory, furniture, equipment, or other personal property is a lien in solido and attaches to all inventory, furniture, equipment, and other personal property that the property owner owns on January 1 of the year the lien attaches or that the property owner subsequently acquires.

(c) If an owner's real property is described with certainty by metes and bounds in one or more instruments of conveyance and part of that property is the owner's residence homestead taxed separately and apart from the remainder of the property, each of the liens under this section that secures the taxes imposed on that homestead and on the remainder of that property extends in solido to all the real property described in the instrument or instruments of conveyance, unless the homestead is identified as a separate parcel and is separately described in the conveyance or another instrument recorded in the real property records.

(d) The lien under this section is perfected on attachment and, except as provided by Section 32.03(b), perfection requires no further action by the taxing unit.

Amended by 1983 Tex. Laws, p. 4827, ch. 851, Sec. 22; amended by 1993 Tex. Laws, p. 4443, ch. 1031, Sec. 3; amended by 1999 Tex. Laws, p. 5100, ch. 1481, Sec. 11.

Cross References:

Constitutional authorization, see art. VIII, Sec. 15, Tex. Const.
Tax certificate, see Sec. 31.08.
Unit to foreclose tax lien, see Sec. 33.4l.
Taxes included in foreclosure suit, see Sec. 33.42.
Restriction on mineral interest tax lien, see Sec. 32.02.
Bona fide purchaser exception to personal property tax lien, see Sec. 32.03.
Priority of liens, see Secs. 32.04 & 32.05.
Residence homestead exemptions, see Sec. 11.13.
Transfer of tax lien, see Sec. 32.06.

Notes:

FDIC was required to pay the delinquent ad valorem taxes and statutory interest but not attorney's fees, costs, and special assessments on properties held in federal receivership. Travis County v. Resolution Trust Corporation, 61 F. Supp.2d 581 (W.D. Tex 1999).

After taxpayer filed for Chapter 11 Bankruptcy Protection on January 14 of tax year, the appraisal district attempted to collect property taxes as a post-petition debt. The court ruled that since taxes are due on January 1 of the year and are a personal debt of the property owner on that date, the appraisal district on behalf of the taxing units was a pre-petition priority tax claimant only (penalty and interest was waived). Therefore, the claim in bankruptcy court was reformed by order of the judge. In Re: Midland Industrial Service Corporation, 35 F. 3rd 164 (5th Cir. 1994, petition for certiorari filed).

The Federal Deposit Insurance Corporation (FDIC) is not liable for penalties owed on taxes that become delinquent while the FDIC owns the property. Penalties and interest that accrued before the FDIC became the property's owner cannot be collected while the FDIC owns the property; however, a lien for penalties and interest remains on the property and may be enforced after the FDIC disposes of the property. Irving Independent School District v. Packard Properties; Carrollton-Farmer's Branch Independent School District v. Johnson & Cravens 13911, Inc., 970 F.2d 58 (5th Cir. 1992).

A lien cannot be retained on each particular tract of land separately assessed for taxation by refusing to take the taxes due on one tract when tendered until all taxes on all lands of the owner are paid. Richey v. Moor, 249 S.W. 172 (Tex. 1923).

Article XVI, Sec. 50, Tex. Const., protecting a homestead against forced sale, does not affect the tax lien that can be foreclosed against the homestead. City of San Antonio v. Toepperwein, 133 S.W. 4l6 (Tex. 1911).

If an owner uses several tracts of land together, a bulk assessment is valid and lien securing tax extends over entire parcel. Manges v. Freer Independent School District, 2d (Tex. App.-San Antonio 1983), rev'd on other grounds, 677 S.W.2d 488 (Tex. 1984).

Because the Resolution Trust Corporation (RTC) held only a lien interest in the property and did not acquire an ownership interest during the tax years in question, there was no statutory bar to attachment of the tax lien on the real property during the period the mortgage was held in receivership by the RTC. Sadeghian v. City of Denton, 49 S.W.3d 403 (Tex. App. - Fort Worth [2nd Dist.] 2000, pet. denied).

Because the tax liens properly attached to the properties at issue during the period of time when the Federal Deposit Insurance Corporation held only a lien interest, the owner of the properties through a foreclosure sale was responsible for paying taxes upon its foreclosure and also responsible for paying penalties the lien secured to the extent that the proceeds from the foreclosure were greater than the amount of the tax liens. Tax Code Section 33.05 did not bar collecting the 1991 and 1992 taxes. PNL Asset Management Company v. Kerrville Independent School District, 37 S.W.3d 80 (Tex. App. - San Antonio [4th Dist.] 2000, pet. denied).

Suspense mineral payments are not subject to foreclosure of a tax lien against a royalty interest. Sheriff's deed resulting from judicial foreclosure of the minerals in place did not convey title to the proceeds, e.g., suspense payments or minerals that had been previously produced or sold from the land. David Hill, Inc. and dba DOH Oil Company v. Enerlex, Inc., 969 S.W.2d 120 (Tex. App. - Eastland 1998, rehearing denied).

The bank's foreclosure of its purchase money lien on personal property did not defeat or destroy the taxing units' statutory tax lien. The foreclosing bank was not a "buyer in the ordinary course of business" and therefore could not re-sell the foreclosed personal property free and clear of the statutory tax lien. Central Appraisal District of Taylor County v. Dixie-Rose Jewels, Inc., 894 S.W.2d 841 (Tex. App.-Eastland 1995, writ requested).

When a tax lien is created, it attaches to personal property as a "floating" lien and encumbers all inventory property as well as any other property held on the date of seizure by the taxing unit. All such property can be used to repay the tax debt subject to the lien. City of Dallas v. Cornerstone Bank, N.A., 879 S.W.2d 264 (Tex. App.-Dallas 1994).

Penalties and interest that accrued as a matter of law while a previous owner of property was in bankruptcy were only voidable, not void, because of the automatic stay provisions in the bankruptcy code. Therefore, only the bankruptcy court had power to invalidate the penalties and interest. Since the bankruptcy court did not do so, the lien for the penalties and interest were still valid, so the new owner could not obtain a refund of the amounts. Walker Country Place v. Central Appraisal Dist. of Taylor County, 867 S.W.2d 111 (Tex. App.-Eastland 1993, no writ).

In a case involving a taxing unit seeking recovery of delinquent taxes from a recorded lienholder of the bankrupt owner of the property, the lienholder refused to pay the taxes, so the taxing unit brought a conversion action. However, the taxing unit's tax lien was not adequate possessory interest in the property being taxed to recover on a conversion theory from the recorded lienholder of the property. If a court had foreclosed upon the tax lien, then the taxing unit would have had the right of possession to the property, so that it could recover on a conversion theory. City of Wichita Falls v. ITT Commercial Finance Corp., 827 S.W.2d 6 (Tex. App.-Fort Worth 1992), rev'd on other grounds 835 S.W.2d 65 (Tex. 1992).

Where owner of lumber company entered into a purchase contract with buyer for all of the lumber company assets and entered into a lease with buyer for the real estate where the business was conducted, the owner is obligated by statute to pay all ad valorem taxes on property unless the owner and the lessee contract for payment of the taxes by the lessee. While a contract does not relieve the owner of the ultimate responsibility to the taxing authority for the taxes, it permits the owner to seek appropriate remedies against lessee if the lessee fails to perform pursuant to the contract. Robbins & Co. v. Roberts, 610 S.W.2d 854 (Tex. App.-Amarillo 1980, writ ref'd n.r.e.).

A tax lien attaches to the land rather than to the person, and a foreclosure suit is a proceeding "in rem" rather than "in personam." Trimble v. Farmer, 296 S.W.2d 580 (Tex. Civ. App.-Ft. Worth l956), rev'd in part on other grounds, 305 S.W.2d 157 (1956).

The lien provided by art. 8, Sec. 15, Tex. Const., attaches only to each separate tract or parcel of land for the taxes assessed against it. Hoffmann v. Wood, 258 S.W. 835 (Tex. Civ. App.-Galveston 1924).

Local Government Code Section 154.025 prohibits the drawing of a warrant on a county fund to a justice of the peace against whom a judgment has been entered for delinquent property taxes until the justice is notified that the debt is outstanding and the debt is paid. Op. Tex. Att'y Gen. No. JC-0087 (1999).

No constitutional provision authorizes a taxing unit to reduce delinquent taxes on real property that has hazardous waste improperly disposed on it. Texas Constitution Article III, Section 55, prohibits a political subdivision of the state from releasing or extinguishing all or part of a person's delinquent tax liability. Taxing units may not agree to settle for an amount of delinquent taxes that is less than the amount actually due. Tex. Att'y Gen. LO-96-099 (1996).

Sec. 32.014. Tax Lien on Manufactured Home.

(a) If the ownership of the real property on which a manufactured home is affixed and the manufactured home are the same, the manufactured home shall be appraised and taxed as an improvement to the real property, and the tax lien attaches to the real property on which the manufactured home is located regardless of the classification of the manufactured home under the Property Code.

(b) If the ownership of the manufactured home, whether by deed or contract for sale, and the real property on which the manufactured home is affixed are not the same, the personal property manufactured home shall be separately appraised and taxed at the same rate and on the same ad valorem basis as other single-family residential structures. The tax lien on the manufactured home does not attach to the real property when the ownership of the manufactured home and real property are different.

(c) In this section, "manufactured home" has the meaning assigned by Section 3, Texas Manufactured Housing Standards Act (Article 5221f, Vernon's Texas Civil Statutes).

Added by 1987 Tex. Laws, ch. 633, Sec. 12 and ch. 1134, Sec. 12; amended by 1989 Tex. Laws, p. 181, ch. 2, Sec. 14.02, and p. 4225, ch. 1039, Sec. 4.04; amended by 1995 Tex. Laws, p. 4889, ch. 978, Sec. 20; amended by HB 1869, 77th Tex. Leg., 2001, eff. January 1, 2002.

Cross References:

Improvement defined, see Sec. 1.04(3).
Manufactured home definition, see VTCS art. 5221(f).

Sec. 32.015. Tax Lien on Manufactured Home.

(a) On payment of the taxes, penalties, and interest for a year for which a valid tax lien filed before September 1, 2001, has been recorded on the title records of the department, the collector for the taxing unit shall issue a tax certificate showing no taxes due or a tax paid receipt for such year to the person making payment. When the tax certificate showing no taxes due or tax paid receipt is filed with the department, the tax lien is extinguished and canceled and shall be removed from the title records of the manufactured home. The collector for a taxing unit may not refuse to issue a tax paid receipt to the person who offers to pay the taxes, penalties, and interest for a particular year or years, even though taxes may also be due for another year or other years.

(b) In this section, "department" and "manufactured home" have the meanings assigned by Section 3, Texas Manufactured Housing Standards Act (Article 5221f, Vernon's Texas Civil Statutes); however, the term "manufactured home" does not include a manufactured home that has been attached to real property and for which the document of title has been canceled under Section 19(l) of that Act.

Added by 1985 Tex. Laws, p. 6295, ch. 846, Sec. 15; amended by 1987 Tex. Laws, ch. 1134, Sec. 22; amended by 1989 Tex. Laws, p. 4226, ch. 1039, Sec. 4.05; amended by 1991 Tex. Laws, p. 2247, ch. 617, Sec. 11; amended by 1995 Tex. Laws, p. 4890, ch. 978, Sec. 21; amended by 1999 Tex. Laws, p. 5100, ch. 1481, Sec. 12; amended by HB 468, 77th Tex. Leg., 2001, eff. September 1, 2001.

Cross References:

Tax lien on manufactured home, see Sec. 32.014.
Personal liability of subsequent purchaser of manufactured home, see Sec. 32.03.
Restrictions on personal property tax lien, see Sec. 32.03.

Sec. 32.02. Restrictions on a Mineral Interest Tax Lien.

(a) If a mineral estate is severed from a surface estate and if different persons own the mineral estate and surface estate, the lien resulting from taxes imposed against each interest in the mineral estate exists only for the duration of the interest it encumbers. After an interest in the mineral estate terminates, the lien encumbering it expires and is not enforceable:

(1) against any part of the surface estate not owned by the owner of the interest encumbered by the lien;

(2) against any part of the mineral estate not owned by the owner of the interest encumbered by the lien; or

(3) against the owner of the surface estate as a personal obligation, unless he also owns the interest encumbered by the lien.

(b) Taxes imposed on a severed interest in a mineral estate that has terminated remain the personal liability of the person who owned the interest on January 1 of the year for which the tax was imposed.

Cross References:

Appraisal of mineral interest not being produced, see Sec. 23.l7.
Separate estates or interests, see Sec. 25.02.
Listing of mineral interests, see Sec. 25.12.
Personal liability for taxes, see Sec. 32.07.

Notes:

Suspense mineral payments are not subject to foreclosure of a tax lien against a royalty interest. Sheriff's deed resulting from judicial foreclosure of the minerals in place did not convey title to the proceeds, e.g., suspense payments or minerals that had been previously produced or sold from the land. David Hill, Inc. and dba DOH Oil Company v. Enerlex, Inc., 969 S.W.2d 120 (Tex. App. - Eastland 1998, rehearing denied).

Only the surface estate in the land can be foreclosed upon when the taxes sued for are based on the surface valuation of the land. Starnes v. Bledsoe Independent School District, 257 S.W.2d 836 (Tex. Civ. App.-Amarillo 1953, writ ref'd n.r.e.).

Sec. 32.03. Restrictions on Personal Property Tax Lien.

(a) A tax lien may not be enforced against personal property transferred to a buyer in ordinary course of business as defined by Section 1.201(9) of the Business & Commerce Code for value who does not have actual notice of the existence of the lien or, if the personal property is a manufactured home, who does not have constructive notice of the existence of the lien.

(b) A bona fide purchaser for value or the holder of a lien recorded on the manufactured home document of title is not required to pay any taxes imposed in a tax year that begins before January 1, 2001, or penalties or interest on those taxes except for each year for which a valid tax lien was duly filed and recorded under Section 32.015, as that section existed on the date the lien was filed, and each year for which the owner of the manufactured home had constructive notice of the taxes under Section 32.015(e), as that section existed before September 1, 2001. The effect and priority of a tax lien that attaches to secure the payment of taxes imposed on a manufactured home in a tax year that begins on or after January 1, 2001, are those established by Sections 32.01 and 32.05. In this section, "manufactured home" has the meaning assigned by Section 32.015(b).

(c) A bona fide purchaser for value or the holder of a lien recorded on a manufactured home document of title is not required to pay any taxes imposed on the manufactured home in a tax year that begins on or after January 1, 2001, or penalties or interest on those taxes, if the chief appraiser of the appraisal district established for the county in which the manufactured home is located, in connection with an application for a permit to transport the manufactured home under Section 623.093(d), Transportation Code, has issued a written statement that no unpaid taxes have been reported on the manufactured home due any taxing unit for which the appraisal district appraises property.

(d) On request of any person, a chief appraiser shall issue a written statement as to whether the chief appraiser has received notice of any taxes on a manufactured home located in the appraisal district due any taxing unit for which the appraisal district appraises property. A request for the issuance of a statement by the chief appraiser under this subsection must:

(1) be in writing and signed by the person requesting the statement;

(2) identify the location of the manufactured home sufficiently for the chief appraiser to determine whether the manufactured home is listed on the current appraisal roll; and

(3) specify the address where the chief appraiser should send the statement.

(e) On receipt of a request under Subsection (d), the chief appraiser shall send to the collector for each taxing unit in which the manufactured home is located a request for information whether any taxes on the manufactured home are due that taxing unit. The chief appraiser shall specify the date by which the collector must respond to the chief appraiser.

(f) Not later than the fifth business day after the date the chief appraiser receives a request for a statement under Subsection (d), the chief appraiser shall issue the statement described by Subsection (d). In issuing the statement, a chief appraiser may rely on a tax certificate, a written statement by the collector, a tax bill, or a reproduction of a tax bill provided by the collector for a taxing unit.

(g) If the chief appraiser receives the appropriate information from the collector for a taxing unit indicating that there are unpaid taxes due that taxing unit on the manufactured home, the chief appraiser shall include in the statement issued under Subsection (d) the amount of taxes due that taxing unit and the name and address of the collector for that taxing unit. If the chief appraiser does not receive information from the collector for any taxing unit to which the chief appraiser sent a request under Subsection (e) before the chief appraiser issues the statement required by Subsection (d), the chief appraiser shall state in the written statement that the chief appraiser has not received notice of any taxes on the manufactured home due the taxing units for which the appraisal district appraises property.

(h) To cover the costs to the appraisal district associated with the issuance of written statements under this section, a chief appraiser may charge the person requesting a statement a fee not to exceed $10 for each statement requested.

(i) A chief appraiser and a county assessor-collector may enter into a contract that authorizes the assessor-collector to issue written statements requested under this section. If a chief appraiser and a county assessor-collector enter into such a contract, a reference in this section to the chief appraiser means the county assessor-collector.

Amended by 1985 Tex. Laws, p. 6297, ch. 846, Sec. 16; amended by 1991 Tex. Laws, p. 2893, ch. 836, Sec. 5.2; and 1991 Tex. Laws, p. 2248, ch. 617, Sec. 12; amended by 1995 Tex. Laws, p. 4891, ch. 978, Sec. 22; amended by HB 468, 77th Tex. Leg., 2001, eff. September 1, 2001.

Cross References:

Definition of personal property, see Sec. l.04(4).
Taxability of certain personal property, see Sec. 21.02.
Appraisal of personal property as inventory, see Sec. 23.12.
Tax lien attaches as of January 1, see Sec. 32.01.
Tax lien on manufactured home, see Sec. 32.015.
Personal liability for taxes, see Sec. 32.07.
Personal property seizure and sale, see Secs. 33.21, 33.22, 33.23, 33.24 & 33.25.

Notes:

Taxpayer sought to avoid statutory property tax liens, while selling off store inventory and equipment during a pending Chapter 11 bankruptcy. The court ruled that the underlying tax liens could not be avoided because the purchaser was not a "buyer in the ordinary course of business" as required by Property Tax Code Section 32.03. In Re: Winn's Stores, Inc., 177 Bankruptcy Reporter 253 (Western District, Texas 1995).

Under bankruptcy law, the fixing of a tax lien on a debtor's personal property is avoidable because Sec. 32.03 provides that tax liens are not enforceable against such property transferred to a bona fide purchaser for value unaware by actual notice of the existence of the lien. In the Matter of Boerne Hills Leasing Corp., 15 F.3d 57 (5th Cir. 1994). (NOTE: This lawsuit was under a previous provision; the 72nd Legislature in 1991 amended this section about the notice of tax lien.)

The bank's foreclosure of its purchase money lien on personal property did not defeat or destroy the taxing units' statutory tax lien. The foreclosing bank was not a "buyer in the ordinary course of business" and therefore could not re-sell the foreclosed personal property free and clear of the statutory tax lien. Central Appraisal District of Taylor County v. Dixie-Rose Jewels, Inc., 894 S.W.2d 841 (Tex. App.-Eastland 1995, writ requested).

Under Tax Code Section 1.04(3), subsection (A), a travel trailer that has been permanently affixed to land is an improvement and is taxable as real property. Under subsection (B), a travel trailer is also an improvement and taxable as real property if the owner of the trailer owns the land on which it is located. It is not relevant under subsection (B) whether or not the travel trailer has been affixed to land. Subsection (B) is intended to expand rather than restrict the universe of structures taxable as improvements. Whether a travel trailer may be taxed as personal property will depend not only on whether the governmental body has complied with the procedural requirements of Section 11.14, but also whether the constitution permits its exemption from taxation. Op. Tex. Att'y Gen. No. JC-282 (2000). (Amendment by HB 1869, 77th Tex. Leg, 2001, eff. January 1, 2002, changed Tax Code Section 32.014 tax lien for manufactured housing.)

Travel trailers that have been affixed to rented land are personal property, but are not exempt as personal property not used to produce income. Imposing property taxes on these travel trailers that have paid sales taxes and motor vehicle registration does not constitute double taxation. Determining if a particular piece of personal property has become an improvement depends on the intent of the owner as evidenced by the mode and sufficiency of annexation. The appraisal district must determine if the attachment is permanent, subject to the property owner's right to protest to the appraisal review board. Long-term placement of travel trailers on lots of land owned by another person results in separate taxable interests, but not two separate interests in real property. A trailer attached to a leased lot, while an improvement to real property, generally will remain the property of the person leasing the lot from the trailer park. Such a trailer is taxable to the lessee of the lot, but as personal property rather than real property. Op. Tex. Att'y Gen. No. JC-150 (1999). (Amendment by HB 1869, 77th Tex. Leg, 2001, eff. January 1, 2002, changed Tax Code Section 32.014 tax lien for manufactured housing.)

Sec. 32.04. Priorities Among Tax Liens.

(a) Whether or not a tax lien provided by this chapter takes priority over a tax lien of the United States is determined by federal law. In the absence of federal law, a tax lien provided by this chapter takes priority over a tax lien of the United States.

(b) Tax liens provided by this chapter have equal priority.

Cross References:

Tax lien attaches as of January 1, see Sec. 32.01.

Notes:

Priority among claims when one is a federal tax lien is a matter of federal law. United States v. Ray Thomas Gravel Co., 380 S.W.2d 576 (Tex. 1964).

Probate Code Section 5C, effective September 1, 1999, provides that a suit to collect delinquent taxes on property should be brought in the county where the property is located even when probate proceedings are pending in another county. Tax Code Section 33.41 controls. Phifer v. Nacogoches County Appraisal District, 45 S.W.3d 159 (Tex. App. - Tyler 2000, pet. denied).

In the case of the Federal Deposit Insurance Corporation's lien interest on property foreclosed upon by certain taxing entities, because U.S.C.A. Sec. 1825(b)(2) provides for the superiority of the FDIC's interest, the effect of U.S.C.A. Sec. 2410 is not to allow the application of state law in the form of Sec. 32.04, Tax Code, to make a taxing authorities' tax lien superior to that the FDIC. State of Texas v. W.W. Bankerd, 838 S.W.2d 639 (Tex. App.-San Antonio 1992, writ denied).

Sec. 32.05. Priority of Tax Liens Over Other Property Interests.

(a) A tax lien on real property takes priority over a homestead interest in the property.

(b) Except as provided by Subsection (c) of this section, a tax lien provided by this chapter takes priority over the claim of any creditor of a person whose property is encumbered by the lien and over the claim of any holder of a lien on property encumbered by the tax lien, whether or not the debt or lien existed before attachment of the tax lien.

(c) A tax lien provided by this chapter is inferior to a claim:

(1) for any survivor's allowance, funeral expenses, or expenses of the last illness of a decedent made against the estate of a decedent as provided by law;

(2) under a recorded restrictive covenant running with the land, other than a restrictive covenant in favor of a property owners' association or homeowners' association recorded before January 1 of the year the tax lien arose; or

(3) under a valid easement of record recorded before January 1 of the year the tax lien arose.

Amended by 1991 Tex. Laws, p. 2952, ch. 854, Sec. 1; amended by 1999 Tex. Laws, p. 5100, ch. 1481, Sec. 13.

Cross References:

Protection of homestead from forced sale, see art. XVI, Sec. 50, Tex. Const.

Notes:

Taxpayer sought to avoid statutory property tax liens, while selling off store inventory and equipment during a pending Chapter 11 bankruptcy. The court ruled that the underlying tax liens could not be avoided because the purchaser was not a "buyer in the ordinary course of business" as required by Property Tax Code Section 32.03. In Re: Winn's Stores, Inc., 177 Bankruptcy Reporter 253 (Western District, Texas 1995).

Under bankruptcy law, only a trustee or debtor-in-possession may avoid the fixing of a tax lien on a debtor's personal property. However, a creditor may initiate avoidance if the creditor asks for permission from the bankruptcy court to act on behalf of the trustee or debtor-in-possession. Because a creditor failed to pursue avoidance of taxing units' liens as required under bankruptcy law, the taxing units' liens were not avoided. Consequently, under Sec. 32.05(b), Tax Code, taxing units' liens took priority over the creditor's lien on the debtor's inventory. In the Matter of Boerne Hills Leasing Corp., 15 F.3d 57 (5th Cir. 1994).

The bank's foreclosure of its purchase money lien on personal property did not defeat or destroy the taxing units' statutory tax lien. The foreclosing bank was not a "buyer in the ordinary course of business" and therefore could not re-sell the foreclosed personal property free and clear of the statutory tax lien. Central Appraisal District of Taylor County v. Dixie-Rose Jewels, Inc., 894 S.W.2d 841 (Tex. App.-Eastland 1995, writ requested).

Neither U.S.C.A. Sec. 1825(b)(2), providing for superiority of the FDIC's lien interest, nor Sec. 1821(d), providing that no court shall issue an attachment on assets held by the FDIC as receiver, prevents foreclosure of tax liens against private property on which the FDIC as receiver holds junior mortgage liens. Nueces County v. Whitley Trucks, Inc., 865 S.W.2d 124 (Tex. App.-Corpus Christi 1993, writ granted).

Even though Sec. 32.05 provides that a tax lien is superior to a contractual lien, it is not a "first lien" for Consumer Credit Code purposes. Enell Corp. v. Longoria, 834 S.W.2d 132 (Tex. App.-San Antonio 1993, writ denied).

An ad valorem tax due against a particular piece of property is secured only by paramount lien upon the property, and if the property proves inadequate to satisfy such ad valorem tax, the state has no priority right to satisfy the deficit out of the tax debtor's other property in preference to such tax debtor's general and unsecured creditors. State v. Mauritz-Wells Co., 170 S.W.2d 625 (Tex. Civ. App.-Galveston 1943), aff'd 175 S.W.2d 238 (Tex. 1943).

Sec. 32.06. Transfer of Tax Lien.

(a) A person may authorize another person to pay the taxes imposed by a taxing unit on the person's real property by filing with the collector for the unit a sworn document stating the authorization, naming the person authorized to pay the taxes, and describing the property.

(b) If a person authorized to pay another's taxes pursuant to Subsection (a) pays the taxes and any penalties and interest imposed, the collector shall issue a tax receipt to the person paying the taxes. In addition, the collector shall certify on the sworn document that payment of the taxes and any penalties and interest on the described property has been made by a person other than the person liable for the taxes when imposed and that the taxing unit's tax lien is transferred to the person paying the taxes. The collector shall attach to the document the collector's seal of office and deliver the document to the person paying the taxes. The collector shall keep a record of all tax liens transferred as provided by this section.

(c) Except as otherwise provided by this section, the transferee of a tax lien and any successor in interest is entitled to foreclose the lien:

(1) in the manner provided by law for foreclosure of tax liens; or

(2) in the manner specified in Section 51.002, Property Code.

(d) To be enforceable, a tax lien transferred as provided by this section must be recorded in the deed records of each county in which the property encumbered by the lien is located.

(e) A person holding a tax lien transferred as provided by this section may not charge a greater rate of interest than 18 percent a year on the taxes, penalties, interest, and recording expenses paid to acquire and record the lien.

(f) The holder of a preexisting lien on property encumbered by a tax lien transferred as provided by this section is entitled, within six months after the date on which the tax lien is recorded in all counties in which the property is located, to pay the holder of the tax lien the amount paid for the lien, plus interest accrued at the rate provided in Subsection (e) and recording expenses, and become subrogated to all rights in the lien.

(g) A suit to foreclose a tax lien transferred as provided by this section may not be instituted within one year from the date on which the lien is recorded in all counties in which the property is located, unless the contract between the owner of the property and the transferee provides otherwise.

(h) After one year from the date on which a tax lien transferred as provided by this section is recorded in all counties in which the property is located, the holder of the lien may file suit to foreclose the lien unless a contract between the holder of the lien and the owner of the property encumbered by the lien provides otherwise. If the suit results in foreclosure of the lien, the person filing suit is entitled to recover attorney's fees in an amount not to exceed 10 percent of the judgment. The proceeds of a sale following foreclosure as provided by this subsection shall be applied first to the payment of court costs, then to payment of the judgment, including accrued interest, and then to the payment of any attorney's fees fixed in the judgment. Any remaining proceeds shall be paid to other holders of liens on the property in the order of their priority and then to the person whose property was sold at the tax sale.

(i) The person whose property is sold as provided by this section or any person holding a first lien against the property is entitled, within one year after the date the property is sold, to redeem the property from the purchaser at the tax sale by paying the purchaser the tax sale purchase price, plus costs, and interest accrued on the judgment to the date of redemption or 118 percent of the amount of the judgment, whichever is less. If a person redeems the property as provided by this subsection, the purchaser at the tax sale shall deliver a deed to the property to the person redeeming the property. If the person who owned the property at the time of foreclosure redeems the property, all liens existing on the property at the time of the tax sale remain in effect to the extent not paid from the sale proceeds.

Amended by 1995 Tex. Laws, p. 957, ch. 131, Sec. 1..

Cross References:

Suit to collect delinquent taxes, see Sec. 33.41.
Tax receipt form, see Rule Sec. 9.1001.

Note:

A property owner of an undivided interest is personally liable only for the owner's proportionate share; owners are not jointly and severally liable for all taxes on a property. Property Tax Code Section 33.46 is an additional, not exclusive, remedy available to the property owner. Rosewood Properties, Inc. v. Community Credit Union, 944 S.W.2d 46 (Tex. App.-Eastland 1997).

Sec. 32.065. Contract for Foreclosure of Tax Lien.

(a) Section 32.06 does not abridge the right of an owner of real property to enter into a contract for the payment of taxes with the holder of a lien on the property, including a transferee under Section 32.06 or this section, or affect a contract between the owner and holder of a lien for the payment of taxes on the property.

(b) A contract entered into under Subsection (a) may provide for:

(1) an event of default; and

(2) notice of acceleration.

(c) Notwithstanding any other provision of this code, a transferee of a tax lien is subrogated to and is entitled to exercise any right or remedy possessed by the transferring taxing unit, including or related to foreclosure or judicial sale.

(d) Chapters 342 and 346, Finance Code, and Section 302.102, Finance Code, do not apply to a transaction covered by this section. The transferee of a tax lien under this section is not required to obtain a license under Title 4, Finance Code.

(e) If in a contract under this section a person contracts for, charges, or receives a rate or amount of interest that exceeds the rate or amount allowed by this section, the amount of the penalty for which the person is obligated is determined in the manner provided by Chapter 349, Finance Code.

(f) The first written communication by the lender to its prospective borrower shall disclose the types of possible additional charges or fees that may be incurred by the borrower in connection with the loan or contract under this section.

Added by 1995 Tex. Laws, p. 958, ch. 131, Sec. 1; amended by 1997 Tex. Laws, p. 5248, ch. 1396, Sec. 39; amended by 1999 Tex. Laws, p. 5100, ch. 62, Sec. 7.91.

Sec. 32.07. Personal Liability for Tax.

(a) Except as provided by Subsections (b) and (c) of this section, property taxes are the personal obligation of the person who owns or acquires the property on January 1 of the year for which the tax is imposed. A person is not relieved of the obligation because he no longer owns the property.

(b) The person in whose name a property is required to be listed by Section 25.13 of this code is personally liable for the taxes imposed on the property.

(c) A qualifying trust as defined by Section 11.13(j) and each trustor of the trust are jointly and severally liable for the tax imposed on the interest of the trust in a residence homestead.

(d) Any person who receives or collects an ad valorem tax or any money represented to be a tax from another person holds the amount so collected in trust for the benefit of the taxing unit and is liable to the taxing unit for the full amount collected plus any accrued penalties and interest on the amount collected.

(e) With respect to an ad valorem tax or other money subject to the provisions of Subsection (d), an individual who controls or supervises the collection of tax or money from another person, or an individual who controls or supervises the accounting for and paying over of the tax or money, and who wilfully fails to pay or cause to be paid the tax or money is liable as a responsible individual for an amount equal to the tax or money, plus all interest, penalties, and costs, not paid or caused to be paid. The liability imposed by this subsection is in addition to any other penalty provided by law. The dissolution of a corporation, association, limited liability company, or partnership does not affect a responsible individual's liability under this subsection.

(f) Venue for suits arising under this section shall be governed by Section 33.41(a).

(g) In this section:

(1) "Responsible individual" includes an officer, manager, director, or employee or a corporation, association, or limited liability company or a member of a partnership who, as an officer, manager, director, employee, or member, is under a duty to perform an act with respect to the collection, accounting, or payment of a tax or money subject to the provisions of Subsection (d).

(2) "Tax" includes any ad valorem tax or money subject to the provisions of Subsection (d), including the penalty and interest computed by reference to the amount of the tax or money.

(h) For purposes of Subsection (a), a person is considered to be an owner of property subject to an installment contract of sale if the person is:

(1) the seller of the property; or

(2) a purchaser of the property who has the duty under the installment contract to pay taxes on the property.

Amended by 1993 Tex. Laws, p. 3365, ch. 854, Sec. 4; amended by 1995 Tex. Laws, p. 3376, ch. 579, Sec. 10; amended by 1997 Tex. Laws, p. 2854, ch. 906, Sec. 2; amended by 1999 Tex. Laws., p. 5101, ch. 1481, Sec. 14 and 15.

Cross References:

Lien attaches as of January 1, see Sec. 32.01.
Lawsuit to collect delinquent tax, see Sec. 33.41.
Name and address of property owner required to be listed, see Sec. 25.02(a)(1).
Mistake in name of property owner not fatal, see Sec. 25.02(b).
Property encumbered by interest, see Sec. 25.06.
Property value as of January 1, see Sec. 23.01.

Notes:

After taxpayer filed for Chapter 11 Bankruptcy Protection on January 14 of tax year, the appraisal district attempted to collect property taxes as a post-petition debt. The court ruled that since taxes are due on January 1 of the year and are a personal debt of the property owner on that date, the appraisal district on behalf of the taxing units was a pre-petition priority tax claimant only (penalty and interest was waived). Therefore, the claim in bankruptcy court was reformed by order of the judge. In Re: Midland Industrial Service Corporation, 35 F. 3rd 164 (5th Cir. 1994, petition for certiorari filed).

Because heirs are not the owners of estate property under administration, they cannot be held personally liable for property taxes against the estate. The estate bears liability for the property taxes accruing during administration. Bailey v. Cherokee County Appraisal Dist., 862 S.W.2d 581 (Tex. 1993).

A purchaser of property encumbered by a lien for taxes and penalties accruing for delinquent taxes is not personally liable for the taxes and penalties. City of San Antonio v. Toepperwein, 133 S.W. 416 (Tex. 1911).

The lender, who obtained possession of a debtor's collateral and took personal property to an auction house, was not the "owner" of such collateral under Tax Code Section 32.07, and therefore was not subject to ad valorem tax on the value of the repossessed or returned property that the lender had not sold by January 1. The lienholder did not enjoy any of the common benefits of property ownership. Comerica Acceptance Corporation v. Dallas Central Appraisal District and Appraisal Review Board of Dallas County, 52 S.W.3d 495 (Tex. App. - Dallas [5th Dist.] 2001, pet. denied).

A leaseholder was liable for the property tax on the taxable leasehold only if the subject property was exempt. If the property was non-exempt, the property owner was liable for any taxes. Unless the leasehold involves exempt property, the leasehold is not independently taxed, but rather, it is subsumed within the value of the fee simple estate. County of Dallas Tax Collector v. Roman Catholic Diocese of Dallas, 41 S.W.3d 739 (Tex. App. - Dallas [5th Dist.] 2001, no pet.).

Where the taxpayer held security interests in 300 mobile homes, and upon default by some dealerships and homeowners, it repossessed the units of those defaulting parties, retaining the power to change the named legal title holder, the court found that the taxpayer, as the secured party in possession, was the equivalent of the title owner for ad valorem tax purposes. General Electric Capital Corp. v. City of Corpus Christi, 850 S.W.2d 596 (Tex. App.-Corpus Christi 1993, writ denied).

Owner was not personally liable for taxes levied before he purchased the property, and while the property is subject to a lien for all past due taxes, the present owner is not personally liable for taxes which were assessed against the property before he purchased it. Leonard v. State, 242 S.W.2d 199 (Tex. Civ. App.-San Antonio 1951, no writ).

The true owners of the property on January l, not the record owners on that date, were the ones personally liable for the taxes for that year. Cranfill Bros. Oil Co. v. State, 54 S.W.2d 813 (Tex. Civ. App.-El Paso 1932, writ ref'd).

The person who owned the property on January l of the year for which the unpaid tax was imposed is personally liable for the delinquent ad valorem taxes, but the taxable interest in the property is subject to sale for the satisfaction of unpaid taxes validly assessed, whoever might be personally liable for the taxes. Op. Tex. Att'y Gen. No. MW-553 (1982).