A recent case from the Ft. Worth Court of Appeals, Hood County Appraisal District v. Mandy Ann Management Ltd., discusses whether property used for grazing cattle on which a quarry is present qualifies for open space tax valuation.
Mandy Ann Management Ltd. (“Mandy”) owns 679 acres in Hood County. The property was purchased by Mandy’s owner, Michael Arnold, in 2006 and he transferred the ownership to Mandy in 2016. The property is shaped like an upside down L. Mandy’s property is surrounded to the north and west by ranches. Mandy’s property is used to graze cattle, and it is also home to a quarry. Since 2006, the 75-acre quarry has been valued as commercial, while the remaining 604 acres was valued as open space agricultural land by the Hood County Appraisal District (“CAD”).
Since 2006, Jim Coleman has kept 40 cows on Mandy’s property from late summer to December. The cattle are managed on a rotation scheduled between Jim’s property and Mandy’s. The cows roam the entire 679 acres as the only fence is the perimeter fence enclosing the entire property. Arnold testified that the cattle roamed where they pleased, and that sometimes the cattle would cross into the commercial quarry and he would have to shoo them away. During this time, Jim testified that he made improvements to the property related to keeping cattle such as maintaining cattle guards, placing a stock tank and stock ponds on the 239 acres at issue, and smoothing some of the native pasture on the 239 acres that were disturbed by mining activities prior to 2006. Jim testified that his cattle did graze on the 239 acres and use the stock ponds located there, and that Jim fed hay to supplement grazing while the cattle were on Mandy’s land.
After a dispute between Arnold and the CAD in 2010 over mis-delivery of a tax statement, the owner claimed the relationship deteriorated and there were continual issues between Arnold and the CAD regarding attempts to strip him of open space valuation for several years on different properties.
After this property was transferred into Mandy’s name in 2016, the CAD determined that the 239 acres should be valued as commercial land, rather than open space for the tax years 2017-2018, and imposed more than $50,000 in rollback taxes because of the change in use due to the rock quarry. The CAD witness testified that the fence was down for approximately 400 yards along the street and determined that Mandy did not meet the intensity requirements for the county.
Mandy protested this decision to the Appraisal Review Board, which sided with the CAD. Mandy then filed a lawsuit challenging the CAD’s classification of the land as commercial. A jury trial was held, and the jury unanimously found that the land should have been appraised as qualified open-space land in 2017 and 2018, which eliminated the rollback taxes imposed by the CAD. The CAD appealed this decision, arguing there was not legally and factually sufficient evidence to support the jury’s verdict.
Appellate Court Opinion
The appellate court affirmed. [Read full opinion here.]
The court addressed two issues on appeal. First, was the land “currently devoted to principally agricultural use?” Second, did the property support agricultural use to “the degree of intensity generally accepted in the area?”
Keep in mind, the court is tasked with determining whether the evidence is legally and factually sufficient to support the jury’s verdict. The court does not address how it would rule on the evidence if given a blank slate, but whether there was at least a scintilla of evidence to support the jury’s finding for Mandy.
Currently Devoted to Principally Agricultural Use
The “principal” use of land is defined as “the more important use in comparison with other uses.” See Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820 (Tex. 1993). Per the Comptroller’s Appraisal Manual (“Manual”), which governs county appraisal districts, leaving land idle in conjunction with normal livestock rotation procedures is considered an agricultural use. The Manual also requires land to be “currently devoted” to agricultural use as of January 1 of the tax year, but if the use is not evidenced on January 1, “the chief appraiser should grant productivity valuation if the owner can show evidence of the intent to put the land into agricultural use and agricultural use will be the primary use for the bulk of the calendar year covered by the application.” The Manual also states that if the property owner is ranching several tracts as a unit, the CAD is to consider the “entire agricultural operation as a unit, not separately, with respect to the activities on an individual parcel.”
The court stated that the jury could have found the land was principally devoted to agricultural use. The jurors could have believed Arnold when he testified the land was used as it always had been and the only change had been the name of the entity holding ownership. Additionally, evidence of fencing, forage, and number of cows was presented that a jury could have relied upon to conclude the principal use of the property was grazing cattle.
With regard to fencing, Arnold and Jim both testified that the property was fenced all the way around. Although the CAD claimed there was 400 yards of the fence down along the street, they offered no photographic evidence to show this. Thus, the jury could have believed the testimony of Arnold and Jim and rejected that of Eatherly.
Additionally, both Jim and Morrison testified that the entire property was used for raising cattle, again, evidence that a jury could reasonably rely upon. The CAD senior appraiser testified that when he was evaluating property for open space valuation “I want to see cows,” and he never saw cows on the 239 acres. This was disputed by Jim, Morrison, and Arnold, all of whom testified cattle were on the 239 acres.
Lastly, although Jim’s cows were not on the property on January 1, they were present for several months as part of a normal livestock rotation, which the jury could have found to satisfy the principal use requirement.
Degree of Intensity
The Manual states that in determining the degree of intensity typical for the area, the CAD should consider what the owner puts into the enterprise in time, labor, equipment, management and capital, and notes that an operation will not be disqualified simply because it differs from the typical operation. The manual notes that raising beef cattle requires fences, proper management for long-term forage, enough animal units to match the carrying capacity, and a herd management procedure to get animals to market.
Arnold noted that he had not used the property any differently in 2017-2018 than he always had, and that Jim had always run the same number of cattle. In addition to Jim’s testimony regarding his use of the property, Mandy also called a neighboring landowner, S.M. Morrison, as a witness. Morrison testified that he currently had 52 cows on his 520 acres, but typically preferred to run around 40 head. He used his 520 acres of native grass and rotated his cattle to an improved pasture and supplemented with hay, like Jim did. Morrison testified that he saw cattle grazing on Mandy’s property when driving by, estimating that he had seen as many as 20 at a time from the road. He did admit that it was more common to see a truck traveling to the quarry than to see cattle and said he may have seen 100 trucks a day but never saw 100 head of cattle.
The CAD relied on testimony of Mr. Eatherly, their senior appraiser. Eatherly, who the court noted has no degrees in animal science, agriculture, or mining, testified that cattle are rotated to the area to make sure they do not overgraze the land and rotation typically is every few months in the area. He disputed the testimony of Jim and Morrison who claimed that 8 months on improved pasture and 4 months on native grass was normal.
The CAD sets the intensity level for cattle in Hood County at 15 acres per 1,000 pound animal on native pasture. (This would be approximately 40 cows for a 605 acre property). A 2017 email between Eatherly and the TAMU AgriLife Extension agent indicated that the agent believed the proper degree of intensity for the county should be 1 cow to 17-25 acres. (This would be 24-35 cows for a 605 acre property).
The court held that the jury could have reasonably found that Jim’s use for cattle met the degree of intensity typical in the area. The email from the County Extension Agent certainly provided evidence of this, along with various photos showing the forage and cattle on the property and the testimony of Jim and Morrison.
The court stated as follows, “The jury had the opportunity to assess the witnesses’ credibility and evaluate the rest of the evidence and could have decided that the District had vindictively pursued stripping the open-space designation from Arnold ever since the dispute arose regarding the late penalty. The jury likewise could have discounted Morrison’s testimony – you may see a hundred trucks – as hyperbole and to disbelieve Eatherly’s testimony that he wanted to see cows but had never seen any on the 239 acres. Accordingly, based on the record before us, and the applicable standards of review, we conclude the evidence is legally and factually sufficient to support the jury’s verdict, and we overrule both of the District’s issues.
This case is a good reminder of the standards applicable when appraisal districts are evaluating whether property qualifies for open space valuation. Additionally, every time I read a case involving these issues, it makes me think about the importance of landowners and ag producers knowing the degree of intensity rules for their county and ensuring they are met. Because each CAD has different standards, taking time to research the standards like stocking rights are critical for landowners and ag producers. Additionally, having good records to prove that these standards are met–such as the number of cattle on the property and the length of time–can be useful for landowners in proving their assertions related to open space valuation.