If a Texas tax-foreclosure sale brings in more than the taxes owed, how do you claim the leftover money?

Plain-English summary

When a property is sold at a Texas tax-foreclosure sale, the sale sometimes brings in more money than is needed to cover the taxes, penalties, interest, and costs. That leftover, called "excess proceeds," does not just vanish; it goes to the clerk of the court that ordered the sale, and someone with a right to it (often the former owner or a lienholder) can claim it for up to seven years. A Tarrant County prosecutor asked the Attorney General two practical questions about how that claim works under Tax Code section 34.04: do you have to start a brand-new lawsuit to get the money, and how do you have to notify everyone involved?

On the first question, the opinion said no new lawsuit is needed. Section 34.04 says you file your claim "in the court that ordered the sale," and the Attorney General read that to mean you file in the same case that produced the sale, not a separate action. The history backed this up. The old version of the law let a claimant file "in the case out of which execution or other final process issued," and when the property tax laws were rewritten in the late 1970s, the drafters said the rewording was not meant to change the meaning. So a person claiming excess proceeds files a petition in the underlying foreclosure case.

On the second question, that conclusion drove the answer. Under the Texas Rules of Civil Procedure, a "petition" filed to start a lawsuit has to be served on the other side with formal citation. But here the claim is filed inside an existing case, so it is not the kind of petition that starts a lawsuit, and the formal-citation rules do not apply. Instead, the claimant serves a copy of the petition on the county or district attorney and on all the parties to the original suit using Rule 21a, the rule for serving motions and other papers in a pending case. That can be done by personal delivery, by an agent, by courier with a receipt, by certified or registered mail to the party's last known address, by fax to the party's current number, or by any other method the court directs, and it must happen at least 20 days before the hearing.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Both the Tax Code excess-proceeds provisions and the Texas Rules of Civil Procedure have been amended since 1993, so confirm the current statute and rules (including current deadlines and service methods) before relying on anything described here.

Background and statutory framework

The Tarrant County Criminal District Attorney asked the Attorney General to construe Tax Code section 34.04 on two points: whether a proceeding to recover excess tax proceeds requires a new lawsuit separate from the tax-lien foreclosure suit, and whether section 34.04 requires personal service on the parties and the county or district attorney.

Chapter 34 of the Tax Code provides for the sale of property seized through foreclosure of a tax lien (§ 34.01(a)). The officer conducting the sale applies the proceeds first toward the costs of the sale (§ 34.02(a)), then distributes proceeds to all participating taxing units for the taxes, penalties, and interest due each, and pays any excess to the clerk of the court that ordered the sale (§ 34.02(c)). The clerk keeps the excess for seven years from the date of sale unless the court orders otherwise (§ 34.03(a); International Paper Co. v. State, 380 S.W.2d 18, 21 (Tex. Civ. App.—Texarkana 1964, writ ref'd n.r.e.) (district court has exclusive jurisdiction for a suit to foreclose a tax lien)). Section 34.04 sets out the procedure: a person may file a petition in the court that ordered the sale claiming the excess within seven years (subsection (a)); a copy must be served on the county attorney (or, if none, the district attorney) and on all parties to the suit not later than the 20th day before the hearing (subsection (b)); at the hearing, if the court finds the claimant entitled, it orders the proceeds paid, without interest or costs (subsection (c)); and no claim may be filed after seven years (subsection (d)).

First question (new lawsuit or not). Subsection (a) requires a claimant to file a petition "in the court that ordered the sale." The legislature had added similar language to the predecessor statute, former V.T.C.S. article 7345b, section 8, in 1953 (Acts 1953, 53d Leg., ch. 108, § 1), which authorized a person claiming excess funds, within four years from the date the clerk forwarded the funds to the State Treasurer, to file a petition "in the case out of which execution or other final process issued." In 1977 the Texas Legislative Council prepared a proposed Property Tax Code that comprehensively and substantively revised the property tax laws to make them more understandable, equitable, and uniform; as proposed, section 34.04(a) authorized a claimant to file a petition "in the court that ordered the sale." Although the council changed the wording from the source law, it stated that, with one irrelevant exception, the provisions in what became chapter 34, subchapter A were unchanged, so the change appeared to be nonsubstantive. The legislature adopted section 34.04(a) as the council proposed it (Acts 1979, 66th Leg., ch. 841, § 1). Finding no legislative history to the contrary, the opinion assumed the legislature agreed with the council's analysis and read "in the court that ordered the sale" to equate with the predecessor's "in the case out of which execution or other final process issued." It therefore concluded that section 34.04(a) does not require a person claiming excess tax proceeds to file a new lawsuit; the claimant files a petition in the underlying case.

Second question (service). A "petition" for purposes of section 34.04(a) thus differs from a "petition" under the Texas Rules of Civil Procedure. Rule 22 provides that a petition filed with the clerk is the instrument by which a plaintiff commences a civil action. Because a claim to recover excess proceeds is filed in the underlying case, the rules on service of a petition that commences an action do not apply. Instead, the petition is served under Rule 21a, which governs service of every notice, pleading, plea, motion, or other request required to be served under Rule 21, other than the citation served on the filing of a cause of action. So a claimant may serve a copy of the petition on the county or district attorney and on all parties to the suit by delivering a copy to the party, the party's authorized agent, or attorney of record, in person or by agent, by courier receipted delivery, by certified or registered mail to the party's last known address, by telephonic document transfer to the recipient's current telecopier number, or by such other manner as the court in its discretion directs.

Common questions

Do I have to file a separate lawsuit to claim excess proceeds from a tax sale?
The opinion concluded no. Under Tax Code section 34.04, the claimant files a petition in the existing case that ordered the sale, not a new, separate lawsuit.

Who do I have to notify, and how?
The opinion said the claimant serves a copy of the petition on the county or district attorney and on all parties to the suit that ordered the sale, using Rule 21a of the Texas Rules of Civil Procedure (for example, certified or registered mail, personal or agent delivery, courier, or fax), at least 20 days before the hearing. Formal citation, used to start a new lawsuit, is not required.

How long do I have to make the claim?
Section 34.04 set a seven-year window from the date of the sale, and the opinion noted the clerk holds the excess proceeds for that period unless the court orders otherwise.

Can I recover interest or costs on top of the excess proceeds?
No. Section 34.04(c) provides that, when the court orders the excess proceeds paid to an entitled claimant, interest and costs may not be allowed.

Citations

• Tax Code § 34.01(a) (sale of property after tax-lien foreclosure); § 34.02(a), (c) (application of proceeds; excess paid to court clerk); § 34.03(a) (clerk holds excess seven years); § 34.04(a)-(d) (petition in the court that ordered the sale; service; hearing; seven-year cutoff)
• Former V.T.C.S. art. 7345b, § 8 (predecessor statute); Acts 1953, 53d Leg., ch. 108, § 1; Acts 1979, 66th Leg., ch. 841, § 1 (adopting Property Tax Code section 34.04(a))
• Tex. R. Civ. P. 21, 21a (service of pleadings/motions other than citation), 22 (petition commences a civil action)
• International Paper Co. v. State, 380 S.W.2d 18 (Tex. Civ. App.—Texarkana 1964, writ ref'd n.r.e.)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0195
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1993/dm0195.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; garbled case names were verified against the official reporters. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

January 5, 1993

Honorable Tim Curry
Criminal District Attorney
Tarrant County
Justice Center
401 West Belknap
Fort Worth, Texas 76196-0201

Opinion No. DM-195

Re: Whether a proceeding to recover excess proceeds after a tax lien foreclosure requires a separate cause of action, and related question (RQ-456)

Dear Mr. Curry:

You have requested that we construe section 34.04 of the Tax Code with regard to the following two questions:

1) Does Tax Code § 34.04 require a new lawsuit, separate from the suit to foreclose the tax lien, in a proceeding to recover excess tax proceeds?
2) Does Tax Code § 34.04 require personal service on the parties and the county attorney or district attorney in a proceeding to recover excess tax proceeds?

Chapter 34 of the Tax Code provides, in part, for the sale of property that has been seized pursuant to foreclosure of a tax lien. See Tax Code § 34.01(a). The officer conducting the sale is to apply the proceeds of the sale first toward the costs of the sale. Id. § 34.02(a). Next, the officer is to distribute proceeds to all taxing units that participated in the sale for the payment of taxes, penalties, and interest due each taxing unit. Id. Finally, the officer is to pay any excess proceeds to the clerk of the court that ordered the sale. Id. § 34.02(c). The clerk is to keep the excess proceeds for a period of seven years after the date of the sale, unless the court has ordered otherwise. Id. § 34.03(a); International Paper Co. v. State, 380 S.W.2d 18, 21 (Tex. Civ. App.—Texarkana 1964, writ ref'd n.r.e.) (stating that district court has exclusive jurisdiction for suit to foreclose tax lien). Section 34.04 provides the procedure by which a person may file a claim to the excess proceeds:

(a) A person may file a petition in the court that ordered the sale setting forth a claim to the excess proceeds within seven years from the date of the sale of the property.
(b) A copy of the petition shall be served on the county attorney or, if there is no county attorney, the district attorney and on all parties to the suit that ordered the sale, if any, not later than the 20th day before the date set for a hearing on the petition.
(c) At the hearing if the court finds that the claimant is entitled to recover the excess proceeds, it shall order that the proceeds be paid to him. Interest or costs may not be allowed.
(d) A claim for the excess proceeds may not be filed after the expiration of seven years from the date the property is sold.

To answer your first question, we note that subsection (a) requires a claimant to file a petition "in the court that ordered the sale." (Emphasis added.) The legislature added similar language to the predecessor statute, V.T.C.S. article 7345b, section 8, in 1953. See Acts 1953, 53d Leg., ch. 108, § 1, at 392. The 1953 amendment authorized a person claiming excess funds "[a]t any time within four (4) years from the date such excess funds are forwarded to the State Treasurer by the clerk of the court" to file a petition "in the case out of which execution or other final process issued." Id. (emphasis added).

In 1977, the Texas Legislative Council (the council) prepared a proposed Property Tax Code for the 65th Legislature. See generally Tex. Legis. Council, Proposed Prop. Tax Code, Report No. 64-2 (1977). The proposed codification completely and substantively revised the existing property tax laws in an effort "to make them more understandable, equitable, and uniform in their application around the state." See id. at i. Section 34.04(a), as the council proposed it, authorized a claimant to file a petition "in the court that ordered the sale." Id. at 161. While the council clearly changed the language from the language used in the source law, it stated that, with one irrelevant exception, the provisions now found in chapter 34, subchapter A were unchanged. Id. at xviii. Apparently, then, the council intended the word change to be nonsubstantive. Although the legislature did not codify the Property Tax Code until the next session, it adopted section 34.04(a) as the council had proposed it. See Acts 1979, 66th Leg., ch. 841, § 1, at 2298.

We found no legislative history clearly indicating whether the legislature, like the council, believed that the change in language was nonsubstantive. We therefore assume that the members of the legislature were aware and agreed with the council's analysis of the proposed chapter 34, subchapter A of the Tax Code. Accordingly, we read "in the court that ordered the sale," as section 34.04(a) states, to equate with the parallel language in the predecessor statute, "in the case out of which execution or other final process issued." To specifically answer your first question, then, we believe that section 34.04(a) does not require a person claiming excess tax proceeds to file a new lawsuit, i.e., the claimant files a petition in the underlying case.

Thus a "petition" for purposes of section 34.04(a) differs from a "petition" for purposes of the Texas Rules of Civil Procedure. Rule 22 of the Texas Rules of Civil Procedure states that a petition filed in the office of the clerk of court is the instrument by which a plaintiff commences a civil action. We have determined that, with respect to a motion to recover excess proceeds under section 34.04 of the Tax Code, the claimant files the petition to recover excess proceeds in the underlying case. Consequently, in answer to your second question, the provisions in the Texas Rules of Civil Procedure relating to service of a petition to commence an action do not apply to a petition to recover excess proceeds under section 34.04 of the Tax Code. Rather, a petition to recover excess proceeds should be served in accordance with rule 21a of the Texas Rules of Civil Procedure, which provides methods of service for "[e]very notice required by these rules, and every pleading, plea, motion, or other form of request required to be served under Rule 21, other than the citation to be served upon the filing of a cause of action and except as otherwise expressly provided by" the rules.[1] Accordingly, a claimant may serve a copy of the petition to recover excess proceeds on the county or district attorney and on all parties to the suit

by delivering a copy to the party to be served, or the party's duly authorized agent or attorney of record, as the case may be, either in person or by agent or by courier receipted delivery or by certified or registered mail, to the party's last known address, or by telephonic document transfer to the recipient's current telecopier number, or by such other manner as the court in its discretion may direct.

Tex. R. Civ. P. 21a.

SUMMARY

Section 34.04(a) of the Tax Code does not require a claimant to file a new lawsuit, separate from the underlying action to foreclose the tax lien, to recover excess tax proceeds. A claimant filing a petition to recover excess tax proceeds must serve a copy of the petition on the county or district attorney and all parties to the suit that ordered the sale in accordance with rule 21a of the Texas Rules of Civil Procedure.

Very truly yours,

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Kymberly K. Okrogge
Assistant Attorney General