Dallas Central Appraisal District and Dallas County Appraisal Review Board v. National Carriers, Inc. and NCI Leasing, Inc. ( 2020 )

Affirmed and Opinion Filed May 5, 2020
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-18-01520-CV
DALLAS CENTRAL APPRAISAL DISTRICT AND DALLAS COUNTY
APPRAISAL REVIEW BOARD, Appellants
V.
NATIONAL CARRIERS, INC. AND NCI LEASING, INC., Appellees
On Appeal from the 44th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-17-04548
MEMORANDUM OPINION
Before Justices Bridges, Whitehill, and Nowell
Opinion by Justice Nowell
This is an appeal from judicial review of an appraisal review board order
upholding a business personal property tax on commercial trucks. After a bench trial,
the trial court granted the taxpayers relief. The appraisal district and review board
appeal arguing that the taxpayers’ trucks were subject to business personal property
taxation in Dallas County. We conclude the evidence supports the trial court’s
findings of fact and the trucks were not subject to personal property taxation in
Dallas County for tax-year 2016. We affirm the trial court’s judgment.
Background
National Carriers, Inc. is a Kansas corporation with its headquarters and
principal place of business in Liberal, Kansas. It specializes in provision of
refrigerated transportation services for its parent company and other customers. The
trucks operated by National Carriers are owned by NCI Leasing, Inc. and leased by
National Carriers. National Carriers is an irregular-route carrier, meaning its drivers
do not travel fixed routes on a repeated basis. As they complete a shipment, drivers
are assigned another nearby shipment based on customer needs. Trucks operated by
National Carriers are kept on the road and at any given time are scattered throughout
the United States. It is possible National Carriers might service the same route more
than once, but unlikely it would do so with the same truck.
National Carriers owns a facility in Irving, Texas used for orientation and
safety, light maintenance on trucks, administration, and recruiting. Ten to twenty
trucks are present at the facility at any given time for minor maintenance or to drop
off trailers. No trucks are located at the facility or generally return there. Individual
trucks are at the Irving facility for as little as an hour or as long as two days, but
never more than a temporary period.
NCI Leasing is a wholly-owned subsidiary of National Carriers. It’s
headquarters and principal place of business is at the same location as National
Carriers in Liberal, Kansas. It has no office or other location in Texas. NCI Leasing
owns the trucks leased to National Carriers. It also sells and leases trucks to others.
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Titles to the trucks are held in Kansas, with NCI Leasing having equitable ownership
subject to security interests held by its lenders. NCI Leasing pays business personal
property tax on the trucks in Kansas.
For tax year 2016, Dallas County Appraisal District issued a notice of
appraised value to National Carriers for business personal property valued at over
$53 million. The property was 430 trucks operated by National Carriers. National
Carriers protested the notice on several grounds, including that the trucks were not
taxable in Dallas County and National Carriers did not own the trucks. National
Carriers and the chief appraiser reached a value settlement, which adjusted the
appraised value to $0.
Afterwards, DCAD sent a supplemental notice of appraised value for the
trucks to National Carriers intended for NCI Leasing. National Carriers and NCI
Leasing filed a protest of the notice on the same grounds as the initial protest and
that the value settlement precluded the supplemental notice of appraised value. The
Dallas County Appraisal Review Board denied the protest and assessed a business
personal property tax value to NCI Leasing of over $8.7 million.
National Carriers and NCI Leasing filed suit seeking judicial review of the
decision. See TEX. TAX CODE §§ 42.01–.09. After a bench trial, the trial court
determined that the trucks lacked local situs in Dallas County and rendered judgment
adjusting the appraised value of the trucks to $0. The trial court filed findings of fact
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and conclusions of law supporting its judgment. DCAD and the ARB (collectively
DCAD) appeal the trial court’s judgment.
Standard of Review
Findings of fact in a nonjury trial have the same weight as a jury’s verdict and
are reviewed under the same standards that are applied in reviewing evidence to
support a jury’s verdict. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).
In evaluating the legal sufficiency of the evidence to support a finding, we credit
favorable evidence if a reasonable factfinder could, and disregard contrary evidence
unless a reasonable factfinder could not. City of Keller v. Wilson, 168 S.W.3d 802,
827 (Tex. 2005). The ultimate test is whether the evidence allows reasonable minds
to reach the finding under review. See id. Anything more than a scintilla of evidence
is legally sufficient to support a challenged finding. Catalina, 881 S.W.2d at 297.
In reviewing the factual sufficiency of evidence, we review all the evidence in
support of and against the trial court’s finding and will set aside the finding only if
the evidence is so weak or if the finding is so against the great weight and
preponderance of the evidence that it is clearly wrong and unjust. See Dow Chem.
Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001); Cain v. Bain, 709 S.W.2d 175, 176
(Tex. 1986) (per curiam). In a bench trial, the trial court is the sole judge of the
credibility of the witnesses and may believe one witness over another and resolve
any conflicts or inconsistencies in the testimony. Shaw v. Cty. of Dallas, 251 S.W.3d
165, 169 (Tex. App.—Dallas 2008, pet. denied).
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A party appealing from a nonjury trial in which the trial court made findings
of fact and conclusions of law should direct an attack on the sufficiency of the
evidence at specific findings of facts, rather than the judgment as a whole. See Shaw,
251 S.W.3d at 169; Fiduciary Mortg. Co. v. City Nat. Bank of Irving, 762 S.W.2d
196, 204 (Tex. App.—Dallas 1988, writ denied). Unless challenged by point of error
on appeal, findings of fact are binding on the parties and the appellate court. See
Employers Cas. Co. v. Henager, 852 S.W.2d 655, 658 (Tex. App.—Dallas 1993,
writ denied). However, a challenge to an unidentified finding of fact may be
sufficient if we can fairly determine from the argument the specific finding of fact
the appellant challenges. See Tittizer v. Union Gas Corp., 171 S.W.3d 857, 863 (Tex.
2005) (per curiam); Shaw, 251 S.W.3d at 169.
Discussion
The parties agree that section 21.02 controls this case. See TEX. TAX CODE
§ 21.02(a). That section provides that tangible personal property is taxable by a
taxing unit if:
(1) it is located in the unit on January 1 for more than a temporary
period;
(2) it normally is located in the unit, even though it is outside the unit
on January 1, if it is outside the unit only temporarily;
(3) it normally is returned to the unit between uses elsewhere and is not
located in any one place for more than a temporary period; or
(4) the owner resides (for property not used for business purposes) or
maintains the owner’s principal place of business in this state (for
property used for business purposes) in the unit and the property is
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taxable in this state but does not have a taxable situs pursuant to
Subdivisions (1) through (3) of this subsection.
Id.
Although DCAD does not challenge any specific findings of fact, we
determine from its argument that it challenges the findings that the trucks were not
located in Dallas County for more than a temporary period, the trucks were not
normally located in Dallas County, the trucks were not normally returned to Dallas
County between uses elsewhere and were not located in any one place for more than
a temporary period, and NCI Leasing, the owner of the trucks, did not maintain its
principal place of business in Dallas County.
“Temporary” as used in section 21.02(a) is given its ordinary meaning, that
is, lasting for a limited time. See Patterson-UTI Drilling Co. LP, LLLP, v. Webb
County Appraisal Dist., 182 S.W.3d 14, 18 (Tex. App.—San Antonio 2005, no pet.).
From the evidence in the record, the trial court could reasonably conclude that the
trucks were not located in Dallas County for more than a temporary period. DCAD
admits in its brief, “Individual trucks are on the Irving property for temporary
periods of time.” The testimony reflects that ten to twenty trucks are on the Irving
Property at any given time and only there for short periods of time, as little as one
hour, but never more than two days. The evidence also shows that no trucks were
stationed or located at the Irving Property and were not returned to the Irving
Property between assignments. The trucks continually transport freight for National
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Carriers’ customers and are not located at any specific location. The evidence further
shows that NCI Leasing owns the trucks and did not maintain its principal place of
business in Dallas County in 2015 or on January 1, 2016. Based on the evidence, it
was reasonable for the trial court to reach the challenged findings. Thus, we conclude
the evidence was legally sufficient to support the trial court’s judgment.
DCAD argues there is a rebuttable presumption, once the taxing unit present
a prima facie case, that personal property has a tax situs within the unit’s jurisdiction.
Davis v. City of Austin, 632 S.W.2d 331, 333 (Tex. 1982) (discussing presumption
arising in tax delinquency suit). A presumption, however, disappears once evidence
to the contrary is introduced. Temple Indep. Sch. Dist. v. English, 896 S.W.2d 167,
169 (Tex. 1995). Here, National Carriers and NCI Leasing presented ample evidence
contrary to a presumption that the trucks had a situs in Dallas County under section
21.02(a). Thus, the Davis presumption was rebutted.
DCAD also argues that the state has jurisdiction to tax the property under tax
code section 11.01 and cites Alaska Flight Services, LLC v. Dallas Central Appraisal
District, 261 S.W.3d 884 (Tex. App.—Dallas 2008, no pet.), for the holding that
“continually” as used in section 11.01(c)(3) means “while present in this state,
though not necessarily exclusively, for some period of the tax year.” Id. at 889. The
case before us, however, deals with whether DCAD has authority to tax personal
property under section 21.02(a). As we said in Alaska Flight, section 21.02 deals
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with tax situs, “an entirely different standard,” than the state’s jurisdiction to tax
under section 11.01. Id. at 887.
DCAD argues that inherently mobile property acquires a tax situs when it has
been located in an area with such permanence that it becomes part of the general
mass of property within the boundaries of the taxing authority. See Exxon Corp. v.
San Patricio County Appraisal Dist., 822 S.W.2d 269, 274 (Tex. App.—Corpus
Christi 1991, writ denied). Exxon Corp. stands for the proposition that to acquire tax
situs, property must be located in a particular area with a “degree of permanency”
that distinguishes it from property that is in the area “on a purely temporary or
transitory basis.” Id. at 273–74 (quoting Davis, 632 S.W.2d at 334). In Exxon Corp.,
the evidence showed that Exxon stored massive quantities of crude oil in seventeen
oil tanks located within the county continuously throughout the year, although each
barrel of oil remained there for an average of only seventeen days. Id. at 272. The
court noted that in analyzing a quantity of fungible personal property, it would be
inappropriate to break the property down into individual units. Id. at 273. Here,
unlike the fungible crude oil in Exxon Corp., the individual trucks owned by NCI
Leasing are discrete, readily identifiable, pieces of tangible personal property. They
are unlike fungible quantities of crude oil stored in tanks. Thus, the conclusion that
an undifferentiated mass of oil was continuously present in the county is inapt in this
case. See id. at 273. Even so, the court in Exxon Corp. concluded that the evidence
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supported the trial court’s judgment. Id. at 275. We reach the same conclusion in this
case: the evidence was legally sufficient to support the trial court’s judgment.
Next, DCAD argues that National Carriers is an equitable owner of the trucks
and is subject to taxation under section 21.02(a)(4). If personal property does not
have situs in a taxing unit under subsections (1) through (3) of section 21.02(a), the
taxing unit may tax the property if the owner maintains the owner’s principal place
of business in the unit. TEX. TAX CODE ANN. § 21.02(a)(4).
Because Title 1 of the tax code does not define “owner,” see TEX. TAX CODE
§ 1.04, we give the term its plain and ordinary meaning, Sw. Royalties, Inc. v. Hegar,
500 S.W.3d 400, 405 (Tex. 2016). An “owner” is “[s]omeone who has the right to
possess, use, and convey something.” Owner, Black’s Law Dictionary (11th ed.
2019); see also Travis Cent. Appraisal Dist. v. Signature Flight Support Corp., 140
S.W.3d 833, 839–40 (Tex. App.—Austin 2004, no pet.) (“plain meaning of ‘owner’
contemplates someone with legal or rightful title”).
The general rule is that taxes are imposed on the legal owner of the property;
“[t]he person having legal title to property is generally considered to be the owner
thereof for purposes of taxation.” Childress Cty. v. State, 92 S.W.2d 1011, 1015
(Tex. 1936); see also TEX. TAX CODE ANN. § 32.07(a) (property taxes are personal
obligation of person who owns or acquires property on January 1). Here, it is
undisputed that NCI Leasing, not National Carriers, owned the trucks on January 1,
2016 and that it did not maintain its principal place of business in Dallas County.
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The authority relied upon by DCAD for the equitable-title argument is
inapposite. See TRQ Captain’s Landing L.P. v. Galveston Cent. Appraisal Dist., 212
S.W.3d 726, 732 (Tex. App.—Houston [1st Dist.] 2006), aff’d, 423 S.W.3d 374
(Tex. 2014). That case held that a tax exemption available for property owned by a
charitable entity organized as a community housing development organization
(CHDO) could be claimed by a limited partnership that was wholly owned by a
limited liability corporation with a CHDO as its only member. Id. The supreme court
later agreed with this holding and reasoned that the statutory language of the tax
exemption, TEX. TAX CODE § 11.182, reflected a legislative intent to encourage
private investment in low- and moderate-income housing by providing a tax
exemption even if a CHDO is only a participant in tiered ownership. AHF-Arbors at
Huntsville I, LLC v. Walker Cty. Appraisal Dist., 410 S.W.3d 831, 837–38 (Tex.
2012). The court concluded that extending the exemption to property equitably
owned by a CHDO through wholly-owned subsidiaries was “compelled by the text
of Section 11.182 and consistent with its purpose.” Id. at 839.
This case concerns liability for taxes, not the availability of a specific statutory
tax exemption. Thus, the general rule that tax liability is imposed on the legal title
holder applies. See Childress, 92 S.W.2d at 1015; Sebastian Cotton & Grain, Ltd. v.
Willacy County Appraisal Dist., 581 S.W.3d 804, 809–10 (Tex. App.—Corpus
Christi–Edinburg 2019, pet. denied) (distinguishing AHF-Arbors and holding that
legal title holder was liable for taxes); see also Bailey v. Cherokee County Appraisal
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District, 862 S.W.2d 581, 584 (Tex. 1993) (“While it is true that the heirs hold
equitable title to estate property, this interest does not give rise to tax liability. The
responsibility for taxes lies with the administrator as holder of legal title.”).
Furthermore, subsidiary corporations and parent corporations are considered
separate and distinct “persons” as a matter of law; the separate entity of corporations
will be observed by the courts even in instances where one may dominate or control,
or may even treat it as a mere department, instrumentality, or agency of the other.
Gregg Cty. Appraisal Dist. v. Laidlaw Waste Sys., Inc., 907 S.W.2d 12, 17 (Tex.
App.—Tyler 1995, writ denied). DCAD has presented no compelling reason to
abandon this rule in this case.
DCAD also contends that public policy prevents property from escaping
business personal property taxation. Although DCAD cites no authority for this
argument, we note that it is the legislature that determines public policy though the
statutes it passes. Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653,
665 (Tex. 2008). The legislature has established the public policy regarding the
taxation of tangible personal property by taxing units through the express language
of section 21.02. Because DCAD lacks authority to tax under that section in this
case, the public policy established by the legislature is satisfied.
We overrule DCAD’s sole issue on appeal.
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Conclusion
We conclude the evidence is legally sufficient to support the trial court’s
findings of fact and judgment. We affirm the judgment.
/Erin A. Nowell/
ERIN A. NOWELL
JUSTICE
181520F.P05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
DALLAS CENTRAL APPRAISAL On Appeal from the 44th Judicial
DISTRICT AND DALLAS District Court, Dallas County, Texas
COUNTY APPRAISAL REVIEW Trial Court Cause No. DC-17-04548.
BOARD, Appellants Opinion delivered by Justice Nowell.
Justices Bridges and Whitehill
No. 05-18-01520-CV V. participating.
NATIONAL CARRIERS, INC.
AND NCI LEASING, INC.,
Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.
It is ORDERED that appellees National Carriers, Inc. and NCI Leasing, Inc.
recover their costs of this appeal from appellants Dallas Central Appraisal District
and Dallas County Appraisal Review Board.
Judgment entered this 5th day of May, 2020.
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