Galveston Central Appraisal District v. Valero Refining - Texas L.P. ( 2015 )

Reversed and Remanded and Opinion filed March 31, 2015.
In The
Fourteenth Court of Appeals
NO. 14-13-00434-CV
GALVESTON CENTRAL APPRAISAL DISTRICT, Appellant
V.
VALERO REFINING - TEXAS L.P., Appellee
On Appeal from the 56th District Court
Galveston County, Texas
Trial Court Cause No. 11-CV-1442
OPINION
Appellee Valero Refining-Texas L.P. filed a petition for review of its 2011
property taxes in the trial court, arguing that appellant Galveston Central Appraisal
District (GCAD) had appraised Valero’s Texas City refinery unequally and that the
refinery’s appraised value should be reduced under section 42.26 of the Tax Code.
Following a trial, the jury found that portions of the refinery GCAD had appraised
at approximately $527 million were unequally appraised, and that the “Equal and
Uniform Value” of those portions was approximately $337 million. The trial court
rendered judgment on the verdict, and GCAD brings this appeal.
GCAD raises three issues on appeal, but we need only reach the first two. In
its first issue, GCAD argues the trial court lacked jurisdiction over Valero’s
petition for review because Valero did not challenge the appraised value of the
refinery as a whole and also did not state the amount of taxes it proposed to pay.
In its second issue, GCAD asserts that legally and factually insufficient evidence
supports the jury’s determination of the equal and uniform value of Valero’s
refinery.
Although we conclude the trial court had jurisdiction over Valero’s petition,
we agree with GCAD that the evidence is legally insufficient to support the jury’s
equal and uniform valuation of Valero’s refinery. Because there is some evidence
of unequal appraisal, we reverse the judgment and remand for a new trial.
BACKGROUND
A. GCAD’s appraisal and Valero’s appeal
Valero owns the refinery located at 1301 Loop 197 South, Texas City,
Galveston County, Texas. As part of its responsibility to appraise all property in
Galveston County, GCAD assigned numerous separate account numbers to
component parts of the Valero refinery. 1 GCAD, as it is required to do, prepared a
2011 appraisal of the refinery, valuing it at $1,046,406,150.
1
The record is unclear on the exact number of accounts GCAD assigned to the Valero
refinery. Valero exhibit 4, prepared by Hugh Landrum, the appraiser retained by GCAD to
perform its annual industrial appraisals, lists ten account numbers for the Valero refinery.
During his trial testimony, however, Landrum admitted he excluded certain accounts from his
appraisal. Valero trial exhibit 18 indicates the Valero refinery had twelve account numbers.
Finally, Valero’s trial counsel represented to the trial court that there were fifteen account
numbers assigned to the refinery. Valero’s expert witnesses did not address this inconsistency or
offer any explanation for not including all accounts associated with the refinery in their equal-
and-uniform analysis.
2
Valero protested the appraised value before the Galveston County Appraisal
Review Board (ARB). The record is not clear regarding whether all or only some
account numbers were included in this protest. The ARB granted Valero some
relief and issued orders reducing the appraised value of the refinery. Valero then
appealed the ARB’s orders by filing a petition for review in district court. See Tex.
Tax Code Ann. §§ 42.01, 42.21 (West 2008). In its petition, Valero alleged that
(1) the 2011 values set by the ARB for five of the accounts associated with the
refinery were appraised over their market values; and (2) the values were also
appraised in a manner that was neither equal nor uniform. See Tex. Tax Code
Ann. §§ 42.25–42.26.
Valero later amended its petition to drop the market-value challenge. This
left only Valero’s claim that the refinery was not appraised equally with
comparable properties. In order to proceed with its appeal, Valero paid the full
amount of taxes due on the refinery at the value that had been certified by the
ARB. See Tex. Tax Code Ann. § 42.08(b)(2).
B. The trial court rejects GCAD’s jurisdictional challenges
Prior to trial, GCAD filed a plea to the jurisdiction asking the trial court to
dismiss Valero’s appeal for failure to state the amount of taxes it proposes to pay,
which GCAD argued was a jurisdictional requirement. See Tex. Tax Code Ann.
§ 42.08(b–1) (West 2008). The trial court denied the plea.
On the first day of trial, Valero sought leave to amend its petition to drop its
challenge to the appraised value of two accounts: R364374 for TNRCC pollution
control equipment, and R234000 for personal property and inventory. 2 The
2
GCAD’s only objection to the amended petition was that it was contradictory. The
record indicates Valero revised the amended petition in response to that objection and GCAD
lodged no further objections.
3
ultimate conclusion that GCAD had appraised the Valero refinery at a higher value
than the other two comparable properties—the BP and Marathon refineries. The
Valero experts reached their conclusion by using Equivalent Distillation Capacity
(EDC) to compare the three refineries. According to Coyle, this methodology
minimized the number of adjustments necessary to make the three properties
comparable for purposes of an equal-and-uniform challenge.
Valero’s experts testified that they calculated the EDC for each refinery by
starting with the Nelson Complexity Factor for each processing unit in the refinery,
and then multiplied that number by the capacity of that unit. 4 Using this method,
they determined that, as of January 1, 2011, Valero’s EDC was 2,940,579, BP’s
was 7,140,883, and Marathon’s was 685,267.
In their next step, Valero’s experts divided the total appraised value of the
portions of Valero’s refinery being challenged (and similar portions of the other
refineries) 5 by the refinery’s EDC to arrive “at an expression of the appraised value
in terms of dollars per EDC.” Valero’s experts did not include the appraised value
of any refinery’s pollution control equipment in its total appraised value even
though Killen testified that pollution control equipment (1) is part of each refinery,
(2) would be included in a market-value appraisal, and (3) would be included in a
sale of the facility. Using the above calculation, Valero’s experts determined that
Valero’s refinery portions had a value of $179 per EDC, BP’s had a value of $146
per EDC, and Marathon’s had a value of $83 per EDC. The experts then
determined that the median value of the BP and Marathon properties was $115 per
4
The Nelson Complexity Factor is an approximation of the relative cost of a process unit
when compared with the cost of a similarly-sized crude processing unit. Killen explained that
Nelson Complexity Factors are published annually in the Oil & Gas Journal.
5
The experts’ report stated that they considered “all of the taxable operating
improvements at each refinery” while excluding land, personal property, and pollution control
equipment.
7
James Clarkson testified as GCAD’s appraisal expert. Clarkson, like
Landrum, testified that an equal-and-uniform comparison must include the value of
each refinery’s pollution control equipment because each refinery must have that
equipment in order to operate. Clarkson also opined that two refineries represent
an insufficient number of comparable refineries to conduct an unequal appraisal
analysis. He then stated that he conducted that analysis anyway because that was
his assignment. After conducting his own equal-and-uniform analysis of the three
refineries, Clarkson opined that Valero’s refinery was appraised below the median
value of the two other Galveston refineries.
E. The verdict and judgment
At the conclusion of the evidence, the jury found that the challenged
portions of the Valero refinery had been unequally appraised in 2011. It then
found that the equal and uniform value of those portions was $337,415,593. The
parties agreed to submit the issue of attorneys’ fees to the trial court in the event
the jury found in favor of Valero. Following a hearing on fees, the trial court
signed a final judgment declaring that the 2011 total appraised value for the three
challenged accounts was $337,415,593. It also awarded Valero attorneys’ fees of
$100,000. This appeal followed.
ANALYSIS
I. The trial court had jurisdiction over Valero’s tax appeal.
In its first issue, GCAD argues that the trial court lacked jurisdiction over
Valero’s tax appeal. GCAD makes two separate arguments within its jurisdictional
challenge. First, it contends the trial court lost jurisdiction when Valero dropped
its challenge to the ARB’s valuation of the pollution control equipment account.
In GCAD’s view, as a result of this decision, Valero failed to appeal the appraised
9
value of the whole property as required by the Texas Tax Code, thereby depriving
the trial court of jurisdiction. See Tex. Tax Code Ann. § 42.26 (West 2008). In its
second argument, GCAD contends that the trial court did not have jurisdiction
because Valero failed to meet the statutory requirement of stating the amount of
taxes it proposed to pay at the time it filed its tax appeal in the trial court. See id.
§ 42.08(b–1).
A. Standard of review
We review a trial court’s ruling on a plea to the jurisdiction de novo.
Woodway Drive, L.L.C. v. Harris Cnty. Appraisal Dist., 311 S.W.3d 649, 651
(Tex. App.—Houston [14th Dist.] 2010, no pet.). During this review, we construe
the pleadings liberally in favor of the pleader and look to the pleader’s intent to
determine whether the facts alleged affirmatively demonstrate the trial court’s
jurisdiction to hear the case. Id. A defendant may prevail on a plea to the
jurisdiction by demonstrating that even if all of the plaintiff’s pleaded allegations
are true, an incurable jurisdictional defect remains on the face of the pleadings that
deprives the trial court of subject-matter jurisdiction. Id. at 652.
When construing a statute, a reviewing court looks to the plain and common
meaning of the statute’s terms. Tex. Dept. of Transp. v. City of Sunset Valley, 146
S.W.3d 637, 642 (Tex. 2004). We read a statute as a whole and not just isolated
portions. Id. “If the statutory language is unambiguous, we must interpret it
according to its terms, giving meaning to the language consistent with other
provisions in the statute.” Id., see also Tex. Gov’t Code Ann. § 311.011(a) (West
2013) (“Words and phrases shall be read in context and construed according to the
rules of grammar and common usage.”).
10
ultimate conclusion that GCAD had appraised the Valero refinery at a higher value
than the other two comparable properties—the BP and Marathon refineries. The
Valero experts reached their conclusion by using Equivalent Distillation Capacity
(EDC) to compare the three refineries. According to Coyle, this methodology
minimized the number of adjustments necessary to make the three properties
comparable for purposes of an equal-and-uniform challenge.
Valero’s experts testified that they calculated the EDC for each refinery by
starting with the Nelson Complexity Factor for each processing unit in the refinery,
and then multiplied that number by the capacity of that unit. 4 Using this method,
they determined that, as of January 1, 2011, Valero’s EDC was 2,940,579, BP’s
was 7,140,883, and Marathon’s was 685,267.
In their next step, Valero’s experts divided the total appraised value of the
portions of Valero’s refinery being challenged (and similar portions of the other
refineries) 5 by the refinery’s EDC to arrive “at an expression of the appraised value
in terms of dollars per EDC.” Valero’s experts did not include the appraised value
of any refinery’s pollution control equipment in its total appraised value even
though Killen testified that pollution control equipment (1) is part of each refinery,
(2) would be included in a market-value appraisal, and (3) would be included in a
sale of the facility. Using the above calculation, Valero’s experts determined that
Valero’s refinery portions had a value of $179 per EDC, BP’s had a value of $146
per EDC, and Marathon’s had a value of $83 per EDC. The experts then
determined that the median value of the BP and Marathon properties was $115 per
4
The Nelson Complexity Factor is an approximation of the relative cost of a process unit
when compared with the cost of a similarly-sized crude processing unit. Killen explained that
Nelson Complexity Factors are published annually in the Oil & Gas Journal.
5
The experts’ report stated that they considered “all of the taxable operating
improvements at each refinery” while excluding land, personal property, and pollution control
equipment.
7
EDC. 6 Finally, Valero’s experts multiplied the median figure of $115 per EDC by
Valero’s EDC (2,940,579) to reach an equal and uniform appraised value of
$337,415,593 for the challenged portions of Valero’s refinery. This represented a
reduction of nearly $190 million from the 2011 appraised value of $526,796,990.
When asked on cross-examination, Killen offered no explanation for
Valero’s last-minute decision to drop the pollution control equipment from the
appeal. John Coyle was Valero’s second appraisal expert, and he collaborated with
Killen in the preparation of Valero’s proposed equalized appraisal value for the
refinery. Coyle was also asked during cross-examination for an explanation of
Valero’s decision to drop the pollution control equipment. Coyle’s only
explanation was that he and Killen performed two different calculations based on
the information they were provided to show the “effect of treating the pollution
control equipment, the exempt pollution control equipment as part of the problem
as opposed to excluding it from the problem.” Coyle denied they had excluded the
pollution control equipment from their calculations to skew the results in favor of
Valero.
Hugh Landrum, GCAD’s industrial appraiser, also testified during the trial.
Landrum testified that comparing the EDCs of the refineries is not a complete
comparison of their values because EDC was not designed to be a representation of
market value. Instead, Landrum testified it compares construction costs to build
refinery units. Landrum also opined that an equal-and-uniform appraisal
calculation for a refinery must include the pollution control equipment because it is
an integral part of the overall refinery, which cannot operate without the
equipment.
6
They also performed the same calculation using appraised values that included pollution
control equipment. In that calculation, the median was $231 per EDC, yielding an equalized
value for the Valero refinery of $678,108,731.
8
appeal . . . an [ARB] order” determining its protest, see Tex. Tax Code Ann.
§ 42.01(a), and it argues that nothing in the Code required it to protest the value of
all property accounts in the refinery, secure adverse orders, and appeal all of those
orders before the trial court could acquire jurisdiction.
Although we agree with GCAD that Covert prohibits piecemeal challenges
to the value of an appraised property, we also agree with Valero that on these facts,
its amended petition gave the trial court jurisdiction over this appeal. In Covert,
the owners of three properties improved with car dealerships, each of which was
appraised in a single tax account that valued the land as well as the improvements,
attempted to appeal the valuation of the “land portion only” of each property. 241
S.W.3d at 657. The appraisal district did not challenge the trial court’s jurisdiction
but instead filed special exceptions, contending that the owners failed to state a
cause of action because the Tax Code provides no remedy for unequal appraisal of
only a portion of an appraised property. Id. The trial court dismissed the case and
the Austin Court of Appeals affirmed. Focusing on what property had been
appraised—there, the land and improvements together (id. at 658–59)—the court
of appeals held “that a taxpayer challenging the equal and uniform assessment of
an improved property under section 42.26 must allege that the overall appraised
value of the property is unequal.” Id. at 661 (emphasis added). The court
explained that an owner may allege and introduce evidence that only certain parts
of its property were valued unequally, but it cannot prevail in its challenge unless it
can show that the value of the entire appraised property is not equal or uniform as a
result. Id. at 659 & n.6.
In sum, each dealership in Covert was appraised in a single property tax
account with a single value, and the court held that the owners’ unequal appraisal
challenge was improperly directed to a portion of that value only. The parties
12
value of the whole property as required by the Texas Tax Code, thereby depriving
the trial court of jurisdiction. See Tex. Tax Code Ann. § 42.26 (West 2008). In its
second argument, GCAD contends that the trial court did not have jurisdiction
because Valero failed to meet the statutory requirement of stating the amount of
taxes it proposed to pay at the time it filed its tax appeal in the trial court. See id.
§ 42.08(b–1).
A. Standard of review
We review a trial court’s ruling on a plea to the jurisdiction de novo.
Woodway Drive, L.L.C. v. Harris Cnty. Appraisal Dist., 311 S.W.3d 649, 651
(Tex. App.—Houston [14th Dist.] 2010, no pet.). During this review, we construe
the pleadings liberally in favor of the pleader and look to the pleader’s intent to
determine whether the facts alleged affirmatively demonstrate the trial court’s
jurisdiction to hear the case. Id. A defendant may prevail on a plea to the
jurisdiction by demonstrating that even if all of the plaintiff’s pleaded allegations
are true, an incurable jurisdictional defect remains on the face of the pleadings that
deprives the trial court of subject-matter jurisdiction. Id. at 652.
When construing a statute, a reviewing court looks to the plain and common
meaning of the statute’s terms. Tex. Dept. of Transp. v. City of Sunset Valley, 146
S.W.3d 637, 642 (Tex. 2004). We read a statute as a whole and not just isolated
portions. Id. “If the statutory language is unambiguous, we must interpret it
according to its terms, giving meaning to the language consistent with other
provisions in the statute.” Id., see also Tex. Gov’t Code Ann. § 311.011(a) (West
2013) (“Words and phrases shall be read in context and construed according to the
rules of grammar and common usage.”).
10
B. The trial court had jurisdiction because it timely petitioned for
review of ARB orders, and Valero’s amended petition alleged that
the refinery was unequally appraised.
The Tax Code provides that a property owner is entitled to appeal a final
order of the appraisal review board determining the owner’s tax protest. Tex. Tax
Code Ann. § 42.01(a), 42.21(a) (West 2008 & Supp. 2014). It is undisputed that
Valero owns the refinery located at 1301 Loop 197 South in Texas City, Galveston
County, Texas, that it protested the appraised value of at least some property
accounts within the refinery, and that it timely appealed the ARB’s orders
regarding some of the accounts by filing a petition for review in the trial court.
GCAD asserts that the trial court nevertheless lacked jurisdiction because
Valero dropped its challenge to the appraised value of the account containing the
refinery’s pollution control equipment on the first day of trial, and it failed to
challenge the value of other accounts within the refinery (such as the land) at all.
In support of this argument, GCAD cites section 42.26 of the Tax Code, which
provides:
The district court shall grant relief on the ground that a property is
appraised unequally if . . . (3) the appraised value of the property
exceeds the median appraised value of a reasonable number of
comparable properties appropriately adjusted.
See id. § 42.26(a)(3). In GCAD’s view, Valero is attempting to appeal only the
appraised value of some component parts of the refinery “property,” a practice
GCAD contends was held improper in Covert v. Williamson Cent. Appraisal Dist.,
241 S.W.3d 655, 658–60 (Tex. App.—Austin 2007, pet. denied).
Valero responds by asserting that each part of the refinery at issue here was
appraised in a separate property tax account, and its protest of the value of those
accounts was determined by ARB orders. Valero points out that it is “entitled to
11
appeal . . . an [ARB] order” determining its protest, see Tex. Tax Code Ann.
§ 42.01(a), and it argues that nothing in the Code required it to protest the value of
all property accounts in the refinery, secure adverse orders, and appeal all of those
orders before the trial court could acquire jurisdiction.
Although we agree with GCAD that Covert prohibits piecemeal challenges
to the value of an appraised property, we also agree with Valero that on these facts,
its amended petition gave the trial court jurisdiction over this appeal. In Covert,
the owners of three properties improved with car dealerships, each of which was
appraised in a single tax account that valued the land as well as the improvements,
attempted to appeal the valuation of the “land portion only” of each property. 241
S.W.3d at 657. The appraisal district did not challenge the trial court’s jurisdiction
but instead filed special exceptions, contending that the owners failed to state a
cause of action because the Tax Code provides no remedy for unequal appraisal of
only a portion of an appraised property. Id. The trial court dismissed the case and
the Austin Court of Appeals affirmed. Focusing on what property had been
appraised—there, the land and improvements together (id. at 658–59)—the court
of appeals held “that a taxpayer challenging the equal and uniform assessment of
an improved property under section 42.26 must allege that the overall appraised
value of the property is unequal.” Id. at 661 (emphasis added). The court
explained that an owner may allege and introduce evidence that only certain parts
of its property were valued unequally, but it cannot prevail in its challenge unless it
can show that the value of the entire appraised property is not equal or uniform as a
result. Id. at 659 & n.6.
In sum, each dealership in Covert was appraised in a single property tax
account with a single value, and the court held that the owners’ unequal appraisal
challenge was improperly directed to a portion of that value only. The parties
12
dispute whether Covert applies when, as here, a facility is appraised in multiple
property tax accounts and the owner’s unequal appraisal challenge is directed to
the entire value of certain accounts only. Cf. Matagorda County Appraisal Dist. v.
Coastal Liquids Partners, L.P., 165 S.W.3d 329, 332–34 (Tex. 2005) (holding
different aspects of real property that are part of same tract can be taxed separately
under certain circumstances without resulting in double taxation); Tex. Att’y Gen.
Op. No. GA-0790 (2010) (stating that assignment of land and improvements,
whether separate or combined, to accounts is an administrative decision made by
the chief appraiser). We need not decide that issue today, however, for two
reasons.
First, Covert does not support GCAD’s position that the trial court lacked
jurisdiction. Covert did not address jurisdiction; it held, on special exceptions, that
a taxpayer “cannot prevail” on an unequal appraisal claim under section 42.26
unless it proves that the value of the appraised property is not equal or uniform.
241 S.W.3d at 659. This holding echoes the language of section 42.26, which
addresses when a court “shall grant relief on the ground that a property is appraised
unequally.” Tex. Tax Code Ann. § 42.26(a). That section does not address what
an owner may appeal or how it may invoke the trial court’s jurisdiction over an
appeal—subjects covered by sections 42.01 and 42.21. See Dubai Petrol. Co. v.
Kazi, 12 S.W.3d 71, 76–77 (Tex. 2000) (explaining distinction between right of
plaintiff to relief and jurisdiction of court to afford it); Reliance Ins. Co. v. Denton
Cent. Appraisal Dist., 999 S.W.2d 626, 629 (Tex. App.—Fort Worth 1999, no pet.)
(holding trial court did not lack jurisdiction to consider unequal appraisal challenge
to value of land portion of property consisting of both land and improvements, and
reasoning that although failure to prove unequal appraisal of property as a whole
would generally prevent owner from prevailing, it would not deprive court of
13
jurisdiction). As discussed above, it is undisputed that Valero filed a timely
petition seeking review of the ARB’s orders in compliance with sections 42.01 and
42.21, which we hold was sufficient to vest the trial court with jurisdiction.
Second, even if Covert were a jurisdictional limitation that foreclosed
unequal-appraisal challenges to the value of only some property tax accounts
within a multi-account facility, it would not require dismissal here because Valero
alleged that the overall appraised value of the entire refinery is unequal. In its
Third Amended Petition, Valero described the property at issue as consisting of
“the real and business personal property located at 1301 Loop 197 S in Galveston
County, Texas,” “and/or” “the economic unit and any improvements,
appurtenances, personal property and fixtures normally included in this kind of
property.” Although the amended petition also specifically listed three account
numbers, Valero alleged that the “appraised value of the PROPERTY exceeds the
median appraised value of a reasonable number of comparable properties
appropriately adjusted” in violation of section 42.26 of the Texas Tax Code.
Because Valero’s amended petition alleged that the entire refinery was unequally
appraised, the trial court had jurisdiction over the dispute and did not err when it
denied GCAD’s motion to dismiss based on Covert. See Covert, 241 S.W.3d at
659 & n.6; see also Matagorda County Appraisal Dist., 165 S.W.3d at 335 (stating
that property description is sufficient when property sought to be assessed may be
identified from the description given).7
7
GCAD also argues on appeal that the trial court abused its discretion by allowing
Valero to amend its petition to drop its challenge to the pollution control equipment account
because the amendment reshaped the trial and operated as a surprise. See Tex. R. Civ. P. 63.
Valero responds that GCAD failed to object to the amendment and has not shown surprise. We
need not decide this issue because the greatest relief available for an improper amendment would
be a new trial, see Stevenson v. Koutzarov, 795 S.W.2d 313, 321, 323 (Tex. App.—Houston [1st
Dist.] 1990, writ denied), and we are ordering a new trial on other grounds as explained below.
14
C. The trial court did not err when it refused to dismiss Valero’s tax
appeal pursuant to section 42.08 of the Texas Tax Code.
GCAD next asserts that the trial court erred in refusing to dismiss Valero’s
tax appeal because Valero failed to provide with its original petition a written
statement of the amount of taxes it proposed to pay as required by section 42.08(b-
1) of the Tax Code. See Tex. Tax Code Ann. § 42.08(b-1) (West 2008). 8 We
disagree that a statement was required on these facts.
Section 42.08(b) requires a property owner, to avoid forfeiture of his right to
obtain judicial review, to pay the lesser of: (1) the amount of taxes not in dispute,
or (2) the current tax liability. See Tex. Tax Code Ann. § 42.08(b)(1)–(2) (West
2008); 9 U. Lawrence Boze’ & Assocs., P.C. v. Harris County Appraisal Dist., 368
S.W.3d 17, 27–28 (Tex. App.—Houston [1st Dist.] 2011, no pet.). This payment
is not due immediately upon filing the petition for review, but before the
delinquency date for the tax year. Id. If the payment is not timely made, then
(with certain exceptions) “the property owner forfeits its right to proceed to a final
determination of the appeal” and the trial court loses subject-matter jurisdiction.
Tex. Tax Code Ann. § 42.08(b); U. Lawrence Boze’ & Assocs., 368 S.W.3d at 23,
27, 31.
The statement requirement of subsection (b–1), on which GCAD relies,
“applies only to an appeal in which the property owner elects to pay” the amount
of taxes not in dispute under subsection (b)(1). Tex. Tax Code Ann. § 42.08(b–1)
(West 2008). In this case, however, Valero paid the current tax liability in full
8
After the trial in this case, the Legislature amended this section to state expressly that
“[t]he failure to provide the statement required by this subsection is not a jurisdictional error.”
See Tex. Tax Code Ann. § 42.08(b-1) (West Supp. 2014) (amendment effective June 14, 2013
while trial court’s judgment was signed March 20, 2013).
9
The Legislature’s recent amendment also gives the taxpayer the option of paying the
previous year’s tax liability. See Tex. Tax Code Ann. § 42.08(b)(3) (West Supp. 2014).
15
before the delinquency date in compliance with subsection (b)(2). Accordingly,
the trial court correctly concluded that it did not lose subject-matter jurisdiction.
Because Valero complied with the jurisdictional requirement to maintain its
tax protest appeal, we reject GCAD’s second jurisdictional argument. Having
rejected both arguments raised in GCAD’s first issue, we overrule that issue.
II. The evidence is legally insufficient to support the jury’s finding of equal
and uniform value.
In its second issue, GCAD contends the evidence is legally and factually
insufficient to support the jury’s finding of the equal and uniform value of the
challenged portions of the refinery. GCAD makes two distinct arguments: (1)
Valero did not use a reasonable number of comparable properties in its equal-and-
uniform analysis because the Marathon refinery is not a comparable property; and
(2) the Valero experts’ equal-and-uniform analysis is conclusory because they
offered no explanation for excluding portions of the refineries when applying their
dollars-per-EDC adjustment method. 10 We address each argument in turn.
A. Standard of review
When an appellant attacks the legal sufficiency of an adverse finding on an
issue on which it did not have the burden of proof, the appellant must demonstrate
on appeal that there is no evidence to support the adverse finding. Univ. Gen.
10
On appeal, GCAD also argues that the opinions of the Valero experts are not reliable
because their methodology did not meet the statutory requirement that, in order to demonstrate
an unequal appraisal, a property owner must find comparable properties and adjust the appraised
values of those properties to arrive at a median appraised value. In the trial court, however,
GCAD did not challenge the reliability of the Valero experts’ methodology of using dollars per
EDC to determine the adjusted appraised values of refineries. Because GCAD failed to preserve
a reliability challenge for our review, we do not reach this argument and express no opinion on
the reliability of the Valero experts’ methodology, which the parties are free to address on
remand. See Tex. R. App. P. 33.1; Harris County Appraisal Dist. v. Kempwood Plaza Ltd., 186
S.W.3d 155, 161–62 (Tex. App.—Houston [1st Dist.] 2006, no pet.).
16
Hosp., L.P. v. Prexus Health Consultants, LLC, 403 S.W.3d 547, 550 (Tex. App.—
Houston [14th Dist.] 2013, no pet.). In conducting a legal sufficiency review, we
must consider the evidence in the light most favorable to the appealed finding and
indulge every reasonable inference that supports it. Id. at 550–51 (citing City of
Keller v. Wilson, 168 S.W.3d 802, 821–22 (Tex. 2005)). The evidence is legally
sufficient if it would enable reasonable and fair-minded people to reach the
decision under review. Id. at 551. This Court must credit favorable evidence if a
reasonable trier of fact could, and disregard contrary evidence unless a reasonable
trier of fact could not. Id. The trier of fact is the sole judge of the witnesses’
credibility and the weight to be given their testimony. Id.
This Court may sustain a legal sufficiency (or no evidence) issue only if the
record reveals one of the following: (1) the complete absence of evidence of a vital
fact; (2) the court is barred by rules of law or evidence from giving weight to the
only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital
fact is no more than a scintilla; or (4) the evidence established conclusively the
opposite of the vital fact. Id. Evidence that is so weak as to do no more than
create a mere surmise or suspicion that the fact exists is less than a scintilla. Id.
A party that preserved a legal sufficiency complaint in the trial court may
argue on appeal that an expert’s opinion is conclusory, and as a result the evidence
supporting the jury’s verdict is legally insufficient. Whirlpool Corp. v. Camacho,
298 S.W.3d 631, 638 (Tex. 2009). In that situation, we independently consider
whether the evidence at trial would enable reasonable and fair-minded jurors to
reach the verdict under review. Id. (citing City of Keller, 168 S.W.3d at 827). A
no-evidence review encompasses the entire record, including contrary evidence
tending to show the expert opinion is incompetent or unreliable. Id.
17
No objection to the admission of an expert’s opinion is required when the
expert’s testimony is conclusory and lacks probative value as a result. Coastal
Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex.
2004). This principle applies when the expert offers no basis for his opinion or the
basis offered by the expert provides no support. City of San Antonio v. Pollock,
284 S.W.3d 809, 818 (Tex. 2009). The supreme court has made it clear that “a
claim will not stand or fall on the mere ipse dixit of a credentialed witness.” Id.
B. There is legally sufficient evidence that Marathon is a comparable
property.
GCAD initially contends that the evidence is legally insufficient to support
the judgment because Valero’s experts used a non-comparable property—the
Marathon refinery—in their equal-and-uniform analysis.11 We disagree.
Section 42.26(a)(3) of the Texas Tax Code provides that a district court shall
grant relief on the ground that a property is appraised unequally if “the appraised
value of the property exceeds the median appraised value of a reasonable number
of comparable properties appropriately adjusted.” Tex. Tax Code Ann.
§ 42.26(a)(3). In GCAD’s view, Valero failed to introduce legally sufficient
evidence that the Marathon refinery is a comparable property, and its exclusion
from the analysis leaves Valero without a reasonable number of comparable
properties as required by the statute.
Neither party cites authority addressing how we are to review GCAD’s
challenge. Many courts analyze arguments that a property is not comparable as
11
Although we ultimately agree with GCAD’s second legal sufficiency argument and
hold that it entitles GCAD to a new trial (see Part II.C. below), we address this first argument
because GCAD contends it would support the greater relief of judgment in GCAD’s favor and
because it is likely to arise again on remand. See Garza v. Cantu, 431 S.W.3d 96, 107 n.7 (Tex.
App.—Houston [14th Dist.] 2013, pet. denied).
18
challenges to the admission of evidence regarding the property’s value or to the
reliability of expert testimony based on that value, holding that trial courts have
considerable discretion in making the fact-intensive determination whether
properties are similar enough to admit the evidence, and that the degree of
comparability goes to the weight of the evidence.12 These holdings have particular
force in this context because a very demanding threshold standard of comparability
could prevent owners of complex industrial properties from bringing an equal-and-
uniform challenge at all—a result at odds with the broad construction we are to
give section 42.26 as a remedial statute.13 Moreover, GCAD did not ask the trial
court to make a comparability determination by objecting to the admission of
evidence regarding the Marathon refinery or to the reliability of the expert
testimony offered by Valero.
Even if GCAD could nevertheless raise a separate challenge to the legal
sufficiency of the evidence regarding Marathon’s comparability, we conclude that
such a challenge fails because there is more than a scintilla of evidence that the
Valero and Marathon refineries are sufficiently comparable. In support of its
position, GCAD points to evidence that Marathon’s refinery has a much smaller
refining capacity and lacks a coker unit as well as other processing units that both
Valero and BP possess. Undisputed evidence also showed, however, that no two
12
E.g., Harris County Appraisal Dist. v. Houston 8th Wonder Prop., L.P., 395 S.W.3d
245, 256 (Tex. App.—Houston [1st Dist.] 2012, pet. denied); Collin County v. Hixon Family
P’ship, Ltd., 365 S.W.3d 860, 872 (Tex. App.—Dallas 2012, pet. denied); City of Dallas v.
Anderson, 570 S.W.2d 62, 66–67 (Tex. Civ. App.—Dallas 1978, writ ref’d n.r.e.); Stewart v.
State, 453 S.W.2d 524, 526–27 (Tex. Civ. App.—Beaumont 1970, writ ref’d n.r.e.).
13
Harris County Appraisal Dist. v. United Investors Realty Trust, 47 S.W.3d 648, 652
(Tex. App.—Houston [14th Dist.] 2001, pet. denied) (stating that remedial statutes, such as
section 42.26 of the Tax Code, should not be given a construction that would defeat the purpose
for which they were enacted by the Legislature); see also Hunter v. Fort Worth Capital Corp.,
620 S.W.2d 547, 551 (Tex. 1981) (noting cardinal rule of statutory construction that the
Legislature is never presumed to do a useless or meaningless act).
19
Hosp., L.P. v. Prexus Health Consultants, LLC, 403 S.W.3d 547, 550 (Tex. App.—
Houston [14th Dist.] 2013, no pet.). In conducting a legal sufficiency review, we
must consider the evidence in the light most favorable to the appealed finding and
indulge every reasonable inference that supports it. Id. at 550–51 (citing City of
Keller v. Wilson, 168 S.W.3d 802, 821–22 (Tex. 2005)). The evidence is legally
sufficient if it would enable reasonable and fair-minded people to reach the
decision under review. Id. at 551. This Court must credit favorable evidence if a
reasonable trier of fact could, and disregard contrary evidence unless a reasonable
trier of fact could not. Id. The trier of fact is the sole judge of the witnesses’
credibility and the weight to be given their testimony. Id.
This Court may sustain a legal sufficiency (or no evidence) issue only if the
record reveals one of the following: (1) the complete absence of evidence of a vital
fact; (2) the court is barred by rules of law or evidence from giving weight to the
only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital
fact is no more than a scintilla; or (4) the evidence established conclusively the
opposite of the vital fact. Id. Evidence that is so weak as to do no more than
create a mere surmise or suspicion that the fact exists is less than a scintilla. Id.
A party that preserved a legal sufficiency complaint in the trial court may
argue on appeal that an expert’s opinion is conclusory, and as a result the evidence
supporting the jury’s verdict is legally insufficient. Whirlpool Corp. v. Camacho,
298 S.W.3d 631, 638 (Tex. 2009). In that situation, we independently consider
whether the evidence at trial would enable reasonable and fair-minded jurors to
reach the verdict under review. Id. (citing City of Keller, 168 S.W.3d at 827). A
no-evidence review encompasses the entire record, including contrary evidence
tending to show the expert opinion is incompetent or unreliable. Id.
17
C. There is no evidence to support the jury’s value finding because
Valero’s experts offered no basis for including some parts of the
refineries in their valuation analysis while excluding others.
Next, GCAD argues the evidence is legally insufficient to support the jury’s
finding that the equal and uniform value of the challenged portions of the Valero
refinery was $337,415,593 because Valero’s experts did not sufficiently explain
the basis for their calculations supporting that value, rendering their opinions
conclusory. In particular, GCAD points out that in applying their chosen
adjustment method of dollars per EDC, Valero’s experts provided no basis for their
decision to include the appraised dollar value of the three refineries’ non-process
facilities in the analysis while excluding the value of their pollution control
equipment—a decision that offered Valero an additional reduction of over $130
million in the appraised value of the challenged portions of the refinery. Because
we agree that Valero’s experts offered no reason for removing the pollution control
equipment from the equal-and-uniform analysis other than that Valero had told
them to do so, we hold that the jury’s finding is not supported by legally sufficient
evidence. See Pollock, 284 S.W.3d at 818.
To explain the basis for our conclusion, we begin by reviewing the portions
of the refineries at issue and the experts’ analysis of their equal and uniform value.
Valero’s appeal of the ARB’s orders challenged the appraised value of property
listed in five specific account numbers: (1) R293410 for process units and various
support facilities (appraised value $520,791,990); (2) R293411 for port tank
facilities (appraised value $2,125,000); (3) R422670 for crude oil tank facilities
(appraised value $3,880,000); (4) R364374 for pollution control equipment
(appraised value $233,718,730); and (5) P234000 for personal property and
inventory (appraised value $2,934,000). The total appraised value of these five
accounts was $763,449,720.
21
On the first day of trial, the court granted Valero leave to file an amended
petition dropping its valuation challenge to two of the accounts: pollution control
equipment and personal property and inventory.15 Nevertheless, Valero’s experts
prepared two equal-and-uniform analyses of the appraised value of the three
refineries, one that included and another that excluded the appraised value of each
refinery’s pollution control equipment. With the pollution control equipment
included in the analysis, the ARB’s 2011 appraised value of the Valero refinery
was $760,515,720. When the pollution control equipment was removed, the
appraised value was $526,796,990, a reduction of $233,718,730.
This reduction had a substantial effect on the experts’ calculation of dollars
of appraised value per EDC—the method they used to make the adjustments
necessary to determine a median appraised value. As explained above, EDC
measures the capacity and complexity of a refinery’s process units (which, in
Valero’s case, were appraised in account R293410). Valero’s experts added
together the appraised dollar values of certain property accounts within each
refinery and divided that total value by the refinery’s EDC to determine a dollars-
per-EDC value, which they then compared across refineries to arrive at a median
value. This median value was $231 per EDC when the experts included the
appraised value of each refinery’s pollution control equipment as well as its
process units and facilities accounts, but $115 per EDC when pollution control
equipment was excluded. As a result, Valero’s experts opined that the equal and
uniform value of the three property accounts still being challenged by Valero—the
15
Although GCAD disputed the dropping of the pollution control equipment account
from the lawsuit, it did not challenge in the trial court, and has not challenged on appeal, the
dropping of account P234000 from the lawsuit. None of the experts included account P234000
in their equal-and-uniform comparisons. We therefore do not address the appropriateness of the
experts’ decisions to exclude the account from their valuation opinions. See Kempwood Plaza
Ltd., 186 S.W.3d at 161.
22
No objection to the admission of an expert’s opinion is required when the
expert’s testimony is conclusory and lacks probative value as a result. Coastal
Transp. Co., Inc. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227, 232 (Tex.
2004). This principle applies when the expert offers no basis for his opinion or the
basis offered by the expert provides no support. City of San Antonio v. Pollock,
284 S.W.3d 809, 818 (Tex. 2009). The supreme court has made it clear that “a
claim will not stand or fall on the mere ipse dixit of a credentialed witness.” Id.
B. There is legally sufficient evidence that Marathon is a comparable
property.
GCAD initially contends that the evidence is legally insufficient to support
the judgment because Valero’s experts used a non-comparable property—the
Marathon refinery—in their equal-and-uniform analysis.11 We disagree.
Section 42.26(a)(3) of the Texas Tax Code provides that a district court shall
grant relief on the ground that a property is appraised unequally if “the appraised
value of the property exceeds the median appraised value of a reasonable number
of comparable properties appropriately adjusted.” Tex. Tax Code Ann.
§ 42.26(a)(3). In GCAD’s view, Valero failed to introduce legally sufficient
evidence that the Marathon refinery is a comparable property, and its exclusion
from the analysis leaves Valero without a reasonable number of comparable
properties as required by the statute.
Neither party cites authority addressing how we are to review GCAD’s
challenge. Many courts analyze arguments that a property is not comparable as
11
Although we ultimately agree with GCAD’s second legal sufficiency argument and
hold that it entitles GCAD to a new trial (see Part II.C. below), we address this first argument
because GCAD contends it would support the greater relief of judgment in GCAD’s favor and
because it is likely to arise again on remand. See Garza v. Cantu, 431 S.W.3d 96, 107 n.7 (Tex.
App.—Houston [14th Dist.] 2013, pet. denied).
18
In this Court, Valero suggests that its decision to narrow its appeal in the
trial court and forgo a challenge to the ARB’s value of the separately-appraised
pollution control equipment provided a basis for its experts to exclude that value
from their analysis. We disagree because it is the refinery comparison method
chosen by Valero’s experts that determines which parts of each refinery must be
included to produce a reliable calculation of median dollars per EDC, and there is
no evidence from the experts suggesting that Valero’s pleading decision affects the
median calculation. When the value of part of a larger property is in dispute, many
valuation methods consider the larger property in valuing the disputed portion.
See, e.g., State v. Windham, 837 S.W.2d 73, 76 (Tex. 1992) (holding that when
parcel condemned is part of larger economic unit of property, value of parcel must
be calculated with reference to remainder of property, and rejecting argument that
condemnee has absolute right to designate economic unit). Here, Valero’s experts
did not address whether dollars per EDC is such a method. Nor can we discern any
basis in the record for concluding that the experts’ method provides a basis for
excluding pollution control equipment. We note that EDC is calculated based on
the refinery’s process units, and pollution control equipment is not a process unit.
But the other tank facilities are likewise not process units, yet the experts included
their value in the analysis. Accordingly, we conclude that neither Valero’s
amended petition nor the experts’ chosen method provides a basis for excluding
the value of Valero’s pollution control equipment from the equal-and-uniform
analysis.
Valero also asserts that the equipment was properly excluded because each
refinery’s pollution control equipment differs from the equipment found in the
other two refineries. We conclude that alleged differences in the type and
decisions made on adjustments to values of comparable properties, and (2) evidence was legally
sufficient to support the judgment as a result).
24
allocation of the pollution control equipment at each refinery do not provide a basis
to exclude pollution control equipment from the equal-and-uniform analysis,
however, because any differences that may exist can be addressed through the
adjustment process. United Investors Realty Trust, 47 S.W.3d at 653. Moreover,
the allegation that the appraised value of the pollution control equipment at one or
more refineries may not match its market value is (if true) a ground for an
excessive-appraisal challenge, not an unequal-appraisal challenge. Compare Tex.
Tax Code Ann. § 42.25 with id. § 42.26.
Finally, Valero points out that it was undisputed at trial that some portion of
each refinery’s pollution control equipment is ultimately exempt from taxation.
We conclude that this exemption likewise provides no basis for excluding pollution
control equipment from the equal-and-uniform analysis. GCAD is charged with
determining the appraised value of property in its district, and it is the appraised
value—not the taxable value—that Valero has challenged as unequal.17
Because we have determined that Valero’s experts offered no basis for
excluding an integral part of each refinery from their equal and uniform valuation,
we conclude the evidence is legally insufficient to support the jury’s determination
17
See Tex. Tax Code Ann. §§ 1.04 (8), (9), (10), (14) (defining “appraised value,”
“assessed value,” “taxable value,” and “assessor”), 6.01 (establishing appraisal district in each
county and assigning it duty to appraise property in district for ad valorem tax purposes), 26.01
(requiring chief appraiser to prepare and certify appraisal roll for all property taxable in district),
31.01 (requiring tax assessor to state in each tax bill the appraised value, assessed value, and
taxable value of the property), 42.26(a)(3) (authorizing district court to grant relief to property
owner “on the ground that a property is appraised unequally” under certain circumstances) (West
2008); see also Benson Chevrolet, Inc. v. Bexar County Appraisal Dist., 242 S.W.3d 54, 56 (Tex.
App.—San Antonio 2007, no pet.) (“If no protest or challenge is filed by the property owner
regarding the appraised value established by the appraisal district, the appraisal district certifies
the value to the tax assessor-collector and the tax assessor-collector issues tax statements and
collects taxes.”); General Motors Acceptance Corp. v. Harris County Appraisal Dist., 899
S.W.2d 821, 823 (Tex. App.—Houston [14th Dist.] 1995, no writ) (stating that appraisal district
lists property and its appraised market value).
25
that the 2011 equal and uniform value of the Valero refinery was $337,415,593.
We therefore sustain GCAD’s second issue on appeal.
Normally, we reverse and render judgment in favor of the appellant when we
sustain a legal sufficiency point. Guevara v. Ferrer, 247 S.W.3d 662, 670 (Tex.
2007). We conclude that is not the appropriate outcome here because there is some
evidence in the record that would support an equal and uniform valuation of the
challenged portions of the Valero refinery that is lower than the valuation ordered
by the ARB. In this situation, we may either remand the case to the trial court for a
new trial or suggest a remittitur. Garza v. Cantu, 431 S.W.3d 96, 108 (Tex.
App.—Houston [14th Dist.] 2013, pet. denied) (citing Guevara, 247 S.W.3d at
670). Here, Valero’s experts performed a separate equal-and-uniform calculation
that included each refinery’s pollution control equipment account. They did not,
however, include all accounts associated with each refinery in that calculation, nor
did they explain why it was acceptable under a dollars-per-EDC method to include
certain accounts and exclude others. We conclude, therefore, that the record
contains insufficient evidence to calculate an accurate remittitur. Accordingly, we
reverse the trial court’s judgment and remand this case to the trial court for a new
trial. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 314 (Tex. 2006)
(holding improperly segregated awards of damages or fees are some evidence of
what the segregated awards should be and therefore require a remand). Because
the disputes in the initial trial included both whether the property was unequally
appraised and, if so, its equal and uniform value, a new trial on both issues is
necessary. See Tex. R. App. P. 44.1(b); Garza, 431 S.W.3d at 108.
26
III. The award of attorneys’ fees to Valero must also be reversed and
remanded for a new trial.
In its third issue, GCAD challenges the trial court’s award of attorneys’ fees
to Valero. Valero sought, and the trial court awarded, attorneys’ fees pursuant to
section 42.29 of the Texas Tax Code. This section provides that a property owner
who prevails in a tax appeal on unequal appraisal grounds may be awarded
reasonable attorneys’ fees. See Tex. Tax Code Ann. § 42.29 (West 2008).
Because we have reversed the unequal appraisal judgment in favor of Valero,
Valero is no longer a prevailing party at this stage of the proceedings. We
therefore sustain GCAD’s third issue, reverse the judgment’s award of attorneys’
fees, and remand that matter to the trial court as well. See Bluelinx Corp. v. Texas
Const. Sys., Inc., 363 S.W.3d 623, 630 (Tex. App.—Houston [14th Dist.] 2011, no
pet.).
CONCLUSION
Having sustained GCAD’s second and third issues on appeal, we reverse the
judgment of the trial court and remand this case to the trial court for a new trial.
/s/ J. Brett Busby
Justice
Panel consists of Justices Boyce, Busby, and Wise.
27