Jack County Appraisal District v. Jack County Hospital District

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00188-CV
JACK COUNTY APPRAISAL APPELLANT
DISTRICT
V.
JACK COUNTY HOSPITAL APPELLEE
DISTRICT
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FROM THE 271ST DISTRICT COURT OF JACK COUNTY
TRIAL COURT NO. 13-07-097
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OPINION
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In two issues, Appellant Jack County Appraisal District (the Appraisal
District) appeals from the trial court’s order granting Appellee Jack County
Hospital District’s (the Hospital District) motion for summary judgment and
denying the Appraisal District’s motion for summary judgment. We affirm.
Background
The Hospital District is a political subdivision of the State of Texas. In
June 2011, the Hospital District entered into a lease agreement with Provident
Equipment Leasing, a division of Celtic Leasing Corporation, to lease a CT
scanner for use at Faith Community Hospital in Jacksboro, Texas. The lease
agreement provided that title to the CT scanner would remain in Provident and
that the Hospital District was required to pay all property taxes on the CT
scanner. The monthly rental payments were $10,788, and the lease agreement’s
initial term was for sixty months and could be extended in one-year intervals.
The lease agreement also gave the Hospital District the right to purchase the CT
scanner from Provident at the expiration of the lease term:
Lessee may purchase, or renew the Lease for, all but not less than
all of the Equipment subject to any Schedule, provided Lessee is not
in default and upon proper written notification to Lessor,[1] as of the
expiration of the Term of said Schedule. In the event Lessee notifies
Lessor it elects to purchase the Equipment, the purchase price shall
be the “Fair Market Value” of the Equipment. For the purpose of this
Lease, “Fair Market Value” is defined as the total cost(s) it would
take to replace the Equipment on an in-place, installed basis,
including all current cost(s) and expense(s) for the purchase,
assembly, installation, delivery, freight, consulting, training, site
preparation[,] and any other services that would be required to
render such Equipment fully installed, ready, and acceptable for use
by an end user as of the termination of the Term. If Lessor and
Lessee can[]not agree on a purchase price then the purchase price
shall be determined by the average of two Senior Appraisers
accredited by the American Society of Appraisers, one chosen by
1
The lease agreement required that the Hospital District notify Provident in
writing of its election to purchase the CT scanner at least six months, but not
more than twelve months, before the end of the lease term.
2
Lessor and one chosen by Lessee, both using the definition of Fair
Market Value hereunder in determining their purchase price, the cost
of which shall be borne by Lessee.
In April 2012, Celtic Leasing rendered the CT scanner to the Appraisal
District. See Tex. Tax Code Ann. § 22.01 (West 2015). The Appraisal District
appraised the CT scanner at a value of $571,560 and sent notice of the
appraised value to Celtic Leasing. See id. § 25.19 (West 2015). Celtic Leasing
did not file a protest. The Appraisal District sent two tax bills to Celtic Leasing
totaling $19,578.71. Celtic Leasing paid the taxes, and Provident billed the
Hospital District for them. The bill from Provident was the first notice the Hospital
District had received that the Appraisal District had appraised the CT scanner for
taxation. The Hospital District filed a protest with the Jack County Appraisal
Review Board, which was denied.
The Hospital District appealed the Jack County Appraisal Review Board’s
decision to the district court, contending that the CT scanner was public property
and therefore tax exempt. See id. § 11.11(a), (h). (West 2015). The Hospital
District and the Appraisal District filed cross-motions for summary judgment. See
Tex. R. Civ. P. 166a(a)–(c). The Hospital District moved for summary judgment
on the grounds that the CT scanner was tax exempt under section 11.11
because it was used for public purposes and because the Hospital District was a
political subdivision of the state and the owner of the CT scanner for purposes of
application of the exemption. See Tex. Tax Code Ann. § 11.11(a), (h). The
Hospital District argued in the alternative that it was the owner of the CT scanner
3
because the lease agreement created a security interest in the CT scanner in
favor of Provident, making the Hospital District the owner. The Hospital District
further argued that because the 2012 notice of appraised value was not delivered
to the Hospital District, it was denied due process, thereby voiding the tax
assessment. The Appraisal District moved for summary judgment on the
grounds that the CT scanner was not exempt under section 11.11 because there
was no signed lease agreement between the Hospital District and Provident, and
even if there were a signed lease agreement, the CT scanner would not be tax
exempt because the Hospital District was not the owner of the CT scanner under
section 11.11.
Without specifying the grounds upon which it relied, the trial court granted
the Hospital District’s motion, denied the Appraisal District’s motion, and ordered
the Appraisal District to “perform the ‘post-appeal administrative procedures’
found at Texas Property Tax Code, Chapter 42, Subchapter C, including, but not
limited to, removing the subject property from the District’s Appraisal Rolls for the
tax year(s) in question.” The Appraisal District appealed.
Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the
light most favorable to the nonmovant, crediting evidence favorable to the
nonmovant if reasonable jurors could, and disregarding evidence contrary to the
nonmovant unless reasonable jurors could not. Mann Frankfort Stein & Lipp
4
Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every
reasonable inference and resolve any doubts in the nonmovant’s favor. 20801,
Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A plaintiff is entitled to
summary judgment on a cause of action if it conclusively proves all essential
elements of the claim. See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710
S.W.2d 59, 60 (Tex. 1986). A defendant who conclusively negates at least one
essential element of a cause of action is entitled to summary judgment on that
claim. Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 508 (Tex. 2010); see
Tex. R. Civ. P. 166a(b), (c).
When both parties move for summary judgment and the trial court grants
one motion and denies the other, the reviewing court should review both parties’
summary-judgment evidence and determine all questions presented. Mann
Frankfort, 289 S.W.3d at 848; see Myrad Props., Inc. v. Lasalle Bank Nat’l Ass’n,
300 S.W.3d 746, 753 (Tex. 2009). The reviewing court should render the
judgment that the trial court should have rendered. Mann Frankfort, 289 S.W.3d
at 848.
Discussion
In its first issue, the Appraisal District argues that the trial court erred by
granting summary judgment for the Hospital District and by denying summary
judgment for the Appraisal District by holding that the CT scanner was owned by
the Hospital District, either legally or equitably, for the purpose of property
5
taxation and, therefore, was tax exempt under tax code section 11.11(h) or
otherwise not subject to property taxation.
All “tangible personal property” that is located in the taxing unit on the date
of valuation “for more than a temporary period” is taxable unless exempt by law.
Tex. Tax Code Ann. §§ 11.01, 21.02 (West 2015). Generally, property owned by
the state or a political subdivision of the state is exempt from taxation if the
property is used for public purposes. Id. § 11.11(a). Section 11.11(h) provides:
For purposes of this section, tangible personal property is owned by
this state or a political subdivision of this state if it is subject to a
lease-purchase agreement providing that the state or political
subdivision, as applicable, is entitled to compel delivery of the legal
title to the property to the state or political subdivision, as applicable,
at the end of the lease term. The property ceases to be owned by
the state or political subdivision, as applicable, if, not later than the
30th day after the date the lease terminates, the state or political
subdivision, as applicable, does not exercise its right to acquire legal
title to the property.
Id. § 11.11(h).
This issue involves statutory construction, which we review de novo. See
CHCA Woman’s Hosp., L.P. v. Lidji, 403 S.W.3d 228, 231 (Tex. 2013). In
construing statutes, our primary objective is to give effect to the legislature’s
intent. Tex. Lottery Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628,
635 (Tex. 2010) (citing Galbraith Eng’g Consultants, Inc. v. Pochucha, 290
S.W.3d 863, 867 (Tex. 2009)). We rely on the plain meaning of the text as
expressing legislative intent unless a different meaning is supplied by legislative
definition or is apparent from the context or the plain meaning leads to absurd
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results. Id. (citing City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26 (Tex.
2008)). We presume that the legislature selected language in a statute with care
and that every word or phrase was used with a purpose in mind. Id. (citing In re
Caballero, 272 S.W.3d 595, 599 (Tex. 2008); Chastain v. Koonce, 700 S.W.2d
579, 582 (Tex. 1985)). We read statutes as a whole and interpret statutes to give
effect to “every sentence, clause, and word of a statute so that no part thereof
[will] be rendered superfluous.” City of San Antonio v. City of Boerne, 111
S.W.3d 22, 29 (Tex. 2003) (quoting Spence v. Fenchler, 180 S.W. 597, 601
(1915)).
In addition to the general principles that guide our construction of the tax
code, statutory tax exemptions are disfavored and are strictly construed against
the taxpayer and in favor of the taxing authority. N. Alamo Water Supply Corp. v.
Willacy Cty. Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991). The burden of
proof for showing the exemption applies lies with the claimant. See id. An
exemption must affirmatively appear in the statute, and all doubts are resolved in
favor of the taxing authority. See Bullock v. Nat’l Bancshares Corp., 584 S.W.2d
268, 272 (Tex. 1979).
The Appraisal District does not dispute that the Hospital District is a
political subdivision of the state or that the CT scanner is used for public
purposes.2 See Tex. Tax Code Ann. § 11.11(a). The Appraisal District contends
2
The Appraisal District has abandoned on appeal its contention that the CT
scanner was not exempt under section 11.11 because there was no signed lease
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that the Hospital District did not own the CT scanner within the meaning of
section 11.11(h) because the lease agreement was not a lease-purchase
agreement giving the Hospital District the present right to compel delivery of legal
title to the CT scanner at the end of the lease agreement’s term but instead
afforded the Hospital District only the opportunity to purchase the CT scanner for
an additional, undetermined amount of consideration at the end of the lease
without credits for the lease payments made by the Hospital District. Thus, the
Appraisal District argues that title does not automatically vest in the Hospital
District at the end of the lease term. The lease merely gives the Hospital District
the option to enter into a second transaction to negotiate for the purchase of the
CT scanner after the lease ends. The Appraisal District asserts that, at best, the
Hospital District has a contingent remainder in the CT scanner because the lease
agreement does not specify a sales price and because the Hospital District’s
ability to purchase the CT scanner depends on the availability of public funding
and on the decision of its board of directors. The Appraisal District further
asserts that the Lease Agreement did not create a security interest in the CT
scanner. It contends that, for these reasons, the CT scanner is not exempt under
section 11.11(h), and therefore, it should not be removed from the appraisal roll.
agreement between the Hospital District and Provident. The lease agreement
attached to the Hospital District’s motion as summary-judgment evidence was
unsigned, but the Hospital District attached a signed copy of the lease agreement
to its summary-judgment response.
8
Section 11.11(h) does not require that a lease-purchase agreement
provide a fixed sales price or credit the lease payments towards the sales price.
Nor does it require that the state or political subdivision have the necessary funds
or approval to purchase the equipment at the end of the lease. The plain
language of section 11.11(h) provides that the state or political subdivision is
considered the owner of tangible personal property if the property “is subject to a
lease-purchase agreement providing that the state or political subdivision, as
applicable, is entitled to compel delivery of the legal title to the property to the
state or political subdivision, as applicable, at the end of the lease term.” Id.
§ 11.11(h). Under the terms of the lease agreement, if the Hospital District
chooses to exercise its right to purchase the CT scanner, it is required to notify
Provident in writing at least six months, but not more than twelve months, before
the end of the lease term. Upon proper written notice of its election to purchase
the CT scanner, the Hospital District has the right to compel delivery of legal title
to the CT scanner at the end of the lease term by purchasing it at its fair market
value, or if the Hospital District and Provident cannot agree on the fair market
value, the average of the values determined by two appraisers.3
Citing Texas Department of Corrections v. Anderson County Appraisal
District, 834 S.W.2d 130 (Tex. App.—Tyler 1992, writ denied), the Appraisal
3
If the Hospital District properly elects to purchase the CT scanner, but a
fair market value purchase price has not been determined at least thirty days
prior to the expiration of the lease term, the term will continue on a month-to-
month basis until such time a fair market purchase price can be determined.
9
District argues that because the lease agreement does not provide that legal title
automatically passes to the Hospital District at the end of the term, section
11.11(h) does not apply. In that case, the court of appeals held that the state
was the equitable owner of a prison unit because, according to the terms of a
lease agreement between the Texas Department of Corrections and a private
entity to finance the construction of the unit, the state would acquire full legal title
to the unit when all the lease payments were made. Id. at 131. The court
reasoned that if the lease payments were made, the state could compel delivery
of legal title, and therefore, the state was the equitable owner of the prison unit.
Id. Thus, the unit was tax exempt. Id.
But interpreting the “entitled to compel delivery of the legal title” language
in section 11.11(h) to mean or to require that title automatically pass at the end of
the lease term renders the remainder of the section meaningless or mere
surplusage: “The property ceases to be owned by the state or political
subdivision, as applicable, if, not later than the 30th day after the date the lease
terminates, the state or political subdivision, as applicable, does not exercise its
right to acquire legal title to the property.” See Columbia Med. Ctr. of Las
Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008) (stating that courts
must not interpret a statute in a manner that renders any part of the statute
meaningless or superfluous); Cont’l Cas. Ins. Co. v. Functional Restoration
Assocs., 19 S.W.3d 393, 402 (Tex. 2000) (noting that courts give effect to all of a
statute’s words and, if possible, do not treat any statutory language as mere
10
surplusage); see also Tex. Gov’t Code Ann. § 311.021(2) (West 2013)
(presuming that legislature intended entire statute to be effective). If title passed
automatically, there would be no right to exercise by the thirtieth day after the
termination of the lease. Moreover, if the legislature intended to require that title
pass automatically, it would have used the language used in tax code section
11.11(g), which addresses improvements to real property leased to the Texas
Department of Criminal Justice:
(g) For purposes of this section, an improvement is owned by the
state and is used for public purposes if it is:
(1) located on land owned by the Texas Department of
Criminal Justice;
(2) leased and used by the department; and
(3) subject to a lease-purchase agreement providing that legal
title to the improvement passes to the department at the end
of the lease period.
Tex. Tax Code Ann. § 11.11(g) (West 2015) (emphasis added).
The Appraisal District also argues that the legislative history of section
11.11(h) supports its contention that the legislature intended that ownership
would transfer to the state or a political subdivision of the state only if title passed
at the end of the lease term. Specifically, the Appraisal District points to the
following language from a fiscal note accompanying one of the versions of House
Bill 846, which eventually became section 11.11(h):
The bill would amend Section 11.11 of the Tax Code to provide that,
for property tax purposes, property is owned by the state or a
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political subdivision of the state if it is subject to a lease-purchase
agreement containing a provision that legal title passes to the state
or to a political subdivision at the end of the lease term.
Fiscal Note, Tex. H.B. 846, 75th Leg., R.S. (1997). The original version of House
Bill 846 was consistent with the fiscal note: “For purposes of this section,
property is owned by this state or a political subdivision of this state if it is subject
to a lease-purchase agreement providing that legal title to the property passes to
this state or the political subdivision, as applicable, at the end of the lease term.”
Tex. H.B. 846, 75th Leg., R.S. (1997). This version of the bill, however, was not
enacted. See Act of May 23, 1997, 75th Leg., R.S., ch. 843, § 1, sec. 11.11,
1997 Tex. Gen. Laws 2715 (codified at Tex. Tax Code § 11.11(h)). Had the
legislature intended to require that the lease agreement provide that legal title
would automatically pass at the end of the lease term, it would have stated as
such. See Tex. Gov’t. Code Ann. § 311.023(3) (West 2013) (stating that in
construing a statute, “whether or not the statute is considered ambiguous on its
face,” courts may consider legislative history).
The Appraisal District further argues that according to Texas Turnpike Co.
v. Dallas County, 271 S.W.2d 400 (Tex. 1954), the Hospital District has only a
contingent remainder. In that case, the two petitioners were chartered as private
corporations for the purpose of building, acquiring, owning, and maintaining toll
roads within the State of Texas. Id. at 401. Conveyances of real property to the
state by the petitioners were placed in escrow pending acceptance by the Texas
Turnpike Authority upon satisfaction of certain conditions by the petitioners. Id.
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at 401–02. The issue on appeal was whether the property acquired by the
petitioners was publicly owned so as to be tax exempt under article XI, section 9
of the Texas constitution. Id. at 402. The supreme court held that the state had
no control over performance of the conditions, which could be exercised only by
the petitioners, and hence had no legal or equitable title but only a “contingent
remainder” that was not a vested interest. Id. at 402–03. Thus, the property was
not owned or held by the state and was not exempt from taxation. Id. In
contrast, in this case, the Hospital District alone has the right to elect to purchase
the equipment at the end of the lease term. Moreover, the issue in this case is
whether the CT scanner is tax exempt under tax code section 11.11(a), which the
legislature enacted under the power granted to it by article VIII, section 2 of the
Texas constitution, not whether the property is exempt under article XI, section 9.
Compare Tex. Const. art. VIII, § 2(a) (stating that “the legislature may, by general
laws, exempt from taxation public property used for public purposes”), with Tex.
Const. art. XI, § 9 (“The property of counties, cities[,] and towns, owned and held
only for public purposes . . . and all other property devoted exclusively to the use
and benefit of the public shall be exempt from forced sale and from taxation.”).
Thus, Texas Turnpike is not controlling.
We conclude and hold that the Hospital District established, as a matter of
law, that it was the owner of the CT scanner as defined in section 11.11(h), and
therefore, the CT scanner was exempt from taxation under section 11.11(a).
Thus, the trial court did not err by granting summary judgment in favor of the
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Hospital District. Because we have concluded that the trial court properly
granted summary judgment on the basis of the tax exemption, we need not
address whether the lease agreement created a security interest in the CT
scanner in favor of Provident, thereby making the Hospital District the owner.
See Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex.
2003); see also Tex. R. App. P. 47.1. It is likewise unnecessary for us to address
the Appraisal District’s second issue in which it argues that the trial court erred by
granting summary judgment for the Hospital District and by denying summary
judgment for the Appraisal District on the basis that the Hospital District was
denied due process because the 2012 notice of appraised value was delivered to
Celtic Leasing and not to the Hospital District. See Knott, 128 S.W.3d at 216;
see also Tex. R. App. P. 47.1.
Conclusion
For these reasons, we affirm the trial court’s judgment.
/s/ Anne Gardner
ANNE GARDNER
JUSTICE
PANEL: GARDNER, WALKER, and GABRIEL, JJ.
GABRIEL, J., filed a dissenting opinion.
DELIVERED: January 14, 2016
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