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Opinion issued April 19, 2007



























In The

Court of Appeals

For The

First District of Texas




NO. 01-04-01185-CV

__________



EXCEL AUTO AND TRUCK LEASING, LLP., Appellant



V.



ALIEF INDEPENDENT SCHOOL DISTRICT, CHARTERWOOD MUNICIPAL UTILITY DISTRICT, CHELFORD ONE MUNICIPAL UTILITY DISTRICT, CIMARRON MUNICIPAL UTILITY DISTRICT, CITY OF BAYTOWN, CITY OF DEER PARK, CITY OF HOUSTON, CITY OF KATY, CITY OF PASADENA, CLEAR BROOK CITY MUNICIPAL UTILITY DISTRICT, CY-CHAMP PUBLIC UTILITY DISTRICT, CYPRESS-FAIRBANKS INDEPENDENT SCHOOL DISTRICT, DEER PARK INDEPENDENT SCHOOL DISTRICT, FALLBROOK UTILITY DISTRICT, GOOSE CREEK CONSOLIDATED INDEPENDENT SCHOOL DISTRICT, HARRIS COUNTY, HARRIS COUNTY EDUCATION DEPARTMENT, HARRIS COUNTY EMERGENCY SERVICE DISTRICT NO. 1, HARRIS COUNTY EMERGENCY SERVICE DISTRICT NO. 7, HARRIS COUNTY EMERGENCY SERVICE DISTRICT NO. 9, HARRIS COUNTY EMERGENCY SERVICE DISTRICT NO. 28, HARRIS COUNTY FLOOD CONTROL DISTRICT, HARRIS COUNTY FORT BEND EMERGENCY SERVICE DISTRICT NO. 100, HARRIS COUNTY HOSPITAL DISTRICT, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 33, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 38, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 64, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 81, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 120, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO.132, HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 158, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 13, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 16, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 17, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 20, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 24, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 25, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 26, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 29, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 46, HARRIS COUNTY RURAL FIRE PREVENTION DISTRICT NO. 48, HARRIS COUNTY UTILITY DISTRICT NO. 6, HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 113, HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 132, HARRIS COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT NO. 133, HORSEPEN BAYOU MUNICIPAL UTILITY DISTRICT, HOUSTON COMMUNITY COLLEGE DISTRICT, HOUSTON INDEPENDENT SCHOOL DISTRICT, HUMBLE INDEPENDENT SCHOOL DISTRICT, KATY INDEPENDENT SCHOOL DISTRICT, KLEIN INDEPENDENT SCHOOL DISTRICT, LAKE FOREST UTILITY DISTRICT, LEE COLLEGE DISTRICT, LOUETTA NORTH PUBLIC UTILITY DISTRICT, NORTH BELT UTILITY DISTRICT, NORTH FOREST INDEPENDENT SCHOOL DISTRICT, NORTH HARRIS MONTGOMERY COMMUNITY COLLEGE DISTRICT, NORTHPARK PUBLIC UTILITY DISTRICT, NORTHWEST HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 16, PASADENA INDEPENDENT SCHOOL DISTRICT, PONDEROSA FOREST UTILITY DISTRICT, PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, RANKIN ROAD WEST MUNICIPAL UTILITY DISTRICT, SAGEMEADOW UTILITY DISTRICT, SAN JACINTO COMMUNITY COLLEGE DISTRICT, SPRING BRANCH INDEPENDENT SCHOOL DISTRICT, SPRING INDEPENDENT SCHOOL DISTRICT, TIMBER LANE UTILITY DISTRICT, WEST HARRIS COUNTY MUNICIPAL UTILITY DISTRICT NO. 6, Appellees




On Appeal from the 11th District Court

Harris County, Texas

Trial Court Cause No. 2002-03877




MEMORANDUM OPINION

In this suit for delinquent ad valorem taxes, Excel Auto & Truck Leasing, L.L.P., appellant/taxpayer, complains of the trial court's granting summary judgment in favor of the various taxing units, appellees. In three issues, Excel argues that the trial court erred (1) in finding that it was the owner of the vehicles and liable for ad valorem taxes; (2) in finding that there was no genuine issue as to any material fact as to ownership of the vehicles; and (3) in granting summary judgment to Pasadena Independent School District ("ISD"), which filed no Motion for Summary Judgment, rendering the judgment interlocutory.

We affirm.

Background

This is a suit predicated upon ad valorem taxes on vehicles owned by Excel Auto & Truck Leasing, L.L.P. Pasadena ISD filed a delinquent tax suit against Excel, and numerous taxing units intervened. The intervening taxing units sought to collect delinquent personal property taxes on the vehicles owned by Excel. The Tax Master recommended judgment for the taxing units, and Excel appealed the recommendation to the trial court and requested a jury trial de novo. The taxing units filed motions for summary judgment contending that Excel is the owner of the vehicles for which the 2002 and 2003 delinquent taxes are due and owing, and Excel is responsible for the payment of those taxes. Attached to the motions were certified copies of the delinquent tax records.

Excel responded by asserting that it does not own the vehicles because its "leases" are actually security agreements. It argued that "it is not the owner of the vehicles and the lease agreement form used is actually a security agreement creating a security interest in the vehicles its customers own." Its customers have possession of the automobiles and insure and care for them, but Excel maintains a lien by possession of the original title. Excel included an affidavit from Larry Tschoerner, Excel's general manager and finance director, in which he testified that Excel's customers were responsible for paying the taxes on their vehicles. The affidavit further states that, "in addition, pursuant to the terms of the agreement, these agreements could not be terminated by a customer." Excel asked the trial court to deny the taxing units' motions for summary judgment, enter judgment in favor of Excel as to no tax liability, or "on the alternative, that the Court find as a matter of law, that the form agreement Excel used was a security agreement, and/or that Excel is not the owner of the vehicles, or, in the alternative, that one or both of these matters should be submitted to the Jury in this case for a determination of the fact questions involved."

The trial court found that there was no genuine issue as to any material fact that the taxing units were entitled to judgment as a matter of law and that the motions should in all things be granted against Excel Auto and Truck Leasing, L.L.P. and Excel Lease Fund, Inc. as successor in interest to BLJ & Associates, Inc. d/b/a Excel Financial Company (in rem only). (1)

Interlocutory Judgment

In issue three, Excel contends that the trial court erred in granting summary judgment to Pasadena ISD, which filed no Motion for Summary Judgment, rendering the judgment interlocutory.

The taxing units supplemented the appellate record with the motion for summary judgment filed by Pasadena ISD. We overrule issue three.

Summary Judgment

In issues one and two, Excel argues that the trial court erred in finding that it was the owner of the vehicles and liable for ad valorem taxes and in finding that there was no genuine issue as to any material fact as to ownership of the vehicles.

Standard of Review

A party moving for summary judgment must conclusively prove all of the elements of its cause of action or defense as a matter of law. Tex. R. Civ. P. 166a(c); Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 566 (Tex. 2001); Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222-23 (Tex. 1999). When, as here, both sides move for summary judgment, and the trial court grants one motion but denies the other, a reviewing court should review both sides' summary judgment evidence, determine all questions presented, and render the judgment that the trial court should have rendered. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). When a summary judgment does not specify or state the grounds on which the trial court relied, the non-movant on appeal must negate any grounds on which the trial court could have relied, and we will affirm the summary judgment on appeal if any of the grounds presented in the motion is meritorious. See Harwell v. State Farm Mut. Auto. Ins. Co., 896 S.W.2d 170, 173 (Tex. 1995); Mellon Serv. Co. v. Touche Ross & Co., 17 S.W.3d 432, 435 (Tex. App.--Houston [1st Dist.] 2000, no pet.). In other words, a non-movant is required to show that each ground alleged in the motion for summary judgment was insufficient to support summary judgment. Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995).
Ad Valorem Taxes

All tangible personal property is taxable unless otherwise exempt by law. Tex. Tax Code Ann. 11.01 (Vernon 2004). Property taxes "are the personal obligation of the person who owns or acquires the property on January 1 of the year for which the tax is imposed." Tex. Tax Code Ann. 32.07 (Vernon 2004). In a prosecution for the collection of delinquent taxes, the introduction of certified copies of a taxing unit's tax records or tax statements constitutes prima facie evidence of all of the elements of the taxing unit's petition, including ownership of the property, and creates a presumption that the taxing units complied with all of the requirements imposed upon them by law. Tex. Tax Code Ann. 33.47(a) (Vernon 2004); Davis v. City of Austin, 632 S.W.2d 331, 333 (Tex. 1982); Aldine Ind. Sch. Dist. v. Ogg, 122 S.W.3d 257, 263-64 (Tex. App.--Dallas 2003, no pet.). It is an affirmative defense to tax liability that the person against whom the tax is assessed was not the owner of the property at the time of assessment. Tex. Tax Code Ann. 42.09(b)(1) (Vernon 2004). It has also been held that a person holding a lien or other security upon the property is not an owner for tax purposes. Comerica Acceptance Corp. v. Dallas Cent. Appraisal Dist., 52 S.W.3d 495, 497 (Tex. App.--Dallas 2001, pet. denied).

Here, the taxing units attached certified copies of their tax records to their motions for summary judgment thus establishing their prima facie case. In response, Excel asserted the affirmative defense that it was not the owner of the vehicles because its leases should be interpreted as security agreements; therefore, the lessees are the actual owners of the vehicles. Excel did not dispute the amount of taxes or any aspect of the levy of the taxes. Its only dispute is whether it can be taxed as the owner of the vehicles. The taxing units argue that, because Excel is the owner of the property and not merely a lienholder or a secured party as it claims to be, Excel is personally liable for the property taxes imposed.

The Texas Business and Commerce Code controls the determination of whether a transaction in the form of a lease creates a lease or security interest. Tex. Bus. & Com. Code Ann. 1.203 (Vernon Supp. 2005). Section 1.203 provides

Lease Distinguished From Security Interest

(a) Whether a transaction in the form of a lease creates a lease or security interest is determined by the facts of each case.



(b) A transaction in the form of a lease creates a security interest if the consideration that the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease and is not subject to termination by the lessee, and:



(1) the original term of the lease is equal to or greater than the remaining economic life of the goods;



(2) the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;



(3) the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement; or



(4) the lessee has an option to become the owner of the goods for no additional consideration or for nominal additional consideration upon compliance with the lease agreement.



Id. All of these four tests focus on economics, not the intent of the parties. In re Berge, 32 B.R. 370, 371-73 (Bankr. W.D. Wis. 1983) (UCC Comment 2). To qualify as a security agreement, the transaction must not be subject to termination by the lessee and must meet at least one of the four listed factors. Tex. Bus. & Com. Code Ann. 1.203(b).

Excel's "Motor Vehicle Lease Agreements," paragraphs 23 and 24 provide as follows:

23. LEASE TERMINATION: This Lease will end ("terminate") when one of the following events occurs, whichever happens first: (a) You choose to end this Lease early and return the Vehicle to us; . . .



24. EARLY TERMINATION: This section applies if the Lease terminates before the end of the scheduled Lease term. . . . On early termination, you will return the Vehicle to us. You will deliver it to our address or to another reasonable location at our request.



(a) Early Termination Liability. On early termination, you agree to pay us:



(1) A VEHICLE RETURN FEE, if any, given in section 28(b);



(2) All accrued and unpaid amounts that are due or past due at that time . . . ;



(3) The amount by which the "Adjusted Lease Balance" is greater than the "Realized Value: [sic] of the Vehicle. . . . and ;



(4) All official fees and taxes imposed in connection with the Lease termination.



Excel's leases expressly provide that they are subject to termination by the lessee. Accordingly, Excel's affirmative defense of nonownership based on its claim that its leases with its customers were security agreements fails as a matter of law. See Tex. Bus. & Com. Code Ann. 1.203(b).

We hold that, because the taxing units' production of certified copies of tax records or tax statements constituted prima facie evidence of all the elements in their petitions and Excel's affirmative defense of nonownership failed, there is no genuine issue of material fact for the trial court to determine in this case. Excel failed to rebut the taxing units' prima facie case of ownership. We overrule Excel's issue one.

Fact Question

In issue two, Excel contends that the trial court erred in finding that there was no genuine issue as to any material fact as to ownership of the vehicles.

Once the movant establishes that it is entitled to summary judgment, the non-movant can defeat that showing only by producing evidence that raises a fact issue. Haight v. Savoy Apartments, 814 S.W.2d 849, 851 (Tex. App.--Houston [1st Dist.] 1991, writ denied). "To constitute competent summary judgment evidence, affidavits must be made on personal knowledge, set forth facts as would be admissible in evidence and show affirmatively that the affiant is competent to testify to matters stated therein." Tex. R. Civ. P. 166a(f).

Larry Tschoerner, Excel's general manager and finance director, submitted an affidavit in which he testified that Excel's customers were responsible for paying the taxes on their vehicles. The majority of Tschoerner's affidavit addressed the four factors listed in section 1.203 of the Texas Business and Commerce Code. Having already held that Excel's leases expressly provide that they are subject to termination by the lessee--the prerequisite to considering the four additional factors--we need not examine Tschoerner's affidavit pertaining to these four factors. The affidavit further states that, "in addition, pursuant to the terms of the agreement, these agreements could not be terminated by a customer." This is contrary to the plain language of the agreement.

Whether a contract is ambiguous is a question of law. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000). If a contract is determined to be ambiguous, then a court may consider extraneous evidence to ascertain the true meaning of the instrument. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). Here, neither party has claimed ambiguity in the subject lease agreements. Accordingly, we may not consider Tschoerner's testimony that changes the plain language of the lease agreements, as noted above.

We hold that there are "no genuine issues as to any material fact as to ownership of the vehicles." We overrule issue two.

Conclusion

Because Excel failed to raise a material fact issue refuting the ownership of the vehicles, we hold that the trial court did not err in denying Excel's summary judgment. We affirm the trial court's judgment.



George C. Hanks, Jr.

Justice



Panel consists of Justices Taft, Keyes, and Hanks.

1. Excel Lease Fund, Inc. as successor in interest to BLJ & Associates, Inc. d/b/a Excel Financial Company is not a party to this appeal.