In this=20
suit for delinquent ad valorem taxes, Excel Auto & Truck =
Leasing,=20
L.L.P., appellant/taxpayer, complains of the trial court's =
granting=20
summary judgment in favor of the various taxing units, appellees. =
In three=20
issues, Excel argues that the trial court erred in (1) finding =
that it was=20
the owner of the vehicles and liable for ad valorem taxes; (2) =
finding=20
that there was no genuine issue as to any material fact as to =
ownership of=20
the vehicles; and (3) granting summary judgment to Pasadena =
Independent=20
School District ("ISD"), which filed no Motion for Summary =
Judgment,=20
rendering the judgment interlocutory. We affirm.=20
This action=20
arises from the non-payment of ad valorem taxes by Excel Auto =
& Truck=20
Leasing, L.L.P. Pasadena ISD filed a delinquent tax suit against =
Excel,=20
and numerous taxing units intervened. The intervening taxing units =
sought=20
to collect delinquent personal property taxes on vehicles that the =
taxing=20
units allege were owned by Excel. The Tax Master recommended =
judgment for=20
the taxing units, and Excel appealed the recommendation to the =
trial court=20
and requested a jury trial de novo. The taxing units moved for =
summary=20
judgment contending that Excel is the owner of the vehicles for =
which the=20
2002 and 2003 delinquent taxes are due and owing, and Excel is =
responsible=20
for the payment of those taxes. Attached to the motions were =
certified=20
copies of the delinquent tax records. Excel=20
responded by asserting that it does not own the vehicles because =
its=20
"leases" are actually security agreements. It argued that "it is =
not the=20
owner of the vehicles and the lease agreement form used is =
actually a=20
security agreement creating a security interest in the vehicles =
its=20
customers own." Its customers have possession of the automobiles =
and=20
insure and care for them, but Excel maintains a lien by possession =
of the=20
original title. Excel included an affidavit from Larry=20
Tschoerner The trial=20
court found that there was no genuine issue as to any material =
fact that=20
the taxing units were entitled to judgment as a matter of law and =
that the=20
motions should in all things be granted against Excel Auto and =
Truck=20
Leasing, L.L.P. and Excel Lease Fund, Inc. as successor in =
interest to BLJ=20
& Associates, Inc. d/b/a Excel Financial Company (in rem =
only).
In issue=20
three, Excel contends that the trial court erred in granting =
summary=20
judgment to Pasadena ISD, which filed no motion for summary =
judgment,=20
rendering the judgment interlocutory. The taxing=20
units supplemented the appellate record with Pasadena ISD's motion =
for=20
summary judgment. We overrule issue three.
In issues=20
one and two, All=20
tangible personal property is taxable unless otherwise exempt by =
law. Tex.=20
Tax Code Ann. =A7 11.01 (Vernon 2004). Property taxes "are the =
personal=20
obligation of the person who owns or acquires the property on =
January 1 of=20
the year for which the tax is imposed." Tex. Tax Code Ann. =A7 =
32.07 (Vernon=20
2004). In a prosecution for the collection of delinquent taxes, =
certified=20
copies of a taxing unit's tax records or tax statements constitute =
prima=20
facie evidence of all of the elements of the taxing unit's =
petition,=20
including ownership of the property, and create a presumption that =
the=20
taxing units complied with all of the requirements imposed upon =
them by=20
law. Tex. Tax Code Ann. =A7 33.47(a) (Vernon 2004); Davis v. =
City of=20
Austin, 632 S.W.2d 331, 333 (Tex. 1982); Aldine Indep. =
Sch. Dist.=20
v. Ogg, 122 S.W.3d 257, 263-64 (Tex. App.--Dallas 2003, no =
pet.). It=20
is an affirmative defense to tax liability that the person against =
whom=20
the tax is assessed was not the owner of the property at the time =
of=20
assessment. Tex. Tax Code Ann. =A7 42.09(b)(1) (Vernon 2004). It =
has also=20
been held that a person holding a lien or other security upon the =
property=20
is not an owner for tax purposes. Comerica Acceptance Corp. v. =
Dallas=20
Cent. Appraisal Dist., 52 S.W.3d 495, 497 (Tex. App.--Dallas =
2001,=20
pet. denied). Here, the=20
taxing units attached certified copies of their tax records to =
their=20
motions for summary judgment, thus establishing their prima facie =
case. In=20
response, Excel asserted the affirmative defense that it was not =
the owner=20
of the vehicles because its leases should be interpreted as =
security=20
agreements, making the lessees the actual owners of the vehicles. =
Excel=20
did not dispute the amount of taxes or any aspect of the levy of =
the=20
taxes. Its only dispute is whether it can be taxed as the owner of =
the=20
vehicles. The taxing units argue that, because Excel is the owner =
of the=20
property and not merely a lienholder or a secured party as it =
claims to=20
be, Excel is personally liable for the property taxes imposed. =
The Texas=20
Business and Commerce Code controls the determination of whether a =
transaction, in the form of a lease, creates a lease or security =
interest.=20
Tex. Bus. & Com. Code Ann. =A7 1.203 (Vernon Supp. 2006). =
Section 1.203=20
sets forth the following two-part test to determine whether an =
agreement=20
constitutes a lease or a security interest: (a) Whether=20
a transaction in the form of a lease creates a lease or security =
interest=20
is determined by the facts of each case. (b) A=20
transaction in the form of a lease creates a security interest if =
the=20
consideration that the lessee is to pay the lessor for the right =
to=20
possession and use of the goods is an obligation for the term =
of the=20
lease and is not subject to termination by the lessee,=20
and: (1) the=20
original term of the lease is equal to or greater than the =
remaining=20
economic life of the goods; (2) the=20
lessee is bound to renew the lease for the remaining economic life =
of the=20
goods or is bound to become the owner of the goods; (3) the=20
lessee has an option to renew the lease for the remaining economic =
life of=20
the goods for no additional consideration or for nominal =
additional=20
consideration upon compliance with the lease agreement; =
or=20
(4) the=20
lessee has an option to become the owner of the goods for no =
additional=20
consideration or for nominal additional consideration upon =
compliance with=20
the lease agreement. . =
.=20
. To create a=20
security interest, the first part of this test requires that the =
rental=20
payments the lessee must pay cannot be terminable by the lessee =
during the=20
term of the lease. Tex. Bus. & Com. Code Ann. =A7 1.203. This =
factor=20
requires the existence of a "hell or high water" clause. =
In this case, =
Excel's Motor=20
Vehicle Lease Agreements do not meet the first part of the test =
because=20
they do not contain "hell or high water" clauses. Instead, they =
contain=20
provisions, which specifically state that the entire =
lease,=20
including the provisions for the payment of the rent over the term =
of the=20
agreement, can be terminated at any time at the will of the =
lessee.=20
Paragraphs 23 of Excel's Motor Vehicle Lease Agreements provide as =
follows: 23. LEASE=20
TERMINATION: This Lease will end ("terminate") when one =
of the=20
following events occurs, whichever happens first: (a) You =
choose to=20
end this Lease early and return the Vehicle to us; . . =
.
This language =
cannot meet=20
the first part of the test because, unlike a hell or high water =
clause, it=20
does not require the payment of all rents, both past due and =
due in=20
the future for the term of the lease, upon a lessee's =
termination of=20
the lease. See, e.g,
Excel has=20
not cited to us, nor do we find, any case law under the current =
version of=20
Section 1.203 that dispenses with the requirement of an express =
hell or=20
high water clause to establish the existence of a security =
interest. 24. EARLY=20
TERMINATION: This section applies if the Lease terminates =
before=20
the end of the scheduled Lease term. . . . On early termination, =
you will=20
return the Vehicle to us. You will deliver it to our address or to =
another=20
reasonable location at our request. (a) Early=20
Termination Liability. On early termination, you agree to =
pay=20
us: (1) A VEHICLE =
RETURN FEE, if=20
any, given in section 28(b); (2) All accrued =
and unpaid=20
amounts that are due or past due at that time . . .=20
; (3) The amount =
by which=20
the "Adjusted Lease Balance" is greater than the "Realized Value:=20
[sic] of the Vehicle (4) All official =
fees and=20
taxes imposed in connection with the Lease termination.
At best, this =
provision is=20
nothing more than a liquidated damages provision, not the =
functional=20
equivalent of a hell or high water clause. Thus, we hold that =
Excel's=20
leases do not satisfy the two-part test for establishing the =
existence of=20
a security interest. Other=20
Considerations We next turn to an =
examination of the lease to determine whether there are any other =
factors=20
that have been recognized by the courts to indicate the existence =
of a=20
security interest. Courts have recognized that, if, under the =
terms of the=20
lease, a lessee has no equity interest whatsoever in the property, =
the=20
lease may be a true lease and not a security interest. Touch =
of Class=20
Leasing v. Mercedes-Benz Credit of Canada, Inc., 591 A.2d =
661, 665-66=20
(N.J. Super. Ct. 1991). 27.=20
TITLING, OFFICIAL FEES AND TAXES: You understand and =
agree that=20
this agreement is a lease only. We own the Vehicle =
and it=20
will be titled in our name or in the name of our assignee. You =
have no=20
ownership interest in the Vehicle except for any future =
options to=20
purchase provided in this Lease. Excel=20
argues that, despite the language above, the leases are security=20
interests, not true leases, because, under their terms, the lessee =
is=20
required to: pay taxes, if any, on the vehicle; pay for and =
maintain=20
insurance on the vehicles; and pay for the service and maintenance =
of the=20
vehicle. However, contrary to Excel's arguments, courts have held =
that=20
lessee's acceptance of the costs similar to those stated in =
Excel's lease=20
are typical of true leases, not secured transactions, and more =
likely=20
reflect the relative bargaining power between parties rather than =
the=20
character of the transaction. (c) A=20
transaction in the form of a lease does not create a security =
interest=20
merely because: . =
.=20
. (2) the=20
lessee assumes risk of loss of the goods; (3) the=20
lessee agrees to pay, with respect to the goods, taxes, insurance, =
filing,=20
recording, or registration fees, or service or maintenance=20
costs; Excel's=20
leases do not comply with the two-part test for the existence of a =
security interest rather than a lease. This mandates the =
conclusion that=20
the agreements are true leases, and Excel is the owner of the =
vehicles.=20
Accordingly, Excel's affirmative defense of nonownership, based on =
its=20
claim that its leases with its customers were security interests, =
fails as=20
a matter of law. See Tex. Bus. & Com. Code Ann.=20
=A7 1.203(b); We hold=20
that, because the taxing units' production of certified copies of =
tax=20
records or tax statements constituted prima facie evidence of all =
the=20
elements in their petitions and Excel's affirmative defense of=20
nonownership failed, there is no genuine issue of material fact =
for the=20
trial court to determine in this case. Excel failed to rebut the =
taxing=20
units' prima facie case of ownership. We overrule Excel's issue=20
one.
In issue=20
two, Excel contends that the trial court erred in finding that =
there was=20
no genuine issue as to any material fact as to ownership of the=20
vehicles. Once the=20
movant establishes that it is entitled to summary judgment, the =
non-movant=20
can defeat that showing only by producing evidence that raises a =
fact=20
issue. Haight v. Savoy Apartments, 814 S.W.2d 849, 851 =
(Tex.=20
App.--Houston [1st Dist.] 1991, writ denied). Larry=20
Tschoerner, Excel's general manager and finance director, =
submitted an=20
affidavit in which he testified that Excel's customers were =
responsible=20
for paying the taxes on their vehicles. Most of Tschoerner's =
affidavit=20
focused on addressing the four factors listed in Section 1.203 of =
the=20
Texas Business and Commerce Code. Having already held that Excel's =
leases=20
expressly provide that they are subject to termination by the =
lessee--the=20
prerequisite to considering the four additional factors--we need =
not=20
examine Tschoerner's affidavit pertaining to these four factors.=20
The=20
affidavit further states that, "in addition, pursuant to the terms =
of the=20
agreement, these agreements could not be terminated by a =
customer."=20
We hold=20
that there is no genuine issue as to any material fact as to =
ownership of=20
the vehicles. We overrule issue two.
Because=20
Excel failed to raise a material fact issue refuting the ownership =
of the=20
vehicles, we hold that the trial court did not err in denying =
Excel's=20
summary judgment. We affirm the trial court's judgment.
George C.=20
Hanks, Jr. Panel=20
consists of Justices Taft, Keyes, and Hanks. Justice=20
Keyes concurring in the judgment. Justice=20
Keyes dissenting from denial of rehearing.
2. 3. 4. (c)=20
Determining the Realized Value. If the law so requires, =
we will=20
send you a notice and wait any required period of time before =
taking=20
action to establish the Vehicle's Realized Value. Unless otherwise =
required by law, the Realized Value will be determined in one of =
the=20
following ways: (1) by a written agreement between you and us =
reached=20
within 15 days of the Vehicle's return; (2) by the professional =
appraisal=20
of an independent third party agreed to by you and us and obtained =
at your=20
expense within 15 days of the Vehicle's return (or longer period, =
if all=20
parties so agree or if the law so requires). The appraisal shall =
be of the=20
Vehicle's wholesale value and shall be final and binding on both =
you and=20
us; or (3) if it is not determined within 15 days of the Vehicle's =
return,=20
we will determine the Realized Value in accordance with accepted =
practices=20
in the automobile industry for determining the wholesale value of =
used=20
vehicles by obtaining a wholesale cash bid for the purchase of the =
Vehicle=20
or by disposing of the Vehicle in an otherwise commercially =
reasonable=20
manner. . . .=20