Opinion
NO. 12-11-00045-CV
02-29-2012
GREGG APPRAISAL DISTRICT, APPELLANT v. CAPACITY OF TEXAS, INC., APPELLEE
APPEAL FROM THE 188TH
JUDICIAL DISTRICT COURT
GREGG COUNTY, TEXAS
MEMORANDUM OPINION
Gregg Appraisal District (GAD) appeals the trial court's order denying its motion for summary judgment as well as its order granting Appellee Capacity of Texas, Inc.'s (Capacity) motion for summary judgment. In three issues, GAD asserts that the trial court's orders on the parties' competing motions for summary judgment are erroneous because (1) Capacity's inventory of heavy equipment was not held for sale at retail, (2) Capacity's inventory is not subject to valuation under Texas Tax Code, Section 23.1241, and (3) the trial court's interpretation of Section 23.1241 is unconstitutional. We affirm.
BACKGROUND
Capacity manufactures and sells terminal tractors from its manufacturing facility in Gregg County, Texas. During calendar year 2006, Capacity sold 1,311 of these terminal tractors. During that same calendar year and on January 1, 2007, Capacity's sales were outpacing its production. As a result, it maintained a backlog of orders. Capacity's facility did not contain a showroom in which to display its products and did not have any completed inventory that did not have a buyer associated with it. Accordingly, if a potential buyer wanted to purchase a terminal tractor from Capacity during that time period, Capacity would manufacture the terminal tractor to the purchaser's specifications on a first-come-first-served basis.
A provision in the tax code permits a dealer's heavy equipment inventory to be appraised using a special valuation method. Based on this special valuation method, Capacity filed the requisite Dealer's Heavy Equipment Inventory Declaration for tax year 2007 stating a value of $151,408. GAD denied Capacity's request because it determined that Capacity did not have "any retail inventory." Thus, GAD concluded that Capacity's inventory did not qualify for the special valuation. As a result, GAD assessed Capacity's inventory value at $1,981,918 for tax year 2007. Capacity protested GAD's determination, but the Appraisal Review Board of Gregg County likewise denied Capacity's special inventory valuation.
See TEX. TAX CODE ANN. § 23.1241 (West Supp. 2011). Many statutes referenced herein were amended in 2011. As a result, the current versions of these statutes were not applicable to this case, which was filed in 2008 and deals with tax year 2007. To the extent we rely on sections of statutes that were unchanged by the recent amendment or we rely on the statute for its general purpose, we will cite to the current version for ease of reference. Any reference to specific sections of the statute that have since been amended will be indicated as such.
Capacity filed a petition for review of the Appraisal Review Board's order in district court in Gregg County. Both parties filed motions for summary judgment. Finding that Capacity's inventory qualified as heavy equipment inventory and should be valued under the special appraisal provision, the trial court granted Capacity's motion for summary judgment and denied GAD's motion for summary judgment. This appeal followed.
See TEX. TAX CODE ANN. § 23.1241 (West Supp. 2011).
SPECIAL VALUATION
In its first issue, GAD argues that because Capacity's inventory of heavy equipment was manufactured to order for customers during 2006, it was not "held for sale at retail" as required under Texas Tax Code, Section 23.1241. In its second issue, GAD argues that Capacity's inventory, which was not "held for sale at retail" during 2006, is not subject to special valuation under Texas Tax Code, Section 23.1241. Because these issues are related, we address them together. Standard of Review
The movant for summary judgment has the burden to prove it is entitled to judgment by establishing each element of its claim or defense as a matter of law. TEX. R. CIV. P. 166a(c). In reviewing a summary judgment, evidence favorable to the nonmovant will be taken as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). Every reasonable inference in favor of the nonmovant is allowed, and all doubts are resolved in its favor. Id. Once the movant has established a right to summary judgment, the nonmovant has the burden to respond to the motion for summary judgment and present to the trial court any issues that would preclude summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678-79 (Tex. 1979). All theories in support of or in opposition to a motion for summary judgment must be presented in writing to the trial court. TEX. R. CIV. P. 166a(c); Chessher v. Sw. Bell Tel. Co., 658 S.W.2d 563, 564 (Tex. 1983) (summary judgment may not be granted on issues not "expressly presented" to trial court).
The propriety of summary judgment is a question of law; therefore, we review the trial court's decision de novo. Tex. Dep't of Ins. v. Am. Home Assurance Co., 998 S.W.2d 344, 347 (Tex. App.-Austin 1999, no pet.). When, as here, both parties file a motion for summary judgment, and one is granted and one is denied, we determine all questions presented and render the judgment the trial court should have rendered. See id. The court may affirm the summary judgment, reverse and render a judgment for the other party, or reverse and remand if neither party has met its burden. Calhoun v. Killian, 888 S.W.2d 51, 54 (Tex. App.-Tyler 1994, writ denied). Applicable Law
The general rule is that all property is appraised at its market value as of January 1. TEX. TAX CODE ANN. § 23.01(a) (West Supp. 2011). Specifically, inventory has a market value equal to the price for which it would sell as a unit to a purchaser who would continue the business. Id. § 23.12 (West 2008). However, special appraisal provisions allow inventory involving automobiles, boats and outboard motors, heavy equipment, and manufactured housing to be appraised using a different valuation method. See id. §§ 23.121, 23.124, 23.1241, 23.127 (West Supp. 2011). Under these methods, the value of a dealer's inventory is the total annual sales, less sales to dealers, subsequent sales, and fleet transactions, for the previous tax year, divided by twelve. See id §§ 23.121(b), 23.124(b), 23.1241(b)(1), 23.127(b) (West Supp. 2011).
To qualify for the special heavy equipment valuation provision, the taxpayer must show that the heavy equipment is classified correctly as dealer's heavy equipment inventory. See id. § 23.1241(b) (West 2008). "Dealer's heavy equipment inventory" is defined as "all items of heavy equipment that a dealer holds for sale at retail" and "includes items of heavy equipment that are leased or rented but subject to a purchase option by the lessee or renter." Id. § 23.1241(a)(2) (West 2008). Although there are similar "held for sale" requirements in the other special valuation provisions, neither the heavy equipment provision nor these other provisions define or clarify the term. See id. §§ 23.121(a)(4), 23.124(a)(4), 23.127(a)(9) (West Supp. 2011).
Amended by Act of 2011, 82nd Leg., R.S., ch. 322, §§ 1, 2, 8, 2011 Tex. Sess. Law Serv. 937, 938 (West) (to be codified as an amendment to TEX. TAX CODE ANN. § 23.1241(b)).
Amended by Act of 2011, 82nd Leg., R.S., ch. 322, §§ 1, 2, 8, 2011 Tex. Sess. Law Serv. 937, 937 (West) (to be codified as an amendment to TEX. TAX CODE ANN. § 23.1241(a)).
In construing a statute, if the legislature does not define a term, its ordinary meaning will be applied. Hopkins v. Spring Indep. Sch. Dist., 736 S.W.2d 617, 619 (Tex. 1987). The term "hold" means "to possess in virtue of a lawful title." BLACK'S LAW DICTIONARY 790 (6th ed. 1990). For purposes of computation of property tax related to dealer's heavy equipment inventory, the Tax Code provides that "a sale is considered to occur when possession of an item of heavy equipment is transferred from the dealer to the purchaser." TEX. TAX CODE ANN. § 23.1241(b)(2) (West 2008). Also, the sales tax section of the Texas Tax Code provides, in pertinent part, as follows:
Repealed by Act of 2011, 82nd Leg., R.S., ch. 322, §§ 1, 2, 8, 2011 Tex. Sess. Law Serv. 937, 938 (West). Even though this section was repealed, the Senate Committee on Finance noted that deleting this text "makes nonsubstantive changes." Senate Comm. on Finance, Bill Analysis, Tex. H.B. 2476, 82nd Leg., R.S. (2011).
"Sale" or "purchase" means any of the following when done or performed for consideration:Id. § 151.005 (West 2008). "Held For Sale at Retail"
(1) a transfer of title or possession of tangible personal property;
(2) the exchange, barter, lease, or rental of tangible personal property;
(8) a transfer of the title or possession of tangible personal property that has been produced, fabricated, or printed to the special order of the customer.
In the instant case, it is undisputed that the terminal tractors are heavy equipment and that Capacity is a dealer. Therefore, the relevant consideration is whether the terminal tractors were ever "held for sale at retail" as necessary to qualify as "dealer's heavy equipment inventory" and be eligible for the special valuation method. Specifically, the pivotal issue is whether a product not in existence at the time of the order, but subsequently completed and stored for a specific buyer, was ever "held for sale."
Barry Hamill, Capacity's financial controller, stated in his deposition that Capacity did not have any product available for a customer to buy upon walking into its facility because sales were outpacing production capacity, and it had a backlog. Hamill also stated Capacity did not maintain a showroom displaying products on January 1, 2007. Further, Hamill stated that in 2006, the customers' orders were being placed for products to be built in the future. Rather than filling orders for buyers from terminal tractors in inventory available on site, Capacity would build the terminal tractors for a specific customer on a first-come-first-served basis.
If a sale occurs when the dealer transfers possession to the purchaser, then Capacity's sales would not occur until after the product had been completed and shipped to the purchaser. See id. § 23.1241(b)(2) (West 2008). Therefore, Capacity would need to "hold" or "possess in virtue of a lawful title" before shipping the product to the purchaser. BLACK'S LAW DICTIONARY 790. Capacity possessed the heavy equipment inventory after production and before shipping it to the purchaser. The time period for the transfer of possession from the dealer to the purchaser is irrelevant. Therefore, as long as Capacity had possession of the product before transferring to the purchaser, it "held" the item for sale.
Repealed by Act of 2011, 82nd Leg., R.S., ch. 322, §§ 1, 2, 8, 2011 Tex. Sess. Law Serv. 937, 938 (West).
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GAD argues that since every unit Capacity produced in 2006 was manufactured to order, no inventory was available for retail purchase on Capacity's property during 2006 or on January 1, 2007 and, thus, was not held for sale. However, GAD's interpretation of "for sale" is too restrictive. GAD argues that "for sale" means inventory is available on site at any given time from which a potential buyer may make a selection. But based on our interpretation of the statute, "for sale," in this context, should be given a broad meaning to cover a product that is available to any purchaser who is willing to purchase the product. Therefore, the fact that the purchaser here was predetermined does not have any impact on whether Capacity possessed the item in anticipation of a sale. Based on GAD's reading, products manufactured to order could not be "held for sale" and, therefore, could not qualify for the special valuation. This is contrary to the tax code since "property that has been produced, fabricated, or printed to the special order of the customer" is specifically included in the definition of sale in the sales tax context. See TEX. TAX CODE ANN. § 151.005 (West 2008).
In sum, Capacity's inventory of heavy equipment qualified as dealer's heavy equipment inventory under Texas Tax Code, Section 23.1241 because those units of personal property were held for sale. Therefore, Capacity qualified for special valuation of its terminal tractor inventory pursuant to Section 23.1241. GAD's first and second issues are overruled.
CONSTITUTIONALITY OF TRIAL COURT'S APPLICATION OF SECTION 23.1241
In its third issue, GAD argues that the trial court's interpretation of Section 23.1241 leads to an unconstitutional result in violation of Article VIII, Sections 1 and 2 of the Texas constitution. To properly preserve a nonjurisdictional claim, including a constitutional claim, for appellate review, a party must first raise the issue before the trial court. See Dreyer v. Greene, 871 S.W.2d 697, 698 (Tex.1993); City of Garland v. Hunter Assocs., Inc., No. 05-94-01620-CV, 1995 WL 464278, at *2 (Tex. App.-Dallas July 31, 1995, writ denied) (op., not designated for publication). Constitutional challenges that are not expressly presented to the trial court by written motion, answer, or other response will not be considered on appeal. See City of San Antonio v. Schautteet, 706 S.W.2d 103, 104 (Tex.1986); State Board of Ins. v. Westland Film Indus., 705 S.W.2d 695, 696 (Tex. 1986) (holding that nonmovant's failure to expressly present issues to trial court in response to motion for summary judgment precludes issues being raised on appeal); see McCain v. NME Hosp., Inc., 856 S.W.2d 751, 755 (Tex. App.-Dallas 1993, no writ) (holding that nonmovant's failure to present nonjurisdictional arguments to trial court in response to motion for summary judgment waived issue on appeal); Fadia v. Unauthorized Practice of Law Comm., 830 S.W.2d 162, 165 (Tex. App.-Dallas 1992, writ denied) (constitutional arguments may be waived if not properly presented to trial court for disposition at summary judgment hearing); see also TEX. R. CIV. P. 166a(c).
In the instant case, GAD did not raise the constitutionality of Section 23.1241 in the trial court. Because GAD failed to present this issue to the trial court, we conclude that it has not preserved this complaint for appellate review. GAD's third issue is overruled.
DISPOSITION
Having overruled GAD's first, second, and third issues, we affirm the trial court's judgment.
SAM GRIFFITH
Justice
Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.
(PUBLISH)
JUDGMENT
GREGG APPRAISAL DISTRICT, Appellant
V.
CAPACITY OF TEXAS, INC., Appellee
Appeal from the 188th Judicial District Court
of Gregg County, Texas. (Tr.Ct.No. 2008-164-A)
THIS CAUSE came to be heard on the oral arguments, appellate record and briefs filed herein, and the same being considered, it is the opinion of this court that there was no error in the judgment.
It is therefore ORDERED, ADJUDGED and DECREED that the judgment of the court below be in all things affirmed, and that all costs of this appeal are hereby adjudged against the appellant, GREGG APPRAISAL DISTRICT, for which execution may issue, and that this decision be certified to the court below for observance.
Sam Griffith, Justice.
Panel consisted of Worthen, C.J., Griffith, J., and Hoyle, J.