CC Frost Props., Ltd. v. Birkeland
| Decision Date | 27 May 2021 |
| Docket Number | NUMBER 13-20-00002-CV |
| Court | Texas Court of Appeals |
| Parties | CC FROST PROPERTIES, LTD., Appellant, v. BRETT BIRKELAND AND MSCI 2007-IQ16 NORTH CARANCAHUA STREET, LLC, Appellees. |
On appeal from the 28th District Court of Nueces County, Texas.
Before Justices Benavides, Hinojosa, and Silva
We handed down our memorandum opinion and judgment in this cause on April 15, 2021. See CC Frost Properties, Ltd. v. Birkeland, No. 13-20-00002-CV, 2021 WL 1418240 () (mem. op.). Appellant CC Frost Properties, Ltd. (CC Frost) filed an amended motion for rehearing wherein they requested we withdraw our opinion and reverse the trial court's judgment and render judgment in its favor or remand for further proceedings. Among the issues raised, appellant contends that it did not waive its constitutional argument that "[t]axation shall be equal and uniform." TEX. CONST. art. 8, § 1(a). We deny appellant's amended motion for rehearing; however, we withdraw our April 15, 2021 memorandum opinion and judgment and we substitute the following memorandum opinion and accompanying judgment in their place.
Appellant appeals the trial court's order discharging appellee Brett Birkeland, the court-appointed receiver of Frost Bank Plaza on behalf of appellee MSCI 2007-IQ16 North Carancahua Street, LLC (MSCI). By four issues, CC Frost argues (1) the trial court erred by misconstruing its order appointing a receiver by determining the order did not require the receiver to pay the franchise tax; (2) the trial court's ruling that Birkeland was not responsible for the franchise tax as receiver violates Texas Administrative Code § 3.584(c)(11); (3) the trial court's ruling that Birkeland was not responsible for the franchise tax as receiver violates Texas Rule of Civil Procedure 39 by adjudicating the interest of the State of Texas; and (4) the trial court's ruling that Birkeland was not responsible for the franchise tax as receiver violates the Texas Constitution, article 8, § 1(a) by applying taxation unequally between two entities of the same taxable class. We affirm.
On April 10, 2018, MSCI filed a verified original petition and emergency application for appointment of receiver, alleging CC Frost had defaulted on a loan held by MSCI andsecured by real property known as Frost Bank Plaza. The trial court signed the order appointing Birkeland as the receiver of Frost Bank Plaza on the same day. The order authorized Birkeland, in part, "[t]o take possession of and operate the [p]roperty . . . ." The order further directed Birkeland:
To apply the leases, rents, issues, profits, and revenues of the Property (i) first to the expenses, costs, and compensation, including reasonable attorneys' fees, of the Receiver, ProEquity and the Lender, and agents and employees of each thereof and/or in accordance with Section 64.051 of the Texas Civil Practice and Remedies Code1; (ii) next to the operating expenses of the Property, which shall include only reasonable and necessary expenses of operating the Property, including taxes, utilities, insurance, maintenance and repair costs (including immediate repair of potential life or safety risks), office expenses, and salaries of on-site personnel; and (iii) then to unpaid installments of indebtedness secured by the Deed of Trust;
(Emphasis added). In addition, the order directed Birkeland:
To pay all appropriate real estate taxes, personal property taxes, or other taxes or assessments against the Property and take any and all action necessary and helpful to contest the valuation of the Property for real property tax purposes during the pendency of the receivership. Receiver shall have no responsibility for tax filings and payments regarding Borrower's federal and/or state income taxes, sales and use taxes or payroll taxes or other matters related to Borrower's employees . . . .
(Emphasis added).
On July 12, 2018, the trial court signed an order on receiver's motion for consent to sell property, permitting Birkeland to enter into a contract to sell Frost Bank Plaza. On September 27, 2019, Birkeland filed a motion to approve his final report, terminate the receivership, authorize compensation for attorneys' fees, authorize final distribution, release of the bond, and discharge him as receiver. CC Frost objected to Birkeland'smotion, asserting that Birkeland was responsible for the unpaid franchise tax associated with the profit from the sale of the property in the amount of $26,281.90.2
Birkeland responded to CC Frost's objection by asserting that the franchise tax attributable to the sale of the property is not a tax against the property but rather a tax against CC Frost as an entity. Birkeland also notified the court that he paid the franchise tax amount attributable to the rental income from the property.
After a hearing, the trial court signed an order discharging Birkeland as receiver, approving Birkeland's final accounting, and granting his requests for attorneys' fees, without ordering Birkeland, as receiver, to pay the outstanding franchise tax. This appeal followed.
By its first issue, CC Frost argues the trial court unreasonably interpreted its own April 10, 2018 order appointing a receiver. Specifically, CC Frost asserts that the order required Birkeland to pay all "appropriate real estate taxes, personal property taxes, or other taxes or assessments against the property[,]" thus requiring Birkeland to pay the franchise tax attributable to the sale of the property. By its second issue, CC Frost argues the trial court erred when it discharged Birkeland as receiver without requiring Birkeland to pay all the Texas franchise tax out of the proceeds of the sale of the property, in contravention of Title 34, § 3.584(c)(11) of the Texas Administrative Code. 34 TEX. ADMIN. CODE ANN. § 3.584(c)(11). Because the analysis for each issue overlaps, we consider them together.
The decision to appoint or terminate a receiver is reviewed under an abuse of discretion standard. CitiMortgage, Inc. v. Hubener, 345 S.W.3d 193, 195 (Tex. App.—Dallas, 2011, no pet.); Unit 82 Joint Venture v. Int'l Com. Bank of China, L.A. Branch, 460 S.W.3d 616, 627 (Tex. App.—El Paso 2014, pet. denied); see also Huffmeyer v. Mann, 49 S.W.3d 554, 559 (Tex. App.—Corpus Christi-Edinburg 2001 no pet.). "To determine whether a trial court abused its discretion, we must decide whether the trial court acted without reference to any guiding rules or principles, such that its ruling was arbitrary or unreasonable." Unit 82, 460 S.W.3d at 627. Rules of construction that direct courts to apply reasonable construction of contracts and like instruments may be applied to orders of courts as well. Lone Star Cement Corp. v. Fair, 467 S.W.2d 402, 405 (Tex. 1971).
A court "may appoint a receiver in an action by a creditor to subject any property or fund to his claim." TEX. CIV. PRAC. & REM. CODE ANN. § 64.001(a)(2). Unless otherwise stated, "the rules of equity govern all matters relating to the appointment, powers, duties, and liabilities of a receiver and to the powers of a court regarding a receiver." Id. § 64.004. "Receivership property is in the custody of the law; consequently, its management and control rests exclusively in the court." Unit 82, 460 S.W.3d at 623 (); see TEX. CIV. PRAC. & REM. CODE ANN. § 64.031.
The Texas margin tax, also known as franchise tax, is a tax that is "imposed on each taxable entity that does business in this state or that is chartered or organized in this state." TEX. TAX. CODE ANN. § 171.001. "'Taxable entity' means a partnership, limitedliability partnership, corporation, banking corporation, savings and loan association, limited liability company, business trust, professional association, business association, joint venture, joint stock company, holding company, or other legal entity." Id. § 171.0002(a).3 "Taxable entity" also explicitly excludes some entities, such as a sole proprietorship. Id. § 171.0002(b).
Questions of statutory interpretation are reviewed de novo. In re C.Y.K.S., 549 S.W.3d 588, 591 (Tex. 2018) (per curiam); Pisharodi v. Colombia Valley Healthcare Sys., L.P., No. 13-18-00364-CV, ___ S.W.3d ___, ___, 2020 WL 2213951, at *7 (Tex. App.—Corpus Christi-Edinburg May 7, 2020, no pet.). "When interpreting a statute, our primary objective is to ascertain and give effect to the [l]egislature's intent without unduly restricting or expanding the Act's scope." Greater Hous. P'ship v. Paxton, 468 S.W.3d 51, 58 (Tex. 2015). "[I]f a statute is unambiguous, rules of construction or other extrinsic aids cannot be used to create ambiguity." Fitzgerald v. Advanced Spine Fixation Sys., Inc., 996 S.W.2d 864, 866-67 (Tex. 1999). "If a statute uses a term with a particular meaning or assigns a particular meaning to a term, we are bound by the statutory usage." TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011). "Undefined terms in a statute are typically given their ordinary meaning, but if a different or more precise definition is apparent from the term's use in the context of the statute, we apply that meaning." Id. "We presume that the [l]egislature chooses a statute's language with care, including each word chosen for a purpose, while purposefully omitting words not chosen."Id. When interpreting a statute, "we look at the entire act, and not a single section in isolation." Fitzgerald, 996 S.W.2d at 866.
If an entity is in receivership, it is the responsibility of the receiver to file and pay the franchise tax of the taxable entity in receivership. 34 TEX. ADMIN. CODE ANN. § 3.584(c)(11). As discussed supra, taxable entity...
To continue reading
Request your trial