Harris County Appraisal Dist. v. Virginia Indonesia Co.

• Decision Date: 10 February 1994
• Docket Number: No. C14-92-01158-CV,C14-92-01158-CV
• Parties: HARRIS COUNTY APPRAISAL DISTRICT and Harris County Appraisal Review Board, Appellants, v. VIRGINIA INDONESIA COMPANY, Appellee.
• Court: Texas Court of Appeals

Page 864

871 S.W.2d 864

HARRIS COUNTY APPRAISAL DISTRICT and Harris County Appraisal Review Board, Appellants, v. VIRGINIA INDONESIA COMPANY, Appellee.

No. C14-92-01158-CV.

Court of Appeals of Texas Houston [14th Dist.].

Feb. 10, 1994.

Rehearing Overruled March 3, 1994.

Kenneth Wall, Houston, for appellants.

J. Randolph Burton, Houston, for appellee.

Before ROBERTSON and CANNON, JJ., and ROBERT E. MORSE, Jr., Former J. (Sitting by Designation).

OPINION

I. Nature of the Case

ROBERT E. MORSE, Jr., Former Justice.

This is an ad valorem property tax case. The Harris County Appraisal District (the "District") assessed a 1991 property tax against Virginia Indonesia Company ("VICO") on goods and equipment located in Harris County but destined for Indonesia. VICO protested to the Harris County Appraisal Review Board (the "Board"), and the Board upheld the tax. VICO sued the District and Board in district court, claiming that the tax violated the United States Constitution's commerce and import-export clauses and Texas property law. Both VICO and the District and Board moved for summary judgment. The district court granted VICO's motion and denied the District and Board's. The District and Board appeal. We reverse and remand.

II. Facts

The following facts are undisputed. VICO is a Delaware corporation authorized to do business in Harris County, Texas. The District is a political subdivision of the state responsible for providing annual appraisal rolls listing taxable property and appraised values to taxing units within its jurisdiction that impose ad valorem property taxes. The Board is a separate entity responsible for, among other matters, hearing and determining taxpayer protests.

VICO is the operator of an Indonesian joint venture which explores for oil and gas in the Republic of Indonesia. VICO purchases goods and equipment for use by the joint venture in its Indonesian operations from vendors both within and outside Texas. Upon being notified that certain goods are needed in Indonesia, VICO issues a request for quotation to an Indonesian company that forwards the request to an agent who solicits bids. VICO selects a vendor and issues a purchase order for the goods. Generally, the vendor ships the goods directly to VICO's export packer in Houston and bills VICO.

At the export packer's yard in Houston, the goods are inspected for quality and correctness. If the goods are damaged or otherwise incorrect, VICO or its export packer resolves the irregularities with the vendor. VICO then requests from Indonesia approval for import. When import approval is granted, an international inspection agency inspects the goods on behalf of Indonesia. Local inspection enables the goods to avoid customs inspection upon their arrival in Indonesia. When a good or item of equipment has been finally cleared for import to Indonesia, VICO pays the vendor's invoice.

VICO's export packer then packs the goods for export. A separate freight forwarder, not associated with the export packer, arranges for shipment of the goods. The freight forwarder notifies the export packer when and where to deliver the goods for shipment. Most items are exported within 45 days from receipt by the packer, but in some cases they may remain with the packer for more than 90 days. VICO's property that was included on the District's 1991 appraisal roll consisted of the goods and equipment physically present at the export packer's premises on January 1, 1991, although VICO has goods and equipment at that location throughout the year.

At no point in VICO's exporting process can the property be diverted to domestic use. All VICO purchase orders have FOREIGN PURCHASE ORDER printed at the top and "Ultimate destination for all items on this order is Indonesia." The property is committed for export to a foreign destination from the moment of purchase. The only reasons for holding the property at the export packer are for inspection, packing, and awaiting approval for import to Indonesia. None of the property is ever used in Texas.

III. Discussion

In two points of error, the District and Board complain that the trial court erred in granting VICO's motion for summary judgment and denying their own.

A. Standard of Review

The movant for summary judgment has the burden to show that there are no genuine issues of material fact and that he is entitled to judgment as a matter of law. Nixon v. Mr. Property Management, Co., 690 S.W.2d 546, 548-49 (Tex.1985). In deciding whether there is a disputed material fact issue precluding summary judgment, we take evidence favorable to the non-movant as true. Id. We indulge every reasonable inference in favor of the non-movant and resolve any doubts in his favor. Id. If the movant's motion and summary judgment proof facially establishes his right to judgment as a matter of law, then the burden shifts to the non-movant to raise fact issues precluding summary judgment. See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979). A defendant, to be entitled to summary judgment, is required to disprove at least one essential element of each pleaded cause of action or otherwise show that plaintiffs could not succeed on any theory pleaded. Rosas v. Buddies Food Store, 518 S.W.2d 534, 537 (Tex.1975).

In its motion for summary judgment, VICO contended that the goods and equipment destined for export were exempt from state taxation under the commerce and import-export clauses of the United States Constitution and under the Texas Constitution and Tax Code. U.S. CONST. art. I, § 8, cl. 3 & § 10, cl. 2; TEX. CONST. art. VIII, § 1-j; TEX.TAX CODE ANN. §§ 11.01(c) and 11.251 (Vernon 1992 & Supp.1994). VICO further contended that the District waived its right to list the property on the 1991 appraisal roll by exempting similar VICO property in prior years. Finally VICO complained that the appraised value of its property was greater than its market value.

In its summary judgment order, the trial court held that VICO's property was not taxable because the property (1) was "protected from state taxation by exemptions provided by the Import-Export or Commerce Clauses of the United States Constitution," and (2) "fails to meet the [taxability] criteria as outlined under the Texas Tax Code." The trial court did not reach the waiver or appraised value issues. When the trial court specifies the grounds upon which it bases its summary judgment, we can only affirm the summary judgment on those grounds. Carlisle v. Philip Morris Inc., 805 S.W.2d 498, 518 (Tex.App.--Austin 1991, writ denied). Therefore, we do not consider VICO's waiver argument as a basis for the summary judgment. However, we note that, generally, the doctrine of waiver does not preclude the taxation of property previously determined to be exempt. 16 STEPHEN M. FLANAGAN, THE LAW OF MUNICIPAL CORPORATIONS § 44.84 (3rd ed. rev. 1984). Also, only in exceptional circumstances, is a governmental unit subject to estoppel, a doctrine related to waiver, in the exercise of its governmental powers. City of Hutchins v. Prasifka, 450 S.W.2d 829, 836 (Tex.1970). The Tax Code itself provides that the chief appraiser may cancel an exemption erroneously allowed. TEX. TAX CODE ANN. § 11.43(h) (Vernon 1992).

To prevail in its summary judgment, VICO must have proved that the tax at issue was (1) unconstitutional under the U.S. commerce clause, (2) unconstitutional under the U.S. import-export clause, or (3) invalid under Texas tax law.

B. Commerce Clause

The foreign and domestic commerce clauses of the United States Constitution provide that "[t]he Congress shall have power ... to regulate commerce with foreign nations, and among the several states...." U.S. CONST. art. I, § 8, cl. 3. While on its face an affirmative grant of power to the Congress, the commerce clause has been interpreted to negative a state's power to unduly burden foreign or interstate commerce. It is this "negative" or "dormant" aspect of the commerce clause that is at issue in the present case.

Here, the ad valorem property tax is being imposed on goods and equipment destined for export to Indonesia. The foreign commerce clause is implicated, and a six-part test is used to determine whether the tax passes constitutional muster. See Itel Containers Int'l Corp. v. Huddleston, 507 U.S. 60, ----, 113 S.Ct. 1095, 1103, 122 L.Ed.2d 421 (1993); Nueces County v. Diamond Shamrock, 853 S.W.2d 212, 217 (Tex.App.--Corpus Christi 1993, writ granted). The first four prongs of the foreign commerce clause test are the same as those used to determine compliance with the domestic commerce clause. A state tax is constitutional under the domestic commerce clause when the tax (1) is applied to an activity with a substantial nexus with the taxing state, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, 97 S.Ct. 1076, 1079, 51 L.Ed.2d 326 (1977). The last two prongs of the six-part test would validate a tax that (5) did not create a substantial risk of multiple international taxation, and (6) did not prevent the federal government from speaking with one voice when regulating commercial relations with foreign governments. Japan Line, Ltd. v. County of Los Angeles, 441 U.S. 434, 451, 99 S.Ct. 1813, 1823, 60 L.Ed.2d 336 (1979).

The burden was on VICO to establish commerce clause immunity. Container Corp. of Am. v. Franchise Tax Board, 463 U.S. 159, 175-76, 103 S.Ct. 2933, 2945-46, 77 L.Ed.2d 545 (1983). To prevail in its summary judgment, VICO need only prove as a matter of law that the tax failed any one prong of the test. Conversely, for the District and Board to prevail on their summary judgment, they must prove as a matter of law that the tax met all six prongs.

Traditional commerce clause analysis focused on whether the goods taxed were "in transit" in interstate or...