Tex-Air Helicopters v. Galveston Review Bd.

• Decision Date: 21 March 2002
• Docket Number: No. 14-00-00869-CV.,14-00-00869-CV.
• Citation: 76 S.W.3d 575
• Parties: TEX-AIR HELICOPTERS, INC., Appellant, v. GALVESTON COUNTY APPRAISAL REVIEW BOARD and Galveston Central Appraisal District, Appellees.
• Court: Texas Court of Appeals

76 S.W.3d 575

TEX-AIR HELICOPTERS, INC., Appellant, v. GALVESTON COUNTY APPRAISAL REVIEW BOARD and Galveston Central Appraisal District, Appellees.

No. 14-00-00869-CV.

Court of Appeals of Texas, Houston (14th Dist.).

March 21, 2002.

Jack Holland, Houston, for appellants.

Kenneth J. Bower, Galveston, for appellees.

Panel consists of Justices YATES, FOWLER, and WITTIG.^*

OPINION

WANDA McKEE FOWLER, Justice.

This case involves a dispute over property taxes owed by appellant Tex-Air Helicopters, Inc. on five helicopters for tax years 1994 and 1995. Tex-Air presents three issues regarding the denial of leave to amend Tex-Air's petition, the failure of the trial court to make an allocation for 1995 under § 21.05 of the Texas Tax Code, and an alleged constitutional defect in § 42.29 of the Texas Tax Code. On cross-appeal, appellees assert that the trial court misapplied § 21.05¹ and that this statute violates article VIII, §§ 1 and 2, of the Texas Constitution ("Article VIII"). We find no error in the trial court's denial of Tex-Air's motion for leave to amend its petition and in the trial court's rejection of the constitutional challenges to these two statutes. Except for the trial court's failure to make an allocation for Helicopter N6037J # 5438 in 1995, we conclude that the trial court correctly applied § 21.05. We sustain Tex-Air's second issue and hold that the 1995 taxable value for Helicopter N6037J # 5438 is $27,455.47. We overrule all other issues presented by the parties, modify the trial court's judgment regarding this one allocation, and, as modified, we affirm the trial court's judgment.

Background

This case concerns the allocation of property taxes under § 21.05 for the tax years 1994 and 1995 as to five helicopters owned by Tex-Air. Tex-Air based these helicopters out of Scholes Field in Galveston. Tex-Air routinely used these helicopters to fly personnel and materials to platforms on the Outer Continental Shelf. Initially, this suit involved only the 1994 tax assessments. Tex-Air did not dispute the fair market value of the helicopters for 1994; however, Tex-Air asserted that it was entitled to allocations under § 21.05, so that it would only be taxed on the portion of the fair market value that fairly reflects the use of these helicopters in Texas. The Galveston Central Appraisal District refused to grant these allocations. The Galveston County Appraisal Review Board affirmed the appraisal district's decision, and Tex-Air appealed to the district court.

Tex-Air claimed in the district court that it was entitled to allocations under § 21.05. The Galveston County Appraisal Review Board and the Galveston Central Appraisal District (collectively "GCAD") responded by arguing that § 21.05 violated the null-and-void clause of Article VIII— both on its face and as applied—by granting an unconstitutional exemption from property tax. GCAD moved for summary judgment on this basis. Tex-Air filed a cross-motion for summary judgment. The trial court denied Tex-Air's motion and granted GCAD's motion. This court reversed and remanded, and held that § 21.05 did not violate the Texas Constitution. Tex-Air Helicopters, Inc. v. Appraisal Review Bd. of Galveston County, 940 S.W.2d 299, 303 (Tex.App.—Houston [14th Dist.] 1997), aff'd, 970 S.W.2d 530 (Tex.1998) ("First Appeal"). In the First Appeal, this court found no violation of Article VIII, holding that § 21.05 is a valuation statute rather than a tax exemption. Id. The supreme court affirmed, Appraisal Review Bd. of Galveston County v. Tex-Air Helicopters, Inc., 970 S.W.2d 530, 533-34 (Tex.1998), disapproving of the constitutional analysis from the Aransas County case² on which GCAD had relied and holding that § 21.05 is constitutional on its face. Id. at 534. The court also rejected the as-applied challenge, holding that Tex-Air's failure to pay property tax in any other jurisdiction does not make § 21.05 unconstitutional as applied. Id. at 534-35. The court held that § 21.05 is not an unconstitutional exemption but rather an attempt to comply with the mandates of the United States Constitution by allocating to Texas the portion of a commercial aircraft's fair market value that fairly reflects its use in Texas. Id.

By the time the issues regarding the 1994 taxes were remanded to the district court, Tex-Air had disputed and appealed GCAD's 1995 assessments of its helicopters. On remand, the district court consolidated Tex-Air's appeal of GCAD's failure to allocate for 1995 with the remanded case. GCAD added new claims, arguing as follows: (1) the allocation formula in § 21.05(b) should not be used, and (2) this formula is unconstitutional because it is arbitrary and capricious. In addition, GCAD continued to assert that § 21.05 is an unconstitutional tax exemption under Article VIII. Although in one of its trial briefs, GCAD asked the district court to consider two suggested formulas as alternatives to the formula in § 21.05(b), at trial, GCAD did not assert that the § 21.05(b) formula failed to fairly reflect the helicopters' use in Texas.

At trial, there were only four witnesses. Edward Behne, CEO of Tex-Air, testified as to the number of revenue departures there were for each of the five helicopters during 1994 and 1995. Behne also testified as follows: (1) Tex-Air flies to platforms that are on the Outer Continental Shelf; (2) Tex-Air does not fly to any platforms that are in state waters; (3) Helicopter N6037J # 5438 did not go into Louisiana in 1994; and (4) in counting revenue departures for the § 21.05(b) formula, Tex-Air only counted departures that left Texas.

Lawrence DeVore was GCAD's expert witness for counting revenue departures. DeVore reviewed Tex-Air's flight logs, counting all take-offs from Texas as revenue departures and therefore calculating a higher number of revenue departures than Tex-Air. Based on his review of the logs, DeVore also gave his opinion as to the number of days that each of the helicopters made stops in Louisiana in 1993 and 1994. DeVore admitted that he was not familiar with tax-allocation issues, that he was not qualified to give an opinion as to these issues, and that he had not made any calculations apportioning the amount of time that these helicopters operated in and outside of Texas.

Jack Holland testified as to Tex-Air's reasonable attorney's fees. Finally, Mitchell McCullough of GCAD answered questions from Tex-Air in an attempt by Tex-Air to show that GCAD lacks standing to assert that the Texas Tax Code is unconstitutional.

Although DeVore testified as to the number of revenue departures from Texas and Louisiana and as to the number of days the helicopters stopped in Louisiana, GCAD put on no evidence as to what portion of the use of these helicopters occurred in Texas and what portion occurred outside of Texas. GCAD also put on no evidence to prove the allocation amounts that would be yielded by any of its proposed alternative formulas.

After the close of evidence and in its post-trial brief, GCAD argued that the § 21.05(b) formula did not produce a fair reflection of the helicopters' use in Texas, and GCAD gave the court the allocation figures that would be produced under GCAD's two alternative formulas. Also post-trial, Tex-Air filed a motion for leave to amend its petition to assert that its helicopters are immune from taxation under the Outer Continental Shelf Lands Act, 43 U.S.C. § 1333. The trial court denied this motion.

The court entered judgment, issued findings of fact and conclusions of law, and also, for the relevant tax years, made specific factual findings as to the revenue departures from Texas for each helicopter. In these findings, the court agreed with Tex-Air's calculation of the revenue departures, and GCAD has not challenged these findings of fact on appeal. The trial court found that § 21.05 is constitutional and that all five helicopters had a taxable situs in Louisiana in 1993 (used to calculate the 1994 allocation). The trial court also found that Helicopter N6037J # 5438 was never in Louisiana in 1994, had no taxable situs in Louisiana in 1994, and therefore cannot receive a § 21.05 allocation for 1995. The trial court found that the other four helicopters had a taxable situs in Louisiana in 1994 (used to calculate the 1995 allocation). Finally, the court denied Tex-Air's request for attorney's fees.

Issues Presented

Tex-Air presents the following issues: (1) Did the trial court abuse its discretion in denying Tex-Air's motion for leave to amend its petition? (2) Did the trial court err by not making an allocation under § 21.05 as to one of the helicopters for the 1995 tax year? and (3) Does § 42.29, as applied to Tex-Air, violate the Equal Protection Clause of the United States Constitution?

On cross-appeal, GCAD presents the following issues: (1) Did the § 21.05 allocations for three of the helicopters constitute unconstitutional tax exemptions under Article VIII? and (2) Was § 21.05 (a) improperly applied or (b) if properly applied, was it arbitrary and capricious in violation of Article VIII?

Standards of Review

Two standards of review apply in this case. First, as to the trial court's denial of Tex-Air's motion for leave to amend its petition, this court reviews this ruling for an abuse of discretion because this ruling involved issues of surprise and prejudice and because the amendment asserts a new claim or defense and GCAD objected. Tex.R. Civ. P. 63, 66; Hardin v. Hardin, 597 S.W.2d 347, 350-51 (Tex.1980).

Second, we review the trial court's interpretation of applicable statutes de novo. Johnson v. City of Fort Worth, 774 S.W.2d 653, 655-56 (Tex.1989). In construing a statute, our objective is to determine and give effect to the Legislature's intent. See National Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex. 2000). We presume that the Legislature intended the plain meaning of its words. Id. If possible, we must ascertain the Legislature's intent...