Wilburn v. State

• Decision Date: 05 February 1992
• Docket Number: No. 3-90-231-CV,3-90-231-CV
• Citation: 824 S.W.2d 755
• Parties: Phyllis WILBURN, Appellant, v. The STATE of Texas, Appellee.
• Court: Texas Court of Appeals

Page 755

824 S.W.2d 755

Phyllis WILBURN, Appellant, v. The STATE of Texas, Appellee.

No. 3-90-231-CV.

Court of Appeals of Texas,

Austin.

Feb. 5, 1992.

Donald L. Anderson, Jr., Whitten, Hacker, Hagin, Anderson & Rucker, P.C., Abilene, for appellant.

Dan Morales, Atty. Gen., David Randell, Asst. Atty. Gen., Collections Div., Austin, for appellee.

Before POWERS, JONES and SMITH, JJ.

SMITH, Justice.

We withdraw our opinion and judgment dated November 13, 1991, and substitute the following in their place.

The question presented is whether the use of the term "debt" in § 171.255 of the Franchise Tax Act ¹ includes liability for delinquent unemployment taxes.

I. BACKGROUND

Travelcorp International, Inc. (Travelcorp), a Texas corporation, failed to pay its franchise taxes that were due March 15, 1986. 1981 Tex.Gen.Laws, ch. 389, § 171.001, at 1691 (Tex.Tax Code Ann. § 171.001, since amended). ² On June 16, 1986, the comptroller forfeited Travelcorp's corporate privileges. ³ Upon forfeiture, each director or officer becomes liable for certain debts of the corporation:

If the corporate privileges of a corporation are forfeited for the failure to file a report or pay a tax or penalty, each director or officer of the corporation is liable for each debt of the corporation that is created or incurred in this state after the date on which the report, tax, or penalty is due and before the corporate privileges are revived. The liability includes liability for any tax or penalty imposed by this chapter on the corporation that becomes due and payable after the date of the forfeiture.

Tex.Tax Code Ann. § 171.255(a) (1982). ⁴ Travelcorp revived its corporate privileges on August 13, 1986. ⁵

During its existence, Travelcorp was subject to the Unemployment Compensation Act which requires an employer to pay contributions to the Texas Employment Commission's Unemployment Compensation Fund. Tex.Rev.Civ.Stat.Ann. § 5221b-5(a) (1987). Travelcorp failed to pay contributions due on wages paid in the first and second quarters of 1986 and the State instituted suit to recover the delinquent contributions.

The original defendants in the suit were Travelcorp (formerly Hoyt Tours, Incorporated, doing business as Barker Travel Services, Inc.), and Phyllis Wilburn, J.N. Fiore and Stephen E. Lewis, each of whom was an officer or director of Travelcorp. The trial court granted an interlocutory default judgment against Travelcorp and severed the cause of action against defendants Fiore and Lewis. The State filed a motion for summary judgment against Wilburn and in its motion requested that the trial court render final judgment against Travelcorp.

In its motion for summary judgment, the State relied upon § 171.255 of the Tax Code to contend that Wilburn was personally liable for delinquent unemployment contributions and penalties in the amount of $11,320.80. Wilburn filed a cross-motion for summary judgment. The trial court granted the State's motion for summary judgment, rendered final judgment against Travelcorp, and denied Wilburn's cross-motion. Wilburn appeals from the trial court's judgment. ⁶

In three points of error, Wilburn asserts the trial court erred in granting the State's motion for summary judgment because: (1) section § 171.255 of the Tax Code does not impose personal liability on an officer of a corporation for taxes; (2) the State failed to offer evidence that the obligations to pay unemployment contributions were created or incurred after the date of forfeiture; and (3) there was no summary judgment evidence as to the date the tax liability was created or incurred to support judgment in the amount of $11,320.80. On original submission we reversed the trial court's summary judgment against appellant. The State has filed an amended motion for rehearing. In its prayer for alternate relief, the State requests that we accept its voluntary remittitur and affirm the trial court's judgment. Tex.R.App.P.Ann. 85(e) (Supp.1991). We will overrule the State's motion for rehearing, accept its remittitur, modify the judgment against appellant to reflect the remittitur, and affirm the trial court's judgment as modified.

II. STANDARD OF REVIEW

The question on appeal is not whether the summary judgment proof raises a fact issue, but whether the summary judgment proof establishes as a matter of law that there is no genuine issue of material fact as to one or more of the essential elements of the plaintiff's cause of action. Gibbs v. General Motors Corporation, 450 S.W.2d 827, 828 (Tex.1970). The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. This Court must indulge every reasonable inference in favor of the non-movant and resolve any doubts in her favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985).

III. DISCUSSION AND AUTHORITIES

A. The Construction To Be Given a Statute Is a Question of Law

In her first point of error, appellant asserts that the trial court erred in granting the State's motion for summary judgment on the basis of § 171.255 of the Tax Code which imposes personal liability for debts of a corporation, because unemployment contributions are taxes, Friedman v. American Surety Co. of New York, 137 Tex. 149, 151 S.W.2d 570, 576 (1941), and Texas law has long recognized that "taxes" are not "debts."

Section 171.255 does not define the term "debt." Debt is defined elsewhere in the Act, but by express provision, the definition does not apply in this cause. ⁷ The term is not otherwise defined in the statute. Neither the State nor appellant has directed this Court to a case construing the term as used in the Act, and we have not found any such case. Neither has the State directed us to any agency rule construing the term "debt" as used in § 171.255. ⁸ It is then our duty to construe the meaning of "debt" to give effect to the legislature's intentions. The construction to be given a statute is a question of law. Johnson v. City of Fort Worth, 774 S.W.2d 653, 656 (Tex.1989).

B. The Meaning of the Term "Debt" Is To Be Determined By Construction

The meaning of the term "debt", as used in a particular statute, is to be determined by construction. Reconstruction Finance Corporation v. Gossett, 130 Tex. 535, 111 S.W.2d 1066, 1073 (1938) (debt defined differently owing to the subject-matter of the statutes in which it has been used); McNeill v. City of Waco, 89 Tex. 83, 33 S.W. 322, 323 (1895) ("debt" is used in different statutes and constitutions in senses varying from the very restricted to the very general).

The term "debt" has been assigned both narrow and broad meanings. For a narrow definition see Stevenson v. Blake, 131 Tex. 103, 113 S.W.2d 525, 527 (1934) (a debt is a pecuniary obligation imposed by contract); McClintock & Robertson v. Cottle County, 127 S.W.2d 319, 322 (Tex.Civ.App.1939, writ dism. judgm. cor.), appeal after remand aff'd, Cottle County v. McClintock & Robertson, 150 S.W.2d 134 (Tex.Civ.App.1941, writ dism. judgm. cor.) (a contingent liability becomes a debt only upon the happening of the contingency) (citing 17 C.J. 1377 for the proposition that every debt must be certain and payable); and 26 C.J.S. Debt § 1 (1956) (a debt is an obligation arising out of contract, express or implied). A more expansive definition of "debt" can be found in Barber v. City of East Dallas, 83 Tex. 147, 18 S.W. 438, 439 (1892) (in its more general sense debt means that which one person is bound to pay to or perform for another); and 26 C.J.S. Debt § 1 (1956) (term "debt" need not be confined to obligations for the payment of money arising out of contract and may include a variety of kinds of obligations). Additionally, this court has treated certain contingent liabilities as debts to be excluded from surplus for purposes of the Act. State v. Shell Oil Co., 747 S.W.2d 54, 55-57 (Tex.App.1988, no writ); State v Sun Refining & Marketing, Inc., 740 S.W.2d 552, 553-55 (Tex.App.1987, writ denied); State v. Sun Oil Co. (Delaware), 740 S.W.2d 556, 558 (Tex.App.1987, no writ) (contingent liabilities based on reasonable estimates, treated as corporate debt and excluded from surplus for franchise tax purposes).

Whether a tax is or may ever be a debt also depends upon the construction to be given in the particular instance. A tax is not a debt in the ordinary sense of the word, because taxes are not contractual obligations and do not bear interest unless expressly provided for by statute. Jones v. Williams, 121 Tex. 94, 45 S.W.2d 130, 136-37 (1931) (discussing the American state court authorities followed by Supreme Court of Texas); 84 C.J.S. Taxation § 1 (1954). Nevertheless, a tax is considered a liability or obligation, and may be a debt under a particular statute, or in the enlarged sense of the word debt, which embraces any kind of just demand. Highland Park Indep. School Dist. v. Republic Ins. Co., 162 S.W.2d 1056, 1063 (Tex.Civ.App.1942), rev'd on other grounds, 141 Tex. 224, 171 S.W.2d 342 (Com.App.1943); 84 C.J.S. Taxation § 1 (1954).

Appellant urges us to adopt a restricted meaning for the term "debt." We begin by applying the rules set forth in the Code Construction Act, Tex.Gov't Code Ann. § 311.001 et seq. (1988 & Supp.1991) ⁹, and other rules applicable to statutory construction.

C. Applicable Rules in Aid of Construction of Statutes

The construction to be given a statute depends upon the legislative intent, which is to be determined from the language used and the purpose in enacting the law. Ross Amigos Oil Co. v. State, 134 Tex. 626, 138 S.W.2d 798, 800 (1940). A court must look to the entire Act in determining the legislature's intent with respect to a specific provision. Taylor v. Firemen's & Policemen's Civil Service, 616 S.W.2d...