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Sebastian Cotton & Grain, Ltd. v. Willacy County Appraisal District

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

April 18, 2019


          On appeal from the 197th District Court of Willacy County, Texas.

          Before Chief Justice Contreras and Justices Longoria and Perkes



         This property-tax dispute has been remanded to us by the Supreme Court of Texas to decide the following issues: (1) whether appellant, Sebastian Cotton & Grain, Ltd. (Sebastian), was the owner of the subject property; (2) if so, whether Sebastian was quasi-estopped from entering an agreement pursuant to tax code § 1.111(e) with appellee, Willacy County Appraisal District (WCAD); and (3) if not, whether the trial court's finding that Sebastian fraudulently induced WCAD into entering the agreement was supported by factually and legally sufficient evidence. Willacy Cty. Appraisal Dist. v. Sebastian Cotton & Grain, Ltd., 555 S.W.3d 29, 48, 52 (Tex. 2018). Because we find that Sebastian was the owner of the grain, and thus estopped from entering a contrary agreement under § 1.111(e), we affirm.

         I. Background[2]

         Sebastian rendered to WCAD its entire grain inventory as of January 1, 2009. See generally Tex. Tax Code Ann. § 22.01(a) (West, Westlaw through 2017 1st C.S.) (requiring a property owner to declare, or "render," to the appraisal district, "all tangible personal property used for the production of income that the person owns . . . on January 1" so that the property may be taxed). After Sebastian applied for and was denied an exemption on a portion of the inventory, it filed a motion to correct ownership under § 25.25(c) of the Property Tax Code, alleging that it actually sold 86% of the rendered grain to DeBruce Grain, Inc. (DeBruce) in 2008.

         To support its position, Sebastian produced four sales contracts between Sebastian and DeBruce, providing for the sale of a total of 1.34 million bushels of grain. Each contract was executed in 2008 and provided for shipment in 2008. Through its representations to the chief appraiser, Sebastian implied that possession of the grain on January 1, 2009 was immaterial because ownership immediately transferred in 2008 upon execution of the contracts.[3] In a phone conversation with Sebastian's property tax agent, the chief appraiser agreed to change the appraisal roll to reflect DeBruce as the owner. Consequently, Sebastian was issued a tax refund.

         DeBruce protested the corrected appraisal roll and resulting tax assessment, also asserting non-ownership. DeBruce pointed to a provision in the contracts expressing the parties' intent to resolve any disputes under the National Grain and Feed Association Rules (NGFA Rules). Rule 6 of the NGFA Rules provides that title and risk of loss transfer to the buyer at either the time of shipment or delivery, depending on the specific term in the contract, but not before. DeBruce provided WCAD with proof that, of the 1.34 million total bushels contracted for, only 138, 300 had been shipped or delivered by January 1, 2009; some were shipped and delivered after January 1; and 808, 797 bushels were never shipped or delivered. DeBruce acknowledged liability for the 138, 300 bushels and disputed the rest. The chief appraiser agreed, changing the appraisal rolls again to reflect Sebastian as the owner of the remaining grain.

         Sebastian protested to the Willacy County Appraisal Review Board (ARB). The ARB upheld the change to the appraisal roll and Sebastian sought judicial review, arguing: (1) WCAD was prohibited by statute from changing the appraisal roll because it increased Sebastian's tax liability; or (2) in the alternative, the phone conversation in which the chief appraiser agreed to change the ownership to DeBruce was a final, nonreviewable agreement under § 1.111(e) of the Property Tax Code. See id. § 1.111(e) (West, Westlaw through 2017 1st C.S.) (providing that "[a]n agreement between a property owner or owner's agent and the chief appraiser is final if the agreement relates to a matter . . . which may be corrected under Section 25.25 or on which a motion for correction under that section has been filed but not determined by the [ARB]").

         WCAD argued the ownership change was authorized and raised fraud as an affirmative defense to its agreement with Sebastian. The case was tried to the bench and the district court rendered a take nothing judgment against Sebastian, finding WCAD was authorized to make the ownership change and the agreement should be set aside because it was induced by fraud.

         On appeal to this Court, Sebastian again challenged WCAD's statutory authority to make the ownership change, as well as the factual and legal sufficiency of the evidence to support the trial court's fraud determination. We reversed the trial court on the authority issue without reaching Sebastian's sufficiency challenge. The Supreme Court of Texas granted WCAD's petition for review and reversed, holding WCAD acted within its authority. Sebastian Cotton & Grain, 555 S.W.3d at 54. The supreme court remanded the case to this Court to first determine the issue of ownership, and then to determine the propriety of Sebastian's agreement with WCAD under § 1.111(e). Id.

         II. Ownership

         "[P]roperty taxes are the personal obligation of the person who owns or acquires the property on January 1 of the year for which the tax is imposed." Tex. Tax Code Ann. § 32.07(a) (West, Westlaw through 2017 1st C.S.). The trial court determined Sebastian was the owner of the grain in its possession on January 1, 2009.[4] We agree.

         Ownership is a legal question based on determined facts. Sebastian Cotton & Grain, 555 S.W.3d at 46 & n.12 (citing Hudson Buick, Pontiac, GMC Truck Co., v. Gooch, 7 S.W.3d 191, 195-96 (Tex. App.-Tyler 1999, pet. denied)). The material facts in this case are undisputed. Instead, both parties point us to the purchase contracts and the NFGA Rules incorporated into those contracts to support their respective positions on ownership.[5] Interpretation of an unambiguous agreement is a question of law we review de novo. AEP Tex. Cent. Co. v. Pub. Util. Comm'n, 286 S.W.3d 450, 464 (Tex. ...

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