      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-01-00101-CV



            Arthur L. Herrera, Jr., d/b/a Nicole’s Diamond Creations, Appellant

                                                  v.

   The State of Texas; The Cities of San Antonio and Balcones Heights, Texas; and The
                   Transit Authority of San Antonio, Texas, Appellees




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
          NO. 97-07590, HONORABLE DON G. HUMBLE, JUDGE PRESIDING




               This is an appeal from a judgment against an individual for delinquent taxes incurred

by a corporation. The taxing authorities1 sued Arthur L. Herrera, Jr. d/b/a Nicole’s Diamond

Creations (“Herrera”) and not the corporate taxpayer, Lloyd’s Jewelers, Inc. Herrera filed a sworn

denial alleging he was not liable in the capacity in which he was sued.2 The State has never

controverted that the delinquent taxes were incurred by the corporate taxpayer, Lloyd’s Jewelers, Inc.

After a brief bench trial, judgment was rendered against Herrera personally. This case is controlled


       1
         The plaintiffs are the State of Texas, which the judgment awarded $73,484.81; the Cities
of San Antonio and Balcones Heights, which were awarded $11,757.57; and the Transit Authority
of San Antonio, which was awarded $11,757.57. Plaintiffs also recovered interest, penalties and
attorney’s fees. For brevity, we refer to these taxing authorities collectively as the “State.”
       2
          Herrera pleaded under oath that he was “not liable in the capacity in which he is sued. . . .
[T]he underlying dollar amount, if any, alleged by the [State] was and could only have been only [sic]
a ‘tax’ account due . . . from and by Lloyd’s Jewelers, Inc., a corporation.” (Emphasis in original.)
See Tex. R. Civ. P. 93.
by two of our prior decisions, Parker v. State, 36 S.W.3d 616 (Tex. App.—Austin 2000, no pet.),3

and N.S. Sportswear, Inc. v. State, 819 S.W.2d 230 (Tex. App.—Austin 1991, no writ). We hold

that the evidence presented by the State is insufficient as a matter of law to support the judgment.

Accordingly, we reverse the judgment of the district court and render judgment that the State take

nothing.


                        FACTUAL & PROCEDURAL BACKGROUND

                In order to recover a corporation’s delinquent sales tax from an individual, the State

must show that the tax is due, that the individual was responsible for the delinquency, and the amount

of the tax actually collected by the individual. In this case, the State obtained a judgment against an

individual based on only a Notice of Tax Due, a certificate issued by the State itself. That certificate

was issued by the Comptroller assessing delinquent tax pursuant to section 111.013 of the Code.

Tex. Tax Code Ann. § 111.013 (West 1992).

               The original certificate issued in this case was entitled “Comptroller’s Certificate to

Attorney General of Sales and Use Tax Liability” and it referenced “Taxpayer Number 2-451-64-

2228-4" and identified the taxpayer as “Arthur L. Herrera, Jr.” The certificate reflected that the

amounts of $73,484.81, $11,757.57 and $11,757.57 were owing for the taxing periods, June 1989

through December 1992. It was attached to the State’s petition filed in this case.




        3
           Subsequent to this Court’s opinion in Parker, dated December 7, 2000, the parties in that
case filed a joint motion to dismiss the appeal. In a supplemental opinion, this Court granted the joint
motion to dismiss and withdrew the judgment previously rendered by the Court. Parker v. State, 40
S.W.3d 555 (Tex. App.—Austin 2001, no pet.). However, this Court did not withdraw its earlier
opinion. Id. (“The opinion of this Court dated December 7, 2000, is not withdrawn.”). Parker,
therefore, remains binding authority. Tex. R. App. P. 42.1(c).

                                                   2
                The caption of the State’s petition characterizes “Nicole’s Diamond Creations” as an

assumed name of an individual, Arthur L. Herrera, Jr. That characterization is carried forth into the

judgment. The certificate attached to the petition reflects that it was “In The Matter of: Nicole’s

Diamond Creations.” There is no mention in the petition or certificate of Lloyd’s Jewelers, Inc.

                At trial, the State introduced only two pieces of evidence. It introduced another

certificate issued by the Comptroller. That certificate makes no mention of either “Nicole’s Diamond

Creations” or “Lloyd’s Jewelers, Inc.,” only Herrera. The State also introduced a copy of an

administrative law decision, and the Comptroller’s order approving it, that was issued in an earlier

administrative proceeding whereby Herrera challenged the Comptroller’s determination of the tax

owed. See Tex. Tax Code Ann. § 111.009 (West 1992).4 The State did not introduce any other

evidence from the administrative record besides the Comptroller’s decision. None of the testimony

or documentary evidence presented at the administrative hearing was introduced at trial. The State

introduced the Comptroller’s decision because it contained a finding of fact which the State contends

establishes Herrera’s personal liability.

                The Comptroller’s decision is important in this case, not for what it proves, but for

what it does not prove. Finding of Fact 3 in the Comptroller’s decision found that “Lloyd’s filed for

bankruptcy protection under Chapter 11 [that] was converted to a Chapter 7 on February 12, 1993.”

Finding of Fact 4 states “Petitioner [Herrera] was the President and Director of Lloyd’s. Petitioner

had check-signing authority on all corporate accounts.” Finding of Fact 5 states that numerous other

individuals had “check signing authority on the corporate accounts.” Finding of Fact 6 states that


        4
          This lawsuit is not an appeal from that administrative proceeding. This is a de novo action
by the State to collect delinquent tax under section 111.010 of the Tax Code.

                                                  3
after filing for bankruptcy, Herrera and his wife had check signing authority on the tax and payroll

accounts. Finding of Fact 9 states “During the fourth quarter of 1992, Petitioner retained sales tax

monies in an effort to keep the corporation in business.” This last finding is the piece of evidence that

the State asserts establishes Herrera’s personal liability for the delinquent tax.

                The decision, however, also states:


        The amount of tax collected by Petitioner has not been established. Sufficient
        evidence has not been presented that indicates how much tax Petitioner collected or
        received on behalf of the State. Since Petitioner contests the entire assessment, the
        Tax Division must establish the extent of Petitioner’s liability and not simply rely upon
        the amount set out in the Notice of Tax Due. [Citation omitted.] The Tax Division
        has not presented the requisite proof.

        ***
        Since the Tax Division has not established the actual amount received or collected by
        Petitioner, the assessment under 111.016 must be deleted. However, Petitioner
        admitted that he did not remit the sales tax collected for the fourth quarter of 1992
        because he was attempting to keep the business running. Inasmuch as Petitioner has
        admitted that he purposely did not remit tax that was collected, he should be held
        responsible for the amount of tax due resulting from taxable sales on all sales tax
        reports for the fourth quarter of 1992. . . . The assessment against Petitioner in his
        personal capacity should be upheld for all the periods in the fourth quarter of 1992;
        the remainder of the assessment should be deleted.


Nothing in the decision or the record before us, however, indicates how much tax was collected in

the fourth quarter of 1992. Further, Findings of Fact 10 and 11 provide:


        10. The Tax Division [Attorney General’s Office acting on behalf of the
            Comptroller] contends that the amount of money Petitioner allegedly collected
            and held in trust for the state is evidenced by the amount of sales tax reported as
            being due on the sales and use tax returns which was not remitted to the State.

        11. There is no evidence in the record of this case which indicates whether Lloyd’s
            accounted for its receipts on the cash or accrual method of accounting. Lloyd’s

                                                   4
            made cash sales and sales on charge accounts. In addition, there is no evidence
            that Petitioner was involved in the day to day record keeping and report filing
            operations of the business.


               Based on this scant evidence, the district court rendered judgment for the State.

Herrera appeals.


                                           DISCUSSION

                While findings of fact and conclusions of law were made in the ancillary administrative

proceeding, there were none requested or filed by the district court in this cause. When a cause is

tried to the court and findings of fact and conclusions of law are neither requested nor filed, all fact

findings necessary to the judgment will be deemed to support the judgment. State v. Heal, 917

S.W.2d 6, 9 (Tex. 1996); Harlandale Indep. Sch. Dist. v. Cornyn, 25 S.W.3d 328, 332 (Tex.

App.—Austin 2000, pet. denied). We will affirm the judgment on any valid legal theory finding

support in the pleadings and evidence. Point Lookout West, Inc. v. Whorton, 742 S.W.2d 277, 278

(Tex. 1987). We review questions of law de novo without deference to a lower court’s legal

conclusions. Heal, 917 S.W.2d at 9.

               In reviewing a “no evidence” challenge on appeal, we must consider all evidence in

the light most favorable to the trial court’s judgment, indulging every reasonable inference in favor

of the judgment. Associated Indem. Corp., v. CAT Contr., 964 S.W.2d 276, 285 (Tex. 1998);

Harlandale Indep. Sch. Dist., 25 S.W.3d at 332. We will uphold an implied finding if there is more

than a scintilla of evidence that supports it. Id. There is more than a scintilla of evidence to support




                                                   5
a finding when reasonable minds could arrive at the finding given the facts in the record. Id. at 332-

33.


A. Collection Suits Under Chapter 111 of the Tax Code

                This suit was brought to collect delinquent tax under section 111.010 of the Texas Tax

Code. By it, the State seeks to hold an individual liable for the tax owed by a corporate taxpayer

pursuant to section 111.016 of the Tax Code. This provision states that “any person who receives

or collects a tax or any money represented to be a tax from another person holds the amount so

collected in trust for the benefit of the state and is liable to the state for the full amount collected

. . . .” Tex. Tax Code Ann. § 111.016(a) (West Supp. 2002).

                In any suit to collect delinquent tax, the State bears the burden of proof. The

Comptroller may issue to the State’s attorney a “certificate” under section 111.013 that reflects the

amount of tax owed, along with penalties and interest accrued.             The Code provides that a

Comptroller’s certificate is prima facie evidence of the existence of the delinquency and the amount

owed. Tex. Tax Code Ann. §111.013(a) (West 1992). This evidentiary presumption may be rebutted

by sworn written pleadings, which Herrera filed. Tex. Tax Code Ann. §111.013(b) (West 1992).

The evidentiary presumption afforded by section 111.013, however, does not affect the State’s

burden of proof under section 111.016. Nevertheless, it is the certificate issued by the Comptroller

in this case that the State argues establishes both individual liability under section 111.016 as well as

the amount of tax actually collected by that individual.

                In order for the State to collect delinquent corporate tax from someone other than the

corporate taxpayer, it must prove the amount of tax the individual actually received or collected, and

                                                   6
the individual’s liability is limited to the amount he actually collected. Parker, 36 S.W.3d at 618;

N.S. Sportswear, Inc., 819 S.W.2d at 232. The State may not rely on a certificate as proof of an

individual’s liability for a corporation’s delinquent tax. This Court has held on more than one

occasion that a comptroller’s certificate does not constitute more than a scintilla of evidence of the

amount of tax an individual actually collected or that an individual is personally liable for a

corporation’s tax. Parker, 36 S.W.3d at 617-18; N.S. Sportswear, 819 S.W.2d at 233 (“Proof, by

means of the comptroller’s certificates, of the full amount of the corporate tax liability is

insufficient.”). A certificate is similarly no evidence of individual liability under the common law

theory of conversion. N.S. Sportswear, 819 S.W.2d at 232. 5

                This Court has addressed the quantum of proof necessary to hold an individual liable

for a corporation’s tax under section 111.016. See Parker, 36 S.W.3d at 618; N.S. Sportswear, Inc.,

819 S.W.2d at 230. In each case, we held that in an action premised on section 111.016, in addition

to liability, the State must affirmatively prove the specific amount of tax actually collected by the

individual. We held in each case that a comptroller’s certificate does not meet this burden. Parker,

36 S.W.3d 617-18; N.S. Sportswear, Inc., 819 S.W.2d at 233. Here, the State introduced the

Comptroller’s decision in an effort to satisfy its burden of proving liability under section 111.016, and

relied on the certificate to prove the amount owed under section 111.016.




        5
           General tort theory imposes personal liability on a corporate employee for the corporation’s
torts if he participated in or directed the tortious conduct. Leyendecker & Assoc., Inc. v. Wechter,
683 S.W.2d 369, 375 (Tex. 1984); N.S. Sportswear, Inc. v. State, 819 S.W.2d 230, 232 (Tex.
App.—Austin 1991, no writ). To recover from an individual for corporate tax under a conversion
theory, the State must prove that the tax funds were converted and that the corporate employee
participated in, directed, had actual knowledge of and ratified the wrongdoing. See id.

                                                   7
B. The Comptroller’s Decision as Proof

                 The only evidence that tends to establish Herrera’s individual liability for any tax is

the Comptroller’s decision discussed above. Other than the alleged “admission” reportedly made by

Herrera and referred to in the decision, there are no facts establishing Herrera’s personal

responsibility for the tax delinquency in this record. At the trial in the district court, Herrera objected

to the admission of the Comptroller’s decision because it was hearsay.6

                 The fact that the State failed to present any evidence of whether Lloyd’s Jewelers, Inc.

used a cash or accrual basis for reporting its taxes is a strong indication that the State was unable to

meet its evidentiary burden of proving the amount of money actually collected by Herrera and not

remitted.7 If a taxpayer uses the accrual method of reporting taxes, it means that a sale is considered

to have been made when an invoice issues and the sales taxes thereon is due during the filing period

covering the date of the sale, even though the invoice is not paid by the customer during that filing

period. Parker, 36 S.W.3d at 618 n.1 (Under the accrual method, “[s]ales taxes are due whether or

not the actual taxes have been collected by the company.”). Id. The cash basis of reporting taxes,

in contrast, means that sales taxes are collected at the time of sale and due during the filing period

covering the date of sale.

        6
          Herrera’s actual statement, which the administrative law judge characterizes as an
“admission,” is not set forth in the decision. The evidentiary record of the administrative proceeding
is not before us. All that is in this record is the statement in the decision that Herrera “admitted” not
remitting tax during the last quarter of 1992. It is not clear whether Herrera made the statement at
the administrative hearing or elsewhere. However, assuming, without deciding, that the hearsay is
admissible, we find that at most it shows only that some amount of tax was withheld during the last
quarter of 1992 by Herrera; it does not satisfy the State’s burden to show how much tax Herrera
actually collected and did not remit.
        7
            See Tex. Tax Code Ann. § 151.408 (West 1992).

                                                    8
               Finding of Fact 11 in the Comptroller’s decision stated that the State failed to produce

any evidence at the administrative level as to whether Lloyd’s Jewelers, Inc. “accounted for its

receipts on the cash or accrual basis of accounting.” There was evidence in the administrative record

that “Lloyd’s Jewelers, Inc. made both cash sales and sales on charge accounts.” The State produced

even less evidence at the trial below. To meet its burden, the State would have had to show which

accounting and tax reporting method Lloyd’s Jewelers, Inc. used in order to establish when the tax

was collected and when it was due. See Parker, 36 S.W.3d at 617-18. It is unlikely the State could

prove how much sales tax Lloyd’s collected, much less how much Herrera himself collected, without

establishing the business’s type of reporting and accounting. Id.


                                          CONCLUSION

               For these reasons, we reverse the judgment of the district court and render judgment

that the State of Texas, the Cities of San Antonio and Balcones Heights, and the Transit Authority

of San Antonio take nothing from Arthur L. Herrera, Jr. or Arthur L. Herrera, Jr. d/b/a Nicole’s

Diamond Creations.




                                               Mack Kidd, Justice

Before Justices Kidd, B. A. Smith and Puryear

Reversed and Rendered

Filed: February 7, 2002

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