
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 authorities (1) 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
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.
	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
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:


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.
 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
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
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
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.
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.
	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
Do Not Publish
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.
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).
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.
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.
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).

