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Keywords

statuteappealdiscriminationcorporationliens
statutemotioncorporation

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HL Farm Corp. v. Self, 877 S.W.2d 288

Facts

H.L. Farm Corporation is a Virginia corporation authorized to do business in Texas and owned by Liebherr–America, Inc., a Virginia corporation that is a subsidiary of Liebherr International, AG, a Swiss corporation. H.L. Farm owns land in Kaufman County and applied for an open-space land designation under the Texas Tax Code, which would allow for reduced tax valuation. However, the Kaufman County Appraisal District denied the application based on section 23.56(3) of the Texas Tax Code, which restricts such designations for land owned by entities with majority interests held by nonresident aliens.

H.L. Farm filed suit against the Appraisal District alleging that section 23.56(3) violated various provisions of the Texas and United States Constitutions.

Issue

Does section 23.56(3) of the Texas Tax Code violate the equal protection clause of the Texas Constitution by discriminating against a Virginia corporation whose majority interest is owned by a nonresident alien?

H.L. Farm argues that section 23.56(3) violates section 3 of article I of the Texas Constitution because it impermissibly discriminates against a Virginia corporation whose majority interest is owned by a nonresident alien.

Rule

The court applied the rational basis test to determine whether the classification created by section 23.56(3) was rationally related to a legitimate state interest, specifically the preservation of open-space land.

When a court reviews the constitutionality of a statute, it presumes that the statute is valid.

Analysis

The court found that the classification in section 23.56(3) was not rationally related to the purpose of promoting the preservation of open-space land. The court noted that any individual or legal entity, regardless of ownership, could contribute to the preservation of open-space land through agricultural use. The statute's restriction based on ownership by nonresident aliens was deemed arbitrary and lacking a rational basis.

No rational basis exists for denying an open-space land designation to H.L. Farm, a 'foreign corporation' owned by a nonresident alien.

Conclusion

The Texas Supreme Court concluded that section 23.56(3) of the Texas Tax Code violates the equal protection clause of the Texas Constitution. The court reversed the judgment of the court of appeals and remanded the case for further proceedings.

Consequently, we hold that section 23.56(3) of the Texas Tax Code violates section 3 of article I of the Texas Constitution.

Who won?

H.L. Farm Corporation prevailed in the case because the court found that the statute's discrimination against nonresident alien ownership was unconstitutional under the Texas Constitution.

H.L. Farm prevailed because the classification drawn by section 23.56(3) is not rationally related to the promotion and preservation of open-space land.

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