Dallas Cent. Appraisal v. Mission Aire IV

• Decision Date: 11 March 2009
• Docket Number: No. 05-07-01595-CV.,05-07-01595-CV.
• Citation: 279 S.W.3d 471
• Parties: DALLAS CENTRAL APPRAISAL DISTRICT, Appellant v. MISSION AIRE IV, L.P., Mission Aire V, L.P. and KPI Properties, Inc., Appellees.
• Court: Texas Court of Appeals

279 S.W.3d 471

DALLAS CENTRAL APPRAISAL DISTRICT, Appellant v. MISSION AIRE IV, L.P., Mission Aire V, L.P. and KPI Properties, Inc., Appellees.

No. 05-07-01595-CV.

Court of Appeals of Texas, Dallas.

March 11, 2009.

David T. Moran, Jackson & Walker, L.L.P., Michael Allan Lang, Peter G. Smith, Nichols, Jackson, Dillard, Hager & Smith, L.L.P., Dallas, for appellant.

Rick L. Duncan, John Brusniak, Jr., Christina W. Perrone, Brusniak Blackwell, P.C., Dallas, for appellee.

Before Justices BRIDGES, FITZGERALD, and LANG.

OPINION

Opinion by Justice FITZGERALD.

Mission Aire IV, L.P., Mission Aire V, L.P., and KPI Properties, Inc. ("tenants") lease property within the Addison Airport from the Town of Addison. Pursuant to their leases, they have built improvements on that property at their own expense. The question presented is who owns those improvements for purpose of taxation under the property tax code. If the tenants own them, they are liable for property taxes on them. If the Town owns them, the improvements are tax exempt. The trial court granted summary judgment in favor of the tenants, concluding that the Town owns the improvements. We conclude that the evidence establishes conclusively that the tenants own the improvements for the duration of their leases, and we accordingly reverse the summary judgment and render judgment in favor of the Dallas Central Appraisal District.

I. BACKGROUND

The Town of Addison has owned the Addison Airport since December 30, 1976. From shortly thereafter until roughly December 31, 2000, a company called Addison Airport of Texas, Inc. ("AATI") operated the Addison Airport pursuant to an Operating Agreement. The Operating Agreement included a lease of the entire airport to AATI.

Each appellee is the tenant in a long-term ground lease of a tract within the airport. Each ground lease was originally a sublease under the lease contained within the Operating Agreement. KPI Properties, Inc. is the successor tenant in a forty-year ground lease that commenced no later than September 30, 1983. Mission Aire IV, L.P. is the original tenant in a forty-year ground lease that commenced on July 1, 1997. Mission Aire V, L.P. is the original tenant in a forty-year ground lease that commenced on January 1, 2000. In each case, the ground lease reflected that the tenant would be responsible for building necessary improvements on the leased tract. And in each case, the tenant did build certain improvements for commercial uses related to the airport.

In or about May 2005, the DCAD notified the tenants of the assessed values of the improvements on their leased tracts. The tenants filed protests with the Appraisal Review Board of Dallas County, claiming, among other things, that they did not own the improvements. The tenants argued that the improvements were actually owned by the Town and were therefore exempt from taxation. The Appraisal Review Board ruled against the tenants, which then filed their Original Petition for Review of Appraisal Review Board Order in district court. They later amended their petition to include 2006 when the DCAD notified them of the assessed values of the improvements again in 2006.

The tenants filed a motion for summary judgment, arguing that the evidence established as a matter of law that the improvements are owned solely by the Town of Addison and are therefore tax exempt. The DCAD filed a cross-motion for summary judgment, arguing that the tenants owned the improvements as a matter of law, rendering the improvements not tax exempt. The trial court granted the tenants' motion and denied the Town's motion. The DCAD appealed, and it presents two issues in which it contends that the trial court erred both in granting the tenants' motion and in denying the DCAD's motion.

II. STANDARD OF REVIEW

We review the trial court's summary judgment de novo. When both parties move for summary judgment, each bears the burden of establishing that it is entitled to judgment as a matter of law. If the trial court grants one motion and denies the other, the non-prevailing party may appeal the granting of the prevailing party's motion as well as the denial of its own motion. We review the summary-judgment evidence presented by both parties and determine all questions presented. We may affirm the trial court's summary judgment, reverse and render judgment for the other party if appropriate, or reverse and remand if neither party has met its summary-judgment burden. U.S. Fire Ins. Co. v. Scottsdale Ins. Co., 264 S.W.3d 160, 164-65 (Tex.App.-Dallas 2008, no pet.).

To defeat a plaintiff's cause of action on a traditional summary-judgment motion, a defendant must either conclusively negate an element of the plaintiff's claim or conclusively establish every element of an affirmative defense. To win summary judgment on its own cause of action, a plaintiff must establish every element of its claim as a matter of law. Evidence favorable to the nonmovant must be taken as true, and every reasonable inference from the evidence must be drawn in favor of the nonmovant. Id. at 165.

III. ANALYSIS

The question presented is whether the evidence established conclusively who "owns" the improvements on the leased tracts as that term is used in the property tax code, found in title 1 of the Texas Tax Code. TEX. TAX CODE ANN. § 1.01 (Vernon 2008). We conclude that the evidence conclusively establishes that the tenants own those improvements until their leases expire. Accordingly, the trial court should have denied the tenants' motion for summary judgment and granted the DCAD's motion.

A. Law governing ownership of improvements

The Texas Property Tax Code recognizes that improvements and land are separate estates or interests that can be owned by different owners for tax purposes. TEX. TAX CODE ANN. § 25.04; id. § 25.08(c); Travis Cent. Appraisal Dist. v. Signature Flight Support Corp., 140 S.W.3d 833, 837 (Tex.App.-Austin 2004, no pet.). "[W]hen different persons own land and improvements in separate estates or interests, each separately owned interest shall be listed separately in the name of the owner of each," unless otherwise provided elsewhere in the code. TEX. TAX CODE ANN. § 25.04; see also Signature Flight, 140 S.W.3d at 837. In this case, the DCAD listed the tenants on its tax rolls as the owners of the improvements, sparking this controversy.

In Signature Flight, the Austin Court of Appeals noted that the tax code does not define the essential terms "own" and "owner." 140 S.W.3d at 839. The court concluded that the plain meaning of "own" is to have legal or rightful title to the property in question. Id. at 840. The court also acknowledged some authority that the holding of equitable title, meaning the present right to compel legal title, is also sufficient to constitute "ownership" for tax purposes. Id.

The Signature Flight court also reviewed the case law and concluded that improvements on leased property are generally considered to be "owned" by the landowner for taxation purposes unless (1) the parties have an understanding that the improvements are not permanently annexed to the land, (2) evidence shows that the improver intended the improvements to remain personalty with the right to be removed, or (3) the parties contractually determine the ownership of the improvements on leased property contrary to the general rule. Signature Flight, 140 S.W.3d at 838; see also Bexar Appraisal Dist. v. Dee Howard Co., No. 04-96-00085-CV, 1997 WL 30884, at *2-3 (Tex. App.-San Antonio Jan. 29, 1997, writ denied) (not designated for publication) (resolving ownership of improvements on leased tract by reference to terms of lease agreement). The Signature Flight court concluded that, on the facts and under the lease involved in that case, legal title to the improvements rested in the City of Austin and not the tenants. Signature Flight, 140 S.W.3d at 839-42. Accordingly, the improvements were tax exempt. Id. at 845. In Dee Howard Co., the court considered different facts and different contractual language and concluded that the tenant, not the City of San Antonio, owned the improvements on the leased premises. Dee Howard Co., 1997 WL 30884, at *2-3. Accordingly, the improvements were not tax exempt. Id. at *3.

In this case, no one argues that the tenants have any right to remove the improvements they have built, so the question presented becomes one of contract interpretation—did the parties agree that the tenants would "own" the improvements for the durations of the leases?

B. Interpretation of the ground leases

We apply familiar rules of contract interpretation in our review of the relevant documents. Our goal is to ascertain the true intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983). "If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law." Id.

1. The "Title to Improvements" clause

The Town rests its case on paragraph 26 of the ground leases, which is entitled "Title to Improvements" in all three leases. Paragraph 26 of the KPI Properties lease provides, "Any and all improvements on the demised premises shall become the property of Landlord upon the expiration or termination of this Lease," with certain provisos not relevant to this case. Paragraph 26 of the two Mission Aire leases provide, "Any and all improvements on the Leased Premises shall become the property of the Landlord upon the termination of the Lease," again with certain provisos not relevant to our analysis. According to the Town, the phrase "shall become" in all three leases clearly manifests the parties' intention that the improvements shall not be the landlord's property until the leases end. Thus, argues the Town, it follows that the improvements must be owned by the tenants until that event comes to pass. The tenants, by...