Flagship Hotel, Ltd. v. City of Galveston

• Decision Date: 02 October 2003
• Docket Number: No. 06-03-00016-CV.,06-03-00016-CV.
• Citation: 117 S.W.3d 552
• Parties: FLAGSHIP HOTEL, LTD., Appellant, v. The CITY OF GALVESTON, Appellee.
• Court: Texas Court of Appeals

117 S.W.3d 552

FLAGSHIP HOTEL, LTD., Appellant, v. The CITY OF GALVESTON, Appellee.

No. 06-03-00016-CV.

Court of Appeals of Texas, Texarkana.

Submitted August 27, 2003.

Decided October 2, 2003.

Rehearing Overruled October 28, 2003.

Jeffrey M. Travis, Travis & Thompson, PC, Dallas, for appellant.

William S. Helfand, Kevin D. Jewell, Magenheim, Bateman & Helfand, PLLC, Houston, for appellee.

Before MORRISS, C.J., ROSS and CARTER, JJ.

OPINION

Opinion by Justice ROSS.

This lawsuit centers around a lease between the City of Galveston and Flagship Hotel, Ltd. The leased premises consist of the Galveston Marine Park and Pier and the Flagship Hotel built on the pier.¹ There are four issues before this Court: (1) the expiration date of the lease; (2) whether the trial court erred in ruling that the provisions of the lease relating to the parties' respective maintenance obligations were unambiguous; (3) whether the trial court erred in sustaining the City's plea to the jurisdiction concerning Flagship's effort to obtain declaratory relief with regard to its alleged water and sewer arrearage; and (4) whether the trial court erred in failing to award attorney's fees to Flagship and whether the trial court erred in awarding attorney's fees to the City.

Background

On May 20, 1963, the City of Galveston and Nide Corporation entered into a lease agreement under which the City was to construct a hotel on the pier and then lease the hotel and the pier to Nide. By agreement, the lease was to commence January 18, 1966, and run for forty years, until January 18, 2006. After a series of assignments, Flagship Hotel, Ltd. became the lessee. The 1963 lease remains the active lease, but it has been modified by five separate amendments. Three of these amendments purported to extend the time period covered by the lease.

On September 1, 1998, Flagship brought suit against the City. In its petition, Flagship alleged: (1) the City was liable for failure to properly repair and maintain the pier, its surface, drive ramps, curbs, and railings; (2) the City was liable for water payments Flagship had made to the City in excess of an alleged agreement between the parties; (3) the City was liable for ad valorem taxes collected from Flagship in violation of the terms of the lease; and (4) the City was liable for Flagship's reasonable and necessary attorney's fees. The City responded with a general denial of Flagship's claims and asserted various affirmative defenses. The City also filed a counterclaim which requested a declaration that the lease was void.

On December 18, 1998, the City filed a motion for summary judgment, contending the lease was void and unenforceable. The trial court partially granted the motion, finding the fourth amendment to the lease was void and unenforceable. On January 30, 2001, both parties filed countervailing motions for summary judgment. On March 6, 2001, the trial court denied Flagship's motion and partially granted the City's motion on grounds that are not before this Court on appeal.

On March 21, 2001, the City filed a plea to the jurisdiction as to Flagship's request for declaratory judgment regarding the water and sewer billing. On March 22, 2001, Flagship applied for a temporary restraining order and temporary injunction to keep the City from turning off its water supply. The trial court granted the temporary restraining order April 16, 2001, and granted the injunction May 8, 2001. The City then brought an interlocutory appeal from the injunction, contending the trial court lacked jurisdiction over the water bill dispute. On May 11, 2001, the First Court of Appeals held the trial court lacked jurisdiction to issue the injunction. City of Galveston v. Flagship Hotel, Ltd., 73 S.W.3d 422 (Tex.App.-Houston [1st Dist.] 2002, no pet.).

On November 19, 2001, Flagship filed another motion for summary judgment, and on December 11, 2001, the City filed a cross-motion for summary judgment. The trial court denied both these motions January 30, 2002. The parties filed a motion for reconsideration, and on March 27, 2002, the trial court entered a final judgment addressing both motions. Both parties appeal from this judgment, which provides in relevant part as follows:

3. The Fourth Amendment to the Lease Agreement between the Plaintiff and Defendant concerning the Flagship Hotel and Pier, dated May 10, 1988, is void and unenforceable.

[4.] The Fifth Amendment to the Lease dated August 18, 1993, and as modified is not void. The Fifth Amendment to the Lease does not extend the term of the Lease and cannot relate back to a void lease. The effective date of the original Lease was adjusted in 1966 by agreement between the City and the original Lessee. THE COURT HEREBY ORDERS the Lease between the Flagship and the City expires January 18, 2006.

5. The Court reverses its order, dated March 6, 2001. The City is entitled to summary judgment that the obligations of the City to repair and maintain the pier and premises are limited to repairs beneath the surface of the pier; and the gas line is excluded from the City's repair and maintenance obligations. The original contract is clear that Lessee is responsible for "the making of any and all exterior repairs to the premises". The Second Amendment to the Lease is not clear who is responsible for the exterior repairs above the surface of the deck other than the Hotel structure and its amenities. However, where a contract contains specific terms within a general clause the general portion of the clause should be read in light of the specific terms. The specific items mentioned in the Lease are all structural components of the pier located beneath the surface of the deck. Therefore, the Defendant's obligations are to be interpreted accordingly. In addition, any obligation not modified by the Second Amendment remains as drafted into the original Lease. Therefore, it is HEREBY ORDERED BY THE COURT the responsibility for exterior repairs above the surface of the deck on which the Hotel is located, whether it be lights, pier rails, or guard rails, are the responsibility of the Plaintiff.

....

8. Plaintiff, as lessee of the Flagship Hotel pursuant to the Lease Agreement, as amended, with the City is not liable for City ad valorem taxes on the leasehold and leasehold improvements of the Flagship Pier and Hotel. THIS COURT HEREBY ORDERS the City is liable for Plaintiff's payment of ad valorem taxes on the leasehold or leasehold improvements in the sum of $47,322.06.

9. THE COURT FURTHER FINDS the First Court of Appeals decision and order dated March 14, 2002 holds this Court does not have jurisdiction to rule on the Flagship's alleged water service arrearage based on the First Court of Appeals statement in its conclusion: "We hold, pursuant to the clear provisions of the relevant sections of the Texas Water Code, the trial court lacked jurisdiction over this specific dispute regarding Flagship's alleged water service arrearage and the City's intention to discontinue water service to the hotel." Therefore, the defendant's Plea to Jurisdiction as to Plaintiff's Request for Declaratory Judgment Regarding Water and Sewer Billing is GRANTED. It is therefore ORDERED that Plaintiff's Request for Declaratory Judgment Regarding Water and Sewer Billing is dismissed for want of subject matter jurisdiction.

Standard of Review

The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex.1985). In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true. Id. at 548-49. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Id. at 549. Questions of law are reviewed de novo and will be upheld if the judgment can be sustained on any legal theory supported by the evidence. Cook Composites, Inc. v. Westlake Styrene Corp., 15 S.W.3d 124, 131 (Tex.App.-Houston [14th Dist.] 2000, pet. dism'd).

Expiration Date of the Lease

As its first point of error, Flagship contends the trial court erred in applying Section 307.023 of the Texas Local Government Code to hold that the term of the lease expires January 18, 2006. This statute allows the governing body of the municipality to enter into any contract in connection with the pier and its facilities on terms it considers to be in the best interest of the municipality. However, such a lease cannot "exceed 40 years from the date of the lease or contract." Tex. Loc. Gov't Code Ann. § 307.023 (Vernon 1999).

In this case, the lease was signed May 20, 1963, but by agreement, the lease was to commence January 18, 1966, and run for forty years, until January 18, 2006. On January 28, 1981, the City and Gulf Resorts, Ltd., the lessee at that time, executed a second amendment to the lease. By this second amendment, Gulf Resorts agreed to spend not less than $700,000.00 for hotel improvements by December 31, 1981. The primary term was still to run until January 18, 2006, but under the second amendment, the lessee had the option to renew the lease for three additional five-year periods. If all renewal options were exercised, the lease would end January 18, 2021 (39 years, 11 months and 20 days from the date of the second amendment). In May 1988, the City and Hospitality Interests, Inc., the lessee at that time, executed a fourth amendment to the lease. Under the fourth amendment, Hospitality Interests agreed to spend not less than $600,000.00 for hotel improvements by July 1, 1988. The primary term of the lease was still to run until January 18, 2006, but under the fourth amendment, the lessee had the option to renew for five successive five-year terms. If all options were exercised, the lease would run until January 18, 2031 (42 years and 7 months from the date of the ...