Dallas Court of Appeals holds grading of land for sports facility is proprietary in specific situation with land lease

The City Carrollton, Texas v. Weir Brothers Contracting, LLC, 05-20-00714-CV (Tex App. – Dallas, March 22, 2021)

This is a contractual immunity case where the Dallas Court of Appeals held the City’s lease of certain land was a proprietary function, therefore immunity did not apply.

The City advertised for proposals to bid on purchasing or leasing several acres of City owned land.  The City then executed a land lease with Blue Sky Sports Center of Carrollton, LP (“Blue Sky”) for 30 acres to “operate a multi-use sports, recreational, entertainment, and related service facility.” Blue Sky was required to use the leased premises “solely for the purpose of constructing, maintaining, and operating the Facilities.”  Blue Sky was allowed to enter into sublease agreements for the provision of food and refreshments, a pro shop, an arcade, and several other services. The Lease required the facilities to be open to the public “during reasonable times as is customary for [Blue Sky’s] type of business.” Blue Sky was further permitted to charge fees for use of the facilities. Shortly less than a year later the City and Arthur James, Inc. (“AJI”) entered into a contract for the grading of several acres which included the 30 acres that had been leased to Blue Sky. As compensation, AJI would receive 6.27 acres of the tract. However, during the grading, AJI’s contractor dug into a capped landfill. All work stopped until the City could develop a solution. The City terminated its agreement with AJI due to work not being completed within the specified time period. The City refused to pay the contractor, Weir. Weir obtained an assignment from AJI and sued the City for breach of contract, quantum meruit, promissory estoppel, and tortious interference with contract. The City filed a plea to the jurisdiction which was denied. The City appealed.

The court held the true nature of the dispute revolves around the City’s lease of property for the recreation facility and not the mere grading of a road. Recreational facilities are listed as governmental functions, but Blue Sky’s construction and operation of the facility is not a function of the City or on the City’s behalf. Although the extent to which the bidder’s use of the property would “complement” a nearby public recreational facility owned and managed by the City, nothing in the record suggests the lease with Blue Sky was essential to the City’s operation of that public facility so as to render the act governmental. As a result, the court held the actions were proprietary. The City does not enjoy immunity from suit and the plea was properly denied.

If you would like to read this opinion click here. Panel consists of e Justices Molberg, Reichek, and Nowell. Opinion by Justice Reichek.