Texas Supreme Court holds lease for marina use is not a contract for services waiving immunity

LUBBOCK COUNTY WATER CONTROL AND IMPROVEMENT DISTRICT et al v. CHURCH & AKIN, 12-1039 (Tex. July 3, 2014).

This is an interlocutory appeal from the denial of a plea to the jurisdiction regarding whether a lease prohibiting a leasee from using property for anything other than a marina is a “contract for goods or services” for which sovereign immunity is waived. The Texas Supreme Court holds it is not.

The Lubbock County Water Control & Improvement District (“LCWCID”) operates the Buffalo Springs Lake and leased the City’s marina to Church & Akin to continue its operation as a marina. While in a renewed term of the lease LCWCID terminated and Church & Akin sued for breach of contract. LCWCID filed a plea to the jurisdiction asserting the lease was not a contract for goods or services but the trial court denied the plea and the court of appeals affirmed. LCWCID filed a petition for review.

The Texas Supreme Court first noted that merely labeling a contract a “lease” does not end the analysis and the court must examine the essential terms of the lease to determine if providing goods or services are contained therein and that such need not be the primary purpose of the agreement. Church & Akin argued that the “use” under the lease is so limited it amounts to providing services of operating the marina for the City. However, the Supreme Court disagreed noting that the lease did not require Church & Akin to operate a marina. It merely noted that if they chose to use the property, the only use is that of a marina without written consent for another use. That is not the obligatory providing of services. If Church & Akin chose not to use the property, the City would have no recourse under the contract to require the marina use. Additionally, even if such a use were obligatory, it is not something provided to the LCWCID. The language regarding catering tickets also was not a required service. The marina services are provided to the patrons, not the property owner, even though the property owner indirectly benefited. Finally, Chapter 271 limits the waiver of immunity only to the balance due under the contract and since LCWCID never agreed to pay Church & Akin, it was the reverse, it is not the type of contact for the providing of services to an entity.

The dissent argued that Church & Akin were required to operate a marina under the language of the lease since it specifically stated they could not abandon any use and therefore it was a contract for services. The dissent also noted that the catering ticket language required Church & Akin to issue tickets and it would have been a breach for them to refuse to issue such tickets. Justice Willett also reasoned that the services were provided to LCWCID just as the building of a roadway is a service to a city even though its intended users are general motorists.

If you would like to read this opinion click here. Opinion by Justice Boyd. Dissent by Justice Willett found here. The attorneys listed for Church and Akin are Gary M. Bellair, Ryan Bigbee, and Elizabeth G. Hill.  The attorneys listed for LCWCID are Mr. Brian Benitez  and Mr. Jody Dewayne Jenkins.