REVERSE and RENDER and Opinion Filed March 11, 2009

In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-07-01595-CV
On Appeal from the 95th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 05-08341-D
Before Justices Bridges, FitzGerald, and Lang
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
   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.

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
   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?

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.

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 contrast, argue that paragraph 26 does
not concern ownership of the improvements at all, but relates only to possession of the improvements and to
the time when the right to possession transfers.
   The Signature Flight and Dee Howard Co. cases cited above are factually similar, although each involved
slightly different contractual language. In Signature Flight, the lease provided, “Legal title to the Facilities
constructed by Tenant shall be held by the City after acceptance of the Facilities by the City . . . .” 140 S.W.
3d at 839. Because it was undisputed that the City accepted the facilities no later than 2000, the court of
appeals affirmed summary judgment that the tenant did not “own” the improvements after that date. Id. at 845.
In Dee Howard Co., the lease provided that “all buildings existing upon the leased premises at the
commencement of this lease are the property of [tenant] and that title to certain buildings shall vest in
[landlord] upon” certain dates set forth in the agreement. 1997 WL 30884, at *2. The court of appeals held
that this clause unambiguously made the tenant the “owner” of the improvements until the stated dates had
passed. Id. at *3. Perhaps contrary to these decisions is the opinion in Simmons & Co. Holdings, Inc. v.
Houston Independent School District, No. 01-97-00691-CV, 1999 WL 442141 (Tex. App.-Houston [1st Dist.]
June 29, 1999, no pet.) (not designated for publication). Although the lease in that case provided that “title to
all improvements” built during the lease term “shall vest in the City” at the expiration of the lease, the lease
also incongruously but specifically stated that the lease of the premises included the improvements then
existing or built in the future. Id. at *2. The court of appeals held that the City of Houston was the owner of the
improvements under that lease, not the tenant. Id.
   The parties marshal other authorities to support their contrary interpretations of paragraph 26. The DCAD
relies on several cases from other jurisdictions. See, e.g., Commissioner v. Hills Corp., 115 F.2d 322 (10th
Cir. 1940); Roach v. Matanuska Valley Farmers Coop. Ass'n, 87 F. Supp. 641 (D. Alaska 1949), aff'd, 188 F.
2d 162 (9th Cir. 1951); Louisville Garage Corp. v. City of Louisville, 198 S.W.2d 40 (Ky. 1946); In re Blue
Knob Recreation, Inc., Assessment Appeal, 551 A.2d 9 (Pa. Commw. Ct. 1988). In Roach, for example, a
lease authorized the tenant to build a building on the leased land and provided that the building “shall be and
become the property of the [landlord] at the expiration of this lease.” 87 F. Supp. at 643-44. Analyzing the tax
consequences of this clause, the court held that “[t]he only reasonable conclusion which can be drawn from
that language is that until the date of expiration of the lease the buildings are the property of the [tenant].” Id.
at 646. Accordingly, the court ordered the tenant to pay the property taxes on the building, leaving the
landowner to pay the property taxes on the land. Id. at 648.
   The tenants rely on a Texas Attorney General opinion and cases from other jurisdictions. See, e.g., Op.
Tex. Att'y Gen No. O-4661 (1942)   See Footnote 1 ; Maricopa County v. Novasic, 473 P.2d 476 (Ariz. Ct.
App. 1970); People ex rel. Int'l Nav. Co. v. Barker, 47 N.E. 46 (N.Y. 1897). In Barker, for example, a lease
required the tenant to build a shed on leased property and further provided “[s]aid shed to become the
property of [the landowner]” upon expiration of the lease. Barker, 47 N.E. at 46. The New York Court of
Appeals held that the use of the word “become” was not sufficient to show an intent to separate ownership of
the improvements from ownership of the land; instead, the court concluded, the parties added the phrase in
question to clarify that the tenant had no right to remove the improvement at the end of the lease, even
though the tenant had to build it at its own expense. Id. at 47.
   We conclude that paragraph 26, read as a whole, has only one reasonable meaning-that title to the
improvements would not pass to the Town until the end of the lease. In addition, the paragraph's heading
“Title to Improvements” supports this conclusion. Cf. E.H. Perry & Co. v. Langbehn, 252 S.W. 472, 474 (Tex.
1923) (“The title, like every other portion of a contract, may be looked to in determining its meaning.”). The
specific reference to “title” to the improvements makes this case very similar to Signature Flight and Dee
Howard Co., and we follow those cases in concluding that paragraph 26 supports the DCAD's position that
title to the improvements would not pass to the Town until the leases ended.
   We deem Simmons & Co. less apposite and less persuasive. Although the lease in that case included a
“title shall vest” clause that was similar to paragraph 26, it also included a clause providing that the landowner
“lease[d] and grant[ed] unto Lessee” the leased premises “including the present and future improvements
located or constructed thereon.” Simmons & Co., 1999 WL 442141, at *2. This clause created a conflict with
the title clause that has no parallel in the instant ground leases. Moreover, the Simmons & Co. court did not
even analyze the possible effect of the title clause on the question of ownership, so its analysis and
conclusion that the tenant did not own the improvements is less persuasive.

Other lease provisions

   Of course, we cannot end our inquiry after analyzing paragraph 26 by itself. We must consider the ground
leases in their entirety before we can interpret them. See Coker, 650 S.W.2d at 393 (“[C]ourts should examine
and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so
that none will be rendered meaningless.”) (emphasis omitted). The tenants argue that several other lease
provisions, taken together with paragraph 26, demonstrate that their interest in the improvements is merely a
possessory interest rather than an ownership interest. The DCAD argues that paragraph 26 vests ownership
of the improvements in the tenants, even when read in conjunction with the other provisions of the ground
   The only other lease provision relied on by the DCAD is paragraph 10, entitled “Property Taxes and
Assessments.” Paragraph 10 of the KPI Properties ground lease provides, “Tenant shall pay any and all
property taxes or assessments levied or assessed on the improvements on the demised premises, the
personal property and fixtures on the demised premises, and, if applicable, upon the leasehold estate of
Tenant created hereby.” Paragraph 10 of the two Mission Aire ground leases provides, “Tenants shall pay
any and all property taxes and assessments levied or assessed on the improvements on the Leased
Premises, the personal property and fixtures on the Leased Premises, and, if applicable, upon the leasehold
estate of Tenant created hereby.” The DCAD points out that paragraph 10 allocates the duty to pay property
taxes on the improvements to the tenant, which is consistent with the DCAD's interpretation of paragraph 26
to vest ownership of the improvements in the tenant. We note also that paragraph 10 refers separately to the
“improvements” and to the “leasehold estate” of the tenant, which further suggests that the improvements are
distinct from, rather than part of, the tenants' leasehold estate.         The tenants argue that the Town's
present ownership of the improvements is supported by lease provisions that incorporate by reference the
now-expired Operating Agreement between the Town and AATI. See Pratt-Shaw v. Pilgrim's Pride Corp., 122
S.W.3d 825, 831-32 (Tex. App.-Dallas 2003, pet. denied) (noting that “instruments pertaining to the same
transaction may be read together to ascertain the parties' intent”). From roughly 1977 through the end of the
year 2000, AATI (or its predecessor) leased the entire airport from the Town and operated it for the Town
pursuant to the Operating Agreement. Thus, the tenants' ground leases were actually subleases of the
Operating Agreement at the time of their execution. The tenants point to section 4 of the Operating
Agreement as demonstrating the Town's intent to own both the real property and all improvements. Section 4

[AATI] agrees to yield and deliver peaceably to the [Town] possession of the Leased Premises together with
all buildings, structures, improvements, additions and other installations therein or thereon, on the date of the
expiration of this Agreement.

Paragraph 1 of each of the tenants' ground leases incorporates the Operating Agreement by reference and
further contains a promise by the tenant to “fully comply at all times and in all respects with the terms and
conditions of the [Operating Agreement] insofar as the same relates to” the particular tract being leased by
the tenant.
   We agree with the DCAD that section 4 of the Operating Agreement does not manifest an intention by the
Town to own all improvements built at the airport. The Operating Agreement is, in part, a lease of the entire
airport to AATI, and section 4 simply provides that tenant AATI will yield possession of the airport back to its
owner, the Town, at the end of the Agreement. Some years after the Town and AATI's predecessor executed
the Operating Agreement, the tenants executed the ground leases as subleases to the Operating Agreement,
and both AATI and the Town signed the ground leases. The ground leases gave the tenants the right to
possess and use their leased tracts and any improvements they built thereon for terms of forty years, well
beyond the expiration of the Operating Agreement. Thus, we conclude that, by operation of paragraph 1 in
the ground leases, the tenants simply assumed AATI's duty under section 4 to return possession of the
leased premises to the Town, with the improvements, at the ends of their respective lease terms. Nothing in
paragraph 1 of the ground leases or section 4 of the Operating Agreement casts any doubt on our conclusion
that paragraph 26 vests title to the improvements in the tenants for the durations of their ground leases.
   Finally, the tenants cite a number of provisions in their ground leases that limit their rights in the leased
premises, contending that these limitations are inconsistent with the interpretation that they own the
improvements. These provisions include the following:

The tenants may not make alterations, additions, or improvements without the Town's prior written consent.


The Town has the right to enter the leased premises during normal business hours in order to inspect and
market them.


The tenants must insure the premises at their own expense, and the Town is entitled to receive the insurance
proceeds in the event of a casualty. (The Town was required, however, to disburse the proceeds as
necessary to pay for the restoration of the premises.)


The tenants may not assign their leases or sublet any part of the leased premises without the Town's consent.


The tenants must maintain the leased premises in good repair and condition, and the Town may order repairs
and maintenance at the tenants' expense if the tenants fail to do so.


The tenants must obtain the Town's permission before installing equipment or advertising signs on the leased

The San Antonio Court of Appeals considered similar restrictions in the Dee Howard Co. case but concluded
that they did not contradict the lease provision establishing the tenant's ownership of the improvements. 1997
WL 30884, at 3. So too did the Pennsylvania Commonwealth Court on similar facts in the Blue Knob case.
551 A.2d at 10 n.6. The Blue Knob court explained, “While [the tenant] may own the building, ownership does
not preclude an agreement to conform its use of the building in accordance with the leasehold provisions.” Id.
Accordingly, the court affirmed the lower court's order confirming the tenant's ownership of the improvement
and obligation to pay property taxes on it. Id. at 9.


   We conclude as a matter of law that the ground leases vest ownership of the improvements in question in
the tenants for the duration of their ground leases.

Other evidence relating to ownership

   The DCAD argues that the trial court erred by overruling the DCAD's objections to certain summary
judgment evidence filed by the tenants. One exhibit was a letter from counsel for the DCAD to the director of
the DCAD. The letter appears to relate to a different case involving a similar lease at the Addison Airport. In
that letter, the attorney concludes that the tenant held only a leasehold interest in the improvements and thus
that the improvements are tax exempt. The DCAD also complains about statements in three affidavits filed by
the tenants in which the affiants declare that the tenants' “ownership interest in the Improvements is a
leasehold interest only.” The DCAD argues, among other things, that all of these statements by counsel and
the affiants are legal conclusions that are not competent summary judgment evidence. We agree with the
   Legal conclusions in summary judgment affidavits are not competent evidence. Mercer v. Daoran Corp.,
676 S.W.2d 580, 583 (Tex. 1984); Green v. Unauthorized Practice of Law Comm., 883 S.W.2d 293, 297 (Tex.
App.-Dallas 1994, no writ). For example, an affiant's conclusions “as to the legal effects of [a] lease” are not
competent summary judgment evidence. Howe v. Kroger Co., 598 S.W.2d 929, 931 (Tex. Civ. App.-Dallas
1980, no writ). The portions of the tenants' evidence described above were legal conclusions, and we can
give them no weight in our analysis. The tenants point out that the DCAD filed an affidavit that contains a
similarly conclusory statement that the improvements are “owned by the Tenants.” This statement is an
incompetent legal conclusion, just like the contrary statements put in evidence by the tenants; we do not
agree with the tenants that the DCAD waived its objection to the tenants' conclusory evidence by trying to
rebut it with similar evidence of its own.


   The evidence established as a matter of law that the tenants are the owners of the improvements in
question for tax purposes. The trial court should have granted the DCAD's motion for summary judgment and
denied the tenants' motion.
IV. Disposition
   We reverse the judgment of the trial court and render judgment that appellees take nothing on their First
Amended Petition for Review of Appraisal Review Board Order.

                                                     KERRY P. FITZGERALD


Footnote 1 Available online at http://www.oag.state.tx.us/opinions/opinions/38mann/op/1942/pdf/gm4661.pdf.
File Date[03/11/2009]
File Name[071595F]
File Locator[03/11/2009-071595F]