As has happened a remarkable number of times in the last year, soon after a discussion bubbles up on DIRT, I find a case for a DD that ties directly into that discussion. The case here cites as authority the Lake Berryessa case that I recently discussed in connection with the "lease/license" thread.

Daily Development for Tuesday, June 12. 2001

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

BROKERS; LEASING BROKERS; COMMISSION; LEASE VS.

LICENSE: An exclusive concession contract to sell popcorn at an airport is a license, not a lease; therefore, licensing requirements under that state's broker's lien act will not act as a bar to contract recovery of unpaid broker's fees.

H.E.Y. Trust v. Popcorn Exp, 35 S.W.3d 55 (Tex. App. 2000).

Appellee contracted with Broker to obtain for it an exclusive popcorn concession contract at the regional airport, in exchange for payment of a percentage of appellee's receipts from the concession. Broker did obtain the concession, but appellee subsequently refused to pay the contracted commission.

Broker sued appellee for commission, and appellee responded that Broker was not licensed under the Texas Real Estate Licensing Act (the "Act"), and that the Act prohibits suits by unlicensed brokers. The trial court found for appellee and denied a commission, finding that Broker had not satisfied licensing requirements. Broker was personally licensed under the Act, but was doing business as a trust, and the trust did not obtain a license.

On review, the Texas Court of Appeals preliminarily accepted the trial court's conclusion that Broker was in breach of the licensing standards, but found this issue to be moot. The court found the Act inapplicable, since it deals only with "sales and leases" of real property, and the concession agreement, in the view of the court, was neither. The court concluded that the popcorn concession, even though irrevocable for the contract term, was a license (a right to go upon another's property for certain purposes) and not a lease (right of possession of real property and grant of a limited real estate interest). It followed that the Act did not apply, and did not bar the broker's contract claim for fees earned.

Notwithstanding this conclusion, the court went to analyze the trial court's conclusion that Broker's trust had not obtained a license under the Act. The court concluded that, even if the concession was deemed a lease for purposes of the Act, as the definitions under the Act at the time of the transfer did not extend the licensing requirements to a trust,.

Thus, the broker's claims were not barred.

Comment 1: The court tells us next to nothing about the rights created by the concession agreement, analogizing them to jukebox and vending machine agreements. Did the agreement guarantee certain locations?

Certain hours? Were the locations secure? ? We don't know, but the opinion seems to conclude that, even though the rights apparently were irrevocable for the term of the agreement, no possessory right was transferred. This is consistent with most other cases dealing with the distinction between leases and easement/licenses. The most analogous cases would be those dealing with kiosks and mobile sales wagons in public areas of a shopping center. Courts commonly have regarded such rights as licenses, and not leases, because they confer no clear possessory interest.

Comment 2: The court, typical of a number of other decisions, does not further analyze whether this irrevocably right constituted a license or an easement. If it was an easement, did it constitute the transfer of an "interest in real property” an easement for a term of years governed by the Act?

There are two types of licenses: The first category consists of use rights that might constituted easements but are revocable at the will of the licensor. The second category consists of use rights that somehow lack the "dignity" to be construed as interest in real property. For instance, as stated, the right to maintain kiosks or sales carts in shopping centers has been regarded as something short of an easement, because the rights are so narrowly circumscribed and are subject to the control of the grantor as to time and location. Similarly, theater tickets have been regarded as licenses, although they may guarantee the right to attend the performance. If the "grantor" refuses to honor the ticket, the "grantee's" rights sound in contract, and there is no cause of action for breach of a real estate interest. Sometimes government contracts characterize grazing rights or the right to establish a campground or even a trailer park as a license. Although it is safe to say that such rights do not grant exclusive possession, and thus are not leases, it is more of a stretch to conclude that these interests are not extensive enough to be viewed as easements, rather than simple licenses.

The issue is becoming more acute recently as courts and government agencies have begun to treat the right to install telecommunications facilities on buildings and even tower privileges as licenses, rather than as real property interests. Often the question of property taxation will drive the characterization issue, and the holders of the rights have an interest in the characterization of the interest as a "license,” but these cases have certainly muddied the waters for defining property interests generally. The rather extensive rights conveyed in many telecommunications contracts clearly ought to be viewed as easements, and thus interests in real estate, whether or not they confer exclusive possession.

Comment 3: On the question of whether the Trust needed a license, the court notes that subsequent amendments to the Act broaden the definition of parties subject to the licensing requirements. Thus, modernly, trusts probably are included. The court asserts that, in any event, its conclusion is consistent with the basic policies of the Act because the agent who actually negotiated the contract on behalf of the trust had a license. But what if the agent had not had a license? Would this have altered the court's conclusion? Theoretically, the answer is no, which raises a question about the court's theory itself. Isn't the basic purpose of the Act to get at all business formats that are engaged in procuring real estate transactions? Why, then, would the policy of the Act preclude its application to trusts? Maybe the language precludes the court from apply the Act to trusts, but the basic policy of the Act, contrary to the court's assertion, compels a different result.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

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