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Apr 21, 2017

Who is a “Property Owner” Under Chapter 95?

By: John Faubion

When certain conditions are met, Chapter 95 of the Texas Civil Practice and Remedies Code affords premises owners with liability protection from negligence claims made by independent contractors performing work on their premises.  Enacted in 1995, Chapter 95 provides that a property owner is not liabile for personal injuries, death, or property damage arising from the construction, repair, renovation, or modification of improvements to real property by an independent contractor unless the plaintiff/contractor can establish that the premises owner (1) excercised actual control over the work performed by the contractor or enjoyed a contractual right to exercise such control; (2) possessed actual knowledge of the danger or condition causing injury; and (3) failed to warn of that danger.  Tex. Civ. Prac. & Rem. Code §§ 95.003(1)-(2).  Unless a plaintiff can prove all three elements, the premises owner is immune from liability.

Consequently, Chapter 95 provides a formidable legal defense to property owners facing premises liability and general negligence claims asserted by independent contractors.  Texas courts have expanded this protection through their broad interpretation of the term “property owner.”  The statute defines a “property owner” as “a person or entity that owns real property primarily used for commercial or business purposes.”  Tex. Civ. Prac. & Rem. Code § 95.001(3).  Texas courts have applied this definition liberally, extending it to find that property management companies, oil and gas well operators, and other agents of the true “owner” fit within the statutory term.    See, e.g., Nagle v. GOM Shelf, LLC, No. Civ.A. V-03-103, 2005 WL 1515439 at *4 (S.D. Tex. June 24, 2005) (Chapter 95 applied to the manager of an offshore platform because it was acting as the owner's agent); Echartea v. Calpine Corp., No. 14-10-00019-CV, 2011 WL 2684889 at n.1 (Tex. App.—Houston [14th Dist.] 2001, no pet.) (finding the general contractor and authorized representative of property owner was entitled to protections of Chapter 95 through agency theory); Abarca v. Scott Morgan Residential, Inc., 305 S.W.3d 110, 122 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (Chapter 95 applied to the general partner of the entity that owned the property, who was also the owner's agent); Padron v. L&M Properties, No. 11-02-00151-CV, 2003 WL 253927 at *3 (Tex. App.—Eastland 2003, no pet.) (Chapter 95 applied to property management company); Fisher v. Lee & Chang P'ship, et al., 16 S.W.3d 198, 203 (Tex. App.— Houston [1st Dist.] 2000, pet. denied) (Chapter 95 applied to agents of the property owner).

An example of this “broad application” is Fisher v. Lee and Chang Partnership, a case in which an independent contractor brought a premises liability action against both the property owner and the property managers for an injury sustained when falling from a ladder.   16 S.W.3d at 200.  The Houston Court of Appeals determined that while a partnership actually owned the property where the injury occurred, the property managers who oversaw the property were entitled to the protection afforded through Chapter 95 because of their status as agents of the property owner.  Id. at 202-03.  In reaching its conclusion, the court considered an appellate decision construing the term “landlord” in the Texas Property Code to encompass not only the “owner, lessor, or sublessor,” as defined in the statute, but also a property manager.  Id. at 203 (citing Berry Prop. Management, Inc. v. Bliskey, 850 S.W.2d 644, 658 (Tex. App.—Corpus Christi 1993, writ dism’d by agr.).  Analogizing the Bliskey court’s determination that the statutory definition of “landlord” extended to property managers, the Fisher court held that “sec. 95.003 applies to property owners and also to their agents who oversee their properties.”  Id. at 203. 

Three years later, in Francis v. Coastal Oil and Gas Corporation, the Houston Court also found that an operator holding mineral leases—and therefore a mineral interest—who used the leased property in commercial business through the production and marketing of hydrocarbons was a “property owner” within the meaning of Chapter 95.  130 S.W.3d at 84 (“Coastal was a “property owner” under chapter 95 of the M. Salinas No. 6 gas well because it held the mineral leases pertaining to those premises and obtained mineral interests pursuant to those leases.”).

The Eastland Court of Appeals reinforced the stance of the Houston Court of Appeals in its decision in Padron v. L & M Properties.  The plaintiff in Padron was a satellite system repairman who suffered personal injuries received as the result of an electric shock while repairing the satellite system.  2003 WL 253927 at *1.  The plaintiff alleged that the property management company of the property on which he was working was negligent though its failure to inspect the premises for dangerous conditions, failure to correct a dangerous condition, failure to warn invitees of a dangerous condition, and crossing outlet wires creating a dangerous condition.  Id.  The Padron court found that the property management company, L & M, was entitled to protections afforded by Chapter 95 due to its status as the owner’s agent.  Id. at *3 (finding that L & M was entitled to rely on Chapter 95 as a “property owner” within the meaning of the statute because “L & M had a real estate management agreement with the owners of the property which gave them the right to institute repairs; to purchase materials; to engage, supervise, and discharge independent contractors; and to maintain, repair, and ‘redecorate’ the property.  L & M also had the exclusive right to execute lease renewals, to screen residents, and to terminate tenancies.  L & M was compensated for managing the property with a percentage of the rentals.  In all respects, L & M was the agent of the owner and is entitled to the protection of Chapter 95.”). 

The decisions in Fisher, Francis, Padron, and other cases applying the protections afforded by Chapter 95 to the agents or defacto owners of real property make good sense.  The superlegal distinctions between an owner, operator, or manager of property may evisorate the intent of Chapter 95 to limit exposure to liability in instances where a specialized, independent contractor is hired to work on an improvement to real property and is injured in the scope of that work.

Despite these appellate decisions and the practical rationale for them, on June 17, 2016, the Texas Supreme Court released the Elmgren opinion, disproving of decisions extending the protection afforded through Chapter 95 beyond the legal owner of a premises.  See Ineos USA, LLC v. Elmgren, 505 S.W.3d 555 (Tex. 2016).  In Elmgren, the plaintiff, Johannes Elmren, worked as a boilermaker for Zachry Industrial.  Zachry Industrial was an independent contractor that provided maintenance services to a petrochemical plant in Alvin, Texas.  The plant was owed by defendant Ineos USA, LLC.  Elmgren was injured while replacing a valve on a furnace header, which is part of a processessing system through which hot, combustible gas flows through pipes under pressure.  Pressured gas exploded and burst through pipe wile Elmren was replacing the pipe valve, resulting in severe burns to his torso, neck, and face.  Elmgren filed suit against Ineos and the plant’s employee, Jonathan Pavlovsky, whom Elmgren alleged was the “furnance maintenance team leader.”  Elmgren’s lawsuit asserted claims for premises liability and negligence.

The District Court in Brazoria County granted the defendants’ motions for summary judgment and Elmgren appealed.  The Houston Court of Appeals, Fourteenth District, affirmed in part, reversed in part, and remanded.  The Supreme Court granted a petition for review, and, among other issues, considered whether the definition of “property owner” in Chapter 95 extends to a corporate owner’s employees or agents.

Relying on the Fisher case discussed above, Pavlovsky argued to the Supreme Court that Chapter 95 protected him from Elmgren’s claims because Pavlovsky was the property owner’s agent and was acting in a managerial capacity on the owner’s behalf.  Id. at 564 (citing Fisher, 16 S.W3d at 202-03).  The Elmgren Court considered the opinion issued in Fisher and noted that “[w]ithout analyzing the statute’s language, the court of appeals . . . held that Chapter 95 applies to claims against ‘property owners and also to their agents who oversee their properties.’”  Id. at 564-65.  The Supreme Court discussed the Fisher decision’s reliance on the definition of “landlord” used in the Texas Property Code, noting that: “[t]he Fisher court failed to note, however, that the Property Code expressly defined the term ‘landlord’ to ‘include a manager or agent of the landlord’ if ‘the anager or agent purports to be the owner, lessor, or sublessor in an oral or written lease.’  Id. at 565 (citing Berry, 850 S.W.2d at 658 (citing Tex. Prop. Code § 92.001(2))).  The Supreme Court acknowledged that the Fisher court’s analogy was “logical,” but ultimately incorrect because the courts’ “task is to construe Chapter 95 as written, not as [they] may believe makes the most sense.”  The Elmgren opinion goes on to note that Chapter 95 contains no language in the definition of “property owner” to include agents who act on behalf of or hold themselves out as the true property owner.  Id. at 565 (citing Tex. Civ. Prac. & Rem. Code § 95.001(3)).  Due to the absence of such language in the statute itself, the Supreme Court concluded that Chapter 95 does not protect a property owner’s agents, and disapproved of decisions holding otherwise.  Id.

The Elmgren court applied the plain language of the law as written by the legislature, but the implications of the holding will adversely affect property owners and defeat the purpose of the protections afforded by Chapter 95.  In practice, property owners often employ the use of property management companies, operators, or other agents to handle the day-to-day business of a commercial property used for business purposes.  The interests of these managers, operators, or agents and the property owners they represent are therefore frequently intertwined.  Likewise, the financial responsibility of a manager, operator, or agent is often tethered to the owner of the property.  In the interest of interpreting “property owner” in a literal manner, the Texas Supreme Court has disapproved of appellate decisions applying the term “property owner” to include agents of those owners.  The Elmgren decision has consequently changed the application of Chapter 95 to premises liability defendants.