Honorable L. 

Rains County 

Courthouse 

Emory, Texas 

September 29, 1987 

M. Braziel Opinion No. JM-800 

Attorney 

75440 

Re: Whether article 2368a.2, 

V.T.C.S., permits the construction of a county jail 

building through a leasepurchase agreement when the 

agreement describes the building as "personal property" 

Dear Mr. Braziel: 

You ask the following question: 

May the construction of a county jail 

building be lawfully financed through a 

lease-purchase arrangement, pursuant to 

article 2368a.2, V.T.C.S., when the parties 

have contractually characterized the jail 

building as "personal property"? 

The Rains County Commissioners Court has entered into 

a "lease-purchase" agreement with Consolidated Financial 

Resources regarding certain llProperty** defined as follows: 

Relocatable County jail facility erected 

with 32 Dan/Tex finished ribbed panels and 

consisting of 51 rooms, including bed-space 

for 17 prisoners, together with a chain-link 

enclosure for an exercise yard. 

Lease-Purchase Agreement By and Between Consolidated 

Financial Resources, Inc., and Rains County, Texas, 

November 1, 1985, Exhibit A [hereinafter Agreement]. 

The lease-purchase agreement is actually a financing 

arrangement. Consolidated Financial Resources, Inc. does 

not agree to deliver the property to the county. Instead, 

the agreement provides that the property shall be acquired 

and installed pursuant to one or more purchase contracts 

entered into by the county and one or more contractors. 

Lease payments are allocated between principal and 

p. 3779 
Honorable L. M. Braziel - Page 2 (J&800) 

interest. Agreement, Exhibit B. The county in fact has 

entered into a purchase contract to acquire a relocatable 

jail from Detention Systems, Inc. IdL Exhibit C. 

The following provision of the lease-purchase 

agreement characterizes the jail as personal property: 

The Property is and will remain personal 

property and will not be deemed to be 

affixed to or a part of the real estate on 

which it may be situated, notwithstanding 

that the Property or any part thereof may be 

or hereafter become in any manner physically 

affixed or attached to real estate or any 

building thereon. Upon direction of Lessor, 

Lessee will, at Lessee>s expense, furnish a 

landlord or mortgagee waiver with respect to 

the Property. In addition, upon execution 

of this Lease, Lessee shall furnish to 

Lessor a certificate executed by an engineer 

or architect, said engineer or architect 

being approved by Lessor and being not 

affiliated with any Contractor, certifying 

that any portion of the Property which 

constitutes a building or structure is 

structurally relocatable and is and will 

remain personal property. 

Agreement, 513. 

The architect's letter to Consolidated Financial 

Resources states that 

all construction elements of the jail could 

be relocated with the exception of the 

following: 

1. 

2. 

Site - underground utilities 

- parking surfaces 

- sidewalks 

- site grading 

- landscaping 

Building - plumbing under slab 

foundation 

- concrete floor slab 

- floor coverings 

- gypsum steel stud walls 

p. 3780 
Honorable L. M. Braziel - Page 3 (JN-800) 

A 

states 

All remaining construction elements could, 

therefore, remain personal property. 

brief submitted in support of the lease agreement 

that site preparation, underground utilities, 

and other "non-relocatable" elements will be financed 

separately from the jail facility. The jail will be 

constructed with prefabricated panels. If the county 

terminates the agreement prior to purchase of the jail 

facility, the facility will be removed and returned to 

Consolidated Financial Resources. Agreement, 558, 23. 

The requestor writes that the Rains County jail is 

described as "relocatable," but that 

it appears from its size and manner of 

construction that it would be commercially 

impractical to do so. The jail facility 

seems to be quite different from the type of 

structures typically considered to be 

*personal property' -- temporary buildings 

and trailers which are brought to the 

property fully assembled, or temporary 

buildings and sheds built through the 

efforts and expense of a tenant upon leasehold property, intended for removal by the 

tenant when his lease expires. 

Article 2368a.2, V.T.C.S., the Public Property 

Finance Act, authorizes governmental agencies, including 

counties, to enter into contracts to lease or purchase 

property. V.T.C.S. art. 2368a.2, 54(a). The county may 

agree to a lease, a lease purchase contract, or an installment purchase. Id. The statute defines "property" 

as 

personal property, appliances, equipment, 

facilities or furnishings or an interest 

therein, whether movable or fixed. . . . 

V.T.C.S. art. 2368a.2, §3(11). It also includes the 

following provision: 

Notwithstanding any contrary provision, 

this Act does not apply to a contract solely 

for the construction of improvements to real 

property. 

V.T.C.S. art. 2368a.2, 59. 

p. 3781 
Honorable L. M. Braziel - Page 4 (.8+800) 

Attorney General Opinion JM-697 (1987) cited sections 

3(11) and 9 of article 2368a.2, V.T.C.S., quoted above, 

and stated that this statute does not authorize the 

commissioners court to acquire a jail under a lease 

purchase contract. Legislative history evidences the 

legislative intent that article 2368a.2, V.T.C.S., does 

not authorize the acquisition of real property. This 

statute was enacted by House Bill No. 1176 of the 

Sixty-sixth Legislature. Acts 1979, 66th Leg., ch. 749, 

at 183.9. The bill was amended in the House to add the 

language in section 9, quoted above, that the act does not 

apply to a contract solely for the construction of 

improvements to real property. Bill File to H.B. No. 

1176, 66th Leg., filed in Legislative Reference Library. 

The Senate amended the bill's definition of "property," 

which originally stated, among other things, that property 

means "any property other than land." Id. The Senate 

amendment, which is part of the enacted language 

quoted above as section 3(11) defines property to mean 

personal property, appliances, equipment, facilities, or 

furnishings and adds the express provision that property 

"shall not include real property." Hence, it appears that 

the intention of the legislature was to exclude more than 

land and instead to exclude real property and the 

construction of improvements to real property. 

Attorney General Opinion JM-697 concluded that a 

county has implied authority to acquire a jail through a 

lease-purchase contract extending beyond the present year, 

but did not consider whether a commissioners court could 

bring a jail construction project within article 2368a.2, 

V.T.C.S., by agreeing that it would remain personal 

property. The opinion further stated that article 

2368a.2, V.T.C.S., 

establishes a procedure whereby the validity 

of a contract may become 'incontestable for 

any cause,' and provides that contracts 

entered into pursuant to the statute are 

legal and authorized investments for certain 

enumerated financial institutions and 

sinking funds of governmental bodies. See 

V.T.C.S. art. 2368a.2, 556, 7. The legislature may have excluded real property and the 

improvement of real property from article 

2368a.2 because it did not want all of these 

provisions to apply to contracts for the 

acquisition or improvement of real property. 

Attorney General Opinion JM-697 (1987). 

p. 3782 
Honorable L. M. Braziel - Page 5 (JM-800) 

Unless the commissioners court may make a valid 

agreement that the county jail will be personal property, 

it may not construct and finance this project under 

article 2368a.2, V.T.C.S. 

Tangible property is either realty or personalty and 

the word "real" describes land and that which is annexed 

to it. Erwin v. Steele, 228 S.W.Zd 882, 885 (Tex. Civ. 

APP. - Dallas 1950, writ ref'd n.r.e.). Generally, a 

building constructed on land becomes part of the freehold 

in the absence of an intention or agreement that the 

building will not become permanently annexed to the land, 

and the law presumes that a house located on land is part 

of the land in the absence of evidence to the contrary. 

See Brown v. Roland, 45 S.W. 795, 796 (Tex. 1898); Ford v. 

Forsoard, 27 S.W. 57, 58 (Tex. 1894); Calvert v. Welch, 

369 S.W.2d 840, 842 (Tex. Civ. App. - Texarkana 

writ); Griqos v. Masnolia Petroleum 

1963, no 

Comnanv, 319 S.W.2d 

818, 819 (Tex. Civ. 

Evanselicai St. John's 

ADD. - Amarillo 

Church v. Otto 

1958. no writ): 

Indewendent School 

District, 203 S.W.2d 299, 301 (Tex. Civ. App. - Waco 1947, 

no writ). Black's Law Dictionary 1096 (5th ed. 1979), 

defines real property as land and generally whatever is 

erected or growing upon or affixed to land. Thus, 

building would ordinarily .be considered to 

a jail 

be real 

property, even though a substantial portion consisted of 

relocatable "construction elements." 

It is a well recognized rule that, as between the 

parties to a contract, the character of property may be 

fixed by contract to the effect that it shall remain 

personalty and not become attached to real property. 

National Bank v. Elk Mfo . C o., 29 S.W.2d 1062, 

1066 (Tex. Comm'n App. 1930, judgment adopted): Roaers v. 

Fort Worth Poultrv and Egg Co., 185 S.W.2d 165, 167 (Tex. 

Civ. App. - Fort Worth 1944, no writ). 

While fixing the character of property as between the 

parties to a contract, such an agreement does not determine the character of the property as to all persons and 

purposes. The Texas courts have held that third party 

purchasers and mortgagees who take in good faith and 

without notice of such an agreement have a right to view 

the property in accord with its apparent condition and 

character at the time of the purchase or acceptance of the 

mortgage. See Citizens' National Bank v. Elk Mfo. Co., 

m; Philliws v. Newsome, 179 S.W. 1123, 1124 (Tex. Civ. 

APP. - Fort Worth 1915, no writ): Ice. Liaht. and Water 

co. v. Lone Star Ensine 8 Boiler Works, 41 S.W. 835, 836 

(Tex. Civ. App. 1897, no writ). The intention of a party 

p. 3783 
Honorable L. M. Braziel - Page 6 (~~-800) 

as to the character of property has been held not to 

determine its character for insurance purposes in the face 

of physical facts to the contrary. See Rubv v. Cambridse 

Mutual Fire Insurance Comvany, 358 S.W.Zd 943, 946 (Tex. 

Civ. App. - Dallas 1962, no writ). 

In the present case, the legislature intended. that 

article 2368a.2, V.T.C.S., not apply to real property. 

The parties have attempted to bring real property within 

the statute by characterizing it as "personal property" 

despite physical facts to the contrary. The parties could 

not alter the statutory definition by consent. See Casias 

v . State of Texas, 503 S.W.2d 262 (Tex. Crim. App. 1973); 

see also Ex warte Salter, 452 S.W.2d 711 (Tex. Civ. App. - 

Houston [lst Dist.] 1970, writ ref'd) (court must confine 

itself to a reasonable construction of the language used). 

We believe the characterization of real property as 

personal property should be disregarded, as an attempt to 

circumvent the legislative intent underlying article 

2368a.2, V.T.C.S. 

The provisions of the Public Property Finance Act do 

not apply to the lease agreement which the Rains County _ 

Commissioners Court entered into to finance the acquisi- ? 

tion of a county jail. 

SUMMARX 

Article 2368a.2, V.T.C.S., the Public 

Property Finance Act, applies to the 

acquisition of personal property and not 

real property. The parties to a contract 

may not bring property ordinarily considered 

to be real property within the terms of this 

statute by agreeing to characterize it as 

personal property. 

JIM MATTOX. 

Attorney General of Texas 

MARY KELLER 

Executive Assistant Attorney General 

p. 3784 
Honorable L. M. Braziel - Page-7 (JM-800) 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney Gene&l 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney General 

p. 3785