Ghidoni v. Stone Oak, Inc., No. 04-94-00837-CV

CourtCourt of Appeals of Texas
Writing for the CourtBefore HARDBERGER; RICKHOFF; DUNCAN, J., dissents with opinion in which ANGELINI; ANTONIO G. CANTU; DUNCAN; ANGELINI; ANTONIO G. CANTU
Citation966 S.W.2d 573
PartiesDonald E. GHIDONI, Appellant, v. STONE OAK, INC., Hill Country Waterworks, Co., Hill Country, S.A. Ltd., and Nancy J. Ghidoni-Meehan, Appellees.
Decision Date28 January 1998
Docket NumberNo. 04-94-00837-CV

Page 573

966 S.W.2d 573
Donald E. GHIDONI, Appellant,
STONE OAK, INC., Hill Country Waterworks, Co., Hill Country,
S.A. Ltd., and Nancy J. Ghidoni-Meehan, Appellees.
No. 04-94-00837-CV.
Court of Appeals of Texas,
San Antonio.
Jan. 28, 1998.
Rehearing Overruled March 16, 1998.

Page 576

Sharon E. Callaway, Crofts, Callaway & Jefferson, P.C., San Antonio, for Appellant.

Ron D. Ross, San Antonio, Kathleen W. Foster, Godwin & Carlton, P.C., Dallas, Seagal V. Wheatley, Bradley S. Wilder, Jenkens & Gilchrist Groce, Locke & Hebdon, San Antonio, for Appellees.



RICKHOFF, Justice.

The motion for rehearing en banc filed by appellees Stone Oak, Inc., Hill Country Waterworks Co., and Hill Country S.A., Ltd. on March 31, 1997 is granted. Our opinion and judgment of February 28, 1997 are withdrawn, and this opinion and judgment are substituted.


Appellant, Donald E. Ghidoni ("Ghidoni"), appeals from a judgment entered in a suit involving a dispute over the rights to a portion of real property (lots 183, 184B, and 185B) located at or near 107 Bitters Road and U.S. Highway 281 in San Antonio, Bexar County, Texas (the "Property"). The dispute giving rise to the litigation underlying this appeal was the second dispute between the parties regarding the Property.

The crux of the first dispute was Ghidoni's right of first refusal to purchase the Property. Our record does not contain the documentation evidencing this right, but from other documentation in our record, we discern that the right of first refusal was granted in a lease (the "Ghidoni Lease") dated August 26, 1982, between the Tomerlin Estate, Clare Joy Campbell and Lori Jane Campbell, as lessors (collectively referred to herein as the "Campbells"), and Ghidoni, as lessee. On February 11, 1983, the Campbells entered into a second lease with Stone Oak (the "Campbell Lease"). The Campbell Lease appears to be for the same property; however, the Campbell Lease states that the lease is for "Lots 183 and those portions of 184B and 185B, not covered by" the Ghidoni Lease. In any event, the dispute regarding Ghidoni's right of first refusal resulted in a suit filed by Ghidoni against the Campbells and Stone Oak. This suit was settled on September 17, 1984, with the execution of a Compromise Settlement Agreement by Ghidoni, Stone Oak and the Campbells (the "CSA").

Under the terms of the CSA, Stone Oak continued to lease the Property from the Campbells; however, Stone Oak subleased all the Property to Ghidoni with the exception of three water well sites and certain easements. In addition, Stone Oak assigned its option to purchase the Property under the Campbell Lease to Ghidoni. In the event Ghidoni exercised the option, the CSA provided that he would become the Lessor under the terms of the Campbell Lease, and the property leased to Stone Oak would be limited to three water well sites and easements. The CSA also required Stone Oak to arrange for the company operating the water wells (which at the time of the CSA was Hill Country Water Works, Inc. ("HCWW")) to provide Ghidoni with 2,500,000 gallons of water each year at no charge. Finally, the CSA provided that Stone Oak could place no more than three water wells on the Property and required that the water wells comply with all Texas statutes, rules and regulations and not generate noise in excess of 50 decibels measured at the well site perimeter.

On December 17, 1986, Ghidoni exercised his option to purchase the Property. On February 15, 1991, Ghidoni and his wife, Nancy J. Ghidoni-Meehan ("Meehan"), were divorced. The divorce decree provided that they would be tenants in common in the

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Property. In addition, the divorce decree separately provided that "all assignments of water leases are to be divided evenly between the parties. Such water leases are with Stone Oak." Ghidoni was named manager of the Property, and Meehan was to provide Ghidoni with a right of first refusal on the Property. On February 19, 1991, Meehan conveyed her interest in the Property to Ghidoni by special warranty deed.

On March 9, 1992, Ghidoni notified Stone Oak in writing that the noise from the well motor was in excess of the agreed noise level. Thereafter, Ghidoni hired an attorney who sent a second letter on June 9, 1992 notifying Stone Oak of the noise violation. The letter states:

This [noise] covenant in the settlement agreement was incorporated into the lease and in my opinion a violation of this covenant is grounds for termination of the lease.... My client is currently contemplating whether he will exercise his right to terminate the lease based upon the breach of this covenant and will be in contact with you shortly regarding his decision. However, he is asserting his right to place you on notice that you are in breach of the covenant contained within the lease and is not hereby intending to waive his rights to terminate the lease based upon this breach.

On July 10, 1992, Stone Oak responded to Ghidoni's second letter stating that it was in the process of investigating the allegations and would respond upon completion of the investigation. The letter further states that landscaping had been undertaken in an effort to muffle the sound of the pump motor. In addition, the letter states that arrangements had been made to have the pump motor reworked to reduce the noise level and estimated that the work would be completed within 10 days to two weeks. Finally, the letter asserts that "[f]or purposes of this letter, the 'contract' means that certain Compromise Settlement Agreement dated September 17, 1984 between [the Campbells, Stone Oak and Ghidoni]."

On September 9, 1992, Ghidoni's attorney sent Stone Oak written notice of termination of the Campbell Lease. The notice states that the June 9, 1992 letter had placed Stone Oak on notice of its default under the lease which gave Stone Oak fourteen days in which to cure the default. The notice further states that additional noise level tests were conducted on August 17, 1992, and it was determined that the wells were operating in the range of 83-85 decibels. Therefore, since the default was not cured within fourteen days from June 9, 1992, Ghidoni was terminating the lease effective September 18, 1992.

On September 16, 1992, Stone Oak's attorney responded to Ghidoni's letter referencing an earlier conversation. The letter states that Stone Oak was unable to have the pump reworked in the time frame given in its July 10, 1992 letter because of scheduling problems and the high use of water in the months of July, August and September making maintenance difficult without impeding the pumping of water for the customers of HCWW. The letter further states that the pump motor would be reworked by September 18, 1992 after which noise level tests would be taken to determine whether additional steps were necessary to reduce the noise level. The letter concludes with a request that Ghidoni forbear from terminating the lease in order to reach an acceptable resolution.

On November 12, 1992, Ghidoni sent Stone Oak a letter reiterating that the lease had been terminated effective September 18, 1992, invoicing Stone Oak for equipment storage charges, and demanding payment for water withdrawn since September 19, 1992. Stone Oak replied by letter dated November 19, 1992, wherein Stone Oak states: "our position in this entire matter has been and continues to be that Stone Oak, Inc. is not in default under the Lease and as a result your attempts to terminate the same are of no force or effect from our standpoint." Stone Oak's letter further states that Stone Oak had contracted for the construction of a building around the well site to be completed within 60 days. This building was completed in December of 1992.

On December 12, 1992, HCWW employees discovered that a new lock had been installed on the gate to the Property, thereby preventing their access to the water wells. The

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lawsuit underlying this appeal was then filed on December 22, 1992. On the same day, a temporary restraining order was issued by the trial court enjoining Ghidoni from taking any action to restrict or prevent Stone Oak's access to the Property or the wells pending further order of the court. On March 1, 1993, Ghidoni filed his original answer and counterclaims for breach of contract arising from the noise level default and for damages based on the value of the water removed after the lease was allegedly terminated.

On June 18, 1993, Meehan (Ghidoni's ex-wife) filed a plea in intervention in the suit filed by Stone Oak claiming an interest in the Property and the Campbell Lease based on the divorce decree. On July 30, 1993, Hill Country, S.A. Ltd. ("HCSA") also intervened in the lawsuit stating that it had purchased the assets of Stone Oak and HCWW, including Stone Oak's rights under the Campbell Lease.

On August 23, 1993, Ghidoni sent written notice to Stone Oak and HCSA that they were in default under the lease for failure to comply with all laws, rules and ordinances of federal, state, and municipal governments. Specifically, Ghidoni asserted that Stone Oak and HCSA were in violation of a Texas regulation requiring them to have a sanitary control easement around the water well locations. On October 4, 1993, Ghidoni notified Stone Oak and HCSA that the lease had been canceled for failure to cure the default referenced in the August 23, 1993 letter.

On October 15, 1993, HCSA sent Ghidoni a letter stating that it was renewing its request that Ghidoni agree to grant HCSA a sanitary control easement. This letter was apparently in response to Ghidoni's termination letter and a notice from the Texas Natural Resource Conservation Commission ("TNRCC") that Stone Oak needed to take remedial measures to correct certain...

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