Z.A.O. Inc. v. Yarbrough Drive Center Joint Venture

• Court: Texas Court of Appeals
• Writing for the Court: RICHARD BARAJAS
• Citation: Z.A.O. Inc. v. Yarbrough Drive Center Joint Venture, 50 S.W.3d 531 (Tex. App. 2001)
• Decision Date: 08 February 2001
• Docket Number: No. 08-99-00083-CV,08-99-00083-CV
• Parties: (Tex.App.-El Paso 2001) Z.A.O., INC. F/K/A BELL THUNDERBIRD OIL CO., INC., Appellant, v. YARBROUGH DRIVE CENTER JOINT VENTURE, Appellee.

Page 531

50 S.W.3d 531 (Tex.App.-El Paso 2001)

Z.A.O., INC. F/K/A BELL THUNDERBIRD OIL CO., INC., Appellant, v. YARBROUGH DRIVE CENTER JOINT VENTURE, Appellee.

No. 08-99-00083-CV

COURT OF APPEALS OF TEXAS, EL PASO, EIGHTH DISTRICT.

Feb. 8, 2001

Appeal from the 171st Judicial District Court of El Paso County, Texas (TC# 94-9994) [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Steven C. James, El Paso, for appellant.

Bruce Koehler, Steven L. Hughes, Mounce, Green, Myers, Safi & Galatzan, P.C., El Paso, for appellee.

Before Panel No. 2 Barajas, C.J., McClure, and Chew, JJ.

O P I N I O N

RICHARD BARAJAS, Chief Justice

This is an appeal from a judgment entered against Z.A.O., Inc. for breach of contract, nuisance, and trespass. For reasons stated below, we affirm in part, reverse and render in part, and reverse and remand in part.

I. SUMMARY OF THE EVIDENCE

A. Factual History

In 1990,Yarbrough Drive Center Joint Venture, ("Yarbrough"), leased premises located in El Paso, Texas to Z.A.O., Inc., ("ZAO"), for use as a service/gas station. The 1993 lease agreement provided that the lease would end on March 31, 1994. On March 21, 1994, Bart Colwell, manager of Yarbrough, agreed to extend the lease to September 30, 1994.

At some point prior to the expiration of the lease, (i.e. September 30, 1994), ZAO abandoned the lease.¹ After several failed attempts to encourage Eugene Bell, president of ZAO, to clean up the premises and to finalize all obligations under the lease agreement, William Mounce, Yarbrough's attorney, in a letter dated July 25, 1994, informed ZAO that in spite of the abandonment, it remained liable for rent payments in the amount specified in the lease through September 30, 1994.² The letter also contained the following notices:

On termination of the lease you are obligated to remove all improvements including the underground storage tanks, pursuant to Section 4.01(b) of the lease. Your attention is also invited to Section 10.09 of the lease agreement. Yarbrough . . . demands that you continue to pay the rental provided in the lease. You must also make arrangements with Yarbrough . . . to comply with Section 4.01(b) of the lease agreement.

Section 4.01 of the lease is entitled "Maintenance and Surrender." That section states:

Lessee shall at its expense and risk, maintain the roof, foundations, underground or otherwise concealed plumbing, and the structural soundness of the exterior walls and all other parts of the building and other improvements on the Leased Premises in good repair and condition, including but not limited to repairs (including all necessary replacements) to the interior plumbing, windows, window glass, plate glass, doors, heating system, air conditioning equipment, fire protection sprinkler system, and the interior of the building in general; and including the reasonable care of landscaping and regular mowing of any grass, and maintenance of paving outside the building.

Lessee shall, throughout the lease term, take good care of the building and other improvements and keep them free from waste or nuisance, and, upon termination of this Lease, shall remove all improvements including the underground storage tanks. Lessee shall restore the premises to level, hard-surfaced, without holes, and suitable for use as a parking space and without any separation barriers between the Leased property and the Lessor's property (reasonable wear and tear and damage by fire, tornado or other casualty excepted.) Lessee agrees to indemnify and hold Lessor harmless from any and all claims, demands, losses or expenses asserted against or suffered by Lessor as a result of any hazardous or toxic substances located in or under the soil of the Leased Premises.

In a letter dated September 28, 1994, Eugene Bell responded to the July 25 letter. Bell informed Colwell that he was enclosing $5,280 as full payment of his financial obligations under the lease and that he had contacted the Texas Water Commission in order to make arrangements for the removal of the storage tanks.³ Bell indicated that he was waiting for certain paperwork from the Commission before he would remove the tanks. Yarbrough's attorney, James Jones, responded to Bell's letter in a letter dated October 10, 1994. Jones informed Bell that Bell did not have to wait for any paperwork prior to removing the tanks, and that Yarbrough was requesting removal as soon as possible.

By November of 1994, ZAO completed the removal of the tanks. However, they had not completed the re-paving process due to rain delays. In a December 1994 letter, Jones informed Bell that all of the necessary restoration had not been completed and that until such restoration was completed, Yarbrough considered Bell to be in breach of the lease. The letter also indicated that "[t]he premises have not been returned to their original condition as is required by the lease." By the end of December 1994 or the beginning of January 1995, ZAO completed re-paving the parking lot in accordance with the lease provisions. After ZAO repaved the premises, the Texas Natural Resource Conservation Commission issued a letter dated January 6, 1995 to Leonard Durling, the manager of the gas station. The letter informed ZAO that a "release" from the storage tanks had occurred.⁴ The letter also stated that:

Title 30, Texas Administrative Code (TAC), Section 334.71 - 334.85 requires the owner or operator of a storage tank system to immediately abate any release of a regulated substance and to conduct an investigation for soil and groundwater cleanup.

. . .

If assessment activities reveal the presence of any phase-separated hydrocarbons (PSH), then you are required, pursuant to 30 TAC 334.79, to immediately implement a recovery program which effectively removes the PSH . . . to the maximum extent practicable and to notify this Office immediately.

Because the Commission's letter mentioned the word "owner," in June or July of 1995, Colwell hired Raba-Kistner, an independent consulting firm, to conduct soil testing on the property.⁵

During the trial, James Williams, manager of geosciences for Raba-Kistner, testified about the testing process that occurred on the effected site. During his testimony, the following exchange took place between him and Yarbrough's counsel:

Question: Now, would you tell the Ladies and Gentlemen of the Jury--describe the analysis that was performed by you, or by your company at the site?

Answer: We analyzed the soil samples using the organic vapor analyzer while we were on the site. And then from the laboratory we requested total petroleum hydrocarbons and BTEX along with which they analyzed for MTBE.

Question: And what is MTBE?

Answer: Methyl tert-Butyl Ether.

Question: Is that a toxic and hazardous substance?

Answer: Yes, it is.

Question: Is TPH--well, first of all, what is TPH?

Answer: TPH includes all total petroleum hydrocarbons. So that could include everything from asphalt through gasoline, methane, your natural gas, those are all petroleum hydrocarbons.

Question: At the action levels that you found, were those hazardous and dangerous substances?

Answer: Yes, we believe that there was a gasoline and/or diesel release, and those concentrations would be hazardous and toxic.

ZAO also hired an environmental specialist to perform tests on the site in accordance with the notice provided by the Commission. ZAO's specialist, Vincent Lahay, testified that the site contained 78 times the action level for gasoline, and 15.6 times the action level for diesel.⁶

After ZAO and Yarbrough tested the soil on the site, ZAO submitted to the Commission a site closure proposal. Then, in a letter dated June 3, 1997, the Commission issued a site closure letter to ZAO which stated the following:

This letter confirms the completion of corrective action requirements for the release incident at the above-referenced facility. Based upon the submitted information and with the provision that the documentation provided to this agency was accurate and representative of site conditions, we concur with your recommendation that the site has met the closure requirements. This letter documents that no further corrective action is necessary.

Please be aware that case closure is based on identified exposure pathways and that remaining contaminant levels and potential exposure pathways should be evaluated when conducting any future soil excavation or construction activities at this site. Please ensure that any wastes generated from these activities are handled in compliance with all applicable regulations.

The information submitted by ZAO to which the closure letter referred failed to indicate that the property would be used as a restaurant in the future. This omission becomes important considering the testimony of James Williams regarding the effects of future site development on Yarbrough's potential liability for the toxic substances. Williams testified that if, during the course of future development, workers come into contact with the toxic substances, then Yarbrough will be obligated to take corrective action. Once such corrective action is undertaken by Yarbrough, they could be considered to be the responsible party by the Commission.

B. Procedural History

Yarbrough filed its First Amended Original Petition on January 11, 1995. Yarbrough claimed that it suffered damages attributable to (1) the failure to timely pay rent; (2) the failure to keep the facility open to the public for the duration of the lease; (3) the failure to return the leased premises in the proper condition under the lease; and (4) the failure to pay holdover rent. In its Fourth Amended Original Petition, Yarbrough asserted the following causes of action: (1) breach of contract; (2) negligence; (3) negligence per se; (4) misrepresentation; (5) fraud; (6) nuisance; (7) trespass; and (8) gross negligence.

At the conclusion of the trial, the jury was asked the following questions: (1) Di...