Opinion
No. 05-06-00954-CV
Opinion Filed April 2, 2008.
On Appeal from the 101st Judicial District Court Dallas County, Texas, Trial Court Cause No. 03-07744-E.
Before Justices O'NEILL, RICHTER, and FRANCIS.
MEMORANDUM OPINION
This case concerns the breach of certain environmental provisions of a commercial lease. Following a jury trial, the trial court entered a judgment in accordance with the verdict in favor of appellee Corporate Property Associates (CPA) for $1,610,000. Appellants VHC, Inc. f/k/a Varo Inc. (Varo) and IMO Industries, Inc. present five issues generally contending (1) Varo did not breach the lease agreement, (2) the trial court erred in refusing certain instructions to the jury, and (3) the attorneys fees award must be set aside. For the following reasons, we affirm the trial court's judgment.
In 1979, Varo sold the leased premises to CPA and entered into a leaseback. The original lease was for a term of twenty years, but the parties entered into a replacement lease in 1992 when improvements were made to the property. Appellant IMO Industries guaranteed Varo's performance under the 1992 lease. This case concerns the breach of that lease.
At the time the parties entered into the 1992 lease, certain environmental concerns had been identified on the property. Thus the lease contained provisions requiring Varo to clean up the property and also allowing CPA, as landlord, to test for environmental violations during the lease term. If an environmental violation was found, Varo was required to take all action necessary to clean the property. The lease also contained a provision that automatically extended the lease until Varo cured any environmental violations in accordance with applicable laws. Specifically, the lease provided that:
Notwithstanding any other provision of this Lease, if an Environmental Violation occurs or is found to exist, then the Term shall be automatically extended and this Lease shall remain in full force and effect until the earlier of (i) the completion of all remedial action in accordance with applicable Environmental Laws or (ii) the date specified in a written notice from Landlord to Tenant terminating this Lease.
(emphasis added).
During the term of the lease, environmental hazards were found on two areas of the site, an abandoned wastewater neutralization pit and a subsurface area where Varo had stored hazardous chemicals. In 1994, Varo notified the Texas Natural Resource Conservation Commission (TNRCC) (now known as the Texas Commission on Environmental Quality (TCEQ)) of an "accidental discharge" of volatile organic compounds. Varo provided the TNRCC a "remedial action plan" to remove the contaminates. The TNRCC monitored the cleanup, but refused to approve Varo's "closure report" because the report did not allow the TNRCC to confirm the site was clean.
Meanwhile, the State of Texas had enacted the Voluntary Cleanup Program (VCP). In 2001, before the lease expired, Varo applied for and was accepted into the VCP. The VCP is part of the solid waste disposal act. The stated purpose of the program is to provide incentives for a landowner to remediate polluted land by removing liability of lenders and future landowners. See Tex. Health Safety Code Ann. § 361.602 (Vernon 2001). The statute also allows a landowner or person responsible for contaminating a site to avoid a State enforcement action.
Under the program, a party responsible for a contaminated site cleans the site under the oversight of the TCEQ. After the site is remediated, the TCEQ will issue a Certificate of Completion (COC) releasing future owners and lenders from liability for past contamination. The VCP requires certain investigative activities, confirmatory sampling and paperwork requirements before the TCEQ will issue the COC.
The VCP generally allowed for a faster and more efficient method of ensuring a contaminated site was cleaned or remediated in accordance with State guidelines. Varo entered the program because it believed it could "accelerate remediation" and more quickly obtain "closure" of the site under the voluntary program. Varo had specifically hoped that, utilizing the VCP, it could obtain closure before the lease expired in 2002, including verification from the State that the property had been remediated. While Varo's entry into the VCP was voluntary, its obligation to clean the property under both the lease and State law was not.
In accordance with the VCP, Varo entered into an agreement with the State in which Varo agreed to clean the site and to provide progress reports and submit a response action completion report. Before the lease was due to expire in September of 2002, Varo conducted excavation and clean up activities on the property. However, it did not complete the reporting and sampling requirements of the VCP or obtain a COC until 2004.
As previously stated, under the lease, if an environmental violation occurred or was "found to exist," the lease was automatically extended until the completion of all remedial action in accordance with applicable environmental laws. The parties agree the VCP and the VCP agreement are applicable environmental laws. The parties however disagree regarding what actions constitute "remedial action" under the VCP, and specifically whether the investigative activities and confirmatory sampling requirements of the VCP are "remedial action."
According to appellants, "remedial action" under the lease is confined to the actual removal of contaminants from the site. They assert all remedial action took place before the lease expired because all the actual excavation and clean up activities were completed before that date. Although Varo did not complete the sampling and reporting requirements of the VCP before the lease expired, appellants assert those requirements were not "remedial action."
The lease does not define "remedial action." To prove the meaning of the term "remedial action" appellants rely on a definition of "response action" found in the VCP. The VCP defines "response action" as "the cleanup or removal of a hazardous substance or contaminant from the environment. . . ." Appellants contend we must use the statutory definition of "response action" in determining the lease's meaning of "remedial action" because, at trial, the experts testified that the two terms were synonymous.
We begin by noting that the question before us is not, as appellants urge, a question of statutory interpretation, but a contract issue. The relevant question is what the parties intended by the phrase "remedial action." See Seagull Energy E P, Inc. v. Eland Energy, Inc. 207 S.W.3d 342, 345 (Tex. 2006) (primary concern when interpreting a contract is to ascertain and give effect to the intent of the parties as that intent is expressed in the contract.). Specifically, we must determine whether the applicable sampling and reporting requirements of the VCP should be labeled as "remedial action" as that term was used by the parties in the 1992 lease. That term, as used in the lease, was not in reference to any particular statute, much less the VCP, which had not been enacted at the time the contract was executed.
When terms in a contract are not specifically defined, we give the terms their plain, ordinary, and generally accepted meaning. Coldwell Banker Whiteside Assoc. v. Ryan Equity Partners, Ltd., 181 S.W.3d 879, 886 (Tex.App.-Dallas 2006, no writ). If however a phrase is ambiguous, extrinsic evidence is admissible to show the intent of the parties, as well as custom or usage in the industry. Monesson v. Champion Intern. Corp., 546 S.W.2d 631, 637 (Tex.Civ.App.-Tyler 1976, writ ref'd n.r.e.). If the meaning of a phrase is ambiguous, it is proper to submit the issue to the jury. Id.
In determining whether there is legally sufficient evidence to support the jury's decision, we view the evidence in the light most favorable to the verdict, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005). To evaluate the factual sufficiency of the evidence supporting the finding, we consider all the evidence and will set aside the verdict only if the evidence supporting the jury finding is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex. 1985); Lamajak, Inc. v. Frazin, 230 S.W.3d 786, 793 (Tex.App.-Dallas 2007, writ dism'd)
At trial, the parties disputed the meaning of the term "remedial action" and both presented extrinsic evidence, by way of expert testimony, regarding its meaning. The meaning of the term "remedial action" was submitted to the jury as a question of fact. Appellants' expert, Charles Epperson, testified remedial action did not include sampling and confirmation activities after a site was physically cleaned. CPA's expert on the other hand testified that remedial action included such reporting requirements. We conclude the jury, as trier of fact, could have reasonably credited CPA's expert.
That both experts believed the phrases "remedial" action and "response" action to be essentially synonymous does not transform this case to one of statutory interpretation. Nor is it disposotive of the parties' intent.
Further, although expert testimony was presented, there is nothing in the record to suggest the meaning of the phrase could only be understood with expert testimony. See Gulf State Utilities Co. v. Low, 79 S.W.3d 561, 570 (Tex. 2002) (in some circumstances, when parties offer expert opinion testimony, a jury is not necessarily bound by that evidence and "can form its own opinion from other evidence and by use of its own experience and common knowledge"). The jury could thus consider the common meaning of the phrase "remedial action," in addition to the expert testimony on the issue.
The word remedial is commonly defined as "affording a remedy; intended for a remedy or for the removal or abatement of a disease or of an evil." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1920 (1981). Here, the sampling and reporting requirements of the VCP enable the TCEQ to ensure contaminates are properly removed from property and within State guidelines. The requirements therefore assist in remedying the environmental concerns the statute was designed to address and give effect to the statute as a whole. We conclude a jury could reasonably find the sampling and reporting requirements constituted "remedial actions" under the VCP.
We further conclude this interpretation supports the general intent of the parties, as reflected in the lease, to place environmental risks on Varo. The lease was automatically extended until Varo complied with all environmental laws. Varo would require possession of the property if further clean up was necessary and whether such cleanup was needed could only be determined with proper sampling, testing, and verification. Moreover, until confirmatory testing was performed on the property, it would be impossible for the parties to determine whether or not the lease was extended and therefore still in effect. We conclude the evidence is legally and factually sufficient to support the jury's finding that Varo breached the lease. We resolve the first issue against appellants.
In its second issue, appellants contend that an environmental violation never existed on the property and thus the lease term was not extended. As of September 30, 2002, the termination date of the lease, the water on the property was classified as a "class three groundwater bearing unit" and contaminates detected on the property exceeded State guidelines for such groundwater. Appellants nevertheless rely on a determination made by the TCEQ in 2003 that the water on the property was nongroundwater bearing. This determination was important because it altered the limits for various contaminants and established the prior levels had been within acceptable limits for a nongroundwater bearing unit. It is undisputed that as of the lease termination date, the TCEQ classified the site as a class three groundwater bearing unit and the levels of certain contaminates found on the site at that time exceeded State limits. Varo admitted it was willing to accept this classification at that time and the cleanup it conducted was for a groundwater bearing unit. In fact, Varo did not contest the classification until after the lease expired. Because the water on the property was classified as groundwater bearing as of the lease termination date and because the contaminates on the property exceeded State guidelines for such groundwater, an "environmental violation" was "found to exist" at the relevant time. Once the violation was found to exist, the lease was extended until Varo completed all remedial actions in accordance with the VCP. We resolve the second issue against appellants.
In its third issue, appellants contend the trial court erred in failing to instruct the jury that the TCEQ's 2003 determination that the property was a nongroundwater bearing unit was "conclusive." The TCEQ's 2003 determination did not effect whether the lease was extended in 2001. Thus, that determination would not have been relevant to the question before the jury. We resolve this issue against appellants.
Because of our disposition of these issues, we need not reach appellants' remaining issues. We affirm the trial court's judgment.