Donovan v Rocklyn Fuel Oil Corp.

[*1] Donovan v Rocklyn Fuel Oil Corp. 2009 NY Slip Op 51008(U) [23 Misc 3d 1130(A)] Decided on May 1, 2009 Supreme Court, Nassau County Palmieri, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on May 1, 2009
Supreme Court, Nassau County

Patrick Donovan, Plaintiff,

against

Rocklyn Fuel Oil Corp., Defendants.



005520/06



Richard E. Gresio, Esq.

Chand & Gresio, LLP

Attorney for Plaintiff

110-23 Jamaica Avenue

Richmond Hill, New York 11418

Hardin, Kundla, McKeon & Poletto, P.A.

Attorneys for Defendant

110 William Street, 25th Floor

New York, NY 10038

Daniel Palmieri, J.

This motion by defendant Rocklyn Fuel Oil Corp. pursuant to CPLR 3212 for summary judgment dismissing the complaint is granted to the extent indicated in this order, and is otherwise denied. The cross motion by plaintiff pursuant to CPLR 3212 for partial summary judgment on the issue of liability is granted to the extent indicated in this order, and is otherwise denied.

This is an action to recover cleanup costs and consequential damages caused by an oil spill. Plaintiff Patrick Donovan is the owner of a two-family home located at 265 Rocklyn Avenue in East Rockaway. Defendant Rocklyn Fuel Oil Corp. is a heating oil dealer. Plaintiff and defendant entered into a home heating oil contract, which required defendant to deliver oil to plaintiff's home on a regular basis.

In March 2003, plaintiff entered into a contract to sell the home to a third-party for $450,000. The premises was to be delivered vacant, and the closing was scheduled to occur on April 4, 2003. The contract required plaintiff to tender the property with a new oil tank, and for the tank to be full at the time of the closing. Plaintiff arranged with defendant to install a new tank, and, towards the end of March, defendant disconnected the old tank in preparation for installation of the new one. However, on March 31, 2003, one of defendant' s employees delivered 150 gallons of fuel oil to the premises, not realizing the tank had been disconnected. The fuel oil flowed out through the hole in the bottom of the tank and caused extensive damage to plaintiff's property.

The Department of Environmental Conservation ("DEC") declared plaintiff's home a "hazard site" and, the Village of East Rockaway revoked the certificate of occupancy for the property. After the purchasers cancelled the contract to purchase the property, plaintiff was [*2]required to refund their down payment. Because of the contamination, title remained unmarketable for at least a year after the date originally set for the closing.

Although the remediation work was directed by the DEC, it was performed by Milro Environmental, defendant's environmental contractor. Plaintiff alleges that the excavation of contaminated soil caused the structural integrity of the home to be impaired. Additionally, the driveway was damaged during the cleanup operation. Plaintiff alleges that he was required to act as "site manager," coordinating the remediation work, because defendant's insurer refused to provide someone to perform that function. Plaintiff claims that his time spent overseeing the remediation caused him to lose income from his business, an auto body shop which he operated in Copiague.

This action was commenced by filing a summons with notice on March 31, 2008. A complaint was served in response to defendant's demand for a complaint. Plaintiff asserts a statutory claim pursuant to Navigation Law § 181, as well as common law claims for negligence, breach of contract, and breach of warranty. Aside from cleanup and removal costs, plaintiff seeks to recover lost rental income, lost "investment potential" on the proceeds of the sale, and lost profit from his personal business.

Defendant is moving for summary judgment dismissing the complaint. Defendant argues that because plaintiff operated the body shop as a Subchapter S corporation, plaintiff may not recover lost profits which would have been earned by the corporation. Defendant further argues that plaintiff may not recover lost rental income absent evidence that the units were actually rented. Finally, defendant argues that the investment potential of the proceeds from the sale are speculative. The Court construes defendant's motion as one for partial summary judgment limiting the measure of damages.

Defendant previously moved to dismiss the complaint on the ground of release. This Court deemed the motion to be a motion for summary judgment, which was denied. In seeking to limit the measure of damages, defendant is not required to move for leave to reargue because its motion does not affect the court's prior order. CPLR 2221. Plaintiff is cross-moving for partial summary judgment on the issue of liability as to its various claims.

The Oil Spill Act establishes a revolving fund, the New York Environmental Protection and Spill Compensation Fund, to compensate those who have been injured by oil spills. Navigation Law § 179. The Act also provides a direct action against the discharger based upon strict liability to recover "all cleanup and removal costs and all direct and indirect damages ...as defined in this section." Navigation Law § 181[1].

"The Fund shall be strictly liable for all cleanup and removal costs and all direct and indirect damages, ...including, but not limited to (a) The cost of restoring, repairing, or replacing any real or personal property damaged or destroyed by a discharge, any income lost from the time such property is damaged to the time such property is restored, repaired, or replaced, any reduction in value of such property caused by such discharge by comparison with its value prior thereto; ...[c] Loss of income or impairment of earning capacity due to damage to real or personal property,...provided that such loss or impairment exceeds 10% of the amount which claimant derives, based upon income or business records, exclusive of other sources of income, from activities related to the particular real or personal property...during the week, month or year for which the claim is filed...." Navigation Law § 181[2]. [*3]

In a direct action against the discharger based on strict liability, the damages recoverable "shall be limited to the damages authorized by this section" (Navigation Law § 181[5]). Where petroleum is discharged on commercial property, plaintiff may recover lost profits that would have been earned from the business conducted on the property, provided the loss exceeds the 10% threshold. See, International, Inc. v. LIRR, 302 AD2d 338 (2d Dep't 2003); Putnam v New York, 223 AD2d 872 (3d Dept 1996). However, where petroleum is discharged on residential property, plaintiff may not recover lost income if the income is not earned from activity conducted on the property. Thus, defendant's motion for summary judgment is granted to the extent that plaintiff seeks to recover lost profits pursuant to Navigation Law § 181. The Court will now consider whether plaintiff may recover this item of damages in a common law cause of action. It holds that he may.

Initially, so much of the defendant's motion that is to dismiss the plaintiff's claim to common-law damages suffered because of the impact the spill had on his wholly-owned corporation, Carriage Auto Body Ltd. ("Carriage") on the ground that plaintiff "does not have an individual cause of action" for those losses (LaFarga Aff., ¶ 9) is denied. This is clearly an argument that the plaintiff lacks the capacity/standing to sue for the same. CPLR 3211(a)(3). The defense has been waived, as it was not asserted by way of answer or in a pre-answer motion to dismiss. CPLR 3211(e); see, Edwards v Siegel, Kelleher & Kahn, 26 AD3d 789 (4th Dept. 2006); Household Bank (SB), N.A. v Mitchell, 12 AD3d 568 (2d Dept. 2004); FBB Asset Mgrs. v Freund, 2 AD3d 573 (2d Dept. 2003); Harte v Richmond County Sav. Bank, 224 AD2d 585 (2d Dept. 1996).

The Court now turns to the merits of the individual claims.. In an action for breach of contract, a party may not recover damages for lost profits unless they were within the contemplation of the parties at the time the contract was made and are capable of measurement with reasonable certainty. Ashland Management Inc. v Janien, 82 NY2d 395, 403 (1993). "The rule that damages must be within the contemplation of the parties is a rule of foreseeability." Id. The breaching party need not have foreseen the particular way the loss came about . It is only necessary that loss from a breach be probable and forseeable. Id.

In a negligence action, plaintiff may recover for "economic loss," provided he has sustained property damage or personal injury. 532 Madison Ave Gourmet Foods v Finlandia Center, 96 NY2d 280, 291-92 (2001). Thus, an injured plaintiff may recover all damages directly flowing from and as a natural consequence of the wrongful act, so long as the damages may be ascertained with reasonable certainty. Behrens v Metropolitan Opera Ass'n, 18 AD3d 47, 50 (1st Dept 2005). Such damages may include past and future lost earnings Id. However, the lost profits of a business owned or operated by an injured plaintiff are not recoverable if the profits depend for the most part on the investment of capital or the labor of others . Where, however, the lost profits are the direct result of the plaintiff's inability, because of injuries, to devote his personal skill, talent, or ability to the business, the decline in profits is admissible to show the plaintiff's loss of earning capacity, these principles apply regardless of the corporate form in which plaintiff's business is conducted. Id.

[*4]On a motion for summary judgment, it is the proponent's burden to make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact. JMD Holding Corp. v. Congress Financial Corp ., 4 NY3d 373, 384 (2005). Failure to make such a prima facie showing requires denial of the motion, regardless of the sufficiency of the opposing papers. Id. However, if this showing is made, the burden shifts to the party opposing the summary judgment motion to produce evidentiary proof in admissible form sufficient to establish the existence of material issues of fact which require a trial. Alvarez v. Prospect Hospital, 68 NY2d 320, 324 (1986).

With respect to plaintiff's claim for breach of contract, it is defendant's burden to establish prima facie that loss of profit by plaintiff's business was not a foreseeable result of defendant's failure to connect the new tank before the oil delivery. Since failure to connect the tank might foreseeably result in an oil spill, and contamination of one's home might reasonably interfere with one's ability to work, defendant has not carried its burden. Defendant's motion for summary judgment is denied to the extent that plaintiff seeks to recover lost profits based on breach of contract. An action for breach of express warranty is grounded in contract. CBS, Inc. v Ziff-Davis Pub. Co., 75 NY2d 496, 503 (1990). Thus, defendant's motion for summary judgment is similarly denied to the extent that plaintiff seeks to recover lost profits on theories of breach of warranty.

With respect to plaintiff's claim for negligence, it is defendant's burden to establish prima facie that the profits of Carriage depended for the most part on the use of capital and equipment rather than the personal skill of plaintiff in auto repair. The corporation 's 2001 tax return shows rent of $24,785 and depreciation expense of $17,000, indicating that real property and equipment were utilized in the business. However, the return shows gross profit of $64,766. The gross profit, sales less cost of goods sold, may be taken as a rough approximation of the value of plaintiff 's services. In view of these figures, defendant has failed to establish that plaintiff's profits depended for the most part on the use of capital. Defendant's motion for summary judgment is denied to the extent that plaintiff seeks to recover lost profits on a negligence theory.

Where commercial premises have been impacted by an oil spill, plaintiff may recover loss of rental income as indirect damages pursuant to Navigation Law § 181. Gettner v Getty Oil Co., 266 AD2d 342 (2d Dept 1999). Loss of rental income may similarly be recovered for residential premises, provided the premises are in compliance with zoning regulations. Nevertheless, proximate cause is a necessary element of any cause of action in strict liability. Blake v Neighborhood Housing Services, 1 NY3d 280, 287 (2003). Since plaintiff intended to sell the property rather than rent it, the oil spill was not a proximate cause of plaintiff's loss of rental income. Defendant's motion for partial summary judgment is granted to the extent that plaintiff seeks to recover lost rental income on the property on a strict liability theory under the Navigation Law.

If it is established that despite efforts at remediation, the premises cannot be [*5]restored to its pre-spill condition, "the proper measure of damages is the total amount of the diminution in value plus the cost of repairs." Turnbull v. MTA, 28 AD3d 647, 649 (2d Dep't 2006). In determining whether a diminution in value has occurred, the Court may consider whether the "stigma" caused by the oil spill has had an impact on the value of the property Id.

While plaintiff may recover diminution in value and cost or repair, he may not recover the "investment potential" of the proceeds of a sale of the property. Similar to lost rental income, the investment potential of the proceeds is not subject to recovery under a strict liability theory. Nor may plaintiff recover the potential return on investment in a negligence action. See, Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421 (1996). Defendant's motion for partial summary judgment thus is granted to the extent that plaintiff seeks to recover loss of investment potential based on strict liability or negligence theories. The Court notes that it previously precluded the defendant from introducing evidence in opposition to the plaintiff's case (order dated March 25, 2008), but the foregoing conclusion regarding this aspect of damages is made as a matter of law, and thus is unaffected by that prior determination.

Since defendant has not shown when the heating oil contract was executed, it has not established prima facie that a sale of the premises, and loss of investment potential, was not within the contemplation of the parties when the contract was executed. The Court notes that plaintiff has not come forward with any evidence that he discussed the terms of the real estate contract with defendant, other than the provision with respect to the oil tank. For example, plaintiff offers no evidence that defendant knew the amount of the sales price, whether there was an outstanding mortgage, or whether the full amount of the price was payable at closing. However, defendant's failure to make a prima facie showing requires denial of its motion, regardless of the sufficiency of the opposing papers. Defendant's motion for summary judgment therefore is denied to the extent that plaintiff seeks to recover loss of investment potential based on a breach of contract theory.

The Court now turns to plaintiff's cross-motion for partial summary judgment as to liability. For purposes of liability or claims against the Spill Compensation Fund, "Claim" means a claim of an injured person "who is not responsible for the discharge" Navigation Law § 172 [3]. Thus, "A landowner may seek contribution or reimbursement from an actual discharger only if the landowner is faultless, meaning not in any way responsible for the discharge." Carter v Suburban Heating Oil Partners, 44 AD3d 1221, 1222 (3d Dept 2007). Any degree of fault dooms the owner's Navigation Law cause of action Id.

Since the oil tank was to be full when title was transferred, the Court must assume that plaintiff had constructive knowledge that oil was to be delivered shortly before the closing. However, plaintiff's affidavit establishes prima facie that he had no actual or constructive knowledge that the new oil tank had not yet been installed at the time that oil [*6]was scheduled to be delivered. Accordingly, the burden shifts to defendant to show a triable issue as to whether plaintiff had any degree of fault for the discharge. As indicated above, the defendant is precluded from offering evidence with respect to the events described in the complaint. Since defendant is precluded from offering evidence as to fault on plaintiff's part, plaintiff's motion for partial summary judgment on liability is granted with respect to his Navigation Law claim and negligence claim, except as indicated above with respect to lost rental and investment returns.

However, the plaintiff has failed to establish that he is prima facie entitled to judgment with respect to his breach of contract and breach of warranty claims, in that he has failed to come forward with evidence regarding the terms of his contractual arrangements with the defendant. Plaintiff' s motion for partial summary judgment as to liability therefore is denied with respect to the contractual and warranty claims, and must await the trial.

In sum, the defendant's motion for summary judgment is denied excepting the negligence cause of action and the Navigation Law cause of action to the extent they seek lost rental and lost investment returns, as these elements of damages may not be pursued under either of these claims. A claim for lost profits under the Navigation Law cause of action only is also dismissed.

The plaintiff's cross motion for partial summary judgment on liability is granted with regard to the Navigation Law and negligence causes of action, and is denied with regard to his claims for breach of contract and breach of warranty. The matter shall proceed to a liability and damages trial on the contract and breach of warranty causes of action, and to a damages trial only on the Navigation Law and negligence causes of action, as limited by this decision and order.

This shall constitute the Decision and Order of this Court.

E N T E R

DATED: May 1, 2009

_____________________________

Hon. Daniel Palmieri

Acting Supreme Court Justice

TO:

Richard E. Gresio, Esq.

Chand & Gresio, LLP

Attorney for Plaintiff

110-23 Jamaica Avenue

Richmond Hill, New York 11418

Hardin, Kundla, McKeon & Poletto, P.A. [*7]

Attorneys for Defendant

110 William Street, 25th Floor

New York, NY 10038