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SMF REALTY CO. v. CONSOLINI

November 16, 1995

SMF REALTY CO., Plaintiff, against JOHN V. CONSOLINI and MICHAEL J. GANS, Defendants.


The opinion of the court was delivered by: KAPLAN

 LEWIS A. KAPLAN, District Judge.

 This dispute concerning a contract to purchase real property is before the Court on cross-motions for summary judgment. Each side contends that it is entitled to judgment as a matter of law. Each, however, contends that if its theory does not prevail, the other is not entitled to summary judgment.

 Facts

 This case is attributable in some measure to confusion engendered by the Pennsylvania Department of Environmental Resources ("DEW").

 SMF Realty Co. ("SMF") owned the property in question, which is located in Allentown, Pennsylvania, and had a large fuel oil tank on the premises. The tank, which was removed prior to the events at issue here, evidently had been associated with some fuel contamination of the soil.

 On February 10, 1993, SMF, as seller, entered into a contract to sell the premises to defendants Michael J. Gans and John V. Consolini for $ 1 million. At the same time, SMF leased the property to Peglin, Inc., a company of which Gans was the principal, thus permitting defendants to take possession prior to consummation of the sale. The lease was for a term of three years, granted the tenant an option to extend for two years, and would terminate upon closing of the sale.

 The sale contract provided that the closing of the purchase transaction "shall occur within forty-five (45) days of Buyer's receipt of a copy of the DER Clearance (as defined in the Lease) regarding the" property. (Sussman Cert. P 4, Ex. A, P 3) The lease defined "DER Clearance" as follows:

 
"written notice from the Pennsylvania Department of Environmental Resources of (i) covenant not to sue; or (ii) full release; or (iii) other documentation of like import, or (iv) DER certification that the contamination has been abated, cured or remediated to 'Level A' Protection Levels as defined in DER Interim Evidence Memorandum of October 18, 1991, or (v) any such other documentation as to the Buyer's reasonable satisfaction will provide assurance that DER is precluded from any further action for damages, assessments, penalties, fines or like remedies for the [property] contamination." (Sussman Cert. P 3, Ex. A, Lease P 2) *fn1"

 In late 1993, SMF submitted a report to the DER, dated September 22, 1993, concerning the soil clean up and the removal of the tank. The DER's November 22, 1993 response, which is not part of the record, was unsatisfactory to the buyers (Gans Aff. Ex. C) and evidently prompted SMF to contact the DER again. On February 2, 1994, the DER acknowledged that the report indicated that the property "meets the Level A criteria established by the Department's Guidance Document." The DER went on to caution, however, that the results set forth in the report were collected solely on behalf of a private party, that the DER had not independently verified them, that the landowner was not being released from any liability, and that the DER would take appropriate action should environmental problems develop.

 On March 29, 1994, the DER again wrote to the buyers' representative in an effort to clarify its position. It noted the receipt of the report from SMF, but again noted that the DER had not independently confirmed its contents. Assuming the accuracy of the report, it indicated, the soils met Level A protection levels. It went on to say that the November 22, 1993 letter is the standard form used by the DER and pointed out that the DER does not issue clearances or affirmative releases from cleanup liability. It concluded by saying that "the Department is not presently contemplating taking any further action with regard to the SMF Realty tank closure." (Sussman Cert. Ex. C, Mar. 29, 1994 letter)

 The buyers evidently remained concerned. They appear to have submitted copies of the sales contract and lease to the DER and referred to the October 18, 1991 memorandum. On June 3, 1994, the DER responded that it had "provided written notice that the soils tested meet 'Level A' protection levels," but pointed out that the October 18, 1991 DER memorandum did not expand the authority of the DER under Pennsylvania law. In substance, the DER thus said that it could give no release or covenant not to sue and implied that it was not in the business of giving certifications. (Id., June 3, 1994 letter) Viewed in the light most favorable to the DER, its letter implicitly took the position that the word "release" in the October 1991 memorandum was not used in its technical legal sense, but merely to indicate that a clean up to Level A protection levels would remove any reason or basis for the DER to seek relief.

 On July 21, 1994, SMF's counsel wrote to his counterpart on the buyers' side, expressing regret that recent Pennsylvania legislation had not altered ...


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