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DORA HOMES, INC. v. EPPERSON

November 18, 2004.

DORA HOMES, INC., Plaintiff,
v.
STUART W. EPPERSON, EDWARD G. ATSINGER, and SALEM COMMUNICATIONS CORPORATION, Defendants.



The opinion of the court was delivered by: I. LEO GLASSER, Senior District Judge

MEMORANDUM AND ORDER

I. INTRODUCTION

Plaintiff Dora Homes, Inc. ("Plaintiff" or "Dora Homes") brings this diversity action against Defendants Stuart W. Epperson ("Epperson"), Edward G. Atsinger ("Atsinger") (Epperson and Atsinger together are referred to as the "Individual Defendants"), and Salem Communications Corporation ("SCC") (collectively, the defendants are referred to as "Defendants"). This case arises out of the July 24, 1997 release of petroleum (the "Petroleum Discharge") from undeveloped Staten Island real property (the "Property") which Plaintiff purchased from Epperson and Atsinger in a transaction that closed on August 29, 1996. The New York State Department of Environmental Conservation ("NYSDEC") cleaned up the Petroleum Discharge. Thereafter, Plaintiff voluntarily entered into a settlement agreement and release with New York State pursuant to which it paid $250,000 (the "Settlement Money") to settle claims brought by the State against Plaintiff for the cost it incurred to clean up the oil spill.

  In this suit, Plaintiff seeks to recover the money that it paid to the State as a result of the Petroleum Discharge and related damages. In the complaint (the "Complaint" or "Compl."), Plaintiff alleges statutory causes of action under the New York State Navigation Law (the "Navigation Law"), and a common law claim for indemnification.*fn1 Defendants now move for summary judgment on Plaintiff's claims, arguing that the Petroleum Discharge occurred when Plaintiff owned the Property, they never had knowledge that underground oil tanks existed on the Property, and there is no evidence that the oil leak started prior to July 24, 1997. Plaintiff opposes Defendants' motion and cross-moves for summary judgment on its Navigation Law claims, asserting, inter alia, that the undisputed material facts establish that Defendants' performance of an illegal demolition on the Property in December 1990 constituted an "act or omission" that caused the Petroleum Discharge, and that they are therefore liable to Plaintiff for the Settlement Money.

  For the reasons set forth below, Defendants' motion for summary judgment is granted and Plaintiff's cross-motion for summary judgment is denied.

  II. FACTUAL BACKGROUND

  The following genuine, material facts are undisputed. The Property is located at Rumba Place and Powell Place in Staten Island, New York and consists of approximately 13 acres of land. (See Affidavit of Arnold Brown sworn to on March 13, 2003 ("Brown 3/13/03 Aff.") ¶¶ 4-8). Relatively early in the twentieth century, the Property was known as the "Rutherford Estate," because it was owned by Joseph Francis Rutherford, the second president of the Watchtower Bible and Tract Society of Philadelphia, of the Jehovah's Witnesses. (Id. ¶ 4). The Jehovah's Witnesses had conducted certain of their activities on the Property, and built a transmitter on it. (Id.; Gluckstern Certification dated September 10, 2003 ("Gluckstern 9/10/03 Cert.") Exh. F). In or about 1959, the Jehovah's Witnesses sold the Property to WPOW, a radio station, whose transmission facilities were located on the Property.*fn2 (Brown 3/13/04 Aff. ¶ 5; Affidavit of John Linstra, sworn to on March 24, 2003 ("Linstra 3/24/03 Aff.") ¶ 4).

  According to Arnold Brown, who was employed by WPOW (and later WNYM) as a broadcast engineer and program director and who worked and lived on the Property between 1961 and 1990, and John Linstra, who served as General Manager of WPOW (and later WNYM) and worked on the Property between the early 1960's and 1985, no one during this period knew of the following: (a) that underground oil tanks existed on the Property; (b) that there had been delivery of oil to an underground container on the Property; and (c) that "appurtenances" existed on the Property to an underground tank which would suggest to persons that an underground tank was, or had been, present at any time on the Property. (Brown Aff. ¶¶ 8, 12 sworn to on July 31, 2003 ("Brown 7/31/03 Aff."); Brown 3/13/03 Aff. ¶¶ 7-18; Linstra 3/24/03 Aff. ¶¶ 5-12). WNYM relocated its transmission facilities from the Property in 1989 to a site in New Jersey. (Brown 3/13/03 Aff. ¶ 10). Consistent with this background, neither Mr. Brown nor Mr. Linstra informed the Individual Defendants that underground oil tanks existed on the Property when it was sold to them. (Brown 3/13/03 Aff. ¶ 18; Linstra 3/24/03 Aff. ¶ 14). In fact, both Mr. Brown and Mr. Linstra did not become aware of the existence of the underground oil tanks until they spoke with Defendants' counsel in late 2002 during the pendency of this case. (3/13/03 Brown Aff. ¶ 16; Linstra 3/24/03 Aff. ¶ 13). Similarly, until late 2002, shortly before the initiation of this lawsuit, Defendants were not aware that underground oil tanks existed on the Property — this was well after they had sold the Property to Plaintiff. (Affidavit of Stuart Epperson sworn to on May 30, 2003 ("Epperson 5/30/03 Aff.") ¶¶ 8, 11; Affidavit of Edward Atsinger sworn to on May 30, 2003 ("Atsinger 5/30/03 Aff." ¶¶ 9, 11).

  The Individual Defendants purchased the Property from WPOW pursuant to a contract dated February 8, 1985. (Defs. Rule 56.1 Statement ("Defs. 56.1 Statement") ¶ 1; Gluckstern Aff. Exh. A). Epperson and Atsinger entered into a lease of the Property with Salem Media Corporation ("SMC"),*fn3 a California radio broadcasting company, which operated a radio station on the Property from February 1985 until September 1989, when it terminated the lease and removed all of its equipment from the Property. (Compl. ¶ 10; Brown 3/13/03 Aff. ¶ 10).

  By agreement dated November 20, 1990, the Individual Defendants contracted with Venstruct, Inc. (the "Contractor"), whose principal was Anthony M. Ventura ("Ventura"), to demolish all building structures located on the Property and to remove all debris from it. (Russo Aff. Exh. O). The Contractor agreed that the demolition and removal of structures from the Property "shall be done strictly in compliance with all applicable federal, state and local laws, ordinances, regulations, and rules currently in existence or promulgated during the term of" the agreement. (Id. ¶ 6). In addition, the Contractor represented that it would "obtain all necessary permits, and arrange for all necessary inspections, as may be required by applicable federal, state, and local agencies having jurisdiction over the demolition project." (Id. ¶ 7). Nonetheless, Plaintiff alleges that the demolition project was conducted in violation of certain New York City regulations. (Savo Aff. ¶ 4).

  On May 1, 1996, Plaintiff's principals, through their corporation, Sophia Homes, Inc., entered into a contract (the "Contract") with Epperson and Atsinger to purchase the Property. (Defs. 56.1 Statement ¶ 2; Gluckstern 6/9/03 Cert. Exh. B). In relevant part, the Contract stated that Plaintiff "has inspected the buildings on the Premises and the personal property included in this sale and is thoroughly acquainted with their condition. Purchaser agrees to purchase them `as is' and . . . shall have the right, after reasonable notice to the Seller, to inspect them before closing." (Gluckstern 6/9/03 Cert. Exh. B ¶ 21). The only due diligence which Plaintiff conducted as part of the transaction to purchase the Property consisted of a cursory review of the vacant and overgrown Property, and review of one survey which Defendants conducted in 1994 (the "1994 Survey"). (Pl. Rule 56.1 Statement ("Pl. 56.1 Statement") ¶ 2).

  The addendum to the Contract stated that the Property is conveyed subject to "[a]ny state of facts which an accurate survey would show." (Gluckstern 6/9/03 Cert. Exh. B, Addendum ¶ 1(A)). After the parties executed the Contract, the Individual Defendants presented Plaintiff with a copy of the 1994 Survey. (Savo Aff. ¶ 4). That survey did not reveal the existence of underground oil tanks on the Property. (Id.) Plaintiff alleges that the Individual Defendants withheld two surveys, one from 1956 (the "1956 Survey") and the other from 1974 (the "1974 Survey"). Plaintiff claims these surveys reveal the existence of the two subsurface oil tanks on the Property which caused the Petroleum Discharge. However, with respect to the 1956 Survey, it was not discovered until 2002 by Mr. Linstra, whose family once owned the Property, when he was asked by Defendants' counsel to review documents in his possession relating to the Property. (Affidavit of John Linstra sworn to on August 8, 2003 ("Linstra 8/8/03 Aff.") ¶¶ 6-10). Further, neither the 1956 Survey nor the 1974 Survey reveal the existence of two underground oil tanks on the Property; rather they show the existence of two underground water tanks once used by the Jehovah's Witnesses when they owned the Property. (Russo. Aff. Exhs. H & I; Gluckstern 9/10/03 Cert. Exh. H; Linstra 8/8/03 Aff. ¶¶ 5, 8). In any event, the "acceptance of a deed by the purchaser shall be deemed to be a full performance and discharge of every agreement and obligation on the part of the seller to be performed pursuant to the provisions" of the Contract. (Gluckstern 6/9/03 Cert. Exh. B, Addendum ¶ 6).

  On July 24, 1997, a heavy rainstorm resulted in four or more inches of rain falling in the New York City area. (Defs. 56.1 Statement ¶ 5). On July 24-25, 1997, a discharge of petroleum entered a body of water located at the South Shore Golf Club, which adjoins the Property. (Id. ¶ 8). South Shore employees reported the petroleum discharge to government authorities. (Id.) Because Plaintiff did not take immediate, appropriate action, the State of New York responded to and cleaned up the spill. (Id.)

  Miller Environmental Group ("MEG"), a consultant to the NYSDEC, wrote a report, dated December 14, 1998, in which it determined that the source of the spill was two underground tanks on the Property containing petroleum. (Russo Aff. Exh. R). MEG reported that each of the tanks had an approximate capacity of 18,000 gallons, and that one of the tanks was full and the other was three-quarters empty. (Id.) The MEG Report concluded that the "heavy rains on [July 24] somehow caused the oil release from the underground storage tanks. MEG did not remove the tanks, which was undertaken by the present property owner. Therefore, MEG does not know if tank #2 had a sudden release, as indicated by the liquid level in the tank." (Id.)

  On or about November 19, 2001, the NYSDEC submitted to Plaintiff an invoice in the amount of $260,068.30 for the costs of the removal action. (Defs. 56.1 Statement ¶ 9). On October 2, 2002, Plaintiff, through one of its principals, Ottavio Savo, settled New York State's claim against it by agreeing to pay $250,000 to reimburse the State for the costs of cleanup and removal. (Id. ¶ 10). Plaintiff received a release from all liability due to the Petroleum Discharge from the State of New York in consideration for its voluntary payment of the Settlement Amount. (Id. ¶ 11). On May 17, 2002, Plaintiff, through its counsel, notified Defendants by letter about the Petroleum Discharge on the Property. (Id. ¶ 12; Gluckstern 6/9/03 Cert. Exh. K). In that letter, Plaintiff put Defendants on notice that it believed they were responsible for the Petroleum Discharge. (Id.) This lawsuit was subsequently filed on September 23, 2002. III. DISCUSSION

  A. Summary Judgment Standard

  Federal Rule of Civil Procedure 56(c) provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits . . . show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." A genuine issue as to a material fact exists when there is sufficient evidence favoring the nonmoving party such that a jury could return a verdict in its favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Therefore, the nonmoving party "may not rest upon the mere allegations or denials" of its pleadings; rather, its response must go beyond the pleadings to "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ. P. 56(e); see also Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). However, when evaluating a motion for summary judgment, "[t]he courts must view the evidence in the light most favorable to the party against whom summary judgment is sought and must draw all reasonable inferences in his favor." L.B. Foster Co. v. American Piles, Inc., 138 F.3d 81, 87 (2d Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).

  B. Evidentiary Challenges

  Before turning to the substantive arguments raised by the parties with respect to their motions, the Court determines the admissibility of the affidavits of Ottavio Savo (the "Savo Affidavit") and John Cignatta (the "Cignatta Affidavit"), which Plaintiff proffers to oppose Defendants' summary judgment motion. Defendants argue that the Savo Affidavit, in whole or in part, constitutes inadmissible hearsay, and that the Cignatta Affidavit is unreliable, and therefore the Court should not consider them.

  Under Fed.R. Civ. P. 56(e), an affidavit submitted in support of or in opposition to a motion for summary judgment "shall set forth such facts as would be admissible in evidence." It is therefore well-established that a "hearsay affidavit is a nullity on a motion for summary judgment." Schwimmer v. Sony Corp. Of Am., 637 F.2d 41, 45 & n. 9 (2d Cir. 1980); see also Amnesty America v. Town of West Hartford, 361 F.3d 113, 131 & n. 12 (2d Cir. 2004) (district court deciding summary judgment motion was required to disregard ...


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