Kb Home Ind. Inc v. Rockville Tbd Corp.

• Decision Date: 18 June 2010
• Docket Number: No. 49A02-0909-CV-881.,49A02-0909-CV-881.
• Citation: 928 N.E.2d 297
• Parties: KB HOME INDIANA INC., Appellant-Plaintiff,v.ROCKVILLE TBD CORP., Appellee-Defendant.
• Court: Indiana Appellate Court

928 N.E.2d 297

KB HOME INDIANA INC., Appellant-Plaintiff,v.ROCKVILLE TBD CORP., Appellee-Defendant.

No. 49A02-0909-CV-881.

Court of Appeals of Indiana.

June 18, 2010.

COPYRIGHT MATERIAL OMITTED

Peter J. Rusthoven, E. Sean Griggs, David M. Heger, Barnes & Thornburg LLP, Indianapolis, IN, Attorneys for Appellant.

Frank J. Deveau, Scott R. Alexander, Michael D. Chambers, Bradley R. Sugarman, Taft Stettinius & Hollister LLP, Indianapolis, IN, Attorneys for Appellee.

OPINION

BAKER, Chief Judge.

Today we consider the delayed ramifications of a party's discharge of pollutants onto real property that was once farmland but subsequently became a residential subdivision. While the owner of the subdivision claims that it is entitled to recover damages for negligence, nuisance, and trespass, the defendant-company insists that the subdivision's actions against it are precluded under various theories, including the economic loss doctrine. The trial court sided with the defendant-company. We believe that the owner may proceed on the theory of negligence.

Appellant-plaintiff KB Home Indiana, Inc. (KB), appeals the trial court's grant of summary judgment in favor of appellee-defendant Rockville TBD Corp. (Rockville), on its claims for negligence, trespass, and nuisance as a result of chemical leakage from Rockville's predecessor's manufacturing site. Specifically, KB argues that the trial court erred in granting summary judgment with regard to these claims because a) the economic loss doctrine is not applicable in these circumstances; b) the designated evidence failed to establish that the damages to KB were not foreseeable as a matter of law with regard to the nuisance claim; and c) it was mistakenly assumed that a trespass occurred as soon as the chemical pollutants entered the land rather than when damages were ascertainable.

We conclude that the trial court erred in holding that the economic loss doctrine precludes KB from pursuing its negligence claims against Rockville. However, we affirm the trial court's entry of summary judgment for Rockville with respect to KB's claims against it for trespass and nuisance. As a result, we reverse in part, affirm in part, and remand this cause for trial on KB's negligence claim.

FACTS¹

Between 1969 and 1990, James Lyons owned and operated L&E, which was a company that manufactured airplane components, on Belmont Avenue (hereinafter referred to as the Site), in Indianapolis. During the Lyonses' operation of the plant, a number of chemical solvents, including trichloroethylene (TCE), were used at the Site to clean metal parts. The TCE was discharged into the facility's septic system and ultimately “leached” into the surrounding environment. Appellant's App. p. 24.

In January 1989, George and Patricia Kopetsky purchased some unimproved farmland adjacent to the Site. Sometime in 1990, Ron and Clara Mears bought L&E's stock, and ownership of the company was transferred to the Mearses in 1991. However, L&E retained ownership of the business that operated at the Site. When the Mearses operated the facility-from August 1990 through February 1993-the TCE was collected in drums and removed by a licensed environmental service.

In March 1993, the manufacturing assets of L&E and the right to use the L&E name were sold to Ferco. As a result of this transaction, the selling corporate entity-L & E-changed the name of the company to Rockville. However, the Mearses still owned the land and leased it to Ferco. Following the sale, the Mearses had no involvement with the operation of the business. After Ferco assumed control of the Site, several gallons of TCE were released onto the Site property. However, all use of TCE at the Site had ceased sometime in 1993. In connection with the 1993 sale of the assets to Ferco, an environmental investigation of the Site was performed. The investigation revealed that the septic tank and septic finger system on the eastern portion of the Site had been affected by solvents, including TCE.

In 1995, Rockville executed a voluntary remediation agreement with the Indiana Department of Environmental Management (IDEM). The following year, Rockville submitted a remediation report to IDEM, which noted that the use of the septic system had been permanently discontinued and that water from the facility operations was now being discharged to the municipal sewer system. The 1996 sampling data disclosed TCE amounts far below voluntary remediation program levels. IDEM reviewed the report and ultimately issued a “Certificate of Completion” to Rockville for the successful conclusion of the voluntary remediation that was conducted at this portion of the Site. Appellant's App. p. 129.

From July through October 1997, additional investigations were conducted at the Site. At that time, TCE was discovered in areas west of the main facility that were outside the area that had been previously investigated and remediated. Indeed, the contamination plume had migrated through portions of the Kopetskys' property. Rockville performed additional sampling in June 1998 in an effort to identify the source of the contamination.

The Kopetskys platted about 200 lots for residential development. In November 1998, the Kopetskys and KB ² entered into a lot purchase and option agreement to develop that land into a residential subdivision known as Cedar Park. The designated evidence established that the Kopetskys had never performed an environmental assessment or chemical investigation of Cedar Park.

Commencing in 1999, KB began purchasing lots in Cedar Park from the Kopetskys for the purpose of contracting with home buyers. Although it is standard practice to perform environmental due diligence before developing land to construct homes, neither KB nor its predecessor-Dura Builders-conducted environmental assessments of the property before purchasing lots or building any homes in Cedar Park.

Kopetsky represented to KB that the Cedar Park land was free of any hazardous materials and promised that he would, at each closing, execute a vendor's affidavit certifying the environmental condition of the lot. The affidavits stated, in part, that “the Real Estate ... contains no ... toxic or hazardous waste or materials, and that no disclosure statement under ... [the Indiana Responsible Property Transfer Law], is required for this transaction.” Appellant's App. p. 242. Kopetsky also represented to his lender that “after due investigation and inquiry, the [Cedar Park] Property is not and has not been a site for the ... presence of contaminants.” Id.

In August 2000, Kopetsky gave Cedar Park's environmental consultant permission to conduct soil boring and ground water sampling activities on the property. As a result, various “monitoring wells” were installed on Kopetsky's land in the fall of 2001. Appellee's App. p. 180. It was determined that certain areas of the Cedar Park subdivision, including some areas that KB owned, were impacted by TCE-contaminated groundwater. Because of the presence of low levels of TCE in the groundwater, Alt & Witzig-an environmental firm-initially proposed deed restrictions to address off-site contamination on the Kopetskys' property. Those restrictions would have prohibited the use of groundwater for residential purposes.

By February 2002, Kopetsky's attorney had asked to meet with representatives of Alt & Witzig to obtain information and test results from the various monitoring wells on the property. On May 1, 2002, Kopetsky was provided with test results showing TCE contamination in Cedar Park. Later that month, Kopetsky notified IDEM of his concerns regarding the contamination and told his insurance carrier of the problems in July 2002. Kopetsky also retained an environmental attorney, who informed him that “the environmental cloud over [the] property is a very significant problem.” Pl. Ex. 1. Kopetsky continued to collect information about the contamination, and when Cedar Park proposed remediating the contamination to non-residential standards, Kopetsky objected because he wanted to sell the property for residential use. Notwithstanding the information that Kopetsky learned, he did not give any information to KB and continued selling the lots. In April 2004, Kopetsky notified IDEM that he would not accept any proposed deed restrictions on the property.

Although Kopetsky told IDEM representatives that a significant portion of the property had been impacted by TCE contamination, he attempted to sell lots directly to Cedar Park in 2004, claiming that “38 lots to the south of [a dividing] line ... show evidence of impact of the release of chlorinated solvents.” Pl. Ex. 28.

KB became aware of the contamination in March 2005 after it conducted an environmental investigation. As a result, KB constructed no new homes in Cedar Park. Because KB halted construction, the subdivision contains empty lots scattered among finished and occupied homes. KB ultimately left the Indianapolis market in 2007 in light of the economic housing conditions.

On June 29, 2007, KB filed a complaint against Rockville, Mears, Kopetsky, and Patriot, an environmental engineering firm, for damages to the Cedar Park property as a result of the chemical leakage from the Site. The complaint alleged counts against the various defendants for negligence, trespass, nuisance, environmental legal action, breach of contract, and constructive fraud. KB's action against Rockville included claims for negligence, trespass, and continuing nuisance. KB requested compensatory damages and amounts for:

a) Reduction in value of its property as a result of the TCE contamination;

b) KB's legal fees;

c) Fees paid to KB's environmental consultants;

d) Fees paid in connection with maintaining lots and homes;

e) Interest on the capital investment made unproductive by the contamination; and

f) Residual damages that may affect the value of KB's property after it has been repaired and/or restored to its pre-contamination condition.

Appellant's App. p....