Poffenbarger v. Merit Energy Co.

• Decision Date: 11 May 2007
• Docket Number: 1041707.
• Citation: 972 So.2d 792
• Parties: Patricia POFFENBARGER and Michael Poffenbarger v. MERIT ENERGY COMPANY and David Hertel.
• Court: Alabama Supreme Court

972 So.2d 792

Patricia POFFENBARGER and Michael Poffenbarger v. MERIT ENERGY COMPANY and David Hertel.

1041707.

Supreme Court of Alabama.

May 11, 2007.

George W. Finkbohner III, David G. Wirtes, Jr., and George M. Dent III of Cunningham, Bounds, Crowder, Brown & Breedlove, L.L.C., Mobile, for appellants.

A. Danner Frazer, Jr., D. Brent Baker, and Mary Margaret Bailey of Frazer, Greene, Upchurch & Baker, L.L.C., Mobile, for appellees.

MURDOCK, Justice.

Pursuant to Rule 5, Ala. R.App. P., Patricia Poffenbarger and Michael Poffenbarger, husband and wife, appeal from a partial summary judgment entered by the Mobile Circuit Court in favor of Merit Energy Company ("Merit") and David Hertel, Merit's operations manager. We affirm.

I. Facts and Procedural History

In 1955, oil was discovered beneath the surface of land located in and around Citronelle, Alabama. This discovery led to the development of what is known as the "Citronelle oil field."

In 1995 and 1999, Merit acquired substantial interests in the Citronelle oil field. On August 29, 2002, a leak was discovered in a section of one of the oil pipelines acquired by Merit. That section of pipeline, although located on land adjacent to a 32-acre tract of land owned by the Poffenbargers, ran along, and in close proximity to, the boundary of that 32-acre tract. Oil had escaped through a hole in the pipeline and had entered the Poffenbargers' land. This 32-acre tract is uninhabited wood lands and, except for pipelines and other equipment associated with the production of oil, is undeveloped.¹

Merit contracted with M & M Industrial Services ("M & M") to remove the spilled oil from the Poffenbargers' property. After containing the oil, M & M replaced the leaking section of pipeline. M & M was on-site cleaning the oil spill from August 29, 2002, through October 1, 2002. Merit spent approximately $42,000 on the initial cleanup of the Poffenbargers' property.

In November 2002, Merit's operations engineer, Laura Nofziger, informed Mrs. Poffenbarger by letter that Merit had completed its cleanup of the property. Merit admits that Nofziger's assertion to Mrs. Poffenbarger was incorrect and that oil remains on the Poffenbargers' property.

On March 21, 2003, the Poffenbargers sued Merit and Hertel, among others, asserting claims of trespass, nuisance, wantonness, and negligence. They sought "compensatory and punitive damages in an amount deemed appropriate by the jury, plus costs." Merit and Hertel filed a joint answer in which they denied the material allegations of the complaint and asserted various affirmative defenses. Later, Merit and Hertel amended their answer by adding, in further response to the Poffenbargers' punitive-damages claim, an affirmative defense that stated, in part, that "[o]n August 9, 2004; [Merit] entered into a consent agreement with the U.S. Environmental Protection Agency and pursuant to that agreement paid a fine of $78,672.00, which was in part a penalty for the spill which is at issue in this case."

On February 11, 2005, Merit and Hertel filed a motion for a partial summary judgment as to the proper measure of compensatory damages for the contamination of real property.² In their supporting brief, Merit and Hertel noted that the Poffenbargers were seeking, as damages, the cost to remediate their property and that, according to the Poffenbargers' expert witness, the cost of that remediation was estimated to be $2,608,740.³ Merit and Hertel pointed out that an appraisal of the Poffenbargers' 32-acre tract had been obtained and that the appraisal indicated a $38,628 value before the contamination ($1,200 per acre) and a post-contamination value of $32,628.⁴

Merit and Hertel argued that the proper measure of damages for an injury to real property is not the cost to remediate the property, but, instead, is the diminution in the fair market value of the property resulting from the injury. Merit and Hertel asserted that, although a property owner may recover the cost of remediation if the injury to the property is "temporary" rather than permanent, the repair costs recovered cannot exceed the diminution in the fair market value of the property caused by the injury. They argued that, because the cost of remediating the Poffenbargers' property exceeded the diminution in its value, the proper measure of damages for the injury to the Poffenbargers' property was the diminution in the value of the property.

In response, the Poffenbargers argued that the leak of oil onto their property caused what Alabama cases refer to as a "temporary" injury and that, accordingly, they were entitled under Alabama law to recover the cost of restoring the real property to its predamaged condition. They also argued that the rule of law limiting damages for injuries to real property caused by pollution to the diminution in value of the property was antiquated, given the "emerging area of environmental law and pollution control," as well as the implementation of statutes and regulations seeking to limit pollution.

On August 1, 2005, the trial court granted Merit and Hertel's motion and entered a partial summary judgment in their favor. In its order, the trial court found "that there [was] no genuine issue of material fact as to [the Poffenbargers'] claim[ ] for remediation costs which exceed diminution in fair market value of the land . . . and that [Merit and Hertel] are entitled to a summary judgment in their favor on [this] claim[ ] as a matter of law."⁵ The trial court held

"that the proper measure of compensatory damages in this action, which is based on alleged damages to [the Poffenbargers'] real property, is the difference between the fair market value of the property before and after the alleged. damage, not to exceed the fair market value of the property before the alleged damage."

The trial court certified its judgment as final pursuant to Rule 54(b), Ala. R. Civ. P. It also certified that an immediate appeal from the judgment would materially advance the ultimate termination of the litigation because it involved a controlling question of law as to which there was a substantial ground for a difference of opinion. According to the trial court, the controlling question of law was: "[W]hat is the appropriate measure of compensatory damages for contamination to land where the remediation or clean-up costs exceed the fair market value of the land before it was contaminated?" Thereafter, the trial court amended its order nunc pro tunc, eliminating the language making the order final under Rule 54(b).⁶

Pursuant to Rule 5, Ala. R.App. P., the Poffenbargers petitioned this Court for permission to appeal from the trial court's partial summary judgment. This Court granted the Poffenbargers' petition.

II. Standard of Review

A summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56, Ala. R. Civ. P. We review the trial court's ruling on a motion for a summary judgment de novo. Bruce v. Cole, 854 So.2d 47, 54 (Ala.2003). In the present case, our review is de novo for the additional reason that the material facts are undisputed and the only issue presented involves a pure question of law. See Christian v. Murray, 915 So.2d 23, 25 (Ala.2005).

III. Analysis

This appeal presents, for the first time, a fact situation that directly raises the following question: Under Alabama law, what is the general rule for the measurement of direct, compensatory damages for an injury to real property when the cost to remediate the property exceeds the diminution in the value of the property caused by the injury? The Poffenbargers assert that the proper measure of damages is the full cost to remediate the property; Merit and Hertel assert that the proper measure of damages generally is the diminution in the value of the property. We agree with Merit and Hertel, and we therefore conclude that the trial court's judgment is due to be affirmed.

Although this is the first time this Court has been confronted with a case in which the cost to remediate injured real property exceeds the diminution in its value caused by the injury, this Court, on numerous occasions, has addressed the issue of the proper measure of damages for injury to real property. Those cases, as well as the authorities on which they rely, inform our conclusion in the present case.

At issue in Brinkmeyer v. Bethea, 139 Ala. 376, 35 So. 996 (1904), was a trespass to real property that involved the removal from the real property of clay, dirt, and topsoil. This Court described the common-law measure of damages for injuries to real property as follows:

"`In actions for injury to real property, when the injury is done to the realty itself, the measure of damages is the difference in the value of the land before and after the trespass, or in some cases the amount necessary to restore the property to the condition in which it was before the trespass was committed.'— [5] Am. & Eng. Ency. Law, 36; 3 Sedg. on Damages (8th Ed.) § 932."

139 Ala. at 378, 35 So. at 997 (emphasis added). The quoted passage from The American and English Encyclopedia of Law is followed in that Encyclopedia by a footnote explaining as follows: "Where the cost of putting the premises in the same condition in which they were before the trespass exceeds the increased value thereby added to the land, the depreciation in value of the land will usually be held to be, the measure of damages." 5 American and English Encyclopedia of Law 36 n. 1 (John Houston Merrill ed., 1888). Section 932 of Sedgwick on Damages, the other source upon which this Court relied in Brinkmeyer, similarly states:

"The general principle upon which compensation for injuries to real property is given, is that the plaintiff should be reimbursed to the extent of the injury to the property. The injury caused by the defendant may be of a permanent nature; in such a case the measure of...