State v. Speonk Fuel Inc.

• Decision Date: 19 October 2004
• Citation: 3 N.Y.3d 720,786 N.Y.S.2d 375,819 N.E.2d 991
• Parties: STATE OF NEW YORK, Respondent-Appellant, v. SPEONK FUEL, INC., Appellant-Respondent, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

3 N.Y.3d 720

819 N.E.2d 991

786 N.Y.S.2d 375

STATE OF NEW YORK, Respondent-Appellant, v. SPEONK FUEL, INC., Appellant-Respondent, et al., Defendants.

Court of Appeals of the State of New York.

Argued September 8, 2004.

Decided October 19, 2004.

Nicholas J. Damadeo, P.C., Smithtown (Nicholas J. Damadeo of counsel), for appellant-respondent.

Eliot Spitzer, Attorney General, Albany (Edward Lindner, Caitlin J. Halligan, Daniel Smirlock and Patrick Barnett-Mulligan of counsel), for respondent-appellant.

Chief Judge KAYE and Judges G.B. SMITH, CIPARICK, ROSENBLATT, GRAFFEO and READ concur; Judge R.S. SMITH dissents in an opinion.

OPINION OF THE COURT Memorandum.

The order of the Appellate Division should be affirmed, without costs.

Defendant Local Wrench Service Station, Inc. immediately preceded defendant Speonk Fuel, Inc. as the owner and operator of a gasoline service station and its associated underground petroleum storage system in East Quogue, New York. On October 24, 1985, Local Wrench's storage system, which included five underground gasoline tanks, was tested for tightness. One of these five tanks — a 4,000-gallon unleaded gasoline tank — failed the tightness test. Subsequently, on January 22, 1986, the tank was removed from the ground and found to have a hole approximately one eighth of an inch in diameter, causing its abandonment. A representative of the New York State Department of Environmental Conservation witnessed the defective tank's removal. Having determined that it was not possible to clean up all the oil-contaminated soil resulting from the tank's past leakage, on January 24, 1986 DEC advised Local Wrench to install groundwater monitoring wells. DEC warned that if Local Wrench failed to investigate and remedy groundwater contamination attributable to the leak, DEC would undertake this work through contractors and seek reimbursement and penalties pursuant to article 12 of the Navigation Law, commonly called the Oil Spill Act.

At the same time as these events were unfolding, Local Wrench was negotiating to sell its gasoline service station, the associated underground petroleum storage system and the underlying real property to Speonk and its president, Thomas H. Mendenhall. On January 8, 1986 — about two weeks before the defective tank was permanently removed from service — Speonk contracted to purchase the service station and the storage system, and Mendenhall contracted to purchase the real property. On March 12, 1986 — roughly seven weeks after the defective tank was permanently removed — Speonk acquired title to the service station and the storage system, and Mendenhall acquired title to the real property by bargain and sale deed.

Mendenhall had visited the service station on October 24, 1985, and so observed the tank tightness testing. Moreover, he acknowledges that after the closings on March 12, 1986, his attorney and the attorney for Local Wrench's owner "discuss[ed]" remedial work and potential insurance coverage with respect to the oil spill with "State representatives." Speonk never agreed to undertake any remedial work at the service station site. Neither did Local Wrench, which went out of business and whose owner subsequently left the country. DEC hired contractors to investigate, clean up and remove the oil spill and paid them, in part, with moneys from the Environmental Protection and Oil Spill Compensation Fund established under article 12. DEC disbursed moneys for cleanup and removal intermittently from April 27, 1987 through September 30, 1996. On September 26, 1996, the State commenced this cost recovery action pursuant to the Oil Spill Act against Local Wrench and Speonk, seeking to recover cleanup and removal costs, plus interest.

In its initial decision in this litigation, the Appellate Division concluded that the successor owner of a system from which a discharge has occurred is liable when contamination remains after purchase (273 AD2d 681 [3d Dept 2000]). In a subsequent decision, the Appellate Division held that the State's claims under article 12 accrue and the six-year limitation period begins to run each time the Fund makes a payment; and that a discharger is not permitted to challenge the reasonableness of the Fund's expenditures (307 AD2d 59 [3d Dept 2003]). We granted Speonk and the State leave to appeal from the latter Appellate Division order, thereby also bringing up the earlier order for our review. We now affirm.

The Legislature enacted the Oil Spill Act to prevent the unregulated discharge of petroleum and to accomplish speedy, effective cleanups when spills occur (see Navigation Law § 171; State of New York v Stewart's Ice Cream Co., 64 NY2d 83, 86 [1984]). Navigation Law § 181 (1) provides that "[a]ny person who has discharged petroleum shall be strictly liable, without regard to fault, for all cleanup and removal costs and all direct and indirect damages, no matter by whom sustained" (emphasis added). While section 181 (1) plainly sets forth the applicable standard of liability, "[a]ny person who has discharged petroleum," the category of persons strictly liable, is unspecified there or elsewhere in the Oil Spill Act. Navigation Law § 172 (8), however, defines the word "discharge" as "any intentional or unintentional action or omission resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping" of petroleum into the state's waters.

In State of New York v Green (96 NY2d 403 [2001]), which was decided after the Appellate Division's decision on liability in this case,...