In this action commenced by the filing of a Summons and Complaint in the Onondaga County Clerk's Office on May 5, 2006, Plaintiffs Falls Bridge Development, LLC and Point Five Development I, LLC ("Falls Bridge"), by Notice of Motion dated April 25, 2008, seek an Order pursuant to New York Navigation Law § 181 granting partial summary judgment on the issue of liability. Defendants DioGuardi Enterprises, Inc. and Adam D. DioGuardi ("DEI"), by Notice of Cross-Motion dated June 6, 2008, also seek an Order pursuant to Navigation Law § 181 granting summary judgment, or in the alternative, an Order compelling disclosure.

Falls Bridge's Complaint seeks monetary damages and indemnification from DEI, due to its actions in conveying to them petroleum contaminated property located at 2100 Ridge Road, Rochester, New York. A third-party action has been commenced by DEI against S & W Redevelopment of North America, LLC, Samaco Enterprises, LLC and Sam A. Convertino, arising out of the removal and remediation efforts of certain underground storage tanks ("UST") at the subject property.

The motions were argued before the Court on July 31, 2008, and the Court reserved decision.

DEI purchased the subject property sometime in 1978 and used the property as a gasoline service station and automatic car wash. Prior to DEI's purchase of the property, the evidence shows that the property was owned by Shell Oil Company. Prior to 1978, Shell Oil Company allegedly removed four underground storage tanks from the subject property.

In 1992, DEI removed four UST systems from the property. These systems included leaded gasoline, unleaded gasoline and diesel fuel. There is evidence set forth in the Clayton Group Service report, which reveals that there was soil contamination as a result of the removal of the USTs in 1992. Subsequent to the removal in 1992, a vapor extraction system ("VES") was installed, however, the VES was not activated until 1998. This VES was used to remediate [*2]contaminated soil.

Falls Bridge and DEI entered into a contract to purchase dated June 2, 2004, for the sale of the subject property to Falls Bridge.^[FN1]

Prior to the closing and transfer of title from DEI to Falls Bridge on June 10, 2005, Falls Bridge requested and received both a Phase I and Phase II environmental audit of the site.^[FN2]

In part, the audits revealed that

•Soil samples collected near the waste oil USTs contained petroleum compounds.

•Groundwater sampling reflected the presence of MTBE, a gasoline additive.

•Older hydraulic lifts on the site represented a recognized environmental condition.

•Area of petroleum staining was observed in the service bays.

•Floor drains discharged into the sanitary sewer system, which is a recognized environmental condition.

Falls Bridge submits the Affidavit of its principal, Guy Hart, dated April 17, 2008, which states that, following the closing and transfer of title, S & W Redevelopment of North America, LLC ("S & W") reported by letter dated September 7, 2005, to the New York State Department of Environmental Conservation ("DEC") a summarization of areas of concern identified during site development and various remedial actions taken to address the areas of concern. The various areas of concern can briefly be identified as follows, all of which were excavations completed by Samaco Services, Inc. ("Samaco").

•On June 27, 2005, Samaco removed one 12,000-gallon gasoline tank, one 8,000-gallon super unleaded gasoline tank, one 6,000-gallon diesel gasoline tank and one 4,000-gallon diesel gasoline tank. Samaco retained Environmental Products and Services of Vermont, Inc. ("EPS") to pump out and dispose of approximately 110 gallons of residual petroleum product contained in the USTs and to cut and clean the USTs following removal. In addition, on June 27, 2005, Samaco began to remove one 550-gallon waste oil tank from Excavation 2 ("E2"). Samaco retained EPS to pump out and dispose of approximately 310 gallons of waste oil contained in an UST and to cut and clean the UST following removal . . . .

•On June 27, 2005, Samaco removed one 1,000-gallon waste oil tank from Excavation 4 ("E4"). Samaco retained EPS to pump out and dispose of approximately 763 gallons of waste oil contained in the UST and to cut and clean the UST following removal . . . .

•Fuel Dispenser Island (sump pumps). On July 25, 2005, Samaco removed three [*3]site dispenser islands and began to excavate impacted soil beneath them . . . .

•Fuel Oil Tank. On August 9, 2005, a 1,000-gallon fuel oil tank was discovered by a construction contractor, while excavating a footer trench for new construction. The tank was not mentioned in the Phase I environmental report. S & W assumed that the fuel oil UST was used as part of historic site operations. The contractor retained EPS to remove and dispose of approximately 790 gallons of residual product, and remove and clean the tank . . . .

•Suspected Historic Manhole/Septic Tank. A manhole structure was discovered below the service/fueling station building following removal of a portion of the building's concrete slab. The structure was located under the concrete slab, beneath what appeared to be a historic layer of asphalt paving . . . . A wooden structure was located immediately north . . . and a concrete block wall was also located to the north and east of the manhole. During excavation the wooden tank was breached releasing black sludge into the excavation . . . .

In this motion, Falls Bridge seeks partial summary judgment for indemnification pursuant to New York Navigation Law § 181. Falls Bridge contends that DEI is responsible for a petroleum discharge from the gas station and, thus, is responsible for the remediation and cleanup costs. Falls Bridge further contends that DEI is liable for its breach of the contract to purchase dated June 2, 2004. Falls Bridge relies to the language contained in paragraph 14, titled "Testing", which states in pertinent part:

TESTING:Buyer or its authorized representative(s) shall have right to access the Premises to examine same or perform environmental and site work with 10 days of notice to Seller. Property shall be restored to its former condition after tests are performed. At Closing, the Premises shall be free of containers of toxic or hazardous substances (as those terms are defined under any federal, state or local laws, rules or regulations pertaining to environmental regulations, contamination or cleanup), paints, household cleaning products, gasoline and used oil, etc. Seller shall deliver to Buyer within 10 days of full execution of this Contract all existing environmental information, including Phase I and II reports, and asbestos reports, if any. Buyer shall conduct testing in a reasonable manner so as to not unreasonably disrupt Seller's ongoing businesses. Buyer shall use its best efforts not disclose the substance of this Contract to Seller's employees on the Premises, unless Seller authorizes same, or has already disclosed same. (emphasis added)

Finally, Falls Bridge contends that defendant Adam DioGuardi, individually, is liable for the environmental cleanup costs as a former operator of the gas station. Falls Bridge contends that DioGuardi was the hands-on owner and operator at the time of the petroleum discharges and is, thus, personally liable as he failed to take action to abate the environmental spill and resulting contamination. [*4]

In opposition, and in support of its cross-motion for summary judgment pursuant to Navigation Law § 181, DEI contends that Falls Bridge had clear, unrefutable knowledge of the existing environmental problems when they chose to close on the purchase of the site. DEI cites to the clear statements in the Phase I and Phase II reports, performed for Falls Bridge, as evidence of this knowledge. Secondly, DEI contends that Falls Bridge also is a "discharger" pursuant to the Navigation Law because they are responsible for the spill caused when the wooden septic tank was breached as well as the "sump pump" spill on July 25, 2005, and thus not eligible for relief under the Navigation Law. Finally, DEI contends that Falls Bridge is barred from recovery under the doctrine of implied assumption of risk as Falls Bridge clearly was a sophisticated developer and knew what they were doing.

In the alternative to summary judgment, DEI seeks to conduct the depositions of Plaintiffs' principals, Guy Hart and Susan Poissant, in relation to the issue of ownership and control relating to the cleanup of the discharges of oil subsequent to Falls Bridge's purchase of the property. In addition, DEI seeks to obtain copies of other contracts of Falls Bridge's related entities that involve other transactions similar to this that DEI alleges are relevant to Falls Bridge's intent and knowledge relating to the responsibility and apportionment of cleanup and remediation expenses.

Falls Bridge's motion for summary judgment pursuant to Navigation Law § 181 (1)

It is well settled that the moving party "must establish its cause of action or defense sufficiently to warrant the court as a matter of law in directing judgment in its favor. (CPLR § 3212 [b]), and he must do so by tender of evidentiary proof in admissible form." See, Friends of Animals v. Associated Fur Manufacturers, 46 NY2d 1065 (1979). The burden then shifts to the non-moving parties to lay bare their proof to show that a genuine question of fact exists. See, Oswald v. City of Niagara Falls, 13 AD3d 1155 (4th Dept. 2004).

New York Navigation Law § 181 (1) establishes strict liability for petroleum discharges and states 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, as defined in this section."

New York courts have construed Navigation Law § 181 (1) so as to impose liability on the owner of property on which a discharge occurred, whether or not that owner caused or contributed to the discharge (emphasis added). See, Matter of White v Regan, 171 AD2d 197 (3d Dept. 1991), lv. denied, 79 NY2d 754 (1992).

In this case, the Court finds that Falls Bridge is a "discharger" because they are a subsequent owner of a petroleum system from which a spill occurred. See, State v. Dennin, 17 AD3d 744 (3d Dept. 2005); see also, White v. Regan, supra. Here, the evidence is undisputed that the subject property was contaminated by multiple petroleum discharges in 1992 and 2005. Therefore, Falls Bridge is liable even in the absence of any evidence that Falls Bridge caused or contributed to the discharge, and is thus precluded from seeking recovery under Navigation Law § 181 (1).

The Court next turns to the issue of whether Falls Bridge, as a discharger, has a remedy as an "injured" party pursuant to Navigation Law § 181 (5). Navigation Law § 181 (5) states in [*5]pertinent part:

Any claim by any injured person for the costs of cleanup and removal and direct and indirect damages based on the strict liability imposed by this section may be brought directly against the person who has discharged the petroleum . . . (emphasis added)

Navigation Law § 172 (8) defines "discharge" as "any intentional or unintentional action or omission resulting in the . . . spilling or leaking . . . of petroleum.

In White v. Long, 85 NY2d 564 (1995), the Court of Appeals expressly held that while a person who "is responsible for the discharge" may not bring a claim under Navigation Law § 181 (5), the owner of property could nevertheless maintain an action to seek contribution under Navigation Law § 181 (5), as an "injured" person if the contamination was not the fault of the property owner. See, White v. Long, at 568-569; see also, State of New York v. Green, 96 NY2d 403 (2001), where the Court of Appeals stated that "Navigation Law § 181[5] allows a faultless landowner to seek contribution from the actual discharger, even though the landowner itself is liable as a discharger under section 181(1)"; see also, Hjerpe v. Globerman, 280 AD2d 646 (2d Dept. 2001).

Here, the Court finds that Falls Bridge is a "faultless landowner" relating to the environmental contamination as specifically set forth and detailed in the Phase I and Phase II environmental audit that was performed prior to the closing and transfer of title. In addition, the Court finds that the removal of the USTs excavated on June 27, 2005, and the 790 gallons of residual product found in a 1,000 gallon fuel oil tank removed from the gas station premises on August 9, 2005, were removed without the fault of Falls Bridge. In other words, Falls Bridge was merely cleaning up USTs that were left on the property by DEI. There is no evidence whatsoever that Falls Bridge caused any environmental contamination during the removal of these storage tanks. See, General Casualty Insurance Company v. Kerr Heating Products, 48 AD3d 512 (2d Dept. 2008). Accordingly, the Court finds that Falls Bridge is an injured "faultless landowner" and, therefore, entitled to summary judgment on liability pursuant to Navigation Law § 181 (5) relating solely to the cleanup and removal costs of the contamination set forth in the Phase I and Phase II environmental audits and the removal of the USTs on June 27, 2005, and August 9, 2005.

Falls Bridge's motion for summary judgment pursuant to Navigation Law § 181 (5) relating to alleged environmental contamination and remediation costs that were caused by the breach of a wooden septic tank and removal of the "sump pump"

The Court next turns to Falls Bridge's motion for summary judgment pursuant to Navigation Law § 181 (5) relating to the alleged environmental contamination and remediation costs that were incurred by the breach of the wooden septic tank, subsequent to Falls Bridge taking title to the subject property. In addition, the Court shall consider Falls Bridge's removal of a sump pump from the first pump island dispenser (the "sump pump" spill) that was excavated on July 25, 2005, that contained "product" in water that allegedly spilled into an excavation pit on removal. [*6]

In State of New York v. Green, supra, the Court of Appeals concluded that an owner of contaminated property is liable as a "discharger" for cleanup costs where the landowner could control the activities occurring on the property and had reason to believe that petroleum products would be stored there. See also, Roosa v. Campbell, 291 AD2d 901 (4th Dept. 2002).

With regard to the "sump pump" spill and the wooden septic tank, the Court finds that Falls Bridge is liable as a "discharger" (not "faultless") and thus precluded from recovering under Navigation Law § 181 (5). Falls Bridge had control and authority over the remediation activities occurring on the property on both July 25, 2005, as well as the excavation that caused the breach of the wooden septic tank. And, Falls Bridge clearly had knowledge or reason to believe that petroleum products were stored on the premises. See, State of New York v. Green, supra; see also, Roosa, supra.

Accordingly, the Court denies Falls Bridge's motion for summary judgment pursuant to Navigation Law § 181 (5) in relation to the environmental cleanup and removal costs associated with the "sump pump" spill on July 25, 2005, including any remediation costs pertaining to the water spilled into the excavation pit. In addition, the Court further denies Falls Bridges' motion for summary judgment pursuant to Navigation Law § 181 (5) relative to the environmental cleanup and removal costs associated with the breached wooden septic tank, as Falls Bridge had control and authority over said remediation activities. See, State v. Green, supra.

Falls Bridge's motion for summary judgment relating to DEI's alleged breach of the contract to purchase dated June 2, 2004

Falls Bridge contends that the contract to purchase dated June 2, 2004, at paragraph 14, titled "Testing", states in pertinent part that "[a]t closing, the premises shall be free of containers of toxic or hazardous substances . . . ." Consequently, Falls Bridge argues that DEI breached the contract to purchase by allowing hazardous substances to remain on the property following the closing.

It is well settled that a real property sales contract merges with the deed . . ., except for those provisions which concern collateral matters, which cannot be performed until after conveyance or where the parties have expressed their intention that such provision shall survive delivery of the deed." See, White, supra; see also, Roosa, supra.

The Court finds that the contract to purchase dated June 2, 2004, does not contain any provision whatsoever that states that any of the terms of the contract shall survive delivery of the deed. Accordingly, the Court finds that the purchase agreement dated June 2, 2004, specifically paragraph 14 titled "Testing," which directs that the property shall be free of containers of toxic or hazardous substances, has merged with the deed, and its alleged breach is thus not actionable. See, Roosa at 902; see also, NVR, Inc. v. Edwards, 21 AD3d 1309 (4th Dept. 2005); see also, Bedrosian v. Guzy, 32 AD3d 1194 (4th Dept. 2006).

Falls Bridge's motion for summary judgment against defendant Adam DioGuardi, [*7]individually

Falls Bridge contends that Adam DioGuardi was the owner and operator of the gasoline service station at issue. Falls Bridge alleges that defendant DioGuardi had multiple roles in his closely held corporation, had complete day-to-day control of the service station and had specific knowledge of the underground storage tanks that were removed on June 27, 2005, and August 9, 2005, and removal of the sump pump on July 25, 2005, thereby warranting his personal liability.

It is well settled that in order to hold a corporate stockholder, officer or employee personally liable under the Navigation Law for a discharge occurring at a site owned or operated by a corporation, an individual must, at a minimum, have been directly, actively and knowingly involved in the culpable activities or inaction which led to a spill. See, Golavach v. Bellmont, L.M., Inc., 4 AD3d 730 (3d Dept. 2004), where the court denied plaintiff's motion for summary judgment against the owner of a service station who owned the property in his individual capacity. The court held that, with regard to defendant's multiple roles in the corporation, his day-to-day control of the service station and the age and condition of the tanks, a jury should determine whether the defendant engaged in active, wrongful conduct or culpable inaction so as to render him liable as a discharger. See, Golavach v. Bellmont, L.M., Inc., supra.

In this case, the Court finds that it is undisputed that Adam DioGuardi, individually, had authority and control of the service station and its operations, along with specific knowledge of the environmental contamination contained thereon, as Adam DioGuardi had owned and actively participated in the operations at the property since 1978. Accordingly, the Court grants Falls Bridge's motion for summary judgment as against Adam DioGuardi, individually, for strict liability pursuant to Navigation Law §181 (5) for any and all damages and cleanup costs that Falls Bridge may have sustained as a "faultless landowner," relating to the cleanup costs of contamination as detailed in the Phase I and Phase II audits and removal costs of the underground storage tanks on June 27, 2005, and August 9, 2005.

DEI's cross-motion for summary judgment pursuant to Navigation Law § 181

DEI submits the Affidavit of their attorney, Louis B. Cristo, Esq., dated June 6, 2008. Attorney Christo contends that summary judgment should be granted to DEI and that the complaint should be dismissed because Falls Bridge had clear, irrefutable knowledge of the existing environmental problems when they chose to purchase and close on the transfer of title to the site on June 10, 2005. DEI submits that Falls Bridge authorized both a Phase I and Phase II environmental audit of the site prior to its purchase and, thus, had detailed and actual knowledge of the actual contamination.

DEI further contends that Falls Bridge is a Navigation Law "discharger" (not faultless) because they or their agents were responsible for a discreet spill after they took title to the property on June 10, 2005. DEI states that Falls Bridge's contractors, while excavating an area under the service station, unearthed a wooden "suspected historic manhole/septic tank" which was removed and breached during the excavation that released black sludge. DEI, therefore, contends that Falls Bridge is a "discharger" and is precluded from recovering under Navigation Law § 181. [*8]

The Court grants only that portion of DEI's cross-motion for summary judgment dismissing Falls Bridge's strict liability claim pursuant to Navigation Law § 181 (1) and (5) specifically relating to indemnification or contribution for the breach of the historic manhole/septic tank. As set forth above, the Court finds that Falls Bridge is a "discharger" as Falls Bridge had complete control and authority over the excavation and removal of the wooden septic tank. Accordingly, the Court grants summary judgment as against Falls Bridge relating to this specific claim.

The Court further grants DEI's cross-motion for summary judgment dismissing that portion of Falls Bridge's Complaint seeking indemnification and contribution pursuant to Navigation Law § 181 (1) and (5) pertaining to the "sump pump" spill on July 25, 2005, as Falls Bridge had authority and control over the excavation, and is thus liable as a "discharger" relating to this spill. See, State v. Green, supra.

The Court further denies DEI's cross-motion to dismiss Falls Bridge's claims pursuant to Navigation Law § 181 (5) relating to all of the environmental contamination identified in the Phase I and Phase II environmental audits, as well as the direct removal costs of the USTs removed from the subject property on June 27, 2005 and August 9, 2005. As set forth above, the Court finds that Falls Bridge is a "faultless landowner" and is thus an "injured party" who may seek contribution for damages that they did not contribute to and/or cause. See, White v. Long, supra.

DEI's cross-motion for summary judgment based on the doctrine of primary assumption of risk

DEI contends that, as a matter of law, Falls Bridge assumed the risk by purchasing and closing on the subject property, with knowledge of the USTs and environmental contamination contained thereon. DEI points to Falls Bridge's actual knowledge due to their undertaking of a Phase I and Phase II environmental investigation. Therefore, DEI contends that Falls Bridge knowingly and voluntarily assumed the risk of environmental contamination when they chose to proceed with the closing on the transfer of title to the subject property.

It is well established, as set forth above, that Navigation Law § 181 creates strict liability for petroleum discharges. See, White v. Regan, supra; see also, White v. Long, supra. The Fourth Department in Lamey v. Foley, 188 AD2d 157 (4th Dept. 1993), discussed the concept of strict liability.^[FN3] The Fourth Department stated in part:

The concept of strict products liability is one of the broadest liability doctrines known to the law. It allows recovery without proof of negligence, in the absence of a guarantee or privity of contract, and notwithstanding contractual disclaimers of liability. Thus, the general focus of the doctrine is not upon the conduct of the parties, but on the characteristics of the product (emphasis added) (cf., Voss v. Black & Decker Mfg. Co., supra, 59 NY2d at 107, 463 N.Y.S.2d [*9]398, 450 N.E.2d 204) . . . .

See, Lamey v. Foley, at 166.

The Fourth Department went on to address assumption of risk:

The doctrine of primary assumption of the risk, in contrast, is based on the plaintiff's consent, express or implied, to relieve the defendant of his duty of care in whole or in part (Turcotte v. Fell, supra, 68 NY2d at 438-439, 510 N.Y.S.2d 49, 502 N.E.2d 964). Such consent is inferred from plaintiff's voluntary participation in the injurious activity with "knowledge of the injury-causing defect [and] appreciation of the resultant risk" (Maddox v. City of New York, supra, 66 NY2d at 289, 496 N.Y.S.2d 726, 487 N.E.2d 553). Where primary assumption of risk is present, it does not merely diminish plaintiff's recovery, but eliminates or qualifies whatever duty defendant otherwise would owe to plaintiff in the circumstances (see, Turcotte v. Fell, supra, 68 NY2d at 438-439, 510 N.Y.S.2d 49, 502 N.E.2d 964; Arbegast v. Board of Educ., supra, 65 NY2d at 170, 490 N.Y.S.2d 751, 480 N.E.2d 365). Thus, a claim of strict products liability and a defense of primary assumption of risk are in inherent conflict, and one must give way. (emphasis added)

See, Lamey v. Foley, at 167.

The Fourth Department in Lamey concluded that "the defense of primary assumption of risk is not available to eliminate or reduce a manufacturer's duty to produce a nondefective product . . .", even where the product's dangerous qualities are obvious to and appreciated by the user. See, Lamey, at 168; see also, Micallef v. Miehle Co., 39 NY2d 376 (1976).

This Court finds that the Fourth Department's analysis in Lamey is persuasive in this case. As set forth above, Navigation Law § 181 establishes strict liability involving petroleum discharges and spills. To allow a party to escape its duty to clean up and remediate oil spills and/or other toxic contamination by invoking the implied consent of a subsequent landowner, would severely undermine the public policy underlying the doctrine of strict liability in cases involving environmental contamination. It would erode a party's incentive to operate a petroleum contaminated site in a safe manner. Accordingly, the Court finds that DEI's defense of primary assumption of risk is not available to eliminate its own strict liability as a discharger. See, Lamey, supra.

DEI's cross-motion for further discovery, including depositions of the principals of Falls Bridge

DEI finally contends that they are in need of additional discovery, specifically the depositions of Guy Hart and Susan Poissant, in relation to the issue of ownership and control relating to the cleanup and potential discharges of oil subsequent to Falls Bridge's purchase of the property. DEI also seeks to obtain copies of other contracts of Falls Bridge's related entities [*10]which involve other transactions similar to this which allegedly go to Falls Bridge's intent and knowledge relating to the responsibility of cleanup and remediation expenses.

It is well settled that discovery should be liberally interpreted to allow a party to obtain discovery which shall aid in the defense or prosecution of an action. CPLR 3101. Here, the Court finds that DEI is entitled to conduct the depositions of Guy Hart and Susan Poissant. The Court further directs that said depositions shall be concluded within 60 days of the date of the Court's Decision. In addition, the Court finds that DEI has failed to show thus far that Falls Bridge's documents relating to other real property transactions involving contaminated property could lead to relevant evidence. Accordingly, the Court denies DEI's cross-motion to obtain records and contracts of Falls Bridge's other transactions, without prejudice to renew, subject to the completion of the depositions of the principals of Falls Bridge.

The above constitutes the Decision of the Court. The attorney for Falls Bridge shall submit an Order, on notice to all counsel, within ten (10) days of the date of this Decision. The proposed Order shall reference and attach this Court's Decision.

Dated:September _____, 2008

E N T E R_________________________________________

James P. Murphy

Justice of the Supreme Court