Daily Development for Friday, October 15, 1999

By: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

TRESPASS; DAMAGES; "STIGMATIZED" PROPERTIES; CONTIGUOUS PARCELS: Where plaintiff in trespass action can demonstrate that toxic materials from neighboring property penetrated only some of plaintiff's property, and the property consists of three "historically separate" parcels, damages will be permitted for injury resulting from "stigma" due to the leakage only to the parcels actually touched by the trespass, even though a third parcel suffers injury in form of "stigma" resulting from the neighboring trespass that is identical to collectible stigma damages of the invaded parcels.

Walker Drug Co., Inc. v. La Sal Oil Co., 972 P.2d 1238 (Utah 1998).

Plaintiff owned three contiguous parcels constituting a shopping center. Defendant caused a trespass on two of those parcels when gasoline from its underground storage tanks leaked into the ground and was carried downhill by groundwater to plaintiff's parcels.

In a prior case, the court held that the gasoline contamination constituted a continuing trespass and continuing nuisance and that the plaintiff could recover for those damages sustained as a consequence of leakage during the period measured by the statute of limitations.

The trial court then tried the case, but refused to permit the plaintiff to submit evidence regarding damages resulting from the decrease in market value of parcels as a consequence of the public knowledge that they had been contaminated by gasoline.

The judge bifurcated the damages portion of the trial, and the jury found that, although some gasoline penetration during the temporary period for which damages were available, a larger amount of existing gasoline leeched out of the soil due to groundwater carrying the gasoline further downhill into the Colorado River. Consequently, there was less gasoline contamination after the operative period than there was at the beginning of that period, and the jury awarded no damages.

On appeal, the Utah Supreme court upheld the trial court's decision in part and reversed in part. The decision, though brief, is very pithy, and deserves study by anyone interested in this area of the law.

The court concluded (at the end of the opinion) that the court should have permitted the plaintiff to show that the two parcels that suffered from actual trespass by gasoline during the operative period were permanently diminished in value as a consequence of the "stigma" in the community due to the perception that there was a contamination problem, even though the source of the trespass now had been remediated and even though, over time, the existing gasoline would disappear.

The court endeavored to set forth a test for measurement of stigma damages resulting from temporary, remediable trespass:

"As a general rule, damages for permanent injuries are measured by 'the difference between the value of the land before the harm [or at the beginning of the trespass period] and the value after the harm.' [Restatement (Second) of Torts Sec. 929*1)a) (1977). With respect to such stigma damages, however, such a test may be inaccurate n that it does not acknowledge the role stigma damages plays in compensating the plaintiff for lost market value in excess of the cost of remediating a temporary injury to the property. When a permanent injury to property resulting from trespass or nuisance is physical, that injury cannot be repaired. Thus, the value of the injured property will not change after the injury is incurred, and it is accurate to assess damages by subtracting the value of the land at the date on which the complaint was filed from the land's value before the harm. When, however, physical injuries to the land are temporary, they are repairable by their nature. And when the injuries are repaired, value is restored to the injured property. Measuring damages only by reference to two dates at the outer boundaries of the events at issue does not account for the fluctuating value of such properties, and could leave the plaintiff uncompensated for repair costs incurred during the limitations period. Stigma damages, although permanent in nature, are recoverable in conjunction with, and measured against, these temporary damages."

In a footnote, the court defines "stigma damages" as "negative public perceptions caused by temporary physical injuries."

At another point in the opinion, the court concludes that the historically separate treatment of the plaintiff's three parcels as separate parcels, in that they were bought and sold separately, and developed separately, results in the conclusion that they are three independent "sites" for evaluation of trespass and nuisance claims, even though they are contiguous and a form of "shopping center."

Comment 1: It is a neat question as to how "stigma" damages can be allocated to the narrow period of trespass damages allowed by the court for the penetrated properties. How can we separate the stigma associated with the larger amount of leakage that occurred earlier from that related to the smaller amount today?

The measure suggested by the court comparing the value of the property at the commencement of the period for which recovery is permitted and at the value today, doesn't seem to work very well if the public's awareness of the existence of the overall pollution arose during that period. If this awareness led to a decrease in value, arguably a portion of that decrease is attributable to gasoline already on the property from earlier leakage, and this leakage, according to the court's earlier opinion, is noncompensable. Is the editor missing something here?

Comment 2: From the standpoint of an injured property owner, it indeed is an uncomfortable result to be denied recovery for provable diminution in value to a portion of one's property simply because of the historical fact that the parcel was separately owned at some prior time. This was plaintiff's "shopping center," regarded, presumably, as an integral economic unit. The court emphasizes the fact that there were separate tax parcels and historically separate ownership, to which the editor answers "so what?" One owner, one injury.

Comment 3: Unfortunately, the problem is complicated by the fact that we are talking about injury resulting from *ungrounded* public fears that the pollution still may have some impact on value, even after it is remediated. This is a dicey issue to begin with. Should such things be compensable at all? Isn't the real cause of the problem public psychology just one of those burdens that everyone in the world must suffer. Ungrounded public perceptions affect value positively and negatively all the time. The plaintiff caused the pollution, but didn't cause the public perception. Having said that, the editor recognizes that the public perception here was directly related to an injury that plaintiff did cause to the affected parcels, so the editor recognizes some "rough justice" in permitting stigma damages only as to parcels actually affected by a "real" trespass or nuisance, and denying such damages to, say, the owners of parcels across the street, even though the whole neighborhood suffers from the stigma. But, because the editor can't find a real principle in the whole analysis, the editor would err on the side of inclusiveness and give the owner of contiguous parcels the right to recover for stigma damages to all of them.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

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