ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEES
Donn H. Wray Rodney E. Farrow
Justin W. Leverton Seymour, Indiana
Indianapolis, Indiana
ATTORNEYS FOR AMICI CURIAE
ATTORNEYS FOR AMICUS CURIAE INSURANCE INSTITUTE OF INDIANA, INC.
THE INDIANA PETROLEUM AND NATIONAL ASSOCIATION OF MUTUAL
MARKETERS AND CONVENIENCE INSURANCE COMPANIES
STORE ASSOCIATION John C. Trimble
George M. Plews Richard K. Shoultz
Christopher J. Braun Indianapolis, Indiana
Jeffrey D. Featherstun
John D. Moriarty
FILED
Indianapolis, Indiana
ATTORNEYS FOR AMICI CURIAE
INDIANA ASSOCIATION OF CITIES AND TOWNS Jun 19 2008, 3:03 pm
AND INDIANA MUNICIPAL LAWYERS’ ASSOCIATION
Donald M. Snemis
Brent H. Huber CLERK
of the supreme court,
court of appeals and
Freedom S.N. Smith tax court
Indianapolis, Indiana
In the
Indiana Supreme Court
_________________________________
No. 36S01-0710-CV-425
RICHARD U. PFLANZ AND
DELORES J. PFLANZ,
Appellants (Plaintiffs Below),
v.
MERRILL FOSTER, INDIVIDUALLY,
MERRILL FOSTER, D/B/A FRIENDLY
FOSTER’S SERVICE, AND SUNOCO, INC.
(R&M),
Appellees (Defendants Below).
_________________________________
Appeal from the Jackson Superior Court, No. 36D01-0412-CT-36
The Honorable Stephen R. Heimann, Special Judge
_________________________________
On Petition To Transfer from the Indiana Court of Appeals, No. 36A01-0612-CV-548
_________________________________
June 19, 2008
Shepard, Chief Justice.
The question here is whether a property owner’s claim for contribution toward
environmental cleanup costs is barred by the statute of limitation if the owner should have
known about the contamination more than ten years before the complaint was filed. We hold
that the statute of limitation does not begin to run until the owner is ordered to cleanup the
property, regardless of whether an owner earlier knew or should have known about the need for
cleanup.
Facts and Procedural History
Taking all the allegations in the complaint to be true, the facts are as follows. In 1976,
Merrill Foster purchased a service station from Sunoco, Inc. and began operating it as Friendly
Foster’s Service. In 1978, he closed the petroleum dispensing activities and stopped using the
underground storage tanks. In April 1984, Richard and Delores Pflanz bought the property from
Foster. Prior to the sale, Foster advised the Pflanzes about the presence of the underground
tanks, but told them that the tanks were not in use and had been closed. In reality, the tanks
remained open and contained some petroleum. The Pflanzes operated a tire store on the property
for two years, at which time they sold their business and began leasing the property to a third
party.
In 2001, the Pflanzes learned for the first time that there were environmental issues with
the property. The Indiana Department of Environmental Management (IDEM) inspected the
property and discovered that the underground tanks were leaking. Thereafter, the Pflanzes
incurred over $100,000 in cleanup costs, including costs for closing or removing the
underground tanks and removing contaminated soil and water.
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On December 30, 2004, the Pflanzes filed a complaint against Foster and Sunoco seeking
a determination of liability relating to the environmental contamination, damages under theories
of waste, negligence, and stigma, contribution for cleanup costs pursuant to the Underground
Storage Tanks Act (USTA), and declaratory relief for future anticipated cleanup costs. See Ind.
Code Ann. ch. 13-23-13 (West 2007). Foster moved to dismiss for failure to state a claim upon
which relief could be granted, arguing that the complaint was barred by the statute of limitation.
The trial court agreed and dismissed.
On March 2, 2006, the Pflanzes filed a second complaint under the same cause number,
containing allegations substantially similar to those in the first complaint. On Foster’s motion,
the court dismissed the second complaint.
The Pflanzes appealed. The Court of Appeals affirmed, reasoning that when Indiana
enacted the USTA’s contribution statute in 1987 and amended it in 1991, the Pflanzes, in the
exercise of reasonable diligence, should have tested the property for contamination such that the
statute of limitation began to run no later than 1991. Pflanz v. Foster, 871 N.E.2d 971 (Ind. Ct.
App. 2007), vacated. We granted transfer.
I. Statute of Limitation for Contribution and Declaratory Relief
The parties agree that the general ten-year statute of limitation applies to the Pflanzes’
contribution claim. See Ind. Code Ann. § 34-11-1-2(a) (West 2007). Cf., Comm’r, Ind. Dep’t of
Envtl. Mgmt. v. Bourbon Mini-Mart, Inc., 741 N.E.2d 361 (Ind. Ct. App. 2000) (applying the
ten-year statute of limitation for actions that are not limited by any other statute, rather than the
six-year statute for property damage, because the case involved recovery of environmental
cleanup costs), summarily aff’d by 783 N.E.2d 253 (Ind. 2003). The resolution of this case turns
on when the ten-year limitation began to run.
In the American legal system, demonstrated harm is an indispensable element of virtually
every type of civil claim. In cases ranging from contract to tort to medical malpractice, a
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claimant cannot recover a monetary judgment unless he has suffered actual damage. The law
does not usually permit monetary recovery for claims solely involving future damages; rather,
some damage must have already begun to occur. This notion that the statute of limitation begins
to run when all the elements of a cause of action can be shown (including whether some damages
have been felt) is part of how we determine when a cause “accrues.” See Doe v. United
Methodist Church, 673 N.E.2d 839, 842 (Ind. Ct. App. 1996) (“For a cause of action to accrue
[for limitation purposes], it is not necessary that the full extent of the damage be known or even
ascertainable but only that some ascertainable damage has occurred.”)
Under Indiana’s discovery rule, a cause of action accrues, and the statute of limitation
begins to run, when a claimant knows or in exercise of ordinary diligence should have known of
the injury. Wehling v. Citizens Nat’l Bank, 586 N.E.2d 840, 843 (Ind. 1992).
Foster contends that the statute of limitation began running when the Pflanzes knew or
should have known about the contamination. The Pflanzes’ contribution claim, however, is not a
claim for damage to the property itself. Rather, they seek to recover for the cleanup costs IDEM
required, which resulted from Foster’s use of the land.
In contribution or indemnification cases, the damage that occurs is the incurrence of a
monetary obligation that is attributable to the actions of another party. That is why, generally,
parties bringing contribution and indemnification claims must wait until after the obligation to
pay is incurred, for otherwise the claim would lack the essential damage element. See Bourbon
Mini-Mart, 741 N.E.2d at 372 n.9 (“an obligation to indemnify or for contribution does not arise
until the party seeking such remedy suffers loss of damages, i.e., at the time of payment of the
underlying claim”); TLB Plastics Corp., Inc. v. Proctor & Gamble Paper Prod. Co., 542 N.E.2d
1373, 1376 (Ind. Ct. App. 1989) (obligation to indemnify arises only after one seeking indemnity
suffers loss or damages even if indemnity and injured party’s claim are litigated
contemporaneously); Estate of Leinbach v. Leinbach, 486 N.E.2d 2, 5 (Ind. Ct. App. 1985) (“to
be entitled to contribution, the [claimant] must have first paid the debt”); McLochlin v. Miller,
139 Ind. App. 443, 448, 217 N.E.2d 50, 53 (Ind. Ct. App. 1966) (“payment must be made under
compulsion to entitle payor to contribution”).
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Because the damage at issue in the Pflanzes’ contribution claim is the cleanup obligation
assessed by IDEM that resulted from Foster’s use of the land, the statute of limitation did not
begin to accrue until after the Pflanzes were ordered to clean up the property.
Accordingly, because IDEM ordered the Pflanzes to pay for the environmental cleanup
costs in 2001, the Pflanzes filed their contribution claim well within the ten-year statute of
limitation.
II. Statute of Limitation for Stigma Damages
Indiana law permits recovery of “stigma damages” for losses in the fair market value of
property after remediation of environmental contamination. Terra-Products, Inc. v. Kraft Gen.
Foods, Inc., 653 N.E.2d 89 (Ind. Ct. App. 1995). Stigma damages are warranted where the
claimant can demonstrate that an imperfect market rendered her property less valuable despite
complete restoration. Id. at 93. A claim for such damages cannot ripen until remediation has
been substantially completed because only then can the impact of the former environmental
contamination on property value be determined. Id. See Allgood v. Gen. Motors Corp., No.
102CV1077DFHTAB, 2006 WL 2669337, at *36 (S.D. Ind. Sept. 18, 2006). 1 Claims for stigma
damages are governed by a six-year statute of limitation. Ind. Code Ann. § 34-11-2-7 (West
2007).
The statute of limitation for stigma damage claims cannot begin to toll until after the
claimant has incurred real damage. As with contribution claims, the “damage” in stigma damage
claims is not the environmental contamination itself. Rather, the damage is a diminution in
property value despite acceptable remediation of the environmental contamination. This
1
In Allgood, the court stated that
a [stigma] damage award would need to be based on something more than guesswork. . . . While
the court does not mean to indicate that a post-remediation stigma claim can be sought only after
the last grain of soil has been removed, the present circumstances of this case make clear that any
estimate of post-remediation value of the plaintiffs’ land would be speculative and premature.
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diminished property value results from buyers’ perceived risk that the property will require
future environmental cleanup costs.
Stigma damages cannot be determined prior to substantial completion of the remediation.
Before substantial completion of the remediation, the property’s value will necessarily be lower
because of the known presence of environmental contamination. Thus, whether or not the
claimant’s property value will continue to be diminished post-cleanup cannot be ascertained until
remediation has been substantially completed.
The Pflanzes’ claim for stigma damages cannot possibly have been outside the statute of
limitation period. The Pflanzes first incurred cleanup costs in 2001 and filed their claim in 2006.
III. Statute of Limitation for Waste and Negligence Claims
Claims for waste and negligence related to real property are governed by a six-year
statute of limitation. Ind. Code Ann. § 34-11-2-7 (West 2007).
Unlike the Pflanzes’ contribution claim, their claims for waste and negligence are based
on alleged injury that arose around the time the property was sold to them, rather than damages
that arose at the time of the IDEM inspection. The Pflanzes’ claims presumably stem from their
contention that, prior to the property’s sale, Foster incorrectly told them the underground storage
tanks were not in use and had been closed. (Appellants’ Br. at 11.) The Pflanzes argue that
because of what they describe as Foster’s “fraudulent misrepresentation,” they were prevented
from discovering the injury (i.e., that the tanks may cause or may have caused environmental
contamination) until the IDEM inspection in 2001. (Id.)
Foster, on the other hand, argues that the Pflanzes should have discovered the potential
injury no later than 1991 because by that time Indiana had adopted legislation, including the
USTA, providing a right to contribution for costs associated with underground storage tank
environmental remediation. See Ind. Code Ann. ch. 13-23-13. According to Foster, the Pflanzes
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should have taken steps to investigate and monitor the underground storage tanks after the
adoption of that legislation.
Neither party asserts that the Pflanzes had actual knowledge that the underground storage
tanks could result in environmental contamination prior to the IDEM inspection in 2001. Thus,
for ascertaining when the statute of limitation began to run on the negligence and waste claims,
the question is when the Pflanzes, in the exercise of ordinary diligence, should have known of
the injury.
The resolution of this question rests on factual determinations not yet in the record. We
cannot accept the trial court’s holding that, as a matter of law, the passage of the USTA
automatically put landowners on notice that they should inspect and monitor any underground
storage tanks on their property even if, taking the Pflanzes’ allegations as true, the former
property owners had assured them the tanks were closed and not in use. Perhaps the exercise of
ordinary diligence required periodic soil testing or inspection of the tanks in light of Indiana’s
enactment of the USTA, but that determination cannot be made on the basis of the facts now
deployed.
Accordingly, we reverse the trial court’s dismissal of this claim and remand for such
further examination of it as the parties may place before the court.
Conclusion
For the above reasons, we reverse the trial court’s order of dismissal and remand the case
for further proceedings on the merits.
Dickson, Sullivan, Boehm, Rucker, JJ., concur.
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