Courts Addresses Claims For Compensatory and Punitive Damages
SJWA LLC asserted claims for trespass and private nuisance based on repeated backups of sewage in the basement of their townhouse. The property next to the townhouse is owned by Father RealtCorp., which leased the top two floors of its property to Chelsea 7 Corporation. According to the complaint, the backups resulted from Realty and Chelsa’s misuse of a shared sewage line running from their property under SJWA’s property and then to the main line in the street. Motion practice and an appeal ensued.
SJWA made a prima facie showing of trespass by submitting evidence that there was an intentional and unauthorized entry upon their property and that they did not take the premises subject to any license. In opposition to SJWA’s trespass claim, Realty and Chelsa contended that they had a license to use the pipe based on an agreement entered into in 2006 between Realty and the prior owner of SJWA’s property after the pipe serving both properties was severed during construction on an abutting property. According to Realty, the prior owners agreed to share the cost of re-laying a combined sewage pipe, which was inspected and approved by New York City agencies, and Realty continued to use the pipe without incident until the backups that occurred.
Although a license is generally revoked when the real property is conveyed, the foregoing raised an issue of fact as to whether a license supported by consideration existed and was relied upon, thus potentially rendering revocation of the license inequitable. Accordingly, issues of material fact existed as to whether Realty held a license barring the trespass action.
However, SJWA established prima facie entitlement to summary judgment on liability on the cause of action for private nuisance. The dispute between the parties centered on whether the sewage backup was intentional in origin and whether it was caused by Realty and Chelsa’s acting or failing to act. As to causation, SJWA submitted evidence of tests and inspections that ruled out a back flow or obstruction in the line to the sewer as sources of the sewage backup, therefore meeting its prima facie burden on causation. In opposition, Realty submitted an expert affidavit that failed to raise an issue of fact, as the expert inspected the basement only after the line had been disconnected.
As to intent, SJWA submitted evidence that both Realty and Chelsa were put on notice of the sewage backups, at the latest, upon receipt of a cease-and-desist letter. Realty contended that it directed Chelsea to limit or stop restroom use after receiving notice, but that direction was not sufficient given that Realty and Chelsa knew or should have known of the inevitable serious impact on SJWA’s use and enjoyment of their property resulting from the sewage backups.
As to compensatory damages, the measure for damages to real property caused by trespass or private nuisance is the lesser of the decline in market value or the reasonable cost of restoration. Some cases have held that the measure of damages for a “continuing trespass” or a nuisance that causes “permanent injury” to real property was the “loss of market value, or the cost of restoration”. But SJWA failed to submit nonspeculative evidence of permanent injury to the property causing loss of market value, and submitted only a speculative claim of diminution in market value due to stigma.
As for punitive damages, the evidence supported a finding that Realty and Chelsea’s remedial action, after receiving notice of the nature and extent of damage to SJWA’s property, was inadequate, but that showing did not meet the strict standard for the imposition of punitive damages. Specifically, the evidence did not show that either Realty or Chelsea acted with conscious and deliberate disregard of the interests of others or with malicious intent, as necessary to support an award of punitive damages.
As to Realty’s contractual indemnification claim against Chelsea, Realty must establish that it was free from any negligence and may be held liable solely by virtue of statutory or vicarious liability. Although the lease contained an indemnity clause benefitting Realty—Realty failed to sustain its burden of showing that it was not independently negligent.