Newsmall v. Earth Management Systems, Inc.

Court of Appeals of South Carolina·Decided July 31, 2008·No. 2008-UP-430·Unpublished

Opinion

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Court of Appeals

Case no. 2001-CP-40-3330/Newsmall Clemson, LLC, Appellant,

v.

Earth Management Systems, Inc., Respondent,

Case no. 2002-CP-40-2778/John H. Newsome, Jr., Appellant,

Earth Management Systems, Inc.,


Appeal From Richland County
 Reginald I. Lloyd, Circuit Court Judge


Unpublished Opinion No. 2008-UP-430
Heard December 12, 2007 – Filed July 31, 2008   


AFFIRMED IN PART, REVERSED AND REMANDED IN PART


T. Alexander Beard, of Mount Pleasant, for Appellants.

Charles E. Hill, James L. Werner, and Michael E. Kozlarek, all of Columbia, for Respondent.

PER CURIAM:  Newsmall Clemson, LLC, and its sole member, John H. Newsome, Jr., (collectively Newsmall) appeal the trial court’s granting  of directed verdict to Earth Management Systems, Inc. (Earth Management), on its causes of action for negligence, negligent misrepresentation, and violation of the South Carolina Unfair Trade Practices Act (UTPA).  We affirm in part and reverse in part. 

FACTS

Newsmall was interested in purchasing forty-three acres of undeveloped commercial property (the Property) in Columbia, South Carolina at the Clemson Road exit of Interstate 20 for commercial development.  Charles Small and his company, Diversified Development, represented Newsmall and were responsible for developing Newsmall’s projects.  Small was Newsome’s business partner in several ventures, and he and his company were experienced in real estate development. 

Small hired Earth Management, on behalf of Newsmall, to perform a Phase I Environmental Site Assessment (Phase I Assessment) of the Property.  The American Society for Testing and Materials (ASTM) standard for Phase I Assessment Process provides the purpose of a Phase I Assessment is to define good commercial and customary practice for conducting an environmental site assessment of commercial real estate.  The intent is to enable a user to qualify for the innocent landowner defense to Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)[1] liability.  The ASTM standard provides the goal of the Phase I Assessment is to identify recognized environmental conditions.  It defines recognized environmental conditions as “the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, groundwater, or surface water of the property.”  (emphasis omitted).  The standard defines hazardous substance as “a substance defined as a hazardous substance pursuant to CERCLA.” 

The ASTM standard describes the components included in a Phase I Assessment as:  (1) records review; (2) site reconnaissance; (3) interviews with current owners and occupants and government officials; and (4) report.  The list of standard environmental sources includes state landfill and/or solid waste disposal site lists.  The standard provides:

One or more additional state sources or local sources of environmental records may be checked, in the discretion of the environmental professional, to enhance and supplement federal and state sources . . . . Factors to consider in determining which local or additional state records, if any, should be checked include (1) whether they are reasonably ascertainable, (2) whether they are sufficiently useful, accurate, and complete in light of the objective of the records review . . . , and (3) whether they are generally obtained, pursuant to local good commercial or customary practice, in initial environmental site assessments in the type of commercial real estate transaction involved.

Further, the standard provides a list of local sources that may be useful including “Department of Heath/Environmental Division.” 

The ASTM standard also provides “[a]ll obvious uses of the property shall be identified from the present, back to the property’s obvious first developed use, or back to 1940, whichever is earlier.”  Additionally, it provides a list of standard historical sources.  Those sources include aerial photographs, property tax files, and recorded land title records.  However, the standard cautions if recorded land title records are used, they cannot be the sole historic source consulted. 

On January 28, 1999, Earth Management issued a report following its investigation.  The report contained an executive summary, which provided: “[e]vidence of debris dumping was observed, but nothing of a hazardous nature was identified, no extensive dumping was observed, and no evidence of debris burial in old borrow pits was identified.”  The executive summary further stated:

During the 1980s, the eastern half . . . contained several borrow areas from which sand was excavated by a local contractor.  This practice ceased in the mid 1980s, with the excavations backfilled with on-site sand.  There is no evidence to suggest that foreign materials were introduced into the borrow pits and buried.

The executive summary concluded:  “No further investigation for environmental considerations is recommended at this time.” 

Newsmall purchased the Property on April 29, 1999.  In the process of constructing a road, contractors unearthed a landfill.  Newsmall found an agreement between Loveless & Loveless and Interstate Investment Associates, a former owner of the Property, that provided for the mining of sand and also for the implementation and management of a refuse dump on the property.  The agreement was recorded in the Richland County Deeds Book.  Additionally, the South Carolina Department of Health and Environmental Control (DHEC) had a file detailing the history of the mining and landfill operations and identified the Property as a former asphalt plant. 

Newsmall excavated part of the landfill to build the road.  The debris could not be reburied because it contained several types of debris such as metal, tires, plastic bags, household trash, and construction debris, and DHEC regulations required the different types of debris be separated before disposal.  Shortly thereafter, Newsmall hired Geo-Systems to determine the amount and location of the former landfill.  Geo-Systems discovered construction debris, household garbage, paint cans, oil cans, batteries, tires, and medical waste. 

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